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Investment in Equity Method Investee and Related Party Transactions | 9 Months Ended
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Sep. 30, 2024
Equity Method Investments and Joint Ventures [Abstract] |
Investment in Equity Method Investee and Related Party Transactions |
Note 11 - Investment in Equity Method Investee and Related Party Transactions
We account for our 15% investment in MAV Canopy under the equity method. Under the Amended & Restated Limited Liability Company Agreement with MAV Canopy, Onity is entitled to receive its 15% percentage interest share of MAV Canopy’s earnings, subject to certain adjustments. In addition, upon MAV Canopy liquidation or upon determination of the MAV Canopy Board of Directors to make advance distributions, Onity is entitled to receive a specified portion of the distribution amount available (Promote Distribution), after satisfaction of required distribution thresholds, including a specified internal rate of return threshold on the Oaktree Capital Management L.P. and its affiliates (Oaktree) member’s gross adjusted capital contributions. We determined that the Promote Distribution represents an incentive fee under our various service agreements with MAV with a variable consideration and is recognized in earnings when it is probable that a significant reversal will not occur. As of September 30, 2024, Onity has not recognized any such Promote Distribution income. See the Transaction Agreement discussed below and Note 22 – Subsequent Events. PHH entered into a Subservicing Agreement with MAV for exclusive rights to service the mortgage loans underlying MSRs owned by MAV. The Subservicing Agreement will continue until terminated by mutual agreement of the parties or for cause, as defined. MAV is permitted to sell the underlying MSR, in whole or in part, without Onity’s consent after May 3, 2024. See the Transaction Agreement discussed below and Note 22 – Subsequent Events. As of September 30, 2024, PHH subserviced a total of $41.9 billion UPB on behalf of MAV under the Subservicing Agreement, of which $21.9 billion of MSRs were previously sold by PHH to MAV and do not qualify for sale accounting and thus remain reported on the consolidated balance sheet of PHH, with a fair value of $337.4 million MSR and $327.5 million Pledged MSR liability - see Note 8 — Other Financing Liabilities, at Fair Value. The fair value of the Pledged MSR liability is determined using the fair value mark provided by third-party valuation experts, consistent with the associated MSR, using the same methodology and assumptions, while considering cash flows contractually retained by PHH during the expected life of the Subservicing Agreement. We are exposed to a risk of loss of this net $9.9 million asset value if, and to the extent that MAV sells the $21.9 billion MSR portfolio, in whole or in part at a faster pace than anticipated or if prepayments exceeds expectations, among other factors. MAV Canopy, MAV and Oaktree are deemed related parties to Onity. In addition to the transactions described above and our 15% equity investment in MAV Canopy, Onity issued common stock, warrants and senior secured notes to Oaktree in 2021. See also Note 13 – Borrowings and Note 16 – Interest Expense.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 323 -SubTopic 740 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481543/323-740-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org//323/tableOfContent + Details
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