Onity Group Inc.: Form 10-Q for the period ended Sep 30, 2025

(Dollars in millions, including for charts, except per share amounts and unless otherwise indicated. Amounts may not add in certain tables due to rounding.)

OVERVIEW

General

We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs. PHH is also one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicers based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs by drawing upon their home equity. We serviced or subserviced 1.4 million loans with a total UPB of $315.5 billion on behalf of more than 3,900 investors and 118 subservicing clients as of September 30, 2025. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans. Our Originations business is part of our balanced business model to generate gains on loan sales and profitable returns, and to support the replenishment and the growth of our servicing portfolio. Through our retail, correspondent and wholesale channels, we originate and purchase conventional and government-insured forward and reverse mortgage loans that we sell or securitize on a servicing retained basis. In addition, we grow our mortgage servicing volume through MSR flow purchase agreements, Agency Cash Window and co-issue programs, bulk MSR purchase transactions, and subservicing agreements.

Volume Overview

The table below summarizes the new volume of Originations by channel on a current and comparative basis. The volume of Originations is a key driver of the profitability of our Originations segment, along with margins, and also a key driver of the replenishment and growth of our Servicing segment. In the third quarter of 2025, we added $24.1 billion of new volume, with $10.9 billion of subservicing additions, $11.9 billion of new Originations production and $1.3 billion bulk acquisitions, as further detailed in the below table.

$ In billions

(1) Represents the UPB of loans that have been originated or purchased (funded) during the respective periods and for which we recognize a new MSR on our consolidated balance sheets upon sale or securitization.

(2) Represents the UPB of loans for which the MSR is purchased.

(3) Represents the UPB of reverse mortgage loans that have been securitized on a servicing retained basis. The loans are recognized on our consolidated balance sheets under GAAP without any separate recognition of MSRs.

(4) Includes interim subservicing, including the volume of UPB associated with short-term interim subservicing for certain clients as a support to their originate-to-sell business.

The following table summarizes the average volume of our Servicing segment, on a current and comparative basis. The average servicing volume is a key driver of the profitability of our Servicing segment. The relative weight of performing and delinquent loans or servicing and subservicing also drive the amount and timing of gross revenue and expenses. Our average total servicing and subservicing UPB increased by $4.5 billion or 1.5% during the third quarter of 2025 compared to the prior quarter (5.9% annualized) and increased by $8.3 billion or 2.8% as compared to the prior year nine months, net of runoff. For comparison purposes, the total estimated industry mortgage debt outstanding increased 2.5% quarter over quarter (annualized) and 2.7% year over year (source: Mortgage Bankers Association (MBA) Mortgage Finance Forecast as of October 19, 2025).

$ In billions

(1) MSRs sold or transferred to Rithm, MAV and other MSR capital partners with subservicing retained and that do not qualify for derecognition / sale accounting. Reported as MSR at fair value on our consolidated balance sheet along with an associated Pledged MSR liability, economically deemed as subservicing relationship,

(2) Reverse mortgage loans and other servicing (including whole loans) carried on balance sheet.

As of September 30, 2025 and June 30, 2025, the total servicing and subservicing UPB amounted to $315.5 billion and $309.5 billion, respectively, a net increase of $6.0 billion or 1.9% (7.7% annualized).

Market Update

The following table presents key market interest rates which are important drivers of our businesses. As further discussed, the 30-year fixed rate mortgage is a key driver of Originations volume and prepayments in Servicing, the 10-year Treasury rate is a key benchmark for MSR valuation and hedging activities, and the 1-month SOFR is a key benchmark for the profitability of our Servicing segment (including float earnings and asset-backed financing cost).

(1) Source: Freddie Mac PMMS - Primary Mortgage Market Survey

The 30-year fixed rate mortgage rate declined 47 basis points in the third quarter of 2025 driving higher refinancing and home purchase activity. The average 30-year fixed rate mortgage rate declined 20 basis points quarter over quarter and remained mostly flat when comparing the first nine months of 2025 and 2024. The 30-year fixed rate mortgage rate remains at elevated levels relative to the past decade, impacting borrower affordability and overall origination market volumes. The average 30-year fixed rate mortgage between 2015 to 2024 was 4.85% excluding the 2020 and 2021 years impacted by Covid 19.

In 2024, the Federal Reserve reduced its federal funds target rate a total of 1 percentage point between September and December 2024 (50-basis point reduction in September and two consecutive 25-basis point reductions in November and December). On September 17, 2025 the Federal Reserve reduced its federal funds target rate 25-basis points, which was the first time it changed its target rate in 2025. The 1-month SOFR largely followed the federal fund rate, as illustrated in the below graph, resulting in an average rate mostly flat quarter over quarter and a 98 basis points decline year over year.

As further illustrated in the below graph, the 10-year Treasury rate declined slightly in the third quarter of 2025 (8 basis points) and declined 42 basis points during the nine months ended September 30, 2025 compared to a decrease of 7 basis points during the same period of 2024.

The following graph compares market interest rates over the current and comparative periods:

Another key driver of our Originations business is the overall mortgage origination market volume, that, in addition to interest rates, is sensitive to home sales and home prices and other macroeconomic conditions, such as gross domestic product and unemployment. We source a large part of our Originations volume from Correspondent lenders and the industry volume is a relevant benchmark. The following graphs present the industry origination volumes (in $ billions, average of the MBA and Fannie Mae data) in the current and comparative periods.

Source: MBA Mortgage Finance Forecast as of October 19, 2025 and Fannie Mae Housing Forecast as of October 13, 2025. Most recent current period volumes are forecasts. In $ billions.

The industry volume grew 3% quarter over quarter (Q3 2025 vs Q2 2025), led by a stronger increase in refinance activity, and grew 16% year over year (Q3 2025 vs Q3 2024), also driven by higher refinance originations as borrowers responded to favorable interest rates movements. On a year-to-date basis (YTD), the average industry volume grew 15% in the first nine months of 2025 as compared with the first nine months of 2024. Comparatively, our Originations volume growth (funded volume of Correspondent and Consumer Direct) outpaced the industry for all periods presented, as summarized below:

Financial Highlights

Results of operations for the third quarter of 2025

• Net income attributable to common stockholders of $18 million, or $2.19 per share basic and $2.03 diluted
• Servicing and subservicing fee revenue of $217 million, with $316 billion total servicing and subservicing UPB
• Originations gain on sale of $31 million
• $4 million MSR valuation gain attributable to input and assumption changes, net of hedging

Financial condition at September 30, 2025

• Stockholders’ equity of $501 million, or $62.21 book value per common share
• MSR investment of $2.8 billion
• Total liquidity of $221 million, and cash position of $173 million
• Total assets of $16.1 billion

Business Strategy

We established the following strategy to deliver sustainable profitability and create long-term value for all stakeholders:

• Balance and diversification: Maintain a scale position in origination and servicing to address market-cycle opportunities;
• Prudent capital-light growth: Emphasize capital-light subservicing to drive servicing portfolio UPB growth and expand higher margin products and origination channels to drive accretive MSR investments;
• Industry-leading cost structure: Achieve industry cost leadership through continuous cost and process improvement, optimizing global operations and technology, and drive innovation, including artificial intelligence based solutions;
• Top-tier operating performance and capabilities: Deliver industry top-tier servicing operational performance and increase borrower and client satisfaction;
• Dynamic asset management: Optimize investment returns and liquidity through dynamic and opportunistic asset purchases and sales.

Our growth and asset management strategy includes purchasing assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs. We have engaged in such transactions in the past, and we continue to explore opportunities that may be accretive to our business and stockholders’ value.

Results of Operations and Financial Condition

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations appearing in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2024.

The following chart displays income before income taxes by segment for the periods presented (also refer to the respective segment discussions):

Onity reported $18.7 million of net income in the third quarter of 2025, compared to $21.5 million in the second quarter of 2025, reflecting a steady income before income taxes and an additional $3.0 million income tax expense quarter over quarter. The following discusses certain notable changes:

• $33.7 million increase in revenue, mostly driven by a $23.7 million increase in Gain on loans held for sale, with higher margins and higher volumes in Originations (+$15.3 million gain) and favorable fair value changes of reverse buyouts. In addition, Servicing and subservicing fees increased $6.2 million with higher float earnings and a higher average servicing UPB.
• $17.7 million higher loss on MSR valuation adjustments, net largely driven by favorable assumption updates in the second quarter of 2025, higher MSR runoff expense in the third quarter of 2025, and the impact of interest rates, net of hedging.
• $16.2 million increase in Operating expenses, mostly explained by reimbursements received in the second quarter of 2025 related to prior years’ legal expenses.

Revenue

The below table presents revenue by type for the periods presented:

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The following chart displays total revenue by segment for the periods presented (also refer to the respective segment discussions):

Total revenue for the three months ended September 30, 2025 increased $33.7 million, or 14% compared to the three months ended June 30, 2025 due to a $16.0 million, or 7% increase, in Servicing revenue and a $17.6 million, or 60% increase, in Originations revenue.

• The $16.0 million increase in Servicing revenue is mostly attributed to higher Servicing and subservicing fees and higher Gain on loans held for sale. Servicing and subservicing fees increased $6.2 million driven by seasonally-increased float earnings and a higher average servicing UPB. Gain on loans held for sale improved $8.4 million largely due to losses in the prior quarter on new buyouts.
• The $17.6 million increase in Originations revenue is primarily attributed to a $15.3 million increase in Gain on loans held for sale, due to the combined effect of higher margins and higher loan production volume in both Consumer Direct and Correspondent channels.

Compared to the nine months ended September 30, 2024, total revenue for the nine months ended September 30, 2025 was $25.5 million, or 3% higher, due to a $26.3 million, or a 33% increase, in Originations revenue, and stable Servicing revenue.

• The $26.3 million increase in Originations revenue is primarily driven by an $18.7 million increase in Gain on loans held for sale, net in our Consumer Direct channel and a $6.2 million increase in fee revenue attributed to a 44% higher loan production volume.
• Servicing revenue remained overall stable, with three contributing factors. First, Servicing and subservicing fees increased $7.5 million driven by MSR growth. Second, Gain on reverse loans held for investment and HMBS-related borrowings, net increased $6.2 million with higher net interest income (due to the reverse portfolio acquisition from Waterfall in the fourth quarter of 2024) and a favorable change in rates and assumptions. Third, offsetting these increases was a $16.4 million unfavorable Gain on loans held for sale variance year-over-year, mostly driven by losses on reverse mortgage buyouts in 2025 (largely attributable to the acquired reverse portfolio from Waterfall) and gains in 2024 on previously acquired reverse mortgage buyouts.

MSR Valuation Adjustments, Net

The table below presents the key components of MSR valuation adjustments, net which include MSRs, MSR pledged liabilities and ESS financing liabilities at fair value, together with MSR hedging derivatives:

(1) Excludes fair value changes of reverse mortgage loans held for investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy. Refer to MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail and the discussion below within Servicing.

The $45.0 million loss on MSR valuation adjustments, net for the three months ended September 30, 2025 is comprised of $48.8 million of runoff expense, a $6.8 million fair value loss attributable to input and assumption changes and $10.6 million gain on MSR hedging derivatives.

• MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary and involuntary prepayments. The unfavorable $5.4 million higher runoff quarter-over-quarter is mostly due to MSR portfolio growth.
• The $6.8 million fair value loss due to input and assumption changes is mostly attributed to an unfavorable change in market rates as the 10-year Treasury rate declined 8 basis points in the third quarter of 2025, partially offset by certain favorable assumption updates. The change from a $21.7 million fair value gain in the second quarter of 2025 to a $6.8 million fair value loss in the third quarter of 2025 is mainly driven by favorable input and assumption updates recognized in the second quarter of 2025 to reflect strong MSR market transaction prices.
• MSR hedging derivative fair value changes are designed to partially offset the expected fair value changes of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio. The $10.6 million derivative gain recognized in the three months ended September 30, 2025 and the variance from the prior quarter are driven by interest rate changes as we maintained a high hedge coverage ratio in both quarters. Also refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy and its effectiveness.

The $111.1 million loss on MSR valuation adjustments, net for the nine months ended September 30, 2025 is comprised of $133.3 million of runoff expense and a $22.2 million fair value gain attributed to input and assumption changes net of hedges. The $35.4 million higher loss in MSR valuation adjustments, net in the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 is primarily driven by the impact of interest rate changes, net of hedge activity, and higher runoff mostly due to MSR portfolio growth.

• The unfavorable $15.1 million increase in runoff expense is mostly due to MSR portfolio growth.
• The change from a $92.4 million fair value gain in the nine months ended September 30, 2024 to a $3.7 million fair value loss in the nine months ended September 30, 2025 is primarily driven by changes in market interest rates, as the 10-year Treasury rate declined 42 basis points during the nine months ended September 30, 2025 compared to a decrease of 7 basis points during the same period of 2024, and assumption updates to reflect actual market trade pricing levels.
• The change from a $50.0 million loss from derivatives in the nine months ended September 30, 2024 to a $25.9 million gain in the nine months ended September 30, 2025 is mainly due to the market interest rate changes noted above.

Operating Expenses

The table below presents the key components of operating expenses:

The following chart displays operating expenses by segment for the periods presented (also refer to the respective segment discussions):

Compensation and benefits expense for the three months ended September 30, 2025 increased $2.3 million, or 4% compared to the three months ended June 30, 2025, due to an increase in salaries and benefits with a higher U.S. headcount. An increase in commissions on higher Originations production volume was offset by a decrease in incentive compensation expenses (mostly a decrease in the fair value of cash-settled share-based awards driven by our stock price decrease).

Compared to the nine months ended September 30, 2024, Compensation and benefits expense for the nine months ended September 30, 2025 increased $13.5 million, or 8%, largely due to a $5.9 million increase in incentive compensation expenses (mostly an increase in the fair value of cash-settled share-based awards due to an increase in our stock price), a $4.9 million increase in commissions due to higher Originations production volume, and a $4.0 million increase in salaries and benefits primarily attributed to an increase in U.S. headcount. Our total average headcount declined 3%, mostly due to a decrease in Servicing headcount attributable to efficiencies and runoff of our reverse subservicing portfolio, partially offset by an increase in Originations headcount to support the growth of our Consumer Direct channel and an increase in our Corporate functions.

Servicing and origination expense for the three months ended September 30, 2025 increased $2.6 million compared to the three months ended June 30, 2025, with increases in both segments driven by higher production volume in Originations and higher provision expense in Servicing mostly attributable to our captive reinsurance business (CRL) that was exposed to higher property casualties.

Compared to the nine months ended September 30, 2024, Servicing and origination expenses for the nine months ended September 30, 2025 increased $1.6 million or 4% largely due to the same drivers described above, with some offsetting factors.

Technology and communication expense for the three months ended September 30, 2025 was flat as compared to the three months ended June 30, 2025. Compared to the nine months ended September 30, 2024, Technology and communication expenses for the nine months ended September 30, 2025 increased $7.5 million or 19% primarily driven by our technology initiatives (including robotic process automation, digitization and machine learning / artificial intelligence) and certain technology expenses previously reflected within Professional services.

Professional services expense for the three months ended September 30, 2025 increased $9.9 million compared to the three months ended June 30, 2025 with an increase in legal expenses due to significant reimbursements received in the second quarter of 2025 related to prior years’ legal expenses and an increase in litigation-related expenses in the third quarter of 2025.

Compared to the nine months ended September 30, 2024, Professional services expense for the nine months ended September 30, 2025 increased $9.3 million, mostly driven by an increase in legal expenses, primarily attributed to our accrual for probable losses in connection with the settlement of a legacy litigation matter in the first quarter of 2025 and an increase in legal fees related to other matters (also refer to certain technology expenses discussed above which partially offset the increase).

Other Income (Expense)

During the nine months ended September 30, 2024, we repurchased a total of $70.9 million of the PMC Senior Secured Notes and recognized a $1.8 million gain on debt extinguishment, net of the associated write-off of unamortized discount and debt issuance costs.

Refer to the segments for discussion and analysis of Interest income and Interest expense. Refer to the Servicing segment for discussion and analysis of Pledged MSR liability expense and earnings of our former equity method investee, MAV Canopy, sold in the fourth quarter of 2024.

Income Tax Expense (Benefit)

Our annual effective tax rate is generally lower than the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets ($179.8 million as of December 31, 2024). We evaluated all positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods, and due primarily to our history of cumulative operating losses, we determined that a full valuation allowance at September 30, 2025 remains appropriate.

Our income tax benefit for the nine months ended September 30, 2025 is primarily driven by a $13.3 million favorable resolution of a prior-year uncertain tax position during the first quarter of 2025 partly offset by a $4.2 million Federal return-to-provision adjustment driven by tax planning strategies pursued by Onity at the time of filing the 2024 tax return. The decrease in the effective tax rate for the nine months ended September 30, 2025 compared to the same period of 2024 is primarily due to recognizing income tax benefit of $13.3 million related to the reversal of the uncertain tax liability.

Under our transfer pricing agreements, our operations in India and Philippines are compensated on a cost-plus basis for the services they provide, such that even when we have a consolidated pre-tax loss from operations these foreign operations have taxable income, which is subject to statutory tax rates in these jurisdictions that are higher than the U.S. statutory rate of 21%.

We believe it is reasonably possible that by December 31, 2025, we could release some of our valuation allowance that currently offsets our net U.S. deferred tax asset. Any release of our valuation allowance requires significant judgment and is contingent on continued analysis of the positive and negative evidence and actual and expected future profitability. As such, the exact timing and amount of any valuation allowance release is subject to change. Refer to Note 17 - Income Taxes for additional information.

Financial Condition

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Total assets decreased $328.0 million, or 2%, between December 31, 2024 and September 30, 2025 primarily due to the decline in reverse Loans held for investment, partly offset by the growth in MSR and Loans held for sale. The $1.0 billion decline in reverse Loans held for investment was driven by the runoff of the portfolio exceeding originations since the acquisition of the $2.9 billion portfolio of reverse mortgage loans from Waterfall in November 2024 that is relatively more aged (faster runoff). In addition, servicing advances declined $142.0 million largely driven by seasonal reduction of taxes and insurance (T&I) balances. Partly offsetting these declines, our portfolio of Loans held for sale increased $625.4 million driven by the growth of our Originations pipeline, predominantly with Ginnie Mae loans and the acquisition of reverse buyouts, and our MSR portfolio increased $296.7 million mostly due to $493.0 million MSR additions and $186.2 million runoff.

Total liabilities decreased by $386.4 million compared to December 31, 2024, largely due to the factors described above. HMBS-related borrowings decreased by $947.6 million with repayments exceeding new securitizations after the $2.9 billion acquisition of reverse mortgage loans and assumption of HMBS-related borrowings in November 2024, and Advance match funded liabilities decreased $96.5 million consistent with the seasonal decline in servicing advances. Our borrowings under Mortgage loan financing facilities increased $534.1 million due to the higher loans held for sale balance and OLIT securitization, and MSR financing facilities increased $265.3 million with the increase in our MSR portfolio.

Total stockholders’ equity increased $58.4 million during the nine months ended September 30, 2025 mainly due to $62.3 million net income for the period partially offset by the exercise of common stock warrants by Oaktree and dividends on preferred stock.

Key Trends and Outlook

Historical trends

The following table displays historical trends of our financial performance by quarter. Past performance is not necessarily indicative of future results.

(a) Fair value changes of the reverse mortgage exposure (securitized reverse loans HFI and HMBS-related borrowings, net) due to interest rates are economically hedged along with the MSR fair value changes due to interest rates per our Risk Management policy, while reported in two separate line items above for GAAP presentation purposes.

(b) Servicing fee collection associated with MSR failed sales (transactions that do not meet sale accounting criteria) is presented gross, within Servicing fees and the associated remittance is presented within Pledged MSR liability expense (net of contractual subservicing fee retained).

Total revenue shows a generally upward trend, with a notable increase in 2025 driven by the growth of servicing fees on our owned MSR portfolio and Originations Gain on loans held for sale. The volatility in Gain on reverse loans held for investment is primarily due to fluctuations in interest rates and is partially offset by our MSR hedging program. The volatility in Servicing Gain on loans held for sale is mainly due to reverse mortgage buyouts.

MSR valuation adjustments, net, reflect the increasing MSR portfolio runoff expense, consistent with the portfolio growth, with fair value volatility due to interest rate and assumption changes, largely mitigated by an effective hedging program. Operating expenses are generally trending upward, following the growth of our operations while maintaining cost discipline. Quarterly fluctuations of operating expenses are driven by legal expenses and recoveries.

The decline in Net interest expense reflects the favorable impact of our corporate debt refinancing in the fourth quarter of 2024 with the associated recognition of a one-time charge within Other. Pledged MSR liability expenses (effectively the servicing fee remittances of MSRs) are relatively stable.

Income before income taxes shows Onity’s net profitability in all quarters except for the one-time debt refinancing charge in the fourth quarter of 2024. Net profitability overall was driven by revenue growth, cost management and effective MSR hedging.

Seasonality

Mortgage origination and servicing can be seasonal with typically higher home purchase activity in the spring and summer driving higher Originations volumes and Gain on loans held for sale and higher MSR runoff expense in the second and third quarters. Servicing revenue, specifically float income, is also impacted by the seasonality of escrow balances typically lower in the first quarter and increasing throughout the year. The seasonal trends may be offset or impacted by changes in our volumes and changes in interest rates, as reflected in the above table.

Financial performance drivers

The following table summarizes certain key drivers of our revenue in the quarter compared with the prior quarter, as disclosed in the segment discussions of this Management Discussion and Analysis. The table also provides certain considerations for, and may be read in conjunction with, the outlook discussed below.

(a) Average UPB (in $B)

(b) Average loan count (in 000’s)

(c) Average float balance (in $B) (information not disclosed in Servicing segment)

(d) Average forward servicing plus total forward and reverse subservicing UPB (in $B)

(e) Newly funded Originations UPB (in $B)

(f) Fair value loans held for sale (in $M)

(g) Implied/calculated as percentage of revenue to volume driver, annualized

Outlook

The following discussion provides additional information regarding certain key drivers of our financial performance and includes certain forward-looking statements that are based on the current beliefs and expectations of Onity’s management and are subject to significant risks and uncertainties. Refer to Forward-Looking Statements beginning on page 2 of this Form 10-Q and Part I, Item 1.A. of our Annual Report on Form 10-K for the year ended December 31, 2024, for discussion of certain of those risks and uncertainties and other factors that could cause Onity’s actual results to differ materially because of those risks and uncertainties. There is no assurance that actual results will be in line with the outlook information set forth below, and Onity does not undertake to update any forward-looking statements. Refer to the Segment results of operations section for further detail, the description of our business environment, initiatives and risks.

Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform, MSR bulk acquisitions, and subservicing additions. We expect ancillary float income to trend with short-term interest rates also considering changes in average float balances due to seasonality and portfolio growth.

Gain on sale of loans held for sale - Our gain on sale is driven by both Originations volume and margin, and is channel-sensitive. The updated industry forecasts (average of MBA, October 2025 and Fannie Mae, October 2025) suggest an estimated 16% increase in loan origination in 2026 as compared to 2025, with the 30-year fixed rate mortgage expected to end 2026 mostly flat at 6.2%. However, macroeconomic conditions and their impact on the housing and capital markets remain highly uncertain. We anticipate growth in our Consumer Direct channel driven by our increased recapture capabilities that may be curtailed if interest rates remain at the current levels or increase. We expect to continue to prudently grow year-over-year our Correspondent volume at margins that are accretive to the business as part of our MSR replenishment and growth strategy. We also expect continued competitive pressure on margins across all channels and volatility of gain on sale associated with GSE pricing dependency and volatile interest rates. We expect some further volatility of gain (loss) on sale on loans held for sale related to reverse mortgage buyouts (mostly inactive loans) due to the increased size of the portfolio.

Gain on reverse loans held for investment and HMBS-related borrowings, net - The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins. With our experience and brand in the marketplace, we expect our origination volume to largely follow the industry growth albeit with some channel mix changes. We expect continued uncertain market interest rate and spread conditions. The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy. Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail.

MSR valuation adjustments, net - Our net MSR fair value changes include two main components. First, amortization of our investment is a function of the UPB and fair value of the MSR. We expect the MSR realization of expected cash flows to generally follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners, and associated prepayments. Second, MSR fair value changes net of hedging are driven by changes in interest rates and assumptions, such as forecasted prepayments, our hedge coverage ratio and hedge performance. We expect MSR fair value changes due to interest rates to be largely offset by hedging derivatives to the extent of our hedge coverage ratio, with increased uncertainties related to assumption updates, hedge performance and hedge cost in an environment of higher economic and capital market volatility. Refer to the sensitivity analysis in Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail.

Operating expenses - Compensation and benefits are a significant component of our cost-to-service and cost-to-originate and is directly correlated to headcount levels. Headcount in Servicing is primarily driven by the number of loans or UPB being serviced and subserviced, and by the relative mix of performing, delinquent and defaulted loans. As servicing volume is expected to increase with relatively more performing loans (see above), we expect a stable workforce with productivity gains. We expect our Originations headcount and operating expenses to align with the expected growth in volume. Our operating expenses are expected to correlate with volumes, with some productivity and efficiencies expected through our technology and continuous improvement initiatives. Incentive compensation is also correlated to our share price and other performance metrics.

Net interest expense - Interest expense varies based on changes in average debt balance and changes in short-term interest rates on our variable rate debt. The average balance of collateralized financing facilities trends with the balance of the underlying assets discussed above (including MSR, advances, loans and reverse buyouts). Interest expense on our warehouse loan facilities is expected to be largely offset by interest income on our Originations pipeline loans.

Stockholders’ equity - After consideration of the above factors and the subsequent event below, we expect our business to continue to generate net income and increase our equity in 2026, absent any material adverse impact related to changes in interest rates, hedge performance and cost, execution of the Rithm servicing transfer and associated downsizing of our operations, regulatory changes, litigation, actions by government entities or GSEs, events which may disrupt the capital markets or any other factors affecting our ability to execute our growth initiatives and plan. In addition, we believe it is reasonably possible that by December 31, 2025, we could release some of our valuation allowance that currently offsets our net U.S. deferred tax asset and would result in a one-time increase to net income and stockholders’ equity. There can be no assurance that the desired strategic and financial impact of our actions will be realized.

Subsequent event - Notice of non-renewal of servicing agreements by Rithm

On October 31, 2025, we were notified by one of our largest subservicing clients, Rithm, of its intent to not renew its subservicing agreements effective January 31, 2026. The termination is for convenience and not for cause.

These agreements accounted for approximately $33.0 billion, or 10% of the UPB and 20% of the loan count of our total servicing and subservicing portfolio, and approximately 55% of all delinquent loans that Onity services, as of September 30, 2025.

The servicing transfer to Rithm’s own servicing platform is expected to occur in the first and second quarters of 2026. The transfer of $8.5 billion of UPB of these agreements is subject to the receipt of necessary consents from trustees and others, the timing and success of which are uncertain. Refer to Note 23 – Subsequent Events.

The servicing transfer will result in the reduction of Servicing and subservicing fees and associated Pledged MSR liability expense. We expect a reduction of Operating expenses after downsizing certain aspects of our servicing and support functions. We further expect the recognition of a restructuring obligation upon transfer. We are evaluating the impact of the servicing transfer on future results of operations.

In addition, the float amount associated with the advance collections and servicing fees of the servicing portfolio will be repaid to Rithm in cash based on the amount due upon transfer (refer to Note 13 – Other Liabilities, Due to Rithm). The amount due varies daily. After consideration of any necessary liquidity actions such as the sale of MSR on a subservicing retained basis, we expect our liquidity will be sufficient to settle the Rithm payable when due and maintain adequate cash resources.

SEGMENT RESULTS OF OPERATIONS

Our activities are organized into two reportable business segments that reflect our primary lines of business - Servicing and Originations - as well as a Corporate segment.

SERVICING

This segment is primarily comprised of our mortgage servicing and subservicing business. We earn servicing and subservicing fees, including ancillary income, and incur cost to service the loans which varies depending on delinquency status. We are exposed to MSR valuation adjustments and advancing obligations when we own the MSR. Our servicing portfolio includes conventional, government-insured and non-Agency mortgage loans, including reverse mortgage loans classified as loans held for investment on our balance sheet. As of September 30, 2025, we serviced 1.4 million mortgage loans with an aggregate UPB of $315.5 billion.

In addition, the Servicing segment includes our wholly-owned captive reinsurance business (referred to as CRL), which provides re-insurance related to direct physical loss coverage on foreclosed real estate properties owned or serviced by us. CRL assumes a 90% (60% through January 2024) quota share of insurance coverage written by a third-party insurer issued to PHH.

Loan Resolutions

We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors. Reducing delinquencies also enables us to recover advances and recognize additional ancillary income such as late fees, which we do not recognize on delinquent loans until they are brought current. Loan resolution activities address the pipeline of delinquent loans and generally lead to (i) modification of the loan terms, (ii) repayment plan alternatives, (iii) a discounted payoff of the loan (e.g., a “short sale”), or (iv) foreclosure or deed-in-lieu-of-foreclosure and sale of the resulting REO. To select an appropriate loan modification option for a borrower in accordance with the applicable servicing agreement, we perform a structured analysis, using a proprietary model, of all options using information provided by the borrower as well as external data, including recent broker price opinions to value the mortgaged property. Our proprietary model includes, among other things, an assessment of re-default risk.

Advance Obligation

As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments. We advance principal and interest (P&I Advances), taxes and insurance (T&I Advances) and legal fees, property valuation fees, property inspection fees, maintenance costs and preservation costs on properties that have been foreclosed (Corporate Advances). For certain loans in non-Agency securitization trusts, we have the ability to cease making P&I advances and immediately recover advances previously made from the general collections of the respective trust if we determine that our P&I advances cannot be recovered from the projected future cash flows. With T&I and Corporate advances, we continue to advance if net future cash flows exceed projected future advances without regard to advances already made. Refer to Note 21 — Commitments for further discussion on our servicing advance obligations.

Most of our advances have the highest reimbursement priority (i.e., they are “top of the waterfall”), so we are entitled to repayment from respective loan or REO liquidation proceeds before any interest or principal is paid on the bonds that were issued by the trust. In the majority of cases, advances in excess of respective loan or REO liquidation proceeds may be recovered from pool-level proceeds. The costs incurred in meeting these obligations consist principally of the interest expense incurred in financing the servicing advances. Most subservicing agreements, including our agreements with Rithm and MAV, provide for prompt reimbursement of any advances from the owner of the servicing rights.

MSR Valuation Adjustments

The financial performance of our Servicing segment is impacted by the changes in fair value of the MSR portfolio due to changes in market interest rates, among other factors. Our MSR hedging policy is designed to reduce the expected volatility of the MSR portfolio fair value due to market interest rates commensurate with the target hedge coverage ratio determined by our Market Risk Committee. Refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy.

We report all fair value changes of our MSR portfolio and MSR hedges within MSR valuation adjustments, net. MSR valuation adjustments, net includes the loss on the MSR portfolio associated with the realization of its expected cash flows, or runoff, due to the passage of time, and any fair value gains or losses due to inputs, market interest rates or assumptions, net of hedging gains and losses. Included in MSR valuation adjustments, net are fair value gains and losses of the MSR pledged liability associated with the MSR transfers that do not meet sale accounting and the ESS financing liabilities for which we elected the fair value option and that is collateralized by MSRs.

Reverse Mortgages

Our reverse business activities include both the subservicing of reverse mortgage loans on behalf of investors and the servicing of our owned portfolio. Owned portfolio loans are insured by the FHA, which provides protection against risk of borrower default, and are securitized through the Ginnie Mae program.

Our servicing activities of reverse loans are generally consistent with forward mortgage loan servicing as described above, with the following additional functions: the funding of borrower advances or draws under their approved borrowing capacity and the repurchase of loans upon reaching a limit:

a. Borrower draw funding obligation - Under the terms of ARM-based HECM loan agreements, the borrowers have additional borrowing capacity. Borrower draws or tails are funded by the servicer and are securitized. We do not incur any substantive underwriting, marketing or compensation costs in connection with any future draws, although we must maintain sufficient capital resources and available borrowing capacity to ensure that we are able to fund these future draws prior to securitization with Ginnie Mae (generally less than 30 days).

b. Loan repurchase obligation - As an HMBS issuer, we are required to purchase loans out of the Ginnie Mae securitization pools once they reach 98% of the maximum claim amount (MCA buyouts). Active buyouts are assigned to HUD and payment is received from HUD through a claims process, generally within 30 days. HUD reimburses us for the outstanding principal balance on the loan up to the maximum claim amount; we bear the risk of exposure if the outstanding balance on a loan exceeds the maximum claim amount. We may carry loans for some time in anticipation of payoff or favorable liquidation if we deem the investment accretive. Inactive buyouts (loans that are in default for one of the following reasons - title conveyances or the borrower is deceased, no longer occupies the property or is delinquent on tax and insurance payments) are generally liquidated through foreclosure and subsequent sale of REO. State specific foreclosure and REO liquidation timelines have a significant impact on the timing and amount of our recovery. If we are unable to sell the property securing the inactive reverse loan for an acceptable price within the timeframe established by HUD (typically six months from obtaining marketable title of the property), we are required to make an appraisal-based claim to HUD. In such cases, HUD reimburses us for the loan balance, eligible expenses and interest, less the appraised value of the underlying property. Thereafter, all the risks and costs associated with maintaining and liquidating the property remain with us; we may incur additional losses on REO properties as they progress through the liquidation processes related to delayed timelines due to market conditions, sales commissions, property preservation costs or property tax and insurance advances. The significance of future losses associated with appraisal-based claims is dependent upon the volume of inactive loans, condition of foreclosed properties and the general real estate market.

The Gain on reverse loans held for investment and HMBS-related borrowings, net reported within the Servicing segment includes the net fair value changes of securitized reverse mortgage loans held for investment and HMBS-related borrowings, that comprise the following:

• contractual interest income earned on securitized reverse mortgage loans, or HECM loans, net of interest expense on HMBS-related borrowings, that is, on a net basis, the servicing fee we are contractually entitled to and collect on a monthly basis under the Ginnie Mae MBS Guide regarding servicing HMBS; and
• other fair value changes of the net balance of securitized loans held for investment and HMBS-related borrowings, that effectively represents tails and servicing value. Tails are participations in previously securitized HECM loans and are created by additions to principal for borrower draws on lines-of-credit (scheduled and unscheduled), interest, servicing fees, and mortgage insurance premiums.

The fair value of our Ginnie Mae securitized HECM loan portfolio net of HMBS-related Borrowings generally decreases as market interest rates rise and increases as market rates fall. The interest rate exposure is managed as part of our MSR hedging strategy (see Item 3 - Quantitative and qualitative disclosures about market risk, Loans Held for Investment and HMBS-related Borrowings and the associated interest rate sensitivity disclosure).

Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net strictly reflects the financial performance of owned loans/servicing and excludes any subservicing activity. The financial performance associated with the subservicing of reverse mortgage loans on behalf of investors is primarily reflected within Servicing and subservicing fees, net.

Since 2023, we have opportunistically acquired reverse mortgage assets from financial institutions, including active and inactive reverse mortgage loan buyouts, advances, HUD claim receivables, and real estate properties. We finance our asset acquisitions along with the buyouts of our own portfolio through on-balance sheet private placement securitizations (referred to as OLIT). The financial performance of such reverse asset management is reported within the Servicing segment, largely within Gains (losses) on loans held for sale, that are driven by multiple factors, including liquidation timeline and changes in market interest rates.

Third-Party Servicer Ratings

Like other servicers, we are the subject of mortgage servicer ratings or rankings (collectively, ratings) issued and revised from time to time by rating agencies including Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings, Inc. (S&P) and Fitch Ratings, Inc.(Fitch). Favorable ratings from these agencies are important to the conduct of our loan servicing and lending businesses.

The following table summarizes our latest key servicer ratings and outlook:

On May 29, 2025, Fitch upgraded PHH’s residential servicer ratings and affirmed its stable outlook for all products. In addition, Fitch affirmed PHH’s residential Master Servicer rating. The rating actions reflect the company’s growth strategy based on diversification between its loan origination and servicing businesses as well as its third-party subservicing efforts, effective enterprise risk management controls and processes, and continuous technology enhancements.

On June 11, 2025, Moody's upgraded the second lien servicer quality (SQ) assessment from SQ3+ to SQ 2- and affirmed the prime, subprime, special servicer, and master SQ assessments for PHH at SQ3+. The upgrade of PHH 's second lien servicing assessment is mainly driven by i) improvement in the company's second lien roll rates, ii) cure rates, and iii) recidivism rates.

Concentration

Rithm is one of our largest subservicing clients. Rithm’s servicing portfolio is in a run-off mode and we continue to diversify and grow our total servicing portfolio. Servicing and subservicing fees from Rithm amounted to $60.2 million, or 13% of total servicing and subservicing fees (excluding ancillary income) in the nine months ended September 30, 2025 ($73.5 million and 16% in the nine months ended September 30, 2024, respectively), and the related remittances to Rithm presented as Pledged MSR liability expense amounted to $27.6 million and $27.6 million in the respective periods. Rithm accounted for $33.0 billion, or 10% and 20% of the total serviced UPB and loan count, respectively, of our servicing and subservicing portfolio as of September 30, 2025, and 55% of all delinquent loans that Onity serviced, for which the cost to service and the associated risks are higher ($42.2 billion, 14%, 25% and 64% as of September 30, 2024, respectively). Consistent with a subservicing relationship, Rithm is responsible for funding the advances we service on its behalf. The servicing agreements automatically renew annually unless notice of termination is provided. Also refer to Note 21 — Commitments, Client Concentration and Note 23 – Subsequent Events.

Operating Metrics

The following table provides selected operating statistics for our Servicing segment:

(1) Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.

(2) Includes HECM reverse mortgage loans held for investment with a UPB of $9.6 billion that are recognized in our unaudited consolidated balance sheet at September 30, 2025.

(3) Includes $18.6 billion UPB subserviced and $20.3 billion UPB of MSRs sold to MAV that did not achieve sale accounting treatment at September 30, 2025.

(4) Loans serviced pursuant to our sale or transfer agreements with MAV, Rithm or others for which sale accounting is not achieved, and loans subserviced.

(5) Includes $24.5 billion UPB of subserviced loans on behalf of Rithm at September 30, 2025.

(6) Total 3-month % CPR includes voluntary and involuntary prepayments, as shown in the table, plus scheduled principal amortization.

(7) Related to our owned MSR forward servicing portfolio.

The following table provides the rollforward of activity of our portfolio of mortgage loans serviced that includes MSRs, whole loans and subserviced loans, both forward and reverse:

(1) Includes the volume of UPB associated with short-term interim subservicing for some clients as a support to their originate-to-sell business, where loans may be boarded and deboarded within the same quarter.

The following table provides a breakdown of our servicer advances, net of allowance for losses:

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The following table provides selected operating statistics related to our reverse mortgage loans reported within our Servicing segment:

(1) Securitized loans only; excludes unsecuritized loans.

(2) Buyouts are reported as Loans held for sale, Accounts Receivable or REO depending on the loan and foreclosure status.

Financial Performance

The following table presents selected results of operations of our Servicing segment. The amounts presented are before the elimination of balances and transactions with our other segments:

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Servicing and Subservicing Fees

The following chart displays servicing and subservicing fees by component for the periods presented:

The following table and discussion present the main drivers of servicing and subservicing fees.

(1) In $ billions, (2) In % of UPB, annualized, (3) In $ millions, (4) In thousands, (5) In dollars.

(6) Includes reverse mortgage loan subservicing.

Servicing fees for the three months ended September 30, 2025 increased $4.4 million or 3% compared to the three months ended June 30, 2025, driven by a 3% increase in average servicing UPB. The increase in average servicing UPB is primarily due to robust originations as part of our replenishment and growth initiative. Subservicing fees remained flat quarter over quarter, with a 2% reduction in subservicing volume (loan count) offset by 2% higher subservicing fee per loan.

Compared to the nine months ended September 30, 2024, our servicing fees for the nine months ended September 30, 2025 grew 6% or $22.1 million, driven by an 8% increase in average servicing UPB, primarily due to robust originations and bulk MSR acquisitions as part of our replenishment and growth initiative. The $14.1 million or 16% decrease in subservicing fees is largely due to the acquisition of the reverse portfolio from Waterfall in the fourth quarter of 2024 that we previously subserviced and the deboarding of $5.7 billion UPB Rithm loans in the first quarter of 2025, partly offset by the growth of our forward subservicing portfolio.

The following table presents the detail of our ancillary income:

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Ancillary income for the three months ended September 30, 2025 increased by $1.8 million, or 3% compared to the three months ended June 30, 2025 primarily due to a $4.1 million increase in float earnings attributable to seasonally higher average float balances, offset in part by $1.8 million lower other fees mainly driven by lower collection fees.

Compared to the nine months ended September 30, 2024, ancillary income for the nine months ended September 30, 2025 remained flat, with some offsetting factors, including a $8.8 million decline in reverse subservicing ancillary fees driven by the acquisition of previously-subserviced client portfolio (from Waterfall) in the fourth quarter of 2024 and portfolio runoff, a $3.4 million increase in late charge collections on higher payoff volume, and $3.7 million higher other fees mainly driven by loss mitigation activities. Float earnings remained mostly flat ($1.3 million increase) with an offsetting impact of higher float balances due to increased servicing volume overall and lower average interest rates (as a benchmark, the average 1-month term SOFR declined by 98 basis points).

Gain (Loss) on Loans Held for Sale, Net

We recognized a $3.4 million gain on loans held for sale, net for the three months ended September 30, 2025, compared to a $5.0 million loss in the three months ended June 30, 2025. The $8.4 million favorable variance quarter-over-quarter is mostly driven by reverse mortgage buyouts, with certain favorable assumption updates in the third quarter of 2025 and losses in the second quarter of 2025 (largely attributed to the reverse portfolio acquired from Waterfall in the fourth quarter of 2024).

We recognized a $5.4 million loss on loans held for sale, net for the nine months ended September 30, 2025, compared to an $11.0 million gain recognized in the nine months ended September 30, 2024. The $16.4 million unfavorable variance year-over-year is mostly driven by $8.3 million losses on reverse mortgage buyouts in 2025 (largely attributed to the reverse portfolio acquired from Waterfall in the fourth quarter of 2024) and $11.3 million gains recognized in 2024 on previously acquired reverse mortgage buyouts.

Gain (Loss) on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net

The following table presents the components of the fair value change of reverse loans held for investment and HMBS-related borrowings, net.

Gain on reverse loans held for investment and HMBS-related borrowings, net was flat for the three months ended September 30, 2025 compared to the three months ended June 30, 2025. While not the only benchmark for the reverse mortgage exposure, the 10-year Treasury rate declined 8 basis points during the third quarter of 2025 and was flat (increased 1 basis point) during the second quarter of 2025. Net interest income remained mostly flat (-3%), consistent with the average portfolio balance.

Compared to the nine months ended September 30, 2024, Gain on reverse loans held for investment and HMBS-related borrowings, net for the nine months ended September 30, 2025 increased $6.2 million mostly driven by a more favorable decline in market interest rates vs. the decrease in the prior year period, partly offset by changes in spreads (less favorable tightening vs. the prior year period) and certain unfavorable assumption updates in the second quarter of 2025. The 10-year Treasury rate declined 42 basis points during the nine months ended September 30, 2025 compared to a decrease of 7 basis points during the nine months ended September 30, 2024. Net interest income increased $5.9 million (or 32%), consistent with the portfolio growth due to the acquisition of the previously subserviced portfolio of Waterfall in the fourth quarter of 2024.

MSR Valuation Adjustments, Net

Refer to the discussion above within Overview-Results of Operations and Financial Condition-MSR Valuation Adjustments, Net.

The following chart summarizes the impact of our MSR interest rate hedging strategy on Servicing segment results along with the impact of fair value changes due to other input and assumption updates (refer to the MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail). As displayed below, our net income (total) is impacted by the combined effect of the fair value changes of the MSR portfolio attributable to rates and assumption changes, the MSR hedging derivative gains and losses - both reported within MSR valuation adjustments, net on the face of the consolidated statement of operations - and other fair value changes of the HECM loans and HMBS-related borrowings (reverse exposure) used as a hedge for risk management purposes but separately presented on our consolidated statement of operations as Gain on reverse loans held for investment and HMBS-related borrowings, net. While our risk management hedging strategy is targeted towards changes in fair value due to interest rates, the below information portrays all fair value changes due to interest rates, inputs and assumptions.

With a high targeted hedge coverage ratio, the fair value volatility of the MSR portfolio due to changes in market interest rates, net of hedges (including the reverse exposure) was reduced for the periods presented. The total impact of our MSR hedge strategy resulted in losses of $1.0 million in the third quarter of 2025 and gains of $9.8 million in the second quarter of 2025, largely driven by favorable MSR valuation input and assumption updates to reflect market transaction pricing levels. The $22.6 million lower gains for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is mainly driven by less favorable input and assumption updates, partly offset by favorable market rate impact net of hedging compared to the prior year period.

Compensation and Benefits

Compensation and benefits expense for the three months ended September 30, 2025 remained flat (increased 2%), compared to the three months ended June 30, 2025 largely consistent with headcount.

Compared to the nine months ended September 30, 2024, Compensation and benefits expense for the nine months ended September 30, 2025 decreased $6.3 million or 8%, mostly driven by a 9% headcount reduction. The decrease in average headcount, with an 11% decrease in the U.S., is largely attributed to the runoff of our reverse subservicing portfolio and further efficiency gains.

Servicing Expense

Servicing expense primarily includes claim losses and interest curtailments on government-insured loans (provision for account receivables), provision expense for advances and servicing representation and warranties, other provision expense (incl. CRL), and certain loan-volume related expenses.

Servicing expense increased $1.5 million in the three months ended September 30, 2025 compared to the three months ended June 30, 2025, largely driven by additional provision expense in our captive reinsurance business (CRL) due to higher property casualties.

Compared to the nine months ended September 30, 2024, Servicing expense for the nine months ended September 30, 2025 were mostly flat (increased $1.0 million or 3%) with additional provision expense in our captive reinsurance business (CRL) due to higher property casualties, partially offset by lower provision expense for servicing advances and other factors.

Other Operating Expenses

Other operating expenses (total operating expenses less Compensation and benefit expense and Servicing expense) for the three months ended September 30, 2025 increased $10.1 million as compared to the three months ended June 30, 2025, mostly due to $8.4 million increased legal expenses reported within Professional services driven by higher recoveries of prior years’ legal expenses in the second quarter of 2025 and an increase in our accrual for probable losses in the third quarter of 2025.

Compared to the nine months ended September 30, 2024, Other operating expenses for the nine months ended September 30, 2025 increased $8.0 million mostly due to a $6.6 million increase in Corporate overhead allocations primarily driven by higher Corporate services to support our growth initiatives and a $4.1 million increase in Technology and communications primarily driven by our technology initiatives (including robotic process automation, digitization and machine learning / artificial intelligence) and certain technology expenses previously reflected within Professional services.

Other Income (Expense)

Other income (expense) primarily includes net interest expense and pledged MSR liability expense.

Interest expense for the three months ended September 30, 2025 increased $5.7 million, or 11% compared to the three months ended June 30, 2025. The increase is primarily driven by a $3.4 million increase due to the acquisition and securitization (OLIT) of reverse mortgage buyouts in July 2025 and a $1.4 million increase on MSR financing facilities due to our owned MSR portfolio growth.

Compared to the nine months ended September 30, 2024, interest expense for the nine months ended September 30, 2025 increased $16.3 million, or 12%, driven by the growth of our assets, partly offset by lower financing cost due to lower interest rates. Interest expense increased $9.5 million mainly due to the acquisition and securitization (OLIT) of reverse mortgage buyouts in September 2024 and July 2025. In addition, interest expense increased $5.7 million on warehouse facilities and $7.0 million on MSR facilities due to an increase in the average debt balance, offset in part by lower average short-term market interest rates. These increases were partially offset by a $5.4 million decrease in interest on Advance funding liabilities, mostly driven by the decline in average debt balances for servicing advances due to lower delinquencies and increased loan resolutions in our non-Agency MSR portfolio.

Interest income for the three months ended September 30, 2025 increased $1.7 million compared to the three months ended June 30, 2025, primarily due to the reverse mortgage buyouts acquired in July 2025. Compared to the nine months ended September 30, 2024, interest income increased $14.5 million for the nine months ended September 30, 2025, primarily due to the reverse mortgage buyouts acquired in the third and fourth quarters of 2024.

Pledged MSR liability expense includes the servicing fee remittance related to the MSR sales or transfers that do not meet sale accounting criteria and are presented on a gross basis in our consolidated financial statements, including the servicing spread remittance associated with our ESS financing liability at fair value. See Note 8 — Other Financing Liabilities, at Fair Value to the Unaudited Consolidated Financial Statements.

The following table provides the components of Pledged MSR liability expense:

(1) See Note 8 — Other Financing Liabilities, at Fair Value. The servicing fee and ancillary income collections on such transferred MSRs are recognized within Servicing and subservicing fees.

Pledged MSR liability expense for the three months ended September 30, 2025 remained mostly stable (decreased 3%) as compared to the three months ended June 30, 2025 consistent with the volume serviced.

Compared to the nine months ended September 30, 2024, Pledged MSR liability expense for the nine months ended September 30, 2025 decreased $6.7 million mostly driven by MAV’s sale of MSRs (previously sold by Onity to MAV in a transaction which did not qualify for sale accounting) which resulted in the derecognition of the Pledged MSR liability during the nine months ended September 30, 2024, partially offset by the increase in the portfolio of MSRs sold to MSR capital partners.

Earnings of equity method investee for the nine months ended September 30, 2024 represents our previously owned 15% share of MAV Canopy which we sold in November 2024.

Other, net for the nine months ended September 30, 2024 included $6.2 million expense related to early payment and payoff protections on our MSR bulk sales.

ORIGINATIONS

We originate and purchase loans and MSRs through multiple channels. Loans generally conform to the underwriting standards of Fannie Mae or Freddie Mac (GSEs) or are government-insured (FHA, VA or USDA). We generally sell the loans in the secondary mortgage market through GSE and Ginnie Mae mortgage securitizations on a servicing retained basis.

The Originations business generates a gain on sale of loans, which represents the difference between the origination or purchase value and the sale or securitization value of the loans, along with fee revenue.

We conduct our Originations business through the following channels:

1- Consumer Direct

Our Consumer Direct channel for forward mortgage loans focuses on targeting existing servicing customers by offering them competitive mortgage refinance opportunities, where permitted by the governing servicing and pooling agreement. A portion of our servicing portfolio is susceptible to refinance activity during periods of declining interest rates. Origination recapture volume and related gains are a natural economic hedge, to a certain degree, to the impact of declining MSR values as interest rates decline. In addition to rate and term refinance activities, our Consumer Direct channel targets purchase mortgage loans, cash-out, debt consolidation, mortgage insurance premium reduction, second lien loans, and new customer acquisition.

2- Correspondent Lending

Our correspondent lending channel drives the replenishment and growth of our MSR portfolio. We purchase closed loans that have been underwritten to investor guidelines from our network of correspondent sellers and sell and securitize them, on a servicing retained basis. We offer correspondent sellers the choice to take out mandatory or “best-efforts” contracts, under which the seller's obligation to deliver the mortgage loan becomes mandatory only when and if the mortgage is closed and funded. Additionally, we offer correspondent sellers the opportunity to leverage a non-delegated underwriting option for best-efforts deliveries. We provide customary origination representations and warranties to investors in connection with our loan sales and securitization activities. We receive customary origination representations and warranties from our network of approved correspondent lenders. As of September 30, 2025, we have relationships with 732 approved correspondent sellers.

3- Reverse Originations

We originate and purchase reverse mortgage loans through our retail, wholesale and correspondent lending channels, under the guidelines of the HECM reverse mortgage insurance program of the FHA. Loans originated under this program are generally insured by the FHA, which provides protection against risk of borrower default. As the securitizations of reverse mortgage loans do not achieve sale accounting treatment and the loans remain reported as Loans held for investment, at fair value together with the securitization HMBS-related borrowings, revenue mostly include the fair value changes of the loan from lock date to securitization date that are reported in Gain on reverse loans held for investment and HMBS-related borrowings, net.

4- Co-Issue Programs

We purchase MSRs through flow purchase agreements, the Agency Cash Window co-issue programs and bulk MSR purchases. The Agency Cash Window programs we participate in, and purchase MSR from, allow mortgage companies and financial institutions to sell whole loans servicing released to the respective agency and sell the MSR to the winning bidder. In addition, we partner with other originators to replenish our MSRs through flow purchase agreements. As of September 30, 2025, we have relationships with 521 approved sellers through the Agency Cash Window co-issue programs. We initially recognize our MSR originations and purchases with the associated economics in our Originations segment, and transfer the MSR to our Servicing segment once the MSR is initially recognized on our balance sheet with all subsequent performance associated with the MSR, including funding cost, run-off and other fair value changes reflected in our Servicing segment.

Operating Metrics

The following table provides selected operating statistics for our Originations segment:

(1) Loan production excludes reverse mortgage loan draws by borrowers disbursed subsequent to origination that are reported within the Servicing segment.

(2) Also refer to interest rate lock commitments in Note 15 – Derivative Financial Instruments and Hedging Activities. The amounts are presented before application of any pull-through adjustment.

(3) Defined as interest rate lock commitments multiplied by pull-through rates and represents loan volume expected to be funded.

(4) Represents Gain on loans held for sale, net divided by pull-through adjusted locked volume.

Financial Performance

The following table presents the results of operations of our Originations segment. The amounts presented are before the elimination of balances and transactions with our other segments:

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Gain on Loans Held for Sale, Net

The following chart displays Gain on loans held for sale by channel for the periods presented:

The following table and discussion present Gain on loans held for sale by channel and the main drivers, specifically the forward loan origination volumes and margins (excluding fees that are presented in Other revenue, net):

(1) Defined as the UPB of loans funded in the period.

(2) Ratio of gain on Loans held for sale to funded UPB. Note that the ratio differs from the day-one gain on sale margin upon lock.

Gain on loans held for sale, net for the three months ended September 30, 2025 nearly doubled (increased 99%) compared to the three months ended June 30, 2025, with a $10.0 million increase in our Correspondent channel and a $5.3 million increase in our Consumer Direct channel. For both channels, the increase in Gain on loans held for sale, net is due to the combined effect of higher margins and higher loan production volume. The Correspondent volume increase largely exceeded the estimated industry volume trend (up 3% quarter over quarter, based on average of MBA and Fannie Mae data) and our increase is mostly driven by a robust execution against our growth objectives within our network of Correspondent sellers. The Consumer Direct volume increase is largely explained by lower mortgage rates in the third quarter with additional refinancing activity. The increase in margins is mostly attributable to relatively lower margins in the second quarter of 2025 due to volatile market conditions. Capital markets experienced a temporary spike in interest rate volatility in early April 2025. Higher margins are also attributable to execution gains in our securitization/sale and hedging activities in the current quarter.

Compared to the nine months ended September 30, 2024, Gain on loans held for sale, net for the nine months ended September 30, 2025 increased $19.5 million, mostly attributable to an $18.7 million increase in our Consumer Direct channel. The increase in the Consumer Direct gain is due to more than twice the amount of funded loan volume (116% increase), largely driven by our increased recapture operational capability. Correspondent channel gain on loans held for sale, net remained mostly flat ($0.8 million increase) with a 41% increase in loan production volume offset by a 26% decline in margin. Our 41% volume increase is mostly driven by our growth objectives and largely exceeded the estimated industry volume trend (15% increase, based on average of MBA and Fannie Mae data). The decline in margin is largely due to the volatile market conditions in the second quarter of 2025 discussed above.

Gain on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net

The following table provides information regarding Gain on reverse loans held for investment and HMBS-related borrowings, net, of the Originations segment that comprises fair value changes of the pipeline and unsecuritized reverse mortgage loans held for investment, at fair value, together with volume and margin (including loan fees):

(1) Defined as the UPB of loans funded in the period.

(2) Ratio of origination gain to funded UPB; includes loan fees.

Gain on reverse loans held for investment and HMBS-related borrowings, net remained mostly flat for the periods presented, with higher margins and lower volumes, more pronounced in our Correspondent channel. Changes in margin are predominantly driven by change in channel mix. The Reverse Originations production volume remains at a historically low level overall due to elevated interest rates.

Other Revenue, net

Other revenue, net consists primarily of correspondent and broker fees, and also includes setup fees earned for loans boarded on our servicing platform. Changes in Other revenue, net for the periods presented are primarily attributed to production volume changes.

MSR Valuation Adjustments, Net

MSR valuation adjustments, net includes revaluation gains on certain MSRs opportunistically purchased through the Agency Cash Window programs, and flow purchases. As an aggregator of MSRs, we may purchase MSRs from smaller originators with a purchase price at a discount to fair value and we recognize valuation adjustments for differences in exit markets in accordance with the accounting fair value guidance. We record such valuation adjustments as MSR valuation adjustments, net within the Originations segment since the segment’s business objective is the sourcing of new MSRs at targeted returns. Changes in MSR valuation adjustments, net period over period are largely due to volume changes.

Operating Expenses

Operating expenses for the three months ended September 30, 2025 increased $2.6 million, or 10% compared to the three months ended June 30, 2025 primarily due to $1.0 million of higher Origination expense, driven by higher production volume, and $1.3 million higher Compensation and benefits largely due to higher commissions on higher production volume.

Compared to the nine months ended September 30, 2024, Operating expenses for the nine months ended September 30, 2025 increased $12.8 million primarily due to an $8.1 million, or a 24% increase, in Compensation and benefits driven by $4.7 million of higher commissions on higher production volume, as well as a $3.6 million increase in salaries and benefits expense and a 21% increase in average headcount. In addition, Origination expense increased $1.8 million primarily due to higher production volume, with a partial offset from the release of the provision for representation and warranty indemnification obligations during the nine months ended September 30, 2025 due to favorable demand resolutions. Other operating expenses also increased $3.0 million primarily driven by higher production volume and technology enhancement related expenses.

Other Income (Expense)

Interest income consists primarily of interest earned on newly-originated and purchased loans during the pipeline period prior to securitization or sale to investors. Interest expense is incurred to finance the mortgage loans during the same pipeline period. We finance mortgage loans with repurchase and participation agreements, commonly referred to as warehouse lines generally indexed on short-term rates like SOFR. Our net interest margin is driven by the difference between the average mortgage note rate and the average warehouse line cost of funds, the average balance of loans and by the average number of days loans remain in the pipeline. The improvement in our net interest margin, periods-over-periods is attributable to the reduction of short-term interest rates relative to mortgage rates and the increase in the average pipeline loan balance.

CORPORATE

Corporate includes expenses of corporate support services and activities that are not directly related to other reportable segments.

• Certain expenses incurred by corporate support services, such as technology, legal, risk and compliance, or finance are allocated to the Servicing and Originations segments using various methodologies intended to approximate the utilization of such services.
• Interest expense on corporate debt is allocated to the Servicing and the Originations segments based on relative financing needs, with the exception of the Onity Senior Secured Notes through their redemption date in November 2024.

The following table presents selected results of operations of Corporate. The amounts presented are before the allocation and elimination of balances and transactions with our other segments:

Operating Expenses

Operating expenses before corporate overhead allocations increased by $2.9 million, or 8%, for the three months ended September 30, 2025 compared to the three months ended June 30, 2025, primarily driven by a $1.9 million increase in Professional services and a $0.5 million increase in Compensation and benefits. The increase in Professional services is primarily due to an increase in accrual for legal fees during the three months ended September 30, 2025 and additional fees related to tax services.

Operating expenses before corporate overhead allocations increased by $25.1 million, or 25%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Professional services increased $12.2 million mostly driven by a $10.4 million increase in legal expenses, primarily attributed to our accrual for probable losses in connection with the settlement of a legacy litigation matter in the first quarter of 2025 and legal fees related to other matters, including the USVI income tax refund matter. Other professional services increased $1.8 million mostly driven by tax services and certain corporate development initiatives. Compensation and benefits increased $11.8 million mostly due to higher incentive compensation, primarily driven by an increase in the fair value of cash-settled share-based awards during the nine months ended September 30, 2025 (30% increase in our stock price vs. a 4% increase in the comparative period), and higher salaries and benefits expense due to an increase in average headcount (mostly in the U.S.). Technology and communications increased $1.9 million primarily due to increased technology usage, including higher cloud storage costs.

Corporate overhead allocations to the segments increased $6.2 million primarily driven by higher Corporate support expenses for our Servicing growth initiatives.

Other Income (Expense)

The $15.7 million reduction in interest expense for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 is driven by the corporate debt refinancing which resulted in both a lower corporate debt balance and a lower effective interest rate. In the fourth quarter of 2024, we issued new corporate debt ($500.0 million principal balance of 9.875% Senior Notes Due 2029) and redeemed the existing corporate debt (the 7.875% PMC Senior Secured Notes due 2026 and the 12% Onity Senior Secured Notes due 2027.

LIQUIDITY AND CAPITAL RESOURCES

Overview

In the normal course of business, we are actively engaged with existing and potential lenders and as a result add, terminate, replace or extend our debt agreements to the extent necessary to finance our operations and growth and optimize our financing costs. In addition, we completed the following key transactions during the nine months ended September 30, 2025 impacting our liquidity:

• Increased the borrowing capacity under a GSE MSR facility from $500.0 million to $650.0 million in January 2025, and subsequently decreased the borrowing capacity under another GSE MSR facility from $400.0 million to $250.0 million in February 2025.
• Entered into a one-year $70.0 million PLS MSR financing agreement in February 2025. The financing agreement is structured as a repurchase agreement and was entered into upon the final repayment of the amortizing PLS Notes issued in 2022.
• In connection with the transfer of certain GSE MSR investment activities between our licensed entities in the second quarter of 2025 (PHH and PAS - See Note 20 – Regulatory Requirements), we completed the following:
• Issued variable-rate advance receivable notes (PGAF Series 2025-VF1) with a maximum borrowing capacity of $350.0 million and an Expected Repayment Date of May 28, 2027. Concurrently, we reduced the maximum borrowing capacity under the existing OMART and OGAF advance facilities from $500.0 million to $350.0 million and from $200.0 million to $100.0 million, respectively.
• Entered into a new GSE MSR facility at PAS with similar terms to the existing PHH facility, with an aggregate capacity of $650.0 million, further increased to $750.0 million in June 2025.
• Repaid the amount due under an existing $250.0 million GSE MSR facility at PHH and PAS entered into a new facility with similar terms, including the same borrowing capacity and a maturity date of May 2027.
• Increased the borrowing capacity under the GNMA MSR facility from $300.0 million to $400.0 million in June 2025.
• On July 10, 2025, we purchased a portfolio of government-insured reverse mortgage loan buyouts for $100.4 million. The purchased assets included reverse loans held for sale, claim receivables from HUD and real estate properties. The purchased assets were financed along with other owned buyouts through a private placement securitization referred to as OLIT 2025-HB1 with total proceeds of $309.5 million. The senior and mezzanine class Notes were issued to third parties with an initial principal balance of $322.5 million at a discount of 13.1 million, with a stated interest rate of 3% and a mandatory three-year call date.
• In September 2025, we issued variable-rate notes (Series 2025-VF1) with a maximum borrowing capacity of $350.0 million and an Expected Repayment Date of September 2027. These notes replaced the Series 2015-VF5 notes with the same borrowing capacity and an Expected Repayment Date of September 2025.

A summary of borrowing capacity under our advance facilities, mortgage warehouse facilities and MSR financing facilities is as follows (see Note 12 – Borrowings to the Unaudited Consolidated Financial Statements for additional information):

(1) Total Borrowing Capacity represents the maximum amount which can be borrowed, subject to eligible collateral. Remaining Borrowing Capacity represents Total Borrowing Capacity less outstanding borrowings, subject to eligible collateral.

We may utilize committed borrowing capacity under our financing facilities and MSR financing facilities to the extent we have sufficient eligible collateral to borrow against and otherwise satisfy the applicable conditions to funding. Uncommitted amounts can be advanced at the discretion of the lender, and there can be no assurance that any uncommitted amounts will be available to us at any particular time.

At September 30, 2025, we had $48.5 million total available committed and uncommitted borrowing capacity based on the amount of eligible collateral as follows:

At September 30, 2025, our total liquidity of $221.3 million included $172.8 million of unrestricted cash and $48.5 million total available committed and uncommitted borrowing capacity based on the amount of eligible collateral as described above. With total liquidity of $248.5 million at December 31, 2024, the decrease is mostly attributed to our originations growth in owned MSRs.

We manage our liquidity on a daily basis to fund our business and comply with debt covenants and regulatory liquidity requirements. Our liquidity position may vary significantly during a given month, generally with the lowest liquidity amount around mid-month due to the cash flow remittance requirements under our servicing agreements and the highest around or a few days after month end as we collect monthly installments from borrowers and benefit from float balances. Other factors include but are not limited to daily variation margins with our derivative instruments and MSR financing facilities. It is not uncommon for our liquidity to materially decline from peak to trough within a month and recover through borrower payment behaviors.

We optimize our daily cash position to reduce financing costs while closely monitoring our liquidity needs and ongoing funding requirements. We regularly monitor and project cash flows over various time horizons to anticipate and mitigate liquidity risk. We maintain liquidity buffers to be responsive to the level of risks, including liquidity peaks and troughs, stressed market interest rate conditions and operational risk.

Use of Funds

Our primary near-term uses of funds in the normal course include:

• Payment of operating costs and corporate expenses;
• Payments for servicing advances in excess of collections including advances and draws related to reverse mortgage assets (see below);
• Investment in MSRs (purchased and originated) and other related asset acquisitions;
• Originated, purchased and repurchased loans, including reverse mortgage buyouts;
• Payment of margin calls under our MSR financing facilities and derivative instruments;
• Debt service and repayments of borrowings, including under our MSR financing, advance financing, warehouse facilities and OLIT securitization notes, and payment of interest expense including on the Senior Notes Due 2029;
• Dividend payments on Series B Preferred Stock; and
• Net negative working capital and other general corporate cash outflows.

We have short-term commitments to lend $2.4 billion in connection with our forward and reverse mortgage loan IRLCs outstanding at September 30, 2025. In addition, we have originated floating-rate reverse mortgage loans under which the borrowers have additional borrowing capacity of $3.0 billion at September 30, 2025. During the nine months ended September 30, 2025, we funded $236.6 million of the $3.1 billion borrowing capacity available as of December 31, 2024. We are able to immediately securitize these borrower draws or advances under the Ginnie Mae program. As an HMBS issuer, we are required to repurchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the loan is equal to or greater than 98% of the maximum claim amount (MCA repurchases). We carry these repurchases until reimbursement by HUD and/or property liquidation if inactive. Our reverse subservicing clients bear the financial obligation and risks associated with purchasing loans out of securitization pools within the portfolio we subservice.

Regarding the current maturities of our borrowings, as of September 30, 2025, we have approximately $2.5 billion of debt outstanding that would either come due, begin amortizing or require partial repayment in the next 12 months. This amount is comprised of $1.5 billion of borrowings under forward and reverse mortgage loan financing facilities, $0.5 million outstanding under advance financing facilities based on expected repayment, $0.9 billion outstanding under GSE and Ginnie Mae MSR financing facilities maturing in the next 12 months, and $62.0 million outstanding under an MSR financing (repurchase) agreement.

With respect to liquidity management, we consider our servicing advance requirements during each investor remittance period and the uncertainties of daily margin calls on our collateralized debt facilities and derivative instruments due to interest rate fluctuations.

As servicer, we are required to advance to investors the loan P&I installments not collected from borrowers for those delinquent loans, including those on forbearance plans. Loan payoffs and prepayments are a source of additional liquidity and are dependent on the interest rate environment. We also advance T&I and Corporate advances primarily on properties that are in default or have been foreclosed. Our obligations to make these advances are governed by servicing agreements or guides, depending on investors or guarantor. As subservicer, we are also required to make P&I, T&I and Corporate advances on behalf of servicers following the servicing agreements or guides. However, servicers are generally required to reimburse us within 30 days of our advancing under the terms of the subservicing agreements, and we are generally reimbursed by Rithm the same day we fund P&I advances, or within no more than three days for certain servicing advances.

We are generally subject to daily margining requirements under the terms of our MSR financing facilities and daily cash calls for our TBAs, interest rate futures or other derivatives. Declines in fair value of our MSRs due to declines in market interest rates, assumption updates or other factors require that we provide additional collateral to our lenders under MSR financing facilities. Similarly, declines in fair value of our derivative instruments require that we provide additional collateral to the clearing counterparties. While the objective of our hedging strategy is to reduce volatility due to interest rates, it is also designed to address cash and liquidity considerations. Refer to the sensitivity analysis in Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our medium- and long-term requirements for cash include:

• Payment of interest and principal repayment of our Senior Notes Due 2029(1);
• Payment of interest and principal repayment of our OLIT securitization note issuances that have a three-year mandatory call date;
• Any payments associated with the confirmation of loss contingencies; and
• Any other payments required under contractual obligations discussed above that extend beyond one year.

(1) Supplemental information required pursuant to the Indenture governing the Onity Senior Notes Due 2029 disclosed in Exhibit 99.1 .

Sources of Funds

Our primary sources of funds for near-term liquidity in normal course include:

• Collections of servicing and subservicing fees and ancillary revenues;
• Collections of advances in excess of new advances;
• Proceeds from match funded advance financing facilities;
• Proceeds from other borrowings, including warehouse facilities, MSR financing facilities, MSR transfers and ESS financing;
• Proceeds from sales and securitizations of originated loans and purchased loans; and
• Net positive working capital from changes in other assets and liabilities.

Servicing advances are an important component of our business and represent amounts that we, as servicer, are required to advance to, or on behalf of, our servicing clients if we do not receive such amounts from borrowers. Our use of advance financing facilities is integral to our cash and liquidity management strategy. Additionally, certain of our financing and subservicing agreements permit us to retain advance collections for a period ranging from one to two business days before remittance, thus providing a source of short-term liquidity.

We use mortgage loan repurchase and participation facilities (commonly called warehouse lines) to fund newly-originated or purchased loans on a short-term basis until they are sold or securitized to secondary market investors, including GSEs or other third-party investors, and to fund repurchases of certain Ginnie Mae forward loans, HECM loans, second-lien loans and other types of loans. These facilities contain eligibility criteria that generally include aging and concentration limits by loan type among other provisions. Currently, our financing agreements generally have maximum terms of 364 days. The funds are typically repaid using the proceeds from the sale of the loans to the secondary market investors, usually within 30 days.

We also rely on the secondary mortgage market as a source of liquidity to support our lending operations. Substantially all of the mortgage loans that we originate or purchase are sold or securitized in the secondary mortgage market in the form of residential mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac and, in the case of mortgage-backed securities guaranteed by Ginnie Mae, are mortgage loans insured or guaranteed by the FHA, VA or USDA. We issued private placement securitizations to finance reverse mortgage buyouts, expanding our access to capital markets and reducing our reliance on warehouse financing facilities.

We regularly evaluate financing structure options including asset-backed financing to support our investment plans and accommodate our business needs. We strive to diversify our sources of funds, optimize maturities and reduce our funding cost. We continuously evaluate the allocation of our capital to MSR and other investments, the related returns, funding and liquidity requirements.

Capital Adequacy and Leverage

Our licensed entities are subject to capital requirements by different agencies and regulators, including but not limited to the GSEs, Ginnie Mae and HUD. We believe our licensed entities are adequately capitalized at September 30, 2025 as reflected by the most restrictive regulatory requirements disclosed in Note 20 – Regulatory Requirements.

Our stockholders’ equity ($501 million at September 30, 2025) relative to total assets denotes a high leverage ratio. Our regulators assess our leverage ratio by deducting from total assets the amount of securitized reverse mortgage loans held for investment (HECM loans) pledged to HMBS due to the “lack of true sale accounting treatment of the HMBS Program” as per the Ginnie Mae guide. As of September 30, 2025, as illustrated below, out of $16.1 billion total assets, $9.9 billion securitized HECM loans remain reported on our balance sheet with the associated HMBS liability as they do not meet sale accounting treatment under GAAP. In addition, under the Ginnie Mae risk-based capital ratio, the UPB of HECM loans held for investment is risk-weighted at zero percent.

(a) The Series B Preferred Stock is classified as mezzanine equity as it is contingently redeemable in the event of a change of control. On and after September 15, 2028, Onity will have the right to redeem the Series B Preferred Stock, in whole or in part, for cash at a redemption price equal to the liquidation preference plus an amount equal to any accumulated and unpaid dividends thereon.

We conduct our Servicing and Originations businesses with asset-backed financing at high effective advance rates, resulting in a relatively low amount of equity required by lenders to finance our operations, consistent with these asset classes in the industry. Originations/pipeline mortgage loans held for sale are financed by our warehouse financing lines with an advance rate generally exceeding 95%, eligible servicing advances are financed by our match-funded advance financing facilities with an advance rate of approximately 90%, and reverse buyouts (loans held for sale, receivables and REO) are generally financed by OLIT securitization liabilities with an initial effective advance rate exceeding 90% of market value.

Accordingly, we assess our capital needs, structure and leverage predominantly with respect to our capital investments, mainly our owned MSR. We prudently manage amount, risks and returns of our owned MSR within the limits of our available capital, as summarized below:

(1) See Note 12 – Borrowings, Collateral table.

(2) Includes $1,853 million owned MSR and $1,193 million MSR financing facilities ($660 million net), excluding ESS.

(3) Includes $100 million unsecuritized HECM loans and tails, $66 million associated warehouse mortgage loan financing ($34 million net), and $93 million of HECM net asset value or economic reverse MSR.

(4) Other assets include Advances, net, Loans held for sale, at fair value, Ginnie Mae claim receivables, net, REO and Debt service accounts (a component of Restricted cash).

(5) Assets that are not subject/pledged to collateralized financing facilities and liabilities that are not financing facilities. Assets include Cash and cash equivalents, Other restricted cash, Contingent loan repurchase asset, Other assets excluding REO, Premises and equipment, and Receivables, net excluding Ginnie Mae claims. Liabilities include Other liabilities and Contingent loan repurchase liability.

Covenants

Our debt agreements contain various qualitative and quantitative covenants including financial covenants, covenants to operate in material compliance with applicable laws and regulations, monitoring and reporting obligations and restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional debt, paying dividends or making distributions on or purchasing equity interests of Onity and its subsidiaries, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Onity and its subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates. These covenants may limit the manner in which we conduct our business and may limit our ability to engage in favorable business activities or raise additional capital to finance future operations or satisfy future liquidity needs. In addition, breaches or events that may result in a default under our debt agreements include, among other things, nonpayment of principal or interest, noncompliance with our covenants, breach of representations, the occurrence of a material adverse change, insolvency, bankruptcy, certain material judgments and litigation and changes of control. See Note 12 – Borrowings to the Unaudited Consolidated Financial Statements for additional information regarding our covenants. The most restrictive liquidity requirement under our debt agreements is for a minimum of $65.0 million in consolidated liquidity, as defined, under certain of our mortgage loan financing and MSR financing facilities agreements. At September 30, 2025, we held unrestricted cash in excess of this minimum amount. Refer to Note 20 – Regulatory Requirements for our regulatory capital and liquidity requirements.

Ginnie Mae announced a new risk-based capital ratio effective on December 31, 2024 for Ginnie Mae issuers. Ginnie Mae issued a waiver extending the deadline by which PHH must meet the risk-based capital ratio requirements to October 1, 2025. PHH will be required to maintain a minimum of 6% ratio of Adjusted Net Worth less Excess MSRs, as defined, to risk weighted assets. In the second quarter of 2025, in order to achieve and maintain compliance with the Ginnie Mae RBCR requirements, we transferred certain GSE MSR investment activities previously conducted by PHH to PAS, a wholly owned subsidiary of PHH Corporation, with PHH retaining the subservicing. As of September 30, 2025, we believe PHH was in compliance with RBCR requirements.

In addition, our debt agreements generally include cross default provisions such that a default under one agreement could trigger defaults under other agreements. If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations, and other legal remedies, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations. We believe that we are in compliance with the covenants in our debt agreements as of September 30, 2025.

Credit Ratings

Credit ratings are intended to be an indicator of the creditworthiness of a company’s debt obligations. Lower ratings generally result in higher borrowing costs and reduced access to capital markets. The following table summarizes our current ratings and outlook by the respective nationally recognized rating agencies. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.

On October 2, 2025, Moody’s affirmed the Caa1 rating of the PHH Corporation Senior Notes due 2029. Moody’s also affirmed the B3 corporate family rating of Onity. The entities’ outlooks are stable. Moody’s recognizes the progress the company has made towards achieving a sustainable level of profitability by managing its operating expenses and maintaining the size of its servicing portfolio despite difficult conditions for residential mortgage companies. The company has also continued to grow its subservicing portfolio, which is a capital-light fee-earning business. The corporate family rating also reflects the company’s sound liquidity and funding profile. At the same time, Moody’s noted a credit challenge is Onity's modest capitalization, especially as the company continues to grow its portfolio and evolve its business.

On October 21, 2024, S&P assigned a B- rating to the new PHH Corporation Senior Notes due 2029. S&P also affirmed the B- rating to Onity with a Stable Outlook. The Stable Outlook reflects S&P’s expectations that Onity will maintain certain levels of debt ratio and debt-interest coverage while continuing to grow and diversify its servicing portfolio.

It is possible that additional actions by credit rating agencies could have a material adverse impact on our liquidity and funding position, including materially changing the terms on which we may be able to borrow money.

Cash Flows

Our operating cash flow is primarily impacted by operating results, changes in our servicing advance balances, the level of mortgage loan production, the timing of sales, securitizations, or liquidation of mortgage loans, and the margin calls required under our MSR financing facilities or derivative instruments. As one of the main differences between proceeds from sale and origination or purchase of loans held for sale, newly originated MSRs are effectively classified as operating cash flows under GAAP. Purchases of MSRs through flow purchase agreements, Agency Cash Window and bulk acquisitions are classified as investing activity. MSR investments, whether originated or purchased, represent a key indicator of our ability to generate future income in our Servicing business.

We classify changes in HECM loans held for investment as investing activity and changes in the related HMBS borrowings as financing activity. Our MSR sale or transfer agreements with MAV, Rithm and others that do not meet sale accounting criteria have a significant impact on our consolidated statements of cash flows. Because the payments we receive in connection with the HECM loan securitizations and MSR transfer agreements are recorded as secured financings, additions to, and reductions in, the balance of those secured financings are presented as financing activity in our consolidated statements of cash flows, excluding the changes in fair value attributable to inputs and assumptions.

Our cash flows are summarized as follows:

$ in millions

Our operating cash flows may be summarized as follows:

(1) Loan acquisitions are servicing released, i.e., cash outflows include the servicing right component of the acquired loans, and most of the loan sales are servicing retained, i.e., the cash proceeds we receive exclude the value of the servicing right component that we retain, resulting in a net $259 million and $164 million operating cash outflow for originated MSRs (OMSRs) in the nine months ended September 30, 2025 and nine months ended September 30, 2024, respectively. We generally finance these new OMSRs along with purchased MSRs (those reflected as investing cashflows) with MSR financing facilities at advance rates up to 70%.

Cash flows for the nine months ended September 30, 2025

Our operating activities used $517 million of cash during the period, with $806 million net cash paid on loans held for sale partly offset by $121 million net collections of servicing advances and $357 million other net operating cash flows. The $806 million net cash paid on loans held for sale is attributed to the growth of the pipeline with loan production volume exceeding sales, $259 million originated MSRs and the acquisition of $79 million reverse buyouts (securitized with our OLIT program). The period over period increase is mostly driven by higher originated MSRs and loan production volume. The $121 million net collections of servicing advances was mostly driven by seasonality, lower delinquencies and loan resolutions in our non-Agency MSR portfolio.

Interest paid ($188 million) remained flat period over period, with a relatively higher interest paid on our MSR and mortgage loans financing facilities in 2025 due to volume growth offset by lower interest paid on our corporate debt after our successful refinancing in the fourth quarter of 2024.

We generated $357 million of other net operating cash flows, that include collections of servicing fees, ancillary income and other revenue, payment of employees and vendors, and other cash receipts and disbursements. The $357 million net cash inflow generated by our business, mostly the servicing business, was largely consistent with the prior year period (increased by 10%) and was primarily re-deployed to invest in MSRs along with other sources of cash, after payment of interest.

Our investing activities provided $1,328 million of cash. Cash inflows primarily include $1,547 million net cash received in connection with our HECM reverse mortgages, with increased collections driven by the runoff of the portfolio acquired from Waterfall, and $36 million proceeds from sales of real estate. The increase in our reverse mortgage collections in the nine months ended September 30, 2025 was largely offset by the increase in our HMBS borrowings repayment under the terms of the Ginnie Mae securitization - see below paragraph. Offsetting cash outflows include $239 million to invest in MSRs as part of our growth strategy.

Our financing activities used $805 million of cash. Cash outflows primarily include $1,468 million net cash repaid in connection with our reverse HMBS related borrowings, with $2,315 million of repayments of borrowings (see above discussion of collection drivers), partly offset by $847 million received in connection with our reverse mortgage securitizations of our new production, and which are accounted for as secured financings. Other cash outflows include $96 million of net repayments on advance match funded liabilities due to the decline in servicing advances, and $53 million of net payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff. Offsetting financing cash inflows are primarily comprised of $267 million net drawdown on MSR financing facilities due to the increase in the MSR portfolio and $520 million net from borrowings under our mortgage loan financing facilities due to the increase in loans held for sale.

Cash flows for the nine months ended September 30, 2024

Our operating activities used $356 million of cash primarily due to net cash paid on loans held for sale of $620 million as loan production volume exceeded sales, including $246 million for the purchase of reverse mortgage buyouts, and $164 million originated MSRs. Offsetting operating cash inflows include net collections of servicing advances of $141 million driven by seasonal activity and our increased collection efforts on legacy advances and earnings distributions of $7 million received from our equity method investee MAV Canopy.

Our investing activities provided $214 million of cash. Investing cash inflows primarily include $194 million proceeds from sales of MSRs, $133 million net cash inflows in connection with our HECM reverse mortgages, $18 million proceeds from sales of real estate as part of our asset recovery strategy, $10 million received from the sale of advances in connection with sales of MSRs, and $7 million of capital distributions received, net of contributions, from our equity method investee MAV Canopy. Offsetting cash outflows include $115 million to purchase MSRs and $33 million to purchase real estate primarily in connection with our reverse mortgage buyout transaction.

Our financing activities provided $167 million of cash. Financing cash inflows are primarily comprised of $636 million net from borrowings under our mortgage loan financing facilities due to the increase in loans held for sale, including $247.8 million with the issuances of the OLIT securitization of reverse mortgage buyouts and $23 million of proceeds from the sale of MSRs accounted for as a financing in connection with sales of MSRs. Offsetting cash outflows include $122 million of net repayments on advance match funded liabilities due to the decline in servicing advances, $110 million of net repayment on MSR financing facilities and $54 million of payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff. We also paid $68 million to repurchase $71 million of our 7.875% PMC Senior Secured Notes. Cash inflows of $792 million received in connection with our reverse mortgage securitizations, which are accounted for as secured financings, were more than offset by repayments on the related financing liability of $923 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our ability to measure and report our financial position and operating results is influenced by the need to estimate the impact or outcome of future events based on information available at the date of the financial statements. An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ from those estimates and assumptions. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. We have processes in place to monitor these judgments and assumptions, and management is required to review critical accounting policies and estimates with the Audit Committee of the Board of Directors.

Our accounting policies and estimates involving significant judgments primarily relate to fair value measurements, income taxes, allowance for losses, and loss contingencies, including indemnification obligations and litigation proceedings. We use fair value measurements to record fair value adjustments to certain instruments in our statement of operations and to determine fair value disclosures, including but not limited to MSRs, Other financing liabilities, Loans held for sale, Loans held for investment-Reverse mortgages, and HMBS-related borrowings. As of September 30, 2025, 92% of our assets and 69% of our liabilities were reported at fair value, with fair value changes reported in our statement of operations. Substantially all our assets and liabilities at fair value were classified as Level 3 instruments due to unobservable inputs. See Note 3 – Fair Value for the carrying amounts and the estimated fair values of our financial instruments and certain of our nonfinancial assets measured at fair value on a recurring and nonrecurring basis or disclosed, but not measured, using fair value.

Our significant accounting policies and critical accounting estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 in Note 1 to the Consolidated Financial Statements and in Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Critical Accounting Policies and Estimates.” There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

RECENT ACCOUNTING DEVELOPMENTS

See Note 1 - Organization and Basis of Presentation to the Unaudited Consolidated Financial Statements for information related to recent accounting standards updates.

Interest Rates

Our principal market risk exposure is the impact of interest rate changes on our mortgage-related assets and commitments, including MSRs, loans held for sale, loans held for investment, IRLCs and other derivative instruments. In addition, changes in interest rates could materially and adversely affect the amount of escrow and float income, the volume of mortgage loan originations or result in MSR fair value changes. We also have exposure to the effects of changes in interest rates on our floating-rate borrowings, including MSR and advance financing facilities.

Our management-level Market Risk Committee establishes and maintains policies that govern our risk appetite and associated hedging programs, including such factors as duration and interest rate sensitivity measures, limits, targeted hedge coverage ratios, the hedge instruments that we are permitted to use in our hedging activities, and the counterparties with whom we are permitted to enter into hedging transactions and our liquidity risk profile. See Note 15 – Derivative Financial Instruments and Hedging Activities to the Unaudited Consolidated Financial Statements for additional information regarding our use of derivatives.

MSR Hedging Strategy

MSRs are carried at fair value with changes in fair value being recorded in earnings in the period in which the changes occur. The fair value of MSRs is subject to changes in market interest rates, among other inputs and assumptions.

The objective of our MSR interest rate risk management and hedging policy is to protect shareholders’ equity and earnings against the fair value volatility of interest-rate sensitive MSR portfolio exposure, considering market, liquidity, cost and other conditions. The interest-rate sensitive MSR portfolio exposure is defined as follows:

• Agency MSR portfolio,
• expected Agency MSR bulk transactions subject to letters of intent (LOI),
• less the Agency MSRs subject to our sale agreements with MAV and others, also referred to as Pledged MSR liabilities (See Note 8 — Other Financing Liabilities, at Fair Value),
• less the asset value for securitized HECM loans, net of the corresponding HMBS-related borrowings (also referred to as HECM or reverse MSR for risk management purposes),
• other interest-rate sensitive exposures, including our ESS financing liabilities, as deemed appropriate by the Market Risk Committee.

The hedge coverage ratio, defined as the ratio of hedge (including reverse MSR) to asset rate sensitivity (referred to as DV01) is subject to lower and upper target thresholds under our policy. We regularly evaluate the hedge coverage ratio at the intended shock interval to determine if it is relevant or warrants adjustment based on market conditions, symmetry of interest rate risk exposure, liquidity impacts under shock scenarios, and other factors. As the market dictates, management may choose to maintain the hedge coverage ratio at different thresholds, with approval of the Market Risk Committee, in order to preserve liquidity, improve hedge effectiveness and/or optimize asset returns.

Effective December 2023, we established a targeted hedge coverage ratio range between 95% and 105%. In April 2024, we changed the risk measure to a dollar DV01 that resulted in an equivalent range of approximately 90% to 110%. In May 2025, we established a new targeted hedge coverage ratio of 85% with a range between 80% and 100%.

With a less-than 100% hedge coverage ratio, the changes in fair value of our hedging instruments may not fully offset the changes in fair value of our net MSR portfolio exposure attributable to interest rate changes. In addition, while interest rate sensitivity measures (DV01) may remain within the range of our hedging strategy’s objective, actual changes in fair value of the derivatives and MSR portfolio may not offset to the same extent, due to many factors. These factors include non-parallel changes in the interest rate curve, the convexity of the MSR, the basis risk inherent in the MSR profile and hedging instruments, model risk observed between actual vs. expected fair value changes, and hedge costs.

We continuously evaluate the use of hedging instruments with the objective of enhancing the effectiveness of our interest rate hedging strategy.

Our derivative instruments include forward trades of MBS or Agency TBAs with different banking counterparties, exchange-traded interest rate futures and interest rate options. These derivative instruments are not designated as accounting hedges. TBAs, or To-Be-Announced securities are actively traded, forward contracts to purchase or sell Agency MBS on a specific future date. From time to time, we enter into exchange-traded options contracts with purchased put options financed by written call options. We report changes in fair value of these derivative instruments in MSR valuation adjustments, net in our consolidated statements of operations, within the Servicing segment.

The derivative instruments are subject to margin requirements, posted as either initial or variation margin. Onity may be required to post or may be entitled to receive cash collateral with its counterparties through margin calls, based on daily value changes of the instruments. Changes in market factors, including interest rates, and our credit rating may require us to post additional cash collateral and could have a material adverse impact on our financial condition and liquidity.

Loans Held for Investment and HMBS-related Borrowings

The fair value of our reverse mortgage loans held for investment (HECM) generally decreases as market interest rates rise and increases as market rates fall. As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach a 98% maximum claim amount liquidation event more quickly, with lower interest rates extending the timeline to liquidation. Additionally, portfolio value is heavily influenced by market spreads for fixed and discount margin for ARMs.

The fair value of our securitized HECM loan portfolio net of the fair value of the HMBS-related borrowings represents a reverse mortgage economic MSR (HMSR) for risk management purposes. HECM loans have a longer duration than HMBS-related borrowings as a result of the future draw commitments, and our obligations as issuer of HMBS to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM loan is equal to 98% of the maximum claim amount. This HMSR exposure is used as a partial offset to our forward MSR exposure and managed as part of our MSR hedging strategy described above.

Pipeline Hedging Strategy - Loans Held for Sale and IRLCs

In our Originations business, we are exposed to interest rate risk and related price risk during the period from the date of the interest rate lock commitment through (i) the lock commitment cancellation or expiration date or (ii) through the date of sale or securitization of the resulting loan into the secondary mortgage market. Loan commitments for forward loans generally range from 5 to 75 days, with the majority of our commitments to borrowers for 40 to 60 days and our commitments to correspondent sellers for 5 to 30 days. Loans held for sale are generally funded and sold within 5 to 30 days. This interest rate exposure of loans and IRLCs is economically hedged with derivative instruments, including forward sales of Agency TBAs. The objective of our pipeline hedging strategy is to reduce the volatility of the fair value of IRLCs and loans due to market interest rates, thus preserving the initial gain on sale margin at lock date. The net daily market risk position of net pull-though adjusted locks and loans held for sale, less the offsetting hedges of the pipeline, is monitored daily and its daily limit is +/- 5%. Actual fair value changes of derivatives may not fully offset fair value changes of the IRLCs and loans due to many factors including basis risk or market volatility, We report changes in fair value of these derivative instruments as gain or loss on economic hedge instruments within either Gain on loans held for sale, net or Gain on reverse loans held for investment and HMBS-related borrowings, net in our consolidated statements of operations.

EBO and Loan Modification Hedging – Loans Held for Sale, at fair value

In our Servicing business, we hedge certain Ginnie Mae EBO loans repurchased out of securitization pools for modification and reperformance with TBAs to manage the interest rate risk while these loans await redelivery.

Advance Match Funded Liabilities

We monitor the effect of changes in interest rates on the interest paid on our variable-rate advance financing debt. Earnings on cash and float balances are a partial offset to our exposure to changes in interest expense.

Sensitivity Analysis

Fair Value MSRs, Loans Held for Sale, Loans Held for Investment and Related Derivatives

We assess and manage our interest rate risk on a daily basis primarily using sensitivity analyses. We develop sensitivity analyses to determine the impact on our earnings and financial condition across various interest rate scenarios that could be expected over different time horizons. Our interest rate exposure spans from overnight rates to 30-year rates, with increased sensitivity related to the 5-, 10-, and 30-year rates. Sensitivity analyses are based on hypothetical change in values of different interest-rate sensitive assets and liabilities together with our hedges and are presented under a set instantaneous +/- 25 basis point parallel move in rates. Changes in fair value cannot be extrapolated because the relationship to the change in fair value may not be linear and other factors may apply, such as change in yield, spreads or other assumptions.

The following table summarizes the estimated change in the fair value of our MSRs, HECM loans held for investment and loans held for sale that we have elected to carry at fair value as well as any related derivatives at September 30, 2025, given hypothetical instantaneous parallel shifts in the yield curve. These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship to the change in fair value may not be linear, among other factors.

(1) Primarily reflects the impact of market interest rate changes on projected prepayments on the Agency MSR portfolio, Rithm and MAV pledged MSR financing liabilities and ESS financing liabilities.

Borrowings

The majority of the collateralized debt used to finance our operations is based on variable rates, but remains exposed to interest rate fluctuations between repricing dates. Our corporate debt is based on fixed interest rates. As servicer, we are also exposed to the impact of interest rate fluctuations on the float income we earn on balances held in trust from the date a loan payment is received from borrowers to the date funds are forwarded to investors.

Based on September 30, 2025 balances, if interest rates were to decrease by 100 bps, we estimate a net negative impact on our annual profitability of approximately $4 million resulting from a decrease of $33 million in annual interest income and other credits on cash deposits and float balances, and a decrease of $30 million in annual interest expense on our variable-rate debt.

Our management, under the supervision of and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2025.

Based on such evaluation, management concluded that our disclosure controls and procedures as of September 30, 2025 were (1) designed and functioning effectively to ensure that material information relating to Onity, including its consolidated subsidiaries, is made known to our principal executive officer and principal financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) operating effectively in that they provided reasonable assurance that information required to be disclosed by Onity in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer or principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

An investment in our common stock involves significant risk. We describe the most significant risks that management believes affect or could affect us under Part I, Item 1.A. of our Annual Report on Form 10-K for the year ended December 31, 2024. Understanding these risks is important to understanding any statement in such reports and in our subsequent SEC filings (including this Form 10-Q) and to evaluating an investment in our common stock. You should carefully read and consider the risks and uncertainties described therein together with all the other information included or incorporated by reference in such Annual Report and in our subsequent SEC filings before you make any decision regarding an investment in our common stock. You should also consider the information set forth under “Forward-Looking Statements.” If any of the risks actually occur, our business, financial condition, liquidity and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could significantly decline, and you could lose some or all of your investment.

There have been no material changes to the risks described in our Annual Report on Form 10-K for the year ended December 31, 2024, other than the following which updates the risk factor titled “A significant reduction in, or the total loss of, our remaining Rithm-related servicing would significantly impact our business, liquidity, financial condition and results of operations.” in light of Rithm’s notification on October 31, 2025 of its intent to not renew its subservicing agreements with us effective January 31, 2026:

If we do not restructure our servicing operations in a timely and cost-effective manner following the non-renewal of our servicing-related agreements with Rithm, it may negatively impact our business, liquidity, financial condition and results of operations.

On October 31, 2025, we were notified by one of our largest subservicing clients, Rithm, of its intent to not renew its subservicing agreements with us effective January 31, 2026. These agreements accounted for approximately $33.0 billion total servicing and subservicing UPB as of September 30, 2025. The servicing transfer to Rithm’s own servicing platform is expected to occur in the first and second quarters of 2026, subject to the receipt of necessary consents applicable to approximately $8.5 billion of UPB. See Note 8 — Other Financing Liabilities, at Fair Value, Rithm Transactions and Note 23 – Subsequent Events for information regarding renewal of our agreements with Rithm.

The servicing transfer will result in the reduction of servicing and subservicing fees and associated pledged MSR liability expense. While we continue to evaluate the impact of the servicing transfer on future results of operations, we expect a reduction of Operating expenses after downsizing certain aspects of our servicing and support functions. We further expect the recognition of a restructuring obligation upon transfer. If we are unable to timely reduce operating expenses by appropriately downsizing certain aspects of our servicing and corporate support functions, our liquidity, financial condition and results of operations may be negatively impacted. If not properly implemented, it is also possible that our restructuring activities may disrupt our ongoing servicing business and operations, including through the diversion of management attention or employee attrition.

The non-renewal of the Rithm servicing agreements will result in the reduction of Servicing and subservicing fees and associated Pledged MSR liability expense. For the nine months ended September 30, 2025, servicing and subservicing fees from Rithm amounted to $60.2 million (excluding ancillary income) and the related Rithm Pledged MSR liability expense amounted to $27.6 million. We continuously seek to replenish and profitably grow our servicing and subservicing business with our enterprise sales force and diversify our relationships. There is no assurance that we will be able to replace the lost revenue or contribution to profitability with new or existing servicing or subservicing clients in a timely manner and at comparable margins.

In addition, the float amount associated with the advance collections and servicing fees of the servicing portfolio will be repaid to Rithm in cash based on the amount due upon transfer (refer to Note 13 – Other Liabilities, Due to Rithm). The amount due varies daily. If we are unable to adjust our liquidity management practices due to the reduction of servicing float balances associated with the Rithm agreements and take additional actions required to appropriately manage our liquidity, such as the sale of MSR on a subservicing retained basis, we may experience a strain on our liquidity and cash resources which could negatively impact our ability to meet the liquidity requirements of regulators and the covenants in our financing and other contractual agreements. In addition, we may be required to reduce or abstain from investing resources in alternative income-generating activities or sell MSR or other assets, negatively impacting our ability to grow our business and improve returns for shareholders.