Florida-based Onity Group reported first-quarter 2026 net income attributable to common stockholders of $7 million as mortgage rate volatility, refinancing activity and elevated FHA delinquencies weighed on results despite growth in revenue and servicing volume.
Net income was down from $21 million last year. In its earnings report, released on Tuesday, the company posted a return on equity (ROE) of 4% for the quarter. Adjusted pre-tax loss totaled $6 million, resulting in an annualized adjusted ROE of negative 4%.
According to Keefe, Bruyette & Woods analysts Bose George and Frankie Labetti, Onity’s earnings miss was largely tied to servicing performance, driven by faster prepayments and changes to FHA modification programs.
KBW noted that shares could see a “modestly negative reaction” despite remaining inexpensive at roughly 63% of tangible book value.
Total revenue rose 18% year over year to $294 million, while adjusted revenue increased 26% to $278 million.
Chair, President and CEO Glen Messina said the company saw “solid underlying business momentum,” citing double-digit growth in revenue, originations volume and servicing balances.
“At the same time, mortgage rate volatility, higher than expected refinancing activity, and elevated FHA delinquencies pressured near-term performance,” Messina said in a statement.
Gap between reported and operating earnings
Onity lowered its 2026 adjusted ROE guidance range to 10% to 15%, down from prior guidance of 13% to 15%, with Messina citing continued rate volatility tied to geopolitical events during the earnings call. The company reaffirmed guidance related to servicing balance growth, mortgage servicing rights hedge effectiveness and operating efficiency.
KBW said the gap between reported and operating earnings was primarily driven by fair-value changes tied to mortgage servicing rights. Analysts highlighted a $17 million increase in MSR runoff losses tied to FHA modification program changes and higher organic prepayments.
Onity’s servicing segment generated an adjusted pre-tax loss of $16 million, compared with positive adjusted pre-tax income of $6 million in the fourth quarter. Onity said total servicing unpaid principal balance increased to $338 billion from $328 billion at the end of the prior quarter.
The company added $28 billion in servicing UPB during the quarter, including $17 billion in subservicing. Average owned subservicing UPB rose to about $160 billion from $151 billion in the fourth quarter.
“Servicing income was down $54 million versus the prior year due to higher-than-expected MSR runoff and higher FHA late-stage delinquencies due to the recent FHA modification rule changes,” Messina told investors during the call.
The company also recorded $99 million in prepayments during the quarter as lower mortgage rates boosted refinancing activity. Onity said it maintained its targeted hedge ratio of 80% to 100% and reported strong hedge effectiveness during the period.
The origination segment posted positive adjusted pre-tax income for the 11th consecutive quarter, rising to $34 million from $29 million in the prior quarter.
Origination volume
Funded originations volume was relatively flat sequentially at $14.2 billion. Correspondent lending volume declined 3% quarter over quarter to $13 billion, while correspondent margins narrowed to 23 basis points from 26 basis points.
Consumer direct lending volume increased 50% sequentially to $1.2 billion from $767 million, although margins slipped to 243 basis points from 256 basis points. Management attributed the margin compression to pipeline hedging challenges amid market volatility.
Book value per share rose to $75 from $74 in the prior quarter and was up $17 from a year earlier.
During the quarter, Onity repurchased about 154,000 shares of common stock for $6.1 million under its $10 million authorization. As of May 1, the company said it had repurchased an additional 88,000 shares using the remaining $3.9 million authorization.
Onity also raised an additional $200 million through a high-yield debt offering.
The company said it revised its previously announced transaction with Finance of America (FOA) and submitted the deal to Ginnie Mae for approval. The transaction is expected to establish a subservicing relationship tied to reverse mortgages.
“As disclosed in our public release this morning, our proposed transaction with Finance of America Reverse was not approved as submitted,” Messina told investors, adding that the transaction is still subject to Ginnie Mae’s approval.
“In the revised transaction, we’ll be selling approximately 57% of our own reverse servicing portfolio to Finance of America, representing approximately 77% of our reverse MSR investment,” Messina said. “We expect between $70 million-$80 million in proceeds before holdbacks and pricing adjustments as of March 31st. The origination, product marketing, and subservicing elements of the transaction remain consistent with the original transaction terms. We expect about 70% of the remaining reverse servicing portfolio will run off in four years.”
Messina added that the benefits of the transaction will largely be the same. “We will establish a significant subservicing relationship with the reverse mortgage market leader, reduce our balance sheet exposure to HECM assets and liabilities, improve our liquidity and capital ratio metrics, and will enhance our focus on other high-growth business areas.”
On March 23, the company’s mortgage subsidiary, PHH Mortgage Corporation, officially changed its name to Onity Mortgage Corporation.
