ONIT

Strategic Growth & Technology Investments

• Ongoing technology investments are delivering tangible operational improvements, including AI-powered tools that increase customer engagement, optimize marketing and sales performance, and reduce servicing costs. AI-enabled contact center tools are projected to deliver $3 million in annual savings at current portfolio size.
• Industry consolidation among subservicers has created new growth opportunities, and the company is winning new clients across capital partners, banks, and independent mortgage banks with a strong value proposition and platform performance. The company secured its first single family rental securitization subservicing mandate for a top-tier client.

Portfolio & Operational Optimization

• The company completed the sale of 80% of its reverse mortgage MSR assets to Finance of America, which simplifies the business, reduces balance sheet volatility, and frees up strategic focus. Retained reverse assets have shorter duration and lower sensitivity to spread movements.
• 12-month trailing operating efficiency continues to improve, reflecting the company's long-term focus on cost-effective sustainable growth. Book value per share is up approximately $13 year-over-year.

Capital Allocation

• Capital deployment priorities are: 1) organic growth including owned MSR growth via originations and product line expansion, 2) maintaining sufficient liquidity and capital buffers to meet regulatory requirements and stress scenarios, 3) returning capital to shareholders.
• The company completed a $10 million share buyback and is executing an ongoing $20 million share repurchase program, reflecting management's view that the stock is materially undervalued relative to book value.

• Management revised full-year 2026 adjusted pre-tax income guidance to the lower end of the prior 10% to 15% range, based on current market conditions and first half 2026 results.
• All other guidance elements are maintained: the company reaffirmed its outlook for continued growth of the total servicing book, further operating efficiency improvements, and strong hedging performance.

1. Originations: Funded volume reached $15.5 billion, the largest quarterly volume in company history. Pre-tax income grew over three times year-over-year, with margins improving alongside volume growth across channels. The B2B (correspondent/co-issue) channel was the strongest contributor to volume growth. Consumer direct remained profitable but reported lower adjusted pre-tax income quarter over quarter due to a 30% sequential drop in lock volume and elevated operating expenses from lagged first quarter refinance surge commissions. Growth product second liens volume more than doubled year-over-year, reaching over $70 million in funding for the quarter. Total year-over-year company revenue grew 24%, driven in part by origination volume and execution improvements.
2. Servicing: Total servicing UPB grew 10% year-over-year, outpacing industry growth of 3%, with growth in both owned MSR and subservicing. Net of runoff, servicing additions totaled $76 billion for the quarter. Servicing revenues grew 13% year-over-year and 3% sequentially, driven by owned MSR volume growth. Adjusted pre-tax income for servicing improved sequentially due to higher float income and lower runoff with stable elevated mortgage rates, but remains lower year-over-year due to higher runoff partially offset by revenue gains. Subservicing added $35 billion in UPB, exceeding prior guidance, with UPB for business purpose residential and commercial subservicing up 25% year-over-year. Servicing advance balances have declined 33% over the past two years even as UPB grows, with targeted strategies focused on high-advance delinquent non-agency loans.

• Reverse MSR assets have far higher fair value volatility than forward MSR assets driven by interest rate and spread movements, though this risk is greatly reduced after the sale of 80% of the reverse portfolio.
• MSR fair value is exposed to periodic volatility from changes in interest rates, prepayment assumptions, default rates, delinquency status, servicing cost assumptions, ancillary income, and bulk market MSR prices. Elevated prepayment speeds (driven by lower mortgage rates and refinance surges) increase runoff that negatively impacts net income.
• GSE 30-day delinquencies saw a quarterly uptick, though management notes this is likely seasonal, and longer-term 60+ and 90+ delinquency metrics are the primary focus for monitoring borrower stress.
• Increased bank competition for MSR assets and correspondent originations creates competitive pressure, particularly if proposed capital regulation changes for bank MSR holdings lead to larger bank expansion in the mortgage sector.

Q: The company is targeting a 10-15% adjusted pre-tax ROE, and is currently at ~9% amid market volatility. What actions will bridge the gap to the target range? / A: Management states that three core ROE expansion strategies: growing servicing scale, portfolio optimization, and technology-driven productivity will drive improvements. Origination pipeline hedging volatility, which impacted results in the first quarter, was far more stable in the second quarter alongside improved margins and record origination volumes. If rates stay elevated, the high runoff that pressured adjusted pre-tax income over the prior three quarters should moderate, boosting servicing income, while originations continue to generate consistent pre-tax income even in volatile markets.

Q: How are banks evolving as competitors in the current market, and what is the competitive landscape for the correspondent channel, particularly at the GSE cash window? / A: Banks have strong demand for MSR assets in the current market, and if proposed capital rule relaxations for MSR holdings go through, incumbent bank mortgage franchises will likely grow further. Few banks are expected to enter the market from scratch, which increases the strategic value of scaled non-bank platforms like Onity. The correspondent team has executed very well with a value-focused enterprise sales strategy, delivering improved margins and record volume despite the competitive landscape.

Q: What are the building blocks for hitting the low end of the ROE range, specifically what drives the consistently strong other revenue line, and is that performance sustainable? / A: Other revenue is primarily driven by ancillary income from the growing owned MSR portfolio, including data revenue and ancillary fees tied to servicing asset growth. Management confirms this revenue stream is sustainable and will grow alongside the continued expansion of the owned MSR portfolio.