Onity wins approval for revised reverse MSR sale to FOA

Onity Group Inc. won regulatory approval for a revised sale of most of its reverse mortgage servicing rights to Finance of America (FOA), the company said Tuesday.

Under the new agreement, Onity will sell MSRs on about 20,000 Home Equity Conversion Mortgages (HECMs) with an unpaid principal balance of $5.1 billion as of March 31. The initial deal included roughly 40,000 loans with $9.6 billion in UPB. Onity will subservice the transferred loans under a three-year agreement with FOA.

FOA will also acquire Onity’s pipeline of reverse mortgage loans, and Onity will exit the reverse mortgage origination business. The company expects total proceeds of $70 million to $80 million from the transaction, based on the book value of the assets as of April 30.

HMBS concentration

Ginnie Mae did not approve the original terms of the transaction, the companies said, although no additional details were provided.

But Ginnie Mae data on Home Equity Conversion Mortgage-backed Securities (HMBS) compiled by New View Advisors show that FOA and Onity together account for about 48% of the HMBS market by unpaid principal balance. Ginnie Mae requires that the HMBS issuer also be the servicer of record.

FOA is currently the largest HMBS issuer of record by unpaid principal balance, with about $18.1 billion in UPB across 3,163 issuances, or roughly 32.2% of HMBS outstanding, according to New View’s data. Onity holds about $8.9 billion in UPB across 5,378 issuances, representing a 15.9% share of outstanding HMBS before the transaction.

Among other major issuers, Longbridge Financial has about $10.3 billion of HMBS UPB (18.3% share), while Mutual of Omaha Mortgage holds about $4.1 billion (7.3% share).

Shift toward subservicing

The sale covers about 57% of Onity’s reverse servicing portfolio and about 77% of its reverse MSR investment. About 70% of Onity’s remaining reverse servicing portfolio is expected to run off within four years, the company said.

Glen A. Messina, Onity’s chair, president and CEO, said the deal repositions the company in the reverse mortgage market. It will “establish a significant subservicing relationship with FAR, a reverse market leader, help simplify our business, and enable increased focus on more substantial growth and earnings opportunities,” Messina said in a statement. 

The transaction remains subject to customary closing conditions. Onity said it will provide an update on the anticipated closing date at a later time.

Onity’s board also authorized a share repurchase program of up to $20 million of the company’s common stock. The authorization “reflects our intent to deploy capital in a disciplined and strategic manner with the goal of delivering meaningful returns to our shareholders,” Messina said.