Onity Group (ONIT) Q3 2025 Earnings Transcript

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DATE

Nov. 6, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

Chair, President, and Chief Executive Officer — Glen A. Messina

Chief Financial Officer — Sean Bradley O'Neil

Vice President, Investor Relations — Valerie C. Haertel

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RISKS

The nonrenewal and transfer of the Rhythm subservicing relationship involves approximately $8.5 billion of UPB, requiring trustee and other consents. Timing and success are characterized as uncertain, potentially creating operational and transition risk.

"The Rhythm subservicing is a shrinking portfolio of mainly low balance, pre-2008 subprime loans and accounts for over half our delinquent loans, and borrower litigation. Portfolio attributes result in a high cost of servicing, and declining profitability." according to Glen A. Messina.

Full year 2025 UPB growth guidance lowered from "10 plus percent," according to Sean Bradley O'Neil, to a range of 5%-10% for the year, reflecting lower expected portfolio growth.

TAKEAWAYS

Adjusted Pretax Income -- Adjusted pretax income was $31 million, driven by origination profitability and favorable fair value gains on reverse buyout loans and servicing.

Adjusted Return on Equity -- Adjusted Return on Equity was 25% for the quarter, above prior guidance, and which management expects will also exceed full-year adjusted ROE guidance.

Book Value Per Share -- Increased by $2 to $62, up 5% from the prior year.

GAAP Net Income -- Earnings per share were $2.03, impacted by a $4 million tax provision expense related to future deferred tax asset utilization strategies.

Servicing UPB -- Grew by $17 billion, or 6% year over year, with $39 billion in servicing additions, net of runoff, more than offsetting planned transfers to Rhythm, and opportunistic client MSR sales.

Originations Volume -- Achieved record levels; quarterly funded volume reached a record high, despite the market size being only 41% of the 2021 peak.

Originations Segment Adjusted Pretax Income -- Significantly higher both year over year and sequentially (non-GAAP), led by recapture and B2B channel performance, as well as improved closed-end second volumes, and gains in Ginnie Mae mix.

Consumer Direct Recapture Rate -- Comparable to other retail originators.

Reverse Segment -- Reverse servicing pretax income rebounded to $4 million, driven by stronger gains on the sale of reverse assets, and stable profitability despite lower volume.

Subservicing Pipeline -- Nine new client wins in 2025, and six additional agreements under negotiation; subservicing additions in the second half of 2025 are expected to reach $32 billion, more than 2.5 times the first half.

Small Balance Commercial Subservicing -- UPB increased 9% sequentially from Q2 2025, and 32% year over year for small balance commercial subservicing UPB, with noted higher returns than residential servicing.

Hedging Strategy -- MSR hedge performance described as effective, with increased hedge coverage ratio, and ongoing benchmarking to market transactions; no expected impact from deferred tax asset valuation allowance release.

SUMMARY

Onity Group (NYSE:ONIT) reported record origination volume and double-digit revenue growth year over year and quarter over quarter in Q3 2025, with adjusted pretax income of $31 million and annualized adjusted ROE of 25% for the quarter, surpassing prior guidance. Net income reached $2.03 per share after a tax provision related to deferred tax asset planning, while book value per share grew $2 to $62. Year-to-date adjusted ROE was 20%, exceeding the target range. Management confirmed expectations to exceed full-year adjusted ROE (non-GAAP) guidance for 2025, and updated the servicing UPB growth target to 5%-10% for the year. The Rhythm subservicing portfolio, described as low-margin and high-cost, is being transferred due to a nonrenewal notice, with no material full-year 2026 impact anticipated. Subservicing expansion continues, especially in small balance commercial, alongside robust technology investments across AI verticals to drive cost efficiency and customer experience improvement.

Management indicated all Rhythm portfolio transfer plans for 2026 include corresponding adjustments to cost structure and business mix, with confidence in backfilling earnings via higher margin segments.

Release of the deferred tax asset valuation allowance will increase reported equity, and result in a higher effective tax rate, which could pressure future ROE unless matched by higher earnings, per O'Neil.

Messina stated, "We have built a technology-enabled award-winning servicing platform that is efficient, delivers differentiated performance, and service excellence."

AI and automation initiatives have resulted in measurable operational improvements, including faster cycle times, and reduced delinquencies, according to management commentary.

INDUSTRY GLOSSARY

MSR (Mortgage Servicing Right): The contractual right to service (collect payments, manage escrow accounts, etc.) a mortgage loan in exchange for a fee, often bought or sold between firms.

UPB (Unpaid Principal Balance): The outstanding principal amount on a loan that has yet to be repaid by the borrower.

Recapture: The process of re-originating or refinancing existing customer mortgages within the servicing or origination footprint, retaining customers rather than losing them to competitors.

B2B Channel: Origination activity through business-to-business relationships, typically with financial institutions or institutional clients, as opposed to consumer direct approaches.

Ginnie Mae Mix: Refers to the portion of loan originations or servicing comprised of Government National Mortgage Association (Ginnie Mae)-guaranteed loans; often seen as higher margin and less credit risky.

Full Conference Call Transcript

Operator: To all sites on hold, we do appreciate your patience and ask that you please continue to stand by. To all sites on hold, we do appreciate your patience. And ask that you please continue to stand by. Please stand by. Your program is about to begin. Should you need audio assistance, you may press star then 0 on your telephone keypad to speak with an audio. Good day, and welcome to the Group's Third Quarter Earnings and Business Update Conference Call. And answer session. You may register to ask a question at any time by pressing the star then 1 on your telephone keypad. Please be advised today's program will be recorded.

It is now my pleasure to turn the program over to Valerie C. Haertel, Vice President, Investor Relations. You may begin.

Valerie C. Haertel: Thank you. Good morning, and welcome to Onity Group's third quarter 2025 earnings call. Please note that our earnings release and presentation are available on our website at onontegroup.com. Speaking on the call will be chair, president, and chief executive officer, Glen A. Messina and chief financial officer, Sean Bradley O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are uncertain. Forward-looking statements speak only as of the date they are made, and involve assumptions, risks, and uncertainties, including those described in our SEC filings.

In the past, actual results have differed materially from those suggested by forward-looking statements and this may happen again. In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pretax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results.

A reconciliation of these non-GAAP measures to their most directly GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation. Now I will turn the call over to Glen A. Messina.

Glen A. Messina: Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We are looking forward to sharing our third quarter results and reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on slide three. Our third quarter results again demonstrate the effectiveness of our strategy and the strength of our execution. Our balanced business delivered sustained results with lower interest rates driven by originations profitability offsetting MSR runoff. Record origination volume and steady servicing profitability drove increased adjusted pretax income versus the second quarter and continued book value growth.

Adjusted ROE exceeded our guidance for the quarter and year to date, and we are expecting to exceed our guidance for the full year, underscoring our commitment to strong shareholder returns. Let's turn to slide four to review a few highlights for the quarter. We delivered adjusted pretax income of $31 million and annualized adjusted return on equity of 25% driven by strong originations performance and favorable fair value gains on reverse buyout loans and servicing. GAAP net income and earnings per share of $2.03 reflect a $4 million or 48¢ per share tax provision expense related to tax planning strategies to support future utilization of our deferred tax asset.

Average servicing UPB continued to grow steadily fueled by year-over-year volume growth which exceeded total industry originations growth for the same period. And finally, book value increased to $62 per share, up 5% versus prior year. We believe our third quarter results demonstrate our effectiveness in navigating changing market conditions with a balanced business model working as designed. Let's turn to slide five for more about the capability of our balanced business. We believe our scale in both servicing and originations enables us to perform well with high or low interest rates. You can see on the left our total business is delivering improved performance, as we have grown servicing, improved overall productivity.

Originations is responding well to changing market conditions, with profitability increasing as rates have generally declined in the second and third quarter. If interest rates were to materially decline like in 2021, we believe industry origination volume and margins would increase while higher MSR runoff would reduce servicing earnings. In this scenario, we would expect originations to again deliver most of our earnings. Regardless of interest rates, we are always maintaining agility to capitalize on asset management and other opportunities consistent with our strategy to create value for shareholders. Let's turn to slide six for more about our growth focus and actions.

We delivered servicing portfolio growth versus the prior quarter and prior year, driven by double-digit originations growth in the same periods. We have increased our owned MSR portfolio consistent with our objective to retain more MSRs to grow earnings and book value, as well as reload our portfolio for recapture opportunity. Ending total servicing in the third quarter is up $17 billion or 6% year over year. $39 billion in servicing additions net of runoff more than offsetting planned transfers to Rhythm and opportunistic client MSR sales. With MSR demand keeping prices elevated, several of our clients have taken the opportunity to monetize their MSRs and are replenishing their portfolio as industry origination volume increases.

I believe our ability to replenish and grow our portfolio while our clients execute opportunistic MSR sales highlights the power of our origination capability and the success of our growth strategy. Now please turn to slide seven for some highlights on our originations performance. In the third quarter, our originations team delivered volume growth of 3926% versus prior year and prior quarter, respectively. In both cases, exceeding the industry and many of our public peers. Consumer Direct is demonstrating strong growth driven by declining rates in the third quarter, and improved execution.

In business to business, we leveraged an enterprise sales approach to deliver our wide range of products, delivery methods, and services coupled with a strong focus on client service. Continuously invested in technology and process optimization, to enhance the customer experience, reduce cost, and improve scalability and competitiveness in both business to business and consumer direct. We are launching new and upgraded products and services to expand our addressable market and access higher margin market segments, create alternatives for our customers, and manage operating capacity surges in refinancing activity.

To highlight how far we have come in origination, our third quarter funded volume was the highest we have recorded with a market size that is only 41% of the 2021 market peak. Let's turn to slide eight to discuss our recapture platform. Our Consumer Direct team is delivering top-tier recapture performance to enhance MSR returns for us and several of our subservicing clients. As you can see on the left, funded volume was 1.8 times the prior year level, with an interest rate environment that is comparable between the two periods. Reflecting the success of our investments.

Based on our refinance recapture benchmarking, our third quarter year-to-date recapture performance, excluding home equity products, is better than several of our peers and the ICE reported average. In addition, our refinance recapture rate the previous loan was originated by our consumer direct channel is 85%, on par with other retail originators. This points out the significant upside in recapture as we continue to improve our first-time recapture capability. We continue to invest in talent, AI tools, predictive analytics, and leverage internal and external data sources, to help us better understand our customers, proactively identify opportunities, and further improve our capability and the customer experience. Let's turn to slide nine to discuss our near-term expectations for subservicing.

We continue to see a high level of interest amongst prospective clients to explore subservicing options and alternatives. We have signed nine new clients so far this year, and have six new agreements under negotiation. We expect subservicing additions in the second half of $32 billion or over 2.5 times the first half level. Driven by these new relationships, our existing clients, and synthetic subservicing with our MSR capital partners. And we expect that momentum to continue into 2026. The subservicing additions from these clients of over two times the 2025.

One area where we are seeing attractive growth opportunities is the small balance commercial segment, where our subservicing UPB is up 9% versus the second quarter and up 32% year over year. While the requirements are more complex than performing residential servicing, the returns are better, we have the expertise, and we are investing to drive continued growth here. Overall, we are excited about the growth potential in subservicing, and we continue to invest in our sales and operating capabilities to pursue a robust opportunity pipeline. Regarding our subservicing relationship with Rhythm, we have received notice of nonrenewal and expect to transfer this portfolio to them starting in 2026.

Approximately $8.5 billion of UPB requires trustee and other consent the timing and success of which are uncertain. We appreciate the opportunity to serve Rhythm and its customers for nearly ten years. The Rhythm subservicing is a shrinking portfolio of mainly low balance, pre-2008 subprime loans and accounts for over half our delinquent loans, and borrower litigation. Portfolio attributes result in a high cost of servicing, and declining profitability. For 2025, the Rhythm subservicing was less than 5% of our total adjusted revenues, and one of our least profitable portfolios before corporate allocations. After corporate allocations, it lost money in the last February loss increasing over the second.

For the past several years, we have assumed in our planning subservicing would not be renewed for the coming year. Our plans for 2026 assume the same. We expect to adjust our cost structure, replace the earnings contribution with more profitable business that are aligned with our current growth focus and not our past. We do not expect the removal of these loans to have a material financial impact for the full year 2026. Let's turn to slide 10 to talk about our continued investment in technology. We have been investing across four categories of AI. Robotics, natural language processing, vision, and machine learning, to improve business performance and competitiveness on several dimensions.

We have cultivated our own award-winning robotic process automation center of excellence, and technology innovation lab which support projects of increasing size and complexity. These projects typically focus on four desired outcomes. Drive cost leadership, accelerate revenue growth, maximize customer retention, and deliver superior operating performance. I am proud of what the team has accomplished through focused and purposeful investment to enable a highly competitive platform, top-tier recapture performance, and an improved customer experience. We continue to utilize this four by four approach to technology innovation, and to ensure our investments are aligned with delivering outcomes that matter most to our stakeholders.

Let's turn to slide 11 to see what we have accomplished and where we are taking our technology program. We believe our AI investments have been an important enterprise-wide performance enabler, creating value for all Onity stakeholders. Our past investments in AI have been focused on improving cycle times, processing cost, customer access and self-service, scalability of operations, customer opportunity identification, and reducing delinquencies. The outcomes of these efforts are reflected in the center column of this slide. And as you can see, they have had a profound impact on our business.

Today, our focus is continued integration of robotics, large language models, and machine learning across all operations to empower our people and processes where every process is optimized, every decision is data-informed, and every outcome is superior. For our people, our goal is to provide them with enhanced tools and data-enabled intelligence that drives heightened responsiveness, real-time decisions, and superior outcomes. For our customers, our focus is increased personalization, enhanced self-service, continuous improvement in ease of use, and anticipating their needs. The opportunity here is exciting, and the potential impact is incredibly powerful. Now I will turn it over to Sean Bradley O'Neil to discuss our results for the quarter in more detail.

Sean Bradley O'Neil: Thanks, Glen. Let's turn to slide 12 for a recap of the key financial measures. 2025 continues to be a strong year for us as evidenced by the following third quarter results. Revenue grew by double digits both year over year and over the trailing quarter. This was driven by both the servicing and origination operating units. Our third quarter adjusted return on equity was 25%, and exceeded our full year 2025 guidance both for the quarter and year to date. Our ability to deliver steady net income added $2 to book value per share in the quarter. Please turn to slide 13 for a historical trend of our adjusted pretax income, which is positive for the twelfth straight quarter.

We posted a strong quarter for adjusted pretax income of $31 million. This shows the strength of our balanced business where originations and servicing each support growth in a diverse range of interest rate environments. The year-to-date adjusted ROE was 20%, above the upper end of our guidance, and as mentioned, we expect to exceed our full year adjusted ROE guidance of 16% to 18%. GAAP ROE was 14%, and the appendix has a walk from net income to adjusted PTI to help you understand the differences. Please turn to slide 14 for the pretax income results for the Originations segment. Originations adjusted pretax income was significantly higher year over year and versus last quarter.

This was driven primarily by strong execution of recapture, and improved performance in our B2B channel, which drove record funding levels and improved margins in those channels. Consumer Direct continued another strong quarter driven by recapture performance resulting in elevated funding volumes. We also benefited from stronger closed-end second volumes. Business to business saw elevated volumes and margins as well with growth in our Ginnie Mae mix. Reverse originations maintained profitability with higher margins on lower volume. This was a breakout quarter for originations as we were able to post margin gains amid record volume. Please turn to slide 15 for the Servicing segment. Servicing remained a solid contributor to adjusted pre-tax income with $31 million for the quarter.

Forward servicing again experienced growth in average UPB with higher revenue both sequentially and year over year. The revenue lift from servicing growth was offset by higher runoff in the third quarter. This was driven by a greater amount of owned MSRs as well as higher prepay speed. The ability to capture some of this runoff is measured in the recapture metric. Reverse servicing pretax income rebounded to a $4 million in the quarter. Driven primarily by stronger gain on sale on the reverse assets. Regarding delinquency, our owned MSR portfolio exhibited improved delinquency statistics again this quarter. For example, our Ginnie Mae MSR portfolio had better delinquency metrics than the broader Ginnie Mae market.

Please see the MSR valuation page in the appendix for more details. On delinquency by investor type. Page 16 will give you an assessment of our continued strong hedging performance. The hedge strategy on the MSR continues to perform well and as intended. As a reminder, our strategy is designed to mitigate interest rate risk and our hedge has been effective in minimizing the impact of interest rates on our MSR valuation. Net of hedge, as you can see on the graph. Over the last two plus years, we have increased our hedge coverage ratio such that by 2023, we were seeking to hedge most of our interest rate exposure.

When we compare our results with information in the public domain, we believe we provide an effective MSR hedge at an efficient cost relative to our peers. Given that an MSR hedge is dependent on the interest rate and relative derivatives market, we frequently review and assess our hedge strategy. To manage risk and optimize liquidity as well as total returns. Please turn to 17 for commentary on our guidance for full year 2025. As mentioned, following the strong quarter of net income, we now expect to exceed our 2025 adjusted ROE guidance.

Note that this guidance on ROE is not dependent on the release of some of the valuation allowance, but is rather driven by our view of the strength of the operating businesses. Our UPB growth for the full year is now estimated to be between 5-10% versus the prior guidance of 10 plus percent. We do not believe the positive but smaller growth will have an adverse effect on our '26 forecast as we are generating growth in higher margin servicing areas that need less UPB to deliver comparable pretax income. Consider Glen's earlier comments on commercial subservicing as an example.

Overall, I am pleased to report another good quarter that grew book value per share and delivered a continued strong return on equity for our shareholders. Back to you, Glen.

Glen A. Messina: Thanks, Sean. Let's turn to slide 18 for a few comments before we open the call for questions. We are focused on accelerating profitable growth and creating value for all stakeholders. I am proud of the team's relentless focus on delivering on our commitments. Our strong third quarter results led by record originations volume validates our balanced business and its ability to perform through market cycles. We have built a technology-enabled award-winning servicing platform that is efficient, delivers differentiated performance, and service excellence. We are delivering profitability comparable to our peers at a more attractive valuation and we expect to exceed our adjusted return on equity guidance for the full year underscoring our commitment to strong shareholder returns.

This comes together to suggest a share price that we believe has significant upside. And we intend to continue to take necessary action and maintain agility in a dynamic market to harvest that value for the benefit of all stakeholders. Overall, I could not be more optimistic about the potential for our business. And with that, Aaron, let's open up the call for questions.

Operator: Certainly. At this time, if you would like to ask a question, please press the star then one on your telephone keypad. You may withdraw your question at any time by pressing star then 2. Again, it is star then one to ask a question. And we will go first to Bose Thomas George with KBW.

Bose Thomas George: Yeah. Hey. Good morning. Just on the Rhythm, you know, the transfer that is going to happen. When you look at that portfolio, just based on your commentary, you know, what is the like, the present value of that, was it basically flat or even negative? You know? Yeah. Just how do you think about that?

Glen A. Messina: Yeah. To put it in context for you, Bose, look. That portfolio is about 25% of the size it was, about five years ago, so it has really run down quite a bit. You know, from a contribution perspective, you know, look, we said it was one of our lowest margin portfolios. Look. You know, if you compare it to four times the profit margin. Ginnie Mae owned servicing, for example, Ginnie Mae owned servicing has about Of the Rhythm portfolio, and you know, you know, looking at it on a dollar value basis, you know, our $5 billion commercial subservicing portfolio generates a multiple of the dollar profit before you know, corporate overhead.

So it has really run down quite a bit. You know, we you know, the portfolio probably had maybe another year of marginal profit contribution associated with it, you know, again, that is you know, it has a lot of assumptions baked in it and stuff like that. But you know, look. It has gotten to the point where the portfolio is so small. Delinquencies are high, cost of servicing is high. I am sure for the Rhythm team, they have got you know, service certain oversight responsibilities. It is just at the point where it is pretty much, getting to where it is uneconomical for us. And our client to maintain the current relationship.

And it you know, I have said it, you know, throughout the course of this year and even last year, that this was an eventuality. It was inevitable, and we are at that point. And, yeah. So we are going to get on with it. We will transfer the portfolio. Adjust our operations accordingly, and, you know, feel good about the growth pipeline we have. To replace the business. And, again, there is, you know, many of our business have a much higher profit margin than the rhythm portfolio. And, you know, we have got a strong team who is demonstrating, you know, incredible growth outpacing the industry and many of our peers.

Bose Thomas George: Okay. Great. Thanks. And then just you know, your ROE guidance, I assume know, it is based on your current capital, but by the end of the year, your DTA gets reversed and your capital you know, goes up, I guess, as that happens. And the ROE on that, obviously, I guess, will be a little bit lower because of that. Or is that right? Or if you can but you will have a gap tax rate that will run through next year as well. Can so where did where does that whole thing kinda shake out after that? Yeah. Sean, I will turn it over to you.

Sean Bradley O'Neil: Sure. Hey, Bose. Yeah. Generally speaking, the directional changes you indicated are what will occur. It is all dependent on the amount of the valuation allowance that we do release at the end of the year. But you are correct. That will flow through it will increase know, equity. And therefore, all else being equal, we will have to generate a higher return to maintain the same ROE. And then the tax rate the effective tax rate will go up once we release the VA. If we release all of the VA, it would look in line with any other normal corporate taxpayer. Think 21% federal and a couple more for states.

And then if we would do a partial release, it will somewhere in between.

Bose Thomas George: Okay. Great. Thanks.

Operator: And as a reminder, it is star then one to ask a question. We can go next to Eric Hagen with BTIG.

Eric Hagen: Hey. Thanks. Good morning, guys. With the valuation allowance expected to be released, can you comment on how that drives the appetite to hedge the portfolio? I mean, do you feel like that changes the interest rate risk profile of the capital structure in any way?

Glen A. Messina: Yeah. Morning, Eric. Yeah. The bottom line is the short answer is no. We do not. Right? Look. We hit our decision of hedging our hedge strategy and approach and hedge coverage ratio, instrument selection, all those things, is really a function of protecting book earnings, I should say, net income, book equity, And as well, we do have secured MSR financing, so we take into consideration the pluses and minuses of margin calls on our derivative instruments as well as margin calls on our debt obligations. So when we take all those factors into consideration, and as well, the recapture performance of our recapture platform as well too.

That is done on a you know, portfolio basis, agency versus government and the like. Yeah. Yeah. The whether or not we how much of the valuation allowance gets released, I do not expect it will have a material impact in terms of how we think about hedging our MSR.

Eric Hagen: Okay. Got you. Hey. Any perspectives on prepayment speeds through September and, you know, October? I mean, you share how flow MSRs are pricing over these last six or eight weeks? And has the cash balance changed since September as you guys have backfilled or presumably backfilled, you know, some of the MSR portfolio?

Glen A. Messina: So from a speed perspective, you know, Sean, we when we release the queue, I you know, there will probably be some information in the queue where we can go and, you know, calculate speeds. I mean, obviously, speeds are up. I think if you look at slide 24, which is our MSR valuation page, you will probably notice that you know, speeds you know, the presumed Life of portfolio prepayment speeds and evaluation, you know, have know, have increased versus periods when they were lower. Yeah. The interest rate environment was higher. And the coupon was lower relative to current market current market conditions. So, yeah, we did see an uptick in prepayments, and the third quarter.

We did see an uptick in MSR runoff. you know, performed very, very well. Again, the balanced business originations And, you know, frankly, than offset that, which was which was really pretty good. You know, in terms of the fourth quarter and what we would expect, you know, look, we do not think anybody's crystal ball on interest rates is know, is magically correct. You know, when we look at the MBA and the Fannie Mae industry forecast, they are expecting, you know, origination volumes for the fourth quarter to be roughly consistent with where they were in the third quarter. Mix shift is a little bit different, though.

They are expecting you know, a little bit more or some growth. In refinancing volume and a decline in purchase volume. So if you look at that and, you know, parse that data, it would suggest that perhaps speeds may pick up a bit. In the fourth quarter But, again, it is going to be highly dependent upon where the average thirty-year fixed rate mortgage rate sells in for the fourth quarter.

Eric Hagen: Yep. That is good color. I appreciate you guys. Can I sneak in one more? I mean, do you guys ever shop the MSR portfolio for changes in interest rates? And what is sort of the max drawdown, you will, if you will, if you think you guys can tolerate on the MSR portfolio. And aside from a change in rates or, like, speed assumptions, what are the variables that you feel like could lead to you know, a correction in the MSR evaluation? How do you harness that risk?

Glen A. Messina: Yeah. Eric, we, you know, we do a fair amount of benchmarking to bulk trades in the MSR marketplace as we think about our valuation of the MSR. We use that as benchmark to, you know, make sure that our portfolio fair value is stated correctly. We look at market transactions in the secondary market or bulk market to support that. As you know, we have historically, from time to time, sold portions of our MSR either on a subservicing retained or servicing release basis, to take advantage of you know, what we believe are, you know, valuations in the market that are better than what we see as intrinsic value in the mortgage servicing rights.

You know, last year, we did, you know, we did a couple of trades like that. This year, we have not. You know, we have largely because our recapture platform is performing so well. I do not want to give up the recapture opportunity in the portfolio. Right? So that is not necessarily a focus for us. And know, from a, you know, portfolio balance perspective, we may from time to time consider synthetic subservicing trades with our capital partners to balance our fifty-fifty mix of own servicing and subservicing. So look, we are we take a dynamic approach to asset management or MSR management. We do not fall in love with any of our assets. You know?

But we do like that fifty-fifty mix. And you know, think that serves best for us to optimize earnings growth, dollar earnings growth and return on equity. In terms of the MSR sensitivity to interest rates, you know, the chart that Sean talked about shows, you know, showed the effectiveness of our, you know, derivative hedging program on the MSR. Has performed very, very well. Super proud of our CIO and his team and the work they are doing to manage the MSR interest rate risk. And a good portion of that is our originations team and how they are doing from a recapture purse how well they are doing from a recapture perspective.

So the combination of the operational hedge and a financial hedge you know, really gives us we believe, nice protection on fair value changes to the MSR. You know, as a matter of our know, when we look at our, hedging performance, we do rate shock analysis for or minus a 100 basis points. You know, we do target a hedge coverage ratio. Think we have talked about all those things in the past. So yeah, really pleased again with how the MSR is performing, how our hedge program is performing. And we will continue to take a very dynamic approach to managing MSRs.

And if there is an opportunity sell it at value above, what we believe is intrinsic values, as we have in the past, we will harvest that opportunity.

Eric Hagen: Thanks, guys. Appreciate you as always.

Glen A. Messina: Thank you.

Operator: And once again, if you would like to ask a question, please press the star then one on your telephone keypad. We will pause briefly for any additional questions to queue. At this time, there are no additional questions. I would like to turn the program back over to Glen A. Messina for any closing remarks.

Glen A. Messina: Thanks, Aaron. I would like to thank our shareholders and key business partners for supporting our business. We also would like to thank and recognize our Board of Directors and global business team for the hard work and commitment to our success. I look forward to updating all of you on our progress at our next quarterly earnings call. Thank you for joining.

Operator: Thank you for your participation. This does conclude today's program. You may disconnect at any time.

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