Onity Group (ONIT) 2026 年第三季財報電話會議：調整後 ROE 達 19%

重點摘要

• Onity Group 公布 2026 年第三季調整後稅前淨利為 3,000 萬美元，較前一季增加逾一倍，調整後股東權益報酬率 (ROE) 則達到 19%。
• 普通股股東應佔淨利季增 1,600 萬美元至 350 萬美元。稀釋後每股盈餘 (EPS) 為 0.41 美元，每股淨值增加至 74 美元。
• 由於利率上升降低了提前還款率與房貸服務權 (MSR) 流失，服務業務調整後稅前淨利增至 2,900 萬美元。放款發起業務貢獻 2,400 萬美元，但隨著利率上升而較前一季走弱。
• 服務業務未償本金餘額 (UPB) 總額年增 9%。今年迄今新增委託服務規模達 530 億美元，提前超越公司全年度目標。
• Onity 維持其 2026 年財測，包括調整後 ROE 落在 10% 至 15% 區間的低端，以及服務業務 UPB 總額成長 5% 至 15%。
• 管理階層預期 2027 年營業費用將減少逾 5,000 萬美元，較 2026 年預估約 5 億美元的費用水準降低超過 10%。

關鍵財務數據

業務與營運表現

隨著房貸利率上升，服務業務成為主要的獲利引擎。較慢的提前還款速度拉長了 MSR 的存續期間，並減少投資組合流失。Onity 亦受惠於退出利潤較低的服務合作關係，並擴大利潤較高的商業委託服務業務。

扣除流失後的服務業務新增總額年增 760 億美元。此一成長足以抵銷計劃轉移至 Rithm 的業務，以及因客戶資產出售導致終止服務的影響。商業用途住宅與商業委託服務 UPB 較前一年成長 46%。

放款發起業務維持獲利，但受利率走高導致活動降溫影響，表現較第二季轉弱。B2B 是放款發起業務調整後稅前淨利的最大貢獻來源，部分反映在先前再融資熱潮尾聲完成撥款的貸款。

消費者直銷撥款金額年增 67%。Onity 的再融資留存率達到 57%，較前一年上升 18 個百分點。該公司在計算此數據時排除了二順位房貸金額。

房屋淨值產品承做量年增逾一倍。管理階層表示，二順位房貸能產生額外現金流、有助於留住客戶，並使既有的 MSR 關係更加持久。消費者直銷利潤率亦較前一季改善，儘管經過轉換率調整後的鎖定金額在 9 月至 10 月期間下滑約 23%。

Onity 正利用機器學習評估 MSR，依據的因素包括地理位置、借款人特徵、賣方背景、信用表現、提前還款傾向及客戶留存潛力。管理階層計劃更加審慎挑選並持有 MSR，以期提升資本效率與報酬率。

科技投資重點仍放在預測分析、全通路互動、智慧文件處理與工作流程自動化。管理階層表示，這些工具使增貸電話行銷的轉換率提升一倍、縮短作業週轉時間，並使每筆貸款的服務成本維持在較美國抵押貸款銀行家協會 (MBA) 大型非銀行服務商平均水準低 30% 以上。

營運展望

Onity 維持其 2026 全年財測：

• 調整後 ROE 落在 10% 至 15% 區間的低端。
• 服務業務 UPB 總額成長 5% 至 15%。
• 維持有效的 MSR 避險。
• 營業效率比率與 2026 年第三季相當。

在假設利率維持在當前水準附近的前提下，管理階層預期服務業務仍將是主要的獲利動能，並正在相應調整放款發起平台的規模。

針對 2027 全年，該公司預期營業費用將減少超過 5,000 萬美元，相當於較預估 2026 全年約 5 億美元的費用水準降低逾 10%。預計節省的項目包括縮減員工編制、佣金及其他變動成本。

Onity 仍以自有服務與委託服務各佔約 50% 為目標。管理階層估計，在目前的成本架構下，服務業務 UPB 每增加 500 億美元，每筆貸款的固定成本即可降低 14%。

風險與觀察重點

金融市場波動仍是主要風險。相較於第二季，避險成本上升與機構貸款出售執行狀況使第三季稅前獲利減少 1,100 萬美元。管理階層警告，市場若持續波動，獲利可能將繼續承壓。

較高的房貸利率正在壓抑再融資需求與鎖定承做量。管理階層援引業界預測指出 2027 年房貸市場規模將會縮減，並表示此展望支持公司對 MSR 採取更具選擇性的策略，以及進一步降低成本。

包含 MSR 債務與公司債在內，Onity 的整體槓桿水準處於管理階層偏好區間的高端。該公司計劃隨著時間推移，透過獲利以及可能伺機進行的債務買回以降低槓桿。

流動性可能因委託服務代墊款、半年度利息支付以及 MSR 價值變動引發的追加保證金而出現波動。管理階層表示，這些因素將影響資本配置的時機與規模。

分析師問答重點

MSR 投資策略：管理階層表示，提高選擇性反映了預期放款發起市場規模縮小以及資金成本上升。Onity 將優先選擇預期信用、提前還款與留存特性較佳的 MSR，而非以固定的市佔率或承做量為目標。

資本配置：公司對 MSR 的有機成長、股票回購及債券買回仍持開放態度。Onity 表示已於 2026 年期間回購約 6% 的流通在外股數，而較低的債券價格亦引起管理階層關注，視為潛在的資本配置機會。

槓桿水準：管理階層坦言，MSR 債務與公司債的總和高於其長期的理想水準。公司計劃主要透過保留盈餘來降低槓桿，並在市場狀況有利時輔以機會性償付債務。

MSR 估值與客戶留存：管理階層表示，根據第三方基準及觀察到的大宗市場價格，Onity 的 MSR 估值公允合理。公司依據相對價值積極買賣 MSR。其公布的再融資留存率排除了二順位房貸，但管理階層表示，二順位房貸業務關係未來可能會提高客戶透過 Onity 辦理再融資的機率。

財報電話會議完整逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Hello and welcome, everyone, joining today's Onity Group third quarter earnings and business update conference call. [Operator Instructions] Please note this call is being recorded. We are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Valerie Hartzell, Vice President, Investor Relations. Please go ahead.

Valerie Haertel

Good morning and welcome to Onity Group's third quarter 2026 earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President, and Chief Executive Officer, Glenn Messina, and Chief Financial Officer, Sean O'Neil.

As a reminder, our comments today may be forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks, and uncertainties, including those described in our SEC filings.

In addition, the presentation and our comments contain references to non-GAAP financial measures, such as adjusted pre-tax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation.

Now I will turn the call over to Glenn Messina.

Valerie Haertel

Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We look forward to sharing our results for the third quarter as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders.

Let's get started on Slide 3. In the third quarter, our balanced business and strong execution delivered improved financial performance versus the second quarter, despite continued market volatility and rising interest rates. Our growth engine is working well, with third quarter year-to-date subservicing additions exceeding our full-year target and record origination volume reflecting the tail end of the refinancing surge. Assuming interest rates remain at current levels, we expect servicing will be the primary earnings driver going forward, and we're adjusting our originations platform accordingly. We believe we're on track to achieve our full-year adjusted ROE guidance.

Let me turn to Slide 4 to review a few key financial highlights. Both servicing and origination contributed to a profitable third quarter, with rising interest rates driving increased servicing income, offsetting declining origination income. Total company net income, adjusted pre-tax income, and adjusted ROE all improved from the second quarter. Our third quarter financial results include $11 million pre-tax, or $0.95 per share after-tax, unfavorable impact of market volatility on hedge costs and agency loan sales versus the second quarter. Total servicing UPB was up 9% year-over-year, with strong total servicing additions from both origination and subservicing. Consumer Direct performed well, delivering funded volumes up 67% over last year, with continued improvement in refinance recapture rate, which remains above industry average. Overall, despite challenging market conditions, we delivered improved financial performance and believe our third quarter results demonstrate our strategy is sound and execution is strong.

Let's turn to Slide 5 to discuss the actions we're taking that we believe will improve long-term ROE performance. Our ROE improvement actions are organized into 3 categories: servicing scale, portfolio optimization, and technology-driven productivity. Scale is a focus because we estimate that an incremental $50 billion of servicing UPB has the potential to reduce fixed costs per loan by 14%, assuming our current cost structure. As we grow our servicing portfolio, we'll continue to target roughly a 50/50 mix of owned servicing and subservicing, which we believe balances capital efficiency, earnings per share growth, and ROE.

Next is optimizing our servicing portfolio. We're leveraging machine learning using client, asset, and consumer data to identify what we believe are the most profitable MSRs to focus our origination activities and improve returns. Based on this work and the projected origination market environment, we intend to be significantly more selective in the MSRs we purchase and hold going forward. In subservicing, we're focused on growing with higher-margin accounts and segments like business purpose residential and commercial that require specialized capabilities that we already possess.

Finally, technology-driven productivity. We've significantly reduced expenses since the acquisition of PHH while growing our portfolio and developing new capabilities. Using robotic process automation, intelligent document processing, and natural language processing, we've reduced manual effort, transformed how we work, and improved customer engagement. We believe our cost structure is highly competitive, and we expect future investments will help drive additional productivity, improve recapture, and enhance the customer experience.

Let's turn to Slide 6 to review our balanced business model. While we may experience variability in any given quarter due to changing market dynamics, our balanced business continues to demonstrate long-term resiliency. The complementary profit dynamics of origination and servicing balance each other as interest rates changed in the 12 months ending third quarter 2026 versus the 12 months ending third quarter 2025. Origination income has increased over 2x due to lower rates in the first half of this year, helping to offset declining servicing income from higher prepayment and MSR runoff. And with interest rates increasing in the third quarter, servicing adjusted pre-tax income has improved, offsetting declining origination income. We continuously optimize operational capability and scalability, as well as our MSR investment profile, to enable our balanced business model to operate as intended through interest rate cycles. Assuming interest rates remain at current levels, we expect servicing will be the primary earnings driver, and we're right-sizing our originations platform accordingly.

Let's turn to Slide 7 for more about our growth focus and actions. Third quarter origination volume reflects the success of our value-based sales approach as clients clear their inventory of closed loans from the end of the refinancing surge. We delivered over 30% year-over-year growth in both B2B and Consumer Direct, outpacing the overall industry. With refinance payoff units up 10% year-over-year, we've improved our overall refinance recapture rate to 57% in the third quarter, up 18 percentage points versus the prior year. Our recapture performance has continued to outpace the ICE industry average for the last 12 months, and we believe we're delivering top-tier recapture performance versus our third-party origination-centric peers.

With mortgage rates increasing, we've seen a doubling of home equity product volume versus the third quarter last year. We believe this is a valuable product suite for consumers and 1 that helps us manage operating capacity and improve customer retention. As a reminder, we do not include home equity volume in our refinance recapture rates. Our originations team is performing well, and we remain committed to our prudent capital-light growth strategy, value-based selling, and leveraging technology to enhance performance.

Let me turn to Slide 8 to discuss subservicing. Our differentiated servicing platform and compelling value proposition is driving key wins with new clients as well as growth with existing clients. Year-to-date third quarter subservicing additions of $53 billion exceeded our full-year target ahead of expectations. We've earned key wins with capital partners, banks, and independent mortgage banks, and continue to have an active opportunity pipeline across all 3 segments. We're excited about the growth we're seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 46% versus the prior year, and we remain focused on growing this higher-margin segment. Overall, we're pleased with our results in subservicing, and we continue to invest in people, processes, and technology to expand our capabilities and deliver superior value and service.

Let's turn to Slide 9 to talk about how we've grown our servicing portfolio. Total servicing UPB ended the quarter up 9% year-over-year, with growth in both owned MSR and subservicing versus 3% for the total industry servicing growth. Year-over-year servicing additions net of runoff of $76 billion was largely driven by organic growth and more than offset planned transfers to Rithm and other client-driven de-boardings due to asset sales. With higher interest rates and MSR demand keeping prices elevated, we continue to see clients sell their older MSRs while replenishing their portfolio with new originations. We believe our portfolio growth demonstrates the strength of our value proposition and our ability to compete effectively for business.

Let me turn to Slide 10 to talk about how our continued investment in technology is improving business performance. In Consumer Direct, our technology investments help improve the key drivers of recapture, engagement, conversion, and platform scalability. Our objectives are to provide a seamless customer experience, increase straight-through processing, and automate elements of our processes that require manual intervention by our customers and employees. We use multiple categories of AI, including predictive analytics, to transform borrower signals into actionable decisions. Omnichannel engagement helps maximize customer connectivity across digital and non-digital channels. Intelligent document processing facilitates data extraction, validation, and document routing. Intelligent workflows elevate service, reduce manual effort, and enable high-value work. These technologies have positioned us to double cash-out telemarketing conversions, reduce turnaround times, increase approval rates, improve Net Promoter Score, and reduce cost per loan.

Now let's turn to Slide 11 to review how we're using technology in servicing. We've applied many of the same technologies to realize our servicing objectives of enhancing borrower engagement, satisfaction, loyalty, streamlining operations, growing servicing and subservicing relationships, and increasing platform scalability. We're using predictive analytics to anticipate borrower needs and drive proactive support. Omnichannel engagement helps us deliver seamless support across customer-preferred channels. Intelligent document processing enables data extraction, validation, and document routing. Intelligent automation streamlines exception management and eliminates manual effort to perform routine tasks. These technologies have allowed us to eliminate thousands of hours of manual work activity, improve agent satisfaction ratings, and maintain servicing cost per loan more than 30% lower than the MBA large non-bank servicer cost average.

Now I'll turn it over to Sean to discuss our financial results in more detail.

Sean O'Neil

Thanks, Glenn. Let me turn to Slide 12, where we describe our income drivers.

The third quarter showed a strong improvement to adjusted pre-tax income, which more than doubled to $30 million and delivered a 19% adjusted ROE. Net income available to common stockholders also improved $16 million to $3.5 million. Due to high interest rate volatility, net income still had to overcome higher MSR hedge costs and origination pipeline execution, which created $11 million of higher expense in the third quarter versus the second quarter. The business model was very balanced across adjusted PTI, with servicing contributing $29 million versus a $24 million contribution from originations, and corporate costs came down slightly. Servicing saw improved PTI as rates increased, with originations coming in lower than the prior quarter. We expect that this trend will continue if rates remain elevated.

On a sequential basis, other key financial metrics improved. Diluted earnings per share increased to $0.41, and book value per share rose to $74. Our end-of-period liquidity was strong at $284 million. As a reminder, servicing typically sees intramonth swings, with peak liquidity occurring at the end of the month as remittances flow in for mid-month subservicing advances. In addition, there are quarterly or seasonal liquidity impacts, such as interest rate payments on our high-yield debt in May and November. Also, rate volatility can cause mark-to-market impacts on the MSR asset that require margin calls. These are just a few of the drivers that impact our decisions to allocate liquidity to other uses.

Please turn to Slide 13 for details on operating expenses. In all 3 reported segments—originations, servicing, and corporate—operating expenses were lower quarter-over-quarter as we carefully managed headcount and other variable expenses while origination locks slowed in Consumer Direct. We also shed costs in servicing as we reduced some high-cost subservicing relationships. These actions led to improvements in operating efficiency for the company. We are continuing to reduce costs to be aligned with the market cycle we are currently experiencing. In anticipation of generally higher mortgage rates for a prolonged period, we expect to have over a $50 million improvement and lower operating expenses for full year 2027. This represents more than a 10% reduction from the forecasted full-year 2026 expense base of about $500 million.

Please turn to Slide 14 for servicing details. Revenue in our servicing segment declined slightly quarter-over-quarter. Importantly, adjusted pre-tax income rose as we exited the lower-margin businesses in the first half of 2026. Improved servicing pre-tax income was also driven by lower runoff. Finally, growth in higher-margin businesses like commercial subservicing also helped the improvement quarter-over-quarter. Our owned MSR book grew about 20% year-over-year, helping drive revenue, net income, and cash flows. As a reminder, the fair value of our reverse HECM MSR assets is markedly smaller both year-over-year and quarter-over-quarter as a result of the sale to Finance of America, which closed at the end of the second quarter.

Please turn to Slide 15 for servicing advances. We have reduced servicing advance balances by 28% over the last 2 years, even as we have grown owned servicing UPB by focusing on the small percentage of loans that drive the biggest advances. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our non-agency owned MSR book. By continuing to deploy various technology strategies, some of which Glenn referenced earlier, we believe we can lower costs and simultaneously improve customer outcomes.

Please turn to Slide 16 for our hedging strategy. Our MSR hedge strategy continued to perform as intended. As a reminder, our strategy is designed to mitigate interest rate risk, and our hedge has been effective in minimizing the impact of interest rates on our MSR valuation net of hedge. Given that an MSR hedge is dependent on the interest rate and related derivatives markets, we frequently review and assess our hedge strategy to manage risk and optimize liquidity and total returns.

Please turn to Slide 17 for originations. Originations pre-tax income was down slightly quarter-over-quarter due to higher rates in the third quarter. Compared to the prior year, our adjusted PTI was roughly similar despite 3Q '26 being less favorable than 3Q '25 for an originations rate environment. The strongest contributor for adjusted pre-tax income was the B2B channel. This is both correspondent lending and co-issue. This was partly driven as we harvested the trailing volume from the refi surge earlier in the year. Pre-tax income came down as a result of post-pricing changes, such as the agency loan sale impacts mentioned previously.

We are focused on AI-assisted analytics to identify what we believe are the most profitable MSRs to acquire as part of our origination activities to improve returns. Based on this work and the projected origination market environment, we intend to be even more selective in purchasing and holding MSRs going forward.

The Consumer Direct channel experienced lower volumes on a sequential quarter basis, but much improved margins. Part of the margin improvement was due to an expanded suite of second lien products, which allowed us to continue to generate cash-out refinancing income in a declining market. On a year-over-year basis, Consumer Direct had both volume and margin improvement. Similar to last quarter, Consumer Direct experienced lower pull-through adjusted lock volume as we entered the fourth quarter, with locks coming down by about 23% from September into October, and lock volume is the key metric for recognizing revenue. Lower operating expense from declining headcount and lower commissions in the third quarter also contributed favorably to adjusted pre-tax income levels.

On Slide 18, we discuss our capital allocation process. Our considerations focus on organic growth, liquidity, and returning capital to investors. Examples of organic growth opportunities include adding owned MSR and broadening our product offering, such as our efforts on second liens. In parallel, we aim to maintain sufficient liquidity to ensure we meet both regulatory and lender requirements and hold enough of a buffer for various stress scenarios. We also consider ways to return capital to investors, whether via a stock repurchase or bond buyback, which is contingent upon market conditions. We monitor both the equity and bond markets closely to evaluate opportunities to drive value to our shareholders.

Please turn to Slide 19 for adjusted ROE performance. In the third quarter, we saw a strong improvement in adjusted ROE, reflecting our balanced business and the simplification efforts discussed last quarter, as well as remaining selective with the assets that we add to our balance sheet. Over the multi-year period shown here, adjusted ROE has averaged about 19%. Recall that adjusted ROE removes the MSR fair value net of hedge, so higher hedge costs or other valuation impacts appear in the net income.

Please turn to Slide 20 for a prior period comparison. We believe that today, Onity is stronger and better positioned to capitalize on any market cycle than the last time we experienced a higher-for-longer rate environment, which was 2023. Compared to our full-year results in 2023, our trailing 12-month results for the current period provide you with a view of our company that has better income generation, higher income, higher book value per share, higher revenues, and lower corporate debt to equity. In addition, we have a more effective hedge. We have better recapture abilities to help originations achieve stronger profits. And for the entire company, we have a more effective cost model than we had in 2023.

On Slide 21, we provide our 2026 guidance. Our full-year guidance remains unchanged from last quarter. We expect to deliver an adjusted ROE at the low end of the 10% to 15% range, total servicing UPB growth of 5% to 15%, an effective MSR hedge, and, of course, an improved operating efficiency ratio similar to what we demonstrated in the third quarter.

Back to you, Glenn.

Valerie Haertel

Thanks, Sean. Let's turn to Slide 22. We believe we're well positioned to navigate the current environment. Onity is a growing, balanced, top 10 non-bank mortgage originator, servicer, and subservicer, shedding lower-return assets and relationships to simplify our business and enable greater strategic flexibility. We're delivering differentiated performance with a technology-enabled, award-winning servicing platform. We're adjusting our cost structure to address the expected market environment and are taking focused actions to improve ROE over the long term. And as always, we're maintaining agility to capitalize on all opportunities to maximize value for shareholders. All this adds up to a business that we believe can deliver adjusted ROE comparable to our peers while continuing to increase our scale and market position. We believe our current market valuation does not fully reflect the progress we've made or the strength of the business that we've built.

Please turn to Slide 23. Before we open the call for questions, I want to remind everyone that we're holding our first Investor Day on November 19th at the New York Stock Exchange. That day's event will feature presentations and a Q&A session including myself, Sean, and other members of our leadership team. For those interested in joining us, please contact Valerie, or you can join the live webcast.

Operator, let's open the call for questions.

Operator

[Operator Instructions]

We'll take our first question from Randy Binner with Texas Capital. Please go ahead.

Unknown Speaker

This is a good presentation and helpful. So, I'm actually going to start with something that might seem small, but it's important, at least for our model, and that's the compensation and benefits line in the quarter was quite a bit lower than we forecasted. You mentioned that you're going to have some improvements going forward in your operating expenses. So is this the right level of comp and benefits in relation to revenue? Is there anything one-time in that number this quarter that we should think about as we look forward?

Sean O'Neil

Hey, Randy, it's Sean here. With respect to one-times, no, there's nothing significant in comp and bennies that jumps out at me. You know, it's lower headcount, lower commissions. I guess lower commissions could change if rates go the other way. But no, I would say this is the trend that we're looking to achieve, and I can come back before the call is over and give you a little more specific guidance.

Valerie Haertel

Randy, the other thing I would add to that, we did see a decline in the share price at the very tail end of the third quarter. So it would have affected our LTIP expense, which would have gone down.

Unknown Speaker

Got it. Okay, that's helpful.

You mentioned you're going to be more selective on buying MSRs going forward, using AI to better evaluate that market. How competitive is that market? Are you going to be more selective because you can be, because there's a lot of sellers, or is there a lot of competition? Can you just kind of help us understand that market dynamic when you're going out to look at those books?

Unknown Speaker

Sure. Yes, Randy, look, throughout the course of 2026, we've been leveraging machine learning using different data elements that would be different than what would appear in a typical MSR valuation model. So certain attributes about geographies, consumers, sellers, asset profile—and I won't get into the gory details of each one of those dimensions—but looking at various cohorts of mortgage servicing rights using that data to identify which MSRs we believe offer the best returns, taking into consideration relative credit performance, relative prepayment propensity, relative recapture propensity.

And as we've continued to refine and hone what we call our buy box, as we look at 2027, which is going to be a smaller market to begin with—the MBA and Fannie Mae are both projecting a market that's going to be 5% smaller. Look, we think in a smaller market, it does make sense to be a bit more selective in what MSRs we originate and choose to put on the books that have what we believe is the best overall dynamics—credit, recapture, prepayment propensity—to max the returns of our business and make sure we're deploying capital on an appropriate and efficient basis.

I would say, looking at the third quarter, as Sean had mentioned, generally we were able to get slightly higher, what we call priced-in margins in our B2B channel. Unfortunately, we and others in the industry faced a fair amount of headwind due to market volatility and hedging costs. So margins look like overall they came down a little bit. But again, that was really more the secondary market side than the primary originations margin.

Look at the IMN MSR Conference that was held earlier this week. You know, look, we're not the only ones who are saying we're going to be more selective. I think Baron Silverstein over at Rithm said it as well, too. That was quoted in one of the mortgage trade presses reporting after the conference. I think we're all getting smarter about relative MSR return and relative value. And I think being selective is appropriate in a smaller market, and especially just given what the cost of capital is these days.

Unknown Speaker

Well, that all makes sense. I guess as a follow-up, will your efficiency and scale initiatives be enough to still have positive cash flow and positive GAAP results as you acquire a somewhat smaller opportunity set in servicing in light of the shrinking of the overall market? I guess, can you make up for it in volume is the question, maybe put more simply.

Unknown Speaker

Yes, look, we don't target a market share or necessarily a volume target. Randy, you know, we're fortunate to have a balanced business. So in market cycles, when rates go up or higher like they are today, the existing servicing portfolio performs very well. Again, you could see servicing profits were up this quarter, prepayment speeds are down, MSR runoff is down, and the duration of our MSRs gets extended, right? So servicing in this part of the business cycle becomes more profitable and generates steadier cash flow than it otherwise would.

We are also taking appropriate cost reduction actions. Sean said we're targeting to realize $50 million plus in cost savings for next year. Look, that's just mortgage 101, right? Rates go up, you've got to adjust your cost structure, and you're going to lean into your servicing book. I don't think as we look forward there's a concern about cash flow or the ability of our balanced business model to perform during this cycle.

The caveat I'd put out there, and I think it applies across the entire industry, is volatility has been the biggest challenge this year, financial market volatility. If that continues, it's going to continue to have the same pressure as we've seen throughout the course of this year. Us and PennyMac and others have talked openly about that. But as far as the fundamentals, we feel great about the business fundamentals.

Unknown Speaker

All right, super. I'll leave it there. Thank you.

Operator

We'll take our next question from Doug Harter with BTIG. Please go ahead.

分析師問答

Douglas Harter

As you're a little more selective on buying MSRs, presumably that would leave cash flow for other options. Wonder how you would think about using that to potentially delever and buy back some of your debt that's trading at a discount?

Unknown Speaker

Doug, good morning. So, look, we've demonstrated historically over time that we are flexible from a capital allocation perspective. We have allocated capital previously in prior years, prior quarters, prior cycles to buying back shares and retiring debt ahead of schedule if the market opportunity provides that it's an appropriate use of capital.

Certainly in a market that's smaller, and just to put it in perspective, I don't know if you all saw, but the MBA application index that was reported yesterday, November 4th, indicated that year-over-year purchase applications were down 19% and refi applications were down 60%. And the fourth quarter forecast of overall volume from the MBA assumes that purchase volume will be flat and refi volume will be down 50%. So we are trending much worse than their original forecast.

So, look, we are going to be mindful about capital allocation. We certainly are always mindful about liquidity. And we plan to be opportunistic in our capital allocation to those priorities that produce the best return for shareholders. We have been repurchasing shares so far this year. We've retired about 6% of our total share float and outstanding shares. So that buyback is still active, and we're continuing to run. And certainly the decline in our bond prices and the yields have caught our attention, for sure. And if that's an appropriate use of capital, the board will see fit to take advantage of that opportunity.

Douglas Harter

Right, and then just an update as to how you view your current leverage relative to where you view a steady state or end state for leverage.

Unknown Speaker

Yes, our leverage is probably a bit higher than where we wanted to be over the next couple of years. We would like to get our—and when I say leverage, I would say total MSR debt plus corporate debt to equity. We've got our corporate debt to equity down quite a bit from where we were 2 to 3 years ago. But when I look at the total debt stack of MSR debt plus corporate debt, it's at the upper end of probably where we'd want to be. And over time, we'd like to continue to work that down, largely through earnings and to the extent that the opportunity is there through opportunistic debt reduction.

Part of the reason why our debt-to-equity ratio is higher is we did take advantage of a very attractive high-yield market in the first quarter, actually in January, and we had an add-on offering that was $200 million of additional high-yield proceeds, which wasn't necessarily anticipated in our plans at the end of 2025. But the markets were so good and so attractive and the demand was there that we ultimately did take advantage of it. It helps support the growth of the business, helps grow our servicing portfolio, which generates cash flow. And yes, I think as we look forward over time, both Sean and I would like to get the leverage down.

Operator

[Operator Instructions]

Our next question comes from Bose George with KBW. Please go ahead.

Bose George

Just wanted to follow up on the MSR selectivity in investing. When you look at the bulk market, do you think higher coupon MSR valuations reflect realistic recapture assumptions, or do you have any concerns about what you see out there?

Unknown Speaker

Yes, so, look, Bose, by the way, good morning. I'm sorry, Bose, for not acknowledging you. But yes, so look, we're pretty active in both buying and selling in the MSR market. We don't really originate that much in the bulk market. We typically sell into the bulk market, and most of our new originations are coming through our B2B channel and to a lesser extent Consumer Direct.

But look, at least where we have our MSRs marked based on the third-party benchmarking that we do and trading prices that we're seeing in the bulk markets for MSRs, we think our MSR values are fairly and appropriately stated. We did take the opportunity in the third quarter, as you saw from our results, to sell some MSRs. That's not unusual for us. We buy and sell MSRs throughout the course of the year based on where we see relative value. And if other people value the MSR higher than we do or see higher value in it, then it probably is time to let it go, and vice versa if we see value, we buy into value.

I think everybody in the industry is using, in some way, shape, or form, thinking about recapture as part of the economic value of the MSR. I mean, our recapture rate's been quite strong, over 50% on a blended basis. So look, I think if you have a well-oiled machine from a recapture perspective, the recapture economics, or I should say the economic value associated with recapturing an MSR, is a real thing, and those folks who have a good shop can harvest it.

Bose George

Okay, great. Thanks. And then actually on the recapture rate, when you include seconds, is the 50% plus the blended rate that you mentioned including the seconds, or is that incremental to that?

Unknown Speaker

No, it's incremental. Yeah, we don't include second lien volume. Our refinance recapture rate is pure refinance recapture rate. There's no second lien volume in there at all.

Bose George

Do you have that number handy if we include the benefit of seconds as well?

Unknown Speaker

You know, we don't even measure it because we don't think about it as recapture.

Bose George

Okay, but clearly it's obviously a benefit that you're monetizing the MSR.

Unknown Speaker

Yes. Yes, clearly a cash flow benefit, but I guess it's a different type. That is correct. It does create, we believe, a stickier MSR because we've got a second lien on the MSR, and to the extent that ultimately rates move in a direction that makes sense to refinance that stack—the first and second—since we have both instruments, we have a higher propensity to refinance with that customer base through our platform than otherwise would.

Bose George

Yes. Okay, great. Thanks. Thank you.

Operator

This concludes our question and answer session. I'd like to now turn the conference back to Glenn for any additional or closing remarks.

Unknown Speaker

Yes, thanks, Stephanie. So, look, I'd like to thank our shareholders and our key business partners for supporting Onity. I also want to thank and recognize our global business team and the Board of Directors for their hard work. And again, as a reminder, we're looking forward to seeing many of you at our first-ever Investor Day on November 19th at the New York Stock Exchange. Thank you very much.

Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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