Onity to Sell Reverse Mortgage Arm to Finance of America

Onity Group will cash out of its reverse mortgage business in a deal with one of the largest providers of the product in the U.S.

The West Palm Beach-based mortgage servicer received the green light from regulators to sell a portfolio of reverse mortgage servicing rights tied to $5.1 billion in loans to Plano, Texas-based Finance of America Reverse, according to an SEC filing on Tuesday.

The deal comprises 20,000 Ginnie Mae-backed home equity conversion mortgages, as well as Onity’s pipeline of reverse mortgage loans. Once the deal closes, Onity expects to nab between $70 million and $80 million in net proceeds and will stop originating reverse mortgages.

Onity will remain involved as a subservicer under a three-year agreement with Finance of America Reverse, one of the nation’s largest players in the reverse mortgage industry.

Reverse mortgages allow homeowners age 62 and older to borrow against their home equity without making monthly mortgage payments and have long been a niche corner of the mortgage market.

The sale coincides with Onity taking steps to reward its investors.

The company’s board approved a plan to buy back up to $20 million of its stock through June 2027. Companies often repurchase shares when they believe their stock is undervalued or want to return excess cash to shareholders.

The reverse mortgage deal awaits final closing steps, and the company has not announced an expected completion date.

Before its 2024 rebrand, Onity was known as Ocwen Financial, the mortgage-servicing giant that became a major player in the industry during the aftermath of the 2008 housing crisis.

As of Tuesday morning, the company’s stock had spiked more than 15 percent from Monday’s close to $38.89 a share, and it’s up more than 11 percent year to date.