insidermonkey.com · Feb 17, 2026 · Collected from GDELT
Published: 20260217T144500Z
Ocwen Financial Corporation (NYSE:OCN) Q4 2025 Earnings Call Transcript February 12, 2026Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to assist you. Hello, and welcome everyone joining today’s Onity Group Inc.’s Full Year and Fourth Quarter Earnings and Business Update Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please follow the operator’s instructions. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Valerie C. Haertel, Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Onity Group Inc.’s full year and fourth 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 A. Messina and Chief Financial Officer, Sean Bradley 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 A. Messina.Glen A. Messina: Thanks, Valerie. Good morning, everyone. And thank you for joining our call. We are looking forward to sharing our results for the fourth quarter and full year as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let’s get started on slide three. Our fourth quarter and full year results again demonstrate the effectiveness of our strategy and the strength of our execution. We delivered record earnings through sustained growth and profitability that enabled a significant partial release of our deferred tax valuation allowance. Our balanced business and MSR hedging strategy performed effectively as rates move lower in 2025 with higher origination earnings offsetting lower servicing earnings. Our fourth quarter results were impacted by $14,000,000 of incremental MSR runoff due to higher delinquencies driven by the changes to the FHA loan modification rules and the government shutdown. We believe this will stabilize in 2026. Sean will talk more about this later. Finally, we executed a strategic partnership with Finance of America Reverse to reposition our participation in the reverse mortgage market to simplify the business, which we believe will drive future earnings growth and improve shareholder returns.Glen A. Messina: Overall, we had a great 2025. And I am proud of our team and what they accomplished. Considering the macroeconomic environment, our liquidity position, and our continuing investment in talent and technology, we are excited about the potential for our business in 2026. Let’s turn to slide four to review a few key financial trends. Over the last three years, we have delivered continued growth in adjusted revenue through steady growth in total servicing additions, servicing UPB, and dynamic asset management. The combination of revenue growth and focus on continuous process reengineering has driven steady improvement in operating efficiency. This has resulted in solid double-digit adjusted ROE over the past several years, notwithstanding the adverse impact of the FHA rule changes and government shutdown which was roughly a three percentage point impact in 2025. Our sustained and growing profitability has driven continued growth in book value per share which was accelerated this year through the deferred tax valuation allowance release made possible by our actions to transform our business. Let’s turn to slide five for more about the capability of our balanced business. There is no better proof of the effectiveness of our balanced business model than our results in 2025. You can see on the left the contrast in how originations and servicing contribute to the company’s financial performance as interest rates change throughout the year. With higher rates in the first half, both servicing and originations were profitable, and servicing was the primary earnings driver. In the second half of the year with falling rates, originations took over as the primary earnings driver. We believe our balanced business is performing as intended and our scale in both servicing and originations enables us to perform well with high or low interest rates. Let’s turn to slide six for more about our growth actions and focus. In 2025, our originations team delivered 44% year-over-year volume growth, versus 18% for the overall industry. In business-to-business, our enterprise sales approach, product breadth, and client service delivery model have been highly effective growth enablers. Consumer Direct is demonstrating strong growth, driven by declining rates in 2025 and improved execution. We continue to deliver industry top-tier recapture performance versus the industry averages and our target peers. We are launching new and upgraded products and services to expand our addressable market, access higher-margin market segments, and manage operating capacity for surges in refinancing activity. We have 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. To highlight how far we have come, our fourth quarter funded volume was the highest we have ever originated. Now please turn to slide seven for an example of how our technology is continuing to enhance refinance recapture performance. We have been investing across four categories of AI—robotics, natural language processing, vision, and machine learning—to improve business performance and competitiveness on several dimensions. While not exhaustive, this slide illustrates the approach we follow in deploying AI to improve recapture performance. As we look across the refinance customer journey and improved customer experience, we are aligning AI efforts with key points along the journey that contribute to an improved refinance recapture rate. Our biggest performance gains have come from using machine learning to bring together internal and external data about our customers, their loan, and our processes. This has helped us enhance communications, manage capacity more dynamically, and better inform decisions and actions across the borrower journey. We use machine learning to identify customer and loan-level characteristics that we believe are predictive to total MSR return, including expected loan performance and recapture propensity. This helps shape our MSR investment and asset management decisions. Other elements of our AI strategy include large language models and robotic process automation that are targeted to improve the human–machine interface and operations capacity, streamline processes, and reduce cost. Ultimately, all these investments resulted in improved borrower experience. Let’s turn to slide eight to see what we have accomplished in subservicing. We continue to see a high level of interest amongst prospective clients to explore servicing options and alternatives. Our second half subservicing additions of $33,000,000,000 were over two and a half times the first half level, driven by new relationships, our existing clients, and synthetic subservicing with our MSR capital partners. And we expect that momentum to continue into 2026, with projected subservicing additions of $28,000,000,000 from these clients. We expect to board eight new clients in 2026 and have another eight new agreements under negotiation. We continue to see attractive growth opportunities in small balance commercial, where subservicing UPB is up 31% year-over-year. While the requirements are more complex than performing residential servicing, we believe the returns are better. We have the expertise and we are investing to drive continued growth in 2026. Overall, we are 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 expect the transition to begin in 2026. As a reminder, the Rithm subservicing is one of our least profitable portfolios before and after corporate allocations. We expect to adjust our cost structure and replace the earnings contribution from the Rithm portfolio with more profitable business that is better aligned with our current growth focus. 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 nine to talk more about how we have grown ou