- What's at Stake: Whether smaller lenders can maintain volume as the market enters a difficult 2027.
- Supporting Data: After spending last quarter in the red, Onity recorded $3.5 million in net income attributable to common shareholders and $29.6 million in adjusted pretax income.Overview bullets generated by AI with editorial review.
Onity Group's recapture rate topped 50% in the third quarter, up 18 percentage points from a year ago. The lender is using its servicing book to grow volume while the rest of the industry shrinks.The servicing segment produced $7 million in pretax income and $29 million on an adjusted basis, up from $12 million in the second quarter. Originations totaled $23.7 million in adjusted pretax income, down 15% from $27.8 million the previous quarter, according to the company's third quarter earnings release.
"The big benefit for them is being a relatively large servicer," Bose George, mortgage finance analyst at Keefe, Bruyette & Woods, told National Mortgage News. "In the
A model for smaller lenders
Onity's performance signals a shift some lenders can make. While it's difficult for larger originators to outperform the market due to their scale, George said, smaller lenders should take a more servicing-forward approach to maintain volume as the market enters what is expected to be a difficult year in 2027.
"In a market environment that is increasingly favorable for servicing and more challenging for originations, our complementary businesses returned the company to profitability and more than doubled adjusted return on equity from the prior quarter," Onity President and CEO Glen Messina said in a press release Thursday.
Growing the servicing book
Onity reported $24.7 billion in total servicing additions last quarter, bringing its total unpaid balance to $343 billion, up 9% from the same quarter last year. Subservicing additions reached $53 billion by the end of the quarter, exceeding its full-year target. Chief Financial Officer Sean O'Neil said on the earnings call that Onity plans to be more selective in its expansion going forward.
Cost advantage
The company has been pursuing efficiencies by reducing its headcount and improving technology. It did not disclose layoffs on the call, but said its investments have decreased the cost per loan to $94, below the independent mortgage bank average of $112 per loan.
"The technology, not just for them but the whole industry, has really improved," George said. "The expectation is that costs will continue to come down as technology becomes more efficient."
Earnings turnaround
After spending last quarter in the red, Onity recorded $3.5 million in net income attributable to common shareholders and $29.6 million in adjusted pretax income. Both came in below last year's marks but were notable improvements over its second-quarter performance, which featured a $12.9 million net loss.
Adjusted earnings per share came in at $2.93, beating BTIG's prediction of $1.60 and S&P Capital IQ's consensus estimate of $1.67. Revenue totaled $278.1 million, down slightly from $282.9 million in the second quarter and $280.3 million last year.
