Onity Group Q3 2026 Earnings Call Transcript

Onity Group (NYSE:ONIT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Onity Group reported improved financial performance in Q3 2026, with net income and adjusted ROE increases from the previous quarter, driven by strong servicing income amid rising interest rates.

The company is focusing on servicing scale, portfolio optimization and technology-driven productivity to improve long-term ROE. It aims to reduce costs per loan by increasing servicing UPB and leveraging machine learning for MSR selection.

Management remains optimistic about meeting full-year guidance, expecting servicing to be the primary earnings driver if current interest rates persist, while continuing to invest in technology to enhance customer engagement and operational efficiency.

The company’s capital allocation strategy includes potential share repurchases and debt reduction, given current market conditions and improved financial metrics, including a 19% adjusted ROE.

Onity Group is actively managing its cost structure to adapt to the market cycle, targeting over $50 million in operating expense reductions for 2027, while maintaining liquidity and strategic flexibility.

Full Transcript

OPERATOR

Hello and welcome everyone joining today’s Onity Group third 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 press star-1 on your telephone keypad. Please note this call is being recorded. We are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Valerie Hartel, Vice President, Investor Relations. Please go ahead.

Valerie Hartel (Vice President, Investor Relations)

Good morning and welcome to Onity Group’s third quarter 2026 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 Glenn Messina and Chief Financial Officer Sean O’Neil. As a reminder, our comments today may be forward-looking statements made pursuant to the safe harbor provisions of the Federal Securities Laws. These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks and uncertainties, including those described in our SEC filings.

In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pre-tax 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 Glenn Messina.

Glen Messina (President and CEO)

Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We’re looking forward to sharing our results for the third quarter as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let’s get started on Slide 3. In the third quarter, our balanced business and strong execution delivered improved financial performance versus the second quarter despite continued market volatility and rising interest rates. Our growth engine is working well with third quarter year-to-date subservicing additions exceeding our full-year target and record origination volume reflecting the tail end of the refinancing surge. Assuming interest rates remain at current levels, we expect servicing will be the primary earnings driver going forward and we’re adjusting our originations platform accordingly.

We believe we’re on track to achieve our full-year adjusted ROE guidance. Let’s turn to Slide 4 to review a few key financial highlights. Both servicing and origination contributed to a profitable third quarter with rising interest rates driving increased servicing income offsetting declining origination income. Total company net income, adjusted pre-tax income and adjusted ROE are all improved from the second quarter. Our third quarter financial results include $11 million pre-tax, or $0.95 per share after tax, unfavorable impact of market volatility on hedge costs and agency loan sales versus the second quarter.

Total servicing UPB was up 9% year over year with strong total servicing additions from both origination and subservicing. Consumer Direct performed well, delivering funded volumes up 67% over last year with continued improvement in refinance recapture rate, which remains above industry average. Overall, despite challenging market conditions, we delivered improved financial performance and believe our third quarter results demonstrate our strategy is sound and execution is strong.

Let’s turn to Slide 5 to discuss the actions we’re taking that we believe will improve long-term ROE performance. Our ROE improvement actions are organized into three categories: servicing scale, portfolio optimization and technology-driven productivity. Scale is a focus because we estimate that an incremental $50 billion of servicing UPB has the potential to reduce fixed cost per loan by 14%, assuming our current cost structure. As we grow our servicing portfolio, we’ll continue to target roughly a 50/50 mix of owned servicing and subservicing, which we believe balances capital efficiency, earnings-per-share growth and ROE.

Next is optimizing our servicing portfolio. We’re leveraging machine learning, using client, asset and consumer data to identify what we believe are the most profitable MSRs to focus our origination activities and improve returns. Based on this work and the projected origination market environment, we intend to be significantly more selective in the MSRs we purchase and hold going forward. In subservicing, we’re focused on growing with higher-margin accounts and segments like business purpose, residential and commercial that require specialized capabilities that we already possess.

Finally is technology-driven productivity. We’ve significantly reduced expenses since the acquisition of PHH while growing our portfolio and developing new capabilities. Using robotic process automation, intelligent document processing and natural language processing, we’ve reduced manual effort, transformed how we work and improved customer engagement. We believe our cost structure is highly competitive and we expect future investments will help drive additional productivity, improve recapture and enhance the customer experience.

Let’s turn to Slide 6 to review our balanced business model. While we may experience variability in any given quarter due to change in market dynamics, our balanced business continues to demonstrate long-term resiliency. The complementary profit dynamics of origination and servicing balance each other as interest rates change. In the 12 months ending third quarter 2026 versus the 12 months ending third quarter 2025, origination income has increased over two times due to lower rates in the first half of this year, helping to offset declining servicing income from higher prepayment and MSR runoff.

And with interest rates increasing in the third quarter, servicing adjusted pre-tax income has improved, offsetting declining origination income. We continuously optimize operations capability and scalability as well as our MSR investment profile to enable our balanced business model to operate as intended through interest rate cycles. Assuming interest rates remain at the current levels, we expect servicing will be the primary earnings driver and we’re right-sizing our originations platform accordingly.

Let’s turn to Slide 7 for more about our growth focus and actions. Third quarter origination volume reflects the success of our value-based sales approach as clients clear their inventory of closed loans from the end of the refinancing surge. We delivered over 30% year-over-year growth in both B2B and Consumer Direct, outpacing the overall industry, with refinance payoff units up 10% year over year. We’ve improved our overall refinance recapture rate to 57% in the third quarter, up 18 percentage points versus the prior year.

Our recapture performance has continued to outpace the ICE industry average for the last 12 months and we believe we’re delivering top-tier recapture performance versus our third-party origination-centric peers. With mortgage rates increasing, we’ve seen a doubling of home equity product volume versus the third quarter last year. We believe this is a valuable product suite for consumers and one that helps us manage operating capacity and improve customer retention.

As a reminder, we do not include home equity volume in our refinance recapture rates. Our originations team is performing well and we remain committed to our prudent, capital-light growth strategy, value-based selling and leveraging technology to enhance performance. Let’s turn to Slide 8 to discuss subservicing. Our differentiated servicing platform and compelling value proposition is driving key wins with new clients as well as growth with existing clients. Year to date, third quarter subservicing additions of $53 billion exceeded our full-year target ahead of expectation. We’ve earned key wins with capital partners, banks and independent mortgage banks and continue to have an active opportunity pipeline across all three segments.

We’re excited about the growth we’re seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 46% versus prior year and we remain focused on growing this higher-margin segment. Overall, we’re pleased with our results in subservicing and we continue to invest in people, processes and technology to expand our capabilities and deliver superior value and service. Let’s turn to Slide 9 to talk about how we’ve grown our servicing portfolio. Total servicing UPB ended the quarter up 9% year over year, with growth in both owned MSR and subservicing versus 3% for the total industry servicing growth year over year. Servicing additions net of runoff of $76 billion was largely driven by organic growth and more than offset planned transfers to Rithm and other client-driven deboardings due to asset sales. With higher interest rates and MSR demand keeping prices elevated, we continue to see clients sell their older MSRs while replenishing their portfolio with new originations.

We believe our portfolio growth demonstrates the strength of our value proposition and our ability to compete effectively for business. Let’s turn to Slide 10 to talk about how our continued investment in technology is improving business performance in Consumer Direct. Our technology investments help improve the key drivers of recapture: engagement, conversion and platform scalability. Our objectives are to provide a seamless customer experience, increase straight-through processing and automate elements of our processes that require manual intervention by our customers and employees.

We use multiple categories of AI, including predictive analytics, to transform borrower signals into actionable decisions. Omnichannel engagement helps maximize customer connectivity across digital and non-digital channels. Intelligent document processing facilitates data extraction, validation and document routing, and intelligent workflows elevate service, reduce manual effort and enable high-value work. These technologies have positioned us to double cash-out telemarketing conversions, reduce turnaround times, increase approval rates, improve Net Promoter Score and reduce cost per loan.

Now let’s turn to page 11 to review how we’re using technology in servicing. We’ve applied many of the same technologies to realize our servicing objectives of enhancing borrower engagement, satisfaction and loyalty, streamlining operations, growing servicing and subservicing relationships and increasing platform scalability. We’re using predictive analytics to anticipate borrower needs and drive proactive support. Omnichannel engagement helps us deliver seamless support across customer-preferred channels.

Intelligent document processing enables data extraction, validation and document routing, and intelligent automation streamlines exception management and eliminates manual effort to perform routine tasks. These technologies have allowed us to eliminate thousands of hours of manual work activity, improve agent satisfaction ratings and maintain servicing cost per loan more than 30% lower than the MBA large non-bank servicer cost average. Now I’ll turn it over to Sean to discuss our financial results in more detail.

Bradley Sean ONeil (Chief Financial Officer)

Thanks, Glenn. Let’s turn to slide 12 where we describe our income drivers. Third quarter showed a strong improvement to adjusted pretax income, which more than doubled to $30 million and delivered a 19% adjusted ROE. Net income available to common stockholders also improved $16 million to $3.5 million due to high interest rate volatility. Net income still had to overcome higher MSR hedge costs and origination pipeline execution, which created $11 million of higher expense in the third quarter versus the second quarter.

The business model was very balanced across adjusted PTI with servicing contributing $29 million versus a $24 million contribution from originations, and corporate costs came down slightly. Servicing saw improved PTI as rates increased, with originations coming in lower than the prior quarter. We expect that this trend will continue if rates remain elevated on a sequential basis. Other key financial metrics improved. Diluted earnings per share increased to $0.41 and book value per share rose to $74. Our end-of-period liquidity was strong at $284 million. As a reminder, servicing typically sees intramonth swings, with peak liquidity occurring at the end of the month as remittances flow in for mid-month subservicing advances. In addition, there are quarterly or seasonal liquidity impacts, such as interest rate payments on our high-yield debt in May and November.

Also, rate volatility can cause mark-to-market impacts on the MSR asset that requires margin calls. These are just a few of the drivers that impact our decisions to allocate liquidity to other uses. Please turn to Slide 13 for details on operating expenses in all three reported segments. Originations, servicing and corporate operating expenses were lower quarter over quarter as we carefully managed headcount and other variable expenses while origination locks slowed in Consumer Direct. We also shed costs in servicing as we reduced some high-cost subservicing relationships. These actions led to improvements in operating efficiency for the company.

We are continuing to reduce costs to be aligned with the market cycle we are currently experiencing in anticipation of generally higher mortgage rates for a prolonged period. We expect to have over a $50 million improvement in lower operating expenses for full year 2027. This represents more than a 10% reduction from the forecasted full year 2026 expense base of about $500 million. Please turn to Slide 14 for servicing details. Revenue in our servicing segment declined slightly quarter over quarter. Importantly, adjusted pretax income rose as we exited the lower-margin businesses in the first half of 2026. The improved servicing pretax income was also driven by lower runoff. Finally, growth in higher-margin businesses like commercial subservicing also helped the improvement quarter over quarter. Our owned MSR book grew about 20% year over year, helping drive revenue, net income and cash flows.

As a reminder, the fair value of our reverse HECM MSR assets is markedly smaller both year over year and quarter over quarter as a result of the sale to Finance of America, which closed at the end of the second quarter. Please turn to Slide 15 for servicing advances. We have reduced servicing advance balances by 28% over the last two years, even as we have grown owned servicing UPB, by focusing on the small percentage of loans that drive the biggest advances. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our non-agency owned MSR book. By continuing to deploy various technology strategies, some of which Glenn referenced earlier, we believe we can lower costs and simultaneously improve customer outcomes.

Please turn to Slide 16 for our hedging strategy. Our MSR hedge strategy continued to perform as intended. As a reminder, our strategy is designed to mitigate interest rate risk, and our hedge has been effective in minimizing the impact of interest rates on our MSR valuation net of hedge. Given that an MSR hedge is dependent on the interest rate and related derivatives markets, we frequently review and assess our hedge strategy to manage risk and optimize liquidity and total returns.

Please turn to Slide 17 for originations. Originations pretax income was down slightly quarter over quarter due to higher rates in the third quarter compared to the prior year. Our adjusted PTI was roughly similar despite Q3.26 being less favorable than Q3.25 for an originations rate environment. The strongest contributor for adjusted pretax income was the B2B channel. This is both correspondent lending and co-issue. This was partly driven as we harvested the trailing volume from the refi surge earlier in the year.

Pretax income came down as a result of post-pricing changes, such as the agency loan sale impacts mentioned previously. We are focused on AI-assisted analytics to identify what we believe are the most profitable MSRs to acquire as part of our origination activities to improve returns. Based on this work and the projected origination market environment, we intend to be even more selective in purchasing and holding MSRs going forward. The Consumer Direct channel experienced lower volumes on a sequential quarter basis but much improved margins. Part of the margin improvement was due to an expanded suite of second-lien products, which allowed us to continue to generate cash-out refinancing income in a declining market. On a year-over-year basis, Consumer Direct had both volume and margin improvement. Similar to last quarter, Consumer Direct experienced lower pull-through adjusted lock volume as we entered the fourth quarter, with locks coming down by about 23% from September into October, and lock volume is the key metric for recognizing revenue.

Lower operating expense from declining headcount and lower commissions in the third quarter also contributed favorably to adjusted pretax income levels. On page 18 we discuss our capital allocation process. Our considerations focus on organic growth, liquidity and returning capital to investors. Examples of organic growth opportunities include adding owned MSR and broadening our product offering, such as our efforts on second liens. In parallel, we aim to maintain sufficient liquidity to ensure we meet both regulatory and lender requirements and hold enough of a buffer for various stress scenarios.

We also consider ways to return capital to investors, whether via a stock repurchase or bond buyback, which is contingent upon market conditions. We monitor both the equity and bond markets closely to evaluate opportunities to drive value to our shareholders. Please turn to Slide 19 for adjusted ROE performance. In the third quarter we saw strong improvement in adjusted ROE, reflecting our balanced business and the simplification efforts discussed last quarter, as well as remaining selective with the assets that we add to our balance sheet. Over the multi-year period shown here, adjusted ROE has averaged about 19%. Recall that adjusted ROE removes the MSR fair value net of hedge, so higher hedge costs or other valuation impacts appear in the net income.

Please turn to Slide 20 for a prior period comparison. We believe that today Onity Group is stronger and better positioned to capitalize on any market cycle than the last time we experienced a higher-for-longer rate environment, which was 2023. Compared to our full year results in 2023, our trailing twelve-month results for the current period provide you with a view of our company that has better income generation, higher book value per share, higher revenues and lower corporate debt to equity.

In addition, we have a more effective hedge. We have better recapture abilities to help originations achieve stronger profits and, for the entire company, we have a more effective cost model than we had in 2023. On slide 21 we provide our 2026 guidance. Our full year guidance remains unchanged from last quarter. We expect to deliver an adjusted ROE at the low end of the 10% to 15% range, total servicing UPB growth of 5% to 15%, an effective MSR hedge and, of course, an improved operating efficiency ratio similar to what we demonstrated in the third quarter. Back to you, Glenn.

Glen Messina (President and CEO)

Thanks, Sean. Let’s turn to slide 22. We believe we’re well positioned to navigate the current environment. Onity Group is a growing, balanced, top-10 non-bank mortgage originator, servicer and subservicer. We’re shedding lower-return assets and relationships to simplify our business and enable greater strategic flexibility. We’re delivering differentiated performance with the technology-enabled, award-winning servicing platform. We’re adjusting our cost structure to adjust to the expected market environment and are taking focused actions to improve ROE over the long term.

And as always, we’re maintaining agility to capitalize on all opportunities to maximize value for shareholders. All this adds up to a business that we believe can deliver adjusted ROE comparable to our peers while continuing to increase our scale and market position. We believe our current market valuation does not fully reflect the progress we’ve made or the strength of the business that we built. Please turn to slide 23. Before we open the call for questions, I want to remind everyone that we’re holding our first investor day on November 19th at the New York Stock Exchange. The half-day event will feature presentations and a Q&A session including myself, Sean and other members of our leadership team. For those interested in joining us, please contact Valerie, or you can join the live webcast. Operator, let’s open the call for questions.

OPERATOR

Thank you. At this time we will open the floor for questions. If you’d like to ask a question, please press star one. To remove yourself from queue, you may press star two. Again, that is star one to ask a question. We’ll take our first question from Randy Byner with Texas Capital. Please go ahead. Your line is open.

Randy Byner (Analyst)

Hey, good morning. Thanks. This is a good presentation and helpful. So, you know, I’m actually going to start with something that might seem small, but it’s important at least for our model, and that’s the compensation and benefits line in the quarter was quite a bit lower than we forecasted. You mentioned that you’re going to have some improvements going forward in kind of your operating expenses. So is this the right level of comp and benefits in relation to revenue?

Is there anything one-time in that number this quarter that we should think about as we look forward?

Bradley Sean ONeil (Chief Financial Officer)

Hey Randy, it’s Sean here. With respect to one-times, no, there’s nothing significant in comp and benefits that jumps out at me. You know, it’s lowered headcount, lower commissions. I guess lower commissions could change if rates go the other way. But no, I would say this is the trend that we’re looking to achieve, and I can come back before the call is over and give you a little more specific guidance.

Glen Messina (President and CEO)

Randy, the other thing I would add to that: we did see a decline in the share price at the very tail end of the third quarter, so it would have affected our LTIP expense, which would have gone down.

Randy Byner (Analyst)

Got it. Okay. LTIP. Okay, that’s helpful. And then you mentioned you’re going to be more selective on buying MSRs going forward and using AI to better evaluate that market. How competitive is that market? Are you going to be more selective because you can be because there’s a lot of sellers, or is there a lot of competition? Can you just help us understand that market dynamic when you’re going out to look at those books?

Glen Messina (President and CEO)

Sure, yeah. Randy, look, throughout the course of 2026 we’ve been leveraging machine learning using different data elements that are different than what would appear in a typical MSR valuation model. So certain attributes about geographies, consumers, sellers, asset profile. And I won’t get into the gory details of each one of those dimensions, but looking at various cohorts of mortgage servicing rights, using that data to identify which MSRs we believe offer the best returns, taking into consideration relative credit performance, relative prepayment propensity, relative recapture propensity, and as we’ve continued to refine and hone what we call our buy box, we are taking, as we look at 2027, which is going to be a smaller market to begin with—the MBA and Fannie Mae are both projecting a market that’s going to be a 5% smaller look—we think it’s in a smaller market.

It does make sense to be a bit more selective in what MSRs we originate and choose to put on the books that have what we believe is the best overall dynamics, credit recapture, prepayment propensity to maximize the returns of our business and make sure we’re deploying capital on an appropriate and efficient basis. I would say looking at the third quarter, as Sean had mentioned, generally we were able to get slightly higher what we call priced-in margins in our B2B channel. Unfortunately, we and others in the industry faced a fair amount of headwind due to market volatility and hedging costs. So margins look like overall they came down a little bit, but again that was really more the secondary market side than the primary originations margin. Look at the MSR conference—I think it was the IMN MSR conference that was held earlier this week.

Look, we’re not the only ones who are saying we’re going to be more selective. I think Baron Silverstein over at Rhythm said it as well, too. That was quoted in, I think, one of the mortgage trade presses reporting after the conference. I think we’re all getting smarter about relative MSR return and relative value. And I think being selective is appropriate in a smaller market and especially just given what the cost of capital is these days.

Randy Byner (Analyst)

Well, that all makes sense, I guess. The follow-up, and then I’ll go to the queue, I guess, are your efficiency and scale initiatives. Will those be enough to still have kind of like positive cash flow and positive GAAP results, you know, as you acquire kind of a somewhat smaller opportunity set in servicing in light of kind of the shrinking of the overall market, I guess. Can you make up for it in volume is the question? Maybe put more simply,

Glen Messina (President and CEO)

Yes. Look, we’re not necessarily—again, we don’t target a market share or necessarily a volume target, Randy. Look, we’re fortunate to have a balanced business. So in market cycles, when rates go up or are higher like they are today, our existing servicing portfolio performs very well. Again, you could see servicing profits were up this quarter. Prepayment speeds are down, MSR runoff is down, and the duration of our MSRs gets extended. Right. So servicing in this part of the business cycle becomes more profitable and generates steadier cash flow than it otherwise would.

We are also taking appropriate cost reduction actions. Sean said we’re targeting to realize $50 million plus in cost savings for next year. Look, that’s just mortgage 101. Rates go up, you’ve got to just adjust your cost structure. You’re going to lean into your servicing book. I don’t think we are necessarily concerned about—as we look forward—we don’t believe there’s a concern about cash flow or the ability of our balanced business model to perform during the cycle.

The caveat I put out there, and I think it applies across the entire industry, is volatility has been the biggest challenge this year—financial market volatility. If that continues, it’s going to continue to have the same pressure as we’ve seen throughout the course of this year. And us and Penny and others have talked openly about that. But as far as the fundamentals, we feel great about the business fundamentals.

Randy Byner (Analyst)

All right, super. I’ll leave it there. Thank you.

OPERATOR

Thank you. We’ll take our next question from Doug Harter with BTIG. Please go ahead. Your line is open.

Doug Harter (Analyst)

Thanks and good morning. As you’re a little more selective on buying MSRs, presumably that would leave cash flow for other options. Wonder how you would think about using that to potentially delever and buy back some of your debt that’s trading at a discount.

Glen Messina (President and CEO)

Doug, good morning. So look, we’ve demonstrated historically over time that we are flexible from a capital allocation perspective. We have allocated capital previously in prior years, prior quarters, prior cycles to buying back shares and retiring debt ahead of schedule if the market opportunity provides that it’s an appropriate use of capital, certainly in a market that’s smaller. And just to put it in perspective, I don’t know if you all saw, but the MBA Application Index that was reported yesterday, November 4th, indicated that year over year purchase applications were down 19% and refi applications were down 60%.

And the fourth quarter forecast of overall volume from the MBA assumes that purchase volume will be flat and refi volume would be down 50%. So we are trending much worse than their original forecast. So look, we are going to be mindful about capital allocation. We certainly are always mindful about liquidity and we plan to be opportunistic in our capital allocation to those priorities that produce the best return for shareholders. We have been repurchasing shares so far this year. We’ve retired about 6% of our total share float and outstanding shares. So we are still active and that buyback is still active and we’re continuing to run. And certainly the decline in our bond prices and the yields have caught our attention for sure.

And if that’s an appropriate use of capital, the board will see fit to take advantage of that opportunity.

Doug Harter (Analyst)

Right. And then just an update as kind of how you view your current leverage and relative to kind of where you view kind of a steady state or end state for leverage.

Glen Messina (President and CEO)

Yeah, our leverage is probably a bit higher than where we want it to be over the next couple of years. We would like to get our—and when I say leverage, I would say total MSR debt plus corporate debt to equity. We’ve got our corporate debt to equity down quite a bit from where we were two to three years ago. But when I look at the total debt stack of MSR debt plus corporate debt, it’s at the upper end of probably where we’d want to be. And over time we’d like to continue to work that down largely through earnings and, to the extent that the opportunity is there, through opportunistic debt reduction.

Part of the reason why our debt to equity ratio is higher is we did take advantage of a very attractive high-yield market in the first quarter, actually in January, and we had an add-on offering—Sean, that was $200 million of additional high-yield proceeds—which wasn’t necessarily anticipated in our plans, I would say, at the end of 2025. But the markets were so good and so attractive and the demand was there that we ultimately did take advantage of it.

Helps support the growth of the business, helps grow our servicing portfolio, which generates cash flow. And yeah, I think as we look forward over time, both Sean and I would like to get the leverage down.

Doug Harter (Analyst)

Great, thank you.

OPERATOR

Thank you. And as a quick reminder, if you’d like to ask a question, you may press Star One now. Our next question comes from Bose George with KBW. Please go ahead.

Bose George (Analyst)

Hey guys, good morning. Just wanted to follow up on the MSR selectivity and investing. When you look at the bulk market, do you think higher coupon MSR valuations reflect realistic recapture assumptions or do you have any concerns about what you see out there?

Glen Messina (President and CEO)

Yeah, so look, Bose—we are, by the way, good morning; I’m sorry, Bose, for not acknowledging you—but yeah, so look, we’re pretty active in both buying and selling in the MSR market. We don’t really originate that much in the bulk market. We typically sell into the bulk market, and most of our new originations is coming through our B2B channel and, to a lesser extent, Consumer Direct. But look, we are—at least where we have our MSRs marked based on the third-party benchmarking that we do and trading prices that we’re seeing in the bulk markets for MSRs—we think our MSR values are fairly and appropriately stated.

We did take the opportunity to, in the third quarter, as you saw from our results, to sell some MSRs. That’s not unusual for us. We buy and sell MSRs throughout the course of the year based on where we see relative value. And if other people value the MSR higher than we do or see higher value in it, then it probably is time to let it go, and vice versa, if we see value, we buy into value. I think everybody in the industry is using in some way, shape, or form—thinking about recapture as part of the economic value of the MSR. Our recapture rate’s been quite strong, over 50% on a blended basis. So look, I think if you have a well-oiled machine from a recapture perspective, the recapture economics, or I should say the economic value associated with recapture in an MSR, is a real thing and those folks who have a good shop can harvest it.

Bose George (Analyst)

Okay, great, thanks. And then actually on the recapture rate, when you include seconds, is the 50% plus—the blended rate that you mentioned—included in the seconds, or is that incremental to that?

Glen Messina (President and CEO)

No, it’s incremental. Yeah. We don’t include second-lien volume. Our refinance recapture rate is pure refinance recapture rate. There’s no second-lien volume in there at all.

Bose George (Analyst)

Do you have that number handy if we include the benefit of seconds as well?

Glen Messina (President and CEO)

You know, we don’t even measure it, because we don’t think about it as recapture.

Bose George (Analyst)

Okay, but clearly it’s obviously a benefit that you’re monetizing the MSR.

Glen Messina (President and CEO)

Yes, clearly a cash benefit, but I guess it’s a different type. That is correct. It does create—we believe it creates—a stickier MSR because here we’ve got a second lien on the MSR. And to the extent that ultimately rates move in a direction that makes sense to refinance that stack, the first and second, since we have both instruments, it makes it, you know, we are a higher propensity to refinance with that customer through our platform than otherwise would. Yeah.

Bose George (Analyst)

Okay, great. Thanks.

OPERATOR

Thank you. This concludes our question and answer session. I’d like to now turn the conference back to Glen for any additional or closing remarks.

Glen Messina (President and CEO)

Yes. Thanks, Stephanie. So, look, I’d like to thank our shareholders and our key business partners for supporting Onity Group. I also want to thank and recognize our global business team and the board of directors for their hard work. And again, as a reminder, we’re looking forward to seeing many of you at our first ever Investor Day on November 19th at the New York Stock Exchange. Thank you very much.

OPERATOR

Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.