Liberty Reverse parent Onity touts higher profitability, solid servicing performance

Onity Group, the recently rebranded parent company of top-10 lender Liberty Reverse Mortgage, posted improved earnings results in the third quarter of the year — with particular attention given to the profitability of its forward and reverse mortgage servicing segments.

Onity CEO Glen Messina led the Tuesday morning earnings call by saying that the company recorded its “highest adjusted pretax income and return on equity in the last three years,” which came in at $35 million. Its net income for the quarter was $21 million. It originated $8.5 billion in loans from July through September, up 23% quarter over quarter.

Reverse mortgage highlights

Onity chief financial officer Sean O’Neill highlighted the reverse servicing segment’s overall contribution to the company’s profitability.

“This quarter’s performance was supported by strong profitability in the reverse business, benefiting from a successful asset management transaction with improvement both quarter over quarter and year over year,” he said.

Part of the contribution came from a previously announced acquisition of assets from Mortgage Assets Management LLC, a subsidiary of investment funds managed by Waterfall Asset Management.

“The Waterfall reverse asset transaction closed last week,” O’Neill said. “It increases our equity through preferred equity issuance, provides additional liquidity and includes about $55 million of reverse assets which are accretive to our earnings per share.”

The company also continues to “capitalize on market cycle opportunities,” he said, which includes its reverse mortgage activity.

This is “demonstrated by our selective MSR (mortgage servicing rights) sales above book value this year, all three of which were replenished in the same period by strong originations volume,” he said, “as well as the opportunistic reverse asset transactions we have engaged in since early 2023, two of which were the reverse transaction in September and the Waterfall transaction, both of which helped our successful debt restructuring and provided accretion to net income.”

Impact on balance sheet

The company gained $10 million in adjusted reverse servicing pre-tax income. It also added $46 million in liquidity via its reverse mortgage servicing operation.

Overall reverse mortgage origination volume also increased quarter over quarter, from $184 million in Q2 to $197 million in Q3.

“Reverse [pre-tax income] improved over last quarter to break even driven by improved margin and volume in the reverse correspondent subchannel,” the company reported.

As it has in prior quarters, the company emphasized that its full reverse mortgage pipeline as an “integrated reverse originator, servicer and subservicer” is contributing to its overall profitability. Onity has logged $722 million in reverse mortgage originations over the past 12 months, and it maintains a reverse servicing and subservicing portfolio of $22 billion, or roughly 7% of its total book.

According to Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), Liberty/Onity is the fourth-largest reverse mortgage lender in the country as measured by endorsements.

It endorsed 1,138 HECM loans during the 12 months ending Oct. 31, narrowly staying above Fairway Independent Mortgage Corp. in the top reverse originator rankings maintained by RMI.