Onity Group (NYSE:ONIT) used its full-year and fourth-quarter 2025 earnings call to highlight what management described as record earnings, record quarterly origination volume, and a notable increase in book value per share tied to the partial release of a deferred tax valuation allowance. Executives also detailed how recent government actions affected servicing results late in the year and outlined financial and operating targets for 2026.
Management says 2025 results showed benefits of a “balanced business” model
Chair, President, and CEO Glen Messina said the company’s performance in 2025 demonstrated the effectiveness of its strategy, emphasizing a model that balances mortgage originations and servicing along with an MSR hedging approach. Messina said the strategy worked as interest rates moved lower in the second half of 2025, with “higher origination earnings offsetting lower servicing earnings.”
Looking at longer-term trends, Messina pointed to three years of growth in adjusted revenue, which he said was supported by servicing additions, servicing unpaid principal balance (UPB) growth, and asset management. He said operating efficiency improved through “continuous process reengineering,” producing double-digit adjusted ROE over the past several years, though he noted the FHA rule changes and government shutdown had an estimated 3 percentage point adverse impact in 2025.
Originations: record volume and new products cited as contributors
In prepared remarks, Messina said Onity’s originations team delivered 44% year-over-year volume growth in 2025 compared with 18% industry growth. He highlighted growth in both business-to-business (B2B) and Consumer Direct channels, and said the company continues to deliver “industry top-tier recapture performance.” He also said fourth-quarter funded volume was the highest Onity has ever originated.
CFO Sean O’Neil said originations adjusted pre-tax income increased both year-over-year and sequentially, driven by record origination volume in Consumer Direct and B2B. O’Neil also attributed the volume to higher Ginnie Mae activity as well as product expansion, including closed-end seconds and a newly launched non-QM product suite.
In discussing channel performance, O’Neil said B2B volume exceeded a record third quarter, with higher volume and improved margins versus both the prior year and prior quarter. He credited an enterprise sales force, product breadth, and customer service delivery. For Consumer Direct, O’Neil said volume rose sharply amid strong recapture results, and he noted that revenue per loan and average loan size improved versus the prior quarter.
Servicing: profitability pressured by higher MSR runoff tied to FHA changes and shutdown
O’Neil said servicing remained profitable in the fourth quarter but was impacted by higher-than-expected MSR runoff expense. While UPB and revenue improved during the quarter, he said the higher runoff more than offset those gains.
He attributed the increased runoff beyond interest-rate-driven prepayments to two government actions: an FHA loan modification program change effective October 1, 2025, and a six-week government shutdown from October to November. O’Neil said the combined impact increased delinquencies and delayed cures, resulting in fewer borrowers moving from delinquent to current. He quantified the impact as approximately $14 million in additional runoff expense in November and December.
O’Neil detailed aspects of the FHA policy change, including the introduction of a three-month trial period before certain modifications, limits on modification frequency (once per 24 months), and the end of some loss mitigation structures dating to the COVID era. He said the industry saw an increase in the overall delinquency rate for FHA borrowers of about 80 basis points in the fourth quarter compared with the third quarter, and noted the changes “may accelerate some loans into foreclosure status in the near term” compared with prior rules.
Management said it expects delinquencies to continue trending higher in the near term and to stabilize by the second quarter of 2026, down from fourth-quarter levels but still elevated, assuming no further program changes or broader credit deterioration.
Capital, liquidity, and valuation allowance release boosted book value per share
O’Neil said fourth-quarter revenue increased 25% year-over-year and 6% sequentially, adding that originations continued to grow in what is typically a seasonally weaker quarter for the industry. He said adjusted return on equity was 7% for the quarter and 17% when adjusted for the impact of what management described as governmental actions.
O’Neil said book value per share increased by more than $11 quarter-over-quarter and $17 year-over-year, citing profitable operations and the release of $120 million of the company’s deferred tax valuation allowance in the fourth quarter.
Discussing the accounting change, O’Neil said Onity released the valuation allowance offsetting its net deferred tax asset as part of its quarterly review under ASC 740, based in part on consistent profitability over several years. He said the action improved net income in the fourth quarter and increased equity, which he said improved the company’s debt-to-equity ratio to 2.6 times. O’Neil said the remaining valuation allowance is $26 million, largely associated with state tax net operating losses, and he does not expect material near-term changes.
On liquidity, O’Neil said Onity ended 2025 with $205 million of liquidity, including $181 million of unrestricted cash and the balance in MSRs pledged but undrawn on a bank line. He also said the company issued $200 million of additional high-yield notes in late January at an effective yield of 8.5%, about 140 basis points better than the company’s 2024 issuance.
O’Neil said the company had not yet closed its Finance of America Reverse MSR transaction, which is awaiting Ginnie Mae approval, and said the closing is expected to generate roughly $100 million in proceeds. Messina described the Finance of America Reverse agreement as a strategic partnership that repositions Onity’s participation in reverse mortgages toward subservicing.
O’Neil also said the board approved a $10 million share repurchase program that can be funded from year-end 2025 liquidity.
2026 outlook: ROE target, UPB growth expectations, and restructuring costs
For 2026, management guided to adjusted ROE of 13% to 15%, reflecting the larger equity base after the valuation allowance release. O’Neil said the same range would be 16% to 18% absent the increase in equity and estimated the valuation allowance release reduces adjusted ROE by about 300 basis points.
Additional 2026 items discussed included:
- Effective tax rate: O’Neil said Onity currently expects an effective tax rate of 28% to 30% in 2026 due to certain permanent expense disallowances.
- Restructuring and indemnification costs: O’Neil said the combined impact of Rithm-related restructuring and Finance of America indemnifications and restructuring costs is expected to be $19 million to $20 million, affecting GAAP net income but not adjusted ROE.
- Servicing book growth: O’Neil said Onity anticipates 5% to 15% servicing book UPB growth, including the effect of not renewing the Rithm contract, which had roughly $32 billion of UPB at year-end 2025.
Messina said Onity will remain focused in 2026 on organic growth, technology investments, and simplification actions, including transitioning out of the legacy Rithm subservicing relationship and focusing reverse mortgage participation on subservicing. He also said the company will evaluate opportunistic bulk acquisitions and M&A when economics are compelling.
During Q&A, management said it was difficult to quantify the future quarterly dollar impact of the FHA-driven delinquency dynamics beyond the fourth quarter, citing uncertainty in borrower behavior under the new rules. Onity reiterated its expectation that the delinquency trend stabilizes by the second quarter of 2026. Management also said it did not see a material impact on refinance recapture performance from the government shutdown.
About Onity Group (NYSE:ONIT)
Onity Group, listed on the New York Stock Exchange under the ticker ONIT, is a technology company specializing in enterprise operations management software. Its platform is designed to help legal, finance, human resources and corporate services teams automate and streamline mission-critical workflows. Leveraging artificial intelligence and no-code automation tools, Onity’s solutions aim to reduce manual processes, improve visibility and ensure compliance across complex organizational structures.
The company’s flagship offerings include contract lifecycle management, matter management, e-billing and spend management, as well as enterprise deal management.
