Onity’s PHH Mortgage Corp. subsidiary is repositioning its reverse mortgage business, selling its loan pipeline and multibillion-dollar servicing rights portfolio in that part of the market to Finance of America while staying involved as a subservicer and niche securitizer.
PHH said it is working to accommodate a smooth transition for its reverse mortgage originators when the deal closes and Onity exits the specialty loan production business. Some of the reverse mortgage originators at PHH will have the option to join Finance of America’s team. The two companies also plan on a partnership in which FOA’s proprietary second-lien reverse mortgage product would be made available to eligible customers in Onity’s forward servicing portfolio.
The transaction aims to solidify acquiring unit Finance of America Reverse’s position in sales of home equity withdrawal loans made to borrowers age 55 and up while Onity refocuses on subservicing and private securitizations of Ginnie Mae buyout loans in the niche. The deal also allows Onity to dedicate more resources to “forward” loans, including PHH’s new non-qualified mortgage product suite.
What Onity and PHH look to gain from the transaction
Onity plans to use the proceeds to reduce debt and potentially repurchase shares. The company anticipates the deal will be accretive over the term of the three-year subservicing agreement, net of costs and including benefits due to redeployed funds from MSR sales.
Finance of America Reverse has committed to a minimum volume of new subservicing over the term of the contract, according to Onity.
The MSRs being sold are linked to 40,000 Federal Housing Administration-insured loans in home equity conversion mortgage-backed securities that Ginnie Mae guarantees, according to Onity. The portfolio had an unpaid principal balance of $9.6 billion as of Sept. 30.
CEO Glen Messina called the deal “a strategic step that we believe will simplify our business and enable us to concentrate our resources on maximizing the growth and earnings of forward originations and recapture, as well as our commercial and reverse subservicing.”
Onity estimates it will receive $100 million to $110 million in adjusted net proceeds from the transaction, depending on when it closes and what the asset balances are at that time. Based on the UPB of the servicing as of Sept. 30, the unadjusted proceeds would be around $189 million, according to the company’s 8-K filing with the Securities and Exchange Commission.
The deal also is aimed at simplifying the company’s balance sheet and strengthening certain financial metrics at the company like liquidity and capital ratios.
How FOA plans to pay for and benefit from the deal
Finance of America will draw on warehouse and asset-level financing as the main sources of funding for the transaction, according to its press release. It could also use cash on hand at the time of closing.
The cross-selling partnership will market Finance of America’s HomeSafe Second product to tens of thousands of forward mortgage borrowers at Onity who qualify for it, according to Finance of America. Other details around how the partnership will work were pending at the time of this writing, according to Onity.
“Beyond the value of acquiring high-quality assets, we anticipate that our expanded relationship with Onity will meaningfully multiply our origination reach,” Finance of America CEO Graham Fleming said in his company’s press release.
The deal is on track to close in the first quarter of 2026 subject to closing conditions and regulatory approvals, according to both companies’ press releases.
Michael Fant, senior vice president of finance at FOA, called the proposed acquisition “an opportunity for us to continue to expand our market leadership in the reverse space,” in an interview.
“The opportunity we see with the second-lien product continues our commitment to expanding access to seniors, making home equity part of their mainstream retirement conversation,” he added.
