v3.26.1
Fair Value
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value
Note 3 – Fair Value
Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy
prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs.
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 or non-recurring basis or disclosed, but not measured, at fair value are as follows:
  March 31, 2026December 31, 2025
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets     
Advances, net (b)
3$431.1 $431.1 $483.4 $483.4 
Loans held for sale, at fair value (a) (d)
3, 23,150.2 3,150.2 1,891.7 1,891.7 
Reverse loans held for sale pooled into HMBS, at fair value (a)
39,596.5 9,596.5 9,807.5 9,807.5 
Receivables, net (b)
3365.0 365.0 189.8 189.8 
Financial liabilities     
HMBS-related borrowings, at fair value (a)
3$9,437.4 $9,437.4 $9,611.7 $9,611.7 
MSR related financing liabilities, at fair value (a)
3794.6 794.6 842.0 842.0 
MSR financing facilities (b) (c)
31,371.0 1,365.0 1,285.2 1,278.3 
Advance match funded liabilities (b)
3291.3 291.3 341.9 341.9 
Mortgage warehouse facilities (b)
32,193.0 2,193.0 1,224.6 1,224.6 
Reverse mortgage securitization notes (b) (c)
31,321.0 1,327.4 899.3 909.6 
Senior notes (b) (c)
3, 2
692.8 673.8 489.6 515.0 
Derivative financial instrument assets (liabilities), net     
Interest rate lock commitments (IRLCs) (a)
3$5.0 $5.0 $17.3 $17.3 
Other derivatives (a)
17.6 7.6 1.7 1.7 
MSRs (a)
3$3,025.9 $3,025.9 $2,825.3 $2,825.3 
(a)Measured at fair value on a recurring basis in our financial statements.
(b)Disclosed, but not measured at fair value in our financial statements. 
(c)The carrying values are net of unamortized debt issuance costs and discount. See Note 12 – Borrowings for additional information.
(d)The newly originated portfolio of loans held for sale pending securitization with the Agencies or sale is classified as Level 2; all other loans are classified as Level 3.
The following tables present a reconciliation of the changes in fair value of certain Level 3 assets and liabilities that we measure at fair value on a recurring basis (refer to the respective notes for other Level 3 assets and liabilities):
Three Months Ended March 31,
20262025
Loans Held for Sale - Fair ValueIRLCsLoans Held for Sale - Fair ValueIRLCs
Beginning balance$780.1 $17.3 $472.9 $(0.5)
Purchases, issuances, sales and settlements 
Purchases and other410.8 — 134.9 — 
Issuances (1)
— 74.5 — 32.7 
Sales(54.9)— (60.4)— 
Settlements
(46.3)— (30.5)— 
Transfers from (to):
Loans held for sale, at fair value (1)
— (6.2)— (47.3)
Reverse mortgage loans, at fair value (2)
0.8 — 3.1 — 
Receivables, net(32.8)— (20.5)— 
REO (Other assets)(23.8)— (12.3)— 
Advances (incl. capitalization upon Ginnie Mae modification)2.5 — 4.8 — 
Other(1.6)— — — 
Net additions (disposition/derecognition)
254.6 68.4 19.0 (14.6)
Included in earnings:
Change in fair value (1)
10.4 (80.7)4.7 24.6 
Ending balance$1,045.0 $5.0 $496.6 $9.4 
(1)IRLC activity (issuances and transfers) represent changes in fair value included in earnings. This activity is presented on a gross basis in the table for disclosure purposes. Total net change in fair value included in earnings attributed to IRLCs is a gain (loss) of $(12.3) million and $9.9 million for the three months ended March 31, 2026 and 2025, respectively. See Note 15 – Derivative Financial Instruments and Hedging Activities. A reconciliation from the beginning balances to the ending balances of Reverse loans held for sale pooled into HMBS, HMBS-related borrowings, MSRs and MSR related financing liabilities that we measure at fair value on a recurring basis is disclosed in Note 5 - Reverse Mortgages, Note 7 – Mortgage Servicing and Note 8 — MSR Related Financing Liabilities, at Fair Value, respectively.
(2)For three months ended March 31, 2025, transfers from loans held for investment, at fair value.
The significant unobservable assumptions that we make to estimate the fair value of certain assets and liabilities classified as Level 3 and measured at fair value on a recurring basis are provided below.
Loans Held for Sale
Repurchased Ginnie Mae forward and reverse loans are classified as Level 3 within the valuation hierarchy. We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications, strategic EBO and loan resolution activity as part of our contractual obligations as the servicer of the loans. The fair value of the forward mortgage loans we purchased from Ginnie Mae guaranteed securitizations is estimated using both observable and unobservable inputs, including estimated default, prepayment, and discount rates. Significant unobservable inputs in estimating fair value include the estimated default rate and, for reverse loans the prepayment rate and liquidation timeline.
Loans Held for Investment and Reverse loans Held for Sale pooled into HMBS - Reverse Mortgages
Reverse mortgage loans classified as loans held for investment through November 2025 and Reverse loans held for sale pooled into HMBS thereafter are carried at fair value and classified as Level 3 within the valuation hierarchy. These loans are not actively traded, and quoted market prices are not available. We measure these loans at fair value based on the expected future cash flows discounted over the expected life of the loans at a rate commensurate with the risk of the estimated cash flows, including future draw commitments for HECM loans. Inputs of the discounted cash flows of these assets include future draws and tail securitization spreads, conditional prepayment rate (including voluntary and involuntary prepayments) and discount rate. We engage third-party valuation experts in the determination of fair value.
Significant unobservable assumptions include conditional prepayment rate and discount rate. The conditional prepayment rate assumption displayed in the table below is inclusive of voluntary (repayment or payoff) and involuntary (inactive/delinquent status and default) prepayments. The discount rate assumption is primarily based on an assessment of current market yields on reverse mortgage loan and tail securitizations, expected duration of the asset and current market interest rates.
Significant unobservable assumptionsMarch 31,
2026		December 31,
2025
Life in years
Range
0.8 to 7.8
0.6 to 7.8
Weighted average 4.74.7 
Conditional prepayment rate (CPR), including voluntary and involuntary prepayments (a)
Range
13.1% to 26.0%
13.1% to 26.6%
Weighted average 19.0 %18.9 %
Discount rate4.9 %4.8 %
(a) Annualized rate of lifetime projected prepayments as a percentage of the UPB at the beginning of any given period.
Significant changes in any of these assumptions in isolation could result in a significant change in fair value. The effects of changes in the assumptions used to value the securitized reverse loans held for sale pooled into HMBS, excluding future draw commitments, are partially offset by the effects of changes in the assumptions used to value the HMBS-related borrowings that are associated with these loans.
MSRs
MSRs are carried at fair value and classified within Level 3 of the valuation hierarchy. MSRs are not actively traded, and quoted market prices are not available. We determine the fair value of MSRs primarily using discounted cash flow methodologies. The significant components of the estimated future cash inflows for MSRs include servicing fees, late fees, float earnings and other ancillary fees. Significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments.
Effective in the first quarter of 2026, we brought the valuation of our MSRs in-house, and implemented internally managed industry standard valuation and prepayment models to estimate the fair value of MSRs. Previously we outsourced the valuation of our MSRs to third-party valuation experts to provide an estimated fair value of our MSRs.
To benchmark the reasonableness of our determination of fair value, we supply our portfolio information to multiple third-party valuation experts who generate an independent assessment of fair value. In arriving at their estimated benchmark fair value ranges, the valuation experts utilize industry standard discounted cash flow modeling incorporating an estimate of prepayments, and other usual and customary inputs which reflect their observations and assumptions related to market activity, generally the bulk market, incorporating available industry survey results and client feedback, and including risk premiums and liquidity adjustments. While interest rates are a key value driver, MSR fair value may change for other market-driven factors, including but not limited to the supply and demand of the market or the required yield or perceived value by investors of such MSRs.
While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts, and we perform additional verification and analytical procedures. The MSR valuation process is subject to significant senior management oversight, including formal approval of MSR valuations and related model and/or assumption updates by Onity’s MSR Valuation Committee. We believe that our procedures provide reasonable assurance that the fair value used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use.
The fair value is equal to the internally modeled fair value mark without adjustment except in the event we have a potential or completed sale, including transactions where we have executed letters of intent, in which case the fair value of the MSRs is recorded at the estimated sale price, or the modeled fair value is outside the range of third-party valuation(s) (benchmarking), in which case we adjust the modeled fair value to ensure it remains within the valuation range provided by at least one of the MSR valuation experts. This determination is separately made for each class of MSR.
A change in the valuation inputs or assumptions may result in a significantly higher or lower fair value measurement. Changes in market interest rates predominantly impact the fair value of Agency MSRs via prepayment speeds by altering the borrower refinance incentive and the non-Agency MSRs due to the impact on advance funding costs. In addition, changes in
market interest rates impact float income. The significant unobservable assumptions used in the valuation of these MSRs include discount rate, prepayment speed, delinquency rates, and cost to service.
Significant unobservable assumptions (1)
March 31, 2026December 31, 2025
GSEGinnie MaeNon-AgencyGSEGinnie MaeNon-Agency
Discount rate
Range
8.8% to 9.0%
10.4% to 13.4%
11.4% to 12.7%
8.9% to 15.1%
10.5% to 15.0%
9.5% to 14.5%
Weighted average8.8 %10.5 %11.9%9.2 %10.6 %10.4 %
Prepayment speed
Range
4.1% to 8.5%
4.7% to 9.0%
4.3% to
 7.3%
4.0% to 10.0%
5.7% to 10.6%
5.4% to
 7.5%
Weighted average6.4 %6.8 %5.1%6.8 %7.7 %6.4 %
Delinquency
Range
1.5% to 2.0%
9.6% to 12.8%
11.9% to
 15.9%
0.4% to
 1.0%
4.8% to
 9.1%
9.0% to 17.7%
Weighted average1.8 %11.4 %12.6%0.5 %5.6 %12.0 %
Cost to service (in dollars)
Range
$71 to
$73
$110 to
 $225
$174 to
 $218
$67 to
$69
$92 to
 $108
$158 to
 $189
Weighted average$72 $118 $18267$96 $173 
(1)March 31, 2026 assumptions reflect the internal model approach implemented in the current quarter, with December 31, 2025 reflecting the assumptions in place under the prior approach.
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs as of March 31, 2026 given hypothetical increases in significant unobservable assumptions:
Adverse change in fair value10%20%
Change in weighted average discount rate (in percentage points)0.9 1.9 
Change in fair value due to change in weighted average discount rate $(109.0)$(209.4)
Change in weighted average prepayment speeds (in percentage points)0.7 1.4 
Change in fair value due to change in weighted average prepayment speeds$(79.1)$(153.6)
Change in weighted average delinquency (in percentage points)
0.4 0.8 
Change in fair value due to change in weighted average delinquency
$(17.8)$(34.6)
Change in weighted average cost to service (in dollars)
9.0 17.0 
Change in fair value due to change in weighted average cost to service
$(35.4)$(70.8)
Financing Liabilities
HMBS-Related Borrowings
HMBS-related borrowings are carried at fair value and classified as Level 3 within the valuation hierarchy. These borrowings are not actively traded, and therefore, quoted market prices are not available. We determine fair value using a discounted cash flow approach, by discounting the projected recovery of principal and interest over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows.
We engage third-party valuation experts to support our valuation and provide observations and assumptions related to market activities. The fair value is equal to the fair value mark provided by a third-party valuation expert. We evaluate the reasonableness of our fair value estimate and assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions and benchmarks of assumptions and value estimates.
Significant unobservable assumptions include yield spread and discount rate. The yield spread and discount rate assumption for these liabilities are primarily based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates.
Significant unobservable assumptionsMarch 31,
2026		December 31,
2025
Life in years
Range
0.8 to 7.8
0.6 to 7.8
Weighted average 4.74.7 
Conditional prepayment rate
Range
13.1% to 26.0%
13.1% to 26.6%
Weighted average19.0 %18.9 %
Discount rate4.8 %4.7 %
Significant changes in any of these assumptions in isolation could result in a significant change in fair value. The effects of changes in the assumptions used to value the HMBS-related borrowings are partially offset by the effects of changes in the assumptions used to value the associated pledged reverse loans held for sale pooled into HMBS, excluding future draw commitments.
Pledged MSR Liabilities
Pledged MSR liabilities are carried at fair value and classified as Level 3 within the valuation hierarchy. We determine the fair value of the pledged MSR liability following a similar approach as for the associated transferred MSRs. Fair value of the pledged MSR liability in connection with the MSR capital partner transactions is determined consistent with the associated MSR, using the same methodology and assumptions, while considering cash flows contractually retained by OMC and expected life of the subservicing agreement, when applicable.
Significant unobservable assumptionsMarch 31,
2026		December 31,
2025
Weighted average prepayment speed5.4 %5.2 %
Weighted average delinquency rate3.8 %3.3 %
Weighted average subservicing life (in years)5.25.2
Weighted average discount rate9.4 %9.6 %
Weighted average cost to service (in dollars)$127 $124 
Significant changes in these assumptions in isolation would result in a significant change in fair value.
ESS Financing Liability
The Excess Servicing Spread (ESS) financing liability is carried at fair value and classified as Level 3 within the valuation hierarchy. The ESS financing liability consists of the obligation to remit to third parties a specified percentage of future servicing fee collections (excess servicing spread) on reference pools of mortgage loans, which we are entitled to as owner of the related MSRs. The fair value represents the net present value of the expected servicing spread cash flows, consistent with the valuation model and behavioral projections of the underlying MSR, as applicable. The significant unobservable assumptions used in the valuation of the ESS financing liability include prepayment speeds, delinquency rates, and discount rates. The discount rate is initially determined based on the expected cash flows and the proceeds from each issuance, and is subsequently updated, at each issuance level, to incorporate discount rate assumption updates for the underlying MSR or other factors. At March 31, 2026 and December 31, 2025, the weighted average discount rate of the ESS financing liability was 9.4% and 9.8%, respectively. Refer to MSRs above for a description of other significant unobservable assumptions.
Derivative Financial Instruments
Fair value amounts of IRLCs are adjusted for expected “fallout” (locked pipeline loans not expected to close) using models that consider cumulative historical fallout rates and other factors. IRLCs are classified as Level 3 assets as fallout rates were determined to be significant unobservable assumptions.