My name is Sean O'Neil. I'm the CFO at Onity and spend a few minutes telling you a little bit about our company, and then see if you have any questions. You can read that at your leisure. Okay, so this is the placemat of kind of who we are, what businesses we're in. We are a non-bank mortgage servicer and originator. So a servicer means we take care of MSRs for ourselves. Those are the ones we own. We take care of them for other people. That's sub-servicing. The difference between those two businesses is the MSRs you own are a higher risk, higher return asset. You have to hedge them. You have to finance them. If they lose value, that's a problem on your balance sheet and your P&L. And if you're taking care of them for someone else, you don't have to advance on them.
You don't have to hedge them. If they lose money, you typically actually make more money because you get paid more to sub-service a delinquent loan. But it's a thinner revenue stream. So we like both of those businesses. Our servicing shop is indifferent. They don't really even know which ones we own and which ones we don't. We like it that way. They just take care of all of them. And we sub-service or service forward loans, reverse loans, conventional. That would be conventionals, also GSEs, Fannie and Freddie, government, Ginnie Mae. Private, another word for private would be private label securitization, PLS, or non-agency, all really the same thing. Those would be think of like jumbos, non-QM transactions like that that would fall into that bucket. And then we also do small balance commercial and multifamily. So that's the servicing shop.
On the other side is the origination shop. Sorry, it's not on the other side of this page, my bad. But we primarily operate in two channels: correspondent lending, also known as third-party origination, and direct-to-consumer, where we're talking to the 1.6 million MSR holders that are sitting in our book using quantitative modeling, machine learning, all the other fun tools you get to read about nowadays, and figuring out who the best candidate are to refinance their loan, recapture, do a cash-out, etc. Across the bottom, you see some of our stats either year-to-date or for the quarter as of the third quarter. That ROE number is year-to-date for the quarter was 25%. Book value per share, 62 bucks and change, up $2.71 year over year. Debt-to-equity ratio, that's as of end of the third quarter, 3.1 to 1.
Strategy has been pretty much the same over the last two years. Balance model is what I was describing earlier. Capital-like growth, that's sub-servicing. Industry-leading cost structure. So we like scale. We like to get bigger. But we like it because scale in the servicing platform gives more marginal net income or marginal spread. We have sufficient scale in today's market to compete effectively with some servicers who are larger than us. Top-tier operating performance. We have award-winning service recognition from Fannie, Freddie, HUD, and several other technology entities. Dynamic asset management means we rotate our book. If we see a good market, we'll sell MSRs into it. We originate better sometimes than what we can sell them at so we can replace them internally. So if you're new to the mortgage market, the number in the dark blue is where you want to start.
$1.9 trillion is ballpark the number of mortgage originations that will happen this year. That's a pretty good number for maybe five of the last 10 years. It peaked in 2020, 2021, and early 2022. It was as high as $4 trillion right after COVID. But that's when the 10-year and mortgage rates went down a lot. If you think of an MSR having a seven-year wall, you just multiply that two, and that gets you to the $14.5 trillion servicing market. So typically, the servicing market's going to be six to eight times the trailing originations market. And then the green in the middle is how much of that big blue bubble is sub-servicing. So you may own an MSR, but if you're like an asset manager, you don't really know the care and feeding of the MSR, and you don't want to because it's a full-time business.
And so you'll call someone like Onity up to sub-servicing that for you. So investment thesis, whether you're equity or high yield, pretty much the same scenario here. We have profitability comparable to or better than peers at a more attractive valuation from the perspective of equity, meaning our price to book is discounted to book, and it shouldn't be. So it's a value play. And in the high yield space, we deliver a higher yield right now, hopefully not for long. And so if you're looking for something that's got a nine handle instead of a seven handle, this is a good place to look. I already talked about the diversified business model. Got a slide on that. Increasing market position. We attract new clients both in the sub-servicing space and the origination space. That keeps driving us forward.
Technology is very big, as well as the low-cost structure is just due to a focus on operational superiority and not ever stopping. 12 straight quarters of adjusted pre-tax income. Most recent quarter, $31 million. So that's been a pretty good trend line for a couple of years now. This is the comment on our profitability comparable to peers at a more attractive valuation. Here's four of our public competitors: IMB, Independent Mortgage Banker. So think names like Penny in the past, Cooper. And when I say Penny, I mean PFSI, sorry. Guild, LDI, Rocket, different players play in this space. There are differentiations. We're a balanced originator and servicer. Other names like Guild are probably more origination-heavy. And then you won't find any public sub-servicing-only companies. It's probably because a lot of them are private, but you're not going to see them in this space.
And then on the right, you see our price to book. So more interesting valuation play on an equity side there. This is just the concept of a balanced business model. We show you different periods of time and how much was contributed by servicing, which is the light blue versus originations, which is the dark blue. So two years ago, originations was basically break-even. That was coming off of a very rough second half 2022 for the entire originations market. Every originator was cutting costs because rates did this. And when rates do this, servicing makes money and originations doesn't. And so you can see on the right how those different businesses balance each other out. Sub-servicing is kind of indifferent to interest rates. It's a fee-based business. Dotted line around reverse servicing, I'll touch on that in a minute.
But for long-term purposes, you might want to ignore that because we just announced a transaction about two weeks ago where we're exiting the reverse sub-servicing market. Got a slide on that. Sorry, reverse servicing market. This shows where we're growing in originations in terms of our UPB and then growth rate down at the bottom versus the industry. So you can see year over year, a quarter over quarter, that implies we're gaining share because we're growing faster than the market as a whole. This is a result of several things. One is an intense focus on recapture, which really helps the consumer direct business. And then on correspondent, it's garnering new clients and then taking care of the clients you have. We probably have about 700 correspondent clients that we work with. So this is the two slides on the reverse transaction.
So we just executed or announced a transaction with Finance of America. It's still waiting Ginnie Mae approval. And so that means it'll probably be a first quarter or early second quarter close. This is something that we think greatly simplifies our business. So we're selling them all of our Ginnie Mae HECM loans, they're called, which stands for Home Equity Conversion Mortgage. That's a reverse mortgage under Ginnie. Didn't have a significant book of private label reverse. And so the proceeds from that, we can redeploy into assets to support growth, think forward MSRs or just regular MSRs. And then this greatly simplifies our balance sheet. It takes about $9.5 billion off the asset and liability side, converts an asset directly into cash, and allows us to redeploy that cash in a number of ways. Here's a few more comments on it. It's 40,000 loans, $9.6 billion UPB.
We have a contract to sub-service these assets for the next three years, so that more firmly entrenches us in the place of a reverse sub-servicer as opposed to a reverse owner, and then the fact that we're originating today but exiting that market could make us a more attractive sub-servicing candidate to other players in this space. There's only two reverse sub-servicing providers, and we're one of them. FOA will also acquire the pipeline of reverse mortgage loans, and off to the right, you can see basically the cash proceeds from this deal based on 930 valuation is somewhere between $100 million and $110 million. That's after paying down financing lines supporting the pipeline or other assets that haven't been put into a Ginnie Mae HECM MBS security.
So monetizes the assets, gives us more focus on our main business, which is forward originations and recapture, keeps the sub-servicing business and actually enhances it, and then also simplifies the balance sheet as well as simplifies our story. This is getting into some of the sub-servicing additions. Signed nine new clients this year and have several other large ones under negotiation for next year. So we see a strong growth. So this was half of that pie chart at the very beginning. This is where we talk about capital-like growth because this is other people acquiring the MSRs. We get paid a fee to sub-service them. Also, we announced that Rithm is not renewing the contract we've had with them for probably pushing 10-plus years now. That book has run down significantly. It was a pre-2008 crisis book.
We've said for a couple of years now that at some point, it's not going to be profitable for us or for Rithm. And as we state here, it was one of our least profitable portfolios in the most recent quarter or for the year. And we have enough advance warning on this that we can adjust our cost structure in accordance with when the loans leave the platform. And so we don't expect this to have any material financial impact for 2026 or beyond. These are some of the awards we picked up. GSEs, that would be Fannie and Freddie, do very specific awards for servicers or sub-servicers. We've picked up those awards at either the, I think it's gold, silver, bronze, kind of like the Olympics level consecutively for the last four years. HUD tier one servicer, that's more than just size.
You have to hit a bunch of other HUD metrics for that, and then some of the other comments. We won a global technology award last year, and we were competing against huge companies. Think Honeywell was in there, DuPont. I believe one of the FANG companies was in there, so it was against some serious competitors. Very competitive cost structure. That's using ICE data, where our cost to service either performing or non-performing loans is significantly lower than our competitors, and then on the right, that's just showing our net performance scores and some of the other, sorry, net promoter scores, NPS, and some of the other awards we've won. Everyone's favorite topic for the year, AI. Really, the green buckets are what we focus on.
So whether it's machine learning or very old-school AI, which is robotic process automation that's been around 10-plus years, we only do it if it does one of these green things. It's either got to improve our cost structure, make our clients happier, have them stick around or attract more of them, or deliver operational superiority. If it doesn't do one of those things and give us an ROI, it's nice to have, but not necessary. Capital allocation structure. We are focused on organic growth. Organic growth means a lot of different things to different people. This is like old school. This just means where can we find assets, grow the net income through something other than M&A. We're a small-cap company. Our goal here is to maintain profitability, discreetly grow our client base, provide the right value, and generate more net income that way.
Optimizing liquidity is a constant focus of ours. Servicing produces cash, origination juices cash, and you need an appropriate amount of liquidity to handle the swings as a servicer. And then, obviously, whether you're talking to an equity investor or a debt investor, you want to drive long-term returns. Here was the guidance we put out at the beginning of the year. We've told the market we expect to exceed our ROE of 16%-18%. Talk about our UPB growth. High hedge effectiveness rate. That just means we hedge out the majority of our interest rate risk on the MSRs and the originations pipeline. Efficiency ratio just means we like to grow revenue faster than we grow costs. And then we've announced earlier in the year that we expect to release a significant portion of our valuation allowance, which is basically a reserve against our net deferred tax asset.
The numbers there you're seeing are what they were as of end of 2024 because we calculate the DTA once a year. So that number is a bit dated, but it doesn't change in a material fashion, plus or minus $10 million every year. So strong outlook, not just for the rest of this year, but for 2026 as well. The balanced business continues to deliver results. We've made money and up and down in static interest rate markets over the last three years. Technology and a low-cost platform continues to be a focus of ours. And we've already talked about the profitability comparable to peers at a better valuation. All right. Questions?
So I think you. In the servicing book [audio distortion], I think we saw it come down a bit. Are we still trending that way? Are we touching on the performance of the system?
Yeah, sure.
So there's my favorite slide right here. This is an ICE chart. All you really care about based on that question is, "Oh, I get to use this. This is so cool." Right there. So you want to look at this box, which is the most recent quarter. That's the total delinquency number. I also tell people, focus on 60 and 90-plus, not 30-day delinquencies. People who pay their mortgage on the last day of the month or on the next paycheck can swing 30 days delinquent back and forth. It's an interesting stat, don't get me wrong, but it's not what I would use to set long-term trends. Loans that are going 60 and 90-plus, if those numbers deteriorate, that's more the canary in the coal mine indication. As you can see, I would focus on the GSEs.
Our Govy book is a little more credit challenged than some others because we have some old GMAC Ginnie Maes in there. The GSE book and the Govy book and the non-agency book all have improved delinquencies. I think the agency market as a whole, and when I say agency, I mean Ginnie, Fannie, Freddie, all collectively, is a little more static to slightly down in the third quarter. I can't give you any commentary on delinquencies since 930 because we don't release that data. But if you look at what Ginnie publishes monthly, you can usually get a pretty good indication of how their whole book is progressing. Amongst the agencies, Ginnie is usually the canary in the coal mine because it's a higher risk, higher reward.
That's why at the bottom here, you see we demand it deserves a higher discount rate than the agencies or, sorry, than the GSEs do. Any other questions?
Consolidation has changed a lot in the last year or so. I mean, any comments from you guys on whether you're looking or who's looking or what the competitive landscape kind of looks like maybe for next year?
Yeah. So two of the bigger names recently have been Bayview buying Guild and obviously Rocket buying Coop. Prior to that, there were several private servicers that had changed hands, SLS, SPS. One went to Rhythm, one went to Sixth Street, I think. HomePoint was acquired. So a lot of names have been changing hands over the last eight quarters. And then the Coop Rocket transaction made a lot of MSR owners step back and look at their sub-servicing providers.
If you only have one sub-servicing provider and they fall into, quote, "the wrong hands," I'm just going to parrot Mat Ishbia from UWM. He wasn't a fan of Rocket holding the servicing reins on his portfolio for good reason. He and Rocket are somewhat competitors there. He's like, "Yeah, I'm out of here." When companies make decisions like that, they're going in one of two directions. They're either going to bring the servicing in-house. That's not a small lift. I'm sure UWM has the resources and the bandwidth to accommodate that, but that is a big ask. Or you switch servicers. That's the simpler ask.
And so plenty of mid-sized banks, you wouldn't believe the number of banks in the U.S. that obviously own MSRs and sometimes don't want to service them themselves, as well as other IMBs are constantly looking at this. Not very many people have the same model we or Cooper had, which is to both own sub-servicing and originate. PennyMac's starting to get into the sub-servicing business. But for the most part, originators such as Guild or Rocket may hold MSRs, but they're usually holding them either for convenience, for a better cycle to sell them, or just because they have enough capital that they don't have to sell them, and it serves to be a nice buffer against your origination pipeline because it moves in the opposite direction. But smaller originators usually have to roll those off their balance sheet fairly quickly.
Think of non-bank credit card financing in the past as a similar model where to keep the flywheel running, you've got to securitize and get cash. Well, here you sell the MSR and get cash. So long answer, but basically, consolidation and M&A attention in the industry remains pretty active. From our perspective, we've said for years that we're a public company. We're for sale every day. If we get an actionable offer that can increase shareholder value, we'll seriously consider it. That hasn't changed. All right. Anyone else?
Thanks for the second question. You guys have talked about the expansion of commercial mortgage servicing, specifically sub-servicing, and the strong economics there. Can you give us a sense of the opportunity for you guys and where we stand today on that front?
Yeah. So when we talk about commercial servicing, we're talking multifamily or small balance.
So we're not talking Rock Center or this hotel. I'm sure this has a nice MSR attached to it or seven or eight, except Michael Dell owns it. It may just be in the family office. I don't know. But we're talking about smaller properties, think $500,000-$5 million range, multifamily being 5-15 units, strip mall-type tenants, that kind of thing. That's a fabulous servicing market because there, just like in reverse, there's not a cogent set of great servicing providers. A lot of people do this for themselves, especially a bank. A lot of banks are in commercial real estate, and a lot of banks own their own servicing.
But as one of my friends in the industry said a long time ago at a bank, the servicing shop is what you get when you walk down the long hallway to the trash at the back of the office, and it's the last door on the left. Banks, I used to work at a bank, and you pay literally that much attention to servicing at a bank, so people that own commercial away from banks are very interested in getting a competitive servicer. We're seeing that, and so we've picked up one or two significant clients in that space, and the margins are just better, so we really like that. It does take extra work, different staffing levels, but once you've done it for one client, then you can replicate it and continue to build scale.
That's an example of an interesting, what I'd call product extension in servicing.
Thank you.
Okay. If no other questions, then thanks for coming. Appreciate your attention. Have a good day.