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Other Financing Liabilities, at Fair Value | 6 Months Ended
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Jun. 30, 2024
Transfers and Servicing [Abstract] |
Other Financing Liabilities, at Fair Value |
Note 8 — Other Financing Liabilities, at Fair Value
The following table presents financing liabilities carried at fair value which include pledged MSR liabilities recorded in connection with MSR transfers, subservicing retained, that do not qualify for sale accounting, liabilities of consolidated mortgage-backed securitization trusts and MSR excess servicing spread (ESS) financing liability carried at fair value (see Note 13 – Borrowings for ESS financing liability carried at amortized cost).
|  |  |  |  |  |  | Outstanding Balance
Borrowing Type | Collateral |  |  |  | Maturity |  | June 30, 2024 |  | December 31, 2023
MSR transfers not qualifying for sale accounting (1): |  |  |  |  |  |  |  |  |
Pledged MSR liability, at fair value - MAV | MSRs |  |  |  | (1) |  | $ | 333.1 |  |  | $ | 409.2 |
Rights to MSRs Agreements, at fair value - Rithm | MSRs |  |  |  | (1) |  | 121.6 |  |  | 121.0 |
Pledged MSR liability, at fair value - Others | MSRs |  |  |  | (1) |  | 135.3 |  |  | 115.3 |
Total Pledged MSR liability, at fair value |  |  |  |  |  |  | 590.0 |  |  | 645.5 |
Financing liability - Owed to securitization investors, at fair value: Residential Asset Securitization Trust 2003-A11 (RAST 2003-A11) (2) | Loans held for investment |  |  |  | October 2033 |  | 5.4 |  |  | 5.6 |
ESS financing liability, at fair value (3) | MSRs (3) |  |  |  | (3) |  | 250.5 |  |  | 248.9 |
Total Other financing liabilities, at fair value |  |  |  |  |  |  | $ | 845.9 |  |  | $ | 900.0 |
(1)MSRs transferred, subservicing retained, or sold in transactions which do not qualify for sale accounting treatment are accounted for as secured financings. Until such time as the transaction qualifies as a sale for accounting purposes, we continue to recognize the MSRs and the related financing liability (referred as Pledged MSR liability) on our consolidated balance sheets, as well as the full amount of servicing fee collected as revenue and the servicing fee remitted as Pledged MSR liability expense in our consolidated statements of operations. Fair value gains and losses of the Pledged MSR liability are recognized in MSR valuation adjustments, net in the consolidated statements of operations - See Note 7 – Mortgage Servicing and Note 9 – MSR Valuation Adjustments, Net. (2)Consists of securitization debt certificates due to third parties that represent beneficial interests in trusts that are consolidated. (3)Consists of the obligation to remit to a third party a specified percentage of future servicing fee collections (servicing spread) on reference pools of MSRs, which we are entitled to as owner of the related MSRs. The servicing spread remittance is reported in Pledged MSR liability expense and fair value gains and losses of the ESS financing liability are reported in MSR valuation adjustment, net. $33.4 billion UPB of MSR and Pledged MSR liability associated with Rithm servicing agreements were derecognized on December 31, 2023 as MSR sale accounting criteria were met. Effective January 1, 2024, as PHH continues to subservice the portfolio, the statement of operations reflects subservicing fee revenue as opposed to the gross presentation of servicing fee revenue and separate offsetting presentation of servicing fee remittances within Pledged MSR liability expense prior to January 1, 2024. The following tables present the activity of the pledged MSR liability recorded in connection with the MSR transfer agreements with MAV and other unrelated parties, including Rithm, that do not qualify for sale accounting.
|  |  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Pledged MSR Liability |  |  |  |  | 2024 |  |  |  |  |  | 2023 |  | 2024 |  | 2023
Beginning balance |  |  |  |  | $ | 647.9 |  |  |  |  |  |  | $ | 883.3 |  |  | $ | 645.5 |  |  | $ | 931.7 |
MSR transfers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
MSR transfers to MAV |  |  |  |  | — |  |  |  |  |  |  | 0.1 |  |  | — |  |  | 0.2 |
MSR transfers to others |  |  |  |  | 5.8 |  |  |  |  |  |  | 93.3 |  |  | 12.7 |  |  | 97.6 |
Total MSR transfers |  |  |  |  | 5.8 |  |  |  |  |  |  | 93.4 |  |  | 12.7 |  |  | 97.8 |
Derecognition of financing liability |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derecognition of financing liability - MAV (2) |  |  |  |  | (85.7) |  |  |  |  |  |  | (32.5) |  |  | (85.7) |  |  | (32.5) |
Total derecognition of financing liability |  |  |  |  | (85.7) |  |  |  |  |  |  | (32.5) |  |  | (85.7) |  |  | (32.5) |
Fair value (gain) loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Changes in fair value due to inputs and assumptions |  |  |  |  | 32.5 |  |  |  |  |  |  | 81.0 |  |  | 40.3 |  |  | 42.7 |
Realization of expected cash flows |  |  |  |  | (10.4) |  |  |  |  |  |  | (15.6) |  |  | (22.9) |  |  | (30.1) |
Total fair value (gain) loss |  |  |  |  | 22.1 |  |  |  |  |  |  | 65.4 |  |  | 17.4 |  |  | 12.6 |
Ending balance (1) |  |  |  |  | $ | 590.0 |  |  |  |  |  |  | $ | 1,009.5 |  |  | $ | 590.0 |  |  | $ | 1,009.5 |
(1)The fair value of the Pledged MSR liability differs from the fair value of the associated transferred MSR asset mostly due to the portion of ancillary income that is contractually retained by PHH (shared between PHH and MAV) and other contractual cash flows. (2)During the three months ended June 30, 2024 and June 30, 2023, we derecognized a portion of the MAV Pledged MSR liability upon sale of the related MSRs by MAV to third parties with a UPB of $5.5 billion and $2.3 billion, respectively. The following tables present the Pledged MSR liability expense recorded in connection with the MSR sale agreements with MAV and other unrelated parties (including Rithm) that do not qualify for sale accounting and the ESS financing liabilities.
| Three Months Ended June 30,
| 2024 |  | 2023
| Rithm and Others |  | MAV |  | Total |  | Rithm and Others (1) |  | MAV |  | Total
Servicing fees collected on behalf of MAV, Rithm and others | $ | 19.1 |  |  | $ | 17.8 |  |  | $ | 36.9 |  |  | $ | 59.2 |  |  | $ | 15.5 |  |  | $ | 74.7 |
Less: Subservicing fee retained by Onity | (4.4) |  |  | (2.3) |  |  | (6.8) |  |  | (16.9) |  |  | (2.1) |  |  | (19.1) |
Ancillary fee/income and other settlement (including expense reimbursement) | 3.1 |  |  | (0.2) |  |  | 3.0 |  |  | 3.6 |  |  | (0.2) |  |  | 3.5 |
Transferred MSR net servicing fee remittance | $ | 17.8 |  |  | $ | 15.3 |  |  | 33.1 |  |  | $ | 45.9 |  |  | $ | 13.2 |  |  | 59.1 |
ESS servicing spread remittance |  |  |  |  | 13.0 |  |  |  |  |  |  | 13.9 |
Pledged MSR liability expense |  |  |  |  | $ | 46.1 |  |  |  |  |  |  | $ | 73.0 |
(1)Includes $45.2 million of servicing fees collected on behalf of Rithm, $12.8 million of subservicing fee retained and $32.4 million of net servicing fee remittance in the three months ended June 30, 2023 related to MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023.
| Six Months Ended June 30,
| 2024 |  | 2023
| Rithm and Others |  | MAV |  | Total |  | Rithm and Others (1) |  | MAV |  | Total
Servicing fees collected on behalf of Rithm, MAV and others | $ | 37.8 |  |  | $ | 35.8 |  |  | $ | 73.6 |  |  | $ | 118.8 |  |  | $ | 31.9 |  |  | $ | 150.7 |
Less: Subservicing fee retained by Onity | (9.0) |  |  | (4.9) |  |  | (13.9) |  |  | (34.2) |  |  | (4.4) |  |  | (38.6) |
Ancillary fee/income and other settlement (including expense reimbursement) | 5.5 |  |  | (0.3) |  |  | 5.3 |  |  | 6.9 |  |  | (0.2) |  |  | 6.7 |
Transferred MSR net servicing fee remittance | $ | 34.3 |  |  | $ | 30.7 |  |  | 65.0 |  |  | $ | 91.5 |  |  | $ | 27.3 |  |  | 118.8 |
ESS servicing spread remittance |  |  |  |  | 26.1 |  |  |  |  |  |  | 24.5 |
Pledged MSR liability expense |  |  |  |  | $ | 91.0 |  |  |  |  |  |  | $ | 143.3 |
(1)Includes $90.9 million of servicing fees collected on behalf of Rithm, $25.9 million of subservicing fee retained and $65.0 million of net servicing fee remittance in the six months ended June 30, 2023 related to MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023. MAV (Related Party) Transactions PHH entered into agreements to sell MSR portfolios to its related party MAV, on a bulk and flow basis, for which PHH has been retained as subservicer. While MSR legal title has transferred to MAV, the transactions do not qualify for sale accounting treatment primarily due to the termination restrictions of the subservicing agreement. See Note 11 - Investment in Equity Method Investee and Related Party Transactions. Accordingly, we continue to report the MSR and an associated Pledged MSR liability on our consolidated balance sheet. Rithm Transactions Starting in 2012, Onity and PHH entered into agreements to sell MSRs and the related servicing advances to Rithm, and in all cases have been retained by Rithm as subservicer. As of June 30, 2024, all transactions met sale accounting treatment except for the agreement to sell a $9.5 billion MSR portfolio to Rithm, referred to as Rights to MSRs (or RMSR). While most of the economics and risks of the MSR and related advances have contractually transferred to Rithm, the MSR legal title was retained by Onity and the third-party consents required for title transfer were not obtained, causing the transactions to be accounted for as secured financings. Accordingly, we continue to report the MSR and an associated Pledged MSR liability on our consolidated balance sheet. Prior to December 31, 2023, while MSR legal title had transferred to Rithm, other MSR sale transactions with a UPB of $33.4 billion did not qualify for sale accounting treatment, primarily due to the length of the non-cancellable term of the subservicing agreements. On December 31, 2023, we derecognized $421.7 million non-Agency MSRs and Pledged MSR liability associated with Rithm servicing agreements with a UPB of $33.4 billion for which MSR sale accounting criteria was met. Specifically, with the amendments described below, starting on December 31, 2023, the parties have the right to cancel or decline to renew the servicing agreements within a reasonable period of time. On May 2, 2022, Onity entered into amendments to its servicing agreements with Rithm to extend their terms to December 31, 2023 and provide for subsequent, automatic one-year renewals, unless Onity provides six months’ advance notice of termination (by July 1), or Rithm provides three months’ advance notice of termination (by October 1), among other changes. Onity and Rithm did not provide notice of termination by July 1, 2024 and October 1, 2023, respectively. Accordingly, all servicing agreements with Rithm, including the $9.5 billion of RMSR and $33.6 billion of subservicing, are extended through December 31, 2024, with subsequent, automatic one-year renewals. Rithm has the right to terminate the $9.5 billion RMSRs for convenience, in whole but not in part, subject to three months’ advance notice of termination. If Rithm exercises this termination right, Rithm has the option of seeking (i) the transfer of the MSRs through a sale to a third party of its Rights to MSRs (together with a transfer of Onity’s title to those MSRs) or (ii) a substitute RMSR arrangement that substantially replicates the Rights to MSRs structure under which we would transfer title to the MSRs to a successor servicer and Rithm would continue to own the economic rights and obligations related to the MSRs. In the case of option (i), we have a purchase option, as specified in the RMSR Agreements. If Rithm is not able to sell the Rights to MSRs or establish a substitute RMSR arrangement with another servicer, Rithm has the right to revoke its termination notice and re-instate the applicable servicing addendum or to establish a subservicing arrangement whereby the MSRs remaining subject to the RMSR Agreements would be transferred to up to three subservicers who would subservice under Onity’s oversight. If such a subservicing arrangement were established, Onity would receive an oversight fee and reimbursement of expenses. We may also agree on alternative arrangements that are not contemplated under our existing agreements or that are variations of those contemplated under our existing agreements. Other MSR Capital Partner Transactions PHH entered into agreements to sell MSR portfolios to different unrelated third parties, referred to as MSR capital partners, on a bulk and flow basis, for which PHH has been retained as subservicer. While MSR legal title has transferred to the MSR capital partners, the transactions do not qualify for sale accounting treatment primarily due to the termination restrictions of the subservicing agreements. Accordingly, we continue to report the MSR and an associated Pledged MSR liability on our consolidated balance sheet.

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