Good day, and welcome to the Onity Group's Third Quarter Earnings and Business Update Conference Call. [Operator Instructions] 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 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…

Thanks, Glenn. 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…

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 validates 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.

[Operator Instructions] And we will go first to Bose George with KBW.

Just on the Rithm, the transfer that's going to happen. When you look at that portfolio, just based on your commentary, what's the -- like the present value of that, was it basically flat or even negative? Just how do you think about that?

Yes. To put it in context for you, Bose, look, that portfolio is about 25% of the size it was about 5 years ago. So it's really run down quite a bit. From a contribution perspective, look, we said it was one of our lowest margin portfolios. Look, if you compare it to Ginnie Mae owned servicing, for example, Ginnie Mae owned servicing has about 4x the profit margin of the Rithm portfolio. And looking at it on a dollar value basis, our $5 billion commercial subservicing portfolio generates a multiple of the dollar profit before corporate overhead. So it's really run down quite a bit. We -- the portfolio probably had maybe another year of marginal profit contribution associated with it. Again, that has a lot of assumptions baked in it and stuff like that. But look, it's gotten to the point where the portfolio is so small, delinquencies are high, cost of servicing is high. I'm sure for the Rithm team, they've got servicing oversight responsibilities. It's just at the point where it's pretty much getting to where it's uneconomical for us and our clients to maintain the current relationship. And I've said it throughout the course of this year and even last year, this was an eventuality. It was inevitable, and we're at that point. And yes, so we're going to get on with it. We'll transfer the portfolio, adjust our operations accordingly and feel good about the growth pipeline we have to replace the business. And again, there's many areas of our business have a much higher profit margin than the Rithm portfolio. And we've got a strong team that is demonstrating incredible growth, outpacing the industry and many of our peers.

Okay. Great. And then just 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 goes up, I guess, as that happens and the ROE on that, obviously, I guess, will be a little bit lower because of that. Is that right? Or if you can -- you'll have a GAAP tax rate that will run through next year as well. So where does that kind of shake out after that?

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

Sure. Bose, Yes, generally speaking, the directional changes you indicated are what will occur. It's all dependent on the amount of the valuation allowance that we do release at the end of the year. But you are correct, that will flow through. It will increase equity. And therefore, all else being equal, we'll have to generate a higher return to maintain the same ROE. And then the tax rate -- the effective tax rate will go up once we release the VA. If we release all of the VA, it would look in line with any other normal corporate taxpayer. I think 21% federal and a couple more for states. And then if we do a partial release, it will be somewhere in between.

[Operator Instructions] 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?

Yes, the bottom line is the short answer is no, we don't, right? Look, we -- our decision of hedging -- our hedge strategy and approach and hedge coverage ratio, instrument selection and all those things is really a function of protecting book earnings, I should say, GAAP net income, book equity. And as well, we do have secured MSR financing. So we take into consideration the pluses and minuses of margin calls on our derivative instruments as well as margin calls on our debt obligations. So when we take all those factors into consideration and as well the recapture -- performance of our recapture platform as well, too, and that's done on a portfolio basis, agency versus government and the like. Yes, whether or not we -- how much of the valuation allowance gets released, I don't expect will have a material impact in terms of how we think about hedging our 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?

So from a speed perspective, Sean, (sic) [ Eric ] when we release the Q, there'll probably be some information in the Q where we can go and calculate speeds. I mean, obviously, speeds are up. I think if you look at Slide 24, which is our MSR valuation page, you'll probably notice that speeds -- the presumed life of portfolio prepayment speeds and the valuation have increased versus periods when they were lower, the interest rate environment was higher and the coupon was lower relative to current market conditions. So yes, we did see an uptick in prepayments in the third quarter. We did see an uptick in MSR runoff. But again, the balanced business, originations performed very, very well and frankly, more than offset that, which was really pretty good. In terms of the fourth quarter and what we would expect, look, we -- I don't think anybody's crystal ball on interest rates is magically correct. When we look at the MBA and the Fannie Mae industry forecast, they are expecting origination volumes for the fourth quarter to be roughly consistent with where they were in the third quarter. Mix shift is a little bit different, though. They are expecting a little bit more or some growth in refinancing volume and a decline in purchase volume. So if you look at that and parse that data, it would suggest that perhaps speeds may pick up a bit in the fourth quarter. But again, it is going to be highly dependent upon where the average 30-year fixed rate mortgage rate settles in for the fourth quarter.

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?

Yes. Yes, Eric, we do a fair amount of benchmarking to bulk trades in the MSR marketplace as we think about our valuation of the MSR. We use that as benchmarks to make sure that our portfolio fair value is stated correctly. We look at market transactions in the secondary market or bulk market to support that. As you know, we have historically from time to time, sold portions of our MSR either on a subservicing retained or servicing release basis to take advantage of what we believe are valuations in the market that are better than what we see as intrinsic value in the mortgage servicing rights. Last year, we did a couple of trades like that. This year, we haven't largely because our recapture platform is performing so well. I don't want to give up the recapture opportunity in the portfolio, right? So that's not necessarily a focus for us. And from a portfolio balance perspective, we may from time to time consider synthetic subservicing trades with our capital partners to balance our 50-50 mix of owned servicing and subservicing. So Look, we are -- we take a dynamic approach to asset management and our MSR management. We don't fall in love with any of our assets. But we do like that 50-50 mix and think that serves best for us to optimize earnings growth, dollar earnings growth and return on equity. In terms of the MSR sensitivity to interest rates, the chart that Sean talked about showed the effectiveness of our derivative hedging program on the MSR. It's performed very, very well. Super proud of our CIO and his team and the work they're doing to manage the MSR interest rate risk. And a good portion of that is our originations team and how they're doing from a recapture -- how well they're doing from a recapture perspective. So the combination of the operational hedge and the financial hedge really gives us, we believe, nice protection on fair value changes to the MSR. As a matter of our -- when we look at our hedging performance, we do rate shock analysis for plus or minus 100 basis points. We do target a hedge coverage ratio. And I think we've talked about all those things in the past. So really pleased again with how the MSR is performing, how our hedge program is performing. And we'll continue to take a very dynamic approach to managing MSRs. And if there's an opportunity to sell at a value above what we believe is intrinsic value, as we have in the past, we'll harvest that opportunity.

[Operator Instructions] 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.