Good day, and welcome to the Onity Group's Third Quarter Earnings and Business Update Conference Call. Please be advised today's program will be recorded. It is now my pleasure to turn the program over to Valerie Haertel, Vice President, Investor Relations. You may begin.

Thank you. Good morning, and welcome to Onity Group's Third Quarter 2025 Earnings Call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President and Chief Executive Officer, Glen Messina; and Chief Financial Officer, Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are uncertain. Forward-looking statements speak only as of the date they are made and involve assumptions, risks and uncertainties, including those described in our SEC filings. In the past, actual results have differed materially from those suggested by forward-looking statements, and this may happen again. In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pretax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation. Now I will turn the call over to Glen Messina.

Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We're looking forward to sharing our third quarter results and reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on Slide 3. Our third quarter results again demonstrate the effectiveness of our strategy and the strength of our execution. Our balanced business delivered sustained results with lower interest rates driven by originations profitability offsetting MSR runoff. Record origination volume and steady servicing profitability drove increased adjusted pretax income versus the second quarter and continued book value growth. Adjusted ROE exceeded our guidance for the quarter and year-to-date, and we're expecting to exceed our guidance for the full year, underscoring our commitment to strong shareholder returns. Let's turn to Slide 4 to review a few highlights for the quarter. We delivered adjusted pretax income of $31 million and annualized adjusted return on equity of 25%, driven by strong originations performance and favorable fair value gains on reverse buyout loans and servicing. GAAP net income and earnings per share of $2.03 reflect a $4 million or $0.48 per share tax provision expense related to tax planning strategies to support the future utilization of our deferred tax asset. Average servicing UPB continued to grow steadily, fueled by year-over-year volume growth, which exceeded total industry originations growth for the same period. And finally, book value increased to $62 per share, up 5% versus prior year. We believe our third quarter results demonstrate our effectiveness in navigating changing market conditions with a balanced business model working as designed. Let's turn to Slide 5 for more about the capability of our balanced business. We believe our scale in both servicing and originations enables us to perform well with high or low interest rates. You can see on the left, our total business is delivering improved performance as we have grown servicing and improved overall productivity. Originations are responding well to changing market conditions with profitability increasing as rates have generally declined in the second and third quarters. If interest rates were to materially decline like in 2021, we believe industry origination volume and margins would increase while higher MSR runoff would reduce servicing earnings. In this scenario, we would expect originations to again deliver most of our earnings. Regardless of interest rates, we're always maintaining agility to capitalize on asset management and other opportunities consistent with our strategy to create value for shareholders. Let's turn to Slide 6 for more about our growth focus and actions. We delivered servicing portfolio growth versus the prior quarter and prior year, driven by double-digit originations growth in the same period. We've increased our owned MSR portfolio, consistent with our objective to retain more MSRs to grow earnings and book value as well as reload our portfolio for recapture opportunity. Ending total servicing in the third quarter is up $17 billion or 6% year-over-year with $39 billion in servicing additions net of runoff more than offsetting planned transfers to Rithm and opportunistic client MSR sales. With MSR demand keeping prices elevated, several of our clients have taken the opportunity to monetize their MSRs and are replenishing their portfolio as industry origination volume increases. I believe our ability to replenish and grow our portfolio while our clients execute opportunistic MSR sales highlights the power of our origination capability and the success of our growth strategy. Now please turn to Slide 7 for some highlights on our originations performance. In the third quarter, our originations team delivered volume growth of 39% and 26% versus the prior year and prior quarter, respectively, in both cases, exceeding the industry and many of our public peers. Consumer Direct is demonstrating strong growth driven by declining rates in the third quarter and improved execution. In business-to-business, we leverage an enterprise sales approach to deliver our wide range of products, delivery methods and services, coupled with a strong focus on client service. We've continuously invested in technology and process optimization to enhance the customer experience, reduce cost and improve scalability and competitiveness in both business-to-business and consumer direct. We're launching new and upgraded products and services to expand our addressable market and access higher-margin market segments, create alternatives for our customers, and manage operating capacity for surges in refinancing activity. To highlight how far we've come in origination, our third quarter funded volume was the highest we've recorded with a market size that's only 41% of the 2021 market peak. Let's turn to Slide 8 to discuss our recapture platform. Our consumer direct team is delivering top-tier recapture performance to enhance MSR returns for us and several of our subservicing clients. As you can see on the left, funded volume was 1.8 times the prior year level with an interest rate environment that is comparable between the two periods, reflecting the success of our investments. Based on our refinance recapture benchmarking, our third quarter year-to-date recapture performance, excluding home equity products, is better than several of our peers and the ICE reported average. In addition, our refinance recapture rate where the previous loan was originated by our consumer direct channel is 85%, on par with other retail originators. This points out the significant upside in recapture as we continue to improve our first-time recapture capability. We continue to invest in talent, AI tools, predictive analytics, and leverage internal and external data sources to help us better understand our customers, proactively identify opportunities and further improve our capability and the customer experience. Let's turn to Slide 9 to discuss our near-term expectations for subservicing. We continue to see a high level of interest among prospective clients to explore subservicing options and alternatives. We've signed 9 new clients so far this year and have 6 new agreements under negotiation. We expect subservicing additions in the second half of $32 billion or over 2.5 times the first half level, driven by these new relationships, our existing clients, and synthetic subservicing with our MSR capital partners. And we expect that momentum to continue into the first half of 2026 with subservicing additions from these clients of over 2 times the first half of 2025. One area where we are seeing attractive growth opportunities is the small balance commercial segment, where our subservicing UPB is up 9% versus the second quarter and up 32% year-over-year. While the requirements are more complex than performing residential servicing, the returns are better, we have the expertise, and we're investing to drive continued growth here. Overall, we're excited about the growth potential in subservicing, and we continue to invest in our sales and operating capabilities to pursue a robust opportunity pipeline. Regarding our subservicing relationship with Rithm, we have received notice of nonrenewal and expect to transfer this portfolio to them starting in the first quarter of 2026. Approximately $8.5 billion of UPB requires trustee and other consent, the timing and success of which are uncertain. We appreciate the opportunity to have served Rithm and its customers for nearly 10 years. The Rithm subservicing is a shrinking portfolio of mainly low balance pre-2008 subprime loans and accounts for over half our delinquent loans and borrower litigation. The portfolio attributes result in a high cost of servicing and declining profitability. For the third quarter of 2025, the Rithm subservicing was less than 5% of our total adjusted revenues and one of our least profitable portfolios before corporate allocations. After corporate allocations, it lost money in the last 2 quarters, with the third-quarter loss increasing over the second. For the past several years, we've assumed in our planning that subservicing would not be renewed for the coming year, and our plans for 2026 assume the same. We expect to adjust our cost structure and replace the earnings contribution with more profitable business aligned with our current growth focus and not our past. We do not expect the removal of these loans to have a material financial impact for the full year 2026. Let's turn to Slide 10 to talk about our continued investment in technology. We've been investing across four categories of AI: Robotics, natural language processing, vision, and machine learning, to improve business performance and competitiveness on several dimensions. We've cultivated our own award-winning robotic process automation center of excellence and technology innovation lab, which support projects of increasing size and complexity. These projects typically focus on four desired outcomes: drive cost leadership, accelerate revenue growth, maximize customer retention, and deliver superior operating performance. I'm proud of what the team has accomplished through focused and purposeful investment to enable a highly competitive platform, top-tier recapture performance, and an improved customer experience. We continue to utilize this 4x4 approach to technology innovation to ensure our investments are aligned with delivering outcomes that matter most to our stakeholders. Let's turn to Slide 11 to see what we've accomplished and where we're taking our technology program. We believe our AI investments have been an important enterprise-wide performance enabler, creating value for all Onity stakeholders. Our past investments in AI have been focused on improving cycle times, processing costs, customer access and self-service, scalability of operations, customer opportunity identification, and reducing delinquencies. The outcomes of these efforts are reflected in the center column of this slide. And as you can see, they've had a profound impact on our business. Today, our focus is continued integration of robotics, large language models, and machine learning across all operations to empower our people and processes, where every process is optimized, every decision is data-informed, and every outcome is superior. For our people, our goal is to provide them with enhanced tools and data-enabled intelligence that drives heightened responsiveness, real-time decisions, and superior outcomes. For our customers, our focus is increased personalization, enhanced self-service, continuous improvement in ease of use, and anticipating their needs. The opportunity here is exciting, and the potential impact is incredibly powerful. Now I'll turn it over to Sean to discuss our results for the quarter in more detail.

Thanks, Glen. Let's turn to Slide 12 for a recap of the key financial measures. 2025 continues to be a strong year for us as evidenced by the following third quarter results. Revenue grew by double digits, both year-over-year and over the trailing quarter. This was driven by both the servicing and origination operating units. Our third quarter adjusted return on equity was 25% and exceeded our full year 2025 guidance, both for the quarter and year-to-date. Our ability to deliver steady net income added over $2 to book value per share in the quarter. Please turn to Slide 13 for a historical trend of our adjusted pretax income, which is positive for the 12th straight quarter. We posted a strong quarter for adjusted pretax income of $31 million. This shows the strength of our balanced business where originations and servicing each support growth in a diverse range of interest rate environments. The year-to-date adjusted ROE was 20% above the upper end of our guidance. And as mentioned, we expect to exceed our full year adjusted ROE guidance of 16% to 18%. GAAP ROE was 14%, and the appendix has a walk from net income to adjusted PTI to help you understand the differences. Please turn to Slide 14 for the pretax income results for the Originations segment. Originations adjusted pretax income was significantly higher year-over-year and versus last quarter. This was driven primarily by strong execution of recapture and improved performance in our B2B channel, which drove record funding levels and improved margins in most channels. Consumer Direct continued another strong quarter, driven by recapture performance, resulting in elevated funding volumes. We also benefited from stronger closed-end second volumes. Business-to-business saw elevated volumes and margins as well with growth in our Ginnie Mae mix. Reverse originations maintained profitability with higher margins on lower volumes. This was a breakout quarter for originations as we were able to post margin gains amid record volume. Please turn to Slide 15 for the Servicing segment. Servicing remained a solid contributor to adjusted pretax income with $31 million for the quarter. Forward servicing again experienced growth in average UPB with higher revenue both sequentially and year-over-year. The revenue lift from servicing growth was offset by higher runoff in the third quarter. This was driven by a greater amount of owned MSRs as well as higher prepay speed. The ability to capture some of this runoff is measured in the recapture metric. Reverse servicing pretax income rebounded to a positive $4 million in the quarter, driven primarily by stronger gain on sale on the reverse assets. Regarding delinquency, our owned MSR portfolio exhibited improved delinquency statistics again this quarter. For example, our Ginnie Mae MSR portfolio had better delinquency metrics than the broader Ginnie Mae market. Please see the MSR valuation page in the appendix for more details on delinquency by investor type. Page 16 will give you an assessment of our continued strong hedging performance. The hedge strategy on the MSR continues to perform well and as intended. As a reminder, our strategy is designed to mitigate interest rate risk and our hedge has been effective in minimizing the impact of interest rates on our MSR valuation, net of hedge, as you can see on the graph. Over the last two-plus years, we have increased our hedge coverage ratio such that by the end of 2023, we were seeking to hedge most of our interest rate exposure. When we compare our results with information in the public domain, we believe we provide an effective MSR hedge at an efficient cost relative to our peers. Given that an MSR hedge is dependent on interest rate and relative derivatives market, we frequently review and assess our hedge strategy to manage risk and optimize liquidity, as well as total returns. Please turn to Slide 17 for commentary on our guidance for full year 2025. As mentioned, following the strong quarter of net income, we now expect to exceed our 2025 adjusted ROE guidance. Note that this guidance on ROE is not dependent on the release of some of the valuation allowance but is rather driven by our view of the strength of the operating businesses. Our UPB growth for the full year is now estimated to be between 5% and 10% versus the prior guidance of over 10%. We don't believe the positive but smaller growth will have an adverse effect on our '26 forecast as we are generating growth in higher-margin servicing areas that need less UPB to deliver comparable pretax income. Consider Glen's earlier comments on commercial subservicing as an example. Overall, I'm pleased to report another good quarter that grew book value per share and delivered a continued strong return on equity for our shareholders. Back to you, Glen.

Thanks, Sean. Let's turn to Slide 18 for a few comments before we open the call for questions. We're focused on accelerating profitable growth and creating value for all stakeholders. I'm proud of the team's relentless focus on delivering on our commitments. Our strong third quarter results led by record originations volume validate our balanced business and its ability to perform through market cycles. We've built a technology-enabled, award-winning servicing platform that is efficient, delivers differentiated performance, and service excellence. We're delivering profitability comparable to our peers at a more attractive valuation, and we expect to exceed our adjusted return on equity guidance for the full year, underscoring our commitment to strong shareholder returns. All this comes together to suggest a share price that we believe has significant upside. And we intend to continue to take the necessary action and maintain agility in a dynamic market to harvest that value for the benefit of all stakeholders. Overall, we could not be more optimistic about the potential for our business. And with that, Aaron, let's open up the call for questions.

And we will go first to Bose George with KBW.

Regarding the upcoming transfer of Rithm, I wanted to ask about the portfolio. Based on your commentary, what is the present value of that? Is it essentially flat or potentially negative? How do you view that situation?

Yes. To provide some context, the Rithm portfolio is now about 25% of what it was five years ago and has significantly diminished. From a contribution perspective, this is one of our lowest margin portfolios. For comparison, Ginnie Mae owned servicing represents about four times the profit margin of the Rithm portfolio. In dollar terms, our $5 billion commercial subservicing portfolio generates a much higher profit before corporate overhead. The Rithm portfolio has experienced significant decline and likely only has another year of marginal profit potential, although that comes with various assumptions. Currently, the portfolio is quite small, with high delinquency rates and servicing costs. The Rithm team is responsible for servicing oversight, but the situation has become uneconomical for us and our clients. I have mentioned throughout this year and last that we anticipated this outcome, and now it has come to fruition. We will proceed with the transfer of the portfolio, adjust our operations accordingly, and remain optimistic about our growth potential to replace this business. There are several areas within our operations that offer much higher profit margins than the Rithm portfolio, and our team continues to show exceptional growth, surpassing the industry and many of our competitors.

Okay. Great. Regarding your ROE guidance, I assume it's based on your current capital, but by the end of the year, your DTA gets reversed and your capital increases. As that happens, it seems like the ROE will be slightly lower as a result. Is that correct? Also, you'll have a GAAP tax rate that will carry through next year. How does that all come together after that?

Yes, Sean, I'll turn it over to you.

Sure. Generally speaking, the directional changes you mentioned will occur. It all depends on the amount of the valuation allowance we release at the end of the year. You are correct that this will flow through and increase equity. Therefore, all else being equal, we will need to generate a higher return to maintain the same return on equity. Additionally, the effective tax rate will rise once we release the valuation allowance. If we release all of it, it will align with any other normal corporate taxpayer, which I believe is around 21% for federal and a bit more for state taxes. If we do a partial release, it will fall somewhere in between.

We can go next to Eric Hagen with BTIG.

With the valuation allowance expected to be released, can you comment on how that drives the appetite to hedge the portfolio? I mean, do you feel like that changes the interest rate risk profile of the capital structure in any way?

The short answer is no, we don’t. Our hedging strategy, approach, and hedge coverage ratio, as well as instrument selection, are mainly about protecting our book earnings, GAAP net income, and book equity. We also have secured MSR financing, so we consider the advantages and disadvantages of margin calls on our derivative instruments and our debt obligations. When evaluating these factors, along with the performance of our recapture platform on a portfolio basis, whether it’s agency versus government, I don’t expect the release of the valuation allowance to have a significant impact on our hedging decisions regarding MSR.

Okay. Got you. Any perspectives on prepayment speeds through September and October? I mean, can you share how flow MSRs are pricing over these last 6 or 8 weeks? And has the cash balance changed since the end of September as you guys have backfilled or presumably backfilled some of the MSR portfolio?

From a speed standpoint, when we release the Q, there will likely be some information there that allows us to calculate speeds. Speeds have increased. If you look at Slide 24, which shows our MSR valuation, you will see that the assumed life of portfolio prepayment speeds and the valuation have risen compared to periods when they were lower and the interest rate environment was higher with lower coupons relative to current market conditions. We noticed an increase in prepayments in the third quarter and an uptick in MSR runoff. However, our balanced business in originations performed very well, more than offsetting this, which was quite positive. Regarding the fourth quarter expectations, predicting interest rates accurately is challenging. According to the MBA and Fannie Mae forecasts, origination volumes for the fourth quarter are expected to be roughly the same as in the third quarter, but the mix is shifting. They anticipate some growth in refinancing volumes and a decrease in purchase volumes. Analyzing this data suggests that prepayment speeds may increase a bit in the fourth quarter, but this will heavily depend on where the average 30-year fixed mortgage rate settles during that time.

Yes. That's good color. I appreciate you guys. Can I sneak in one more? I mean, do you guys ever shock the MSR portfolio for changes in interest rates? And what is sort of the max drawdown, if you will, you think you guys can tolerate on the MSR portfolio? And aside from a change in rates or like speed assumptions, what are the variables that you feel like could lead to a correction in the MSR valuation? How do you harness that risk?

We conduct a significant amount of benchmarking in the MSR marketplace to assess our valuation of the MSR. This benchmarking helps ensure that the fair value of our portfolio is accurately represented. We analyze market transactions in both the secondary and bulk markets to support our valuations. Historically, we have sold parts of our MSR selectively to capitalize on market valuations that may exceed our assessment of the intrinsic value of the mortgage servicing rights. Last year, we executed a few such transactions, but this year we have not been active in that regard due to the strong performance of our recapture platform. We prefer to maintain those recapture opportunities. While we may occasionally consider synthetic subservicing trades with our capital partners to maintain a balanced mix of owned servicing and subservicing, our approach to asset management is dynamic. We do not become overly attached to any particular asset; however, we value maintaining a balanced 50-50 mix to optimize earnings growth and return on equity. Regarding MSR sensitivity to interest rates, our derivative hedging program has proven effective, and I commend our CIO and his team for their excellent management of MSR interest rate risk. A significant aspect of this is our originations team’s success in recapture efforts. The combination of operational and financial hedges provides us with considerable protection against fair value changes in the MSR. We conduct rate shock analyses for fluctuations of plus or minus 100 basis points and aim to maintain a specific hedge coverage ratio, which we've discussed previously. Overall, we are pleased with the performance of both the MSR and our hedging program, and we will continue to manage our MSRs dynamically. Should an opportunity arise to sell at a valuation that exceeds our intrinsic value, we will seize it, as we have done in the past.

At this time, there are no additional questions. I'd like to turn the program back over to Glen Messina for any closing remarks.

Thanks, Aaron. I'd like to thank our shareholders and key business partners for supporting our business. We also would like to thank and recognize our Board of Directors and global business team for their hard work and commitment to our success. I look forward to updating all of you on our progress at our next quarterly earnings call. Thank you for joining.

Thank you for your participation. This does conclude today's program. You may disconnect at any time.