10-Q

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to

Commission file number: 001-34416

PennyMac Mortgage Investment Trust
(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	27-0186273 (IRS Employer Identification No.)
27001 Agoura Road, Calabasas, California (Address of principal executive offices)	91301 (Zip Code)

(818) 224-7442
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o    No ý

        Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class	Outstanding at November 2, 2011
Common Shares of Beneficial Interest, $.01 par value	27,874,200

PENNYMAC MORTGAGE INVESTMENT TRUST
FORM 10-Q
September 30, 2011

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			1
Item 1.	Financial Statements (Unaudited):		1
	Consolidated Balance Sheets		1
	Consolidated Statements of Income		2
	Consolidated Statements of Changes in Shareholders' Equity		3
	Consolidated Statements of Cash Flows		4
	Notes to Consolidated Financial Statements		5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		40
	Observations on Current Market Opportunities		41
	Results of Operations		43
	Net Investment Income		43
	Expenses		53
	Balance Sheet Analysis		54
	Asset Acquisitions		55
	Investment Portfolio Composition		55
	Cash Flows		60
	Liquidity and Capital Resources		61
	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations		64
	Quantitative and Qualitative Disclosures About Market Risk		67
	Accounting Developments		68
	Factors That May Affect Our Future Results		69
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		71
Item 4.	Controls and Procedures		71
PART II. OTHER INFORMATION			73
Item 1.	Legal Proceedings		73
Item 1A.	Risk Factors		73
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		73
Item 3.	Defaults Upon Senior Securities		73
Item 4.	[Reserved]		73
Item 5.	Other Information		73
Item 6.	Exhibits		75

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

		September 30, 2011		December 31, 2010
		(unaudited)
ASSETS
Cash		$	11,975	$	45,447
Short-term investments			30,743		—
Mortgage-backed securities at fair value			86,702		119,872
Mortgage loans acquired for sale at fair value			40,850		3,966
Mortgage loans at fair value			715,272		364,250
Mortgage loans under a forward purchase agreement at fair value			152,908		—
Real estate acquired in settlement of loans			60,108		29,685
Real estate acquired in settlement of loans under a forward purchase agreement			9,798		—
Mortgage servicing rights:
	at fair value		532		—
	at lower of amortized cost or fair value		104		—
Principal and interest collections receivable			6,720		8,249
Principal and interest collections receivable under a forward purchase agreement			9,735		—
Interest receivable			2,132		978
Due from affiliates			7,203		2,115
Other assets			20,712		14,533
	Total assets	$	1,155,494	$	589,095
LIABILITIES
Accounts payable and accrued liabilities		$	1,096	$	9,080
Unsettled mortgage-backed securities purchases			17,205		—
Loans sold under agreements to repurchase			345,969		147,422
Securities sold under agreements to repurchase at fair value			62,843		101,202
Borrowings under a forward purchase agreement			163,755		—
Real estate acquired in settlement of loans financed under agreements to repurchase			12,814		—
Contingent underwriting fees payable			5,883		5,883
Payable to affiliates			13,435		5,595
Income tax payable			1,831		—
	Total liabilities		624,831		269,182
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares of beneficial interest—authorized, 500,000,000 shares of $0.01 par value; issued and outstanding, 27,874,554 and 16,832,343 shares at September 30, 2011 and December 31, 2010, respectively			279		168
Additional paid-in capital			508,634		317,175
Retained earnings			21,750		2,570
	Total shareholders' equity		530,663		319,913
	Total liabilities and shareholders' equity	$	1,155,494	$	589,095

The accompanying notes are an integral part of these consolidated financial statements.

1

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

			Quarter ended September 30,						Nine months ended September 30,
			2011			2010			2011			2010
Investment Income
	Net gain (loss) on investments:
		Mortgage-backed securities	$	(791	)	$	596		$	(2,106	)	$	446
		Mortgage loans		32,311			7,578			65,594			18,677
				31,520			8,174			63,488			19,123
	Interest income:
		Short-term investments		24			10			82			77
		Mortgage-backed securities		651			1,229			2,719			3,780
		Mortgage loans		9,164			2,607			21,211			6,445
				9,839			3,846			24,012			10,302
	Net gain (loss) on mortgage loans acquired for sale			84			(17	)		207			11
	Results of real estate acquired in settlement of loans			352			637			1,527			972
	Net servicing fee income			14			—			17			—
	Other income			176			16			240			17
		Net investment income		41,985			12,656			89,491			30,425
Expenses
	Interest			5,225			251			10,473			251
	Loan servicing fees			4,473			885			9,992			1,561
	Management fees			2,288			1,237			5,750			3,650
	Compensation			1,567			573			3,831			2,212
	Professional services			1,656			628			3,648			1,121
	Other			1,898			992			4,631			2,096
		Total expenses		17,107			4,566			38,325			10,891
Income before provision for income taxes				24,878			8,090			51,166			19,534
Provision for income taxes				4,350			361			6,376			2,400
Net income			$	20,528		$	7,729		$	44,790		$	17,134
Earnings per share
	Basic		$	0.73		$	0.46		$	1.72		$	1.02
	Diluted		$	0.73		$	0.45		$	1.72		$	1.01
Weighted-average shares outstanding
	Basic			27,847			16,796			25,782			16,756
	Diluted			28,138			17,069			26,065			17,029
Dividends declared per share			$	0.50		$	0.35		$	0.92		$	0.35

The accompanying notes are an integral part of these consolidated financial statements.

2

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands, except share data)

		Number of shares		Par value		Additional paid-in capital			Retained earnings (accumulated deficit)			Total
Balance at December 31, 2009			16,735,317	$	167	$	315,514		$	(1,883	)	$	313,798
	Net income		—		—		—			17,134			17,134
	Share-based compensation		97,026		1		1,588			—			1,589
	Dividends declared		—		—		—			(5,891	)		(5,891	)
	Underwriting and offering costs		—		—		(150	)		—			(150	)
Balance at September 30, 2010			16,832,343	$	168	$	316,952		$	9,360		$	326,480
Balance at December 31, 2010			16,832,343	$	168	$	317,175		$	2,570		$	319,913
	Net income		—		—		—			44,790			44,790
	Share-based compensation		88,711		1		2,811			—			2,812
	Dividends declared		—		—		—			(25,610	)		(25,610	)
	Proceeds from offerings of common shares		10,953,500		110		197,052			—			197,162
	Underwriting and offering costs		—		—		(8,404	)		—			(8,404	)
Balance at September 30, 2011			27,874,554	$	279	$	508,634		$	21,750		$	530,663

The accompanying notes are an integral part of these consolidated financial statements.

3

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

				Nine months ended September 30,
				2011			2010
Cash flows from operating activities
	Net income			$	44,790		$	17,134
		Adjustments to reconcile net income to net cash used by operating activities:
			Net loss (gain) on mortgage-backed securities		2,106			(446	)
			Net gain on mortgage loans		(65,594	)		(18,677	)
			Accrual of unearned discounts on mortgage-backed securities		(1,759	)		(2,318	)
			Net gain on mortgage loans acquired for sale		(207	)		(11	)
			Results of real estate acquired in settlement of loans		(1,527	)		(972	)
			Change in fair value and amortization of mortgage servicing rights		7			—
			Amortization of credit facility commitment fees		1,142			—
			Accrual of costs related to a forward purchase agreement		2,222			—
			Share-based compensation expense		2,812			1,589
	Purchases of mortgage loans acquired for sale				(294,410	)		(27,696	)
	Sales of mortgage loans acquired for sale				257,060			22,984
	Decrease (increase) in principal and interest collections receivable				1,529			(16,077	)
	Increase in principal and interest collections receivable under a forward purchase agreement				(9,735	)		—
	Increase in interest receivable				(4,675	)		(337	)
	Increase in due from affiliates				(5,088	)		(100	)
	(Increase) decrease in other assets				(8,103	)		(3,462	)
	(Decrease) increase in accounts payable and accrued liabilities				(10,764	)		255
	Increase in payable to affiliates				7,840			449
	Increase in income taxes payable				1,831			—
		Net cash used by operating activities			(80,523	)		(27,685	)
Cash flows from investing activities
	Net (increase) decrease in short-term investments				(30,743	)		213,628
	Purchases of mortgage-backed securities at fair value				(4,974	)		(89,217	)
	Repayments of mortgage-backed securities at fair value				47,008			38,703
	Sales of mortgage-backed securities at fair value				7,994			—
	Purchases of mortgage loans at fair value				(453,309	)		(270,757	)
	Repayments of mortgage loans at fair value				87,795			40,797
	Sales of mortgage loans at fair value				2,570			2,851
	Repayments of mortgage loans under a forward purchase agreement at fair value				20,040			—
	Purchases of real estate acquired in settlement of loans				(1,510	)		(1,238	)
	Sales of real estate acquired in settlement of loans				46,410			7,827
	Decrease (increase) in margin deposits				735			—
		Net cash used by investing activities			(277,984	)		(57,406	)
Cash flows from financing activities
	Sales of loans under agreements to repurchase				516,522			—
	Repurchases of loans sold under agreements to repurchase				(317,975	)		—
	Sales of securities under agreements to repurchase				1,081,542			241,948
	Repurchases of securities sold under agreements to repurchase				(1,119,901	)		(125,809	)
	Repayment of borrowings under a forward purchase agreement				(11,115	)		—
	Sales of real estate acquired in settlement of loans financed under agreements to repurchase				17,108			—
	Repurchases of real estate acquired in settlement of loans financed under agreements to repurchase				(4,294	)		—
	Proceeds from issuance of common shares				197,162			—
	Payment of underwriting and offering costs				(8,404	)		(150	)
	Payment of dividends				(25,610	)		(5,891	)
		Net cash provided by financing activities			325,035			110,098
Net (decrease) increase in cash					(33,472	)		25,007
Cash at beginning of period					45,447			54
		Cash at end of period		$	11,975		$	25,061

The accompanying notes are an integral part of these consolidated financial statements.

4

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Organization and Basis of Presentation

        PennyMac Mortgage Investment Trust ("PMT" or the "Company") was organized in Maryland on May 18, 2009, and began operations on August 4, 2009, when it completed its initial offerings of common shares of beneficial interest ("shares"). The Company is a specialty finance company, which, through its subsidiaries (all of which are wholly-owned), invests primarily in residential mortgage loans and mortgage-related assets.

        The Company's primary investment objective is to maximize the value of the mortgage loans that it acquires, a substantial portion of which may be distressed and acquired at discounts to their unpaid principal balances, either through loan modification programs, special servicing and other initiatives focused on keeping borrowers in their homes, or, when necessary, through timely acquisition and liquidation of the property securing the loan. Accordingly, management has concluded that the Company operates as a single segment.

        The Company believes that it qualifies, and has elected to be taxed, as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), beginning with its taxable period ended on December 31, 2009. To maintain its tax status as a REIT, the Company plans to distribute at least 90% of its taxable income in the form of qualifying distributions to shareholders.

        The Company is externally managed by an affiliate, PNMAC Capital Management, LLC ("PCM"), an investment adviser registered with the Securities and Exchange Commission (the "SEC") that specializes in and focuses on residential mortgage loans. Under the terms of a management agreement, PCM is paid a management fee with a base component and a performance incentive component. Determination of the amount of management fees is discussed in Note 3—Transactions with Related Parties.

        The Company conducts substantially all of its operations and makes substantially all of its investments through its subsidiary, PennyMac Operating Partnership, L.P. (the "Operating Partnership"), and the Operating Partnership's subsidiaries. A subsidiary of the Company is the sole general partner, and the Company is the sole limited partner, of the Operating Partnership.

        The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the SEC's instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by U.S. GAAP for complete financial statements. The interim consolidated information should be read together with our Annual Report on Form 10-K for the year ended December 31, 2010 (the "Annual Report").

        Preparation of financial statements in compliance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.

        In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods

5

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1—Organization and Basis of Presentation (Continued)

ended September 30, 2011 are not necessarily indicative of the results for the year ending December 31, 2011.

Note 2—Concentration of Risks

        As discussed in Note 1—Organization and Basis of Presentation above, PMT's operations and investing activities are centered in real estate-related assets, a substantial portion of which are distressed at acquisition. Because of the Company's investment strategy, many of the mortgage loans in its targeted asset class are purchased at discounts reflecting their distressed state or perceived higher risk of default, as well as a greater likelihood of collateral documentation deficiencies. PCM validates key information provided by the sellers that is necessary to determine the value of the acquired asset. A substantial portion of the non-correspondent lending loans purchased by the Company has been acquired from or through one or more subsidiaries of Citigroup Inc.

        Through its management agreement with PCM and its loan servicing agreements with its loan servicers, including an affiliate, PennyMac Loan Services, LLC ("PLS"), PMT works with borrowers to perform loss mitigation activities. Such activities include the use of loan modification programs (such as the U.S. Departments of the Treasury and Housing and Urban Development's Home Affordable Modification Program, or HAMP) and workout options that PCM believes have the highest probability of successful resolution for both borrowers and PMT. Loan modification or resolution may include PMT accepting a reduction of the principal balances of certain mortgage loans in its investment portfolio. When loan modifications and other efforts are unable to cure distressed loans, the Company's objective is to effect timely acquisition and liquidation of the property securing the mortgage loan.

        Because of the Company's investment focus, PMT is exposed, to a greater extent than traditional mortgage investors, to the risks that borrowers may be in economic distress and/or may have become unemployed, bankrupt or otherwise unable or unwilling to make payments when due, and to the effects of fluctuations in the residential real estate market on the performance of its investments. Factors influencing these risks include, but are not limited to:

•

changes in the overall economy, unemployment rates and residential real estate values in the markets where the properties securing the Company's mortgage loans are located;

•

PCM's ability to identify, and the Company's loan servicers' ability to execute, optimal resolutions of problem mortgage loans;

•

the accuracy of valuation information obtained during the Company's due diligence activities;

•

PCM's ability to effectively model, and to develop appropriate model assumptions that properly anticipate, future outcomes;

•

the level of government support for problem loan resolution and the effect of current and future proposed and enacted legislative and regulatory changes on the Company's ability to effect cures or resolutions to distressed loans; and

6

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2—Concentration of Risks (Continued)

•

regulatory, judicial, and legislative support of the foreclosure process, and the resulting impact on the Company's ability to acquire and liquidate the real estate securing its portfolio of distressed mortgage loans in a timely manner or at all.

        Due to these uncertainties, there can be no assurance that risk management activities identified and executed on PMT's behalf will prevent significant losses arising from the Company's investments in real estate-related assets.

        On July 12, 2011, the Company entered into a forward purchase agreement with Citigroup Global Markets Realty Corp. ("CGM"), a subsidiary of Citigroup Inc., to purchase certain nonperforming residential mortgage loans and residential real property acquired in settlement of loans (collectively, the "CGM Assets"). The CGM Assets were acquired by CGM from an unaffiliated money-center bank. The initial purchase price under the forward commitment is $172.7 million. Subsequent adjustments may increase the purchase price to $174.4 million based on the date the purchase is settled. The Company also pays CGM a cost of carry on the CGM Assets pending purchase through the date such CGM Assets are ultimately acquired. The Company recognized the assets subject to the transaction and the related liability. The CGM Assets are serviced by PLS.

        The CGM Assets are included on the Company's consolidated balance sheet as Mortgage loans under a forward purchase agreement at fair value and the related liability is included as Borrowings under a forward purchase agreement. The CGM Assets are being held by CGM within a separate trust entity deemed a variable interest entity. The Company's interest in the CGM Assets is deemed to be contractually segregated from all other interests in the trust as a silo. The silo consists of the CGM Assets and its related liability. The Company directs all of the activities that drive the economic results of the CGM Assets. All of the changes in the fair value and cash flows of the CGM Assets are attributable solely to the Company, and such cash flows can only be used to settle the related liability.

        As a result of consolidating the silo, the consolidated statements of income of the Company include net gain on mortgage loans of $10.0 million, interest income on mortgage loans of $625,000, interest expense on borrowings of $1.7 million and loan servicing fees expense of $648,000 for the three and nine months ended September 30, 2011. The Company received repayments of mortgage loans totaling $20.0 million and repaid borrowings under the forward purchase agreement totaling $11.1 million during the three and nine months ended September 30, 2011. The Company has no other variable interests in the trust entity, or other exposure to the creditors of the trust entity which could expose the Company to loss.

        Including the CGM Assets, the Company purchased $627.5 million and $272.0 million at fair value of mortgage loans and real estate acquired in settlement of loans ("REO") for its investment portfolio during the nine months ended September 30, 2011 and 2010, respectively. Of those totals, $556.8 million and $260.5 million, respectively, were purchased from or through one or more subsidiaries of Citigroup Inc.

Note 3—Transactions with Related Parties

        The Company is managed externally by PCM under the terms of a management agreement that expires on August 4, 2012 and will be automatically renewed for a one-year term each anniversary date thereafter unless previously terminated. If the Company terminates the management agreement without

7

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Transactions with Related Parties (Continued)

cause, or PCM terminates the management agreement upon a default by the Company in its performance of any material term in the management agreement, PMT will be obligated to pay a termination fee to PCM. As more fully described in the Company's Annual Report, certain of the underwriting costs incurred in the Company's initial public offering ("IPO") were paid on PMT's behalf by PCM and a portion of the underwriting discount was deferred by agreement with the underwriters of the offering. Under circumstances where the termination fee is payable, as discussed in Note 15—Shareholders' Equity, PMT will reimburse PCM the underwriting costs.

        PMT pays PCM a base management fee and may pay a performance incentive fee, both payable quarterly and in arrears. Following is a summary of management fee expense and the related liability recorded by the Company for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(in thousands)
Base management fee	$	2,288		$	1,237		$	5,750		$	3,650
Performance incentive fee		—			—			—			—
Total management fee incurred during the period		2,288			1,237			5,750			3,650
Fee paid during the period		(2,018	)		(2,413	)		(4,795	)		(3,582	)
Fee outstanding at beginning of period		1,913			2,413			1,228			1,169
Fee outstanding at end of period	$	2,183		$	1,237		$	2,183		$	1,237

        Both the management and termination fees are more fully described in Note 4—Transactions with Related Parties to the Company's Annual Report.

        The Company, through the Operating Partnership, also has a loan servicing agreement with PLS. Servicing fee rates are based on the risk characteristics of the mortgage loans serviced and total servicing compensation is established at levels that management believes are competitive with those charged by other servicers or specialty servicers, as applicable.

        Servicing fee rates for nonperforming loans are expected to range between 30 and 100 basis points per year on the unpaid principal balance of the mortgage loans serviced on the Company's behalf. PLS is also entitled to certain customary market-based fees and charges, including boarding and de-boarding fees, liquidation and disposition fees, assumption, modification and origination fees, and late charges, as well as interest on funds on deposit in custodial accounts. In the event PLS either effects a refinancing of a loan on the Company's behalf and not through a third party lender and the resulting loan is readily saleable, or originates a loan to facilitate the disposition of real estate that the Company has acquired in settlement of a loan, PLS is entitled to receive from the Company market-based fees and compensation.

        PLS, on behalf of the Company, currently participates in HAMP (and other similar mortgage loan modification programs), which establishes standard loan modification guidelines for "at risk" homeowners and provides incentive payments to certain participants, including loan servicers, for achieving modifications and successfully remaining in the program. The loan servicing agreement entitles PLS to retain any incentive payments made to it and to which it is entitled under HAMP;

8

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Transactions with Related Parties (Continued)

provided, however, that with respect to any such incentive payments paid to PLS under HAMP in connection with a mortgage loan modification for which the Company previously paid PLS a modification fee, PLS shall reimburse the Company an amount equal to the lesser of such modification fee or such incentive payments.

        In connection with the Company's correspondent lending business, by which the Company acquires mortgage loans originated by correspondent lenders for resale to the Agencies (as defined in Note 5—Fair Value) and other investors, PLS is entitled to base servicing fees, which range from 5 to 20 basis points per year of the unpaid principal balance of such loans, and other customary market-based fees and charges as described above. PLS also provides certain mortgage banking services, including fulfillment and disposition-related services, to the Company for a fulfillment fee based on a percentage of the unpaid principal balance of the mortgage loans. The fulfillment fee for such services is currently 50 basis points. Since November 1, 2010, the Company has collected interest income and a sourcing fee of three basis points for each mortgage loan it purchases from a correspondent lender and sells to PLS for ultimate disposition to a third party where the Company is not approved or licensed to sell to such third party. The sourcing fees collected by the Company during the quarter and nine months ended September 30, 2011 amounted to $41,000 and $53,000, respectively. During the quarter and nine months ended September 30, 2011, the Company recorded fulfillment fees totaling $263,000 and $336,000, respectively. During the quarter and nine months ended September 30, 2010, the Company recorded fulfillment fees totaling $38,000.

        The Company paid servicing fees to PLS as described above and as provided in its loan servicing agreement and recorded other expenses, including common overhead expenses incurred on its behalf by PCM and its affiliates, in accordance with the terms of its management agreement.

        Following is a summary of those expenses for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands)
Loan servicing and fulfillment fees payable to PLS		$	2,107	$	644	$	7,163	$	1,267
Reimbursement of expenses incurred on PMT's behalf:
	Compensation		155		101		413		307
	Other		809		157		1,721		506
			964		258		2,134		813
Reimbursement of common overhead incurred by PCM and its affiliates			988		497		2,517		978
		$	4,059	$	1,399	$	11,814	$	3,058
Payments made during the period		$	2,273	$	2,432	$	8,476	$	2,680

        During the Company's startup period and through the quarter ended March 31, 2010, PCM and its affiliates did not charge the Company for its proportionate share of common overhead expenses. Such expenses totaled approximately $500,000 for the quarter ended March 31, 2010. No other charges were waived by PCM during the Company's startup period and through the quarter ended March 31, 2010.

9

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Transactions with Related Parties (Continued)

Management believes that PCM does not intend to waive recovery of common overhead costs in the future.

        Amounts due to affiliates are summarized below as of the dates presented:

	September 30, 2011		December 31, 2010
	(in thousands)
Contingent offering costs	$	2,941	$	2,941
Management fee		2,183		1,228
Expenses		8,311		1,426
	$	13,435	$	5,595

        Amounts due from affiliates totaled $7.2 million and $2.1 million at September 30, 2011 and December 31, 2010, respectively, and represent amounts receivable pursuant to loan sales to PLS and reimbursable expenses paid on the affiliates' behalf by the Company.

        Private National Mortgage Acceptance Company, LLC held 75,000 of the Company's common shares of beneficial interest at both September 30, 2011 and December 31, 2010.

Note 4—Earnings Per Share

        Basic earnings per share is determined using net income divided by the weighted-average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common shareholders by the weighted-average shares outstanding, assuming all potentially dilutive common shares were issued. In periods in which the Company records a loss, potentially dilutive shares are excluded from the diluted loss per share calculation, as their effect on loss per share is anti-dilutive.

        During the nine months ended September 30, 2011, the Company made grants of restricted share units which entitle the recipients to receive dividends during the vesting period on a basis equivalent to the dividends paid to holders of common shares. Unvested share-based compensation awards containing nonforfeitable rights to dividends or dividend equivalents (collectively, "dividends") are participating securities and are included in the basic earnings per share calculation using the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends.

10

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4—Earnings Per Share (Continued)

        The following table summarizes the basic and diluted earnings per share calculations for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(in thousands except per share amounts)
Basic earnings per share:
	Net income	$	20,528		$	7,729	$	44,790		$	17,134
	Effect of participating securities—share-based compensation instruments		(234	)		—		(478	)		—
	Net income attributable to common shareholders	$	20,294		$	7,729	$	44,312		$	17,134
	Weighted-average shares outstanding		27,847			16,796		25,782			16,756
	Basic earnings per share	$	0.73		$	0.46	$	1.72		$	1.02
Diluted earnings per share:
	Net income	$	20,528		$	7,729	$	44,790		$	17,134
	Weighted-average shares outstanding		27,847			16,796		25,782			16,756
	Dilutive potential common shares—shares issuable under share-based compensation plan		291			273		283			273
	Diluted weighted-average number of common shares outstanding		28,138			17,069		26,065			17,029
	Diluted earnings per common share	$	0.73		$	0.45	$	1.72		$	1.01

Note 5—Fair Value

        The Company's financial statements include assets and liabilities that are measured based on their estimated fair values. The application of fair value estimates may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its estimated fair value as discussed in the following paragraphs.

Fair Value Accounting Elections

        Management identified all of its financial assets, including the short-term investments, mortgage-backed securities ("MBS") and mortgage loans, as well as its securities sold under agreements to repurchase and its mortgage servicing rights ("MSRs") relating to loans with interest rates of more than 4.5% that were acquired as a result of its correspondent lending operations to be accounted for at estimated fair value so such changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company's investment performance.

11

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

        For MSRs relating to loans with interest rates of less than or equal to 4.5% that were acquired as a result of the Company's correspondent lending operations, management has concluded that such assets present different risks to the Company than MSRs relating to loans with interest rates of more than 4.5% and therefore require a different risk management approach. Management's risk management efforts relating to these assets are aimed at moderating the effects of non-interest rate risks on fair value, such as the effect of changes in home prices on the assets' values. Management has identified these assets for accounting at the lower of amortized cost or fair value. Management's risk management efforts in connection with MSRs relating to loans with interest rates of more than 4.5% are aimed at moderating the effects of changes in interest rates on the assets' values.

        For loans sold under agreements to repurchase subject to agreements made beginning in December 2010, REO financed through agreements to repurchase beginning in June 2011 and borrowings under a forward purchase agreement beginning in July 2011, management has determined that historical cost accounting is more appropriate because under this method debt issuance costs are amortized over the term of the debt, thereby reflecting the debt issuance expense over the periods benefiting from the usage of the debt.

Financial Statement Items Measured at Fair Value on a Recurring Basis

        Following is a summary of financial statement items that are measured at estimated fair value on a recurring basis as of the dates presented:

		September 30, 2011
		Level 1		Level 2		Level 3		Total
		(in thousands)
Assets:
	Short-term investments	$	30,743	$	—	$	—	$	30,743
	Mortgage-backed securities at fair value		—		—		86,702		86,702
	Mortgage loans acquired for sale at fair value		—		40,850		—		40,850
	Mortgage loans at fair value		—		—		715,272		715,272
	Mortgage loans under a forward purchase agreement at fair value		—		—		152,908		152,908
	Mortgage servicing rights at fair value		—		—		532		532
		$	30,743	$	40,850	$	955,414	$	1,027,007
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—	$	62,843	$	62,843
		$	—	$	—	$	62,843	$	62,843

12

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

		December 31, 2010
		Level 1		Level 2		Level 3		Total
		(in thousands)
Assets:
	Mortgage-backed securities at fair value	$	—	$	—	$	119,872	$	119,872
	Mortgage loans acquired for sale at fair value		—		3,966		—		3,966
	Mortgage loans at fair value		—		—		364,250		364,250
		$	—	$	3,966	$	484,122	$	488,088
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—	$	101,202	$	101,202
		$	—	$	—	$	101,202	$	101,202

        The Company's MBS, mortgage loans (mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value), MSRs and securities sold under agreements to repurchase were measured using Level 3 inputs.

        The following is a summary of changes in items measured using Level 3 inputs on a recurring basis for the periods presented:

		Quarter ended September 30, 2011
		Mortgage- backed securities			Mortgage loans			Mortgage servicing rights			Total
		(in thousands)
Assets:
Balance, June 30, 2011		$	82,421		$	657,223		$	180		$	739,824
Purchases			22,179			264,749			—			286,928
Repayments			(12,843	)		(52,684	)		—			(65,527	)
Accrual of unearned discounts			385			—			—			385
Transfers of mortgage loans to REO			—			(36,857	)		—			(36,857	)
Sales			(4,649	)		—			—			(4,649	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			3,210			—			3,210
Servicing received as proceeds from sales of mortgage loans			—			—			362			362
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			10,640			—			10,640
	Other factors		(791	)		21,899			(10	)		21,098
			(791	)		32,539			(10	)		31,738
Balance, September 30, 2011		$	86,702		$	868,180		$	532		$	955,414
Changes in fair value recognized during the period relating to assets still held at September 30, 2011		$	(791	)	$	24,070		$	(10	)	$	23,269

13

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, June 30, 2011	$	70,978
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		258,608
Repurchases		(266,743	)
Balance, September 30, 2011	$	62,843
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2011	$	—

		Quarter ended September 30, 2010
		Mortgage-backed securities			Mortgage loans			Total
		(in thousands)
Assets:
Balance, June 30, 2010		$	103,164		$	197,216		$	300,380
Purchases			52,319			72,675			124,994
Repayments			(19,787	)		(16,940	)		(36,727	)
Accrual of unearned discounts			757			—			757
Transfers of mortgage loans to REO			—			(18,460	)		(18,460	)
Sales			—			(1,960	)		(1,960	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			55			55
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			2,408			2,408
	Other factors		596			5,170			5,766
			596			7,578			8,174
Balance, September 30, 2010		$	137,049		$	240,164		$	377,213
Changes in fair value recognized during the period relating to assets still held at September 30, 2010		$	596		$	3,842		$	4,438

14

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, June 30, 2010	$	31,362
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		210,586
Repurchases		(125,809	)
Balance, September 30, 2010	$	116,139
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2010	$	—

		Nine months ended September 30, 2011
		Mortgage- backed securities			Mortgage loans			Mortgage servicing rights			Total
		(in thousands)
Assets:
Balance, December 31, 2010		$	119,872		$	364,250		$	—		$	484,122
Purchases			22,179			625,152			—			647,331
Repayments			(47,008	)		(107,835	)		—			(154,843	)
Accrual of unearned discounts			1,759			—			—			1,759
Transfers of mortgage loans to REO			—			(82,680	)		—			(82,680	)
Sales			(7,994	)		(2,570	)		—			(10,564	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			3,521			—			3,521
Servicing received as proceeds from sales of mortgage loans			—			—			539			539
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			23,642			—			23,642
	Other factors		(2,106	)		44,700			(7	)		42,587
			(2,106	)		68,342			(7	)		66,229
Balance, September 30, 2011		$	86,702		$	868,180		$	532		$	955,414
Changes in fair value recognized during the period relating to assets still held at September 30, 2011		$	(2,106	)	$	48,336		$	(7	)	$	46,223

15

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, December 31, 2010	$	101,202
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		1,081,542
Repurchases		(1,119,901	)
Balance, September 30, 2011	$	62,843
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2011	$	—

		Nine months ended September 30, 2010
		Mortgage- backed securities			Mortgage loans			Total
		(in thousands)
Assets:
Balance, December 31, 2009		$	83,771		$	26,046		$	109,817
Purchases			89,217			270,757			359,974
Repayments			(38,703	)		(40,797	)		(79,500	)
Accrual of unearned discounts			2,318			—			2,318
Transfers of mortgage loans to REO			—			(31,762	)		(31,762	)
Sales			—			(2,851	)		(2,851	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			74			74
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			3,190			3,190
	Other factors		446			15,507			15,953
			446			18,697			19,143
Balance, September 30, 2010		$	137,049		$	240,164		$	377,213
Changes in fair value recognized during the period relating to assets still held at September 30, 2010		$	446		$	9,153		$	9,599

16

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, December 31, 2009	$	—
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		241,948
Repurchases		(125,809	)
Balance, September 30, 2010	$	116,139
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2010	$	—

        Following are the fair values and related principal amounts due upon maturity of mortgage loans accounted for under the fair value option as of the dates presented:

	September 30, 2011
	Fair value		Principal amount due upon maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	230,850	$	360,115	$	(129,265	)
90 or more days delinquent(1)		678,180		1,310,766		(632,586	)
	$	909,030	$	1,670,881	$	(761,851	)

	December 31, 2010
	Fair value		Principal amount due upon maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	90,208	$	139,475	$	(49,267	)
90 or more days delinquent(1)		278,008		521,326		(243,318	)
	$	368,216	$	660,801	$	(292,585	)

(1)

Loans delinquent 90 or more days are placed on nonaccrual status and previously accrued interest is reversed.

17

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

        Following are the changes in fair value included in current period income by consolidated statement of income line item for financial statement items accounted for under the fair value option:

		Changes in fair value included in current period income Quarter ended September 30,
		2011													2010
		Interest income		Gain (loss) on investments			Net gain (loss) on mortgage loans acquired for sale		Net servicing fee income			Total			Interest income		Gain (loss) on investments		Net gain (loss) on mortgage loans acquired for sale			Total
		(in thousands)
Assets:
	Short-term money market investments	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—
	Mortgage-backed securities at fair value		385		(791	)		—		—			(406	)		757		596		—			1,353
	Mortgage loans acquired for sale at fair value		—		—			84		—			84			—		—		(17	)		(17	)
	Mortgage loans at fair value		—		32,311			—		—			32,311			—		7,578		—			7,578
	Mortgage servicing rights at fair value		—		—			—		(10	)		(10	)		—		—		—			—
		$	385	$	31,520		$	84	$	(10	)	$	31,979		$	757	$	8,174	$	(17	)	$	8,914
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—
		$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—

18

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

		Changes in fair value included in current period income Nine months ended September 30,
		2011													2010
		Interest income		Gain (loss) on investments			Net gain (loss) on mortgage loans acquired for sale		Net servicing fee income			Total			Interest income		Gain (loss) on investments		Net gain (loss) on mortgage loans acquired for sale		Total
		(in thousands)
Assets:
	Short-term money market investments	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—
	Mortgage-backed securities at fair value		1,759		(2,106	)		—		—			(347	)		2,318		446		—		2,764
	Mortgage loans acquired for sale at fair value		—		—			207		—			207			—		—		11		11
	Mortgage loans at fair value		—		65,594			—		—			65,594			—		18,677		—		18,677
	Mortgage servicing rights at fair value		—		—			—		(7	)		(7	)		—		—		—		—
		$	1,759	$	63,488		$	207	$	(7	)	$	65,447		$	2,318	$	19,123	$	11	$	21,452
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—
		$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—

Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

Real Estate Acquired in Settlement of Loans

        The Company measures its investment in REO at management's estimates of the respective properties' fair values less cost to sell on a nonrecurring basis. The value of the REO is initially established as the lesser of (a) either the fair value of the loan at the date of transfer or the purchase price of the property, or (b) the fair value of the real estate less estimated costs to sell as of the date of transfer. REO may be subsequently revalued due to the Company receiving greater access to the property, the property being held for an extended period or management receiving indications that the property's value may not be supported by developing market conditions. Any subsequent change in fair value to a level that is less than or equal to the value at which the property was initially recorded is recognized in Results of real estate acquired in settlement of loans in the consolidated statements of income.

19

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

        Real estate acquired in settlement of loans is summarized below:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Carrying value at period end		$	69,906		$	26,112		$	69,906		$	26,112
Transfers from mortgage loans during the period		$	36,857		$	18,460		$	82,680		$	31,762
Remeasurements of REO at fair value during the period:
	Fair value after remeasurement	$	29,008		$	2,994		$	27,627		$	3,059
	Net remeasurement losses recognized in Results of real estate acquired in settlement of loans	$	(2,740	)	$	(562	)	$	(4,513	)	$	(766	)

Mortgage Servicing Rights at Lower of Amortized Cost or Fair Value

        The Company evaluates its MSRs at lower of amortized cost or fair value with reference to the assets' fair value. For purposes of performing its MSR impairment evaluation, the Company stratifies its MSR at lower of amortized cost or fair value based on the loans' underlying interest rates. Loans are grouped into note rate pools of fifty basis points for note rates between 3% and 4.5% and a single pool for note rates below 3%. If the fair value of MSRs in any of the note rate pools is below the amortized cost of the MSRs for that pool reduced by any existing valuation allowance, those MSRs are impaired.

        When MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted using a valuation allowance. If the value of the MSRs subsequently increases, the restoration of value is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a reduction in the valuation allowance.

        Management periodically reviews the various impairment strata to determine whether the value of the impaired MSRs in a given stratum is likely to recover. When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance. No impairment was recorded during the three and nine month periods ended September 30, 2011.

Fair Value of Financial Instruments Carried at Amortized Cost

        In November and December 2010 and in June, July and September 2011, the Company entered into new debt facilities to finance its investment in nonperforming loans and REO in the form of repurchase agreements and borrowings under a forward purchase agreement. As discussed in Fair Value Accounting Elections above, management designated these agreements to be accounted for at amortized cost. Management has concluded that the estimated fair value of loans sold under agreements to repurchase, REO financed under agreements to repurchase and borrowings under a forward purchase agreement approximates the agreements' carrying values due to the agreements' short terms and variable interest rates.

20

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

Valuation Techniques

        The following describes the methods used in estimating the fair values of Level 2 and Level 3 financial statement items:

Mortgage-Backed Securities

        Non-Agency MBS are categorized as "Level 3" financial statement items. Fair value of non-Agency MBS is estimated using broker indications of value. Agency MBS refers to securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae") (Freddie Mac and Fannie Mae are each referred to as an "Agency" and, collectively, as the "Agencies"). For indications of value received, PCM's Capital Markets and Valuation staff reviews the price indications provided by non-affiliate brokers for completeness, accuracy and consistency across all similar bonds managed by PCM. Bond-level analytics such as yield, weighted average life and projected prepayment and default speeds of the underlying collateral are computed. The reasonableness of the brokers' indications of value and of changes in value from period to period is evaluated in light of the analytical review performed and considering market conditions. The review of the Capital Markets and Valuation staff is reported to PCM's Valuation Committee as part of their review and approval of monthly valuation results. PCM does not intend to adjust its fair value estimates to amounts different than the brokers' indications of value.

21

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

        Following is a quantitative summary of key inputs used by PCM's valuation staff to evaluate the reasonableness of the fair value of MBS:

		Range (Weighted Average)
Security Class	Key Inputs(1)	September 30, 2011	December 31, 2010
Non-Agency subprime	Discount rate	3.6% - 18.6%	2.9% - 17.3%
		(9.8)%	(4.5)%
	Prepayment speed(2)	0.2% - 10.4%	0.1% - 5.3%
		(4.8)%	(1.5)%
	Default speed(3)	4.6% - 15.1%	3.6% - 19.2%
		(12.2)%	(10.5)%
	Collateral remaining loss percentage(4)	23.7% - 65.4%	12.1% - 56.6%
		(43.3)%	(36.9)%
Non-Agency Alt-A	Discount rate	5.4% - 30.9%	5.0% - 11.4%
		(6.7)%	(7.1)%
	Prepayment speed(2)	1.6% - 10.5%	0.9% - 10.1%
		(8.5)%	(6.7)%
	Default speed(3)	3.6% - 15.6%	4.2% - 21.2%
		(12.3)%	(12.3)%
	Collateral remaining loss percentage(4)	7.9% - 38.8%	10.5% - 41.1%
		(24.3)%	(22.8)%
Non-Agency prime jumbo	Discount rate	6.4% - 6.4%	2.7% - 2.7%
		(6.4)%	(2.7)%
	Prepayment speed(2)	14.5% - 14.5%	14.7% - 14.7%
		(14.5)%	(14.7)%
	Default speed(3)	1.4% - 1.4%	1.5% - 1.5%
		(1.4)%	(1.5)%
	Collateral remaining loss percentage(4)	0.8% - 0.8%	0.6% - 0.6%
		(0.8)%	(0.6)%

(1)

Key inputs are those used to evaluate broker indications of value.

(2)

Prepayment speed is measured using 1 year Voluntary Conditional Prepayment Rate ("CPR").

(3)

Default speed is measured using 1 year Constant Default Rate ("CDR").

(4)

The projected future losses on the loans in the collateral groups paying to each bond as a percentage of the current balance of the loans.

        Interest income on MBS is recognized over the life of the security using the interest method and is included in the consolidated statement of income under the caption Interest income—mortgage-backed securities. Changes in fair value arising from amortization of purchase premiums and accrual of unearned discounts are recognized as a component of interest income.

22

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

Mortgage Loans

        Fair value of mortgage loans is estimated based on whether the mortgage loans are saleable into active markets with established counterparties and transparent pricing:

•

Mortgage loans that are saleable into active markets, comprised of the Company's mortgage loans acquired for sale at fair value, are categorized as "Level 2" financial statement items and their fair values are estimated using their quoted market or contracted price or market price equivalent.

•

Loans that are not saleable into active markets are categorized as "Level 3" financial statement items, and their fair values are estimated using a discounted cash flow valuation model. Inputs to the model include current interest rates, loan amount, payment status and property type, and forecasts of future interest rates, home prices, prepayment speeds, default and loss severities. The valuation process includes the computation by stratum of loan population and a review for reasonableness of various measures such as weighted average life, projected prepayment and default speeds, and projected default and loss percentages. The valuation staff computes the impact on the valuation of changes in input variables such as interest rates, home prices, and delinquency status in order to assess the reasonableness of changes in the loan valuation.

Changes in fair value attributable to changes in instrument-specific credit risk are measured by the change in the respective loan's delinquency status at period-end from the later of the beginning of the period or acquisition date.

        Following is a quantitative summary of key inputs used in the valuation of mortgage loans at fair value:

	Range (Weighted Average)
Key Inputs	September 30, 2011	December 31, 2010
Discount rate	9.1% - 20.7%	9.1% - 18.7%
	(14.5)%	(13.8)%
Twelve-month projected housing price index change	-8.5% - 10.6%	-18.4% - 10.7%
	(-1.2)%	(-2.4)%
Prepayment speed(1)	0.3% - 6.4%	0.2% - 7.5%
	(2.0)%	(2.8)%
Total prepayment speed (Life Total CPR)(2)	0.6% - 35.8%	0.4% - 38.6%
	(28.1)%	(31.9)%

(1)

Prepayment speed is measured using Life Voluntary Conditional Prepayment Rate.

(2)

Total prepayment speed is measured using Life Total Conditional Prepayment Rate.

        Management incorporates lack of liquidity into its fair value estimates based on the type of asset or liability measured and the valuation method used. For example, for mortgage loans where the significant inputs have become unobservable due to illiquidity in the markets for distressed mortgage

23

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

loans or non-Agency, non-conforming mortgage loans, a discounted cash flow technique is used to estimate fair value. This technique incorporates forecasting of expected cash flows discounted at an appropriate market discount rate that is intended to reflect the lack of liquidity in the market.

        Interest income on loans is recognized over the life of the loan using its contractual interest rate and is included in the consolidated statements of income under the caption Interest income—mortgage loans. Accrual of interest earned but not yet collected is suspended and all previously accrued interest is reversed for loans when they become 90 days delinquent, or when, in management's opinion, a full recovery of income and principal becomes doubtful. Accrual of interest is resumed when the loan becomes contractually current.

Real Estate Acquired in Settlement of Loans

        REO is measured based on its fair value on a nonrecurring basis and is categorized as a "Level 3" financial statement item. Fair value of REO is estimated using a current estimate of value from a broker's price opinion or a full appraisal. REO values are reviewed by PCM's staff appraisers when the Company obtains multiple indications of value and there is a significant discrepancy between the values received. PCM's staff appraisers will attempt to resolve the discrepancy between the indications of value. In circumstances where the appraisers are not able to generate adequate data to support a value conclusion, the staff appraisers will order an additional appraisal to resolve the property's value. Changes in fair value of REO are included in the consolidated statements of income under the caption Results of real estate acquired in settlement of loans.

Mortgage Servicing Rights

        MSRs are categorized as "Level 3" financial statement items. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting servicing cash flows discounted at a rate that management assumes market participants would use in their determinations of value. The key assumptions used in the estimation of the fair value of MSRs include prepayment and default rates of the underlying loans, the applicable discount rate, and cost to service loans. The results of the estimates of fair value of MSRs are reported to PCM's Valuation Committee as part of their review and approval of monthly valuation results. Changes in the fair value of MSRs are included in the consolidated statements of income under the caption Net servicing fee income.

24

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Fair Value (Continued)

        Following is a quantitative summary of key inputs used in the valuation of mortgage servicing rights as of September 30, 2011:

	Range (Weighted Average)
Key Inputs	At Fair Value	At Amortized Cost
Discount rate	9.2% - 17.9%	9.2% - 9.5%
	(10.7)%	(9.4)%
Prepayment speed(1)	6.1% - 54.4%	5.6% - 12.6%
	(13.1)%	(6.7)%
Average life (in years)	1.9 - 8.0	3.7 - 8.1
	(5.8)	(7.6)
Cost of servicing	$68 - $140	$68 - $68
	$(81)	$(68)

(1)

Prepayment speed is measured using CPR.

        The Company had no mortgage servicing rights as of December 31, 2010.

Securities Sold Under Agreements to Repurchase

        Fair value of securities sold under agreements to repurchase is based on the accrued cost of the agreements, which approximates fair value, due to the agreements' short maturities.

Note 6—Mortgage-Backed Securities at Fair Value

        Investments in MBS were as follows as of the dates presented:

		September 30, 2011
				Credit rating
		Total		AAA		AA		A		BBB		Non-investment grade		Not rated		Market Yield
		(in thousands)
Security collateral type:
	Non-Agency subprime	$	70,242	$	—	$	—	$	—	$	15,671	$	54,571	$	—		9.90	%
	Non-Agency Alt-A		10,123		483		5,599		—		—		4,041		—		6.65	%
	Non-Agency prime jumbo		6,337		—		6,337		—		—		—		—		6.41	%
		$	86,702	$	483	$	11,936	$		$	15,671	$	58,612	$	—		9.28	%

25

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6—Mortgage-Backed Securities at Fair Value (Continued)

		December 31, 2010
				Credit rating
		Total		AAA		AA		A		BBB		Non-investment grade		Not rated		Market Yield
		(in thousands)
Security collateral type:
	Non-Agency subprime	$	93,783	$	382	$	5,627	$	2,134	$	2,532	$	79,138	$	3,970		4.50	%
	Non-Agency Alt-A		15,824		649		6,750		—		14		8,411		—		7.10	%
	Non-Agency prime jumbo		10,265		—		10,265		—		—		—		—		2.70	%
		$	119,872	$	1,031	$	22,642	$	2,134	$	2,546	$	87,549	$	3,970		(4.69	)%

        All of the Company's MBS had remaining contractual maturities of more than ten years at September 30, 2011 and at December 31, 2010. At September 30, 2011, the Company had pledged $69.5 million of its MBS and at December 31, 2010, the Company had pledged all of its MBS to secure agreements to repurchase.

Note 7—Mortgage Loans Acquired for Sale at Fair Value

        Mortgage loans acquired for sale at fair value is comprised of recently originated mortgage loans purchased by the Company for resale.

        Following is a summary of the distribution of the Company's mortgage loans acquired for sale at fair value as of the dates presented:

		September 30, 2011					December 31, 2010
Loan Type		Fair value			Unpaid principal balance		Fair value		Unpaid principal balance
		(in thousands)
Government insured or guaranteed		$	10,833		$	10,051	$	3,212	$	3,115
Fixed-rate:
	Agency-eligible		27,886			26,494		754		750
	Jumbo loans		2,601			2,557		—		—
			41,320			39,102		3,966		3,865
Pipeline and other hedging derivatives, net			(470	)		—		—		—
		$	40,850		$	39,102	$	3,966	$	3,865

        Mortgage loans acquired for sale at fair value totaling $40.5 million and $2.7 million were pledged to secure sales of loans under agreements to repurchase at September 30, 2011 and December 31, 2010, respectively.

        The Company is exposed to price risk relative to its mortgage loans acquired for sale as well as to the commitments it makes to acquire loans from correspondent lenders. The Company is exposed to price risk from the time a commitment to purchase a loan is made to a correspondent lender to the time the purchased mortgage loan is sold. During this period, the Company is exposed to losses if mortgage rates rise, because the value of the purchase commitment or mortgage loan acquired for sale

26

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7—Mortgage Loans Acquired for Sale at Fair Value (Continued)

declines. The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in interest rates.

        To manage this price risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the value of the Company's interest rate lock commitments and inventory of mortgage loans acquired for sale. The Company does not use derivative financial instruments for purposes other than in support of its risk management activities.

        The Company records all derivative financial instruments at fair value. The Company had the following derivative financial instruments recorded within the mortgage loan balances on the balance sheet as of September 30, 2011:

			September 30, 2011
Instrument			Notional amount		Fair value
Interest rate lock commitments			$	319,156	$	1,205
Hedging derivatives:
		MBS Put Options		38,000		72
		MBS Call Options		2,000		—
				40,000		72
	Forward sales contracts			215,382		(1,747	)
			$	574,538	$	(470	)

        As of September 30, 2011, the Company had $975,000 on deposit with its derivatives counterparties.

        The Company did not have any derivative contracts at December 31, 2010.

        The following table summarizes the activity for derivative contracts used to hedge the Company's interest rate lock commitments and inventory of mortgage loans acquired for sale at notional value:

	Balance, Beginning of Period		Additions		Dispositions/ Expirations			Balance, End of Period
	(in thousands)
Quarter ended September 30, 2011
Options	$	1,500	$	41,500	$	(3,000	)	$	40,000
Forward sales contracts	$	11,115	$	314,345	$	(110,078	)	$	215,382
Nine months ended September 30, 2011
Options	$	—	$	43,000	$	(3,000	)	$	40,000
Forward sales contracts	$	—	$	352,290	$	(136,908	)	$	215,382

        The Company did not have any derivative contracts during the three and nine months ended September 30, 2010.

27

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8—Mortgage Loans at Fair Value and Mortgage Loans Under a Forward Purchase Agreement at Fair Value

        Mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value are comprised of all mortgage loans not acquired for immediate resale. Such loans may be sold at a later date pursuant to a management determination that such a sale represents the most advantageous liquidation strategy for the identified loan.

        Following is a summary of the distribution of the Company's mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value as of the dates presented:

		September 30, 2011				December 31, 2010
Loan Type		Fair value		Unpaid principal balance		Fair value		Unpaid principal balance
		(in thousands)
Nonperforming loans		$	678,180	$	1,310,766	$	278,008	$	521,326
Performing loans:
	Fixed		94,818		160,409		49,444		73,256
	ARM/Hybrid		74,120		124,311		31,916		54,430
	Interest rate step-up		20,914		36,068		4,813		7,831
	Balloon		148		225		69		93
			190,000		321,013		86,242		135,610
		$	868,180	$	1,631,779	$	364,250	$	656,936

        At September 30, 2011, approximately 73% of the mortgage loan portfolio consisted of mortgage loans that were originated between 2005 and 2007. Approximately 72% of the estimated fair value of the mortgage loans in this portfolio is comprised of loans with unpaid-principal-balance-to-current-property-value ratios in excess of 100% at September 30, 2011.

        The mortgage loan portfolio consists of mortgage loans originated throughout the United States with loans secured by California real estate comprising approximately 27% of the loan portfolio's estimated fair value at September 30, 2011. The mortgage loan portfolio contains loans from New York and Florida that each represent 5% or more of the portfolio's estimated fair value at September 30, 2011.

        At December 31, 2010, approximately 94% of the mortgage loan portfolio consisted of mortgage loans that were originated between 2005 and 2007. Over 67% of the estimated fair value of the mortgage loans in this portfolio was comprised of loans with unpaid-principal-balance-to-current-property-value ratios in excess of 100% at December 31, 2010. The mortgage loan portfolio consisted of mortgage loans originated throughout the United States with loans secured by California real estate comprising approximately 27% of the loan portfolio's estimated fair value at December 31, 2010. The mortgage loan portfolio contained loans from Florida, Illinois and New York that each represented 5% or more of the portfolio's estimated fair value at December 31, 2010.

        At September 30, 2011, mortgage loans in this portfolio totaling $811.4 million were either pledged to secure sales of loans under agreements to repurchase or subject to borrowings under a forward purchase agreement. At December 31, 2010, mortgage loans at fair value totaling $326.9 million were pledged to secure sales of loans under agreements to repurchase. The Company did not have mortgage loans under a forward purchase agreement at December 31, 2010.

28

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9—Real Estate Acquired in Settlement of Loans

        Following is a summary of the activity in REO for the periods presented:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Balance at beginning of period		$	48,872		$	13,241		$	29,685		$	—
Purchases			914			—			2,424			1,238
Transfers from mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value			36,857			18,460			82,680			31,762
Results of REO:
	Valuation adjustments, net		(2,779	)		(645	)		(6,764	)		(502	)
	Gain on sale, net		3,131			1,249			8,291			1,441
			352			604			1,527			939
Sales proceeds			(17,089	)		(6,193	)		(46,410	)		(7,827	)
Balance at period end		$	69,906		$	26,112		$	69,906		$	26,112

        At September 30, 2011, REO totaling $13.9 million was financed under agreements to repurchase and a forward purchase agreement and $26.0 million was held in a consolidated subsidiary of the Company whose stock was pledged to secure financing of the real estate held in that subsidiary. The assets of the consolidated subsidiary are solely REO. At December 31, 2010, no REO was pledged to secure repurchase agreements.

Note 10—Loans Sold Under Agreements to Repurchase

        Following is a summary of financial information relating to loans sold under agreements to repurchase as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	345,969		$	—	$	345,969		$	—
	Unused amount(1)	$	219,031		$	—	$	219,031		$	—
Weighted-average interest rate at end of period			3.67	%		—		3.67	%		—
Weighted-average interest rate during the period(2)			3.83	%		—		3.63	%		—
Average balance of loans sold under agreements to repurchase		$	276,352		$	—	$	231,452		$	—
Maximum daily amount outstanding		$	345,969		$	—	$	345,969		$	—
Total interest expense		$	3,105		$	—	$	7,782		$	—
Fair value of loans and REO securing agreements to repurchase at period-end		$	703,051		$	—	$	703,051		$	—

(1)

The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

29

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10—Loans Sold Under Agreements to Repurchase (Continued)

(2)

Weighted-average interest rate during the period excludes the effect of amortization of debt issuance costs of $398,000 and $1.4 million during the quarter and nine months ended September 30, 2011, respectively.

        The repurchase agreements collateralized by loans have an average remaining term of approximately 3.2 months at September 30, 2011.

        The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's loans sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Citibank, N.A.	$	254,226	December 8, 2011
Wells Fargo Bank, N.A.	$	76,824	February 27, 2012
Credit Suisse First Boston Mortgage Capital LLC	$	25,856	January 8, 2012

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the loans securing those agreements decreases. The Company had no margin deposits with its loan repurchase agreement counterparties at September 30, 2011 and on December 31, 2010. Margin deposits are included in Other assets in the consolidated balance sheets.

Note 11—Securities Sold Under Agreements to Repurchase at Fair Value

        Following is a summary of financial information relating to securities sold under agreements to repurchase at fair value as of and for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(dollar amounts in thousands)
Period-end balance	$	62,843		$	116,139		$	62,843		$	116,139
Weighted-average interest rate at end of period		0.97	%		1.36	%		0.97	%		1.36	%
Weighted-average interest rate during the period		0.96	%		1.45	%		1.14	%		1.45	%
Average balance of securities sold under agreements to repurchase	$	65,364		$	67,642		$	80,020		$	22,795
Maximum daily amount outstanding	$	70,978		$	121,047		$	101,202		$	121,047
Total interest expense	$	161		$	251		$	692		$	251
Fair value of securities securing agreements to repurchase at period-end	$	69,500		$	137,049		$	69,500		$	137,049

        The repurchase agreements collateralized by securities have an average remaining term of 12 days. All securities underlying repurchase agreements are held by the buyer. All agreements collateralized by MBS are to repurchase the same or substantially identical securities.

30

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11—Securities Sold Under Agreements to Repurchase at Fair Value (Continued)

        The amount at risk (the fair value of the securities pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's securities sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Wells Fargo Bank, N.A.	$	9,687		October 11, 2011

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the MBS securing those agreements decreases. As of September 30, 2011 and December 31, 2010, the Company had $3.0 million and $4.8 million, respectively, on deposit with its securities repurchase agreement counterparties. Margin deposits are included in Other assets in the consolidated balance sheets.

Note 12—Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase

        Following is a summary of financial information relating to REO financed under agreements to repurchase as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	12,814		$	—	$	12,814		$	—
	Unused amount(1)	$	87,186		$	—	$	87,186		$	—
Weighted-average interest rate at end of period			3.99	%		—		3.99	%		—
Weighted-average interest rate during the period(2)			4.76	%		—		4.71	%		—
Average balance of REO sold under agreements to repurchase		$	12,663		$	—	$	4,725		$	—
Maximum daily amount outstanding		$	16,797		$	—	$	16,797		$	—
Total interest expense		$	279		$	—	$	319		$	—
Fair value of REO held in a consolidated subsidiary whose stock is pledged to secure agreements to repurchase at period-end		$	26,102		$	—	$	26,102		$	—

(1)

The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered REO eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

(2)

Weighted-average interest rate during the period excludes the effect of amortization of debt issuance costs of $125,000 and $150,000 during the quarter and nine months ended September 30, 2011, respectively.

31

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 12—Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase (Continued)

        The repurchase agreement collateralized by REO has an average term of approximately 8.5 months at September 30, 2011.

        The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's REO sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	13,273		June 11, 2012

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the REOs securing those agreements decreases.

Note 13—Borrowings Under a Forward Purchase Agreement

        Following is a summary of financial information relating to borrowings under a forward purchase agreement as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	163,755		$	—	$	163,755		$	—
	Interest rate		3.87	%		—		3.87	%		—
Weighted-average interest rate during the period			4.48	%		—		4.48	%		—
Average balance of borrowings under a forward purchase agreement		$	146,708		$	—	$	49,440		$	—
Maximum daily amount outstanding		$	173,398				$	173,398
Total interest expense		$	1,680		$	—	$	1,680		$	—
Fair value of underlying loans and REO at period-end		$	162,706		$	—	$	162,706		$	—

        The forward purchase agreement has an average term of approximately 8.9 months at September 30, 2011.

        At September 30, 2011, there was no amount at risk (the fair value of the mortgage loans pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's borrowings under a forward purchase agreement.

32

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 14—Commitments and Contingencies

        From time to time, the Company may be involved in various proceedings, claims and legal actions arising in the ordinary course of business. As of September 30, 2011, the Company was not involved in any such proceedings, claims or legal actions that would be reasonably likely to have a material adverse effect on the Company.

Mortgage Loan Commitments

        The following table summarizes the Company's outstanding contractual loan commitments as of the date presented:

		September 30, 2011
		(in thousands)
Correspondent lending:
	Commitments to purchase mortgage loans	$	319,156
Other mortgage loans:
	Commitments to purchase mortgage loans	$	337,837

Note 15—Shareholders' Equity

        On February 16, 2011, the Company issued and sold 9,500,000 common shares in an underwritten public offering at a price of $18 per share, for net proceeds of approximately $163.8 million after the underwriting discount and estimated offering expenses and the reimbursement of certain expenses. On March 3, 2011, the Company issued and sold an additional 1,425,000 common shares at a price of $18 per share pursuant to the exercise of an over-allotment option by the public offering's underwriters and received $24.6 million of proceeds after the underwriting discount and reimbursement of certain expenses.

        On November 19, 2010, the Company entered into a Controlled Equity Offering Sales Agreement (the "2010 Sales Agreement") with Cantor Fitzgerald & Co. During the nine months ended September 30, 2011, the Company sold a total of 28,500 of its common shares under the 2010 Sales Agreement at a weighted average price of $18.34 per share, providing net proceeds to the Company of approximately $512,000, net of sales commissions. The sales agent received a total of approximately $10,000, which represents an average commission of approximately 2.0% of the gross sales price.

        As more fully described in the Company's Annual Report, certain of the underwriting costs incurred in the Company's IPO were paid on PMT's behalf by PCM and a portion of the underwriting discount was deferred by agreement with the underwriters of the offering. Reimbursement to PCM and payment to the underwriters of the deferred underwriting discount are both contingent on PMT's performance during any full four calendar quarter period during the 24 full calendar quarters after the date of the completion of its IPO, August 4, 2009. If PMT meets the specified performance levels during any full four calendar quarter period during the 24-quarter period, the Company will reimburse PCM approximately $2.9 million of underwriting costs paid by PCM on the offering date and pay the underwriters approximately $5.9 million in deferred underwriting discount. If this requirement is not satisfied by the end of such 24-quarter period, the Company's obligation to reimburse PCM and make the conditional payment of the underwriting discount will terminate. Management has concluded that

33

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 15—Shareholders' Equity (Continued)

this contingency is probable of being met during the 24-quarter period and has recognized a liability for reimbursement to PCM and payment of the contingent underwriting discount as a reduction of additional paid-in capital.

Note 16—Net Gain on Mortgage Loans Acquired For Sale

        Net gain (loss) on mortgage loans acquired for sale is summarized below for the periods presented:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Cash gain (loss) on sale:
	Loan proceeds	$	(63	)	$	(28	)	$	(73	)	$	(23	)
	Hedging activities		(929	)		—			(1,013	)		20
			(992	)		(28	)		(1,086	)		(3	)
Mortgage servicing rights received as proceeds on sale			466			—			643			—
Provision for representations and warranties on loans sold			(21	)		(5	)		(32	)		(5	)
Change in fair value relating to loans and hedging instruments acquired for sale at period-end:
	Loans		1,067			60			1,151			63
	Hedging instruments		(436	)		(44	)		(469	)		(44	)
			631			16			682			19
		$	84		$	(17	)	$	207		$	11

Note 17—Share-Based Compensation Plan

        The Company's equity incentive plan allows for grants of equity-based awards up to a total of 8% of PMT's issued and outstanding shares on a diluted basis at the time of the award. Restricted share units have been awarded to trustees and officers of the Company and to employees of PCM and its affiliates at no cost to the grantees. Such awards generally vest over a one- to four-year period. Expense relating to awards is included in the consolidated statements of income under the caption Compensation.

34

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 17—Share-Based Compensation Plan (Continued)

        The table below summarizes restricted share unit activity and compensation expense for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(in thousands, except share data)
Number of shares:
Outstanding at beginning of period		606,320			371,210			272,984			374,810
Granted		—			—			340,500			23,600
Vested		(82,811	)		(97,026	)		(88,711	)		(97,026	)
Canceled		(14,200	)		(1,200	)		(15,464	)		(28,400	)
Outstanding at end of period		509,309			272,984			509,309			272,984
Expense recorded during the period	$	1,148		$	368		$	2,812		$	1,589
Unamortized compensation cost at period-end	$	4,106
At September 30, 2011:
Weighted average grant date fair value per share	$	14.66
Shares available for future awards(1)		1,762,000

(1)

Based on shares outstanding as of September 30, 2011. Total shares available for future awards may be adjusted in accordance with the equity incentive plan based on future issuances of PMT's shares as described above.

Note 18—Income Taxes

        The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. Therefore, PMT generally will not be subject to corporate federal or state income tax to the extent that qualifying distributions are made to shareholders and the Company meets REIT requirements including certain asset, income, distribution and share ownership tests. The Company believes that it has met the distribution requirements, as it has declared dividends sufficient to distribute substantially all of its taxable income. Taxable income will generally differ from net income. The primary differences between net income and the REIT taxable income (before deduction for qualifying distributions) is the income of the taxable REIT subsidiaries ("TRSs") and the method of determining the income or loss related to valuation of the mortgage loans owned by the qualified REIT subsidiary ("QRS"). Other than the TRS income and the QRS loan valuation differences, the other differences between REIT book income and REIT taxable income are not material.

        In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital.

35

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 18—Income Taxes (Continued)

        The Company has elected to treat two of its subsidiaries as TRSs. Income from the TRSs is only included as a component of REIT taxable income to the extent that the TRS makes dividend distributions of income to the REIT. No such dividend distributions were made in the quarters ended September 30, 2011 and 2010. A TRS is subject to corporate federal and state income tax. Accordingly, a provision for income taxes for the TRSs is included in the accompanying consolidated statements of income.

        The Company files U.S. federal and state income tax returns for both the REIT and TRSs. These returns for 2009 and forward are subject to examination by the respective tax authorities. No returns are currently under examination.

        The following table details the Company's provision for income taxes which relates primarily to the TRSs, for the periods presented:

				Quarter ended September 30,					Nine months ended September 30,
				2011			2010		2011			2010
				(in thousands)
Current expense (benefit):
		Federal		$	3,815		$	268	$	6,114		$	1,815
		State			1,350			93		2,093			630
			Total current		5,165			361		8,207			2,445
Deferred expense (benefit):
		Federal			(605	)		—		(1,359	)		—
		State			(210	)		—		(472	)		—
Total deferred expense					(815	)		—		(1,831	)
		Valuation allowance			—			—		—			(45	)
	Total provision for income taxes			$	4,350		$	361	$	6,376		$	2,400

        The provision for deferred income taxes for the quarter ended September 30, 2011 relates to net unrealized valuation losses on REO. There was no provision for deferred income taxes for the quarter ended September 30, 2010.

36

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 18—Income Taxes (Continued)

        The following table is a reconciliation of the Company's provision for income taxes at statutory rates to the provision for income taxes at the Company's effective rate:

	Quarter ended September 30,												Nine months ended September 30,
	2011						2010						2011						2010
	Amount			Rate			Amount			Rate			Amount			Rate			Amount			Rate
	(dollars in thousands)
Federal provision for income taxes at statutory tax rate	$	8,707			35.0	%	$	2,831			35.0	%	$	17,908			35.0	%	$	6,837			35.0	%
Effect of non-taxable REIT income		(5,028	)		(20.2	)%		(2,460	)		(19.9	)%		(12,682	)		(24.8	)%		(4,800	)		(24.6	)%
Provision for state income taxes, net of federal benefit		741			3.0	%		61			3.2	%		1,053			2.1	%		410			2.1	%
Other		(70	)		(0.3	)%		(71	)		0.7	%		97			0.2	%		(2	)		(0.0	)%
Valuation allowance		—			—			—			0.0	%		—			—			(45	)		(0.2	)%
Provision for income taxes	$	4,350			17.5	%	$	361			19.0	%	$	6,376			12.5	%	$	2,400			12.3	%

        At September 30, 2011 and September 30, 2010, the Company has no unrecognized tax benefits and does not anticipate any increase in unrecognized tax benefits. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company's policy to record such accruals in the Company's income tax accounts. No such accruals existed at September 30, 2011 or at September 30, 2010.

Note 19—Supplemental Cash Flow Information

		Nine months ended September 30,
		2011		2010
		(in thousands)
Income taxes paid		$	3,841	$	2,521
Interest paid		$	9,249	$	123
Non-cash investing activities:
	Transfer of mortgage loans to REO	$	82,680	$	31,762
	Addition of unpaid interest to mortgage loan balances in loan modifications	$	3,521	$	74
	Receipt of MSRs as proceeds from sales of loans	$	643	$	—
	Purchase of mortgage loans financed through a forward purchase agreement	$	171,796	$	—
	Purchase of REO financed through a forward purchase agreement	$	914	$	—
	Unsettled purchases of MBS	$	17,205	$	—
Non-cash financing activities:
	Purchase of mortgage loans financed through a forward purchase agreement	$	171,796	$	—
	Purchase of REO financed through a forward purchase agreement	$	914	$	—

37

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 20—Regulatory Net Worth Requirement

        PennyMac Corp. ("PMC"), an indirect subsidiary of the Company, is a seller-servicer for Fannie Mae. Fannie Mae's approval required PMC to deposit $5.0 million in a pledged cash account to secure its performance under its master agreement with Fannie Mae. The pledged cash is included in Other assets in the consolidated balance sheets at September 30, 2011 and December 31, 2010.

        To retain its status as an approved seller-servicer, PMC is required to meet Fannie Mae's capital standards, which require PMC to maintain a minimum net worth of $2.5 million. Management believes PMC complies with Fannie Mae's net worth requirement as of September 30, 2011.

Note 21—Recently Issued Accounting Pronouncements

        In May 2011, the Financial Accounting Standards Board issued an Accounting Standards Update ("ASU"), ASU 2011-04 to the Fair Value Measurements topic of the Accounting Standards Codification ("ASC"). ASU 2011-04 eliminates unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards, expands the disclosure requirements of the Fair Value Measurements and Disclosure topic of the ASC for fair value measurements and makes other amendments, including:

•

limiting the highest-and-best-use valuation premise concepts only to measuring the fair value of nonfinancial assets;

•

permitting an exception to fair value measurement principles for financial assets and financial liabilities (and derivatives) with offsetting positions in market risks or counterparty credit risk when several criteria are met. When the criteria are met, an entity can measure the fair value of the net risk position;

•

clarifying that premiums or discounts that reflect size as a characteristic of the reporting entity's holding rather than as a characteristic of the asset or liability (for example, a control premium when measuring the fair value of a controlling interest) are not permitted in a fair value measurement; and

•

prescribing a model for measuring the fair value of an instrument classified in shareholders' equity; this model is consistent with the guidance on measuring the fair value of liabilities.

        ASU 2011-04 expands the Fair Value Measurements topic's disclosure requirements, particularly for fair value measurements categorized in Level 3 of the fair value hierarchy: (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place (e.g., how the entity decides its valuation policies and procedures, as well as changes in its analyses of fair value measurements, from period to period), and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs.

        ASU 2011-04 is applicable to the Company for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have a material effect on the Company's financial statements.

38

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 22—Subsequent Events

        Management has evaluated all events or transactions through the date the Company issued these financial statements. During this period:

•

On October 26, 2011, the Company's Board of Trustees declared a cash dividend of $0.50 per share payable on November 30, 2011 to holders of record of the Company's common shares as of November 16, 2011.

•

On October 11, 2011, the Company entered into a forward purchase agreement through CGM for approximately $35.1 million in fair value of distressed mortgage assets. The pending transaction is subject to changes in the loans allocated to us by PCM, continuing due diligence, customary closing conditions, and our obtaining additional capital adequate to fund the transaction. There can be no assurance that the committed amount will ultimately be acquired or that the transaction will be completed at all.

•

During October of 2011, the Company purchased loans subject to its forward purchase agreement with CGM with fair values totaling $19.2 million.

•

On November 1, 2011, the Company entered into an amendment (the "Amendment") to its master repurchase agreement, dated November 2, 2010 (the "Loan Repo Facility"), with Credit Suisse First Boston Mortgage Capital LLC ("CSFB"), pursuant to which PMC may sell, and later repurchase, newly originated mortgage loans. The Loan Repo Facility is used to fund newly originated mortgage loans that are purchased from correspondent lenders by PMC and held for sale and/or securitization. The Loan Repo Facility is committed for a period of 364 days, and the obligations of PMC are fully guaranteed by the Company and the Operating Partnership.

Under the terms of the Amendment, the maximum aggregate purchase price provided for in the Loan Repo Facility was increased from $75 million to $150 million and the termination date was extended until October 30, 2012. Through PMC, the Company is also required to pay CSFB a commitment fee for the Loan Repo Facility, as well as certain other administrative costs and expenses in connection with CSFB's structuring, management and ongoing administration of the Loan Repo Facility. All other terms and conditions of the Loan Repo Facility and the related guaranty remain the same in all material respects.

39

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        We are a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our investors over the long-term, principally through dividends and secondarily through capital appreciation. We intend to achieve this objective largely by investing in mortgage loans, a substantial portion of which may be distressed and acquired at discounts to their unpaid principal balances. We acquire these loans through direct acquisitions of mortgage loan portfolios from institutions such as banks, mortgage companies and insurance companies and direct acquisitions or participations in structured transactions. A substantial portion of the nonperforming loans we have purchased has been acquired from or through one or more subsidiaries of Citigroup Inc.

        We seek to maximize the value of the mortgage loans that we acquire using means that are appropriate for the particular loan, including both proprietary and nonproprietary loan modification programs (such as the U.S. Departments of the Treasury and Housing and Urban Development's Home Affordable Modification Program, or HAMP), special servicing and other initiatives focused on avoiding foreclosure, when possible. When we are unable to effect a cure for a mortgage delinquency, our objective is to effect timely acquisition and/or liquidation of the property securing the loan.

        We supplement these activities through participation in other mortgage-related activities, which are in various states of analysis, planning or implementation and include the following:

•

Acquisition and sale or securitization of mortgage loans, including jumbo loans, from originators of mortgage loans to be resold to the Agencies (as defined below) and other investors and securitization markets. Changes in the mortgage market have significantly reduced the outlets for sales of mortgage loans by smaller mortgage originators who have traditionally sold their loans to larger mortgage companies and banks who, in turn, sold those loans to Agencies and other investors or into securitizations.

We believe these changes, along with recent reductions to government-sponsored entity ("GSE") loan size limits and the reduced participation of large bank lenders due in part to anticipation of regulatory changes to securitization-related capital requirements, provide us with the opportunity to act as a link between these loan originators and the Agency and securitization markets.

During the quarter and nine months ended September 30, 2011, we purchased loans with fair values totaling $220.0 million and $294.4 million, respectively, in furtherance of our correspondent lending strategy. To the extent that we purchase FHA insured or VA guaranteed loans, we sell such loans to PennyMac Loan Services, LLC ("PLS"), which is licensed to sell loans to such entities. The Company receives a sourcing fee from PLS of three basis points on the unpaid principal balance of each loan that it sells to PLS under such arrangement. We held an inventory of mortgage loans totaling $40.9 million at September 30, 2011. To the extent that we transfer these loans into securitizations in the future, we intend to retain a portion of the securities created in the securitization transaction.

•

Acquisition of real estate investment trust ("REIT")-eligible mortgage-backed securities ("MBS"). We believe that the recent dislocations of the residential mortgage markets have disproportionately affected the pricing of certain classes of MBS, thereby providing attractive investment opportunities in certain residential and commercial mortgage-backed and asset-backed securities. Such securities include securities backed by Alt-A and subprime mortgage loans.

We purchased $22.2 million of MBS during the three and nine months ended September 30, 2011. Our portfolio of MBS totaled $86.7 million at September 30, 2011.

40

•

Providing inventory financing of mortgage loans for smaller mortgage originators. We believe this activity will supplement and make our correspondent lending business more attractive to lenders from which we acquire newly originated loans.

•

Acquisition of mortgage servicing rights ("MSRs"). We believe that opportunities exist to acquire MSRs from liquidating and other institutions. We believe that MSR investments allow us to capture attractive current returns and to leverage the capabilities and efficiencies of PLS to improve the assets' value. We also intend to retain the MSRs that we receive as a portion of the proceeds from our sale or securitization of mortgage loans through our correspondent lending operation.

We received MSRs as proceeds on sale of mortgage loans with fair values totaling $469,000 and $643,000 during the quarter and nine months ended September 30, 2011, respectively, and held MSRs with carrying values totaling $636,000 as of September 30, 2011.

        We are externally managed by PNMAC Capital Management, LLC ("PCM" or our "Manager"), an investment adviser that specializes in, and focuses on, residential mortgage loans. Most of our mortgage loan portfolio is serviced by PLS, an affiliate of PCM.

        We conduct substantially all of our operations, and make substantially all of our investments, through PennyMac Operating Partnership, L.P. (the "Operating Partnership") and its subsidiaries. One of our subsidiaries is the sole general partner, and we are the sole limited partner, of the Operating Partnership.

        We believe that we qualify to be taxed as a REIT. We believe that we will not be subject to federal income tax on that portion of our income that is distributed to shareholders as long as we meet certain asset, income and share ownership tests. If we fail to qualify as a REIT, and do not qualify for certain statutory relief provisions, our profits will be subject to income taxes and we may be precluded from qualifying as a REIT for the four tax years following the year we lose our REIT qualification. A portion of our activities is conducted in two taxable REIT subsidiaries, which are subject to corporate federal and state income taxes. Accordingly, we have made a provision for income taxes with respect to the operations of our taxable REIT subsidiaries. We expect that the effective rate for the provision for income taxes will be volatile in future periods. Our goal is to manage the business to take full advantage of the tax benefits afforded to us as a REIT.

Observations on Current Market Opportunities

        The U.S. economy continues its pattern of modest growth, with economic data providing mixed reports on the economic recovery. During the third quarter of 2011, the U.S. gross domestic product expanded at an annual rate of 2.5% compared to 1.3% and 2.5% during the second quarter of 2011 and the third quarter of 2010, respectively. Slow economic growth and pressure on state and federal government spending continued to affect unemployment rates during the quarter ended September 30, 2011. The national unemployment rate was 9.2% at September 30, 2011. Unemployment has persisted at a seasonally adjusted rate at or above 9% for all but two months during the period from May 2009 through September 2011.

        Distress in the banking industry persists at historically high levels. However, the rate of growth in the number of problem banks as identified by the FDIC appears to be slowing. As of June 30, 2011, the most recent date for which problem bank information is available, the FDIC identified 865 problem banks, a decrease from 884 at December 31, 2010 and an increase from 829 at June 30, 2010. The decrease in the number of problem banks is the first since 2006. The number of banks that have been seized is leveling off with 26 depository institutions seized during the third quarter of 2011 compared to 22 depository institutions in the second quarter of 2011 and 41 in the third quarter of 2010.

41

        Residential real estate transactions continue to see historically low levels of activity as a result of continuing historically high levels of unemployment, restrictive loan underwriting standards and uncertainties about economic prospects. Foreclosure activity increased by 4% during the quarter ended September 30, 2011 compared to the quarter ended June 30, 2011 as lenders have corrected operational issues identified with their foreclosure processes.

        Thirty-year fixed mortgage interest rates decreased from 4.51% for the week ended June 30, 2011 to 4.01% for the week ended September 29, 2011 (Source: Freddie Mac's Weekly Primary Mortgage Market Survey). Interest rates have been generally trending downward throughout the nine months ended September 30, 2011.

        Our Manager continues to see substantial volumes of distressed residential mortgage loan sales by a limited number of sellers, which remain primarily sales of nonperforming loan pools (with a small but increasing number of sales of troubled but performing loans). During the quarter ended September 30, 2011, our Manager reviewed 20 mortgage loan pools with unpaid principal balances totaling approximately $3.6 billion. These mortgage loan pools were offered by 17 prospective sellers. This compares to our Manager's review of 27 mortgage loan pools with unpaid principal balances totaling approximately $4.5 billion offered by 17 prospective sellers during the quarter ended June 30, 2011. During the quarter and nine months ended September 30, 2011, we made acquisitions of distressed mortgage loans totaling $264.7 million and $625.1 million, respectively, of which $210.0 million and $554.6 million were acquired from or through one or more subsidiaries of Citigroup Inc.

        We expect that our mortgage loan portfolio may continue to grow at an uneven pace, as opportunities to acquire distressed mortgage loans may be irregularly timed and may involve large portfolios of mortgage loans, and the timing and extent of our success in acquiring such mortgage loans, along with availability of capital to complete such transactions, cannot be predicted.

        We believe that the collapse of the independent mortgage company business model and the weakened condition of banks and other traditional mortgage lenders have created additional opportunities for our business. Under current market conditions, these opportunities include the purchase from smaller mortgage lenders of newly originated mortgage loans that are eligible for sale to a GSE such as the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae") (Freddie Mac and Fannie Mae are each referred to as an "Agency" and, collectively, as the "Agencies"). These opportunities also include the purchase of newly originated mortgage loans that can be resold in the non-Agency whole loan market or securitized in the private label market as well as providing inventory financing to originators of such loans.

        During the quarter ended September 30, 2011, we acquired $220.0 million in fair value of newly originated mortgage loans, an increase of $165.2 million or 302% when compared to the quarter ended June 30, 2011.

42

Results of Operations

        The following is a summary of our key performance measures for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands, except per share amounts)
Net investment income		$	41,985	$	12,656	$	89,491	$	30,425
Net income		$	20,528	$	7,729	$	44,790	$	17,134
Earnings per share:
	Basic	$	0.73	$	0.46	$	1.72	$	1.02
	Diluted	$	0.73	$	0.45	$	1.72	$	1.01
Distributions per share:
	Declared	$	0.50	$	0.35	$	0.92	$	0.35
	Paid	$	0.50	$	0.35	$	1.34	$	0.35
Investment acquisitions:
	Correspondent lending purchases	$	220,040	$	12,539	$	294,410	$	13,914
	Other		288,260		124,994		650,350		361,212
Total investment acquisitions		$	508,300	$	137,533	$	944,760	$	375,126
Share price:
	High	$	17.26	$	18.02	$	19.04	$	18.02
	Low	$	15.82	$	15.68	$	15.82	$	15.68
	At period end	$	15.90	$	17.89
At period end:
	Total investments(1)	$	1,066,274	$	408,073
	Total assets	$	1,155,494	$	453,971
	Book value per share	$	19.04	$	19.40

(1)

Mortgage-backed securities, mortgage loans, REO and MSRs

        During the quarter and nine months ended September 30, 2011, we recorded net income of $20.5 million and $44.8 million, or $0.73 and $1.72 per diluted share, respectively. Our net income for the three and nine months ended September 30, 2011 reflects net gains on our investments in financial instruments totaling $31.6 million and $63.7 million, including $22.7 million and $48.4 million of valuation gains on MBS and mortgage loans excluding mortgage loans acquired for sale, supplemented by $9.8 million and $24.0 million of interest income, respectively.

        During the quarter and nine months ended September 30, 2010, we recorded net income of $7.7 million and $17.1 million, or $0.45 and $1.01 per diluted share, respectively. Net income for the quarter and nine months ended September 30, 2010 reflected net gains on our investments in financial instruments totaling $8.2 million and $19.1 million, including $4.6 million and $8.6 million of valuation gains on MBS and mortgage loans excluding mortgage loans acquired for sale, supplemented by $3.8 million and $10.3 million of interest income, respectively.

Net Investment Income

        During the quarter and nine months ended September 30, 2011, we recorded net investment income of $42.0 million and $89.5 million, respectively, comprised primarily of net gains on investments in financial instruments of $31.6 million and $63.7 million supplemented by $9.8 million and $24.0 million of interest income and $352,000 and $1.5 million of gains from results of REO, respectively. This compares to net investment income of $12.7 million and $30.4 million recognized during the quarter and nine months ended September 30, 2010, comprised primarily of $8.2 million and

43

$19.1 million of net gains on investments in financial instruments, supplemented by $3.8 million and $10.3 million of interest income and $637,000 and $972,000 of gains from results of REO, respectively.

        The growth and shift in net investment income reflects the incomplete deployment of the proceeds from our IPO and the short time in which we held the assets during the first part of 2010, followed by complete deployment of our IPO proceeds, growth through leveraging of our shareholders' equity and additional issuances of common shares beginning in late 2010 through September 30, 2011.

        Net investment income on financial instruments is summarized below for the periods presented:

			Quarter ended September 30, 2011
						Interest income/expense											Annualized %
			Net gain (loss) on investments			Coupon		Discount/ fees(1)		Total		Total revenue/ expense			Average balance		Interest yield/cost			Total return
			(dollars in thousands)
Assets:
	Short-term investments		$	—		$	24	$	—	$	24	$	24		$	39,472		0.23	%		0.23	%
	Mortgage-backed securities:
		Non-Agency subprime		(612	)		70		262		332		(280	)		58,468		2.23	%		(1.87	)%
		Non-Agency Alt-A		(135	)		150		116		266		131			10,668		9.73	%		4.78	%
		Non-Agency prime jumbo		(44	)		46		7		53		9			6,963		2.96	%		0.47	%
	Total mortgage-backed securities			(791	)		266		385		651		(140	)		76,099		3.35	%		(0.73	)%
	Mortgage loans:
		At fair value(2)		32,311			8,745		—		8,745		41,056			744,488		4.60	%		21.58	%
		Acquired for sale at fair value		84			419		—		419		503			30,900		5.30	%		6.37	%
	Total mortgage loans			32,395			9,164		—		9,164		41,559			775,388		4.62	%		20.97	%
			$	31,604		$	9,454	$	385	$	9,839	$	41,443		$	890,959		4.32	%		18.20	%
Liabilities:
	Loans sold under agreements to repurchase		$	—		$	2,707	$	398	$	3,105	$	3,105		$	276,352		3.83	%
	Securities sold under agreements to repurchase			—			161		—		161		161			65,364		0.96	%
	Borrowings under a forward purchase agreement			—			1,680		—		1,680		1,680			146,708		4.48	%
	Real estate acquired in settlement of loans financed through agreements to repurchase			—			154		125		279		279			12,663		4.76	%
			$	—		$	4,702	$	523	$	5,225	$	5,225		$	501,087		3.67	%

(1)

Amounts in this column represent accrual of unearned discounts for assets and amortization of facility commitment fees for liabilities.

(2)

Includes mortgage loans under a forward purchase agreement.

44

			Quarter ended September 30, 2010
						Interest income/expense											Annualized %
			Net gain (loss) on investments			Coupon		Discount/ fees(1)		Total		Total revenue/ expense			Average balance		Interest yield/cost			Total return
			(dollars in thousands)
Assets:
	Short-term investments		$	—		$	10	$	—	$	10	$	10		$	18,545		0.22	%		0.22	%
	Mortgage-backed securities:
		Non-Agency subprime		254			110		651		761		1,015			71,391		4.18	%		5.57	%
		Non-Agency Alt-A		223			263		103		366		589			19,751		7.25	%		11.66	%
		Non-Agency prime jumbo		119			99		3		102		221			13,449		2.97	%		6.43	%
	Total mortgage-backed securities			596			472		757		1,229		1,825			104,591		4.60	%		6.83	%
	Mortgage loans:
		At fair value		7,578			2,592		—		2,592		10,170			222,763		4.55	%		17.86	%
		Acquired for sale at fair value		(17	)		15		—		15		(2	)		2,190		2.65	%		(0.34	)%
	Total mortgage loans			7,561			2,607		—		2,607		10,168			224,953		4.53	%		17.69	%
			$	8,157		$	3,089	$	757	$	3,846	$	12,003		$	348,089		4.32	%		13.49	%
Liabilities:
	Securities sold under agreements to repurchase		$	—		$	251	$	—	$	251	$	251		$	67,642		1.45	%

(1)

Amounts in this column represent accrual of unearned discounts for assets and amortization of facility commitment fees for liabilities.

			Nine months ended September 30, 2011
						Interest income/expense											Annualized %
			Net gain (loss) on investments			Coupon		Discount/ fees(1)		Total		Total revenue/ expense			Average balance		Interest yield/cost			Total return
			(dollars in thousands)
Assets:
	Short-term investments		$	—		$	82	$	—	$	82	$	82		$	49,701		0.22	%		0.22	%
	Mortgage-backed securities:
		Non-Agency subprime		(1,809	)		274		1,404		1,678		(131	)		73,450		3.01	%		(0.24	)%
		Non-Agency Alt-A		(64	)		517		336		853		789			12,458		9.02	%		8.34	%
		Non-Agency prime jumbo		(233	)		169		19		188		(45	)		8,169		3.04	%		(0.73	)%
	Total mortgage-backed securities			(2,106	)		960		1,759		2,719		613			94,077		3.81	%		0.86	%
	Mortgage loans:
		At fair value(2)		65,594			20,723		—		20,723		86,317			587,626		4.65	%		19.37	%
		Acquired for sale at fair value		207			488		—		488		695			14,868		4.32	%		6.16	%
	Total mortgage loans			65,801			21,211		—		21,211		87,012			602,494		4.64	%		19.04	%
			$	63,695		$	22,253	$	1,759	$	24,012	$	87,707		$	746,272		4.24	%		15.50	%
Liabilities:
	Loans sold under agreements to repurchase		$	—		$	6,369	$	1,413	$	7,782	$	7,782		$	231,452		3.63	%
	Securities sold under agreements to repurchase			—			692		—		692		692			80,020		1.14	%
	Borrowings under a forward purchase agreement			—			1,680		—		1,680		1,680			49,440		4.48	%
	Real estate acquired in settlement of loans financed through agreements to repurchase			—			169		150		319		319			4,725		4.71	%
			$	—		$	8,910	$	1,563	$	10,473	$	10,473		$	365,637		3.21	%

(1)

Amounts in this column represent accrual of unearned discounts for assets and amortization of facility commitment fees for liabilities.

(2)

Includes mortgage loans under a forward purchase agreement.

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			Nine months ended September 30, 2010
						Interest income/expense										Annualized %
			Net gain (loss) on investments			Coupon		Discount/ fees(1)		Total		Total revenue/ expense		Average balance		Interest yield/cost			Total return
			(dollars in thousands)
Assets:
	Short-term investments		$	—		$	77	$	—	$	77	$	77	$	85,547		0.12	%		0.12	%
	Mortgage-backed securities:
		Non-Agency subprime		(44	)		189		1,782		1,971		1,927		48,077		5.41	%		5.29	%
		Non-Agency Alt-A		213			908		521		1,429		1,642		22,923		8.22	%		9.45	%
		Non-Agency prime jumbo		277			365		15		380		657		15,358		3.26	%		5.64	%
	Total mortgage-backed securities			446			1,462		2,318		3,780		4,226		86,358		5.77	%		6.45	%
	Mortgage loans:
		At fair value		18,677			6,430		—		6,430		25,107		153,831		5.51	%		21.52	%
		Acquired for sale at fair value		11			15		—		15		26		642		3.04	%		5.53	%
	Total mortgage loans			18,688			6,445		—		6,445		25,133		154,473		5.50	%		21.46	%
			$	19,134		$	7,984	$	2,318	$	10,302	$	29,436	$	326,378		4.16	%		11.89	%
Liabilities:
	Securities sold under agreements to repurchase		$	—		$	251	$	—	$	251	$	251	$	22,795		1.45	%

(1)

Amounts in this column represent accrual of unearned discounts for assets and amortization of facility commitment fees for liabilities.

Net Gain (Loss) on Investments

        During the quarter and nine month periods ended September 30, 2011, we recognized net gains on financial instruments totaling $31.6 million and $63.7 million, respectively. This compares to $8.2 million and $19.1 million for the quarter and nine months ended September 30, 2010. The increase for the quarter and nine months ended September 30, 2011 as compared to the comparable prior year periods is due primarily to growth in our portfolio of investments in financial instruments. Our average portfolio balance increased 156% and 129% during the quarter and nine month periods ended September 30, 2011 as compared to the comparable prior year periods.

        During the quarter and nine month periods ended September 30, 2011, we recognized net valuation losses on our portfolios of MBS totaling $791,000 and $2.1 million, respectively. The valuation losses reflect, in part, marketplace concerns regarding the potentially growing supply of MBS similar to those we hold as a result of sales by the Federal Reserve Bank and other entities, marketplace discounting of distressed MBS resulting from expectations that involuntary prepayments of mortgages underlying the securities may remain slow or slow further due to regulatory actions relating to servicers' foreclosure activities, and marketplace concern regarding servicers' behavior with respect to advancing and modification practices. The weighted average discount rate of the non-Agency subprime MBS, the most sizable component of our MBS portfolio, increased from 4.5% at December 31, 2010 to 5.1% at September 30, 2011, reflective of these market factors.

46

        Net gains on mortgage loans at fair value, excluding mortgage loans acquired for sale, are summarized below for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands)
Valuation changes(1):
	Performing loans	$	1,625			$	5,460
	Nonperforming loans		22,142				45,490
		$	23,767	$	4,000	$	50,950	$	8,138
Payoffs			8,544		2,728		14,411		9,517
Sales			—		850		233		1,022
		$	32,311	$	7,578	$	65,594	$	18,677

(1)

Comparative prior period information was not maintained.

        The net gains on mortgage loans arising from valuation changes were due primarily to changes in home prices over the quarter that were more positive than had been projected and to changes in value of loans as the loans moved through the resolution process. This includes both impending liquidations and reinstatements of nonperforming loans. Our valuation gains for the nine months ended September 30, 2011 also reflect an increase in the collectability of claims on government-insured loans as well as increasing demand for distressed mortgage loans as reflected in increased transaction prices. As a result of this market observation, the discount rates we use to estimate the fair value of certain of our mortgage loans were decreased.

        The increase in valuation changes during the quarter and nine months ended September 30, 2011, as compared to the comparable periods ended September 30, 2010, is due to the growth and seasoning of our portfolio of mortgage loans at fair value. Our average investment in mortgage loans at fair value increased $521.7 million and $433.8 million, or 234% and 282%, for the quarter and nine months ended September 30, 2011 as compared to the comparable periods ended September 30, 2010. Furthermore, our initial acquisitions of mortgage loans at fair value occurred in December of 2009 and were only beginning to move through the resolution process during 2010.

47

        Following is a comparison of the valuation techniques and key inputs we use in the valuation of our financial assets:

				Range (Weighted Average)
Financial Statement Item		Valuation Technique	Key Inputs	September 30, 2011	December 31, 2010
Mortgage-backed securities(1):		Broker quote(7)
	Non-Agency subprime		Discount rate	3.6% - 18.6%	2.9% - 17.3%
				(9.8)%	(4.5)%
			Prepayment speed(2)	0.2% - 10.4%	0.1% - 5.3%
				(4.8)%	(1.5)%
			Default speed(3)	4.6% - 15.1%	3.6% - 19.2%
				(12.2)%	(10.5)%
			Collateral remaining loss	23.7% - 65.4%	12.1% - 56.6%
			percentage(4)	(43.3)%	(36.9)%
	Non-Agency Alt-A		Discount rate	5.4% - 30.9%	5.0% - 11.4%
				(6.7)%	(7.1)%
			Prepayment speed(2)	1.6% - 10.5%	0.9% - 10.1%
				(8.5)%	(6.7)%
			Default speed(3)	3.6% - 15.6%	4.2% - 21.2%
				(12.3)%	(12.3)%
			Collateral remaining loss	7.9% - 38.8%	10.5% - 41.1%
			percentage(4)	(24.3)%	(22.8)%
	Non-Agency prime jumbo		Discount rate	6.4% - 6.4%	2.7% - 2.7%
				(6.4)%	(2.7)%
			Prepayment speed(2)	14.5% - 14.5%	14.7% - 14.7%
				(14.5)%	(14.7)%
			Default speed(3)	1.4% - 1.4%	1.5% - 1.5%
				(1.4)%	(1.5)%
			Collateral remaining loss	0.8% - 0.8%	0.6% - 0.6%
			percentage(4)	(0.8)%	(0.6)%
Mortgage loans at fair value(5)		Discounted cash flow	Discount rate	9.1% - 20.7%	9.1% - 18.7%
				(14.5)%	(13.8)%
			Twelve-month projected	-8.5% - 10.6%	-18.4% - 10.7%
			housing price index change	(-1.2)%	(-2.4)%
			Prepayment speed(5)	0.3% - 6.4%	0.2% - 7.5%
				(2.0)%	(2.8)%
			Total prepayment speed (Life	0.6% - 35.8%	0.4% - 38.6%
			total CPR)	(28.1)%	(31.9)%

(1)

With respect to mortgage-backed securities, key inputs are those used to evaluate broker indications of value.

(2)

Prepayment speed is measured using 1 year Voluntary Conditional Prepayment Rate ("CPR").

(3)

Default speed is measured using 1 year Constant Default Rate ("CDR").

(4)

The projected future losses on the loans in the collateral groups paying to each bond as a percentage of the current balance of the loans.

(5)

Prepayment speed is measured using Life Voluntary Conditional Prepayment Rate ("CPR").

(6)

Includes mortgage loans under a forward purchase agreement at September 30, 2011.

(7)

For indications of value received, PCM's Capital Markets and Valuation staff reviews the price indications provided by non-affiliate brokers for completeness, accuracy and consistency across all similar bonds managed by PCM. Bond-level analytics such as yield, weighted average life and projected prepayment and default speeds of the underlying collateral are computed. The reasonableness of the brokers' indications of value and of changes in value from period to period is evaluated in light of the analytical review performed and considering market conditions. The review of the Capital Markets and Valuation staff is reported to PCM's Valuation Committee as part of their review and approval of monthly valuation results. PCM does not intend to adjust its fair value estimates to amounts different than the brokers' indications of value.

48

        We monitor and value our investments in pools of distressed mortgage loans, with each acquisition being a unique pool. Most of the measures we use to value and monitor the loan portfolio, such as projected prepayment and default speeds and discount rates, are applied or output at the pool level, although some key inputs and measures, such as projected housing price index change, are measured at the loan level. Since the predominant feature of most of the loan pools we purchase is that they are distressed, the characteristics of the individual loans, such as loan size, loan-to-value ratio and current delinquency status, can vary widely within a pool.

        The weighted average discount rate used in the valuation of mortgage loans increased slightly from December 31, 2010 to September 30, 2011 due to higher yielding portfolio additions during the nine months ended September 30, 2011 offset by a decrease in certain pools' discount rates resulting from increasing market demand for distressed mortgage loans.

        The weighted average twelve month projected housing price index ("HPI") change improved from -2.4% at December 31, 2010 to -1.2% at September 30, 2011. This improvement primarily reflects the movement of the portfolio toward the projected housing price bottom with the passage of time.

        The total prepayment speed of our mortgage loan portfolio decreased from 31.9% at December 31, 2010 to 28.1% at September 30, 2011, primarily due to a greater than expected volume of reinstatements of nonperforming loans and lower than expected rates of defaults of distressed performing loans as well as lengthening of expected liquidation timelines.

        While we believe that the Company's current fair value estimates are representative of fair value at the reporting date, the market for our mortgage assets is illiquid with very few market participants. Furthermore, our business strategy is to enhance value during the period in which the loans are held; any resulting appreciation or depreciation in the fair value of the loans would be recorded during such holding period and ultimately realized at the end of the holding period.

        During the quarter and nine months ended September 30, 2011, we recognized gains on mortgage loan payoffs as summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
	(dollars in thousands)
Number of loans		228		78		496		178
Unpaid principal balance	$	77,066	$	20,157	$	162,679	$	37,574
Gain recognized at payoff	$	8,544	$	2,728	$	14,411	$	9,517

        The increase in gains recognized at payoff reflects the significant growth in the average balance of our mortgage loan portfolio of $521.7 million and $433.8 million, or 234% and 282%, for the quarter and nine months ended September 30, 2011 when compared to the comparable periods in 2010.

        During the quarter and nine months ended September 30, 2011, we recognized gains on sales of distressed mortgage loans as summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
	(dollars in thousands)
Number of loans		—		169		13		179
Unpaid principal balance	$	—	$	55,842	$	5,524	$	58,751
Gain recognized at sale	$	—	$	850	$	233	$	1,022

49

        The following tables present a summary of loan modifications completed for the periods presented:

	Quarter ended September 30,								Nine months ended September 30,
	2011				2010				2011				2010
Modification type(1)	Number of Loans		Balance of loans(2)		Number of Loans		Balance of loans(2)		Number of Loans		Balance of loans(2)		Number of Loans		Balance of loans(2)
	(dollars in thousands)
Rate reduction		75	$	19,145		13	$	3,268		158	$	37,915		14	$	3,618
Term extension		26	$	7,040		8	$	2,010		52	$	13,885		8	$	2,010
Capitalization of interest and fees		100	$	25,824		10	$	2,442		188	$	45,371		11	$	2,793
Principal forbearance		8	$	2,752		3	$	735		18	$	5,633		4	$	1,086
Principal reduction		59	$	14,719		—	$	—		116	$	28,200		1	$	351
Total		105	$	26,883		13	$	3,268		209	$	50,106		14	$	3,618

(1)

Modification type categories are not mutually exclusive, and a modification of a single loan may be counted in multiple categories if applicable. The total number of modifications noted in the table is therefore lower than the sum of all of the categories.

(2)

Before modification.

        The following tables summarize the average impact of the modifications noted above to the terms of the loans modified:

	Quarter ended September 30,												Nine months ended September 30,
	2011						2010						2011						2010
Category	Before Modification			After Modification			Before Modification			After Modification			Before Modification			After Modification			Before Modification			After Modification
	(dollars in thousands)
Loan balance	$	256		$	231		$	251		$	259		$	241		$	216		$	258		$	262
Remaining term (months)		312			341			330			389			316			344			343			396
Interest rate		6.69	%		3.96	%		7.89	%		2.32	%		6.87	%		3.81	%		8.02	%		2.38	%
Forbeared principal	$	—		$	3		$	—			7		$	—		$	4		$	—		$	7

        Our loan servicer offers HAMP as well as proprietary loan modification programs. HAMP modifications are available for borrowers who meet certain criteria, including occupying their properties and having debt-to-income ratios in excess of 31%. Borrowers who receive a HAMP modification may receive rate reduction, term extension, forbearance of principal and principal forgiveness. HAMP modifications may utilize either a stepped-rate or fixed-rate schedule. Borrowers who do not require payment relief, or who do not occupy their properties, may be eligible for a proprietary loan modification program, which may include capitalization of arrearages, term extension, rate reduction, and principal forgiveness. The proprietary programs can also take the form of either a stepped-rate or fixed-rate schedule.

50

Interest Income

        The effects of changes in the composition of our investments on our interest income during the periods presented are summarized below:

		Quarter ended September 30, 2011 vs. Quarter ended September 30, 2010									Nine months ended September 30, 2011 vs. Nine months ended September 30, 2010
		Increase (decrease) due to changes in									Increase (decrease) due to changes in
								Total change									Total change
		Rate			Volume						Rate			Volume
		(in thousands)
Short-term investments		$	1		$	13		$	14		$	46		$	(41	)	$	5
Mortgage-backed securities:
	Non-Agency subprime		(309	)		(120	)		(429	)		(1,083	)		790			(293	)
	Non-Agency Alt-A		101			(201	)		(100	)		129			(705	)		(576	)
	Non-Agency prime jumbo		—			(49	)		(49	)		(25	)		(167	)		(192	)
Total mortgage-backed securities			(208	)		(370	)		(578	)		(979	)		(82	)		(1,061	)
Mortgage loans:
	At fair value(1)		25			6,128			6,153			(1,154	)		15,447			14,293
	Acquired for sale at fair value		28			376			404			8			465			473
Total mortgage loans			53			6,504			6,557			(1,146	)		15,912			14,766
		$	(154	)	$	6,147		$	5,993		$	(2,079	)	$	15,789		$	13,710

(1)

Includes mortgage loans under a forward purchase agreement for the quarter and year-to-date periods ended September 30, 2011.

        In the quarter and nine months ended September 30, 2011, we earned interest income of $9.8 million and $24.0 million, compared to $3.8 million and $10.3 million for the quarter and nine months ended September 30, 2010.

        Interest income on our portfolio of MBS decreased in the quarter ended September 30, 2011 compared to the quarter ended September 30, 2010 primarily due to a decrease in yields of these securities from 4.60% to 3.35%, and a decrease of $28.5 million in the average balance of our investment in such securities during the same corresponding quarter end periods. The decrease in interest income on our MBS for the year-to-date periods is attributable to a decrease in the yield on our portfolio of MBS from 5.77% to 3.81%, partially offset by an increase in the average balance of our investment in MBS of $7.7 million. These comparisons reflect the growth of our investment in MBS during 2010, followed by net repayments of the securities as investments in mortgage loans became our primary investment activity later in 2010 through September 30, 2011.

        At September 30, 2011, our portfolio of MBS was comprised of currently cash flowing securities with an average yield of 9.28% and a contractual remaining life of more than ten years. We invest in MBS as a complement to our investments in mortgage loans and as a means of ensuring our compliance with REIT tax regulations governing our asset composition.

        In the quarter and nine months ended September 30, 2011, we recognized interest income on mortgage loans at fair value of $8.7 million and $20.7 million, which compares to $2.6 million and $6.4 million for the comparable periods ended September 30, 2010. During the quarter and nine months ended September 30, 2011, we recognized annualized interest of 4.60% and 4.65%, respectively, on our portfolio of mortgage loans (excluding mortgage loans acquired for sale at fair value) as

51

measured by the portfolio's average fair value. This compares to 4.55% and 5.51% for the comparable periods ended September 30, 2010.

        The increase in interest income is due primarily to growth in the average balance of our mortgage loan portfolio of $550.4 million and $448.0 million or 245% and 290% for the quarter and nine months ended September 30, 2011 when compared to the quarter and nine months ended September 30, 2010. This growth in interest income for the nine months ended September 30, 2011 was partially offset by a decrease in the yield on the loans from 5.50% as compared to 4.64% for the nine months ended September 30, 2011. The decrease in yield in 2011 as compared to 2010 is due primarily to the addition of pools of loans with lower interest rates during the period from September 30, 2010 through September 30, 2011. At September 30, 2010, our investment in performing mortgage loans had a weighted-average coupon of 6.11%; at September 30, 2011, our investment in performing mortgage loans had a weighted-average coupon of 4.99%.

        At September 30, 2011, approximately 78% of the fair value of our portfolio of mortgage loans was nonperforming, which compares to 76% at September 30, 2010. We do not accrue interest on nonperforming loans and generally do not recognize revenues during the period we hold REO. We calculate the yield on our mortgage loan portfolio based on the portfolio's average fair value, which most closely reflects our investment in the mortgage loans. Accordingly, the yield we realize is substantially higher than would be recorded based on the loans' unpaid balances as we purchase our mortgage loans at substantial discounts to their unpaid principal balances.

        The revenue benefits of nonperforming loans and REO generally take longer to realize than those of performing loans due to the time required to work with borrowers to resolve payment issues through our modification programs and to acquire and liquidate the property securing the mortgage loans. The value and returns we realize from these assets are determined by our ability to cure the borrowers' defaults, or when curing of borrower defaults is not a viable solution, by our ability to effectively manage the liquidation process. As a participant in HAMP, we are required to comply with the process specified by the HAMP program before liquidating a loan, and this may extend the liquidation process. At September 30, 2011, we held $678.2 million in fair value of nonperforming loans and $69.9 million in carrying value of REO.

Net Gain (Loss) on Mortgage Loans Acquired for Sale

        During the quarter and nine months ended September 30, 2011, we recorded a gain of $84,000 and $207,000 on mortgage loans acquired for sale. These net gains included approximately $466,000 and $643,000 in fair values of MSRs received as part of the proceeds from our correspondent lending loan sales. During the quarter and nine months ended September 30, 2010, we recorded net losses of $17,000 and net gains of $11,000 on mortgage loans acquired for sale, respectively.

Results of Real Estate Acquired in Settlement of Loans

        Results from REO includes the gains or losses we record upon sale of the properties as well as valuation adjustments we record during the period we hold those properties. During the quarter and nine months ended September 30, 2011, we recorded net gains of $352,000 and $1.5 million, respectively, in results of real estate acquired in settlement of loans as compared to net gains totaling $637,000 and $972,000 for the quarter and nine months ended September 30, 2010, respectively. The decrease in gain between the quarter ended September 30, 2010 and the quarter ended September 30, 2011 is primarily due to valuation adjustments recorded during 2011 as compared to 2010 due to the longer period the properties were held during 2011 as compared to 2010.

52

Expenses

        Our expenses are summarized below for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands)
Interest		$	5,225	$	251	$	10,473	$	251
Loan servicing fees			4,473		885		9,992		1,561
Management fees			2,288		1,237		5,750		3,650
Compensation			1,567		573		3,831		2,212
Professional services			1,656		628		3,648		1,121
Other			1,898		992		4,631		2,096
	Total expenses	$	17,107	$	4,566	$	38,325	$	10,891

        Increased expenses during the quarter and nine month periods ended September 30, 2011 compared to the same periods in 2010 were a result of the growth in the Company's investment portfolio and the use of borrowings beginning in the fourth quarter of 2010 to finance that growth.

        The effects of changes in the composition of our borrowings on our interest expense during the periods presented are summarized below:

	Quarter ended September 30, 2011 vs. Quarter ended September 30, 2010									Nine months ended September 30, 2011 vs. Nine months ended September 30, 2010
	Increase (decrease) due to changes in									Increase (decrease) due to changes in
							Total change								Total change
	Rate			Volume						Rate			Volume
	(in thousands)
Loans sold under agreements to repurchase	$	—		$	3,105		$	3,105		$	—		$	7,782	$	7,782
Securities sold under agreements to repurchase		(82	)		(8	)		(90	)		(1,017	)		1,458		441
Borrowings under a forward purchase agreement		—			1,680			1,680			—			1,680		1,680
Real estate acquired in settlement of loans financed through agreements to repurchase		—			279			279			—			319		319
	$	(82	)	$	5,056		$	4,974		$	(1,017	)	$	11,239	$	10,222

        During the quarter and nine months ended September 30, 2011, we incurred interest expense totaling $5.2 million and $10.5 million, respectively, as compared to $251,000 during both the quarter and nine months ended September 30, 2010. Our interest cost was 3.67% and 3.21% for the quarter and nine month periods ended September 30, 2011, respectively, as compared to 1.45% for both the quarter and nine month periods ended September 30, 2010, respectively. The increase in interest cost reflects the changing nature of assets we are financing. During 2010, we financed MBS which provides for financing at lower rates as compared to nonperforming mortgage loans, which represented most of the assets we financed during 2011. Interest expense during 2011 reflects our efforts to leverage our investing capacity after fully deploying the proceeds of our initial equity offerings.

        Loan servicing fees also grew substantially as our average investment in mortgage loans increased by 245% and 290% during the quarter and nine months ended September 30, 2011, respectively. We

53

also began incurring activity-based fees relating to the liquidation of loans during 2011 that we did not incur due to the short period we held the loans through September 30, 2010.

        Compensation expense increased as the result of additional grants of restricted share units to our officers and trustees as well as certain employees of PCM and its affiliates during the quarter ended March 31, 2011. Professional services expense increased due to our heightened level of mortgage investment acquisition activity during the quarter and nine months ended September 30, 2011 as compared to the comparable periods ended September 30, 2010.

Balance Sheet Analysis

        Following is a summary of key balance sheet items as of the dates presented:

		September 30, 2011		December 31, 2010
ASSETS
Cash		$	11,975	$	45,447
Investments:
	Short-term investments		30,743		—
	Mortgage-backed securities at fair value		86,702		119,872
	Mortgage loans acquired for sale at fair value		40,850		3,966
	Mortgage loans at fair value		715,272		364,250
	Mortgage loans under a forward purchase agreement at fair value		152,908		—
	Real estate acquired in settlement of loans		69,906		29,685
			1,096,381		517,773
Other assets			47,138		25,875
	Total assets	$	1,155,494	$	589,095
LIABILITIES
Borrowings:
	Loans sold under agreements to repurchase	$	345,969	$	147,422
	Securities sold under agreements to repurchase at fair value		62,843		101,202
	Borrowings under a forward purchase agreement		163,755		—
	Real estate acquired in settlement of loans financed under agreements to repurchase		12,814		—
			585,381		248,624
Other liabilities			39,450		20,558
	Total liabilities		624,831		269,182
SHAREHOLDERS' EQUITY			530,663		319,913
	Total liabilities and shareholders' equity	$	1,155,494	$	589,095

        Total assets increased $566.4 million, or 96%, during the period from December 31, 2010 to September 30, 2011. Growth in total assets reflects growth of investments totaling $578.6 million or 112% during the period. We financed our asset growth through additional borrowings of $336.8 million and through issuance of additional shares for net proceeds of $188.8 million. We made investments totaling $784.9 million and received proceeds from sales and repayments of those assets totaling $448.8 million. Our acquisitions are summarized below.

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Asset Acquisitions

        Following is a summary of our acquisitions of mortgage investments (excluding correspondent lending mortgage loans) for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands)
Mortgage-backed securities		$	22,179	$	52,319	$	22,179	$	89,217
Distressed mortgage loans(1)(2)
	Performing		7,889		2,260		52,266		13,688
	Nonperforming		256,811		70,415		572,837		257,069
			264,700		72,675		625,103		270,757
REO			915		—		2,425		1,238
MSRs			466		—		643		—
		$	288,260	$	124,994	$	650,350	$	361,212

(1)

Performance status as of the date of acquisition.

(2)

$210.0 million of our distressed asset purchases during the quarter ended September 30, 2011 and all of our distressed asset purchases during the quarter ended September 30, 2010, were acquired from or through one or more subsidiaries of Citigroup Inc. Subsequent to September 30, 2011 and through the date of this Report, we purchased $19.2 million of loans subject to a forward purchase agreement with Citigroup Global Markets Realty Corp. ("CGM"). We also have a pending purchase in the amount of $35.1 million through CGM as of the date of this Report. The pending transaction is subject to changes in the loans allocated to us by PCM, continuing due diligence, customary closing conditions, and our obtaining additional capital adequate to fund the transactions. There can be no assurance that the committed amounts will ultimately be acquired or that the transactions will be completed at all.

        Our acquisitions during the quarter and nine months ended September 30, 2010 reflect continuing investment of the proceeds from our initial public offering which we completed during August of 2009. Our acquisitions during the quarter and nine months ended September 30, 2011 primarily reflect a subsequent underwritten public offering completed in the first quarter of 2011 and the use of borrowings to leverage our equity. We continue to identify additional means of increasing our investment portfolio through cash flow from existing investments, borrowings and transactions that minimize current cash outlays. However, we expect that, over time, our ability to continue our portfolio growth will depend on our ability to raise additional equity capital.

Investment Portfolio Composition

        Our portfolio of MBS is backed by non-Agency subprime, Alt-A and prime jumbo loans and consists of currently cash flowing senior priority securities with an average remaining life of approximately 0.82 years. We acquired these securities to supplement our investments in mortgage loans and to help ensure compliance with the REIT tax regulations relating to our asset composition.

55

        The following is a summary of our portfolio of MBS as of the dates presented:

		September 30, 2011
						Average
		Fair value		Principal		Life (in years)		Coupon			Market Yield
		(dollars in thousands)
Security collateral type:
	Non-Agency subprime	$	70,242	$	74,845		0.78		0.66	%		9.80	%
	Non-Agency Alt-A		10,123		10,310		1.14		5.55	%		6.65	%
	Non-Agency prime jumbo		6,337		6,524		0.78		2.72	%		6.41	%
		$	86,702	$	91,679		0.82		1.36	%		9.28	%

		December 31, 2010
						Average
		Fair value		Principal		Life (in years)		Coupon			Market Yield
		(dollars in thousands)
Security collateral type:
	Non-Agency subprime	$	93,783	$	96,653		0.82		0.51	%		4.50	%
	Non-Agency Alt-A		15,824		16,282		1.48		5.35	%		7.10	%
	Non-Agency prime jumbo		10,265		10,240		1.12		2.90	%		2.70	%
		$	119,872	$	123,175		0.93		1.35	%		4.69	%

        The relationship of the fair value of our mortgage loans at fair value (excluding mortgage loans acquired for sale at fair value) to the fair value of the real estate collateral underlying the loans is summarized below:

	September 30, 2011				December 31, 2010
	Fair values
	Loan		Collateral		Loan		Collateral
	(in thousands)
Performing loans	$	190,000	$	292,968	$	86,242	$	139,393
Nonperforming loans		678,180		1,001,688		278,008		424,856
	$	868,180	$	1,294,656	$	364,250	$	564,249

        The collateral values presented above do not represent our assessment of the amount of future cash flows to be realized from the mortgage loans and/or underlying collateral. Future cash flows will be influenced by, among other considerations, our asset disposition strategies with respect to individual loans, the costs and expenses we incur in the disposition process and changes in borrower performance and the underlying collateral values.

        Collateral values summarized above are estimated and may change over time due to various factors including our level of access to the properties securing the loans, changes in the real estate market or the condition of individual properties. Collateral values noted do not include any costs that would typically be incurred in obtaining the property in settlement of the loan, readying the property for sale or in the sale of a property.

56

        Following is a summary of the distribution of our mortgage loans at fair value (excluding mortgage loans acquired for sale at fair value) at September 30, 2011:

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Loan type	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Fixed	$	94,818		11	%		5.71	%	$	304,005		35	%		6.55	%	$	49,444		14	%		6.86	%	$	105,669		29	%		7.17	%
ARM/Hybrid		74,120		9	%		4.83	%		373,276		43	%		6.26	%		31,916		9	%		4.68	%		171,591		47	%		6.13	%
Interest rate step-up		20,914		2	%		2.00	%		548		0	%		8.61	%		4,813		1	%		2.43	%		247		0	%		6.73	%
Balloon		148		0	%		2.38	%		351		0	%		4.53	%		69		0	%		9.94	%		501		0	%		7.70	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Lien position	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
1st lien	$	189,962		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,238		24	%		5.73	%	$	278,008		76	%		6.54	%
2nd lien		35		0	%		5.17	%		—		0	%					—		0	%					—		0	%
Unsecured		3		0	%		0.01	%		—		0	%					4		0	%		0.00	%		—		0	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Occupancy	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Owner occupied	$	167,610		19	%		4.96	%	$	509,467		59	%		6.35	%	$	75,049		21	%		5.72	%	$	213,959		59	%		6.53	%
Investment property		22,070		3	%		5.23	%		168,006		19	%		6.55	%		11,032		3	%		5.85	%		63,305		17	%		6.56	%
Other		320		0	%		4.16	%		707		0	%		6.81	%		161		0	%		5.39	%		744		0	%		6.45	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Loan age	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Less than 12 months	$	35		0	%		5.17	%	$	139		0	%		4.63	%	$	4		0	%				$	—
12 - 35 months		3,658		0	%		4.37	%		20,182		2	%		6.00	%		2,210		1	%		5.77	%		16,596		5	%		6.27	%
36 - 59 months		93,108		11	%		5.20	%		387,734		45	%		6.57	%		46,617		13	%		6.21	%		154,628		42	%		6.80	%
60 months or more		93,199		11	%		4.83	%		270,125		31	%		6.16	%		37,411		10	%		5.06	%		106,784		29	%		6.10	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

57

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Origination FICO score	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Less than 600	$	41,956		5	%		5.62	%	$	104,093		12	%		6.71	%	$	20,404		6	%		5.66	%	$	44,930		12	%		6.62	%
600 - 649		37,765		4	%		5.40	%		113,518		13	%		6.59	%		19,235		5	%		5.92	%		49,096		13	%		6.45	%
650 - 699		53,317		6	%		4.86	%		186,406		22	%		6.42	%		20,521		6	%		5.77	%		78,528		22	%		6.18	%
700 - 749		38,945		5	%		4.45	%		184,630		21	%		6.13	%		20,748		6	%		5.55	%		70,493		19	%		6.30	%
750 or greater		18,017		2	%		4.09	%		89,533		10	%		6.23	%		5,334		1	%		6.38	%		34,961		10	%		5.94	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Current loan-to-value(1)	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Less than 80%	$	38,499		4	%		6.40	%	$	67,121		8	%		6.67	%	$	21,867		6	%		5.94	%	$	36,667		10	%		6.52	%
80% - 99.99%		31,643		4	%		5.53	%		107,095		12	%		6.54	%		15,296		4	%		6.53	%		46,002		13	%		6.42	%
100% - 119.99%		37,271		4	%		5.75	%		147,983		17	%		6.42	%		19,585		6	%		5.58	%		62,228		17	%		6.49	%
120% or greater		82,587		10	%		4.22	%		355,981		41	%		6.35	%		29,494		8	%		5.43	%		133,111		36	%		6.58	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

(1)

Current loan-to-value is calculated based on the unpaid principal balance of the mortgage loan and our estimate of the value of the mortgaged property.

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Geographic distribution	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
California	$	52,962		6	%		4.26	%	$	180,760		21	%		5.83	%	$	20,372		6	%		4.75	%	$	75,533		21	%		5.86	%
New York		14,567		2	%		4.52	%		79,170		9	%		6.56	%		5,502		1	%		5.32	%		20,767		6	%		6.89	%
Florida		10,228		1	%		4.61	%		91,880		11	%		6.48	%		5,832		2	%		5.31	%		35,231		10	%		6.59	%
Illinois		8,565		1	%		4.65	%		29,616		3	%		6.35	%		4,987		1	%		5.86	%		13,746		4	%		6.55	%
Other		103,678		12	%		5.53	%		296,754		34	%		6.68	%		49,549		14	%		6.33	%		132,731		35	%		6.89	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

58

	September 30, 2011																December 31, 2010
	Performing loans								Nonperforming loans								Performing loans								Nonperforming loans
Payment status	Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate			Fair value		% total			Average note rate
	(dollars in thousands)
Current	$	129,412		15	%		4.71	%	$	—		0	%				$	56,504		16	%		5.60	%	$	—		0	%
30 days delinquent		36,811		4	%		5.35	%		—		0	%					16,274		4	%		5.83	%		—		0	%
60 days delinquent		23,777		3	%		5.80	%		—		0	%					13,464		4	%		6.11	%		—		0	%
90 days or more delinquent		—		0	%					210,351		24	%		6.13	%		—		0	%					115,586		32	%		6.44	%
In foreclosure		—		0	%					467,829		54	%		6.52	%		—		0	%					162,422		44	%		6.60	%
	$	190,000		22	%		4.99	%	$	678,180		78	%		6.40	%	$	86,242		24	%		5.73	%	$	278,008		76	%		6.54	%

        Following is a summary of our REO by attribute as of the dates presented:

	September 30, 2011					December 31, 2010
Property type	Fair value		% total			Fair value		% total
1 - 4 dwelling units	$	50,219		72	%	$	22,729		77	%
Planned unit development		12,248		18	%		4,460		15	%
5+ dwelling units		2,544		3	%		918		3	%
Condominium/Co-op		4,895		7	%		1,578		5	%
	$	69,906		100	%	$	29,685		100	%

	September 30, 2011						December 31, 2010
Geographic distribution	Fair value			% total			Fair value			% total
California	$	30,544			44	%	$	11,078			37	%
Florida		3,682			5	%		2,291			8	%
Arizona		2,915			4	%		1,659			6	%
Colorado		4,240			6	%			*			*
Michigan			*			*		1,263			4	%
Maryland			*			*		1,220			4	%
Other		28,525			41	%		12,174			41	%
	$	69,906			100	%	$	29,685			100	%

*

Not included in the states representing the largest balances as of the date presented.

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        Following is a summary of the current status of our portfolio of acquisitions by quarter acquired:

			Acquisitions for the quarter ended
			June 30, 2011						March 31, 2011
			at Purchase			September 30, 2011			at Purchase			September 30, 2011
			(dollars in millions)
Unpaid principal balance			$	259.8		$	251.3		$	515.1		$	462.6
Pool factor*				1.00			0.97			1.00			0.90
Collection status:
	Delinquency
		Current		11.5	%		14.1	%		2.0	%		7.6	%
		30 days		6.5	%		6.0	%		1.9	%		3.9	%
		60 days		5.2	%		2.7	%		3.9	%		2.7	%
		over 90 days		31.2	%		32.8	%		25.9	%		20.7	%
	in foreclosure			43.9	%		38.6	%		66.3	%		53.9	%
	REO			1.7	%		5.6	%		0.0	%		11.3	%

			Acquisitions for the quarter ended
			December 31, 2010						September 30, 2010						June 30, 2010						March 31, 2010
			at Purchase			September 30, 2011			at purchase			September 30, 2011			at purchase			September 30, 2011			at purchase			September 30, 2011
			(dollars in millions)
Unpaid principal balance			$	277.8		$	221.4		$	146.2		$	91.0		$	195.5		$	109.5		$	182.7		$	101.0
Pool factor*				1.00			0.80			1.00			0.62			1.00			0.56			1.00			0.55
Collection status:
	Delinquency
		Current		5.0	%		17.5	%		1.2	%		20.1	%		5.1	%		19.5	%		6.2	%		28.0	%
		30 days		4.0	%		4.0	%		0.4	%		4.7	%		2.0	%		5.6	%		1.6	%		4.7	%
		60 days		5.1	%		2.5	%		1.3	%		1.1	%		4.1	%		2.5	%		5.8	%		3.3	%
		over 90 days		26.8	%		20.2	%		38.2	%		12.6	%		42.8	%		15.9	%		37.8	%		15.9	%
	in foreclosure			59.1	%		46.1	%		58.9	%		46.7	%		45.9	%		41.3	%		46.4	%		35.5	%
	REO			0.0	%		9.7	%		0.0	%		16.4	%		0.0	%		15.2	%		2.3	%		12.6	%

*

Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition.

Cash Flows

        We invested the Company's cash at the beginning of 2011 through the acquisition of loans, resulting in a net decrease in cash of $33.5 million during the nine months ended September 30, 2011. Cash used by operating activities totaled $80.5 million during the nine months ended September 30, 2011. This use of cash was primarily due to the cash requirements related to the growth in our operating balance sheet which tracked our overall growth. Cash used by operating activities during the nine months ended September 30, 2010 also reflects the effects of growth in our operating balance sheet accounts.

        Net cash used by investing activities was $278.0 million for the nine months ended September 30, 2011. This use of cash reflects the growth of our investment portfolio. We purchased mortgage loans, MBS and REO with fair values of $453.3 million, $5.0 million and $1.5 million, respectively, during the nine months ended September 30, 2011. This contrasts with cash used by investing activities totaling $57.4 million during the nine months ended September 30, 2010. While we purchased $270.8 million in

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fair value of mortgage loans during that period, we effected those purchases by redeploying a portion of our short-term investments.

        Approximately 70% of our investments, comprised of non-correspondent lending mortgage loans, MBS, REO and MSRs, were nonperforming assets as of September 30, 2011. Nonperforming assets include mortgage loans delinquent 90 or more days and REO. Accordingly, we expect that these assets will require a longer period to begin producing cash flow and the timing and amount of cash flows from these assets is less certain than for performing assets. During the nine months ended September 30, 2011, we transferred $82.7 million of mortgage loans to REO and realized cash proceeds from the repayments and sale of REO, mortgage-backed securities and mortgage loans at fair value totaling $46.4 million, $55.0 million and $110.4 million, respectively.

        Net cash provided by financing activities was $325.0 million for the nine months ended September 30, 2011. These funds were procured primarily to finance the acquisition of additional mortgage loans. As discussed above, during the quarter ended March 31, 2010, we were able to complete our acquisitions through the redeployment of our short-term investments. Therefore, we did not procure cash flow to finance our investments during the quarter ended March 31, 2010. As discussed below in Liquidity and Capital Resources, our Manager continues to evaluate and pursue additional sources of financing to provide us with future investing capacity.

Liquidity and Capital Resources

        Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, retirement of, and margin calls relating to, our debt), make investments as our Manager identifies them and make distributions to our shareholders. We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.

        We expect our primary sources of liquidity to be proceeds from earnings on our investments, proceeds from sales and repayments on our investments, and proceeds from borrowings and/or additional equity offerings. We believe our current liquidity is sufficient to meet our short-term liquidity needs.

        Our current leverage strategy is to finance our assets where we believe such borrowing is prudent and appropriate. To the extent available to us, we expect in the future to obtain long-term financing for assets with estimated future lives of more than one year; this may include term financing and securitization of nonperforming and/or re-performing mortgage loans.

        Until attractive long-term financing is procured, we will continue to finance our assets on a short-term basis through agreements to repurchase and other secured lending and structured finance facilities, pending the ultimate disposition of the assets, whether through sale, securitization or liquidation. Because our current debt facilities consist solely of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.

        During the nine months ended September 30, 2011, we received proceeds from the issuance of common shares as follows:

•

On February 16, 2011, we issued and sold 9,500,000 common shares in an underwritten public offering and received $163.8 million of proceeds, after the underwriting discount and estimated offering expenses and the reimbursement of certain expenses.

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•

On March 3, 2011, we issued and sold an additional 1,425,000 common shares pursuant to the exercise of an over-allotment option by the public offering's underwriters and received $24.6 million of proceeds after the underwriting discount and reimbursement of certain expenses.

•

During the three months ended June 30, 2011, the Company sold a total of 28,500 of its common shares under a controlled equity offering sales agreement with Cantor Fitzgerald & Co. at a weighted average price of $18.34 per share, providing net proceeds to the Company of approximately $512,000 net of sales commissions. The sales agent received a total of approximately $10,000, which represents an average commission of approximately 2.0% of the gross sales price per share.

        During 2011, we have increased our use of debt financing as a means of extending our balance sheet capacity through the use of repurchase agreements and a forward purchase agreement. Our repurchase agreements represent the sales of assets together with agreements for us to buy back the assets at a later date. The forward purchase agreement represents an agreement between the Company and CGM, pursuant to which the Company agreed to purchase from CGM certain nonperforming residential mortgage loans and residential real property acquired in settlement of loans (collectively, the "CGM Assets").

        The CGM Assets were acquired by CGM from an unaffiliated large money center bank (the "Initial Seller"). As part of the agreement and in connection with the Company's purchase of the CGM Assets, CGM assigned, and the Company assumed, all of CGM's rights and obligations under a separate purchase agreement with the Initial Seller. The Company recorded the transaction as a purchase of loans. The CGM Assets are serviced by PLS. On the settlement date for any CGM Asset, in addition to the payment of the purchase price, the Company will reimburse CGM for certain out-of-pocket costs and other expenses, including servicing fees and servicing advances, and a cost of carry for such CGM Asset.

        These debt and equity sources of liquidity were used to partially finance acquisitions of $453.3 million in fair value of mortgage loans during the nine months ended September 30, 2011. We acquired mortgage loans totaling $19.2 million and settled liabilities for unsettled MBS purchases totaling $17.2 million after September 30, 2011, through the date of this Report.

        During the quarter ended September 30, 2011, the average balance outstanding under agreements to repurchase MBS and mortgage loans and REO financed under agreements to repurchase totaled $354.4 million, and the maximum daily amount outstanding under the agreements to repurchase MBS mortgage loans and REO totaled $433.7 million. The difference between the maximum and average daily amounts outstanding was due to increasing utilization of our existing facilities and our entry into a new credit facility during the nine months ended September 30, 2011.

        The total unpaid principal balance of the CGM Assets subject to the forward purchase agreement as of July 12, 2011 was approximately $337.8 million. The initial purchase price was $172.7 million. Subsequent adjustments may increase the purchase price to $174.4 million based on the date the Company settles the purchase. At September 30, 2011, the remaining borrowings under the forward purchase agreement totaled $163.8 million.

        As of September 30, 2011, we financed $69.5 million of MBS, $40.5 million of mortgage loans acquired for sale at fair value, $658.5 million of mortgage loans at fair value, $152.9 million of mortgage loans under a forward purchase agreement at fair value and $39.9 million of REO, or approximately 76% of our investments in mortgage loans, MBS and REO. This compares to the 24% of such assets that we financed at December 31, 2010. Accordingly, repurchase agreements and the forward purchase agreement represent significant sources of funding for our investment portfolio.

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        As discussed above, all of our borrowings have short-term maturities:

•

The transactions relating to securities sold under agreements to repurchase mature on or before October 11, 2011 and provide for sale to major financial institution counterparties of MBS in our investment portfolios at advance rates based on the estimated fair value of the securities sold. The agreements provide for repurchase by us of the securities at terms of either three weeks or three months, depending on the facility under which the securities are sold. All transactions maturing before the date of this Report have been refinanced by renewing the agreements at maturity.

•

The transactions relating to mortgage loans under agreements to repurchase mature between December 8, 2011 and October 30, 2012 and provide for sale to major financial institution counterparties based on the estimated fair value of the mortgage loans sold. The agreements provide for terms of approximately one year.

•

The transactions relating to REO are secured financings that mature between January 2, 2012 and June 6, 2012 and provide for sale to major financial counterparties at advance rates based on the estimated fair value of the REO.

•

The forward purchase agreement requires that the Company settle the purchase of the CGM Assets on or before December 26, 2011; provided, however, that if on or prior to such date the Company reduces the total purchase price of the CGM Assets (measured as of the cut-off date agreed to with the Initial Seller (the "Cut-off Date")) by 35% or more through collections of principal and interest, liquidations and settlements of CGM Assets, the date by which the CGM Assets must be purchased shall be extended until June 22, 2012.

In the event that the Company fails to settle any CGM Assets on or before December 26, 2011 or June 22, 2012, as applicable, the agreement provides for a net settlement between the Company and CGM, in an amount based on the difference between the fair value of such CGM Assets on the date of determination and the sum of the purchase price and reimbursement amounts that would have applied to such CGM Assets had they been purchased on such date.

Any CGM Asset that liquidates prior to its settlement by the Company will be settled between the Company and CGM in the month following liquidation, in an amount based on the difference between the liquidation proceeds and the sum of the purchase price and reimbursement amounts that would have applied to such CGM Asset had it been purchased on the liquidation date.

The Company's settlement of the purchase of the CGM Assets is subject to the Company obtaining additional capital adequate to fund the transaction. There can be no assurance that the purchase of the CGM Assets will ultimately be settled.

        Our debt financing agreements require us and certain of our subsidiaries to comply with various financial covenants. These financial covenants currently include the following:

•

profitability at each of the Company and two of our subsidiaries, PennyMac Corp. ("PMC") and PennyMac Mortgage Investment Trust Holdings I, LLC ("PMITH"), for at least one (1) of the previous two consecutive fiscal quarters, as of the end of each fiscal quarter;

•

a minimum of $10 million in unrestricted cash and cash equivalents among the Company and/or its subsidiaries; a minimum of $7.75 million in unrestricted cash and cash equivalents between PMC and PMITH; and a minimum of $7.5 million in unrestricted cash and cash equivalents at PMC;

•

a minimum tangible net worth for the Company of $265 million, plus 75% of the total net proceeds received by it in connection with equity issuances after November 2, 2010; a minimum

63

tangible net worth for PMITH of $195 million; and a minimum tangible net worth for PMC of the sum of (y) $65 million and (z) 50% of its positive quarterly income after November 2, 2010;

•

a maximum ratio of total liabilities to tangible net worth of less than 3:1 for the Company, 10:1 for PMC and 5:1 for PMITH; and

•

at least two warehouse or repurchase facilities that finance amounts and assets similar to those being financed under our existing debt financing agreements.

        Although these financial covenants limit the amount of indebtedness we may incur and impact our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.

        The transactions relating to securities sold under agreements to repurchase contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or additional securities in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value of the assets subject to an agreement to repurchase, although in some instances we may agree with the lender upon certain thresholds (in dollar amounts or percentages based on the market value of the assets) that must be exceeded before a margin deficit will arise. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice. At September 30, 2011, all of our securities sold under agreements to repurchase were sold to one lender. With respect to these agreements, we have agreed with the lender to a threshold of $250,000 in market value decline that must be exceeded before a margin deficit will arise.

        Similarly, the transactions relating to mortgage loans and/or equity interests in special purpose entities holding real property under agreements to repurchase contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or additional mortgage loans or real property, as applicable, in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value of the assets subject to an agreement to repurchase. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.

        Our Manager continues to explore a variety of additional means of financing our continued growth, including debt financing through bank warehouse lines of credit, additional repurchase agreements, term financing, securitization transactions and additional equity offerings. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or that such efforts will be successful. Further, counterparty credit sensitivity and collateral documentation requirements have made it difficult to obtain financing for REO, the result of which could place stress on our capital and liquidity positions at certain times during the foreclosure cycles of the related nonperforming loans.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Guarantees

        As of September 30, 2011, we have not entered into any off-balance sheet arrangements or guarantees.

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Contractual Obligations

        As of September 30, 2011, we had on-balance sheet contractual obligations of $341.0 million of agreements to repurchase loans and securities sold with maturities between October 11, 2011 and June 6, 2012. All agreements to repurchase that matured between September 30, 2011 and the date of this Report have been renewed and are described in Note 10—Loans Sold Under Agreements to Repurchase and Note 11—Securities Sold Under Agreements to Repurchase at Fair Value in the accompanying financial statements.

        As of the date of this Report, PCM has committed to acquire, on our behalf, mortgage loans with a purchase price of approximately $337.8 million. The pending transaction is subject to changes in the loans allocated to us by PCM, continuing due diligence, customary closing conditions and our obtaining additional capital adequate to fund the transaction. There can be no assurance that the committed amount will ultimately be acquired or that the transaction will be completed at all.

        On July 12, 2011, we purchased a pool of mortgage loans and REO from CGM. The initial purchase price was $172.7 million. Subsequent adjustments may increase the purchase price to a maximum of $174.4 million based on the date we settle the purchase. Our settlement of the purchase of these loans and REO is subject to our obtaining additional capital sufficient to fund the transaction. There can be no assurance that the transaction will ultimately be settled. This transaction is more fully described in Note 22—Subsequent Events in the accompanying financial statements and Liquidity and Capital Resources above.

        Management Agreement.    Pursuant to the management agreement between PCM and us, we pay PCM a base management fee and a performance incentive fee, both payable quarterly and in arrears. The base management fee is calculated at the annual rate of 1.5% of shareholders' equity. "Shareholders' equity" is defined as the sum of the net proceeds from any issuances of our equity securities since inception (weighted for the time outstanding during the measurement period); plus our retained earnings at the end of the quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less any amount we pay for repurchases of our common shares (weighted for the time held during the measurement period); excluding any unrealized gains, losses or other non-cash items that have impacted our shareholders' equity as reported in our financial statements, regardless of whether those items are included in other comprehensive income or loss or net income; and excluding one-time events pursuant to changes in U.S. GAAP and certain other non-cash charges after discussions between PCM and our independent trustees and approval by a majority of our independent trustees.

        The performance incentive fee is calculated at 20% per year of the amount by which "core earnings," on a rolling four-quarter basis and before the incentive fee, exceeds an 8% "hurdle rate." "Core earnings," for purposes of determining the amount of the performance incentive fee, is defined as U.S. GAAP net income (loss) adjusted to exclude non-cash equity compensation expense, unrealized gains and losses or other non-cash items recognized during the period, any conditional payment amounts relating to our IPO paid to PCM and the underwriters of our IPO, and certain other non-cash charges after discussions between PCM and our independent trustees and approval by a majority of our independent trustees. The "hurdle rate" is calculated as the product of (1) the weighted average of the issue price per share of all of our public offerings multiplied by the weighted average number of shares outstanding (including, for the avoidance of doubt, restricted share units) in the four-quarter period and (2) 8%. During our first four quarters, core earnings were calculated based on the annualized results of each of the preceding quarters. For purposes of calculating the incentive fee, to the extent we have a net loss in core earnings from a period prior to the rolling four-quarter period that has not been offset by core earnings in a subsequent period, such loss will continue to be included in the rolling four-quarter calculation until it has been fully offset. This term is not applicable for purposes of determining whether the conditional payment of the underwriting discount is payable.

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        Under the management agreement, PCM is entitled to reimbursement of organizational and operating expenses, including third party expenses, incurred on our behalf. Our reimbursement obligation is not subject to any dollar limitation. Expenses are reimbursed in cash on a quarterly basis.

        Under the management agreement, PCM may be entitled to a termination fee under certain circumstances. Specifically, the termination fee is payable for (1) our termination of the management agreement without cause or (2) PCM's termination of the management agreement upon a default in the performance of any material term of the management agreement. The termination fee is equal to three times (a) the average annual base management fee and (b) the average annual (or, if the period is less than 24 months, annualized) incentive fee earned by PCM during the prior 24-month period before termination. Under circumstances where the termination fee is payable, we will agree to pay to PCM its portion of the conditional payment of the underwriting discount described below.

        Loan Servicing Agreement.    For its services under our loan servicing agreement, PLS is entitled to base servicing fees that are competitive with those charged by other servicers or specialty servicers, as applicable. Base servicing fees are calculated as a percentage of the unpaid principal balance of the mortgage loans, with the actual percentage being based on the risk characteristics of the loans in a particular pool. Such risk characteristics include market value of the underlying properties, creditworthiness of the borrowers, seasoning of the loans, degree of current and expected loan defaults, current loan-to-value ratios, borrowers' payment history and debt-to-income levels.

        The base servicing fees for nonperforming loans range from 30 to 100 basis points per year of the unpaid principal balance of such loans. PLS is also entitled to certain customary market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and late charges, as well as interest on funds on deposit in custodial or escrow accounts.

        When PLS effects a refinancing of a loan on our behalf and not through a third party lender and the resulting loan is readily saleable, PLS is entitled to receive from us market-based fees and compensation. Similarly, when PLS originates a loan to facilitate the disposition of real estate that we acquire in settlement of a loan, PLS is entitled to a fee in the same amount.

        To the extent we participate in HAMP (or other similar mortgage loan modification programs), PLS is entitled to retain any incentive payments made to it and to which it is entitled under HAMP; provided, however, that with respect to any such incentive payments paid to PLS in connection with a mortgage loan modification for which we previously paid PLS a modification fee, PLS is required to reimburse us an amount equal to the lesser of such modification fee or such incentive payments.

        Under the loan servicing agreement, PLS is also entitled to reimbursement for all customary, reasonable and necessary out of pocket expenses incurred by PLS in connection with the performance of its servicing obligations.

        In connection with our correspondent lending business, PLS is entitled to base servicing fees, which range from 5 to 20 basis points per year of the unpaid principal balance of such loans, and other customary market-based fees and charges as described above. PLS also provides us with certain mortgage banking services, including fulfillment and disposition-related services, for a fulfillment fee based on a percentage of the unpaid principal balance of the mortgage loans. The fulfillment fee for such services is currently 50 basis points. Since November 1, 2010, we collect interest income and a sourcing fee of three basis points for each mortgage loan we buy from a correspondent and sell to PLS for ultimate disposition to a third party only where we are not approved or licensed to sell to such third party. During the quarter ended September 30, 2011, we recorded fulfillment fees totaling $263,000.

66

        We paid servicing fees to PLS as described above and as provided in our loan servicing agreement, and recorded other expenses, including common overhead expenses incurred on our behalf by PCM and its affiliates in accordance with the terms of our management agreement.

        Conditional Payment of Underwriting Discount.    Certain of the underwriting costs incurred in our IPO were paid on our behalf by PCM and a portion of the underwriting discount was deferred by agreement with the underwriters of the offering. Reimbursement to PCM and payment to the underwriters of the deferred underwriting discount are both contingent on our performance as follows: we will reimburse PCM approximately $2.9 million of underwriting costs paid by PCM on the offering date and pay the underwriters approximately $5.9 million in deferred underwriting discount if, during any full four calendar quarter period during the 24 full calendar quarters after the date of the completion of our IPO, August 4, 2009, our "core earnings" for such four-quarter period and before the incentive portion of PCM's management fee equals or exceeds an 8% incentive fee "hurdle rate" (both defined above). If this requirement is not satisfied by the end of such 24 calendar quarter period, our obligation to reimburse PCM and make the conditional payment of the underwriting discount will terminate. We have concluded that this contingency is probable of being met during the 24-quarter period and have recognized a liability for reimbursement to PCM and payment of the contingent underwriting discount as a reduction of additional paid-in capital.

Quantitative and Qualitative Disclosures About Market Risk

        Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market-based risks. The primary market risks that we are exposed to are real estate risk, credit risk, interest rate risk, prepayment risk, inflation risk and market value risk. A substantial portion of our investments are comprised of nonperforming loans. We believe that such assets' fair values respond primarily to changes in the fair value of the real estate securing such loans.

        The following table summarizes the estimated change in fair value of our portfolio of mortgage loans as of the dates presented, given several hypothetical (instantaneous) changes in home values from those used in the determination of fair value:

Property value shift		-15%			-10%			-5%			+5%			+10%			+15%
		(dollar amounts in thousands)
As of September 30, 2011:
Fair value		$	760,710		$	797,183		$	833,096		$	902,413		$	935,508		$	967,402
Change in fair value:
	$	$	(107,522	)	$	(71,049	)	$	(35,136	)	$	34,181		$	67,276		$	99,170
	%		(12.38	)%		(8.18	)%		(4.05	)%		3.94	%		7.75	%		11.42	%
Change in fair value as of December 31, 2010		$	(44,013	)	$	(29,054	)	$	(14,371	)	$	14,019		$	27,575		$	40,588

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        The following table summarizes the estimated change in fair value of our portfolio of MBS as of the dates presented, given several hypothetical (instantaneous) shifts in interest rates and parallel shifts in the yield curve:

Interest rate shift in basis points		-200			-100			-50			+50			+100			+200
		(dollar amounts in thousands)
As of September 30, 2011:
Fair value		$	86,632		$	86,664		$	86,643		$	86,793		$	86,902		$	87,162
Change in fair value:
	$	$	(70	)	$	(38	)	$	(59	)	$	91		$	200		$	460
	%		(0.08	)%		(0.04	)%		(0.07	)%		0.10	%		0.23	%		0.53	%
Change in fair value as of December 31, 2010		$	(298	)	$	(303	)	$	(246	)	$	326		$	679		$	1,475

        These sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate certain movements in real estate values as they relate to mortgage loans and interest rates as they relate to MBS; do not incorporate changes in interest rate volatility or changes in the relationship of one interest rate index to another; are subject to the accuracy of various models and assumptions used, including prepayment forecasts and discount rates; and do not incorporate other factors that would affect our overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as an earnings forecast.

Accounting Developments

        In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2011-04 to the Fair Value Measurements topic of the Accounting Standards Codification ("ASC"). ASU 2011-04 eliminates unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards, expands the disclosure requirements of the Fair Value Measurements and Disclosure topic of the ASC for fair value measurements and makes other amendments, including:

•

limiting the highest-and-best-use valuation premise concepts only to measuring the fair value of nonfinancial assets;

•

permitting an exception to fair value measurement principles for financial assets and financial liabilities (and derivatives) with offsetting positions in market risks or counterparty credit risk when several criteria are met. When the criteria are met, an entity can measure the fair value of the net risk position;

•

clarifying that premiums or discounts that reflect size as a characteristic of the reporting entity's holding rather than as a characteristic of the asset or liability (for example, a control premium when measuring the fair value of a controlling interest) are not permitted in a fair value measurement; and

•

prescribing a model for measuring the fair value of an instrument classified in shareholders' equity; this model is consistent with the guidance on measuring the fair value of liabilities.

        ASU 2011-04 expands the Fair Value Measurements topic's disclosure requirements, particularly for fair value measurements categorized in Level 3 of the fair value hierarchy: (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place (e.g., how the entity decides its valuation policies and procedures, as well as changes in its analyses of fair value measurements, from period to period), and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs.

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        ASU 2011-04 is applicable to the Company for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have a material effect on our financial statements.

Factors That May Affect Our Future Results

        This Report contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "continue," "plan" or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include the following:

•

projections of our revenues, income, earnings per share, capital structure or other financial items;

•

descriptions of our plans or objectives for future operations, products or services;

•

forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and

•

descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues.

        Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are a number of factors, many of which are beyond our control, that could cause actual results to differ significantly from management's expectations. Some of these factors are discussed below.

        You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Report and as set forth in Item 1A. "Risk Factors" in our Annual Report and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.

        Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:

•

changes in our investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject us to additional risks;

•

volatility in our industry, interest rates and spreads, the debt or equity markets, the general economy or the residential finance and real estate markets specifically, whether the result of market events or otherwise;

•

events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as a credit downgrade of U.S. Government obligations, the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts;

•

changes in general business, economic, market, employment, consumer confidence and spending habits and political conditions from those expected;

69

•

continued declines in residential real estate and significant changes in U.S. housing prices and/or activity in the U.S. housing market;

•

the availability of, and level of competition for, attractive risk-adjusted investment opportunities in residential mortgage loans and mortgage-related assets that satisfy our investment objective and investment strategies;

•

our success in winning bids to acquire loans;

•

the concentration of credit risks to which we are exposed;

•

the degree and nature of our competition;

•

changes in personnel and lack of availability of qualified personnel;

•

our dependence on PCM, potential conflicts of interest with PCM and its affiliated entities, and the performance of such entities;

•

the availability, terms and deployment of short-term and long-term capital;

•

the adequacy of our cash reserves and working capital;

•

our ability to match the interest rates and maturities of our assets with our financing;

•

the timing and amount of cash flows, if any, from our investments;

•

unanticipated increases in financing and other costs, including a rise in interest rates;

•

the performance, financial condition and liquidity of borrowers;

•

incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of our customers and counterparties;

•

the quality and enforceability of the collateral documentation evidencing our ownership and rights in the assets in which we invest;

•

increased rates of delinquency, default and/or decreased recovery rates on our investments;

•

our ability to foreclose on our investments in a timely manner or at all;

•

increased prepayments of the mortgages and other loans underlying our MBS and other investments;

•

the degree to which our hedging strategies may or may not protect us from interest rate volatility;

•

the effect of the accuracy of or changes in the estimates we make about uncertainties and contingencies when measuring and reporting upon our financial condition and income;

•

our failure to maintain appropriate internal controls over financial reporting;

•

developments in the secondary markets for our mortgage loan products;

•

legislative and regulatory changes that impact the mortgage loan industry or housing market;

•

changes in regulations or the occurrence of other events that impact the business, operation or prospects of GSEs;

•

the Dodd-Frank Wall Street Reform and Consumer Protection Act and any other legislative and regulatory changes that impact the business, operations or governance of publicly-traded companies;

•

changes in government support of homeownership;

70

•

changes in governmental regulations, accounting treatment, tax rates and similar matters (including changes to laws governing the taxation of REITs or the exclusions from registration as an investment company);

•

limitations imposed on our business and our ability to satisfy complex rules for us to qualify as a REIT for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 (the "Investment Company Act") and the ability of certain of our subsidiaries to qualify as REITs and certain of our subsidiaries to qualify as TRSs for U.S. federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

•

estimates relating to our ability to make distributions to our shareholders in the future;

•

the effect of public opinion on our reputation; and

•

the occurrence of natural disasters or other events or circumstances that could impact our operations.

        Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, income and/or financial condition.

        Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        In response to this Item 3, the information set forth on pages 67 and 68 is incorporated herein by reference.

Item 4.    Controls and Procedures

Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. However, no matter how well a control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in our periodic reports.

        Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

71

Internal Control over Financial Reporting

        There has been no change in our internal control over financial reporting during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

72

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

        From time to time, we may be involved in various legal proceedings, claims and actions arising in the ordinary course of business. As of September 30, 2011, we were not involved in any such legal proceedings, claims or actions that would be reasonably likely to have a material adverse effect on us.

Item 1A.    Risk Factors

        There are no material changes from the risk factors set forth under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 7, 2011, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the SEC on May 6, 2011, except as set forth below.

Any potential changes to the laws and regulations governing the Investment Company Act status of REITs as a result of a recent SEC concept release or otherwise could materially and adversely affect us.

        The SEC recently solicited public comment through a concept release on a wide range of issues relating to the Section 3(c)(5)(C) exemption from the Investment Company Act, including the nature of the assets that qualify for purposes of the exemption and whether mortgage-related REITs should be regulated in a manner similar to investment companies. There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including guidance and interpretations from the Division of Investment Management of the SEC regarding the exceptions and exemptions therefrom, will not change in a manner that adversely affects our operations. If the SEC takes action that could result in our or our subsidiaries' failure to maintain an exception or exemption from the Investment Company Act, we could, among other things, be required to (a) restructure our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so or (c) register as an investment company (which, among other things, would require us to comply with the leverage constraints applicable to investment companies), any of which could negatively affect the value of our common shares, the sustainability of our business model, and our ability to make distributions to our shareholders, which could, in turn, materially and adversely affect our business and the market price of our common shares.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        None

Item 3.    Defaults Upon Senior Securities

        None

Item 4.    [Reserved]

Item 5.    Other Information

        On November 1, 2011, we entered into an amendment (the "Amendment") to our master repurchase agreement, dated November 2, 2010 (the "Loan Repo Facility"), with Credit Suisse First Boston Mortgage Capital LLC ("CSFB"), pursuant to which PMC may sell, and later repurchase, newly originated mortgage loans. The Loan Repo Facility is used to fund newly originated mortgage loans that are purchased from correspondent lenders by PMC and held for sale and/or securitization.

        The principal amount paid by CSFB for each eligible mortgage loan is based on a percentage of the lesser of the market value or the unpaid principal balance of such mortgage loan. Upon our

73

repurchase of a mortgage loan, we are required to repay CSFB the principal amount related to such mortgage loan plus accrued interest (at a rate reflective of the current market and based on CSFB's cost of funds plus a margin) to the date of such repurchase. The Loan Repo Facility is committed for a period of 364 days, and the obligations of PMC are fully guaranteed by us and our Operating Partnership. The mortgage loans are serviced by PLS. Other material terms of the Loan Repo Facility and related guaranty are described more fully in Item 5 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed with the SEC on November 8, 2010.

        Under the terms of the Amendment, the maximum aggregate purchase price provided for in the Loan Repo Facility was increased from $75 million to $150 million and the termination date was extended until October 30, 2012. Through PMC, we are also required to pay CSFB a commitment fee for the Loan Repo Facility, as well as certain other administrative costs and expenses in connection with CSFB's structuring, management and ongoing administration of the Loan Repo Facility. All other terms and conditions of the Loan Repo Facility and the related guaranty remain the same in all material respects.

        The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which has been filed with this Report as Exhibit 10.22, and the full text of the Loan Repo Facility and the related guaranty, which were filed as Exhibits 10.13 and 10.14, respectively, to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed with the SEC on November 8, 2010.

74

Item 6.    Exhibits

Exhibit Number		Exhibit Description
	3.1	Declaration of Trust of PennyMac Mortgage Investment Trust, as amended and restated (incorporated by reference to Exhibit 3.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	3.2	Bylaws of PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	4.1	Specimen Common Share Certificate of PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 4.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.1	Registration Rights Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, Stanford L. Kurland, David A. Spector, BlackRock Holdco II, Inc., Highfields Capital Investments LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.2	Underwriting Fee Reimbursement Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.7 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.3	Amended and Restated Limited Partnership Agreement of PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.4	Management Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.5	Amendment No. 1 to Management Agreement, dated March 3, 2010, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).
	10.6	Flow Servicing Agreement, dated as of August 4, 2009, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.7	Amendment No. 1 to Flow Servicing Agreement, dated as of March 3, 2010, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.6 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).
	10.8	Amendment No. 2 to Flow Servicing Agreement, dated as of March 8, 2011, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.8 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011).

75

Exhibit Number		Exhibit Description
	10.9	Amendment No. 3 to Flow Servicing Agreement, dated as of May 17, 2011, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.9 on our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
	10.10	PennyMac Mortgage Investment Trust 2009 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.11	Form of Restricted Share Unit Award Agreement under the PennyMac Mortgage Investment Trust 2009 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to Amendment No. 3 to the Company's Registration Statement on Form S-11, filed with the SEC on July 24, 2009).
	10.12	Master Repurchase Agreement, dated as of November 2, 2010, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.11 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.13	Amendment Number One to Master Repurchase Agreement, dated as of August 18, 2011, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association.
	10.14	Amendment Number Two to Master Repurchase Agreement, dated as of September 28, 2011, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association.
	10.15	Guaranty Agreement, dated as of November 2, 2010, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.12 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.16	Amendment Number One to Guaranty Agreement, dated as of August 18, 2011, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association.
	10.17	Amendment Number Two to Guaranty Agreement, dated as of September 28, 2011, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association.
	10.18	Master Repurchase Agreement, dated as of November 2, 2010, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership,  L.P. (incorporated by reference to Exhibit 10.13 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.19	Amendment Number One to Master Repurchase Agreement, dated as of May 20, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.15 on our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
	10.20	Amendment Number Two to Master Repurchase Agreement, dated as of July 14, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.
	10.21	Amendment Number Three to Master Repurchase Agreement, dated as of October 7, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.

76

Exhibit Number		Exhibit Description
	10.22	Amendment Number Four to Master Repurchase Agreement, dated as of November 1, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.
	10.23	Guaranty, dated as of November 2, 2010, by PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P. and Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.14 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.24	Master Repurchase Agreement, dated as of December 9, 2010, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and PennyMac Loan Services, LLC, and Citibank, N.A. (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on December 15, 2010).
	10.25	Amendment Number One to Master Repurchase Agreement, dated as of February 25, 2011, by and among Citibank, N.A. and PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on March 3, 2011).
	10.26	Guaranty Agreement, dated as of December 9, 2010, by PennyMac Mortgage Investment Trust in favor of Citibank, N.A. (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on December 15, 2010).
	10.27	Master Repurchase Agreement, dated as of June 8, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on June 14, 2011).
	10.28	Amended and Restated Master Repurchase Agreement, dated as of August 25, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Mortgage Investment Trust.
	10.29	Guaranty, dated as of June 8, 2011, of PennyMac Mortgage Investment Trust in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on June 14, 2011).
	10.30	Master Loan and Security Agreement, dated as of September 28, 2011, by and between PCNPL Trust and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on October 4, 2011).
	10.31	Limited Guaranty Agreement, dated as of September 28, 2011, of PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on October 4, 2011).
	10.32	Letter Agreement, dated as of July 12, 2011, by and between PennyMac Corp. and Citigroup Global Markets Realty Corp.*
	31.1	Certification of Stanford L. Kurland pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Anne D. McCallion pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Stanford L. Kurland pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

77

Exhibit Number		Exhibit Description
	32.2	Certification of Anne D. McCallion pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Income for the quarter and nine months ended September 30, 2011 and September 30, 2010, (iii) the Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2011 and September 30, 2010, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2010, and (v) the Notes to the Consolidated Financial Statements.**

*

Certain terms have been redacted pursuant to a request for confidential treatment submitted to the Securities and Exchange Commission concurrently with the filing of this Report.

**

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under those sections.

78

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PENNYMAC MORTGAGE INVESTMENT TRUST (Registrant)
Dated: November 4, 2011	By:	/s/ STANFORD L. KURLAND Stanford L. Kurland Chairman of the Board and Chief Executive Officer
Dated: November 4, 2011	By:	/s/ ANNE D. MCCALLION Anne D. McCallion Chief Financial Officer

79

PENNYMAC MORTGAGE INVESTMENT TRUST

FORM 10-Q
September 30, 2011

INDEX OF EXHIBITS

Exhibit Number		Exhibit Description
	3.1	Declaration of Trust of PennyMac Mortgage Investment Trust, as amended and restated (incorporated by reference to Exhibit 3.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	3.2	Bylaws of PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	4.1	Specimen Common Share Certificate of PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 4.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.1	Registration Rights Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, Stanford L. Kurland, David A. Spector, BlackRock Holdco II, Inc., Highfields Capital Investments LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.2	Underwriting Fee Reimbursement Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.7 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.3	Amended and Restated Limited Partnership Agreement of PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.4	Management Agreement, dated as of August 4, 2009, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.5	Amendment No. 1 to Management Agreement, dated March 3, 2010, among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).
	10.6	Flow Servicing Agreement, dated as of August 4, 2009, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.7	Amendment No. 1 to Flow Servicing Agreement, dated as of March 3, 2010, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.6 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).
	10.8	Amendment No. 2 to Flow Servicing Agreement, dated as of March 8, 2011, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.8 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011).

Exhibit Number		Exhibit Description
	10.9	Amendment No. 3 to Flow Servicing Agreement, dated as of May 17, 2011, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.9 on our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
	10.10	PennyMac Mortgage Investment Trust 2009 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
	10.11	Form of Restricted Share Unit Award Agreement under the PennyMac Mortgage Investment Trust 2009 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to Amendment No. 3 to the Company's Registration Statement on Form S-11, filed with the SEC on July 24, 2009).
	10.12	Master Repurchase Agreement, dated as of November 2, 2010, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.11 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.13	Amendment Number One to Master Repurchase Agreement, dated as of August 18, 2011, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association.
	10.14	Amendment Number Two to Master Repurchase Agreement, dated as of September 28, 2011, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and Wells Fargo Bank, National Association.
	10.15	Guaranty Agreement, dated as of November 2, 2010, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.12 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.16	Amendment Number One to Guaranty Agreement, dated as of August 18, 2011, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association.
	10.17	Amendment Number Two to Guaranty Agreement, dated as of September 28, 2011, by PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association.
	10.18	Master Repurchase Agreement, dated as of November 2, 2010, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership,  L.P. (incorporated by reference to Exhibit 10.13 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.19	Amendment Number One to Master Repurchase Agreement, dated as of May 20, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.15 on our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
	10.20	Amendment Number Two to Master Repurchase Agreement, dated as of July 14, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.
	10.21	Amendment Number Three to Master Repurchase Agreement, dated as of October 7, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.
	10.22	Amendment Number Four to Master Repurchase Agreement, dated as of November 1, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P.

Exhibit Number		Exhibit Description
	10.23	Guaranty, dated as of November 2, 2010, by PennyMac Mortgage Investment Trust and PennyMac Operating Partnership, L.P. and Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.14 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).
	10.24	Master Repurchase Agreement, dated as of December 9, 2010, among PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC, and PennyMac Loan Services, LLC, and Citibank, N.A. (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on December 15, 2010).
	10.25	Amendment Number One to Master Repurchase Agreement, dated as of February 25, 2011, by and among Citibank, N.A. and PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on March 3, 2011).
	10.26	Guaranty Agreement, dated as of December 9, 2010, by PennyMac Mortgage Investment Trust in favor of Citibank, N.A. (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on December 15, 2010).
	10.27	Master Repurchase Agreement, dated as of June 8, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Mortgage Investment Trust (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on June 14, 2011).
	10.28	Amended and Restated Master Repurchase Agreement, dated as of August 25, 2011, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Corp., PennyMac Mortgage Investment Trust Holdings I, LLC and PennyMac Mortgage Investment Trust.
	10.29	Guaranty, dated as of June 8, 2011, of PennyMac Mortgage Investment Trust in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on June 14, 2011).
	10.30	Master Loan and Security Agreement, dated as of September 28, 2011, by and between PCNPL Trust and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on October 4, 2011).
	10.31	Limited Guaranty Agreement, dated as of September 28, 2011, of PennyMac Mortgage Investment Trust in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 1.2 of our Current Report on Form 8-K filed on October 4, 2011).
	10.32	Letter Agreement, dated as of July 12, 2011, by and between PennyMac Corp. and Citigroup Global Markets Realty Corp.*
	31.1	Certification of Stanford L. Kurland pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Anne D. McCallion pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Stanford L. Kurland pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Anne D. McCallion pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit Number		Exhibit Description
	101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Income for the quarter and nine months ended September 30, 2011 and September 30, 2010, (iii) the Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2011 and September 30, 2010, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2010, and (v) the Notes to the Consolidated Financial Statements.**

*

Certain terms have been redacted pursuant to a request for confidential treatment submitted to the Securities and Exchange Commission concurrently with the filing of this Report.

**

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under those sections.

EX-10.13

Exhibit 10.13

EXECUTION VERSION

AMENDMENT NUMBER ONE

to the

Master Repurchase Agreement

Dated as of November 2, 2010

among

PENNYMAC CORP.

PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

This AMENDMENT NUMBER ONE is made this 18th day of August, 2011, by and among PENNYMAC CORP., a Delaware corporation, PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC, a Delaware limited liability company (each a “Seller” and collectively the “Sellers”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Buyer”), to the Master Repurchase Agreement, dated as of November 2, 2010, by and among Sellers and Buyer (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”).

WHEREAS, Sellers have requested that Buyer amend the Agreement to modify the pricing terms, income distributions, covenants and certain other provisions thereunder; and

WHEREAS, Sellers and Buyer have agreed to amend the Agreement as set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1.           Amendment. Effective as of August 18, 2011 (the “Amendment Effective Date”), the Agreement is hereby amended as follows:

(a)           The Table of Contents of the Agreement is hereby modified by adding “Schedule 7 Schedule of Reports” on page “iv” therein.

(b)           Article 2 of the Agreement is hereby amended by adding the following definitions (in the appropriate alphabetical order) thereto:

“Amendment Effective Date”: August 18, 2011.

“Ancillary Income”:   All income derived from the Mortgage Loans (other than payments or other collections in respect of principal, interest, Escrow Payments and prepayment penalties attributable to the Mortgage Loans) including, but not limited to, all interest received on funds deposited in the Custodial Account (as defined in the Servicing Agreement) or any Escrow Account (as defined in the Servicing Agreement and subject to applicable law), assumption fees, reconveyance fees, subordination fees, speedpay fees, mortgage pay on the web fees, automatic clearing house fees, demand statement fees, modification fees, if any, fees received with respect to checks on bank drafts returned by the related bank for insufficient funds, assumption fees and other

similar types of fees arising from or in connection with any Mortgage Loan to the extent not otherwise payable to the Mortgagor under applicable law or pursuant to the terms of the related Mortgage Note. In no event shall the Servicer be entitled to any prepayment penalties.

“Buyout Amount”:  Any amount paid by a Seller to (i) remove an Underlying Mortgage Loan from the pool of mortgage loans supporting a Purchased REMIC Certificate in accordance with the related REMIC Declaration Agreement on a Conversion Date, and (ii) convert such Underlying Mortgage Loan into an Eligible Mortgage Loan, provided the related Mortgage Loan remains at all times subject to the terms of a Transaction hereunder.

“Collection and Reporting Period”:  For any Purchased Asset the first day of each calendar month through and including the last day of such calendar month.

“Reconciliation Date”:  (i) each Remittance Date, (ii) the date which is two (2) weeks following such Remittance Date and (iii) with respect to a foreclosed Purchased Mortgage Loan or Underlying Mortgage Loan that has not been repurchased by Sellers, any date on which the Purchase Price of such foreclosed Purchased Mortgage Loan or Underlying Mortgage Loan when added to the aggregate outstanding Purchase Price of all other foreclosed Purchased Mortgage Loans and Underlying Mortgage Loans that have not been repurchased by Sellers, exceeds $3,000,000.

(c)           Article 2 of the Agreement is hereby amended by deleting the definitions of “Carryover Amount”, “Direct Pass-Through Expenses”, “Estimate of Guarantor Net Income”, “Foreclosed Mortgage Loan” “Management Fees” and “Sale and Disposition of Purchased Assets” therein in their respective entirety.

(d)           Article 2 of the Agreement is hereby amended by deleting the definitions of “Applicable Percentage”, “Conversion Date”, “Early Repurchase Schedule”, “Margin Deficit”, “Removed Mortgage Loan” and “Turbo Trigger Event” therein in their respective entirety and replacing each of them (as applicable) with the following:

“Applicable Percentage”:  For each Purchased Asset, the applicable percentage (up to the Maximum Applicable Percentage) determined by Buyer in its sole discretion for such Purchased Asset on the Purchase Date thereof and set forth in the applicable Confirmation.  For the avoidance of doubt any Purchased Asset which is a Mortgage Loan shall have an Applicable Percentage of zero upon completion of any related foreclosure sale or other liquidation of the related Mortgage Loan.

“Conversion Date”: With respect to any Purchased REMIC Certificate, the date on which Buyer releases its rights, title and interest in a Removed Mortgage Loan and such Removed Mortgage Loan becomes subject to a Transaction as a Purchased Mortgage Loan pursuant to Section 3.01(g)(i) hereof.

“Early Repurchase Schedule”: With respect to any Early Repurchase on the schedule set forth Exhibit F attached hereto.

“Margin Deficit”:  Either a REO Margin Deficit or Mortgage Loan/REMIC Margin Deficit.

“Removed Mortgage Loans”: Any Underlying Mortgage Loan which, upon payment of the related Buyout Amount, is removed from the pool of mortgage loans supporting a Purchased REMIC Certificate in accordance with the related REMIC Declaration Agreement on a Conversion Date and held by PMC.

“Turbo Trigger Event”:  At any time that: (i) the Aggregate Purchase Price falls below $12,500,000; or (ii) a loss of REMIC status occurs with respect to any related REMIC Certificate.

(e)           Article 2 of the Agreement is hereby amended by modifying the definition of “Eligible Mortgage Loan” by deleting each of clauses (v) and (ix) therein in their respective entirety and replacing each of them with “[Reserved]”.

(f)            Article 2 of the Agreement is hereby amended by modifying the definition of “Eligible REO Property” by:

(i)            deleting clause (b) therein and replacing it with the following:

“(b)        as to which (i) the related REO Deed has been recorded by the applicable recording office in the name of PC REO and evidence of recording thereon (acceptable to Buyer) has been delivered to Buyer or its designee, or (ii) the related REO Deed has been sent for recordation in the name of PC REO to the applicable recording office and Buyer has received (y) an email transmittal from Seller acknowledging that the related REO Deed has been sent for recordation in the name of PC REO to the applicable recording office and (z) a receipt, electronic transmittal or other written evidence provided by Sellers’ vendor acknowledging that such REO Deed has been sent for recordation in the name of PC REO and listing the recording office to which such REO Deed was submitted”

(ii)           replacing the word “and” appearing at the end of clause (x) and clause (xi) with the following;

“(xi)         With respect to REO Property for which the REO Deed has been submitted for recordation in the name of PC REO and a recorded REO Deed has not yet been returned, the state in which the REO Property is located is a race/notice or a notice jurisdiction identified on Schedule 8 hereto (as such Schedule may be updated by Buyer from time to time) with respect to the recordation of real property deeds; and

(xii)          Any other eligibility criteria as mutually agreed to by the Buyer and Sellers.”

(g)           Article 2 of the Agreement is hereby amended further by modifying the definition of “Eligible REO Property” by deleting clause (x) therein in its entirety and replacing it with “[Reserved]; and”.

(h)           Article 2 of the Agreement is hereby amended by modifying the definition of “Income” by deleting clause (f) therein in its entirety and replacing it with the following:

“(f) with respect to Purchased REMIC Certificates and Purchased REO Entity Interests, each of the foregoing amounts collected with respect to the related Underlying Assets; provided, that (x) Ancillary Income, (y) any Buyout Amounts on deposit in the Participation Account or Waterfall Account and (z) amounts that under the applicable Asset Documents are required to be deposited into and held in escrow or reserve to be used for a specific purpose, such as taxes and insurance, shall not be included in the term “Income”; unless and until with respect to clause (z) only, (i) an event of default exists under such Asset Documents, (ii) the holder of the related Purchased Asset or Underlying Asset has exercised or is entitled to exercise rights and remedies with respect to such amounts, (iii) such amounts are no longer required to be held for such purpose under such Asset Documents, or (iv) such amounts may be applied to all or a portion of the outstanding indebtedness under such Asset Documents.”

(i)            Article 2 of the Agreement is hereby amended by modifying the definition of “Market Value” by deleting the last sentence of the first paragraph therein and replacing it with the following:

“Notwithstanding anything else in this definition, the Market Value shall be deemed to be zero with respect to each Purchased Asset or Underlying Asset for which such valuation is not provided and/or with respect to which:”

(j)            Article 2 of the Agreement is hereby amended further by modifying the definition of “Market Value” by (1) deleting “or” at end of clause (i) therein; (2) replacing the period with “; or” at the end of clause (j) therein; and (3) adding new clause (k) as follows:

“(k) as of any Reconciliation Date, the Purchased Mortgage Loan or Underlying Mortgage Loan has been foreclosed and has not been repurchased by Sellers.”

(k)           Article 2 of the Agreement is hereby amended by modifying the definition of “Purchase Price” by deleting clause (ii) therein and replacing it with following:

“(ii)         any Principal Payments remitted to the Waterfall Account and which were applied to the Purchase Price of such Purchased Asset by Buyer pursuant to Section 5.02(b)(I) and clause fifth of Section 5.02(b)(II) and (c), and”

(l)            Section 3.01(g)(i) of the Agreement is hereby amended by deleting the last sentence therein in its entirety and replacing it with the following:

“Notwithstanding anything contained herein to the contrary, each Conversion Date hereunder shall occur prior to the date of the completion of the related foreclosure sale with respect to each related Removed Mortgage Loan.”

(m)          Section 3.01(g)(ii) of the Agreement is hereby amended by deleting the section in its entirety and replacing it with “[Reserved]”.

(n)           Section 3.04 is hereby amended by deleting the definition of “Early Repurchase Date” in its entirety and replacing it with the following:

“Sellers may terminate any Transaction with respect to any or all Purchased Assets subject to an Early Repurchase and repurchase such Purchased Assets on any date prior to the Repurchase Date”

(o)           Section 3.04 of the Agreement is hereby amended by deleting subparagraph (iii) of the second paragraph thereof in its entirety and replacing it with “(iii) either (1) any Underlying Mortgage Loan is not an Eligible Mortgage Loan at any time after the date the REMIC Certificates were issued, as determined by Buyer or (2) evidence acceptable to Buyer that any related REO Deed has been recorded (or submitted for recording, as applicable) in the name of the PC REO in the appropriate recording office has not been delivered to Buyer, Buyer may assign a Market Value of zero to such Underlying Mortgage Loan, or”.

(p)           Section 3.06(c) of the Agreement is hereby amended by deleting the references therein to “Closing Date” and replacing each of them with “Amendment Effective Date”.

(q)           Section 4.01(a) of the Agreement is hereby amended by deleting the section its entirety and replacing it with the following:

If on any date the Market Value of all Purchased Mortgage Loans and Purchased REMIC Certificates (taking into account the Market Value of the Underlying Mortgage Loans) is less than the product of (A) Buyer’s Margin Percentage times (B) the aggregate outstanding Purchase Price for such Purchased Assets as of such date, a margin deficit shall exist (a “Mortgage Loan/REMIC Margin Deficit”).  If on any date the Market Value of all Purchased REO Entity Interests (taking into account the Market Value of the related REO Properties) is less than the product of (A) Buyer’s Margin Percentage times (B) the aggregate outstanding Purchase Price for such Purchased Assets as of such date, a margin deficit shall exist (an “REO Margin Deficit”).  If on any date that a Mortgage Loan/REMIC Margin Deficit exists, Buyer may provide a Margin Call Notice to Sellers notifying Sellers of such Margin Deficit (a “Margin Call”) and such Margin Call Notice shall require Sellers, upon Buyer’s direction to either (i) transfer cash to Buyer, (ii) transfer to Buyer or its designee (including Custodian) for no additional consideration additional Eligible Assets (“Additional Purchased Assets”), or (iii) choose (at Buyer’s discretion) any combination of the foregoing, so that, after giving effect to such transfers and payments, the aggregate outstanding Purchase Price for all Purchased Mortgage Loans and Purchased REMIC Certificates does not exceed the product of (A) the aggregate Market Value thereof times (B) the Applicable Purchase Price Percentage.  If on any date that an REO Margin Deficit exists, Buyer may make a Margin Call and Sellers may, but shall have no obligation to, (i) transfer cash to Buyer, (ii) transfer to Buyer or its designee (including Custodian) for no additional consideration Additional Purchased Assets, or (iii) choose (at Buyer’s discretion) any

combination of the foregoing, so that, after giving effect to such transfers, repurchases and payments, the aggregate outstanding Purchase Price for all Purchased REO Entity Interests does not exceed the product of (A) the aggregate Market Value thereof times (B) the Applicable Purchase Price Percentage.  Buyer shall apply the funds received in satisfaction of a Margin Deficit to the Repurchase Obligations in such manner as Buyer determines; provided that any funds received from Sellers to satisfy an REO Margin Deficit shall be applied to satisfy such REO Margin Deficit and any funds received from Sellers to satisfy a Mortgage Loan/REMIC Margin Deficit shall be applied to satisfy such Mortgage Loan/REMIC Margin Deficit.  For the avoidance of doubt a Margin Call may be made with respect to a single Purchased Asset or multiple Purchased Assets.

(r)            Section 5.02 of the Agreement is hereby amended by deleting the reference therein to “Pricing Period” and replacing it with “Collection and Reporting Period”.

(s)           Section 5.02(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(a)         All Income received prior to the occurrence of a Turbo Trigger Event shall be applied as follows:

I.              With respect to Income on deposit in the Waterfall Account with respect to the Purchased REO Entity Interests:

first, to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased REO Entity Interests as of such Remittance Date;

second, to pay to Buyer an amount sufficient to eliminate any outstanding REO Margin Deficit;

third, to deposit any amounts necessary to maintain the Required Amount with respect to the Purchased REO Entity Interests in the REO Property Interest Reserve Account;

fourth, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Sellers and other applicable Persons to Buyer under the Repurchase Documents and allocable to the Purchased REO Entity Interests; and

fifth, any remaining amounts to the Waterfall Account.

II.            With respect to Income on deposit in the Waterfall Account with respect to the Purchased Mortgage Loans and Purchased REMIC Certificates and any amounts referred to in clause fifth of (a)(I) above:

“first, to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased REMIC Certificates and Purchased Mortgage Loans as of such Remittance Date and any outstanding Facility Fees;

second, to pay to Buyer an amount sufficient to eliminate any outstanding Mortgage Loan/REMIC Margin Deficit with respect to the Purchased REMIC Certificates and the Purchased Mortgage Loans (without limiting Sellers’ obligation to satisfy a Mortgage Loan/REMIC Margin Deficit in a timely manner as required by Section 4.01);

third, to deposit any amounts necessary to maintain the Required Amount with respect to the Purchased Mortgage Loans and Purchased REMIC Certificates in the Mortgage Loan Interest Reserve Account;

fourth, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Sellers and other applicable Persons to Buyer under the Repurchase Documents and allocable to the Purchased REMIC Certificates and the Purchased Mortgage Loans; and

fifth, any remaining amounts to Sellers.”

(t)            Section 5.02(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(b)  All Income received during the occurrence of a Turbo Trigger Event with respect to Purchased Assets shall be applied as follows:

I.              With respect to Income on deposit in the Waterfall Account with respect to the Purchased REO Entity Interests to be paid to Buyer to reduce the aggregate outstanding Purchase Price of such Purchased Assets to zero and any remaining amounts to be paid in accordance with section (II) below.

II.            With respect to Income on deposit in the Waterfall Account with respect to the Purchased Mortgage Loans and Purchased REMIC Certificates and any amounts referred to in clause sixth of (a)(I) above:

first, to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased REMIC Certificates and Purchased Mortgage Loans as of such Remittance Date;

second, to pay to Buyer an amount sufficient to eliminate any outstanding Mortgage Loan/REMIC Margin Deficit with respect to the Purchased REMIC Certificates and the Purchased Mortgage Loans (without limiting Sellers’ obligation to satisfy a Mortgage Loan/REMIC Margin Deficit in a timely manner as required by Section 4.01);

third, to deposit any amounts necessary to maintain the Required Amount with respect to the Purchased Mortgage Loans and Purchased REMIC Certificates in the Mortgage Loan Interest Reserve Account;

fourth, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Sellers and other applicable Persons to Buyer under the Repurchase Documents and allocable to the Purchased Mortgage Loans and Purchased REMIC Certificates;

fifth, to pay to Buyer, the amount needed to reduce the aggregate outstanding Purchase Price for the Purchased REMIC Certificates and Purchased Mortgage Loans to zero; and

sixth, any remaining amounts to Sellers.”

(u)           Section 5.02(d) of the Agreement is hereby amended by deleting the reference to “second of Section 5.02(a)(II)” therein and replacing it with “first of Section 5.02(a)(II)”.

(v)           Section 6.02(c) of the Agreement is hereby amended by deleting the reference to “(including, without limitation any Foreclosed Mortgage Loans)” therein.

(w)          Section 8.09(g) of the Agreement is hereby amended by adding new section (vi) therein as follows:

“(vi)        servicing reports identifying the aggregate outstanding servicing advances (including without limitation Protective Servicing Advances) made by Seller or Servicer with respect to the Purchased Assets or Underlying Assets.”

(x)            Section 8.09(g)(iii) of the Agreement is hereby amended by deleting the section in its entirety and replacing it with the following:

“(iii) servicing reports for the prior Collection and Reporting Period, including identification of any modifications to any Purchased Assets or Underlying Assets;”

(y)           Section 8.09(g)(iv) of the Agreement is hereby amended by deleting the reference therein to “prior month” and replacing it with “prior Collection and Reporting Period”.

(z)            Section 8.09(i) of the Agreement is hereby amended by deleting the section its entirety and replacing it with the following:

“(i) (x) daily/weekly/monthly reports as set forth on Schedule 7 attached hereto and (y) “view access” to Sellers’ REO Property management systems, to Buyer as required and mutually agreed upon prior to the Purchase Date of the first Transaction following the Amendment Effective Date;”

(aa)         Section 8.12 of the Agreement is hereby amended by deleting the section its entirety and replacing it with the following:

“8.12       Trailing Fees and Expenses for Recordation of REO Deed. In the event that PMC or PC REO shall incur any trailing fees and/or expenses from time to time in connection with the recordation of any REO Deed, PMC or PC REO, as the case may be, shall promptly satisfy such payment obligation.”

(bb)         Section 11.04(a) of the Agreement is hereby amended by deleting the last sentence therein in its entirety and replacing it with the following:

“Each such REO Deed shall be duly executed, be in recordable form in accordance with applicable law and shall have been recorded (or submitted for recording, as applicable) in the recordation office of the jurisdiction in which the REO Property is located.”

(cc)         Section 11.04(b) of the Agreement is hereby amended by deleting the section in its entirety and replacing it with the following:

“PMC shall cause PC REO, with respect to any REO Property owned by it or transferred to it, to deliver a correct and complete REO Property File (including a certified copy of the file-stamped REO Deed or, in the case where the REO Deed has been submitted to the applicable recording office for recordation but not yet returned, a receipt or other written acknowledgment (acceptable to Buyer) from the clerk evidencing the receipt of such REO Deed) to Buyer or its designee as a condition precedent to any Transaction involving such REO Property.    Each copy of an REO Deed delivered to the Buyer or its designee as part of an REO Property File (including intervening deeds) shall be a true, correct and complete copy of the original REO Deed, the original REO Deed shall be acceptable to Buyer in all respects and shall have been recorded in the name of PC REO in the appropriate recording office.  Each title commitment, ‘date-down’ or trustee’s sale guarantee delivered to the Buyer or its designee as part of an REO Property File shall be a true, correct and complete copy of the original document.”

(dd)         Section 18.01 of the Agreement is hereby amended by deleting the section in its entirety and replacing it with the following:

“This Agreement and any claim, controversy or dispute arising under or related to or in connection with this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.”

(ee)         Schedule 1-B to the Agreement is hereby amended by adding the following new paragraph at the end thereof:

“(u)         Recordation of REO Deed. All conditions to the recordation of the related REO Deed have been satisfied by PMC and PC REO, including without limitation payment of all transfer taxes, fees and expenses incurred in connection with such recordation as a requirement for such recordation and with the transfer of the REO Property to PC REO, extinguishment of all liens on the REO Property and

satisfactory submission of all required forms to the applicable recording office, as may be required by applicable law.”

(ff)           The Agreement is hereby amended by adding new Schedules 7 and 8 in the form attached hereto as Exhibit A, directly after the end of Schedule 6 to Agreement.

SECTION 2.           Defined Terms.  Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Agreement.

SECTION 3.           Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number One need not be made in the Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.

SECTION 4.           Representations.  In order to induce Buyer to execute and deliver this Amendment Number One, Sellers hereby represent to Buyer that as of the date hereof, Sellers are in full compliance with all of the terms and conditions of the Agreement, including without limitation, all of the representations and warranties and all of the affirmative and negative covenants, and no Default or Event of Default has occurred and is continuing under the Agreement.

SECTION 5.           Fees and Expenses. Sellers agree to pay to Buyer all reasonable fees and out of pocket expenses incurred by Buyer in connection with this Amendment Number One (including all reasonable fees and out of pocket costs and expenses of Buyer’s legal counsel incurred in connection with this Amendment Number One) pursuant to Section 13.02 of the Agreement.

SECTION 6.           Governing Law. This Amendment Number One and any claim, controversy or dispute arising under or related to or in connection with this Amendment Number One, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

SECTION 7.           Counterparts.  This Amendment Number One may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same agreement.  This Amendment Number One, to the extent signed and delivered by facsimile or other electronic means, shall be treated in all manner and respects as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  No signatory to this Amendment Number One shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature or agreement was transmitted or communicated through the use of a facsimile machine or other electronic means as a defense to the formation or enforceability of a contract and each such Person forever waives any such defense.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Sellers and Buyer have caused this Amendment Number One to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Buyer

By:	/s/ Goetz Rokahr
Its:	Goetz Rokahr
Title:	Vice President

[Additional Signature Pages Follow]

Signature Pages to Amendment Number One to Master Repurchase Agreement (WF-PennyMac)

PENNYMAC CORP., as a Seller
By:	/s/ David M. Walker
Its:	David M. Walker
Title:	Chief Credit Officer
PENNYMAC MORTGAGE INVESTMENT
TRUST HOLDINGS I, LLC, as a Seller
By:	/s/ David M. Walker
Its:	David M. Walker
Title:	Chief Credit Officer

Signature Pages to Amendment Number One to Master Repurchase Agreement (WF-PennyMac)

EXHIBIT A

Schedule 7

Reports

Daily Reports

·         Wells NPL Cashbook

Weekly Reports

·         REO Report

·         Wells REMIC Buyout Report

Monthly Reports

·         Full Loan Activity Report (LAR)

·         Wells NPL Repo Servicing Pricing File

Signature Pages to Amendment Number One to Master Repurchase Agreement (WF-PennyMac)

Schedule 8

Schedule of Race-Notice and Notice Jurisdictions

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Signature Pages to Amendment Number One to Master Repurchase Agreement (WF-PennyMac)

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Dakota

Oklahoma

Oregon

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

Signature Pages to Amendment Number One to Master Repurchase Agreement (WF-PennyMac)

EX-10.14

Exhibit 10.14

EXECUTION VERSION

AMENDMENT NUMBER TWO

to the

Master Repurchase Agreement

Dated as of November 2, 2010

among

PENNYMAC CORP.

PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

This AMENDMENT NUMBER TWO is made this 28th day of September, 2011, by and among PENNYMAC CORP., a Delaware corporation, PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC, a Delaware limited liability company (each a “Seller” and collectively the “Sellers”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Buyer”), to the Master Repurchase Agreement, dated as of November 2, 2010, by and among Sellers and Buyer (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”).

WHEREAS, Sellers have requested that Buyer amend the Agreement to modify the definition of Maturity Date, insert a new definition of “Cash Equivalents” and revise the financial covenants thereunder; and

WHEREAS, Sellers and Buyer have agreed to amend the Agreement as set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1.Amendment. Effective as of September 28, 2011 (the “Amendment Effective Date”), the Agreement is hereby amended as follows:

(a)Section 1 of the Agreement is hereby amended by deleting the definition of “Maturity Date” therein in its entirety and replacing it with the following (modified text underlined for review purposes):

“Maturity Date”:  The earliest of (a) January 2, 2012; (b) any Accelerated Repurchase Date and (c) any date on which the Maturity Date shall otherwise occur in accordance with the Repurchase Documents or Requirements of Law.

(b)Section 1 of the Agreement is hereby amended by inserting the following new definition “Cash Equivalents” in the appropriate alphabetical order:

“Cash Equivalents”:  Any overnight bank deposits, securities or other investments held in an account at a commercial bank, the proceeds of which are swept on a daily basis and credited to or for the benefit of the holder of such account.

(c)Section 8.07 of the Agreement is hereby amended by deleting clause (b) thereof in its entirety and replacing it with the following (modified text underlined for review purposes):

(b)Servicer’s unrestricted cash and Cash Equivalents shall at all times be greater than or equal to $2,500,000;

(d)Schedule 1-A to the Agreement is hereby amended by deleting clause (y) thereof in its entirety and replacing it with the following (modified text underlined for review purposes):

(y)Broker Price Opinion.  The related Mortgage Loan Schedule contains a BPO that has been obtained within ninety (90) days preceding the date of the initial Transaction with respect to such Mortgage Loan.  The BPO Value attributable to each Mortgage Loan is not less than $30,000.

SECTION 2.Defined Terms.  Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Agreement.

SECTION 3.Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number Two need not be made in the Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.

SECTION 4.Representations.  In order to induce Buyer to execute and deliver this Amendment Number Two, Sellers hereby represent to Buyer that as of the date hereof, Sellers are in full compliance with all of the terms and conditions of the Agreement, including without limitation, all of the representations and warranties and all of the affirmative and negative covenants, and no Default or Event of Default has occurred and is continuing under the Agreement.

SECTION 5.Fees and Expenses. Sellers agree to pay to Buyer all reasonable fees and out of pocket expenses incurred by Buyer in connection with this Amendment Number Two (including all reasonable fees and out of pocket costs and expenses of Buyer’s legal counsel incurred in connection with this Amendment Number Two) pursuant to Section 13.02 of the Agreement.

SECTION 6.Governing Law. This Amendment Number Two and any claim, controversy or dispute arising under or related to or in connection with this Amendment Number Two, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

SECTION 7.Counterparts.  This Amendment Number Two may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same agreement.  This Amendment Number Two, to the extent signed and delivered by facsimile or other electronic means, shall be treated in all manner and respects as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  No signatory to this Amendment Number Two shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature or agreement was transmitted or communicated through the use of a facsimile machine or other electronic means as a defense to the formation or enforceability of a contract and each such Person forever waives any such defense.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Sellers and Buyer have caused this Amendment Number Two to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Buyer
By:	/s/ Andrew W. Riebe
Its:	Andrew W. Riebe
Title:	Vice President

[Additional Signature Pages Follow]

Signature Pages to Amendment Number Two to Master Repurchase Agreement (WF-PennyMac)

PENNYMAC CORP., as a Seller
By:	/s/ David M. Walker
Its:	David M. Walker
Title:	Chief Credit Officer
PENNYMAC MORTGAGE INVESTMENT
TRUST HOLDINGS I, LLC, as a Seller
By:	/s/ David M. Walker
Its:	David M/ Walker
Title:	Chief Credit Officer

Signature Pages to Amendment Number Two to Master Repurchase Agreement (WF-PennyMac)

EX-10.16

Exhibit 10.16

EXECUTION VERSION

AMENDMENT NUMBER ONE

to the

Guaranty Agreement

Dated as of November 2, 2010

made by

PENNYMAC MORTGAGE INVESTMENT TRUST

in favor of

WELLS FARGO BANK, NATIONAL ASSOCIATION

This AMENDMENT NUMBER ONE is made this 18th day of August, 2011, by and between PENNYMAC MORTGAGE INVESTMENT TRUST, a Maryland real estate investment trust  (“Guarantor”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Buyer”), to the Guaranty Agreement, dated as of November 2, 2010, made by Guarantor in favor of Buyer (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”).

WHEREAS, Guarantor has requested that Buyer amend the Agreement to modify the covenants and certain other provisions thereunder; and

WHEREAS, Guarantor and Buyer have agreed to amend the Agreement as set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1.Amendment. Effective as of August 18, 2011 (the “Amendment Effective Date”), the Agreement is hereby amended as follows:

(a)Section 3(s) of the Agreement is hereby amended and restated in its entirety to read as follows:

(i)Guarantor’s Adjusted Tangible Net Worth is greater than or equal to the sum of (x) $400,000,000 and (y) 75% of the aggregate net proceeds received by Guarantor in connection with any future equity issuances;

(ii)Guarantor’s and its Subsidiaries aggregate unrestricted cash is greater than or equal to $10,000,000; and

(iii)The ratio of Guarantor’s Total Indebtedness to Adjusted Tangible Net Worth is less than 3:1.

(b)Section 4(n) of the Agreement is hereby amended and restated in its entirety to read as follows:

(i)Guarantor’s Adjusted Tangible Net Worth shall at all times be greater than or equal to the sum of (i) $400,000,000 and (ii) 75% of the aggregate net proceeds received by Guarantor in connection with any future equity issuances;

(ii)Guarantor’s and its Subsidiaries aggregate unrestricted cash shall at all times be greater than or equal to $10,000,000; and

(iii)The ratio of Guarantor’s Total Indebtedness to Adjusted Tangible Net Worth shall at all times be less than 3:1.

(c)Section 17 of the Agreement is hereby amended and restated in its entirety to read as follows:

This Guaranty and any claim, controversy or dispute arising under or related to or in connection with this Guaranty, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

SECTION 2.Defined Terms.  Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Agreement.

SECTION 3.Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number One need not be made in the Agreement, the Repurchase Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.

SECTION 4.Representations.  In order to induce Buyer to execute and deliver this Amendment Number One, Guarantor hereby represents to Buyer that as of the date hereof, Guarantor is in full compliance with all of the terms and conditions of the Agreement, including without limitation, all of the representations and warranties and all of the affirmative and negative covenants, and no default has occurred and is continuing under the Agreement.

SECTION 5.Fees and Expenses. Guarantor agrees to cause Sellers to pay to Buyer all reasonable fees and out of pocket expenses incurred by Buyer in connection with this Amendment Number One (including all reasonable fees and out of pocket costs and expenses of Buyer’s legal counsel incurred in connection with this Amendment Number One) pursuant to Section 13.02 of the Repurchase Agreement.

SECTION 6.Governing Law. This Amendment Number One and any claim, controversy or dispute arising under or related to or in connection with this Amendment Number One, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

SECTION 7.Counterparts.  This Amendment Number One may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same agreement.  This Amendment Number One, to the extent signed and delivered by facsimile or other electronic means,

shall be treated in all manner and respects as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  No signatory to this Amendment Number One shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature or agreement was transmitted or communicated through the use of a facsimile machine or other electronic means as a defense to the formation or enforceability of a contract and each such Person forever waives any such defense.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Guarantor and Buyer have caused this Amendment Number One to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Buyer
By:	/s/ Goetz Rokahr
Its:	Goetz Rokahr
Title:	Vice President

[Additional Signature Pages Follow]

Signature Pages to Amendment Number One to Guaranty Agreement (WF-PennyMac)

PENNYMAC MORTGAGE INVESTMENT
TRUST, as Guarantor
By:	/s/ David M. Walker
Its:	David M. Walker
Title:	Chief Credit Officer

Signature Pages to Amendment Number One to Guaranty Agreement (WF-PennyMac)

EX-10.17

Exhibit 10.17

EXECUTION VERSION

AMENDMENT NUMBER TWO

to the

Guaranty Agreement

Dated as of November 2, 2010

made by

PENNYMAC MORTGAGE INVESTMENT TRUST

in favor of

WELLS FARGO BANK, NATIONAL ASSOCIATION

This AMENDMENT NUMBER TWO is made this 28th day of September, 2011, by and between PENNYMAC MORTGAGE INVESTMENT TRUST, a Maryland real estate investment trust  (“Guarantor”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Buyer”), to the Guaranty Agreement, dated as of November 2, 2010, made by Guarantor in favor of Buyer (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”).

WHEREAS, Guarantor has requested that Buyer amend the Agreement to modify the covenants and certain other provisions thereunder; and

WHEREAS, Guarantor and Buyer have agreed to amend the Agreement as set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1.Amendment. Effective as of September 28, 2011 (the “Amendment Effective Date”), the Agreement is hereby amended as follows:

(a)Section 3(s) of the Agreement is hereby amended by deleting clause (ii) thereof in its entirety and replacing it with the following (modified text underlined for review purposes):

(ii)Guarantor’s and its Subsidiaries aggregate unrestricted cash and Cash Equivalents is greater than or equal to $10,000,000; and

(b)Section 4(n) of the Agreement is hereby amended by deleting clause (ii) thereof in its entirety and replacing it with the following (modified text underlined for review purposes):

(ii)Guarantor’s and its Subsidiaries aggregate unrestricted cash and Cash Equivalents shall at all times be greater than or equal to $10,000,000; and

SECTION 2.Defined Terms.  Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Agreement.

SECTION 3.Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number Two need not be made in the Agreement, the Repurchase Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.

SECTION 4.Representations.  In order to induce Buyer to execute and deliver this Amendment Number Two, Guarantor hereby represents to Buyer that as of the date hereof, Guarantor is in

full compliance with all of the terms and conditions of the Agreement, including without limitation, all of the representations and warranties and all of the affirmative and negative covenants, and no default has occurred and is continuing under the Agreement.

SECTION 5.Fees and Expenses. Guarantor agrees to cause Sellers to pay to Buyer all reasonable fees and out of pocket expenses incurred by Buyer in connection with this Amendment Number Two (including all reasonable fees and out of pocket costs and expenses of Buyer’s legal counsel incurred in connection with this Amendment Number Two) pursuant to Section 13.02 of the Repurchase Agreement.

SECTION 6.Governing Law. This Amendment Number Two and any claim, controversy or dispute arising under or related to or in connection with this Amendment Number Two, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

SECTION 7.Counterparts.  This Amendment Number Two may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same agreement.  This Amendment Number Two, to the extent signed and delivered by facsimile or other electronic means, shall be treated in all manner and respects as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  No signatory to this Amendment Number Two shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature or agreement was transmitted or communicated through the use of a facsimile machine or other electronic means as a defense to the formation or enforceability of a contract and each such Person forever waives any such defense.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Guarantor and Buyer have caused this Amendment Number Two to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Buyer
By:	/s/ Andrew W. Riebe
Its:	Andrew W. Riebe
Title:	Director

[Additional Signature Pages Follow]

Signature Pages to Amendment Number Two to Guaranty Agreement (WF-PennyMac)

PENNYMAC MORTGAGE INVESTMENT
TRUST, as Guarantor
By:	/s/ David M. Walker
Its:	David M. Walker
Title:	Chief Credit Officer

Signature Pages to Amendment Number Two to Guaranty Agreement (WF-PennyMac)

EX-10.20

Exhibit 10.20

AMENDMENT NO. 2
TO MASTER REPURCHASE AGREEMENT

Amendment No. 2, dated as of July 14, 2011 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Buyer”), PENNYMAC CORP. (the “Seller”), PennyMac Mortgage Investment Trust (a “Guarantor”) and PennyMac Operating Partnership, L.P (a “Guarantor” and together with the other Guarantor, the “Guarantors”).

RECITALS

The Buyer, the Seller and the Guarantors are parties to that certain Master Repurchase Agreement, dated as of November 2, 2010 (as amended, the “Existing Repurchase Agreement”; and as further amended by this Amendment, the “Repurchase Agreement”).  The Guarantors are parties to that certain Guaranty (the “Guaranty”), dated as of November 2, 2010, as the same may be further amended from time to time, by the Guarantors in favor of Buyer.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Guaranty, as applicable.

The Buyer, the Seller and the Guarantors have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.  As a condition precedent to amending the Existing Repurchase Agreement, the Buyer has required the Guarantors to ratify and affirm the Guaranty on the date hereof.

Accordingly, the Buyer, the Seller and the Guarantors hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:

SECTION 1.           Definitions.  Section 2 of the Existing Repurchase Agreement is hereby amended by:

1.1           Adding the following definitions of “Jumbo Prime Mortgage Loan” and “Jumbo Traditional Mortgage Loan” in their proper alphabetical order:

“Jumbo Prime Mortgage Loan” means a Mortgage Loan originated in accordance with the guidelines set forth on Exhibit K attached hereto.

“Jumbo Traditional Mortgage Loan” means a Mortgage Loan with an outstanding principal balance in an amount in excess of the conventional conforming limits which is also eligible for purchase by Buyer, Buyer’s Affiliates or any other national residential mortgage lender acceptable to Buyer in its sole discretion.

1.2           Deleting the definitions of “Governmental Event” and “Jumbo Mortgage Loan” in their entirety and replacing them with the following:

“Governmental Event” means (i) Seller’s failure to obtain licensing from any Governmental Authority where it is required to be licensed and such failure to be licensed and requirement to be licensed continue for 30 days following notice to or knowledge thereof by Seller, (ii) the imposition of material sanctions on Seller from any Governmental Authority, or (iii) any material dispute, litigation, investigation, proceeding or suspension between Seller and any Governmental Authority or any Person.

“Jumbo Mortgage Loan” means a Jumbo Prime Mortgage Loan or a Jumbo Traditional Mortgage Loan.

SECTION 2.           Covenants.  Section 14 of the Existing Repurchase Agreement is hereby amended by deleting Sections 14.j., 14.n. and 14.o. in their entirety and replacing them as set forth below:

j.              Approvals.  Seller shall maintain all licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Agreements, and Seller shall conduct its business in all material respects in accordance with applicable law.

n.             Applicable Law.  Seller and each Guarantor shall comply in all material respects with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.

o.             Existence.  Seller and the Guarantors shall preserve and maintain their legal existence and all of their material rights, privileges, material licenses and franchises.

SECTION 3.           Events of Default.  Section 15 of the Existing Repurchase Agreement is hereby amended by deleting Sections 15.f. and 15.h. in their entirety and replacing them with the following:

f.              Breach of Specified Representation or Covenant or Obligation. A breach by Seller or either Guarantor of any of the representations, warranties or covenants or obligations set forth (i) in Sections 13(a)(1), 13(a)(7), 13(a)(12), 13(a)(19), 14b, 14m, 14o, 14s, or 14z of this Agreement or (ii) Sections  13(a)(23), 14t, 14dd or 14ee of this Agreement and such breach identified in this clause (ii) shall remain unremedied for one Business Day.

h.             Breach of Non-Specified Representation or Covenant.  A breach by Seller or any Guarantor of any other representation, warranty or covenant set forth in this Agreement in any material respect (and not otherwise specified in Sections 15(f) and (g) above), if such breach is not cured within five (5) Business Days (other than the representations and warranties set forth in Schedule 1, which shall be considered solely for the purpose of determining the Market Value, the existence of a Margin Deficit and the obligation to repurchase such Purchased Mortgage Loan) unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Buyer in its sole discretion to be materially false or misleading on a regular basis, or (iii) Buyer, in its sole discretion, determines that such

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breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party, its Subsidiaries or Affiliates; or (B) Buyer’s determination to enter into this Agreement or Transactions or Purchase Price Increases, as applicable, with such party, then such breach shall constitute an immediate Event of Default and Seller shall have no cure right hereunder).

SECTION 4.           Exhibits.  The Existing Repurchase Agreement is hereby amended by adding the attached Exhibit A as Exhibit K to the Agreement.

SECTION 5.           Conditions Precedent.  This Amendment shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction of the following conditions precedent:

5.1           Delivered Documents.  On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:

(a)           this Amendment, executed and delivered by duly authorized officers of the Buyer, the Seller and the Guarantors; and

(b)           such other documents as the Buyer or counsel to the Buyer may reasonably request.

SECTION 6.           Representations and Warranties.  Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Existing Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred and is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Existing Repurchase Agreement.

SECTION 7.           Limited Effect.  Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms and the execution of this Amendment by the Buyer.

SECTION 8.           Counterparts.  This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.

SECTION 9.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

SECTION 10.         Reaffirmation of Guaranty.  The Guarantors hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of Seller to Buyer under the Repurchase Agreement, as amended hereby.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer
By:	/s/ A. Adam Loskove
	Name:	A. Adam Loskove
	Title:	Vice President
PennyMac Corp., as Seller
By:	/s/ David M. Walker
	Name:	David M. Walker
	Title:	Chief Credit Officer
PennyMac Mortgage Investment Trust, as Guarantor
By:	/s/ David M. Walker
	Name:	David M. Walker
	Title:	Chief Credit Officer
PennyMac Operating Partnership, L.P., as Guarantor
By:	PennyMac GP OP, Inc., its General Partner
By:	/s/ David M. Walker
	Name:	David M. Walker
	Title:	Chief Credit Officer

Exhibit A

Exhibit K

JUMBO PRIME MORTGAGE LOAN GUIDELINES

EX-10.21

Exhibit 10.21

AMENDMENT NO. 3
TO MASTER REPURCHASE AGREEMENT

Amendment No. 3, dated as of October 7, 2011 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Buyer”), PENNYMAC CORP. (the “Seller”), PENNYMAC MORTGAGE INVESTMENT TRUST (a “Guarantor”) and PENNYMAC OPERATING PARTNERSHIP, L.P (a “Guarantor” and together with the other Guarantor, the “Guarantors”).

RECITALS

The Buyer, the Seller and the Guarantors are parties to that certain Master Repurchase Agreement, dated as of November 2, 2010 (as amended, the “Existing Repurchase Agreement”; and as further amended by this Amendment, the “Repurchase Agreement”).  The Guarantors are parties to that certain Guaranty (the “Guaranty”), dated as of November 2, 2010, as the same may be further amended from time to time, by the Guarantors in favor of Buyer.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Guaranty, as applicable.

The Buyer, the Seller and the Guarantors have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.  As a condition precedent to amending the Existing Repurchase Agreement, the Buyer has required the Guarantors to ratify and affirm the Guaranty on the date hereof.

Accordingly, the Buyer, the Seller and the Guarantors hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:

SECTION 1.           Definitions.  Section 2 of the Existing Repurchase Agreement is hereby amended by:

1.1           adding, in the proper alphabetical order, the terms “Pooled Mortgage Loan” and “Trade Assignment” as set forth below:

“Pooled Mortgage Loan” means any Purchased Mortgage Loan that is subject to a Transaction hereunder and is part of a pool of Purchased Mortgage Loans certified by Custodian to an Agency to be either (a) purchased by such Agency or (b) swapped for an Agency Security backed by such pool, in each case, in accordance with the terms of the guidelines issued by the applicable Agency.

“Trade Assignment” means an assignment to Buyer of a forward trade between a Takeout Investor and Seller with respect to one or more Purchased Mortgage Loans that are Pooled Mortgage Loans substantially in the form of Exhibit K hereto.

1.2           deleting the definitions of “Aged Loans” and “Mortgage Loan” in their entirety and replacing them with the following:

“Aged Loan” means, other than with respect to Pooled Mortgage Loans, an Aged 60 Day Loan or an Aged 90 Day Loan.

“Mortgage Loan” means any first lien closed Conforming Mortgage Loan, Pooled Mortgage Loan, FHA Loan, VA Loan or Jumbo Mortgage Loan which is a fixed or floating-rate, one-to-four-family residential mortgage loan evidenced by a promissory note and secured by a first lien mortgage.

SECTION 2.           Pooled Mortgage Loans; Conditions Precedent.  Section 10(b) of the Existing Master Repurchase Agreement is hereby amended by adding subsection (9) thereto with the following

(9) Pooled Mortgage Loans.  Solely with respect to Transactions the subject of which are Pooled Mortgage Loans, Buyer shall have received the related Trade Assignment on or prior to the Purchase Date with respect thereto.

SECTION 3.           Exhibits. The Existing Master Repurchase Agreement is hereby amended by adding Exhibit K thereto with Exhibit A hereto.

SECTION 4.           Conditions Precedent.  This Amendment shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction of the following conditions precedent:

4.1           Delivered Documents.  On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:

(a)           this Amendment, executed and delivered by duly authorized officers of the Buyer, the Seller and the Guarantors; and

(b)           such other documents as the Buyer or counsel to the Buyer may reasonably request.

SECTION 5.           Representations and Warranties.  Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Existing Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred and is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Existing Repurchase Agreement.

SECTION 6.           Limited Effect.  Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms and the execution of this Amendment by the Buyer.

SECTION 7.           Counterparts.  This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.

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SECTION 8.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

SECTION 9.           Reaffirmation of Guaranty.  The Guarantors hereby ratify and affirm all of the terms, covenants, conditions and obligations of the Guaranty and acknowledge and agree that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of Seller to Buyer under the Repurchase Agreement, as amended hereby.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer
By:	/s/ A. Adam Loskove
	Name: A. Adam Loskove
	Title:   Vice President
PennyMac Corp., as Seller
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:   Chief Credit Officer
PennyMac Mortgage Investment Trust, as Guarantor
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:   Chief Credit Officer
PennyMac Operating Partnership, L.P., as Guarantor
By: PennyMac GP OP, Inc., its General Partner
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:    Chief Credit Officer

Exhibit A to Amendment No. 1

Exhibit K

FORM OF TRADE ASSIGNMENT

[NAME] (“Takeout Investor”)
[Address]

[Address]

Attention: [    ]

[DATE]

Ladies and Gentlemen:

Attached hereto is a correct and complete copy of your confirmation of commitment (the “Commitment”) for the following security (the “Security”):

Trade Date:	[    ]
Settlement Date:	[    ]
Security Description:	[    ]
Coupon:	[    ]
Price:	[    ]
Par Amount:	[    ]
Pool Number:	[    ]

The undersigned customer (the “Customer”) has assigned the Security to Credit Suisse First Boston Mortgage Capital LLC (“Credit Suisse”) as security for Customer’s Obligations under the Master Repurchase Agreement, as amended (the “Agreement”), by and between Customer and Credit Suisse.

This is to confirm that (i) Takeout Investor’s obligation to purchase the Security on the above terms in accordance with the Commitment is in full force and effect, (ii) Takeout Investor will accept delivery of the Security directly from Credit Suisse, (iii) Takeout Investor will pay Credit Suisse for the Security, (iv) Customer unconditionally guarantees payment to Credit Suisse of all sums due under the Commitment, (v) Credit Suisse shall deliver the Security to Takeout Investor on the above terms and in accordance with the Commitment.  Payment will be made “delivery versus payment” to Takeout Investor in immediately available funds. Capitalized terms used, but not otherwise defined herein, shall have the respective meanings assigned to such terms in the Agreement.

Very truly yours,	Agreed to, confirmed and accepted:
	[TAKEOUT INVESTOR]
[CUSTOMER]
	By:
By:	Name:
Name:	Title:
Title:

EX-10.22

Exhibit 10.22

AMENDMENT NO. 4
TO MASTER REPURCHASE AGREEMENT

Amendment No. 4, dated as of November 1, 2011 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Buyer”), PENNYMAC CORP. (the “Seller”), PENNYMAC MORTGAGE INVESTMENT TRUST (a “Guarantor”) and PENNYMAC OPERATING PARTNERSHIP, L.P (a “Guarantor” and together with the other Guarantor, the “Guarantors”).

RECITALS

The Buyer, the Seller and the Guarantors are parties to that certain Master Repurchase Agreement, dated as of November 2, 2010 (as amended, the “Existing Repurchase Agreement”; and as further amended by this Amendment, the “Repurchase Agreement”).  The Guarantors are parties to that certain Guaranty (the “Guaranty”), dated as of November 2, 2010, as the same may be further amended from time to time, by the Guarantors in favor of Buyer.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Guaranty, as applicable.

The Buyer, the Seller and the Guarantors have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.  As a condition precedent to amending the Existing Repurchase Agreement, the Buyer has required the Guarantors to ratify and affirm the Guaranty on the date hereof.

Accordingly, the Buyer, the Seller and the Guarantors hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:

SECTION 1.           Definitions.  Section 2 of the Existing Repurchase Agreement is hereby amended by deleting the definitions of “Maximum Committed Purchase Price” and “Termination Date” in their entirety and replacing them with the following:

“Maximum Committed Purchase Price” means ONE-HUNDRED FIFTY MILLION DOLLARS ($150,000,000).

“Termination Date” means the earlier of (a) October 30, 2012, and (b) the date of the occurrence of an Event of Default.

SECTION 2.           Reports.  Section 17 of the Existing Repurchase Agreement is hereby amended by deleting subsection (b)(1) in its entirety and replacing it with the following:

(1)           as soon as available and in any event within forty (40) calendar days after the end of each calendar month, the unaudited consolidated balance sheets of Seller and PennyMac Mortgage Investment Trust and their consolidated Subsidiaries as at the end of such period and the related unaudited consolidated statements of income and retained earnings for the Seller and PennyMac Mortgage Investment Trust and their consolidated

Subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Seller and PennyMac Mortgage Investment Trust, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Seller and PennyMac Mortgage Investment Trust and their consolidated Subsidiaries in accordance with GAAP (other than solely with respect to footnotes, year-end adjustments and cash flow statements) consistently applied, as at the end of, and for, such period;

SECTION 3.           Conditions Precedent.  This Amendment shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction of the following conditions precedent:

3.1           Delivered Documents.  On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:

(a)           this Amendment, executed and delivered by duly authorized officers of the Buyer, the Seller and the Guarantors; and

(b)           such other documents as the Buyer or counsel to the Buyer may reasonably request.

SECTION 4.           Representations and Warranties.  Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Existing Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred and is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Existing Repurchase Agreement.

SECTION 5.           Limited Effect.  Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms and the execution of this Amendment by the Buyer.

SECTION 6.           Counterparts.  This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.

SECTION 7.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

SECTION 8.           Reaffirmation of Guaranty.  The Guarantors hereby ratify and affirm all of the terms, covenants, conditions and obligations of the Guaranty and acknowledge and agree that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of Seller to Buyer under the Repurchase Agreement, as amended hereby.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer
By:	/s/ A. Adam Loskove
	Name: A. Adam Loskove
	Title:  Vice President
PennyMac Corp., as Seller
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:   Chief Credit Officer
PennyMac Mortgage Investment Trust, as Guarantor
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:   Chief Credit Officer
PennyMac Operating Partnership, L.P., as Guarantor
By: PennyMac GP OP, Inc., its General Partner
By:	/s/ David M. Walker
	Name: David M. Walker
	Title:   Chief Credit Officer

EX-10.28

Exhibit 10.28

EXECUTION VERSION

AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as buyer
(“Buyer”), and

PENNYMAC CORP., and PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC, each a seller (collectively, the “Sellers”), and

PENNYMAC MORTGAGE INVESTMENT TRUST (“Guarantor”)

Dated August 25, 2011

TABLE OF CONTENTS

		Page
1.	Applicability	1
2.	Definitions	2
3.	Program; Initiation of Transactions; Purchase Price Increases	21
4.	Repurchase; Release Price; Conversion to REO Property	24
5.	Price Differential	26
6.	Margin Maintenance	27
7.	Income Payments	28
8.	Conveyance; Security Interest; REO Property	29
9.	Payment and Transfer	32
10.	Conditions Precedent	33
11.	Program; Costs	36
12.	Servicing	38
13.	Representations and Warranties	39
14.	Covenants	46
15.	Events of Default	53
16.	Remedies Upon Default	56
17.	Reports	60
18.	Repurchase Transactions	63
19.	Single Agreement	63
20.	Notices and Other Communications	64
21.	Entire Agreement; Severability	66
22.	Non assignability	66

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23.	Set-off	67
24.	Binding Effect; Governing Law; Jurisdiction	67
25.	No Waivers, Etc.	68
26.	Intent	68
27.	Disclosure Relating to Certain Federal Protections	69
28.	Power of Attorney	69
29.	Buyer May Act Through Affiliates	70
30.	Indemnification; Obligations	70
31.	Counterparts	71
32.	Confidentiality	71
33.	Recording of Communications	72
34.	Commitment Fee	72
35.	Reserved	72
36.	Periodic Due Diligence Review	72
37.	Authorizations	73
38.	Acknowledgement Of Anti-Predatory Lending Policies	73
39.	Documents Mutually Drafted	73
40.	General Interpretive Principles	73
41.	Joint and Several	74
42.	Amendment and Restatement	74
43.	Reaffirmation of Guaranty	74
SCHEDULES
Schedule 1 - Representations and Warranties with Respect to Purchased Assets
Schedule 2 — Authorized Representatives
EXHIBITS

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Exhibit A — Reserved

Exhibit B — Reserved

Exhibit C — Form of Servicing Renewal Letter

Exhibit D — Form of Seller Power of Attorney

Exhibit E-1 — Form of Servicer Power of Attorney

Exhibit E-2 — Form of REO Subsidiary Power of Attorney

Exhibit E-3 — Form of Trust Subsidiary Power of Attorney

Exhibit F — Officer’s Certificate

Exhibit G — Sellers’ and Guarantor’s Tax Identification Numbers

Exhibit H — Existing Indebtedness

Exhibit I — State Specific Foreclosure Aging Timeline

Exhibit J — State Specific REO Disposition Timeline

Exhibit K — State Specific REO Recording Timeline

Exhibit L-1 — Form of Servicer Notice and Pledge

Exhibit L-2 — Form of Servicer Notice

Exhibit M — Loan Activity Report

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This is an AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, dated as of August 25, 2011, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Buyer”), PENNYMAC CORP., and PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC (each a “Seller” and collectively, the “Sellers”), and PENNYMAC MORTGAGE INVESTMENT TRUST (the “Guarantor”).

The Buyer, the Guarantor and the Sellers previously entered into a Master Repurchase Agreement, dated as of June 8, 2011 (the “Existing Master Repurchase Agreement”).

The parties hereto have requested that the Existing Master Repurchase Agreement be amended and restated, in its entirety, on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.     Applicability

From time to time the parties hereto may enter into transactions in which the applicable Seller agrees to transfer to Buyer Mortgage Loans (as hereinafter defined) on a servicing released basis and the Trust Interests against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to the applicable Seller such Purchased Mortgage Loans on a servicing released basis and the Trust Interests against the transfer of funds by Sellers.  From time to time, the Sellers may request Purchase Price Increases for the Transaction involving the Trust Interests in conjunction with the transfer of an REO Property to the REO Subsidiary or any Trust Subsidiary or Trust Mortgage Loans to any Trust Subsidiary, as applicable, as a result of the increase in Market Value of the Trust Interests. From time to time, the Sellers may request a release of REO Property from the REO Subsidiary or any Trust Subsidiary or Trust Mortgage Loans from a Trust Subsidiary, as applicable, in conjunction with a Mandatory Partial Prepayment as a result of the decrease in Market Value of the Trust Interests in connection therewith.  This Agreement is a commitment by Buyer to engage in the Transactions (and requests for Purchase Price Increases, from time to time) as set forth herein up to the Maximum Committed Purchase Price; provided, that Buyer shall have no commitment to enter into any Transaction or agree to any Purchase Price Increase requested that would result in the aggregate Purchase Price of then-outstanding Transactions to exceed the Maximum Committed Purchase Price.  Each such transaction involving the transfer of Mortgage Loans or the transfer of the Trust Interests shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder.

On the Initial Purchase Date, Buyer purchased the Trust Interests with respect to the REO Subsidiary from PennyMac Corp. in connection with the initial Transaction and, on the Amendment Purchase Date, Buyer will purchase the Trust Interests with respect to SWDNSI Trust Series 2010-3 from PennyMac Corp. and SWDNSI Trust Series 2010-4 from PennyMac Holdings in connection with the Transaction on such date.  On subsequent Purchase Dates,

Buyer will subject to the terms and conditions of this Agreement purchase additional Trust Interests.

After the Initial Purchase Date, as part of a Purchase Price Increase Request, Sellers may request and Buyer will fund, subject to the terms and conditions of this Agreement, an increase in the Purchase Price for the Transactions in respect of the Trust Interests based upon the acquisition of additional REO Properties by the REO Subsidiary or a Trust Subsidiary, or additional Trust Mortgage Loans by a Trust Subsidiary, as applicable.  From time to time, the Sellers will pay a Mandatory Partial Prepayment to Buyer in accordance with Section 4(b) hereof.

2.     Definitions

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

“Acceptable State” means any state acceptable to Buyer.

“Accepted Servicing Practices” means, with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, those mortgage servicing practices or property management practices, as applicable, of prudent mortgage lending institutions which service mortgage loans and manage real estate properties, as applicable, of the same type as such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, as applicable, in the jurisdiction where the related Mortgaged Property or REO Property is located.

“Accrual Period” means with respect to any Payment Date, the period from and including the last Payment Date to but excluding the next Payment Date.  Buyer shall provide notice to Sellers of interest accrued during the applicable Accrual Period one Business Day prior to the applicable Payment Date.

“Act” has the meaning set forth in Section 32(b) hereof.

“Act of Insolvency” means, with respect to any Person or its Affiliates, (a) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (b) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (c) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (d) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (e) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (f) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management

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of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.

“Acquisition Guidelines” means the standards, procedures and guidelines of Sellers for acquiring Mortgage Loans and REO Properties, as applicable, in general conformance with such Seller’s due diligence protocols for the purchase of Mortgage Loans or REO Properties, as applicable, as previously provided to Buyer.

“Adjusted Tangible Net Worth” means (a) the sum of (i) Net Worth and (ii) Subordinated Debt, minus (b) intangibles and goodwill.

“Affected Transaction” has the meaning set forth in Section 4(e) hereof.

“Affiliate” means, with respect to any Person, any “affiliate” of such Person, as such term is defined in the Bankruptcy Code; provided, however, that any entity that is otherwise not directly or indirectly owned or controlled by any Seller or Guarantor shall not be deemed an “Affiliate” for the purposes of this definition.  For the avoidance of doubt, the term “Affiliate” as used herein shall include only PennyMac Mortgage Investment Trust and its Subsidiaries.

“Agency” means Freddie Mac, Fannie Mae or GNMA, as applicable.

“Agreement” means this Amended and Restated Master Repurchase Agreement, as it may be amended, supplemented or otherwise modified from time to time.

“Amendment Purchase Date” means a date mutually agreed by Buyer and each Seller in writing as evidenced by a Transaction Request following the date hereof.

“Ancillary Income” means all income derived from the Purchased Mortgage Loans or Trust Mortgage Loans (other than payments or other collections in respect of principal, interest and escrow payments attributable to the Purchased Mortgage Loans or Trust Mortgage Loans) including, but not limited to, late charges, all interest received on funds deposited in the Collection Account, any Trust Account or REO Account, as applicable, reconveyance fees, subordination fees, speedpay fees, mortgage pay on the web fees, automatic clearing house fees, demand statement fees, modification fees, if any, fees received with respect to checks on bank drafts returned by the related bank for insufficient funds, assumption fees and other similar types of fees arising from or in connection with any Purchased Mortgage Loan or Trust Mortgage Loan to the extent not otherwise payable to the Mortgagor under applicable law or pursuant to the terms of the related Mortgage Note.

“Asset Documents” means the documents in the related Asset File to be delivered to the Custodian.

“Asset File” means, with respect to each Purchased Asset, Trust Mortgage Loan or REO Property, the documents and instruments relating to such Purchased Asset, Trust Mortgage Loan or REO Property, as applicable, and set forth in an exhibit to the Custodial Agreement.

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“Asset Schedule” means, with respect to any Transaction as of any date, an Asset Schedule in the form prescribed by the Custodial Agreement.

“Attorney Bailee Letter” means a bailee letter substantially in the form prescribed by the Custodial Agreement or otherwise approved in writing by Buyer.

“Bailee Letter” has the meaning assigned to such term in the Custodial Agreement.

“Bank” means City National Bank and any successor or assign.

“Bankruptcy Code” means the United States Bankruptcy Code of 1978, as amended from time to time.

“BPO” means an opinion of the fair market value of a Mortgaged Property or parcel of real property given by a licensed real estate agent or broker in conformity with customary and usual business practices, which includes comparable sales and comparable listings; provided that no BPO shall be valid if it is dated earlier than 180 days prior to the date of determination.

“Business Day” means any day other than (A) a Saturday or Sunday and (B) a public or bank holiday in New York City.

“Buydown Amount” has the meaning set forth in Section 5(c) hereof.

“Buyer” means Credit Suisse First Boston Mortgage Capital LLC, and any successor or assign hereunder.

“Buyer’s Margin Amount” means with respect to any Purchased Mortgage Loan, Trust Interests, Trust Mortgage Loan or REO Property, as applicable, without duplication, as of any date of determination, an amount equal to the product of (a) Buyer’s Margin Percentage and (b) the Purchase Price for such Purchased Mortgage Loan, Trust Interests, or Purchase Price Increase, for such REO Property or Trust Mortgage Loan, as applicable.

“Buyer’s Margin Percentage” means, with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, as applicable, as of any date, a percentage equal to the percentage obtained by dividing the (a) Market Value of the related Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, as applicable, on the Purchase Date or Purchase Price Increase Date, as applicable, by (b) the Purchase Price on the Purchase Date or Purchase Price Increase Date, as applicable, for such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property; provided, that, with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property which was one Category on the related Purchase Date or Purchase Price Increase Date, as applicable, and which, as of the date of determination, is a different Category, Buyer’s Margin Percentage as of such date of determination shall be equal to the percentage obtained by dividing (a) the Market Value of such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property on the related Purchase Date or Purchase Price Increase Date, as applicable, by (b) the amount the Purchase Price would have been on the Purchase Date or Purchase Price Increase Date, as applicable, if such Purchased Mortgage Loan, Trust Mortgage

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Loan or REO Property had been in the Category of asset (e.g., Eligible REO Property, etc.) that it is categorized on the date of determination.

“Capital Lease Obligations” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“Cash Equivalents” means  (a) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90 days or less from the date of acquisition and overnight bank deposits of Buyer or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of Buyer or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody’s and in either case maturing within 90 days after the day of acquisition, (e) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of 90 days or less from the date of acquisition backed by standby letters of credit issued by Buyer or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.

“Category” means the category or type of Purchased Mortgage Loan, Trust Mortgage Loan or REO Property as delineated in the definition of Purchase Price Percentage.

“Change in Control” means:

(a)           any transaction or event as a result of which PennyMac Operating Partnership, L.P. ceases to own, beneficially or of record, 100% of the stock of PennyMac Corp. or PennyMac Holdings;

(b)           any transaction or event as a result of which PennyMac Mortgage Investment Trust ceases to own, directly or indirectly and beneficially or of record, 100% of the partnership interests of PennyMac Operating Partnership, L.P.;

(c)           the acquisition by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission thereunder), directly or indirectly, beneficially or of record, of

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ownership or control of in excess of 50% of the voting common stock of PennyMac Mortgage Investment Trust on a fully diluted basis at any time;

(d)           the sale, transfer, or other disposition of all or substantially all of any Seller’s or Guarantor’s assets (excluding any such action taken in connection with any securitization transaction); or

(e)           the consummation of a merger or consolidation of either Seller or Guarantor with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s stock outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders of such Seller or Guarantor immediately prior to such merger, consolidation or other reorganization.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collection Account” means each account established at the Bank into which all Income other than REO Subsidiary Income and Trust Income shall be deposited, each of which shall be subject to a Collection Account Control Agreement.

“Collection Account Control Agreement” means a letter agreement among Sellers, PennyMac Loan Services, LLC, Buyer, City National Securities, Inc. and Bank in form and substance reasonably acceptable to Buyer, as it may be amended, supplemented or otherwise modified from time to time.

“Commitment Fee” has the meaning assigned to such term in the Pricing Side Letter.

“Confidential Information” has the meaning specified in Section 32(b) hereof.

“Confirmation Statement and Instruction Agreement” means the confirmation statement in the form of Annex A to Exhibit A hereto.

“CSCOF” means, in the Buyer’s sole discretion, which may be confirmed by notice to the Sellers (which may be electronic), for each day, the rate of interest (calculated on a per annum basis) determined by Buyer (which such determination shall be dispositive absent manifest error), equal to the overnight interest expense incurred by Buyer for borrowing funds.

“Custodial Agreement” means the amended and restated custodial agreement, dated as of the date hereof, among Sellers, Buyer and Custodian, as it may be amended, supplemented or otherwise modified from time to time.

“Custodial Asset Schedule” has the meaning assigned to such term in the Custodial Agreement.

“Custodian” means Deutsche Bank Trust Company Americas or such other party specified by Buyer and agreed to by Sellers, which approval shall not be unreasonably withheld.

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“Deed” means the deed issued in connection with a foreclosure sale of a Mortgaged Property or in connection with receiving a deed in lieu of foreclosure evidencing title to the related REO Property.

“Default” means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

“Dollars” and “$” means dollars in lawful currency of the United States of America.

“EDGAR” means the Electronic Data-Gathering, Analysis, and Retrieval system maintained by the SEC.

“Effective Date” means the date upon which the conditions precedent set forth in Section 10 shall have been satisfied.

“Electronic Tracking Agreement” means each of those certain Electronic Tracking Agreements among Buyer, the applicable Seller, MERS and MERSCORP, Inc., and those certain Electronic Tracking Agreements among Buyer, the applicable Seller, Citibank, N.A., as certificate trustee, MERS and MERSCORP, Inc., in each case as it may be amended, supplemented or otherwise modified from time to time.

“Eligible Mortgage Loan” means (i) with respect to Purchased Mortgage Loans, a Mortgage Loan that satisfies the Acquisition Guidelines and representations and warranties set forth on Schedule 1-A with respect thereto and (ii) with respect to Trust Mortgage Loans, a Mortgage Loan that satisfies the Acquisition Guidelines and representations and warranties set forth on Schedule 1-A with respect thereto.

“Eligible REO Property” means an REO Property that satisfies the Acquisition Guidelines and the applicable representations and warranties set forth on Schedule 1-B with respect thereto.

“Eligible Trust Interest” means the Trust Interest that satisfies the applicable representations and warranties set forth on Schedule 1-C with respect thereto.

“EO13224” has the meaning specified in Section 13(a)(27) hereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any corporation or trade or business that, together with Sellers or Guarantor is a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Section 414 of the Code or Section 4001 of ERISA.

“Event of Default” has the meaning specified in Section 15 hereof.

“Event of Termination” means with respect to Sellers or Guarantor (a) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the

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PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified with 30 days of the occurrence of such event, or (b) the withdrawal of any Seller, Guarantor or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (c) the failure by any Seller, Guarantor or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code (or Section 430 (j) of the Code as amended by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303 (j) of ERISA, as amended by the Pension Protection Act), or (d) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by any Seller, Guarantor or any ERISA Affiliate thereof to terminate any plan, or (e) the failure to meet requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (f) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (g) the receipt by any Seller, Guarantor or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (f) has been taken by the PBGC with respect to such Multiemployer Plan, or (h) any event or circumstance exists which may reasonably be expected to constitute grounds for any Seller, Guarantor or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412 (b) or 430 (k) of the Code with respect to any Plan.

“Excluded Taxes” means (a) income Taxes based on (or measured by) net income or net profits (or franchise taxes imposed in lieu of net income Taxes) that are imposed on Buyer or other recipient of any payment hereunder as a result of a present or former connection between such Buyer or other recipient and the jurisdiction of the governmental authority imposing such Tax or any political subdivision or Taxing authority thereof, (b) any branch profits Taxes that are imposed on Buyer or other recipient of any payment hereunder by any jurisdiction described in clause (a) above, (c) any Tax imposed on Buyer or other recipient of a payment hereunder that is attributable to such Buyer’s or other recipient’s failure to comply with relevant requirements set forth in Section 11(e), and (d) any withholding Tax that is imposed on amounts payable to Buyer or other recipient of a payment hereunder on the date such person becomes a party to or under this Agreement.

“Existing Indebtedness” has the meaning specified in Section 13(a)(23) hereof.

“Fannie Mae” means the Federal National Mortgage Association or any successor thereto.

“FDIA” has the meaning specified in Section 26(c) hereof.

“FDICIA” has the meaning specified in Section 26(d) hereof.

“FICO” means Fair Isaac & Co., or any successor thereto.

“Fidelity Insurance” means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary,

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property (other than money and securities) and computer fraud in an aggregate amount acceptable to Sellers’ regulators.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation or any successor thereto.

“GAAP” means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.

“GNMA” means the Government National Mortgage Association and any successor thereto.

“Government Security” means securities, bonds, notes and other debt instruments sold by and guaranteed by the United States government to finance its borrowings.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over any Seller, Guarantor or Buyer, as applicable.

“Governmental Event” means (i) any Seller’s failure to obtain licensing from any Governmental Authority where it is required to be licensed and such failure to be licensed and requirement to be licensed continue for 30 days following notice to or knowledge thereof by such Seller, (ii) the imposition of material sanctions on any Seller from any Governmental Authority, or (iii) any material dispute, litigation, investigation, proceeding or suspension between any Seller and any Governmental Authority or any Person.

“Guarantee” means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgaged Property, to the extent required by Buyer.  The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.  The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

“Guarantor” means PennyMac Mortgage Investment Trust, in its capacity as guarantor under the Guaranty.

“Guaranty” means the guaranty of the Guarantor, dated as of June 8, 2011 as the same may be amended from time to time, pursuant to which Guarantor fully and unconditionally guarantees the obligations of Sellers hereunder as it may be amended, supplemented or otherwise modified from time to time.

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“High Cost Mortgage Loan” means a Mortgage Loan classified as (a) a “high cost” loan under the Home Ownership and Equity Protection Act of 1994 or (b) a “high cost,” “threshold,” “covered,” or “predatory” loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).

“Income” means, with respect to any Purchased Mortgage Loan, Trust Interest, Trust Mortgage Loan, or REO Property, without duplication, all principal and income or dividends or distributions received with respect to such Purchased Mortgage Loan, Trust Interest, Trust Mortgage Loan, or REO Property, including any sale or liquidation premiums, Liquidation Proceeds, insurance proceeds, interest, dividends or other distributions payable thereon or any fees or payments of any kind received by the related Servicer.  For the avoidance of doubt, Income shall include Ancillary Income.

“Indebtedness” means, for any Person: at any time, and only to the extent outstanding at such time: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements, including, without limitation, any Indebtedness arising hereunder; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness of general partnerships of which such Person is a general partner and (j) with respect to clauses (a)-(i) above both on and off balance sheet.

“Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.

“Initial Purchase Date” means June 8, 2011.

“Interior Access REO Property” means an REO Property for which any Seller has interior access and has failed to provide within 30 days of obtaining such interior access, an updated BPO for such REO Property taking into account the interior inspection thereof.

“Lien” means any mortgage, lien, pledge, charge, security interest or similar encumbrance.

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“Liquidated Asset” means (i) a Purchased Mortgage Loan or Trust Mortgage Loan, as applicable, that has been sold or refinanced or was subject to a short sale or with respect to which the Mortgaged Property has been sold or (ii) a REO Property that has been sold.

“Liquidation Proceeds” means, for any Purchased Mortgage Loan, Trust Mortgage Loan, or REO Property that becomes a Liquidated Asset, the proceeds received on account of the liquidation of such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property.

“Loan to Value Ratio” or “LTV” means with respect to any Purchased Mortgage Loan or Trust Mortgage Loan, the ratio of the outstanding principal amount of such Purchased Mortgage Loan or Trust Mortgage Loan, as applicable, as of the Purchase Date to the BPO of the Mortgaged Property.

“Low Percentage Margin Call” has the meaning specified in Section 6(b) hereof.

“Mandatory Partial Prepayment” has the meaning specified in Section 4(b) hereof.

“Mandatory Partial Prepayment Date” has the meaning specified in Section 4(b) hereof.

“Margin Call” has the meaning specified in Section 6(a) hereof.

“Margin Deadline” has the meaning specified in Section 6(b) hereof.

“Margin Deficit” has the meaning specified in Section 6(a) hereof.

“Market Value” has the meaning assigned to such term in the Pricing Side Letter.

“Master Trust Agreement” means that certain Master Trust Agreement, dated as of December 15, 2010, among PNMAC Mortgage Opportunity Fund Investors, LLC, PNMAC Mortgage Co., LLC, PennyMac Corp., PennyMac Holdings, Citibank, N.A., and Citigroup Trust-Delaware, N.A., as the same may be amended, supplemented or otherwise modified from time to time.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of any Seller, Guarantor, REO Subsidiary, any Trust Subsidiary or any Affiliate that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of any Seller, Guarantor, REO Subsidiary, any Trust Subsidiary or any Affiliate that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against any Seller, Guarantor, REO Subsidiary, any Trust Subsidiary or any Affiliate that is a party to any Program Agreement, in each case as determined by the Buyer in its sole good faith discretion.

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“Maximum Committed Purchase Price” has the meaning assigned to such term in the Pricing Side Letter.

“MERS” means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.

“Moody’s” means Moody’s Investors Service, Inc. or any successors thereto.

“Mortgage” means each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a lien on real property and other property and rights incidental thereto.

“Mortgage Interest Rate” means the rate of interest borne on a Purchased Mortgage Loan or a Trust Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.

“Mortgage Loan” means any first lien closed loan which is a fixed or floating-rate, one-to-four-family residential mortgage loan evidenced by a promissory note and secured by a first lien mortgage.

“Mortgage Note” means the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.

“Mortgaged Property” means the real property securing repayment of the debt evidenced by a Mortgage Note.

“Mortgagor” means the obligor or obligors on a Mortgage Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by each Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.

“Net Income” means, for any period and any Person, the net income of such Person for such period as determined in accordance with GAAP.

“Net Worth” means, with respect to any Person, an amount equal to, on a consolidated basis, such Person’s stockholder equity (determined in accordance with GAAP).

“1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.

“Obligations” means (a) all of Sellers’ indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Payment Date, and other obligations and liabilities, to Buyer, its Affiliates or Custodian arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums paid by Buyer or on behalf of Buyer in order to preserve any Purchased Asset, Trust

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Mortgage Loan and/or REO Property or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of a Seller’s indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Asset, Trust Mortgage Loan and/or REO Property, or of any exercise by Buyer of its rights under the Program Agreements, including, without limitation, attorneys’ fees and disbursements and court costs; and (d) all of any Seller’s indemnity obligations to Buyer or Custodian or both pursuant to the Program Agreements.

“OFAC” has the meaning set forth in Section 13(a)(27) hereof.

“Officer’s Compliance Certificate” has the meaning assigned to such term in the Pricing Side Letter.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, any Program Agreement, in each case, other than Excluded Taxes.

“Payment Date” means, with respect to a Purchased Asset, the 20th day of the month following the month of the related Purchase Date and each succeeding 20th day of the month thereafter; provided, that, with respect to such Purchased Asset, the final Payment Date shall be the related Repurchase Date; and provided, further, that if any such day is not a Business Day, the Payment Date shall be the next succeeding Business Day.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“PennyMac Corp.” means PennyMac Corp. or its permitted successors or assigns.

“PennyMac Holdings” means PennyMac Mortgage Investment Trust Holdings I, LLC or its permitted successors or assigns.

“Pension Protection Act” means the Pension Protection Act of 2006.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Plan” means an employee benefit or other plan established or maintained by Sellers or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.

“PMIT” means Pennymac Mortgage Investment Trust, or its permitted successors or assigns.

“PMIT Group” means PMIT and its Subsidiaries.

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“Power of Attorney” means the power of attorney in the form of Exhibit D, Exhibit E-1, Exhibit E-2 or Exhibit E-3 delivered by each Seller, PennyMac Loan Services, LLC, REO Subsidiary and any Trust Subsidiary, as applicable.

“Post Default Rate” has the meaning assigned to such term in the Pricing Side Letter.

“Price Differential” means with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, as applicable, as of any date of determination, an amount equal to the product of (a) the Pricing Rate for such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, as applicable, and (b) the Purchase Price for such Purchased Mortgage Loan or Purchase Price Increase for such REO Property or Trust Mortgage Loan, as applicable, calculated daily on the basis of a 360-day year for the actual number of days during the period commencing on (and including) the Purchase Date for such Purchased Mortgage Loan or Purchase Price Increase Date for such REO Property or Trust Mortgage Loan, as applicable, and ending on (but excluding) the Repurchase Date or the Mandatory Partial Prepayment Date with respect to such REO Property or Trust Mortgage Loan, as applicable.  The Price Differential accrued during any Accrual Period shall be due and payable on the following Payment Date.

“Pricing Rate” has the meaning assigned to such term in the Pricing Side Letter.

“Pricing Side Letter” means the amended and restated letter agreement, dated as of the date hereof, among Buyer, Sellers and the Guarantor, as the same may be amended from time to time.

“Program Agreements” means, collectively, this Agreement, the Pricing Side Letter, the Guaranty, the Custodial Agreement, each Electronic Tracking Agreement, each Power of Attorney, the Collection Account Control Agreement, REO Account Control Agreement, each Trust Account Control Agreement, the REO Contribution Agreement, the Servicing Agreements, if any, the Servicer Notice, and the Servicer Notice and Pledge.

“Prohibited Person” has the meaning set forth in Section 13(a)(27) hereof.

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“Purchase Date” means the date on which a Purchased Asset is to be transferred by a Seller to Buyer.

“Purchase Price” means the price at which each Purchased Asset is transferred by a Seller to Buyer or, with respect to each REO Property and Trust Mortgage Loan, the Purchase Price Increase related to the increase in value of the Trust Interests related to the transfer of such REO Property to the REO Subsidiary or a Trust Subsidiary, or Trust Mortgage Loan to a Trust Subsidiary, as applicable, which shall equal:

(a) on the Purchase Date or Purchase Price Increase Date, as applicable, the applicable Purchase Price Percentage multiplied by the lesser of either: (i) the Market Value of such Purchased Asset, Trust Mortgage Loan or REO Property, as applicable, or (ii) solely with

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respect to a Purchased Asset or Trust Mortgage Loan that is an Eligible Mortgage Loan, the outstanding principal amount thereof as set forth on the related Asset Schedule;

(b) on any day after the Purchase Date or Purchase Price Increase Date, as applicable, except where Buyer and such Seller agree otherwise, the amount determined under the immediately preceding clause (a) (i) solely with respect to the Eligible Trust Interest, without duplication, increased or decreased upon the acquisition or disposition of REO Property by REO Subsidiary or a Trust Subsidiary, or Trust Mortgage Loan by a Trust Subsidiary, as applicable, pursuant to Sections 3(b) and 4 hereof, and (ii) decreased by the amount of any cash transferred by such Seller to Buyer pursuant to Section 6 hereof.

“Purchase Price Increase” means an increase in the Purchase Price for the Trust Interests based upon REO Subsidiary or a Trust Subsidiary acquiring additional REO Property or a Trust Subsidiary acquiring additional Trust Mortgage Loans, as applicable, to which such portion of the Purchase Price is allocated, as requested by a Seller pursuant to Section 3(b) hereof.

“Purchase Price Increase Date” means the date on which an REO Property is transferred to REO Subsidiary or a Trust Subsidiary, or a Trust Mortgage Loan is transferred to a Trust Subsidiary, as applicable, and a Purchase Price Increase is made with respect thereto.

“Purchase Price Increase Request” means a request via email from a Seller to Buyer requesting a Purchase Price Increase for Trust Interests based upon the acquisition of additional REO Properties by the REO Subsidiary or a Trust Subsidiary, or additional Trust Mortgage Loans by a Trust Subsidiary and indicating that it is a Purchase Price Increase Request under this Agreement.

“Purchase Price Percentage” has the meaning assigned to such term in the Pricing Side Letter.

“Purchased Assets” means the collective reference to Purchased Mortgage Loans and Trust Interests together with the Repurchase Assets related to such Purchased Mortgage Loans and Trust Interests transferred by Sellers to Buyer in a Transaction hereunder, listed on the related Asset Schedule attached to the related Transaction Request which such Asset Files and Trust Interests the Custodian has been instructed to hold pursuant to the Custodial Agreement; provided that, in the case of the transfer of Trust Interests under any Transaction, Purchased Assets shall be deemed to include all such portion(s) of the Trust Interests allocable to the Purchase Price or Purchase Price Increase, as applicable, that correspond to the related Unrecorded REO Property or REO Property owned by the REO Subsidiary or a Trust Subsidiary, or Trust Mortgage Loan owned by a Trust Subsidiary, as applicable, and as related to such Transaction or Purchase Price Increase, as applicable.

“Purchased Mortgage Loan” means a Purchased Asset that is a Mortgage Loan.

“Records” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Sellers, Servicers, Guarantor or any other person or entity with respect to a Purchased Asset, Trust Mortgage Loan or REO Property.  Records shall include the Mortgage Notes, any Mortgages, the

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Asset Files, the credit files related to the Purchased Asset or Trust Mortgage Loan, as applicable, and any other instruments necessary to document or service a Purchased Mortgage Loan or Trust Mortgage Loan, as applicable.  For REO Properties, Records shall include the Asset Files and any other instruments necessary to document or manage a REO Property.

“Regulation Z” shall mean Regulation Z of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

“REIT” means a real estate investment trust, as defined in Section 856 of the Code.

“Release Price” means the price at which REO Properties or Trust Mortgage Loans, as applicable, supporting a portion of the Purchase Price or a Purchase Price Increase are to be released from the REO Subsidiary or a Trust Subsidiary, as applicable, upon the Mandatory Partial Prepayment Date, which price will be equal to the sum of (a) such portion of the Purchase Price or the Purchase Price Increase, as applicable, and (b) accrued unpaid Price Differential related to such REO Property or Trust Mortgage Loan, as applicable, as of the date of such determination.

“REO Account” means each account as established pursuant to the Trust Agreement for the benefit of REO Subsidiary, into which PennyMac Loan Services, LLC shall direct all REO Subsidiary Income received with respect to the assets owned by the REO Subsidiary.

“REO Account Control Agreement” means the amended and restated letter agreement among REO Subsidiary, PennyMac Loan Services, LLC, PennyMac Corp., Buyer, City National Securities, Inc. and Bank in form and substance reasonably acceptable to Buyer, as it may be amended, supplemented or otherwise modified from time to time.

“REO Contribution Agreement” means that certain REO Contribution Agreement, dated as of June 8, 2011, between PennyMac Corp. and REO Subsidiary pursuant to which REO Subsidiary has acquired and shall acquire REO Property.

“REO Property” means (a) real property acquired by or transferred to REO Subsidiary or a Trust Subsidiary, including a Mortgaged Property acquired through foreclosure of a Mortgage Loan or by deed in lieu of such foreclosure, the fee title of which is held by the REO Subsidiary or a Trust Subsidiary, as applicable, and (b) Unrecorded REO Property.

“REO Subsidiary” means PMC REO Financing Trust, a wholly owned Subsidiary of PennyMac Corp. that is a Special Purpose Entity formed for the sole purpose of holding REO Property.

“REO Subsidiary Income” means, with respect to assets owned by REO Subsidiary (including Unrecorded REO Property), all principal and income received with respect to such assets, including any sale or liquidation premiums, Liquidation Proceeds, insurance proceeds, interest, dividends or other distributions payable thereon or any fees or payments of any kind received by REO Subsidiary.

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“Reporting Date” means the 10th Business Day of each month.

“Repurchase Assets” has the meaning assigned thereto in Section 8 hereof.

“Repurchase Date” means the earliest of (a) the Termination Date, (b) the date specified by Sellers for repurchase of a Purchased Asset or (c) the date determined by application of Section 16 hereof.

“Repurchase Price” means the price at which Purchased Assets are to be transferred from Buyer to Sellers upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as (a) with respect to Purchased Mortgage Loans the sum of the Purchase Price and the accrued but unpaid Price Differential as of the date of such determination and (b) with respect to Trust Certificates, the aggregate Release Price of all REO Properties owned by REO Subsidiary, or, as applicable, the aggregate Release Price of all REO Properties and all Trust Mortgage Loans owned by any Trust Subsidiary, plus, in either case, and the accrued and unpaid Price Differential as of the date of such determination.

“Request for Certification” means a notice sent to the Custodian reflecting the sale of one or more Mortgage Loans to Buyer or the transfer of one or more REO Properties to REO Subsidiary or a Trust Subsidiary or transfer of one or more Trust Mortgage Loans to a Trust Subsidiary hereunder.

“Requirement of Law” means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other governmental authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer” means as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person.  The Responsible Officers of Sellers and Guarantor as of the date hereof are listed on Schedule 2 hereto.

“S&P” means Standard & Poor’s Ratings Services, or any successor thereto.

“SEC” means the Securities and Exchange Commission, or any successor thereto.

“Seller” means PennyMac Corp. and PennyMac Mortgage Investment Trust Holdings I, LLC, or their permitted successors or assigns.

“Servicer” means PennyMac Loan Services, LLC, Specialized Loan Servicing LLC or any other servicer approved by Buyer in its sole discretion, which may be either Seller.

“Servicer Account” means that certain clearing account in the name of the applicable Servicer into which all sale proceeds of a Purchased Mortgage Loan, Trust Mortgage Loan or REO Property (unless otherwise agreed pursuant to the Program Documents) are remitted.

“Servicer Notice” means the notice acknowledged by Specialized Loan Servicing LLC substantially in the form of Exhibit L-2 hereto.

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“Servicer Notice and Pledge” means the amended and restated notice to and pledge by the Servicer substantially in the form of Exhibit L-1 hereto.

“Servicing Agreements” means that certain Flow Servicing Agreement, dated as of August 4, 2009, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC, that certain Servicing Agreement, dated as of December 20, 2010, by and between SWDNSI Trust Series 2010-3 and Specialized Loan Servicing LLC, that certain Servicing Agreement, dated as of December 20, 2010, by and between SWDNSI Trust Series 2010-4 and Specialized Loan Servicing LLC, that certain Servicing Agreement, dated as of February 25, 2011, by and between SWDNSI Trust Series 2010-3 and PennyMac Loan Services, LLC, that certain Servicing Agreement, dated as of February 25, 2011, by and between SWDNSI Trust Series 2010-4 and PennyMac Loan Services, LLC, and any other servicing agreement by and between any Trust Subsidiary and any Servicer, in each case, as the same may be amended from time to time.

“Servicing Guidelines” means the standards, procedures and guidelines of each Servicer for servicing Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties in accordance with the Servicing Agreements and Accepted Servicing Practices.

“Servicing Rights” means rights of any Person to administer, service or subservice the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties or to possess related Records.

“SIPA” means the Securities Investor Protection Act of 1970, as amended from time to time.

“Special Purpose Entity” means a Person, other than an individual, which is formed or organized solely for the purpose of holding, directly or indirectly, an ownership interest in one or more REO Properties and/or Trust Mortgage Loans, does not engage in any business unrelated to the REO Properties and/or Trust Mortgage Loans, does not have any assets other than as otherwise expressly permitted by this Agreement, has its own separate books and records and will not commingle its funds in each case which are separate and apart from the books and records of any other Person, and is subject to all of the limitations on the powers set forth in the organizational documentation of such REO Subsidiary or Trust Subsidiary, as the case may be, as in effect on the date hereof, and holds itself out as a Person separate and apart from any other Person and otherwise complies with all of the covenants set forth in Section 13(u).

“State Specific Foreclosure Aging Timeline” means the state specific foreclosure timeline as of the date of the Agreement as set forth for each state on Exhibit I hereto.

“State Specific REO Disposition Timeline” means the state specific disposition timeline for REO Properties as of the date of the Agreement as set forth for each state on Exhibit J hereto.

“State Specific REO Recording Timeline” means the state specific recording timeline for REO Properties as of the date of the Agreement as set forth for each state on Exhibit K hereto.

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“Subordinated Debt” means Indebtedness of each Seller (a) which is unsecured, (b) as to which no part of the principal of such Indebtedness is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the date which is one year following the Termination Date and (c) as to which the payment of the principal of and interest on such Indebtedness and other obligations of such Seller in respect of such Indebtedness are subordinated to the prior payment in full of the principal of and interest (including post-petition obligations) on the Transactions and all other obligations and liabilities of such Seller to Buyer hereunder on terms and conditions approved in writing by Buyer and all other terms and conditions of which are satisfactory in form and substance to Buyer.

“Subsidiary” means, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person; provided, however, that any entity that is under the management of PNMAC Capital Management LLC in its capacity as an “investment adviser” within the meaning of the Investment Advisers Act of 1940 and is otherwise not directly or indirectly owned or controlled by any Seller shall not be deemed a “Subsidiary” for the purposes of Section 13(a)(16).

“Take-out Commitment” means a commitment of any Seller, any Trust Subsidiary or REO Subsidiary, as applicable, to sell one or more identified Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties to a Take-out Investor.

“Take-out Investor” means (a) PennyMac Loan Services, LLC or (b) any other Person which has made a Take-out Commitment and, with respect to Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties, has been approved by Buyer if such Take-out Commitment is for twenty-five (25) or more Purchased Mortgage Loans, Trust Mortgage Loans and/or REO Properties.

“Taxes” means any and all present or future taxes (including social security contributions and value added taxes), levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges), withholdings or other charges of any nature whatsoever imposed by any governmental authority.

“Termination Date” means the earlier of (a) June 6, 2012, and (b) the date of the occurrence of an Event of Default.

“Test Period” means any one fiscal quarter.

“Transaction” has the meaning set forth in Section 1 hereof.

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“Transaction Request” means a request via email from a Seller to Buyer notifying Buyer that such Seller wishes to enter into a Transaction hereunder that indicates that it is a Transaction Request under this Agreement.

“Trust Account” means each account as established pursuant to the applicable Trust Agreement for the benefit of a Trust Subsidiary, into which the applicable Servicer shall direct all Trust Income of such Trust Subsidiary received with respect to the assets owned by such Trust Subsidiary.  For avoidance of doubt, no escrow account shall constitute a “Trust Account”.

“Trust Account Control Agreement” means (a) a letter agreement among SWDNSI Trust Series 2010-3, PennyMac Corp., Buyer, and Citibank, N.A., and (b) a letter agreement among SWDNSI Trust Series 2010-4, PennyMac Holdings, Buyer and Citibank, N.A., each in form and substance reasonably acceptable to Buyer, as the same may be amended, supplemented or otherwise modified from time to time.

“Trust Agreement” means the organizing documents governing any Trust Subsidiary or REO Subsidiary as contemplated by this Agreement.

“Trust Assignment Agreement” means an Assignment and Assumption Agreement between PennyMac Corp. and SWDNSI Trust Series 2010-3 or PennyMac Holdings and SWDNSI Trust Series 2010-4 pursuant to which such Trust Subsidiary has acquired and shall acquire REO Property and Trust Mortgage Loans.

“Trust Certificates” means, collectively, the certificates evidencing 100% of the Trust Interests for such REO Subsidiary or Trust Subsidiary.

“Trust Income” means, with respect to assets owned by any Trust Subsidiary (including Trust Mortgage Loans and REO Property), all principal and income received with respect to such assets, including any sale or liquidation premiums, Liquidation Proceeds, insurance proceeds, interest, dividends or other distributions payable thereon or any fees or payments of any kind received by any Trust Subsidiary net of any servicing fees and servicing advances payable to Specialized Loan Servicing LLC pursuant to the applicable Servicing Agreement and trustee fees payable to the Trustees with respect to SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4 pursuant to the Master Trust Agreement.

“Trust Interests” means any and all of either Seller’s interests, as the case may be, including units of trust interest designated as “securities” (as defined in Section 8-102 of the Uniform Commercial Code), in REO Subsidiary, any Trust Subsidiary and other trust interests acceptable to Buyer in its sole discretion and identified on a Transaction Request from time to time, including, without limitation, all its rights to participate in the operation or management of REO Subsidiary and any Trust Subsidiary and all its rights to properties, assets, trust interests and distributions under the Trust Agreements in respect of such trust interests.  “Trust Interests” also include (i) all accounts receivable arising out of the applicable Trust Agreement; (ii) all general intangibles arising out of the applicable Trust Agreement; and (iii) to the extent not otherwise included, all proceeds of any and all of the foregoing (including within proceeds, whether or not otherwise included therein, any and all contractual rights of either Seller under

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any revenue sharing or similar agreement to receive all or any portion of the revenues or profits of such REO Subsidiary or Trust Subsidiary).

“Trust Mortgage Loan” means a Mortgage Loan acquired by or transferred to a Trust Subsidiary.

“Trust Receipt” means, with respect to any Transaction as of any date, a receipt in the form attached as an exhibit to the Custodial Agreement.

“Trust Subsidiary” means each of SWDNSI Trust Series 2010-3, a wholly owned Subsidiary of PennyMac Corp., and SWDNSI Trust Series 2010-4, a wholly owned Subsidiary of PennyMac Holdings, that is a Special Purpose Entity formed for the sole purpose of holding REO Property and Trust Mortgage Loans and any other wholly owned Subsidiary of either Seller that has been approved by Buyer in writing in its sole discretion and is subject to a Transaction Request.

“Trustees” means Citibank, N.A., as certificate trustee, and Citigroup Trust — Delaware, N.A., as Delaware trustee, each under the Master Trust Agreement.

“Unrecorded REO Property” means REO Property for which the Custodian has not received a copy of the Deed recorded or submitted for recording into the name of REO Subsidiary or a Trust Subsidiary, as applicable, and otherwise meets the criteria set forth in this Agreement.

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.

“Warehouse Facility” means a mortgage loan warehouse facility, warehouse line of credit (including both on and off balance sheet facilities), and any other such facility with terms and conditions similar to the terms and conditions of this Agreement and the purpose of which is to fund the origination and/or purchase of assets similar to the Eligible Mortgage Loans and Eligible REO Property pending sale or securitization of mortgage loans and real property.

3.Program; Initiation of Transactions; Purchase Price Increases

a.From time to time, Buyer will purchase from Sellers certain Mortgage Loans.  On the Initial Purchase Date, Buyer purchased the Trust Interests with respect to the REO Subsidiary from PennyMac Corp. and on the Amendment Purchase Date, Buyer shall purchase the Trust Interests with respect to SWDNSI Trust Series 2010-3 from PennyMac Corp. and with respect to SWDNSI Trust Series 2010-4 from PennyMac Holdings.  From time to time, Buyer may purchase additional Trust Interests from Sellers in accordance with this Agreement. This Agreement is a commitment by Buyer to enter into Transactions and Purchase Price Increases with Sellers for an aggregate amount equal to the Maximum Committed Purchase Price.  This Agreement is not a commitment by Buyer to enter into Transactions or Purchase Price Increases with Sellers for amounts exceeding the Maximum Committed Purchase Price, but rather,

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sets forth the procedures to be used in connection with periodic requests for Buyer to enter into Transactions or Purchase Price Increases with Sellers.  Each Seller hereby acknowledges that, beyond the Maximum Committed Purchase Price, Buyer is under no obligation to agree to enter into, or to enter into, any Transaction or Purchase Price Increase pursuant to this Agreement.  All Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties shall exceed or meet the Acquisition Guidelines, and all Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties shall be serviced by Sellers or Servicers, as applicable.  The aggregate Purchase Price (including Purchase Price Increases) of Purchased Assets subject to outstanding Transactions shall not exceed the Maximum Committed Purchase Price.

b.Sellers shall request that Buyer enter into a Transaction or Purchase Price Increase by delivering to Buyer, a Transaction Request or Purchase Price Increase Request, as applicable, BPO valuation and valuation date for each Mortgage Loan or REO Property, as applicable, summary results of due diligence delivered in connection with Section 10(b)(1) of this Agreement, compliance diligence information and upon request of Buyer, a copy of the BPO and BPO results, in each case in the format mutually agreed to by Buyer and Sellers on or before 12:00 p.m. (New York City time) five (5) Business Days prior to the proposed Purchase Date or Purchase Price Increase Date, as applicable; provided that if such REO Property is related to a Purchased Mortgage Loan or Trust Mortgage Loan, Sellers shall not be required to deliver an additional BPO at the time of such Purchase Price Increase, and either (i) to Buyer and Custodian a Request for Certification and related Asset Schedule, in accordance with the Custodial Agreement or (ii) to the extent that such Purchase Price Increase is a result of a change of Category for a Purchased Mortgage Loan or Trust Mortgage Loan to a REO Property, evidence of such change in Category. In the event the Asset Schedule provided by Sellers contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Buyer shall provide written or electronic notice to Sellers describing such error and Sellers shall correct the computer data, reformat or properly align the computer fields itself and resubmit the Asset Schedule as required herein.  Buyer shall review and advise Sellers in writing of Buyer’s Market Value within four (4) Business Days of receipt of a Transaction Request or Purchase Price Increase Request, as applicable. Upon Buyer and Sellers’ mutual agreement of the Market Value, Buyer and Sellers shall enter into a Transaction or Purchase Price Increase, as applicable, within one (1) Business Day of such agreement as set forth in Section 3(e) hereto.

c.Upon transfer of the Trust Interests to Buyer as set forth herein and until termination of such Transaction as set forth herein, ownership of the Trust Interests is vested in the Buyer, and record title (i) to each REO Property (subject to exceptions permitted for Unrecorded REO Property) shall be retained by REO Subsidiary or a Trust Subsidiary, as applicable, (ii) to each Trust Mortgage Loan shall be retained by a Trust Subsidiary, and (iii) to each Unrecorded REO Property shall be retained by the applicable Servicer, a Seller, or any prior owner

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or prior servicer for whom the applicable Servicer is contractually permitted to act in trust, for the benefit of REO Subsidiary or a Trust Subsidiary, as applicable, which shall be for the benefit of Buyer provided that with respect to any Unrecorded REO Property in the name of a Seller, the applicable Servicer, or any prior owner or prior servicer for whom the applicable Servicer is contractually permitted to act, Sellers shall deliver or cause to be delivered to the applicable county recorder’s office (with a copy to Custodian) a Deed in the name of REO Subsidiary or a Trust Subsidiary, as applicable, within the period of time generally necessary in the applicable jurisdiction for the applicable Servicer, acting in accordance with the Servicing Guidelines, to (i) receive the Deed into the name of such party, (ii) review such Deed and perform all necessary title work with respect to the related property and (iii) prepare the new Deed to the REO Subsidiary or a Trust Subsidiary, as applicable.

d.Reserved.

e.Upon the satisfaction of the applicable conditions precedent set forth in Section 10 hereof, all of Sellers’ interest in the Purchased Mortgage Loans or Trust Interests shall pass to Buyer on the Purchase Date, against the transfer of the Purchase Price to Sellers.  Upon transfer of (i) the Purchased Mortgage Loans to Buyer, (ii) Unrecorded REO Property to Sellers, the applicable Servicer or any prior owner or prior servicer for whom the applicable Servicer is contractually permitted to act, all for the benefit of REO Subsidiary or a Trust Subsidiary, as applicable, which shall be for the benefit of Buyer, (iii) Trust Mortgage Loans to a Trust Subsidiary or (iv) REO Properties to REO Subsidiary or a Trust Subsidiary, as applicable, in each case, as set forth in this Section and until termination of any related Transactions or the release of REO Properties or Trust Mortgage Loans as set forth in Sections 4 or 16 of this Agreement, ownership of each Purchased Asset, including each document in the related Asset File and Records, is vested in Buyer; provided that, prior to the recordation as provided for in the Custodial Agreement (i) with respect to Purchased Mortgage Loans, record title in the name of the applicable Seller or Servicer to each Mortgage shall be retained by such Seller or Servicer in trust, for the benefit of Buyer, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Purchased Mortgage Loans, (ii) with respect to REO Properties, record title in the name of the REO Subsidiary or a Trust Subsidiary, as applicable, to each REO Property shall be retained by REO Subsidiary or a Trust Subsidiary, as applicable, in trust pursuant to the applicable Trust Agreement for the benefit of Buyer, as owner of the Trust Interests, for the sole purpose of facilitating the administration of the REO Property, (iii) with respect to each Unrecorded REO Property, in which the legal title may be in the name of Sellers, Servicers or any prior owner or prior servicer for whom the applicable Servicer is contractually permitted to act, all for the benefit of REO Subsidiary or a Trust Subsidiary, as applicable, (iv) with respect to each Trust Mortgage Loan, record title in the name of a Trust Subsidiary to each Mortgage shall be retained by such Trust Subsidiary in trust pursuant to the applicable Trust Agreement for the benefit of Buyer, as owner of the Trust Interests, for the sole purpose of facilitating the supervision of the

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servicing of the Trust Mortgage Loans and (v) with respect to each REO Property other than Unrecorded REO Property, upon transfer of such REO Property to REO Subsidiary or a Trust Subsidiary, as applicable, as set forth in this Section and until termination of the Transaction (or release of the REO Property upon payment of the related Mandatory Partial Prepayment) as set forth in Sections 4 or 16 of this Agreement, ownership of such REO Property, including each document in the related Asset File and Records, is vested in the REO Subsidiary or a Trust Subsidiary, as applicable; provided that, prior to the recordation as provided for in the Custodial Agreement (a) with respect to REO Properties other than Unrecorded REO Properties, record title in the name of the REO Subsidiary or a Trust Subsidiary, as applicable, to each REO Property shall be retained by REO Subsidiary or a Trust Subsidiary, as applicable, in accordance with the applicable Trust Agreement and (b) with respect to Unrecorded REO Property, record title in the name of the applicable Seller, Servicer or any prior owner or prior servicer for whom the applicable Servicer is contractually permitted to act to each REO Property shall be retained in trust for REO Subsidiary or a Trust Subsidiary, as applicable, and promptly transferred to REO Subsidiary or a Trust Subsidiary, as applicable, to be held in accordance with the applicable Trust Agreement but subject to the requirements of this Agreement.

4.Repurchase; Release Price; Conversion to REO Property

a.Sellers shall repurchase from Buyer the related Purchased Assets on each related Repurchase Date.  Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property (but liquidation proceeds received by Buyer shall be applied to reduce the Repurchase Price for the related Purchased Mortgage Loan or Trust Interests on each Payment Date except as otherwise provided herein).  Sellers are obligated to repurchase and, with respect to Purchased Mortgage Loans, take physical possession of the Purchased Mortgage Loans from Buyer or its designee (including the Custodian) then in Buyer’s or its designee’s possession at Sellers’ expense on the related Repurchase Date.

b.When the REO Properties or Trust Mortgage Loans, as applicable,  supporting a portion of the Purchase Price of the Transaction related to the Trust Interests is desired to be sold or otherwise liquidated, Sellers shall make payment to Buyer in order to prepay the Repurchase Price (a “Mandatory Partial Prepayment”) in an amount equal to the Release Price on each date such REO Properties or Trust Mortgage Loans, as applicable, are desired to be sold or otherwise liquidated (each, a “Mandatory Partial Prepayment Date”).  Such payment shall serve as a partial prepayment of the Repurchase Price in connection with the Transaction in respect of the Trust Interests in order to avoid a Margin Deficit.  Such obligation to pay the Mandatory Partial Prepayment exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property.  Sellers are obligated to pay the Mandatory Partial Prepayment and take physical possession of the REO

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Properties or Trust Mortgage Loans, as applicable, giving rise to the Mandatory Partial Prepayment from REO Subsidiary or a Trust Subsidiary, as applicable, or its designee (including the Custodian) at Sellers’ expense on the related Mandatory Partial Prepayment Date.

c.Provided that no Default shall have occurred and be continuing, and Buyer has received the related Repurchase Price, Buyer agrees to release, as applicable, its ownership interest hereunder in the Purchased Mortgage Loan or the Trust Interests (including, the Repurchase Assets related thereto).  The applicable Purchased Mortgage Loan or the Trust Interests (and the Repurchase Assets related thereto, as applicable) shall be retransferred by delivery to the applicable Seller or the designee of such Seller free and clear of any lien, encumbrance or claim of Buyer.

d.Provided that no Default shall have occurred and be continuing, and Buyer has received the applicable Mandatory Partial Prepayment, Buyer agrees to permit the release from the REO Subsidiary or a Trust Subsidiary, as applicable, of the related REO Property or the release from a Trust Subsidiary of the related Trust Mortgage Loans, as applicable, attributable to such Mandatory Partial Prepayment (including, the Repurchase Assets related thereto) at the request of Sellers.  The applicable REO Property, Trust Mortgage Loans and the Repurchase Assets related thereto, shall be delivered to the applicable Seller or the designee of such Seller free and clear of any lien, encumbrance or claim of Buyer, any Trust Subsidiary or REO Subsidiary.

e.With respect to a Liquidated Asset, Sellers agree to (i) provide Buyer with a copy of a report from the related Servicer indicating that such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property has been liquidated, (ii) cause the applicable Servicer to (x) if such Liquidated Asset is a Purchased Mortgage Loan, remit to the Servicer Account, immediately upon the applicable Servicer’s receipt of the proceeds, the Repurchase Price, with respect to such Liquidated Asset and thereafter cause the applicable Servicer to remit such proceeds to the Collection Account within two (2) Business Days and (y) if such Liquidated Asset is a REO Property or Trust Mortgage Loan, remit the Mandatory Partial Prepayment in accordance with Section 4(b) and (iii) provide Buyer a notice specifying each Purchased Mortgage Loan, Trust Mortgage Loan or REO Property that has been liquidated.  Buyer agrees to release its ownership interest in such Liquidated Asset or, if the Liquidated Asset is a REO Property or Trust Mortgage Loan, permit the release of the Liquidated Asset from the REO Subsidiary or a Trust Subsidiary, as applicable, concurrently with receipt of confirmation that proceeds have been received by the applicable Servicer.  All amounts on deposit in the REO Account and each Trust Account shall be remitted to the Collection Account on each Payment Date in accordance with the terms of the applicable Trust Agreement.

f.Promptly upon a Purchased Mortgage Loan or Trust Mortgage Loan becoming a REO Property as contemplated by Section 8(b), (a) Sellers shall (i)

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notify Buyer in writing that such Purchased Mortgage Loan or Trust Mortgage Loan has become a REO Property and the value attributed to such REO Property by Sellers, (ii) deliver to Buyer and Custodian an Asset Schedule with respect to such REO Property, (iii) be deemed to make the representations and warranties listed on Schedule 1-B hereto with respect to such REO Property; and (iv) without limiting the requirements set forth in the definition of Market Value, deliver to Buyer a true and complete copy of a BPO of such REO Property no less frequently than once per 180 day period, and (b) solely with respect to a Purchased Mortgage Loan becoming a REO Property (i) such REO Property shall automatically and immediately be deemed contributed by PennyMac Corp.  to REO Subsidiary or a Trust Subsidiary, as applicable, or by PennyMac Holdings to a Trust Subsidiary, as applicable, and (ii) such REO Property shall be deemed a REO Property owned by the REO Subsidiary or a Trust Subsidiary, as applicable, hereunder and its Market Value as determined by Buyer shall be included in the Market Value of the Trust Interests.  The acquisition of such REO Property by the REO Subsidiary or any Trust Subsidiary shall result in an increase in the value of the Trust Interests (as determined in accordance with the definition of Market Value) of the REO Subsidiary or a Trust Subsidiary, as applicable, and any Purchase Price Increase or Margin Deficit attributed to any change in Category shall be paid by the Buyer or Sellers as applicable.

g.The acquisition of Trust Mortgage Loans by any Trust Subsidiary shall result in an increase in the value of the Trust Interests (as determined in accordance with the definition of Market Value) of the applicable Trust Subsidiary.  For the avoidance of doubt, to the extent that a Trust Mortgage Loan owned by a Trust Subsidiary is converted to an REO Property, a Purchase Price Increase shall be deemed to occur and shall be offset against the Purchase Price for the related Trust Mortgage Loan, which shall be deemed reduced.

5.Price Differential.

a.On each Business Day that a Transaction is outstanding, the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential shall be settled in cash on each related Payment Date.  One (1) Business Day prior to the Payment Date, Buyer shall give Sellers written or electronic notice of the amount of the Price Differential due on such Payment Date.  On the Payment Date, Sellers shall pay to Buyer the Price Differential for such Payment Date (along with any other amounts to be paid pursuant to Sections 7 and 34 hereof), by wire transfer in immediately available funds.

b.If Sellers fail to pay all or part of the Price Differential by 4:00 p.m. (New York City time) on the related Payment Date, with respect to any Purchased Asset, Sellers shall be obligated to pay to Buyer (in addition to, and together with, the amount of such Price Differential) interest on the unpaid Repurchase Price at a rate per annum equal to the Post Default Rate until the Price Differential is received in full by Buyer.

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c.Sellers may remit to Buyer funds in an amount up to the outstanding Purchase Price (including, without duplication, Purchase Price Increase) of the Purchased Assets, to be held as unsegregated cash margin and collateral for all Obligations under this Agreement (such amount, to the extent not applied to Obligations under this Agreement, the “Buydown Amount”).  The Buydown Amount shall be used by Buyer in order to calculate the aggregate Price Differential, which will accrue on the aggregate Purchase Price then outstanding minus the Buydown Amount, applied to Transactions involving the lowest Pricing Rate.  The Sellers shall be entitled to request a drawdown of the Buydown Amount or remit additional funds to be added to the Buydown Amount no more than one time per week.  Without limiting the generality of the foregoing, in the event that a Margin Call or other Default exists, the Buyer shall be entitled to use any or all of the Buydown Amount to cure such circumstance or otherwise exercise remedies available to the Buyer without prior notice to, or consent from, any Seller.  Within two (2) Business Days’ receipt of written request from any Seller, and provided no Margin Call or other Default exists, Buyer shall remit any portion of such Buydown Amount back to such Seller.

6.Margin Maintenance

a.If at any time the Market Value of any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property subject to a Transaction is less than Buyer’s Margin Amount for such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property (a “Margin Deficit”), then Buyer may by notice to Sellers require Sellers to transfer to Buyer cash in an amount at least equal to the Margin Deficit subject to or related to a Transaction or solely with the consent of Buyer in its sole discretion, additional Mortgage Loans or REO Property with a Purchase Price equal to such Margin Deficit (such requirement, a “Margin Call”).

b.Notice delivered pursuant to Section 6(a) may be given by any written or electronic means.  With respect to a Margin Call in the amount of less than 5% of the Purchase Price for all Transactions (a “Low Percentage Margin Call”), any notice given before 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day; notice given after 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the second Business Day following the date of such notice. With respect to all Margin Calls other than Low Percentage Margin Calls, any notice given before 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on such Business Day; notice given after 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day. The foregoing time requirements for satisfaction of a Margin Call are referred to as the “Margin Deadlines”).  The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right

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of Buyer to do so at a later date.  Sellers and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyer’s rights under this Agreement or otherwise existing by law or in any way create additional rights for Sellers.

c.In the event that a Margin Deficit exists with respect to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, Buyer may retain any funds received by it to which the Sellers, any Trust Subsidiary or REO Subsidiary, as applicable, would otherwise be entitled hereunder, which funds (i) shall be held by Buyer against the related Margin Deficit and (ii) may be applied by Buyer against the Repurchase Price of any Purchased Mortgage Loan or, without duplication, Release Price of any REO Property or Trust Mortgage Loan, as applicable, for which the related Margin Deficit remains otherwise unsatisfied.  Notwithstanding the foregoing, the Buyer retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 6.

d.In the event that Sellers reasonably believe that the Market Value of all Purchased Assets exceeds the aggregate Buyer’s Margin Amount of all Purchased Assets by more than $3,000,000, Sellers may request that Buyer remit additional Purchase Price with respect to specific Purchased Assets to be identified by Sellers to Buyer, and Buyer will consider such request; provided that Buyer will make such determination in its sole discretion. Any additional Purchase Price remitted by Buyer to Sellers hereunder (and in the case of REO Properties and Trust Mortgage Loans, Purchase Price Increase) shall be added to the Purchase Price for the applicable Purchased Assets. For the avoidance of doubt, Buyer shall have no obligation to advance additional Purchase Price hereunder, and Buyer’s agreement to do so in any instance, shall not be deemed as Buyer’s agreement to do so in the future.

7.Income Payments

a.All Income received on account of the Purchased Mortgage Loans or Trust Certificates (including Income derived from REO Properties owned by REO Subsidiary and any Trust Subsidiary, and Trust Mortgage Loans owned by any Trust Subsidiary) during the term of a Transaction shall be the property of Buyer.  Sellers shall and shall cause the applicable Servicer to deposit (i) all Income with respect to Purchased Mortgage Loans into the Collection Account within two (2) Business Days following receipt by either Seller or the applicable Servicer, (ii) all REO Subsidiary Income into the REO Account within two (2) Business Days following receipt by REO Subsidiary or a Servicer, as applicable, and (iii) all Trust Income of a Trust Subsidiary into the related Trust Account within two (2) Business Days following receipt by such Trust Subsidiary or the applicable Servicer; provided, however, that notwithstanding the foregoing, (a) the applicable Servicer shall be entitled to retain Ancillary Income to which it is entitled under the applicable Servicing Agreement, (b) Specialized Loan Servicing LLC shall be entitled to retain funds on account of uncollected servicing fees and unreimbursed servicing advances as permitted pursuant to the

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applicable Servicing Agreement with respect to SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4 and (c) the applicable Servicer shall remit payments to the Trustees pursuant to the Master Trust Agreement with respect to SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4, in each case without any obligation to deposit such Income into the Collection Account, REO Account or a Trust Account.

b.On each Payment Date, Buyer shall, or shall direct the Bank to remit amounts on deposit in the Collection Account, each Trust Account or REO Account as follows:

(1)first, to Buyer in payment of any accrued and unpaid Price Differential, to the extent not paid by Sellers to Buyer pursuant to Section 5;

(2)second, to Buyer in reduction of the Repurchase Price or Release Price of any Liquidated Asset, an amount equal to the lesser of (x)  Liquidation Proceeds received on or with respect to such Liquidated Asset or (y) Repurchase Price or Release Price of such Liquidated Asset;

(3)third, without limiting the rights of Buyer under Section 6 of this Agreement, to Buyer, in the amount of any unpaid Margin Deficit;

(4)fourth, to the payment of all other costs and fees payable to Buyer pursuant to this Agreement;

(5)fifth, only to the extent of amounts then remaining on deposit in the Collection Account, to the payment of reasonable and actual fees and unreimbursed advances of the applicable Servicer attributable to the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties, as applicable; and

(6)sixth, to Sellers, any remaining amounts.

c.Notwithstanding any provision to the contrary in this Section 7, upon the occurrence and continuance of an Event of Default or on the Termination Date all Income shall be remitted to Buyer for application to the aggregate Repurchase Price and any other amounts owing by Sellers hereunder as Buyer deems appropriate.

8.Conveyance; Security Interest; REO Property

a.Conveyance and Security Interest.  On the Initial Purchase Date, Sellers hereby sold, assigned, and conveyed all right, title and interest in the Trust Interests with respect to REO Subsidiary and all other Purchased Assets identified on a Transaction Request and/or Trust Receipt and the related Repurchase Assets. On the Amendment Purchase Date, PennyMac Corp. hereby sells, assigns and conveys all right, title and interest in the Trust Interests with respect to SWDNSI Trust Series 2010-3 and PennyMac Holdings hereby sells, assigns and conveys all right, title and interest in the Trust Interests with respect to SWDNSI Trust Series

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2010-4. On each subsequent Purchase Date, Sellers hereby sell, assign and convey all right, title and interest in all Trust Interests and Purchased Assets identified on a Transaction Request and/or Trust Receipt and the related Repurchase Assets.  Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, Sellers hereby pledge to Buyer as security for the performance by Sellers of their Obligations and hereby grant, assign and pledge to Buyer a fully perfected first priority security interest in the Purchased Assets, the Records, and all related Servicing Rights, the Program Agreements (to the extent such Program Agreements and Sellers’ right thereunder relate to the Purchased Assets), any related Take-out Commitments, any Property relating to Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties, all insurance policies and insurance proceeds relating to any Purchased Mortgage Loan, Trust Mortgage Loan or REO Property or the related Mortgaged Property, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and mortgage insurance contracts and loan guaranty agreements (if any), to the extent of the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties protected thereby, Income, the Buydown Amount and any account to which such amount is deposited, each of the Collection Account, any Trust Account and the REO Account and all amounts deposited therein, the obligations of Sellers to deliver and convey each REO Property to the REO Subsidiary or a Trust Subsidiary, as applicable, accounts (including any interest of Sellers and any Trust Subsidiary in escrow accounts) and any other contract rights, instruments, accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles and other assets relating to the Purchased Assets (including, without limitation, any other accounts) or any interest in the Purchased Assets, and any proceeds of the Purchased Assets, Trust Mortgage Loans and REO Properties (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “Repurchase Assets”).

b.Acquisition of REO Property.  If the Sellers shall acquire, or contemplate the acquisition of, any REO Property, or desire to extinguish any Mortgage Note in connection with the foreclosure of the related Mortgage Loan, a transfer of the real property underlying the Mortgage Note in lieu of foreclosure or other transfer of such real property, the Sellers shall cause such real property to be taken by deed, or by means of such instruments as is provided by the Governmental Authority governing the transfer, or right to request transfer and issuance of the deed, or such instrument as is provided by the related Governmental Authority, or to be acquired through foreclosure sale in the jurisdiction in which the REO Property is located, in the name of REO Subsidiary or a Trust Subsidiary, as applicable; provided that each Seller or the applicable Servicer may achieve this by initially taking such REO Property in its own name or in the name of any prior owner or prior servicer for whom the applicable Servicer is contractually permitted to act, and then transferring (and hereby covenants to transfer) such

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REO Property to REO Subsidiary or a Trust Subsidiary, as applicable, by deed within the period of time generally necessary in the applicable jurisdiction for the applicable Servicer.

c.Trust Interests as Securities.  The parties acknowledge and agree that the Trust Interests shall constitute and remain “securities” as defined in Section 8-102 of the Uniform Commercial Code; each Seller covenants and agrees that (i) the Trust Interests are not and will not be dealt in or traded on securities exchanges or securities markets and (ii) the Trust Interests are not and will not be investment company securities within the meaning of Section 8-103 of the Uniform Commercial Code.  Each Seller shall, at its sole cost and expense, take all steps as may be necessary in connection with the endorsement, transfer, delivery and pledge of all Trust Interests to Buyer.

d.Additional Interests.  If Sellers shall, as a result of their ownership of the Trust Interests, become entitled to receive or shall receive any certificate evidencing any trust interest or other equity interest, any option rights, or any equity interest in REO Subsidiary or any Trust Subsidiary, whether in addition to, in substitution for, as a conversion of, or in exchange for the Trust Interests, or otherwise in respect thereof, such Seller shall accept the same as the Buyer’s agent, hold the same in trust for the Buyer and deliver the same forthwith to the Buyer in the exact form received, duly indorsed by such Seller to the Buyer, if required, together with an undated transfer power, if required, covering such certificate duly executed in blank, or if requested, deliver the Trust Interests re-registered in the name of Buyer, to be held by the Buyer subject to the terms hereof as additional security for the Obligations.  Any sums paid upon or in respect of the Trust Interests upon the liquidation or dissolution of REO Subsidiary or any Trust Subsidiary or otherwise shall be paid over to the Buyer as additional security for the Obligations.  If following the occurrence and during the continuation of an Event of Default any sums of money or property so paid or distributed in respect of the Trust Interests shall be received by either Seller, such Seller shall, until such money or property is paid or delivered to the Buyer, hold such money or property in trust for the Buyer segregated from other funds of Sellers, as additional security for the Obligations.

e.Cash Dividends; Voting Rights.  Unless an Event of Default shall have occurred and be continuing, the applicable Seller shall be permitted to receive all cash dividends or other cash distributions paid in respect of the Trust Interests and to exercise all voting and member rights with respect to the Trust Interests; provided, however, that no vote shall be cast or member right exercised or other action taken which would impair the Trust Interests or which would be inconsistent with or result in a violation of any provision of this Agreement.  Without the prior consent of the Buyer, no Seller shall (i) vote to enable, or take any other action to permit REO Subsidiary or any Trust Subsidiary to issue any trust interests of any nature or to issue any other trust interests convertible into or granting the right to purchase or exchange for any trust interests of REO Subsidiary or any Trust Subsidiary, or (ii) sell, assign, transfer, exchange or

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otherwise dispose of, or grant any option with respect to, the Trust Interests or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, the Trust Interests, or any interest therein, except for the Lien provided for by this Agreement, or (iv) enter into any agreement (other than the applicable Trust Agreement and this Agreement) or undertaking restricting the right or ability of any Seller to sell, assign or transfer any of the Trust Interests.

f.Release of Servicing Rights.  The Sellers and Guarantor each acknowledge that they have conveyed all rights to service the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties to Buyer but subject to the current Servicing Agreements.  Without limiting the generality of the foregoing, and for the avoidance of doubt, each of Sellers and Guarantor grants, assigns and pledges to Buyer a security interest in the Servicing Rights and proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created.

g.Intent.  The foregoing provisions (a) and (f) are intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.

h.Financing Statements.  Each Seller agrees to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Buyer’s security interest created hereby.  Furthermore, each Seller hereby authorizes the Buyer to file financing statements relating to the Repurchase Assets, as the Buyer, at its option, may deem appropriate.  The Sellers shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 8.  For the avoidance of doubt, the parties hereby agree that no mortgages will be filed with respect to such security interest.

9.Payment and Transfer

Unless otherwise mutually agreed in writing, all transfers of funds to be made by Sellers hereunder shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer, except to the extent otherwise provided herein, at the following account maintained by Buyer: Account No. 30865638, for the account of CSFB Buyer/PennyMac NPL-Inbound Account, Citibank, ABA No. 021 000 089 or such other account as Buyer shall specify to Sellers in writing.  Each Seller acknowledges that it has no rights of withdrawal from the foregoing account.  All Purchased Assets transferred by one party hereto to the other party shall be in the case of a purchase by Buyer in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as Buyer may reasonably request.  All Purchased Assets, Trust Mortgage Loans and REO Properties shall be evidenced by a Trust Receipt.  Any Repurchase Price received by Buyer after 2:00 p.m. (New York City time) shall be deemed received on the next succeeding Business Day.

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10.Conditions Precedent

a.Initial Transaction.  As conditions precedent to the effectiveness of this Agreement on the Amendment Purchase Date, Buyer shall have received on or before the Amendment Purchase Date the following, in form and substance satisfactory to Buyer and duly executed by Sellers, Guarantor and each other party thereto:

(1)Program Agreements.  The Program Agreements duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.

(2)Reaffirmation of Guaranty. As a condition precedent to amending the Existing Master Repurchase Agreement, Buyer has required Guarantor to ratify and affirm the Guaranty on the date hereof as provided herein.

(3)Security Interest.  Evidence that all other actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyer’s interest in the Purchased Assets and other Repurchase Assets have been taken, including, without limitation, duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1 and Form UCC-3.

(4)Organizational Documents.  A certificate of the secretary of each Seller, Guarantor, Trust Subsidiary and REO Subsidiary substantially in the form of Exhibit F hereto, attaching certified copies of PennyMac Corp.’s certificate of incorporation and by-laws, PennyMac Holdings’ certificate of formation and operating agreement, Guarantor’s declaration of trust, Trust Subsidiary’s Trust Agreement and REO Subsidiary’s Trust Agreement and with respect to Sellers and Guarantor resolutions approving the Program Agreements entered into as of the date hereof and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements.

(5)Good Standing Certificate.  A certified copy of a good standing certificate from the jurisdiction of organization of Sellers, Trust Subsidiary, REO Subsidiary and Guarantor, dated as of August 25, 2011.

(6)Incumbency Certificate.  An incumbency certificate of the corporate secretary of each of Sellers, PNMAC Capital Management, LLC as Administrator and signatory for each Trust Subsidiary, and Guarantor, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.

(7)Opinion of Counsel.  An opinion of Sellers’, Trust Subsidiary’s, REO Subsidiary’s and Guarantor’s counsel, in form and substance reasonably acceptable to Buyer.

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(8)Opinion of Delaware Counsel.   An opinion of counsel that the owners and creditors of any other trust created under the Master Trust Agreement shall not have claims to or be deemed creditors of the assets or interests of any Trust Subsidiary.

(9)Fees.  Payment of any fees due to Buyer hereunder.

(10)Insurance.  Evidence that Sellers have added Buyer as an additional loss payee under the Sellers’ Fidelity Insurance.

(11)Security Interest.  Evidence that all other actions necessary to perfect and protect Buyer’s interest in the Purchased Mortgage Loans and other Repurchase Assets and in the Trust Interests have been taken, including, without limitation, ensuring that any trust interests in REO Subsidiary and any Trust Subsidiary are evidenced by certificates in registered form and that such trust interests constitute and remain “securities” (as defined in Section 8-102 of the Uniform Commercial Code).  Sellers shall take all steps as may be necessary in connection with the indorsement, transfer of power, delivery and pledge of all Trust Interests to Buyer, and perform UCC searches and duly authorize and file Uniform Commercial Code financing statements on Form UCC-1 and Form UCC-3, as applicable;

(12)Trust Interests.  Sellers shall deliver an original Trust Certificate and all applicable transfer documents in blank for each of REO Subsidiary and any Trust Subsidiary to the Custodian.

(13)Amendment to Trust Subsidiary’s Trust Agreement.  Sellers shall deliver an amendment to Trust Agreement of SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4 evidencing changes consistent with the requirements set forth in the Trust Agreement for REO Subsidiary including an opinion that the execution of the amendment is authorized or permitted by the Master Trust Agreement and is enforceable.

b.All Transactions and Purchase Price Increases.  The obligation of Buyer to enter into each Transaction or Purchase Price Increase pursuant to this Agreement is subject to the following conditions precedent:

(1)Due Diligence Review.  Without limiting the generality of Section 36 hereof, Buyer shall have completed, to its satisfaction, its due diligence review of the related Mortgage Loans, REO Properties and Sellers, REO Subsidiary, any Trust Subsidiary, Guarantor and the applicable Servicer.  In addition to the foregoing, at least five (5) Business Days prior to the related Purchase Date, Sellers shall have delivered to Buyer summary results of the due diligence Sellers performed in connection with the acquisition of Mortgage Loans by Sellers, Trust Mortgage Loans by any Trust Subsidiary and REO Properties by REO Subsidiary and any Trust Subsidiary and Buyer shall have excluded such assets as it deemed appropriate in its sole discretion.

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(2)Required Documents.

(a)With respect to each of the Mortgage Loans, Trust Mortgage Loans and REO Properties, the Asset File has been delivered to the Custodian in accordance with the Custodial Agreement;

(3)Transaction Documents.  Buyer or its designee shall have received on or before the day of such Transaction or Purchase Price Increase, as applicable, (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Buyer and (if applicable) duly executed:

(a)A Transaction Request or Purchase Price Increase Request, as applicable, and Asset Schedule or other information required to be delivered by the applicable Seller pursuant to Section 3(b) hereof.

(b)The Request for Certification and the related Asset Schedule delivered by Sellers, and the Trust Receipt and Custodial Asset Schedule delivered by Custodian.

(c)Such certificates, opinions of counsel or other documents as Buyer may reasonably request.

(4)No Default.  No Default or Event of Default shall have occurred and be continuing;

(5)Requirements of Law.  Buyer shall not have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into Transactions or remit Purchase Price Increases with a Pricing Rate based on CSCOF.

(6)Representations and Warranties.  Both immediately prior to the related Transaction or Purchase Price Increase, as applicable, and also after giving effect thereto and to the intended use thereof, the representations and warranties made by each Seller in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

(7)Electronic Tracking Agreement. To the extent Sellers are selling Mortgage Loans which are registered on the MERS® System and to the extent Trust Mortgage Loans owned by any Trust Subsidiary are registered on the MERS® System, Electronic Tracking Agreements entered into, duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver; provided that executed signature pages by MERS and MERSCORP, Inc. may be produced following the date hereof.

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(8)Delivery of Broker’s Price Opinion.  With respect to each Mortgage Loan and REO Property, Sellers shall have delivered to Buyer a BPO valuation and valuation date, and such other information as may be required by Buyer pursuant to Section 3(b) for such Purchased Asset;

(9)Material Adverse Change.  None of the following shall have occurred and/or be continuing:

(a)Credit Suisse AG, New York Branch’s corporate bond rating as calculated by S&P or Moody’s has been lowered or downgraded to a rating below investment grade by S&P or Moody’s;

(b)an event or events shall have occurred in the good faith determination of Buyer resulting in the effective absence of a “repo market” or comparable “lending market” for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in Buyer not being able to finance Purchased Assets through the “repo market” or “lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or

(c)an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by mortgage loans or an event or events shall have occurred resulting in Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events; or

(d)there shall have occurred a material adverse change in the financial condition of Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of Buyer to fund its obligations under this Agreement.

11.Program; Costs

a.Sellers shall pay the fees, expenses and costs of Buyer and Buyer’s counsel as set forth in the Pricing Side Letter.

b.If Buyer determines that, due to the introduction of, any change in, or required change in compliance by Buyer with (i) any eurocurrency reserve requirement or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be an increase in the cost to Buyer in engaging in the present or any future Transactions or remitting Purchase Price Increases, then Sellers agree to pay to Buyer, from time to time, upon demand by Buyer (with a copy to Custodian) the actual cost of additional amounts as specified by Buyer to compensate Buyer for such increased costs; provided that this Section 11(b) shall only apply to the extent that such increased costs are not reflected in Buyer’s calculation of CSCOF.

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c.With respect to any Transaction or Purchase Price Increase, as applicable, Buyer may conclusively rely upon, and shall incur no liability to Sellers in acting upon, any request or other communication that Buyer reasonably believes to have been given or made by a person authorized to enter into a Transaction or request a Purchase Price Increase, as applicable, on any Seller’s behalf, whether or not such person is listed on the certificate delivered pursuant to Section 10(a)(6) hereof.  In each such case, each Seller hereby waives the right to dispute Buyer’s record of the terms of the request or other communication.

d.Notwithstanding the assignment of the Program Agreements with respect to each Purchased Asset to Buyer, Sellers agree and covenant with Buyer to enforce diligently Sellers’ rights and remedies set forth in the Program Agreements.

e.(i)  Any payments made by Sellers or Guarantor to Buyer hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if a Seller or Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 11(e)(i)) the Buyer receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Sellers shall make such deductions, (iii) the Sellers shall pay the full amount deducted to the relevant official body in accordance with applicable Law, and(iv) the Sellers shall notify the Buyer of the amount paid and shall provide evidence of such payment within ten days thereafter.Sellers and Guarantor shall otherwise indemnify Buyer for any Indemnified Taxes or Other Taxes imposed on Buyer.

(ii)  Buyer and any Buyer assignee shall deliver to each of the Sellers and the Guarantor (A) in the case of a Buyer or Buyer assignee which is a “U.S. Person” as defined in section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (“IRS”)  Form W-9 certifying that it is not subject to backup withholding, and (B) in the case of a Buyer or Buyer assignee which is not a “U.S. Person” as defined in Code section 7701(a)(30), a properly completed and executed IRS Form W-8BEN or W-8ECI, as appropriate, evidencing entitlement to a zero percent rate of U.S. federal income tax withholding on any payments made hereunder and, in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Code sections 871(h) or 881(c) with respect to payments of “portfolio interest,” a duly executed certificate to the effect that such non-U.S. Person is not (A) a “bank” within the meaning of Code section 881(c)(3)(A), (B) a “10 percent shareholder” of any Seller, Guarantor of affiliate thereof, within the meaning of Code section 881(c)(3)(B), or (C) a “controlled foreign corporation” described in Code section 881(c)(3)(C).

f.(i)  Any indemnification payable by Sellers to Buyer or any Buyer assignee for Indemnified Taxes or Other Taxes that are imposed on Buyer or a Buyer assignee, as described in Section 11(e)(i) hereof, shall be paid by Sellers within thirty (30) days after written demand therefor.  As part of any such written

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demand for payment, the Buyer or the relevant Buyer assignee shall deliver a certificate to Sellers (along with a copy of the applicable documents from the relevant Governmental Authority) setting forth a calculation of the amount of Indemnified Taxes or Other Tax for which the demand is made, which calculated amount shall be conclusive absent manifest error.  The Buyer or relevant Buyer assignee also shall timely deliver to the Sellers a receipt (or other evidence reasonably satisfactory to the Sellers) of the actual payment of Indemnified Taxes or Other Taxes with respect to which the indemnification request relates.

(ii)  In addition, as soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Seller to a Governmental Authority pursuant to Section 11(e)(i), such Seller shall deliver to the Buyer or the relevant Buyer assignee the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Buyer or the relevant Buyer assignee.

The applicable IRS forms referred to above shall be delivered by each applicable Buyer or Buyer assignee on or prior to the date on which such person becomes a Buyer or Buyer assignee under this Agreement, as the case may be, and upon the obsolescence or invalidity of any IRS form previously delivered by it hereunder.

12.Servicing

a.Pursuant to the Servicing Agreements, Sellers, any Trust Subsidiary and REO Subsidiary, respectively have contracted with the applicable Servicer to service the Purchased Mortgage Loans, Trust Mortgage Loans, and REO Properties consistent with the degree of skill and care that Sellers customarily require with respect to similar Mortgage Loans and REO Properties owned or managed by them and in accordance with Servicing Guidelines.  The Sellers and Servicers shall (i) comply with all applicable Federal, State and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities hereunder and (iii) not impair the rights of Buyer in any Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties or any payment thereunder.  Buyer may terminate the servicing of any Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties with the then-existing servicer in accordance with Section 12(e) hereof.

b.Sellers shall and shall cause the applicable Servicer to hold or cause to be held all escrow funds collected by Sellers and Servicers with respect to any Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties in trust accounts and shall apply the same for the purposes for which such funds were collected.

c.Sellers shall and shall cause the applicable Servicer to deposit all collections received by the applicable Servicer on the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties in the accounts set forth in Section 9.

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d.Sellers shall provide to Buyer (i) a Servicer Notice and Pledge addressed to and agreed to by PennyMac Loan Services, LLC of the related Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties, and (ii) a Servicer Notice addressed to and agreed to by Specialized Loan Servicing LLC of the related Trust Mortgage Loans and REO Properties,  advising such Servicer of such matters as Buyer may reasonably request, including, without limitation, recognition by such Servicer of Buyer’s interest in such Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties and such Servicer’s agreement that upon receipt of notice of an Event of Default from Buyer, it will follow the instructions of Buyer with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties and any related Income with respect thereto.

e.Upon the occurrence and continuation of an Event of Default hereunder, Buyer shall have the right to immediately terminate each Servicer’s right to service the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties without payment of any penalty or termination fee under any Servicing Agreement.  Sellers and the Servicers shall cooperate in transferring the applicable servicing of the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties to a successor servicer appointed by Buyer in its sole discretion.

f.If Sellers should discover that, for any reason whatsoever, Sellers or any entity responsible to Sellers for managing or servicing any such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property has failed to perform fully any Seller’s obligations under the Program Agreements or any of the obligations of such entities with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties, Sellers shall promptly notify Buyer.

g.PennyMac Loan Services, LLC shall service the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties on behalf of Buyer for ninety (90) day intervals which will automatically terminate if not renewed by Buyer, which renewal shall be evidenced by delivery of a renewal letter substantially in the form of Exhibit C hereto.

h.For the avoidance of doubt, the Sellers retain no economic rights to the servicing of the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties; provided that the Sellers shall and shall cause the Servicers to continue to service the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties hereunder as part of the Obligations hereunder.  As such, the Sellers expressly acknowledge that the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties are sold to Buyer or transferred to REO Subsidiary or any Trust Subsidiary, as applicable, on a “servicing released” basis.

13.Representations and Warranties

a.Except as otherwise specifically set forth below, each of Sellers and Guarantor represents and warrants to Buyer as of the date hereof and as of each Purchase Date for any Transaction or Purchase Price Increase Date, as applicable, that:

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(1)Existence.  PennyMac Corp. has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware.  PennyMac Holdings has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware. PennyMac Mortgage Investment Trust has been duly organized and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland.   Each of SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4 is duly organized, validly existing and in good standing under the laws of the State of Delaware.  REO Subsidiary is duly organized, validly existing and in good standing under the laws of the State of Delaware.

(2)Licenses.  Each of Sellers and Guarantor is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business and is required to be licensed or otherwise qualified for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect.  Each Seller, each Trust Subsidiary and REO Subsidiary has the requisite power and authority, legal right and necessary licenses to purchase Mortgage Loans and REO Properties, (as applicable) and to own, sell and grant a lien on all of its right, title and interest in and to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties, and to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, each Program Agreement and any Transaction Request or Purchase Price Increase Request, as applicable.

(3)Power.  Each of Sellers, Trust Subsidiaries, REO Subsidiary and Guarantor has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.

(4)Due Authorization.  Each of Sellers, Trust Subsidiaries, REO Subsidiary and Guarantor has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable.  Each Program Agreement has been (or, in the case of Program Agreements not yet executed, will be) duly authorized, executed and delivered by each Seller, each Trust Subsidiary, REO Subsidiary and Guarantor, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against each Seller, each Trust Subsidiary, REO Subsidiary and Guarantor in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.

(5)Financial Statements.  Each of PennyMac Mortgage Investment Trust and Sellers have heretofore furnished to Buyer a copy of (a)

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PennyMac Mortgage Investment Trust’s consolidated balance sheets and the consolidated balance sheets of its consolidated Subsidiaries for the fiscal year ended December 31, 2010 and the related consolidated statements of income and retained earnings and of cash flows for it and its consolidated Subsidiaries for such fiscal year, with the opinion thereon of Deloitte & Touche LLP and (b) PennyMac Mortgage Investment Trust’s consolidated balance sheets and the consolidated balance sheets of its consolidated Subsidiaries for the quarterly fiscal period ended March 31, 2011 and the related consolidated statements of income and retained earnings and of cash flows for it and its consolidated Subsidiaries for such quarterly fiscal period.  All such financial statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of PennyMac Mortgage Investment Trust and the consolidated results of its operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis.  Each of each Seller and Guarantor has, on the date of the statements delivered pursuant to this Section (the “Statement Date”) no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of each Seller except as heretofore disclosed to Buyer in writing.

(6)Event of Default.  There exists no Event of Default under Section 15(b) hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 15(b) hereof, under any mortgage, borrowing agreement or other instrument or agreement pertaining to indebtedness for borrowed money or to the repurchase of mortgage loans or securities.

(7)Solvency.  Each of Sellers, Trust Subsidiaries, REO Subsidiary and Guarantor is solvent and will not be rendered insolvent by any Transaction or Purchase Price Increase and, after giving effect to such Transaction or Purchase Price Increase, will not be left with an unreasonably small amount of capital with which to engage in its business.  No Seller, Trust Subsidiary, REO Subsidiary or Guarantor intend to incur, nor believe that they have incurred, debts beyond their ability to pay such debts as they mature and are not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets.  The amount of consideration being received by each Seller upon the sale of the Purchased Assets to Buyer constitutes reasonably equivalent value and fair consideration for such Purchased Assets.  No Seller is transferring any Purchased Assets with any intent to hinder, delay or defraud any of its creditors.  Each transfer of REO Property to REO Subsidiary or any Trust Subsidiary constitutes reasonably equivalent value and fair consideration for such REO Property.  Each transfer of Trust Mortgage Loans to any Trust Subsidiary constitutes reasonably equivalent value and fair consideration for such Trust Mortgage Loan.

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(8)No Conflicts.  The execution, delivery and performance by each Seller, each Trust Subsidiary, REO Subsidiary and Guarantor of each Program Agreement do not conflict with any term or provision of the formation documents or by-laws of Sellers, any Trust Subsidiary, REO Subsidiary or Guarantor or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to either Seller, any Trust Subsidiary, REO Subsidiary or Guarantor of any court, regulatory body, administrative agency or governmental body having jurisdiction over any Seller or Guarantor, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement or obligation to which either Seller, any Trust Subsidiary, REO Subsidiary or Guarantor is a party.

(9)True and Complete Disclosure.  All information, reports, exhibits, schedules, financial statements or certificates of Sellers, Guarantor, or any Affiliate thereof or any of their officers furnished or to be furnished to Buyer in connection with the initial or any ongoing due diligence of Sellers, Guarantor, or any Affiliate or officer thereof, negotiation, preparation, or delivery of the Program Agreements are true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading.  All financial statements have been prepared in accordance with GAAP (other than monthly financial statements solely with respect to footnotes, year-end adjustments and cash flow statements).

(10)Approvals.  No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by each Seller, any Trust Subsidiary, REO Subsidiary or Guarantor of each Program Agreement.  For the avoidance of doubt, the parties acknowledge that certain details, excluding pricing details, of the Program Agreements will be filed in the Guarantor’s 8-K filing.

(11)Litigation.  There is no action, proceeding or investigation pending with respect to which either Seller or Guarantor has received service of process or, to the best of either Seller’s or Guarantor’s knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated any Program Agreement, (C) makes a claim individually in an amount greater than $1,000,000 or in an aggregate amount greater than $5,000,000, (D) which requires filing with the Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder or (E) which might materially and adversely affect the validity of the Purchased Assets, Trust Mortgage Loans or REO Properties or the performance by it of its obligations under, or the validity or enforceability of any Program Agreement.

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(12)Material Adverse Change.  There has been no material adverse change in the business, operations, financial condition, properties or prospects of Sellers, Guarantor or their Affiliates since the date set forth in the most recent financial statements supplied to Buyer as determined by Buyer in its sole good faith discretion.

(13)Ownership.  Upon (a) payment of the Purchase Price and the filing of the financing statement and delivery of the Asset Files to the Custodian and the Custodian’s receipt of the related Request for Certification, Buyer shall become the sole owner of the Purchased Assets and related Repurchase Assets, (b) transfer of each REO Property, the REO Subsidiary or a Trust Subsidiary, as applicable, shall become the sole owner of the REO Properties or (c) transfer of each Trust Mortgage Loan, the applicable Trust Subsidiary shall become the sole owner of the Trust Mortgage Loans, free and clear of all liens and encumbrances.

(14)Reserved.

(15)Taxes. Sellers, Guarantor and their Subsidiaries have timely filed all tax returns that are required to be filed by them and have paid all taxes, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided.  The charges, accruals and reserves on the books of Sellers, Guarantor and their Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Sellers or Guarantor, as applicable, adequate.

(16)Investment Company.  None of any Seller, Guarantor or any of their Subsidiaries is an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(17)Chief Executive Office; Jurisdiction of Organization.  On the Effective Date, each Seller’s chief executive office, is, and has been, located at 27001 Agoura Road, Third Floor, Calabasas, California 91301.  On the Effective Date, each Seller’s jurisdiction of organization is the State of Delaware.  Sellers shall provide Buyer with thirty days advance notice of any change in either Seller’s principal office or place of business or jurisdiction.  Each Seller has no trade name.  During the preceding five years, each Seller has not been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.

(18)Location of Books and Records.  The location where each Seller keeps its books and records, including all computer tapes and records relating to the Purchased Assets, Trust Mortgage Loans and REO Properties and the related Repurchase Assets is its chief executive office.

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(19)Adjusted Tangible Net Worth.  On the Effective Date, each Seller’s Adjusted Tangible Net Worth is not less than the amount set forth in Section 2.1 of the Pricing Side Letter.

(20)ERISA.  Each Plan to which Sellers, Guarantor or their Subsidiaries make direct contributions, and, to the knowledge of Sellers, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.

(21)Adverse Selection.  No Seller has selected the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties in a manner so as to adversely affect Buyer’s interests.

(22)Agreements.  No Seller nor any of their respective Subsidiaries is a party to any agreement, instrument, or indenture or subject to any restriction materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 13(a)(5) hereof.  No Seller or any of their respective Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default could have a material adverse effect on the business, operations, properties, or financial condition of Sellers as a whole.  No holder of any indebtedness of any Seller or of any of its Subsidiaries has given notice of any asserted default thereunder.

(23)Other Indebtedness.  All Indebtedness (other than Indebtedness evidenced by this Agreement) of each Seller existing on the date hereof is listed on Exhibit H hereto (the “Existing Indebtedness”).

(24)Reserved.

(25)No Reliance.  Each Seller, each Trust Subsidiary, REO Subsidiary and Guarantor has made its own independent decisions to enter into the Program Agreements and each Transaction or request a Purchase Price Increase, as applicable, and as to whether such Transaction or request a Purchase Price Increase, as applicable, is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary.  No Seller, Trust Subsidiary, REO Subsidiary or Guarantor is relying upon any advice from Buyer as to any aspect of the Transactions or Purchase Price Increases, as applicable, including without limitation, the legal, accounting or tax treatment of such Transactions or Purchase Price Increases, as applicable.

(26)Plan Assets. Neither any Seller nor Guarantor are an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets are not

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“plan assets” within the meaning of 29 CFR §2510.3 101 as amended by Section 3(42) of ERISA, in Sellers’ hands, and transactions by or with Sellers or Guarantor are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

(27)No Prohibited Persons. No Seller nor any of their respective Subsidiaries, officers, directors, partners or members, is an entity or person (or to each Seller’s knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “Prohibited Person”).

(28)Servicing.  Each Seller has adequate financial standing and, through the Servicing Agreements with the applicable Servicer, access to adequate servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Purchased Mortgage Loans and Trust Mortgage Loans and in accordance with Accepted Servicing Practices.

(29)Real Estate Investment Trust.  PennyMac Mortgage Investment Trust is a REIT.

b.With respect to every Purchased Asset, Trust Mortgage Loan and REO Property, each Seller and Guarantor jointly and severally represents and warrants to Buyer as of the applicable Purchase Date for any Transaction and as of any Purchase Price Increase Date, as applicable, and each date thereafter that each representation and warranty set forth on Schedule 1-A, 1-B, 1-C, as applicable, is true and correct.

c.The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Assets to Buyer, the Trust Mortgage Loans to any Trust Subsidiary and the REO Property to the REO Subsidiary and any Trust Subsidiary and shall continue for so long as the Purchased Assets, Trust Mortgage Loans and REO Properties are subject to this Agreement.

d.Upon discovery by any Seller, any Servicer or Buyer of any breach of any of the representations or warranties set forth in this Agreement, the party discovering such breach shall promptly give notice of such discovery to the others.  Buyer has

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the right to require, in its unreviewable discretion, Sellers to repurchase within one (1) Business Day after receipt of notice from Buyer any Purchased Asset, or cause REO Subsidiary or any Trust Subsidiary, as applicable, to transfer any REO Property or any Trust Subsidiary to transfer any Trust Mortgage Loans, as applicable, in each case, at the Release Price for which a breach of one or more of the representations and warranties referenced in Section 13(b) exists and which breach has a material adverse effect on the value of such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property or the interests of Buyer.

14.Covenants

Each of each Seller and Guarantor covenants with Buyer that, during the term of this facility:

a.Litigation. Each Seller and Guarantor, as applicable, will promptly, and in any event within ten (10) days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting Sellers, Guarantor or any of their Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually in an amount greater than $1,000,000 or in an aggregate amount greater than $5,000,000, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect.  Each Seller and Guarantor, as applicable, will promptly provide notice of any judgment, which with the passage of time, if adversely decided, could reasonably be expected to cause an Event of Default hereunder.

b.Prohibition of Fundamental Changes.  No Seller shall enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that each Seller may merge or consolidate with (a) any wholly owned subsidiary of such Seller, or (b) any other Person if such Seller is the surviving corporation; and provided further, that if after giving effect thereto, no Default would exist hereunder.

c.Servicing.  Sellers shall not cause the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties to be serviced by any servicer other than a servicer expressly approved in writing by Buyer, which approval shall be deemed granted by Buyer with respect to each Servicer with the execution of this Agreement.

d.Insurance.  The Sellers or Guarantor shall continue to maintain, for each Seller and its Subsidiaries, Fidelity Insurance in an aggregate amount at least equal to $300,000.  The Sellers or Guarantor shall maintain, for each Seller and its Subsidiaries, Fidelity Insurance in respect of its officers, employees and agents,

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with respect to any claims made in connection with all or any portion of the Repurchase Assets.  The Sellers or Guarantor shall notify the Buyer of any material change in the terms of any such Fidelity Insurance.

e.No Adverse Claims.  Each Seller warrants and will defend, and shall cause any Servicer to defend, the right, title and interest of (i) Buyer in and to all Purchased Assets and the related Repurchase Assets, (ii) REO Subsidiary or any Trust Subsidiary, as applicable, in and to all REO Properties held by it and (iii) any Trust Subsidiary in and to all Trust Mortgage Loans held by it, in each case, against all adverse claims and demands.

f.Assignment.  Except as permitted herein, no Seller nor any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets, Trust Mortgage Loans, or REO Properties or any interest therein, provided that this Section shall not prevent any transfer of Purchased Assets, Trust Mortgage Loans, or REO Properties in accordance with the Program Agreements.

g.Security Interest.  Each Seller shall do all things necessary to preserve the Purchased Assets and the related Repurchase Assets so that they remain subject to a first priority perfected security interest hereunder.  Without limiting the foregoing, each Seller will comply in all material respects with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets, Trust Mortgage Loans, and REO Properties and the related Repurchase Assets to comply with all applicable rules, regulations and other laws in all material respects.  Each Seller shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets, Trust Mortgage Loans, and REO Properties and the related Repurchase Assets and any Program Agreement.

h.Records.

(1)Each Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets, Trust Mortgage Loans, and REO Properties in accordance with industry custom and practice for assets similar to the Purchased Assets, Trust Mortgage Loans, and REO Properties, including those maintained pursuant to the preceding subparagraph, and all such Records shall be in Custodian’s possession unless Buyer otherwise approves.  Except in accordance with the Custodial Agreement, no Seller will allow any such papers, records or files that are an original or an only copy to leave Custodian’s possession, except for individual items removed in connection with servicing a specific Purchased Mortgage Loan, Trust Mortgage Loan or REO Property, in which event each Seller will obtain or cause to be obtained a receipt from a financially responsible person for any such paper, record or file.  Each Seller or the applicable Servicer of the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties will maintain all such Records not in the

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possession of Custodian in good and complete condition in accordance with industry practices for assets similar to the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties and preserve them against loss.

(2)For so long as Buyer has an interest in or lien on any Purchased Asset, each Seller will hold or cause to be held all related Records in trust for Buyer.  Each Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Buyer granted hereby. For so long as REO Subsidiary has an interest in or lien on any REO Property, PennyMac Corp. shall cause REO Subsidiary to hold or cause to be held all related Records in trust for Buyer.  PennyMac Corp.  shall cause REO Subsidiary to notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Buyer granted hereby. For so long as a Trust Subsidiary has an interest in or lien on any REO Property or Trust Mortgage Loan, the applicable Seller shall cause such Trust Subsidiary to hold or cause to be held all related Records in trust for Buyer.  The applicable Seller shall cause each Trust Subsidiary to notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Buyer granted hereby.

(3)Upon reasonable advance notice from Custodian or Buyer, each Seller shall (x) make any and all such Records available to Custodian or Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Buyer or its authorized agents to discuss the affairs, finances and accounts of each Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of each Seller with its independent certified public accountants.

i.Books.  Each Seller shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Buyer.  PennyMac Corp. shall cause REO Subsidiary to keep in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of REO Property to REO Subsidiary. The applicable Seller shall cause each Trust Subsidiary to keep in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of REO Property and Trust Mortgage Loans to such Trust Subsidiary.

j.Approvals.  Each Seller shall maintain all licenses, permits or other approvals necessary for such Seller to conduct its business and to perform its obligations under the Program Agreements, and each Seller shall conduct its business in all material respects in accordance with applicable law.

k.Material Change in Business.  Neither Sellers nor Guarantor shall make any material change in the nature of its business as carried on at the date hereof.

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l.Acquisition Guidelines and Servicing Guidelines.  Without prior written notice to Buyer, Sellers shall not amend or otherwise modify the Acquisition Guidelines in any material respect.  In the event that a Servicer makes any amendment or modification to the applicable Servicing Agreement, Sellers shall promptly deliver to Buyer a complete copy of such amended or modified Servicing Agreement, specifying in detail the amendments and modifications set forth therein from the previous copy delivered.  Buyer shall not be bound by such amended or modified Servicing Agreement unless Buyer provides written consent in its sole discretion to any amendment or modification.

m.Distributions.  If an Event of Default has occurred and is continuing, neither Sellers nor Guarantor shall pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Sellers or Guarantor.

n.Applicable Law.  Each Seller and Guarantor shall comply in all material respects with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.

o.Existence.  Each Seller, each Trust Subsidiary, REO Subsidiary and the Guarantor shall preserve and maintain their legal existence and all of their material rights, privileges, material licenses and franchises.

p.Chief Executive Office; Jurisdiction of Organization.  Sellers shall not move their chief executive office from the address referred to in Section 13(a)(17) or change their jurisdiction of organization from the jurisdiction referred to in Section 13(a)(17) unless it shall have provided Buyer 30 days’ prior written notice of such change.

q.Taxes.  Each Seller and Guarantor shall timely file all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

r.Transactions with Affiliates.  No Seller will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate, other than any contribution of REO Property to REO Subsidiary or a Trust Subsidiary or Trust Mortgage Loans to a Trust Subsidiary, unless such transaction is (a) otherwise permitted under the Program Agreements, (b) in the ordinary course of such Seller’s business and (c) upon fair and reasonable terms no less favorable to such Seller than it would obtain in a comparable arm’s length transaction with a Person which is not an

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Affiliate, or make a payment that is not otherwise permitted by this Section to any Affiliate.

s.Guarantees.  No Seller shall create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in such Seller’s financial statements or notes thereto and (ii) to the extent the aggregate Guarantees of all Sellers combined do not exceed $250,000.

t.Indebtedness.  No Seller shall incur any additional material Indebtedness (other than (i) the Existing Indebtedness in amounts not to exceed the amounts specified on Exhibit H hereto; (ii) usual and customary accounts payable for a mortgage company; (iii) Indebtedness incurred in connection with another secured lending facility; and (iv) Indebtedness incurred in connection with an intercompany lending agreement) without the prior written consent of Buyer.

u.Special Purpose Entity.  Sellers shall cause each of REO Subsidiary and any Trust Subsidiary to be a Special Purpose Entity that shall (i) own no assets other than the assets specifically contemplated by the Program Agreements, and will not engage in any business, other than the assets and transactions specifically contemplated by the Program Agreements; (ii) not incur any Indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than pursuant to the Program Agreements; (iii) not make any loans or advances to any Affiliate or third party, and shall not acquire obligations or securities of any Sellers’ Affiliates; (iv) pay its debts and liabilities (including, as applicable, shared personnel expenses and overhead expenses) only from its own assets; (v) comply with the provisions of its organizational documents; (vi) do all things necessary to observe organizational formalities and to preserve its existence, and not amend, modify or otherwise change its organizational documents, or suffer same to be amended, modified or otherwise changed, without the Buyer’s prior written consent which shall not be unreasonably withheld; (vii) maintain all of its books, records and financial statements separate from those of its Affiliates (except that such financial statements may be to the extent consolidation is required under GAAP or as a matter of applicable law; provided, that (A) appropriate notation shall be made on such financial statements if prepared to indicate the separateness of the Sellers from such Affiliate and to indicate that the Sellers’ assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person, (B) such assets shall also be listed on the applicable Seller’s own separate balance sheet if prepared and (C) the Sellers shall file its own tax returns if filed, except to the extent consolidation is required or permitted under applicable law); (viii) be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other; (ix) not enter into any transactions other than transactions specifically contemplated by the Program Agreements with any Affiliates except on commercially reasonable terms similar to those available to

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unaffiliated parties in an arm’s length transaction; (x) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities; (xi) not engage in or suffer any dissolution, winding up, liquidation, consolidation or merger or transfer all or substantially all of its properties and assets to any Person (except as contemplated herein); (xii) not commingle its funds or other assets with those of any Affiliate or any other Person and shall maintain its properties and assets in such manner that it would not be costly or difficult to identify, segregate or ascertain its properties and assts from those of others; (xiii) not institute against, or join any other Person in instituting against the REO Subsidiary or a Trust Subsidiary, as applicable, any proceedings of the type referred to in the definition of Act of Insolvency hereunder or seek to substantively consolidate the REO Subsidiary or any Trust Subsidiary, as applicable, in connection with any Act of Insolvency with respect to any Seller; (xiv) will not hold itself out to be responsible for the debts or obligations of any other Person; (xv) not form, acquire or hold any Subsidiary or own any equity interest in any other entity; (xvi) allocate fairly and reasonably any overhead for shared office space and services performed by an employee of an Affiliate; and (xvii) not pledge its assets to secure the obligations of any other Person.

v.True and Correct Information.  All information, reports, exhibits, schedules, financial statements or certificates of each Seller, Guarantor, any Affiliate thereof or any of their officers furnished to Buyer hereunder and during Buyer’s diligence of each Seller and Guarantor are and will be true and complete in all material respects and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading.  All required financial statements, information and reports delivered by each Seller to Buyer pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.

w.REO Subsidiary and Trust Subsidiary Compliance.  Sellers shall cause REO Subsidiary and each Trust Subsidiary to comply with all requirements and obligations imposed upon it under the applicable Trust Agreement.  Sellers shall not cause, or permit REO Subsidiary or any Trust Subsidiary to cause any REO Property to be taken in the name of any Person other than a REO Subsidiary or Trust Subsidiary or any Trust Subsidiary to cause any Trust Mortgage Loans to be taken in the name of any Person other than a Trust Subsidiary, in each case, without the consent of Buyer.

x.Take-out Payments. For Take-out Commitments with respect to the purchase of twenty-five (25) or more Purchased Mortgage Loans, Trust Mortgage Loans, and/or REO Properties sold to the same Take-out Investor, each Seller shall arrange that all payments under the related Take-out Commitment shall be paid directly to the Collection Account, the applicable Trust Account or REO Account as applicable.  All other remittances under Take-out Commitments shall be handled in a manner consistent with Section 7 hereof.

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y.No Amendment to Fees.  Sellers shall not increase the fees payable to any Servicer or to any successors thereto.

z.Plan Assets.  Neither Sellers nor Guarantor shall be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and the Sellers shall not use “plan assets” within the meaning of 29 CFR §2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement or any Transaction hereunder. Transactions by or with Sellers or Guarantor shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

aa.Sharing of Information.  The Sellers shall allow the Buyer to exchange information related to the Sellers and the Transaction hereunder with third party lenders and the Sellers shall permit each third party lender to share such information with the Buyer.

bb.Reserved.

cc.Quality Control.  Sellers shall provide to Buyer, with respect to mortgage loans and real estate it acquires and/or owns, quality control reports with respect to (a) its due diligence in connection with the acquisition of such mortgage loans and real estate, and (b) the servicing of such mortgage loans and real estate to the quality control program established in accordance with Fannie Mae guidelines.

dd.Financial Covenants.  Each Seller and PennyMac Mortgage Investment Trust, as applicable, shall or shall cause at all times the compliance with any and all financial covenants and/or financial ratios set forth in Section 2 of the Pricing Side Letter.

ee.Most Favored Status.  Sellers, Guarantor and the Buyer each agree that should any Seller enter into a Warehouse Facility with any Person other than the Buyer or an Affiliate of the Buyer which by its terms provides more favorable terms to the Buyer with respect to the financial covenants set forth in Section 14dd hereof (a “More Favorable Agreement”), the terms of this Agreement shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement; provided, that in the event that such More Favorable Agreement is terminated, upon notice by the Sellers to the Buyer of such termination, the original terms of this Agreement shall be deemed to be automatically reinstated.  The Sellers, the Guarantor, and the Buyer further agree to execute and deliver any new agreements or amendments to this Agreement evidencing such provisions, provided that the execution of such amendment shall not be a precondition to the effectiveness of such amendment, but shall merely be for the convenience of the parties hereto.  Promptly upon any Seller entering into a repurchase agreement or other credit facility with any Person other than the Buyer, such Seller shall notify Buyer that it has entered into such repurchase agreement or other credit facility and deliver to Buyer a summary of the material

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terms related to the comparable financial covenants of such repurchase agreement or other credit facility in form and substance acceptable to Buyer.

15.Events of Default

Each of the following shall constitute an “Event of Default” hereunder:

a.Payment Failure.  Failure of any Seller to (i) make any payment of Price Differential or Repurchase Price or any other sum which has become due, on a Payment Date, a Mandatory Partial Prepayment Period or a Repurchase Date, or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of any Seller to Buyer or to any Affiliate of Buyer, or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof.

b.Cross Default.  Any Seller, Guarantor or any Affiliates thereof shall be in default under (i) any Indebtedness, in the aggregate, in excess of $1.5 million of any Seller, Guarantor or any Affiliate thereof, which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (ii) any other contract or contracts, in the aggregate in excess of $1.5 million to which any Seller, Guarantor or any Affiliate thereof is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract.

c.Assignment.  Assignment or attempted assignment by any Seller or Guarantor of this Agreement or any rights hereunder without first obtaining the specific written consent of Buyer, or the granting by any Seller of any security interest, lien or other encumbrances on any Purchased Assets to any person other than Buyer; the granting by REO Subsidiary of any security interest, lien or other encumbrances on any REO Property to any person other than Buyer or nominee approved by Buyer; or the granting by any Trust Subsidiary of any security interest, lien or other encumbrances on any Trust Mortgage Loan or any REO Property to any person other than Buyer or nominee approved by Buyer.

d.Insolvency.  An Act of Insolvency shall have occurred with respect to any Seller, any Trust Subsidiary, REO Subsidiary, Guarantor or any Affiliate.

e.Material Adverse Change.  Any material adverse change in the Property, business, financial condition or operations of any Seller, any Trust Subsidiary, REO Subsidiary, Guarantor or any of their Affiliates shall occur, in each case as determined by Buyer in its sole good faith discretion, or any other condition shall exist which, in Buyer’s sole good faith discretion, constitutes a material impairment of any Seller’s ability to perform its obligations under this Agreement or any other Program Agreement.

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f.Breach of Specified Representation or Covenant or Obligation. A breach by either Seller or Guarantor of any of the representations, warranties or covenants or obligations set forth (i) in Sections 13(a)(1), 13(a)(7), 13(a)(12), 13(a)(19), 14b, 14m, 14o, 14s, or 14z of this Agreement or (ii) Sections  13(a)(23), 14t, 14dd or 14ee of this Agreement and such breach identified in this clause (ii) shall remain unremedied for one Business Day.

g.Breach of Take-out Payment Covenant.  A breach by any Seller or Guarantor of the covenant set forth in Section 14x, if such breach is not cured within one (1) Business Day.

h.Breach of Non-Specified Representation or Covenant.  A breach by any Seller or Guarantor of any other representation, warranty or covenant set forth in this Agreement in any material respect (and not otherwise specified in Sections 15(f) and (g) above), if such breach is not cured within five (5) Business Days (other than the representations and warranties set forth in Schedule 1, which shall be considered solely for the purpose of determining the Market Value, the existence of a Margin Deficit and the obligation to repurchase such Purchased Mortgage Loan or pay the Release Price with respect to such REO Property or Trust Mortgage Loan, as applicable) unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Buyer in its sole discretion to be materially false or misleading on a regular basis, or (iii) Buyer, in its sole discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party, its Subsidiaries or Affiliates; or (B) Buyer’s determination to enter into this Agreement or Transactions or Purchase Price Increases, as applicable, with such party, then such breach shall constitute an immediate Event of Default and Sellers shall have no cure right hereunder).

i.Change of Control.  The occurrence of a Change in Control without prior consent of Buyer which consent shall be granted or withheld in its sole discretion.

j.Failure to Transfer.  Any Seller fails to transfer the Purchased Assets to Buyer (or with respect to REO Properties, fails to transfer such REO Properties to the REO Subsidiary or a Trust Subsidiary, subject to the additional qualifications with respect to Unrecorded REO Properties or with respect to Trust Mortgage Loans, fails to transfer such Trust Mortgage Loans to a Trust Subsidiary) on or prior to the applicable Purchase Date (provided Buyer has tendered the related Purchase Price).

k.Judgment.  A final judgment or judgments for the payment of money in excess of $1,000,000 in the aggregate shall be rendered against any Seller, Guarantor, any Servicer or any of their respective Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or

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bonded, or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof.

l.Government Action.  Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller, Guarantor or any Affiliate thereof, or shall have taken any action to displace the management of any Seller, Guarantor or any Affiliate thereof or to curtail its authority in the conduct of the business of any Seller, Guarantor or any Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of any Seller, Guarantor or Affiliate as an issuer, buyer or a seller/servicer of Mortgage Loans or REO Properties or securities backed by either, and such action provided for in this Section 15(l) shall not have been discontinued or stayed within 30 days.

m.Inability to Perform.  A Responsible Officer of any Seller, any Trust Subsidiary, REO Subsidiary or Guarantor shall admit its inability to, or its intention not to, perform any of the Obligations hereunder or Guarantor’s obligations hereunder or under the Guaranty.

n.Security Interest.  This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Purchased Assets purported to be covered hereby.

o.Financial Statements.  Each Seller’s or Guarantor’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of either Seller or Guarantor as a “going concern” or a reference of similar import.

p.Guarantor Breach.  A breach by Guarantor of any material representation, warranty or covenant set forth in the Guaranty or any other Program Agreement, any “event of default” by Guarantor under the Guaranty, any repudiation of the Guaranty by Guarantor, or if the Guaranty is not enforceable against  Guarantor.

q.REO Subsidiary Breach and Trust Subsidiary Breach.  A breach by REO Subsidiary of any material representation, warranty or covenant set forth in the REO Contribution Agreement or any other Program Agreement, any “event of default” by REO Subsidiary under the REO Contribution Agreement, any repudiation of the REO Contribution Agreement by REO Subsidiary, or if the REO Contribution Agreement is not enforceable against REO Subsidiary. A breach by any Trust Subsidiary of any material representation, warranty or covenant set forth in the Trust Assignment Agreement or any other Program Agreement, any repudiation of the Trust Assignment Agreement by any Trust Subsidiary, or if the Trust Assignment Agreement is not enforceable against the applicable Trust Subsidiary.

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r.REIT Asset and Income Tests.  The failure of PennyMac Mortgage Investment Trust to qualify as a REIT and Buyer has delivered notice of an Event of Default to the Sellers with respect thereto:

s.Governmental Event.  Buyer shall determine, in its sole discretion, that a Governmental Event, individually or collectively, and whether unforeseen or arising out of any Seller’s existing applications, communications and correspondence with any Governmental Authority or Person, has had, or is likely to have, a Material Adverse Effect, or an adverse effect upon its ability to perform its obligations under this Agreement or any other material agreement to which it is a party or that may otherwise materially impair, limit or restrict any Seller’s ability to conduct its business or its operations.

An Event of Default shall be deemed to be continuing unless expressly waived by Buyer in writing.

16.Remedies Upon Default

In the event that an Event of Default shall have occurred:

a.Buyer may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency of any Seller or any Affiliate), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction or Purchase Price Increase Date for any Purchase Price Increase has not yet occurred as of the date of such exercise or deemed exercise, such Transaction or Purchase Price Increase shall be deemed immediately canceled).  Buyer shall (except upon the occurrence of an Act of Insolvency) give notice to Sellers and Guarantor of the exercise of such option as promptly as practicable.

b.If Buyer exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Section, (i) Sellers’ obligations in such Transactions to repurchase all Purchased Assets, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Section, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied, in Buyer’s sole discretion, to the aggregate unpaid Repurchase Prices for all outstanding Transactions and any other amounts owing by Sellers hereunder, provided, that following the payment of all Obligations, any remaining Income shall be forwarded to the Sellers, and (iii) Sellers shall immediately deliver to Buyer the Asset Files relating to any Purchased Assets, REO Properties or Trust Mortgage Loans subject to such Transactions then in Sellers’ possession or control.

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c.Buyer also shall have the right to obtain physical possession, and to commence an action to obtain physical possession, of all Records and files of Sellers, any Trust Subsidiary and REO Subsidiary relating to the Purchased Assets, Trust Mortgage Loans and REO Properties and all documents relating to the Purchased Assets (including, without limitation, any legal, credit or servicing files with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties) which are then or may thereafter come in to the possession of Sellers, any Trust Subsidiary and REO Subsidiary or any third party acting for Sellers.  To obtain physical possession of any Purchased Assets, Trust Mortgage Loans and REO Properties held by Custodian, Buyer shall present to Custodian a Trust Receipt.  Without limiting the rights of Buyer hereto to pursue all other legal and equitable rights available to Buyer for Sellers’ failure to perform its obligations under this Agreement, each Seller acknowledges and agrees that the remedy at law for any failure to perform obligations hereunder would be inadequate and Buyer shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Buyer from pursuing any other remedies for such breach, including the recovery of monetary damages.

d.Buyer shall have the right to direct all servicers then servicing any Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties to remit all collections thereon to Buyer, and if any such payments are received by Sellers, Sellers shall not commingle the amounts received with other funds of Sellers and shall promptly pay them over to Buyer.  Buyer shall also have the right to terminate any one or all of the servicers then servicing any Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties with or without cause.  In addition, Buyer shall have the right to immediately sell the Purchased Assets, cause any Trust Subsidiary and REO Subsidiary to sell the REO Properties, cause any Trust Subsidiary to sell the Trust Mortgage Loans and liquidate all Repurchase Assets.  Such disposition of Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties may be, at Buyer’s option, on either a servicing-released or a servicing-retained basis.  Buyer shall not be required to give any warranties as to the Purchased Assets, Trust Mortgage Loans or REO Properties with respect to any such disposition thereof.  Buyer may specifically disclaim or modify any warranties of title or the like relating to the Purchased Assets, Trust Mortgage Loans or REO Properties.  The foregoing procedure for disposition of the Purchased Assets, Trust Mortgage Loans or REO Properties and liquidation of the Repurchase Assets shall not be considered to adversely affect the commercial reasonableness of any sale thereof.  Each Seller agrees that it would not be commercially unreasonable for Buyer to dispose of the Purchased Assets, cause the disposition of REO Properties and Trust Mortgage Loans or dispose of the Repurchase Assets or any portion thereof by using Internet sites that provide for the auction of assets similar to the Purchased Assets, Trust Mortgage Loans, REO Properties or the Repurchase Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets.  Buyer shall be entitled to place the Purchased Assets or cause the placement of the REO Properties and Trust Mortgage Loans in a pool for issuance of securities

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at the then-prevailing price for such securities and to sell such securities for such prevailing price in the open market.  Buyer shall also be entitled to sell any or all of such Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties individually for the prevailing price. Buyer shall also be entitled, in its sole discretion to elect, in lieu of selling all or a portion of such Purchased Assets or causing the sale of all or a portion of such REO Properties and Trust Mortgage Loans, to give the Sellers credit for such Purchased Assets and the Repurchase Assets in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by the Sellers hereunder.

e.Upon the happening of one or more Events of Default, Buyer may apply any proceeds from the liquidation of the Purchased Assets and Repurchase Assets to the Repurchase Prices hereunder and all other Obligations in the manner Buyer deems appropriate in its sole discretion.

f.Each Seller recognizes that the market for the Purchased Assets, Trust Mortgage Loans or REO Properties may not be liquid and as a result it may not be possible for Buyer to sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner.  Each Seller further recognizes that Buyer may be unable to effect a public sale of any or all of the Purchased Assets that are Trust Interests, by reason of certain prohibitions contained in the 1934 Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not a view to the distribution or resale thereof.  In view of the nature of the Purchased Assets, Trust Mortgage Loans or REO Properties, each Seller agrees that liquidation of any Purchased Asset, Trust Mortgage Loan or REO Property may be conducted in a private sale and at such price as Buyer may deem commercially reasonable.  Buyer shall be under no obligation to delay a sale of any of any Purchased Assets that are the Trust Interests for the period of time necessary to permit the applicable Seller to register the Trust Interests for public sale under the 1934 Act, or under applicable state securities laws, even if such Seller would agree to do so.

g.Each Seller agrees to use its reasonable efforts to do or cause to be done all such other acts as may be reasonably necessary to make any sale or sales of any portion of the Trust Interests pursuant to this Agreement valid and binding and in compliance with any and all other applicable laws other than registration under applicable securities laws, provided that each Seller shall have no obligation to register the Trust Interests for public sale under the 1934 Act.  Each Seller further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Buyer, that Buyer has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Sellers, and each Seller hereby waives and agrees not to assert any defenses against an action for specific

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performance of such covenants except for defense that no Event of Default has occurred hereunder.

h.Sellers shall be liable to Buyer for (i) the amount of all reasonable legal or other expenses (including, without limitation, all costs and expenses of Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally, further including, without limitation, the reasonable fees and expenses of counsel (including the costs of internal counsel of Buyer) incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.

i.To the extent permitted by applicable law, Sellers shall be liable to Buyer for interest on any amounts owing by Sellers hereunder, from the date Sellers become liable for such amounts hereunder until such amounts are (i) paid in full by Sellers or (ii) satisfied in full by the exercise of Buyer’s rights hereunder.  Interest on any sum payable by Sellers under this Section 16(i) shall accrue at a rate equal to the Post-Default Rate.

j.Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.

k.Buyer may exercise one or more of the remedies available to Buyer immediately upon the occurrence of an Event of Default and, except to the extent provided in subsections (a) and (d) of this Section, at any time thereafter without notice to Sellers.  All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have.

l.Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Sellers hereby expressly waive any defenses Sellers might otherwise have to require Buyer to enforce its rights by judicial process.  Sellers also waive any defense (other than a defense of payment or performance) Sellers might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies.  Sellers recognize that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

m.Buyer shall have the right to perform reasonable due diligence with respect to each Seller and the Purchased Assets, Trust Mortgage Loans and REO Properties, which review shall be at the expense of such Seller.

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17.Reports

a.Default Notices.  Sellers or Guarantor shall furnish to Buyer (i) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, breaches, potential defaults or potential breaches) and any material financial information that is not otherwise required to be provided by Sellers hereunder which is given to Sellers’ lenders and (ii) immediately, notice of the occurrence of any (A) Event of Default hereunder, (B) default or breach in any material respect by any Seller or any Servicer, any Trust Subsidiary, REO Subsidiary or Guarantor of any obligation under any Program Agreement or any material contract or agreement of Sellers or any Servicer, any Trust Subsidiary, REO Subsidiary or Guarantor or (C) event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default or such a default or breach by such party.

b.Financial Notices.  Sellers or PennyMac Mortgage Investment Trust shall furnish to Buyer:

(1)as soon as available and in any event within forty (40) calendar days after the end of each calendar month, the unaudited consolidated balance sheets of Sellers and PennyMac Mortgage Investment Trust as at the end of such period and the related unaudited consolidated statements of income and retained earnings for the Sellers and PennyMac Mortgage Investment Trust and their consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Sellers and PennyMac Mortgage Investment Trust, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Sellers and PennyMac Mortgage Investment Trust in accordance with GAAP (other than solely with respect to footnotes, year-end adjustments and cash flow statements) consistently applied, as at the end of, and for, such period;

(2)to the extent not filed with the SEC on EDGAR, as soon as available and in any event within ninety (90) days after the end of each fiscal year of Sellers or PennyMac Mortgage Investment Trust, the consolidated balance sheets of Sellers, PennyMac Mortgage Investment Trust as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for the Sellers or PennyMac Mortgage Investment Trust for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion and the scope of audit shall be acceptable to Buyer in its sole discretion, shall have no “going concern” qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of each Seller or PennyMac Mortgage Investment Trust and their respective

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consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;

(3)at the time the Sellers or PennyMac Mortgage Investment Trust furnish each set of financial statements pursuant to Section 17(b)(1) or (2) above (or, with respect to (2) above, at the time filed with the SEC on EDGAR an Officer’s Compliance Certificate of a Responsible Officer of Seller in the form of Exhibit A to the Pricing Side Letter;

(4)if applicable, notice of any 10-K or 10-Q filings with the SEC on EDGAR by Sellers or PennyMac Mortgage Investment Trust, within five (5) Business Days of such filing with the SEC; and

(5)as soon as available and in any event within thirty (30) days of receipt thereof:

(a)reserved;

(b)copies of relevant portions of all final written Agency, Governmental Authority and investor audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required, (ii) material sanctions proposed, imposed or required, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (iii) “report cards,” “grades” or other classifications of the quality of Sellers’ operations;

(c)such other information regarding the financial condition, operations, or business of the Sellers or Guarantor as Buyer may reasonably request; and

(d)the particulars of any Event of Termination in reasonable detail.

c.Notices of Certain Events.  As soon possible and in any event within five (5) Business Days of knowledge thereof, Sellers shall furnish to Buyer notice of the following events:

(1)a change in the insurance coverage required of Sellers, any Servicer or any other Person pursuant to any Program Agreement, with a copy of evidence of same attached;

(2)any material dispute, litigation, investigation, proceeding or suspension between Sellers or any Servicer, on the one hand, and any Governmental Authority or any Person;

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(3)any material change in accounting policies or financial reporting practices of any Seller or any Servicer;

(4)that the underlying Mortgaged Property, with respect to any Purchased Mortgage Loan or Trust Mortgage Loan or any REO Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Mortgaged Loan;

(5)any material issues raised upon examination of any Seller or any Seller’s facilities by any Governmental Authority;

(6)any material change in the Indebtedness of any Seller, including, without limitation, any default, renewal, non-renewal, termination, increase in available amount or decrease in available amount related thereto;

(7)any default related to any Repurchase Asset or any lien or security interest (other than security interests created hereby or by the other Program Agreements) on, or claim asserted against, any of the Purchased Assets, any Trust Mortgage Loan or any REO Property;

(8)any other event, circumstance or condition that has resulted, or has a possibility of resulting, in a Material Adverse Effect with respect to any Seller or any Servicer;

(9)the occurrence of any material employment dispute and a description of the strategy for resolving it that has the possibility of resulting in a Material Adverse Effect; and

(10)without limiting any of the other reporting obligations of any Seller hereunder, each Seller shall promptly notify Buyer of any Governmental Event or update thereto, and shall include the particulars of each update with sufficient detail as is satisfactory to Buyer.

d.Portfolio Performance Data.  On the first Reporting Date of each calendar month, Sellers will furnish to Buyer (i) electronic Purchased Mortgage Loan, Trust Mortgage Loan and REO Property performance data, including, without limitation, delinquency reports and volume information, broken down by product (i.e., delinquency, foreclosure and net charge-off reports) and (ii) (a) for Mortgage Loans and REO Properties serviced by PennyMac Loan Services, LLC, electronically, in a format mutually acceptable to Buyer and Sellers, servicing information, including, without limitation, the current BPO, the current BPO date and information to determine if there are any Interior Access REO Properties,  and (b) for Trust Mortgage Loans and REO Properties serviced by Specialized Loan Servicing LLC, information mutually agreed to by the Sellers and Buyer, and for both (ii)(a) and (ii)(b), those fields reasonably requested by Buyer from time to time, on an asset-by-asset basis and in the aggregate, with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and the REO Properties

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serviced by Sellers or any Servicer for the month (or any portion thereof) prior to the Reporting Date.  In addition to the foregoing information on each Reporting Date, Sellers will furnish to Buyer such information upon the occurrence and continuation of an Event of Default.

e.Other Reports. Sellers shall deliver to Buyer any other reports or information reasonably requested by Buyer or as otherwise required pursuant to this Agreement.

f.Loan Activity Report.  Sellers hereby acknowledge that by the 10th Business Day of each calendar month, Sellers will furnish to Buyer (i) an Asset Schedule and (ii) a loan activity report comprised of the information set forth in Exhibit M attached hereto.

18.Repurchase Transactions

Buyer may, in its sole election, engage in repurchase transactions with the Purchased Assets or its interests in REO Properties and Trust Mortgage Loans or otherwise pledge, hypothecate, assign, transfer or otherwise convey the Purchased Assets with a counterparty of Buyer’s choice.  Unless an Event of Default shall have occurred, no such transaction shall relieve Buyer of its obligations to transfer Purchased Assets to Sellers pursuant to Section 4 hereof, or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Sellers pursuant to Section 7 hereof.  In the event Buyer engages in a repurchase transaction with any of the Purchased Assets or its interests in REO Properties and Trust Mortgage Loans or otherwise pledges or hypothecates any of the Purchased Assets or its interests in REO Properties and Trust Mortgage Loans, Buyer shall have the right to assign to Buyer’s counterparty any of the applicable representations or warranties herein and the remedies for breach thereof, as they relate to the Purchased Assets or its interests in REO Properties and Trust Mortgage Loans that are subject to such repurchase transaction.

19.Single Agreement

Buyer and Sellers acknowledge they have and will enter into each Transaction hereunder, in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other.  Accordingly, each of Buyer and each Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set-off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.

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20.Notices and Other Communications

Any and all notices (with the exception of Transaction Requests or Purchase Price Increase Requests, as applicable, which shall be delivered via facsimile only), statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other.  All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.  In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.

If to PennyMac Corp.:

PennyMac Corp.
27001 Agoura Road
Calabasas, CA 91301
Attention: David M. Walker/Brian Stack
Phone Number: (818) 224-7053/(818) 746-2540
E-mail: david.walker@pnmac.com; brian.stack@pnmac.com

with a copy to:

PennyMac Corp.
27001 Agoura Road
Calabasas, CA 91301
Attention: Jeff Grogin
Phone Number: (818) 224-7050
E-mail: jeff.grogin@pnmac.com

If to PennyMac Mortgage Investment Trust Holdings I:

PennyMac Mortgage Investment Trust Holdings I
27001 Agoura Road
Calabasas, CA 91301
Attention: David M. Walker/Brian Stack
Phone Number: (818) 224-7053/(818) 746-2540
E-mail: david.walker@pnmac.com; brian.stack@pnmac.com

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with a copy to:

PennyMac Mortgage Investment Trust Holdings I
27001 Agoura Road
Calabasas, CA 91301
Attention: Jeff Grogin
Phone Number: (818) 224-7050
E-mail: jeff.grogin@pnmac.com

If to Guarantor:

PennyMac Mortgage Investment Trust
27001 Agoura Road
Calabasas, CA 91301
Attention: David M. Walker/Brian Stack
Phone Number: (818) 224-7053/(818) 746-2540
E-mail: david.walker@pnmac.com; brian.stack@pnmac.com

with a copy to:

PennyMac Mortgage Investment Trust
27001 Agoura Road
Calabasas, CA 91301
Attention: Jeff Grogin
Phone Number: (818) 224-7050
E-mail: jeff.grogin@pnmac.com

If to Buyer:

For Transaction or Purchase Price Increase Requests:

CSFBMC LLC

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 2nd floor

New York, New York 10010

Attention: Christopher Bergs, Resi Mortgage Warehouse Ops

Phone:  212-538-5087

E-mail: christopher.bergs@credit-suisse.com

with a copy to:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

Eleven Madison Avenue, 4th Floor

New York, NY 10010

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Attention: Bruce Kaiserman

E-mail: bruce.kaiserman@credit-suisse.com

For all other Notices:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

Eleven Madison Avenue, 4th Floor

Attention:Margaret Dellafera

Phone Number: 212-325-6471

Fax Number:  212-743-4810

E-mail: margaret.dellafera@credit-suisse.com

with a copy to:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 9th Floor

New York, NY 10010

Attention: Legal Department—RMBS Warehouse Lending

Fax Number: (212) 322-2376

21.Entire Agreement; Severability

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

22.Non assignability

Sellers and Guarantor may assign any of their rights or obligations hereunder only with the prior written consent of Buyer which may be granted or withheld for any reason in its sole discretion.  Buyer may from time to time assign all or a portion of its rights and obligations under this Agreement and the Program Agreements; provided, however that Buyer shall maintain as agent of Sellers, for review by Sellers upon written request, a register of assignees and a copy of an executed assignment and acceptance by Buyer and assignee (“Assignment and Acceptance”), specifying the percentage or portion of such rights and obligations assigned.  No such assignment shall be effective unless such assignee shall be a party hereto and to each Program Agreement to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Buyer hereunder. Upon such assignment, Buyer shall, to the extent that such rights and obligations have been so assigned by it to either (i) an Affiliate of Buyer which assumes the obligations of Buyer or (ii)  another Person approved by Sellers (such approval not to be unreasonably withheld) which assumes the obligations of Buyer, be released from its obligations hereunder and under the Program Agreements.  Unless otherwise stated in the Assignment and Acceptance, Sellers shall continue

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to take directions solely from Buyer unless otherwise notified by Buyer in writing.  Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by Sellers.

23.Set-off

In addition to any rights and remedies of the Buyer hereunder and by law, the Buyer shall have the right, without prior notice to the Sellers or Guarantor, any such notice being expressly waived by the Sellers and Guarantor to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from any Seller, Guarantor or any Affiliate thereof to Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from the Buyer or any Affiliate thereof to or for the credit or the account of any Seller, Guarantor or any Affiliate thereof.  The Buyer agrees promptly to notify the Sellers or Guarantor after any such set off and application made by the Buyer; provided that the failure to give such notice shall not affect the validity of such set off and application.

24.Binding Effect; Governing Law; Jurisdiction

a.This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Sellers acknowledge that the obligations of Buyer hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Buyer.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

b.EACH SELLER AND GUARANTOR HEREBY WAIVE TRIAL BY JURY.  EACH SELLER AND GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING.  EACH SELLER AND GUARANTOR HEREBY SUBMIT TO, AND WAIVE ANY OBJECTION THEY MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

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25.No Waivers, Etc.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder.  No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto.  Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 6(a), 16(a) or otherwise, will not constitute a waiver of any right to do so at a later date.

26.Intent

a.The parties intend that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of the Bankruptcy Code (except insofar as the type of Mortgage Loans subject to such Transaction or the term of such Transaction would render such definition inapplicable or such Transaction involves a transfer of a Trust Interest), and a “securities contract” as that term is defined in Section 741 of the Bankruptcy Code (except insofar as the type of assets subject to such Transaction would render such definition inapplicable) and that all payments hereunder are transfers made in connection with a “repurchase agreement” and a “securities contract” (as so defined).

b.The parties further intend that Buyer’s rights to terminate or accelerate Transactions hereunder and to liquidate Purchased Assets delivered to Buyer in connection with Transactions hereunder, are contractual rights to liquidate such Purchased Assets, or terminate or accelerate such Transactions, as applicable, as described in Sections 555 and 559 of the Bankruptcy Code, as amended.

c.The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

d.It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

e.The parties further intend this Agreement to be a “repurchase agreement” and a “securities contract,” within the meaning of Section 559 and Section 555, respectively, of the Bankruptcy Code.

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f.For U.S. federal tax purposes, each of the Sellers, the Guarantor, the Buyer, and each Buyer assignee by acquiring an interest in any Transaction agree to treat and report each Transaction as indebtedness issued by PennyMac Mortgage Investment Trust, PennyMac Corp., or PennyMac Mortgage Investment Trust Holdings I, LLC as the case may be, which indebtedness, in the case of each obligor, shall have but a single maturity for purposes of Code section 7701(i)(2)(A)(ii) and U.S. Treasury Regulation section 301.7701(i)-1(e).

27.Disclosure Relating to Certain Federal Protections

The parties acknowledge that they have been advised that:

a.in the case of Transactions in which one of the parties is a broker or dealer registered with the SEC under Section 15 of the 1934 Act, the Securities Investor Protection Corporation has taken the position that the provisions of the SIPA do not protect the other party with respect to any Transaction hereunder;

b.in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

c.in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

28.Power of Attorney

Sellers hereby authorize Buyer to file such financing statement or statements relating to the Repurchase Assets without Sellers’ signature thereon as Buyer, at its option, may deem appropriate.  Sellers hereby appoint Buyer as Sellers’ agent and attorney-in-fact to execute any such financing statement or statements in Sellers’ name and to perform all other acts which Buyer deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Repurchase Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing, and sign assignments on behalf of each Seller as its agent and attorney-in-fact.  This agency and power of attorney is coupled with an interest and is irrevocable without Buyer’s consent.  Sellers shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 28.  In connection with the foregoing, the Sellers agree to execute a power of attorney, in the form of Exhibit D hereto (the “Power of Attorney”), to be delivered on the date hereof.  Sellers shall cause PennyMac Loan Services, LLC, REO Subsidiary and any Trust Subsidiary to execute a Power of Attorney in the form of Exhibit E-1, Exhibit E-2, and Exhibit E-3 respectively, hereto.  Notwithstanding the foregoing, the powers of attorney granted thereunder may be exercised only during the occurrence and continuance of any Default hereunder.

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29.Buyer May Act Through Affiliates

Buyer may, from time to time, designate one or more Affiliates for the purpose of performing any action hereunder.

30.Indemnification; Obligations

a.Each of each Seller and Guarantor agrees to hold Buyer and each of its respective Affiliates and their officers, directors, employees, agents and advisors (each, an “Indemnified Party”) harmless from and indemnify each Indemnified Party (and will reimburse each Indemnified Party as the same is incurred) against all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of any kind which may be imposed on, incurred by, or asserted against any Indemnified Party relating to or arising out of this Agreement, any Transaction Request or Purchase Price Increase Request, any Program Agreement, the Master Trust Agreement or any transaction contemplated hereby or thereby resulting from anything other than the Indemnified Party’s gross negligence or willful misconduct.  Each of each Seller and Guarantor also agrees to reimburse each Indemnified Party for all reasonable expenses in connection with the enforcement of this Agreement and the exercise of any right or remedy provided for herein, any Transaction Request or Purchase Price Increase Request, and any Program Agreement, including, without limitation, the reasonable fees and disbursements of counsel.  Each Seller’s and Guarantor’s agreements in this Section 30 shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement.  Each of each Seller and Guarantor hereby acknowledges that its obligations hereunder are recourse obligations of such Seller and Guarantor and are not limited to recoveries each Indemnified Party may have with respect to the Purchased Assets.  Each of each Seller and Guarantor also agrees not to assert any claim against Buyer or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions or Purchase Price Increases, this Agreement or any of the transactions contemplated thereby.  THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

b.Without limitation to the provisions of Section 4, if any payment of the Repurchase Price of any Transaction or Purchase Price Increase is made by Sellers other than on the then scheduled Repurchase Date thereto as a result of an acceleration of the Repurchase Date pursuant to Section 16 or for any other reason, Sellers shall, upon demand by Buyer, pay to Buyer an amount sufficient to compensate Buyer for any losses, costs or expenses that it may reasonably incur as of a result of such payment.

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c.Without limiting the provisions of Section 30(a) hereof, if any Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Seller by Buyer, in its sole discretion.

31.Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

32.Confidentiality

a.This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Buyer and shall be held by each Seller and Guarantor in strict confidence and shall not be disclosed to any third party without the written consent of Buyer except for (i) disclosure to Sellers’ or Guarantor’s direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, or (ii)  disclosure required by law, rule, regulation or order of a court or other regulatory body.  Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreement, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Sellers may not disclose the name of or identifying information with respect to Buyer or any pricing terms (including, without limitation, the Pricing Rate, Commitment Fee, Purchase Price Percentage and Purchase Price) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the Buyer.

b.Notwithstanding anything in this Agreement to the contrary, the Sellers in all material respects shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Purchased Assets, Trust Mortgage Loans and REO Properties and/or any applicable terms of this Agreement (the “Confidential Information”).  The Sellers understand that the Confidential Information may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the “Act”), and the Sellers agree to maintain such nonpublic personal information that it receives hereunder in accordance with the Act and other applicable federal and state privacy laws.  The

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Sellers shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the Act) of Buyer or any Affiliate of Buyer which the Sellers hold, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. The Sellers represent and warrant that they have implemented appropriate measures to meet the objectives of Section 501(b) of the Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect.  Upon request, the Sellers will provide evidence reasonably satisfactory to allow Buyer to confirm that the providing party has satisfied its obligations as required under this Section.  Without limitation, this may include Buyer’s review of audits, summaries of test results, and other equivalent evaluations of the Sellers.  The Sellers shall notify Buyer immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Buyer or any Affiliate of Buyer provided directly to the Sellers by Buyer or such Affiliate.  The Sellers shall provide such notice to Buyer by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.

33.Recording of Communications

Buyer, Sellers and Guarantor shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions.  Buyer, Sellers and Guarantor consent to the admissibility of such tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticated transcript of such a tape recording shall be deemed to be a writing conclusively evidencing the parties’ agreement.

34.Commitment Fee

Sellers shall pay to Buyer in immediately available funds, due and owing on the date hereof, a non-refundable Commitment Fee.  The Commitment Fee shall be paid in four equal installments as set forth in the Pricing Side Letter.  All such payments shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer at such account designated by Buyer.

35.Reserved

36.Periodic Due Diligence Review

Sellers acknowledge that Buyer has the right to perform continuing due diligence reviews with respect to the Sellers and the Purchased Assets, Trust Mortgage Loans and REO Properties, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, for the purpose of performing quality control review of the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties or otherwise, and Sellers

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agree that upon reasonable (but no less than one (1) Business Day’s) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to Sellers, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Asset Files and any and all documents, data, records, agreements, instruments or information relating to such Purchased Assets, Trust Mortgage Loans and REO Properties (including, without limitation, quality control review) in the possession or under the control of Sellers and/or the Custodian.  Sellers also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Asset Files and the Purchased Assets, Trust Mortgage Loans and REO Properties.  Without limiting the generality of the foregoing, Sellers acknowledge that Buyer may purchase Mortgage Loans and REO Properties from Sellers based solely upon the information provided by Sellers to Buyer in the Asset Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties purchased in a Transaction, including, without limitation, ordering BPOs, new credit reports and new appraisals on the related Mortgaged Properties or REO Properties and otherwise re-generating the information used to determine the Market Value of such Purchased Mortgage Loan, Trust Mortgage Loan or REO Property.  Sellers agree to cooperate with Buyer and any third party underwriter, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties in the possession, or under the control, of Sellers.  Each Seller further agrees that Sellers shall pay all out-of-pocket costs and expenses incurred by Buyer in connection with Buyer’s activities pursuant to this Section 36 (“Due Diligence Costs”).

37.Authorizations

Any of the persons whose signatures appear on Schedule 2 are authorized, acting singly, to act for Sellers or Buyer, as the case may be, under this Agreement.

38.Acknowledgement Of Anti-Predatory Lending Policies

Buyer has in place internal policies and procedures that expressly prohibit its purchase of any High Cost Mortgage Loan.

39.Documents Mutually Drafted

The Sellers and the Buyer agree that this Agreement and each other Program Agreement prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.

40.General Interpretive Principles

For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

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a.the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;

b.accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

c.references herein to “Articles”, “Sections”, “Subsections”, “Paragraphs”, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

d.a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;

e.the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision;

f.the term “include” or “including” shall mean without limitation by reason of enumeration;

g.all times specified herein or in any other Program Agreement (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and

h.all references herein or in any Program Agreement to “good faith” means good faith as defined in Section 1-201(19) of the UCC as in effect in the State of New York.

41.Joint and Several

Sellers and Buyer hereby acknowledge and agree that Sellers are each jointly and severally liable to Buyer for all of their respective obligations hereunder.

42.Amendment and Restatement

The terms and provisions of the Existing Master Repurchase Agreement shall be amended and restated in their entirety by the terms and provisions of this Agreement and shall supersede all provisions of the Existing Master Repurchase Agreement as of the date hereof.  From and after the date hereof, all references made to the Existing Master Repurchase Agreement in any Program Agreement or in any other instrument or document shall, without more, be deemed to refer to this Agreement.

43.Reaffirmation of Guaranty

The Guarantor hereby (i) agrees that the liability of Guarantor or rights of Buyer under the Guaranty shall not be affected as a result of amending and restating this Agreement,

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(ii) ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and (iii) acknowledges and agrees that such Guaranty is and shall continue to be in full force and effect.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer

By:	/s/ A. Adam Loskove
	Name: A. Adam Loskove
	Title: Vice President
PennyMac Corp., as a Seller
By:	/s/ David M. Walker
	Name: David M. Walker
	Title: Chief Credit Officer

PennyMac Mortgage Investment Trust Holdings I, LLC, as a Seller

By:	/s/ David M. Walker
	Name: David M. Walker
	Title: Chief Credit Officer
PennyMac Mortgage Investment Trust, as Guarantor
By:	/s/ David M. Walker
	Name: David M. Walker
	Title: Chief Credit Officer

Signature Page to the Amended and Restated Master Repurchase Agreement

SCHEDULE 1-A

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASED MORTGAGE LOANS AND TRUST MORTGAGE LOANS

The Sellers make the following representations and warranties to the Buyer, with respect to the Purchased Mortgage Loans subject to a Transaction and Trust Mortgage Loans owned by any Trust Subsidiary, as applicable, that as of the Purchase Date for the purchase of Purchased Mortgage Loans subject to a Transaction by the Buyer from a Seller,  and as of the Purchase Price Increase Date for the acquisition of Trust Mortgage Loans by any Trust Subsidiary, as applicable, and as of the date of this Agreement and any Transaction hereunder relating to the Purchased Mortgage Loans or Trust Mortgage Loans is outstanding and at all times while the Program Agreements and any Transaction hereunder is in full force and effect.  For purposes of this Schedule 1 and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to the Purchased Mortgage Loans or Trust Mortgage Loans if and when the Sellers have taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Purchased Mortgage Loans or Trust Mortgage Loans.

(a)Data.  The information on the Asset Schedule correctly and accurately reflects the information contained in the Sellers’ records (including, without limitation, the Asset File, as applicable) in all material respects. The information contained under each of the headings in the Asset Schedule is true, complete and correct in all material respects.

(b)No Error, Omission, Fraud etc.  No fraud, misrepresentation, material error or omission or gross negligence, has taken place on the part of the Sellers or, to the best of Sellers’ knowledge any other party in connection with the origination of the Mortgage Loan, the determination of the value of the Mortgaged Property, or the sale or servicing of the Mortgage Loan.

(c)Regulatory Compliance.  At the time of origination, or if modified, the date of modification, each Mortgage Loan complied in all material respects with all then-applicable federal, state, and local laws, including (without limitation) usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, predatory and abusive lending laws, disclosure or unfair and deceptive practice laws or such noncompliance was cured subsequent to origination, as permitted by applicable law.  The servicing and collection practices used by the related Servicer with respect to each Mortgage Loan have at all times complied in all material respects with all applicable federal, state, and local laws.  While the Mortgage Loan has been serviced by the related Servicer, it has been serviced in accordance with the terms of the Mortgage Note or any applicable forbearance plan or bankruptcy plan.

(d)Ownership.   Immediately prior to the transfer and assignment of the Mortgage Loan pursuant to this Agreement, the applicable Seller was the sole owner and holder of the Mortgage Loan (except that the applicable Trust Subsidiary was the sole owner and holder of the related Trust Mortgage Loan) free and clear of any and all liens, pledges, charges, or security interests of any nature and had full right and authority to sell and assign the same. Upon

Schedule 1-A-1

consummation of a Transaction with respect to the Mortgage Loan, the Buyer shall acquire good and marketable title to the Purchased Mortgage Loans.

(e)Enforceability and Priority of Lien.  (A) The Mortgage is a valid, subsisting, and enforceable first lien on the property therein described, the Mortgaged Property is free and clear of all encumbrances and liens having priority over the lien of the Mortgage except for, (i) the lien of current real property taxes and assessments not yet due and payable, (ii) covenants, conditions, and restrictions, rights of way, easements, and other matters of public record as of the date of recording of such mortgage acceptable to mortgage lending institutions in the area in which the Mortgaged Property is located, (iii) liens created pursuant to any federal, state, or local law, regulation, or ordinance affording liens for the costs of clean-up of hazardous substances or hazardous wastes or for other environmental protection purposes, and (iv) such other matters to which like properties are commonly subject that do not individually or in aggregate materially interfere with the benefits of the security intended to be provided by the Mortgage; and (B) any security agreement, chattel mortgage, or equivalent document related to and delivered to the Custodian with any Mortgage establishes a valid and subsisting first lien on the property described therein.

(f)Mortgage Loan Legal and Binding.  (A) The Mortgage Note, the related Mortgage, and other agreements executed in connection therewith are genuine, and each is the legal, valid, and binding obligation of the maker thereof, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and (B) to the best of Sellers’ knowledge, all parties to the Mortgage Note and the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage, and each Mortgage Note and Mortgage has been duly and properly executed by the Mortgagor and delivered by the parties.

(g)Customary Provisions.  The Mortgage and related Mortgage Note contain customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including (i) in the case of a Mortgage designated as a deed of trust by trustee’s sale, and (ii) otherwise by judicial foreclosure.  There is no homestead or other exemption available to the Mortgagor that would interfere with such right of foreclosure.

(h)No Prior Modifications.  If a Mortgage Loan has been modified after acquisition by the applicable Seller or Trust Subsidiary, the current and applicable modified terms are reflected on the Asset Schedule and the signed modification documents are in the related loan file.

(i)Taxes Paid.  Except as disclosed to Buyer, all taxes, and insurance premiums, and, to the best of the applicable Seller’s knowledge, homeowner or similar association fees, charges and assessments, governmental assessments, and water, sewer and municipal charges, which previously became due and owing have been paid, or an escrow of funds has been established, to the extent permitted by law, in an amount sufficient to pay for every such item which remains unpaid.

Schedule 1-A-2

(j)No Damage/Condemnation.  To the best of Sellers’ knowledge, the Mortgaged Property is undamaged by water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado, defective construction materials or work, or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances) to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan as reflected in the value of the Mortgage Loan; and to the best of Sellers’ knowledge, there is no proceeding (pending or threatened) for the total or partial condemnation of the Mortgaged Property.

(k)Predatory Lending Regulations; High Cost Loans.  No Mortgage Loan (a) is subject to Section 226.32 of Regulation Z or any similar state law (relating to high interest rate credit/lending transactions), (b) is a High Cost Mortgage Loan or (c) contains any term or condition, or involves any loan origination practice, that has been defined as “predatory” under any applicable federal, state, county or municipal law, or that has been expressly categorized as an “unfair” or “deceptive” term, condition or practice in any such applicable federal, state, county or municipal law.  No predatory or deceptive lending practices, including, without limitation, the extension of credit without regard to the ability of the Mortgagor to repay and the extension of credit which has no apparent benefit to the Mortgagor, were employed in the origination of the Mortgage Loan.

(l)Existence of Title Insurance.  The Mortgage Loan (except any Mortgage Loan secured by a Mortgaged Property located in any jurisdiction for which an opinion of counsel of the type customarily rendered in such jurisdiction in lieu of title insurance is instead received) is covered by an American Land Title Association mortgagee title insurance policy or other generally acceptable form of policy or insurance issued by a title insurer acceptable to Fannie Mae or Freddie Mac, issued by a title insurer acceptable to Fannie Mae or Freddie Mac insuring the originator and its successors, and assigns, as to the first priority lien of the Mortgage in the original or current principal amount of the Mortgage Loan and subject only to (a) the lien of current real property taxes and assessments not yet due and payable, (b) covenants, conditions, and restrictions, rights of way, easements, and other matters of public record as of the date of recording of such mortgage acceptable to mortgage lending institutions in the area in which the Mortgaged Property is located or specifically referred to in the appraisal performed in connection with the origination of the related Mortgage Loan, (c) liens created pursuant to any federal, state, or local law, regulation, or ordinance affording liens for the costs of clean-up of hazardous substances or hazardous wastes or for other environmental protection purposes, and (d) such other matters to which like properties are commonly subject which do not individually, or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgage. The Sellers or the Trust Subsidiary, as the case may be, or any other person on behalf of the Sellers or the Trust Subsidiary, as the case may be,  are the sole insured of such mortgagee title insurance policy.  The assignment of such mortgagee title insurance policy does not require any consent of or notification to the insurer which has not been obtained or made.  No claims have been made under such mortgagee title insurance policy.

(m)Hazard Insurance; Flood Insurance.  The Mortgaged Property securing each Mortgage Loan is insured by an insurer acceptable to Fannie Mae or Freddie Mac against loss by fire and such hazards as are covered under a standard extended coverage endorsement in an amount that is not less than the value.  If the Mortgaged Property is a condominium unit, it is

Schedule 1-A-3

included under the coverage afforded by a blanket policy for the project. If upon origination of the Mortgage Loan, the improvements on the Mortgaged Property were in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with a generally acceptable insurance carrier in an amount representing commercially reasonable coverage.  Each Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor’s cost and expense.

(n)Mortgage Recorded.  With respect to any Mortgage that has not been recorded in the name of MERS, as agent for the holder from time to time of the Mortgage Note, each original Mortgage was recorded or submitted for recordation in the jurisdiction in which the Mortgaged Property is located and all subsequent assignments of the original Mortgage have been delivered in the appropriate form for recording in all jurisdictions in which such recordation is appropriate.

(o)Litigation.  Other than any customary claim or counterclaim arising out of any foreclosure or collection proceeding relating to any Mortgage Loan, there is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding, existing or relating to the Mortgage Loan or the related Mortgaged Property.

(p)Property Value.  For each Mortgage Loan where a BPO was provided, such BPO was provided by a licensed real estate broker or realtor in the jurisdiction where the Mortgaged Property is located. The person performing any BPO received no benefit from, and such person’s compensation or flow of business from the Sellers were not affected by, the acquisition of the Mortgage Loan by the Sellers or any other applicable transferee.

(q)Location and Type of Mortgaged Property.  Each Mortgaged Property is located in an Acceptable State as identified in the Custodial Mortgage Loan Schedule and consists of a one- to four-unit residential property, which may include, but is not limited to, a single-family dwelling, townhouse, condominium unit, or unit in a planned unit development.  No Mortgaged Property is a cooperative or a manufactured home.

(r)Insurance Coverage Not Impaired.  With respect to any Mortgage Loan that is not covered under an umbrella insurance policy of the related Servicer, with respect to any insurance policy including, but not limited to, hazard, title, or mortgage insurance covering a Mortgage Loan and the related Mortgaged Property, neither (i) the originator nor (ii) any prior holder has engaged in, and the Sellers have no knowledge of the Mortgagor’s having engaged in, any act or omission that would impair the coverage of any such policy, the benefits of the endorsement, or the validity and binding effect of either, including without limitation, no unlawful fee, commission, kickback, or other unlawful compensation or value of any kind as has been or will be received, retained, or realized by any attorney, firm, or other person or entity, and no such unlawful items have been received, retained, or realized by the originator.

(s)Environmental Laws.  To the best of Sellers’ knowledge, the Mortgaged Property is currently in material compliance with all applicable environmental laws pertaining to environmental hazards including, without limitation, asbestos.

Schedule 1-A-4

(t)Deeds of Trust.  In the event that the Mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Buyer or any other applicable transferee to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgage.

(u)Due-On-Sale.  The Mortgage contains an enforceable provision, to the extent not prohibited by applicable law as of the date of such Mortgage, for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee.

(v)Leases.  The Mortgaged Property is either a fee simple estate or a long-term residential lease.  If the Mortgage Loan is secured by a long-term residential lease, to the best of Sellers’ knowledge: (A) the terms of such lease expressly permit the mortgaging of the leasehold estate, the assignment of the lease without the lessor’s consent (or the lessor’s consent has been obtained and such consent is in the Asset File), and the acquisition by the holder of the Mortgage of the rights of the lessee upon foreclosure or assignment in lieu of foreclosure or provide the holder of the Mortgage with substantially similar protection; (B) the terms of such lease do not allow the termination thereof upon the lessee’s default without the holder of the Mortgage being entitled to receive written notice of, and opportunity to cure, such default or prohibit the holder of the Mortgage from being insured under the hazard insurance policy related to the Mortgaged Property; (C) the original term of such lease is not less than 15 years; (D) the term of such lease does not terminate earlier than five years after the maturity date of the Mortgage Note; and (E) the Mortgaged Property is located in a jurisdiction in which the use of leasehold estates for residential properties is an accepted practice.

(w)Complete Asset Files.  For each Mortgage Loan, all of the required Mortgage Loan documents have been delivered to the Custodian in accordance with the Custodial Agreement and all Mortgage Loan documents necessary to foreclose on the Mortgaged Property are included in the Asset File delivered to the Custodian.  No material documentation is missing from the Asset File in possession of Custodian, unless such documentation is subject to a Servicer request for release of documents and a foreclosure attorney acknowledgment in form and substance acceptable to Buyer.  Each of the documents and instruments specified to be included in the Asset File is executed and in due and proper form, and each such document or instrument is in form acceptable to the applicable federal or state regulatory agency.

(x)No Construction Loans; Reverse Mortgage Loans; Home Equity Lines of Credit.  No Mortgage Loan (i) was made in connection with the construction or rehabilitation of a Mortgaged Property where construction loan proceeds are still being disbursed, (ii) is a reverse mortgage loan or (iii) is a home equity line of credit.

(y)No Rescission.  (A) No Mortgage Note or Mortgage is subject to any right of rescission, set-off, counterclaim, or defense, including the defense of usury, nor will the operation of any of the terms of the Mortgage Note or Mortgage, or the exercise of any right thereunder, render the Mortgage Note or Mortgage unenforceable, in whole or in part, or subject it to any right of rescission, set-off, counterclaim, or defense, including the defense of usury; and

Schedule 1-A-5

(B) to the best of the applicable Seller’s knowledge, no such right of rescission, set-off, counterclaim, or defense has been asserted with respect thereto.

Schedule 1-A-6

SCHEDULE 1-B

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REO PROPERTY

The Sellers make the following representations and warranties to the Buyer, with respect to the REO Property owned or deemed owned by the REO Subsidiary and any Trust Subsidiary and any Unrecorded REO Property owned or deemed owned by REO Subsidiary and any Trust Subsidiary, that as of the Purchase Price Increase Date for the acquisition of REO Property by REO Subsidiary and any Trust Subsidiary and as of the date of this Agreement and any Transaction hereunder relating to the Trust Interests is outstanding and at all times while the Program Agreements and any Transaction hereunder is in full force and effect, provided that to the extent that either Seller has declared in writing a REO Property to be ineligible to satisfy the representations and warranties set forth below, then Sellers shall not make such representations and warranties with respect to such REO Property.  For purposes of this Schedule 1 and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to the REO Property if and when the Sellers have taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such REO Property.

(a)Asset File.  All documents required to be delivered as part of the Asset File, have been delivered to the Custodian or held by an attorney in connection with a foreclosure pursuant to an Attorney Bailee Letter and all information contained in the related Asset File (or as otherwise provided to Buyer) in respect of such REO Property is accurate and complete in all material respects.

(b)Ownership.  Either the REO Subsidiary or a Trust Subsidiary is the sole owner and holder of the REO Property; provided that with respect to Unrecorded REO Property, the holder of record title in the REO Property may be a Seller, the applicable Servicer, or any prior owner or prior servicer for whom a Servicer is contractually permitted to act.

(c)REO Property as Described.  The information set forth in the Asset Schedule accurately reflects information contained in the applicable Seller’s records in all material respects.

(d)Taxes, Assessments and Other Charges.  All taxes, homeowner or similar association fees, charges, and assessments, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid.

(e)No Litigation.  Other than any customary claim or counterclaim arising out of any foreclosure or collection proceeding relating to any REO Property, there is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding, existing or relating to Sellers, any Trust Subsidiary, the REO Subsidiary or any of their Subsidiaries with respect to the REO Property that would materially and adversely affect the value of the REO Property.

Schedule 1-B-1

(f)Hazard Insurance.  All buildings or other customarily insured improvements upon the REO Property are insured by an insurer against loss by fire, hazards of extended coverage and such other hazards in an amount not less than the BPO Value.

(g)Flood Insurance.If the improvements on the REO Property were in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards at the time of origination of the Mortgage Loan that resulted in the REO Property, a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with a generally acceptable insurance carrier in an amount representing commercially reasonable coverage.

(h)Title Insurance.  The REO Property (and the Unrecorded REO Property Deed upon its submission) is covered by an owner’s mortgage title insurance policy or an attorney’s opinion of title, or such other generally acceptable form of policy or insurance issued by a title insurer qualified to do business in the jurisdiction where the REO Property is located, insuring the owner of the REO Property, its successors and assigns as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan.  Either the REO Subsidiary or a Trust Subsidiary, as applicable, is the insured under such mortgage title insurance policy.  No claim has been made under such owner’s title insurance policy, and the Sellers, have not done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy.

(i)No Mechanics’ Liens.  To the best of the applicable Seller’s knowledge, there are no mechanics’ or similar liens or claims which have been filed for work, labor or material affecting the related REO Property.

(j)No Damage.  To the best of the applicable Seller’s knowledge, the REO Property is undamaged by water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado, defective construction materials or work, or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances) to affect adversely the Value of the REO Property.

(k)No Condemnation.  To the best of the applicable Seller’s knowledge, there is no proceeding pending, or threatened, for the total or partial condemnation of the REO Property.

(l)Environmental Matters.  To the best of the applicable Seller’s knowledge, there is no pending action or proceeding directly involving the REO Property in which compliance with any environmental law, rule or regulation is an issue or is secured by a secured lender’s environmental insurance policy.

(m)Location and Type of REO Property.  Each REO Property is located in the U.S. or a territory of the U.S. and consists of a one- to four-unit residential property, which may include, but is not limited to, a single-family dwelling, townhouse, condominium unit, or unit in a planned unit development.  No REO Property is a cooperative or a manufactured home.

Schedule 1-B-2

SCHEDULE 1-C

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO

REO SUBSIDIARY TRUST INTERESTS AND TRUST SUBSIDIARY TRUST INTERESTS

The Sellers make the following representations and warranties to the Buyer, with respect to the Trust Interests subject to a Transaction, that as of the Purchase Date for the purchase of Trust Interests subject to a Transaction by the Buyer from a Seller and as of the date of this Agreement and any Transaction hereunder relating to the Trust Interests is outstanding and at all times while the Program Agreements and any Transaction hereunder is in full force and effect.  For purposes of this Schedule 1 and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to the Trust Interests if and when the Sellers have taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Trust Interests.

(a)   Trust Interests.  The Trust Interests constitute all the issued and outstanding trust interests of all classes of REO Subsidiary and all the issued and outstanding trust interests of all classes of the related Trust Subsidiary and are certificated.  Neither Seller shall issue certificates representing the Trust Interests or issue additional trust interests other than the Trust Interests.

(b)   Duly and Validly Issued.  All of the shares of the Trust Interests have been duly and validly issued and, if capital stock of a corporation, are fully paid and nonassessable.

(c)   Trust Interests as Securities.  The Trust Interests (a) constitute “securities” as defined in Section 8-102 of the Uniform Commercial Code (b) are not dealt in or traded on securities exchanges or in securities markets, (c) do not constitute investment company securities (within the meaning of Section 8-103(c) of the Uniform Commercial Code) and (d) are not held in a securities account (within the meaning of Section 8-103(c) of the Uniform Commercial Code).

(d)   Beneficial Owner.  Either Seller is the sole record and beneficial owner of, and has title to, the Trust Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Lien created herein.

(e)   Consents.  All consents of majority in interest of the members of the REO Subsidiary and each Trust Subsidiary to the grant of the security interests provided herein to Buyer and to the Transactions provided for herein have been obtained and are in full force and effect.

(f)    Conveyance; First Priority Lien.  Upon delivery to the Buyer of the certificates evidencing the Trust Interests (and assuming the continuing possession by the Buyer

Schedule 1-C-1

of such certificate in accordance with the requirements of applicable law) and the filing of a financing statement covering the Trust Interests in the State of Delaware and naming the applicable Seller as debtor and the Buyer as secured party, such Seller has conveyed and transferred to Buyer all of its right, title and interest to the Trust Interests, including taking all steps as may be necessary in connection with the indorsement, transfer of power, delivery and pledge of all Trust Interests as “securities” (as defined in Section 8-102 of the Uniform Commercial Code) to Buyer.  The Lien granted hereunder is a first priority Lien on the Trust Interests.

(g)           No Waiver.  The applicable Seller has not waived or agreed to any waiver under, or agreed to any amendment or other modification of, the Trust Agreements.

Schedule 1-C-2

SCHEDULE 2

AUTHORIZED REPRESENTATIVES

PENNYMAC CORP. AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PennyMac Corp. under this Agreement:

Name	Signature
David M. Walker	/s/ David M. Walker
Vandad Fartaj	/s/ Vandad Fartaj
Brian Stack	/s/ Brian Stack
Kiki Perera	/s/ Kiki Perera
Michael Wong	/s/ Michael Wong

Signature Page to the Amended and Restated Master Repurchase Agreement

PENNYMAC MORTGAGE INVESTMENT TRUST HOLDINGS I, LLC AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PennyMac Mortgage Investment Trust Holdings I, LLC under this Agreement:

Name	Signature
David M. Walker	/s/ David M. Walker
Brian Stack	/s/ Brian Stack
Kiki Perera	/s/ Kiki Perera
Vandad Fartaj	/s/ Vandad Fartaj
Michael Wong	/s/ Michael Wong

Signature Page to the Amended and Restated Master Repurchase Agreement

BUYER NOTICES

Name: Margaret Dellafera Telephone: (212) 325-6471 Facsimile: (212) 743-4810 Email: margaret.dellafera@credit-suisse.com Address: Credit Suisse First Boston
Mortgage Capital LLC
11 Madison Avenue
New York, NY 10010

BUYER AUTHORIZATIONS

Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Buyer under this Agreement:

Name	Title	Signature
Bruce Kaiserman	VP	/s/ Bruce Kaiserman
Margaret Dellafera	VP	/s/ Margaret Dellafera
Adam Loskove	VP	/s/ Adam Loskove

Signature Page to the Amended and Restated Master Repurchase Agreement

EXHIBIT A

RESERVED

Exh. A-1

EXHIBIT B

RESERVED

B-1

EXHIBIT C

FORM OF SERVICING RENEWAL LETTER

[Date]

PennyMac Loan Services, LLC, as Servicer
[ADDRESS]
Attention:

Re: Amended and Restated Master Repurchase Agreement, dated as of August 25, 2011 (the “Repurchase Agreement”), by and among PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”), PennyMac Mortgage Investment Trust (the “Guarantor”) and Credit Suisse First Boston Mortgage Capital LLC (the “Buyer”).

Ladies and Gentlemen:

The Buyer hereby renews the servicing term with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties listed on the attached schedule for an additional period of ninety (90) days.  The servicing term will automatically terminate at the end of such additional period unless renewed by Buyer in accordance with the Repurchase Agreement.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer
By:
	Name:
	Title:

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EXHIBIT D

FORM OF SELLER POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that PennyMac Corp. (“PennyMac Corp.”), and PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”) each hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (“Buyer”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Sellers and in the name of Sellers or in its own name, from time to time in Buyer’s discretion:

(a)           in the name of Sellers, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Master Repurchase Agreement (as amended, restated or modified, “the Agreement”) among Buyer, Sellers and PennyMac Mortgage Investment Trust dated [                         ], 20[    ] or owned by the subsidiary of any Seller subject to the Agreement (the “Assets”) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;

(b)           to pay or discharge taxes and liens levied or placed on or threatened against the Assets;

(c)           (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against either Seller with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (vii) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Sellers’ expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets  and to effect the intent of this Agreement, all as fully and effectively as Sellers might do;

(d)           for the purpose of carrying out the transfer of servicing with respect to the Assets from the Sellers to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, each Seller hereby gives Buyer the power and right, on behalf of such Seller, without assent by such Seller, to, in the name of such Seller or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;

(e)           for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.

(f)            for the purpose of transferring real estate owned property from a Seller’s Subsidiary by execution and delivery of a deed.

Each Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.

Each Seller also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.

The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Sellers for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, EACH SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]

IN WITNESS WHEREOF Sellers have caused this Power of Attorney to be executed and Sellers’ seal to be affixed this          day of                   , 2011.

PennyMac Corp.
By:
	Name:
	Title:

STATE OF [                     ]	)
	)             ss.:
COUNTY OF [                 ]	)

On the                day of                   , 2011 before me, a Notary Public in and for said State, personally appeared                                                                                                            , known to me to be [                                                                                                    ] of PennyMac Corp., the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.

Notary Public

My Commission expires

PennyMac Mortgage Investment Trust Holdings I, LLC
By:
	Name:
	Title:

STATE OF [                     ]	)
	)             ss.:
COUNTY OF [                 ]	)

On the                day of                   , 2011 before me, a Notary Public in and for said State, personally appeared                   , known to me to be [                                                                                                    ] of PennyMac Mortgage Investment Trust Holdings I, LLC, the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.

Notary Public

My Commission expires

EXHIBIT E-1

FORM OF SERVICER POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that PennyMac Loan Services, LLC (the “Servicer”) hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (“Buyer”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Servicer and in the name of Servicer or in its own name, from time to time in Buyer’s discretion:

(a)           in the name of Servicer, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Master Repurchase Agreement (as amended, restated or modified, “the Agreement”) dated [                         ], 20[    ] among Buyer, PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”), and PennyMac Mortgage Investment Trust or owned by the subsidiary of any Seller subject to the Agreement (the “Assets”) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;

(b)           to pay or discharge taxes and liens levied or placed on or threatened against the Assets;

(c)           (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Servicer with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (vii) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Servicer’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets  and to effect the intent of this Agreement, all as fully and effectively as Servicer might do;

(d)           for the purpose of carrying out the transfer of servicing with respect to the Assets from the Servicer to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the

E-1

generality of the foregoing, Servicer hereby gives Buyer the power and right, on behalf of such Servicer, without assent by Servicer, to, in the name of Servicer or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;

(e)           for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.

(f)            for the purpose of transferring real estate owned property from a Seller’s Subsidiary by execution and delivery of a deed.

Servicer hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.

Servicer also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.

The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Servicer for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SERVICER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]

E-1-2

IN WITNESS WHEREOF Servicer has caused this Power of Attorney to be executed and Servicer’s seal to be affixed this          day of                   , 2011.

PennyMac Loan Services, LLC
By:
	Name:
	Title:

STATE OF [                     ]	)
	)             ss.:
COUNTY OF [                 ]	)

On the                day of                   , 2011 before me, a Notary Public in and for said State, personally appeared                                                                               , known to me to be [                                                                                    ] of PennyMac Loan Services, LLC, the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.

Notary Public

My Commission expires

E-1-3

EXHIBIT E-2

FORM OF REO SUBSIDIARY POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that PMC REO Financing Trust (the “REO Subsidiary”) hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (“Buyer”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of REO Subsidiary and in the name of REO Subsidiary or in its own name, from time to time in Buyer’s discretion:

(a)           in the name of REO Subsidiary, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Master Repurchase Agreement (as amended, restated or modified, “the Agreement”) among Buyer, PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”) and PennyMac Mortgage Investment Trust dated [                         ], 20[    ] or owned by the subsidiary of REO Subsidiary subject to the Agreement (the “Assets”) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;

(b)           to pay or discharge taxes and liens levied or placed on or threatened against the Assets;

(c)           (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against REO Subsidiary with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (vii) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and REO Subsidiary’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and to effect the intent of this Agreement, all as fully and effectively as REO Subsidiary might do;

(d)           for the purpose of carrying out the transfer of servicing with respect to the Assets from the REO Subsidiary to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments

E-2-1

which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, REO Subsidiary hereby gives Buyer the power and right, on behalf of REO Subsidiary, without assent by REO Subsidiary, to, in the name of REO Subsidiary or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;

(e)           for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.

(f)            for the purpose of transferring real estate owned property from REO Subsidiary by execution and delivery of a deed.

REO Subsidiary hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.

REO Subsidiary also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.

The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to REO Subsidiary for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, REO SUBSIDIARY HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]

E-2-2

IN WITNESS WHEREOF REO Subsidiary has caused this Power of Attorney to be executed and REO Subsidiary’s seal to be affixed this          day of                   , 2011.

PMC REO Financing Trust
By: PennyMac Corp., as Administrator
By:
	Name:
	Title:

STATE OF [                ]	)
	)	ss.:
COUNTY OF [        ]	)

On the                day of                   , 2011 before me, a Notary Public in and for said State, personally appeared                                               , known to me to be [                                                                                                    ] of PMC REO Financing Trust, the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.

Notary Public

My Commission expires 

E-2-3

EXHIBIT E-3

FORM OF TRUST SUBSIDIARY POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that [                        ] (the “Trust Subsidiary”) hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (“Buyer”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Trust Subsidiary and in the name of Trust Subsidiary or in its own name, from time to time in Buyer’s discretion:

(a)           in the name of Trust Subsidiary, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Amended and Restated Master Repurchase Agreement (as amended, restated or modified, “the Agreement”) among Buyer, PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”) and PennyMac Mortgage Investment Trust dated [                         ], 20[    ] or owned by the subsidiary of Trust Subsidiary subject to the Agreement (the “Assets”) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;

(b)           to pay or discharge taxes and liens levied or placed on or threatened against the Assets;

(c)           (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Trust Subsidiary with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (vii) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Trust Subsidiary’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and to effect the intent of this Agreement, all as fully and effectively as Trust Subsidiary might do;

(d)           for the purpose of carrying out the transfer of servicing with respect to the Assets from the Trust Subsidiary to a successor servicer appointed by Buyer in its sole discretion

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and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Trust Subsidiary hereby gives Buyer the power and right, on behalf of Trust Subsidiary, without assent by Trust Subsidiary, to, in the name of Trust Subsidiary or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;

(e)           for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.

(f)            for the purpose of transferring real estate owned property from Trust Subsidiary by execution and delivery of a deed.

Trust Subsidiary hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.

Trust Subsidiary also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.

The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Trust Subsidiary for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, Trust Subsidiary HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]

E-3-2

IN WITNESS WHEREOF Trust Subsidiary has caused this Power of Attorney to be executed and Trust Subsidiary’s seal to be affixed this          day of                   , 2011.

[                                      ]
By: [                    ], as [                    ]
By:
	Name:
	Title:

STATE OF [                ]	)
	)	ss.:
COUNTY OF [        ]	)

On the                day of                   , 2011 before me, a Notary Public in and for said State, personally appeared                                               , known to me to be [                                                                                                    ] of [                        ], the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.

Notary Public

My Commission expires 

E-3-3

EXHIBIT F

Officer’s Certificate

The undersigned,                          of [PennyMac Corp.] [PennyMac Mortgage Investment Trust Holdings I, LLC] [PennyMac Mortgage Investment Trust], a [STATE] [corporation] (the “Company”), hereby certifies as follows:

1.             Attached hereto as Exhibit A is a copy of the formation documents of the Company, as certified by the Secretary of State of the State of [STATE].

2.             Neither any amendment to the formation documents of the Company nor any other charter document with respect to the Company has been filed, recorded or executed since                    ,         , and no authorization for the filing, recording or execution of any such amendment or other charter document is outstanding.

3.             Attached hereto as Exhibit B is a true, correct and complete copy of the By-laws of the Company as in effect as of the date hereof and at all times since                        ,         .

4.             Attached hereto as Exhibit C is a true, correct and complete copy of resolutions adopted by the Board of Directors of the Company by unanimous written consent on                        , 200_ (the “Resolutions”). The Resolutions have not been further amended, modified or rescinded and are in full force and effect in the form adopted, and they are the only resolutions adopted by the Board of Directors of the Company or by any committee of or designated by such Board of Directors relating to the execution and delivery of, and performance of the transactions contemplated by the Amended and Restated Master Repurchase Agreement dated as of August     , 2011 (the “Repurchase Agreement”), between PennyMac Corp (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”), PennyMac Mortgage Investment Trust (the “Guarantor”) and Credit Suisse First Boston Mortgage Capital LLC (the “Buyer”) and the Amended and Restated Custodial Agreement dated as of August     , 2011, among the Sellers, the Buyer and Deutsche Bank Trust Company Americas, as custodian (the “Custodian”).

5.             The Repurchase Agreement and the [Custodial Agreement] [Guarantee] are substantially in the form approved by the Resolutions or pursuant to authority duly granted by the Resolutions.

6.             The undersigned, as a officers of the Company or as attorney-in-fact, are authorized to and have signed manually the Repurchase Agreement, the [Custodial Agreement] [Guarantee] or any other document delivered in connection with the transactions contemplated thereby, were duly elected or appointed, were qualified and acting as such officer or attorney-in-fact at the respective times of the signing and delivery thereof, and were duly authorized to sign such document on behalf of the Company, and the signature of each such person appearing on any such document is the genuine signature of each such person.

Name Title Signature

F-1

IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate as of the            day of                     , 2011.

[PennyMac Corp.] [PennyMac Mortgage Investment Trust Holdings I, LLC] [PennyMac Mortgage Investment Trust] [, as [Seller] [Guarantor]]

By:

Name:

Title:

F-2

EXHIBIT G

SELLERS’ AND GUARANTOR’S TAX IDENTIFICATION NUMBERS

PennyMac Corp.	80-0463416
PennyMac Mortgage Investment Trust Holdings I, LLC	27-2199755
PennyMac Mortgage Investment Trust	27-0186273

G-1

EXHIBIT H

EXISTING INDEBTEDNESS

 (As of August 25, 2011)

Obligor	Guarantor	Outstanding Principal Amount		Agreement
PMC	N/A	$	26,030,729	Master Repurchase Agreement, dated as of November 1, 2010, by and among POP, PMC, and PLS
PMC / PMITH	PMT	$	51,105,604	Master Repurchase Agreement, dated as of November 2, 2010, by and among PMC, PMITH, and Wells Fargo Bank, National Association
PMC / PMITH	PMT	$	204,491,181	Master Repurchase Agreement, dated as of December 9, 2010, by and among PMC, PMITH, PLS, and Citibank, N.A.
PMC	PMT	$	36,325,988	Master Repurchase Agreement, dated as of November 2, 2010, by and among PMC, PMT, POP, and Credit Suisse First Boston Mortgage Capital, LLC
PMC	N/A	$	20,404,563	Master Securities Forward Transaction Agreement, dated as of October 6, 2010, between PMC and Cantor Fitzgerald & Co.
PMC	PMT	$	23,570,083	Master Securities Forward Transaction Agreement, dated January 7, 2011, between PMC and Credit Suisse Securities (USA) LLC
PMC	PMT	$	12,140,904	Master Securities Forward Transaction Agreement, dated March 31, 2011, between PMC and Merril Lynch, Pierce, Fenner & Smith Incorporated
PMC	N/A	$	4,222,684	Master Agreement, dated June 15, 2011, between PMC and Fannie Mae
PMC	PMT	$	17,911,736	Master Securities Forward Transaction Agreement, dated April 1, 2011, between PMC and Citigroup Global Markets Inc.
PMC	N/A	$	1,005,000	Master Securities Forward Transaction Agreement, dated March 31, 2011, between PMC and BNY Mellon Capital Markets, LLC
PMC	N/A	$	173,345,007	Forward Trade Agreement, dated July 12, 2011, between PMC and Citigroup Global Markets Realty Corp.

H-1

PMC	-	PennyMac Corp.
PMITH	-	PennyMac Mortgage Investment Trust Holdings I, LLC
POP	-	PennyMac Operating Partnership, L.P.
PMT	-	PennyMac Mortgage Investment Trust
PLS	-	PennyMac Loan Services, LLC

H-2

EXHIBIT I

State Specific Foreclosure Aging Timeline

State	State Specific Foreclosure Aging Timeline
NY	689
VT	677
ME	649
NJ	859
IL	483
PA	465
FL	653
NM	369
MA	370
CA	313
AK	192
MD	318
CT	447
WI	388
IN	451
NV	270
SC	354
KY	305
LA	423
UT	209
OK	329
CO	226
NC	194
NE	291
IA	384
AZ	212
SD	438
OH	432
DE	431
AL	135
WY	147
MT	263
VA	136

I-1

KS	260
WA	277
MO	153
ID	307
TN	192
HI	387
OR	290
TX	169
AR	186
MI	224
GA	182
WV	221
RI	281
NH	259
MN	259
MS	304
DC	360
ND	419

I-2

Exhibit J

State Specific REO Disposition Timeline

State	State Specific REO Disposition Timeline
NY	403
VT	285
ME	306
NJ	409
IL	379
PA	325
FL	263
NM	353
MA	407
CA	325
AK	263
MD	421
CT	342
WI	306
IN	254
NV	282
SC	288
KY	305
LA	288
UT	185
OK	188
CO	217
NC	311
NE	223
IA	236
AZ	218
SD	400
OH	265
DE	275
AL	301
WY	470
MT	339
VA	289

J-1

KS	323
WA	240
MO	209
ID	229
TN	258
HI	301
OR	253
TX	236
AR	230
MI	380
GA	320
WV	319
RI	378
NH	371
MN	379
MS	315
DC	762
ND	382

J-2

Exhibit K

State Specific REO Recording Timeline

State	State Specific REO Recording Timeline - REO Deed Out For Recording	State Specific REO Recording Timeline - REO Deed Back From Recording
NY	92	162
VT	82	142
ME	117	212
NJ	77	132
IL	112	202
PA	77	132
FL	57	92
NM	57	92
MA	60	90
CA	42	62
AK	42	62
MD	237	452
CT	87	152
WI	62	102
IN	57	92
NV	42	62
SC	72	122
KY	132	242
LA	67	112
UT	37	52
OK	62	102
CO	67	112
NC	60	90
NE	127	232
IA	47	72
AZ	37	52
SD	222	422
OH	142	262
DE	107	192
AL	67	112
WY	177	332

K-1

MT	37	52
VA	82	142
KS	147	272
WA	42	62
MO	37	52
ID	37	52
TN	37	52
HI	117	212
OR	37	52
TX	37	52
AR	60	90
MI	37	52
GA	60	90
WV	52	82
RI	67	112
NH	82	142
MN	37	52
MS	37	52
DC	122	222
ND	132	242

K-2

EXHIBIT L-1

FORM OF SERVICER NOTICE AND PLEDGE

[Date]

PennyMac Loan Services, LLC, as Servicer
[ADDRESS]
Attention:

Re:Amended and Restated Master Repurchase Agreement, dated as of August 25, 2011 (the “Repurchase Agreement”), by and among PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (a “Seller,” together with PennyMac Corp., the “Sellers”), PennyMac Mortgage Investment Trust (the “Guarantor”)  and Credit Suisse First Boston Mortgage Capital LLC (the “Buyer”).

Ladies and Gentlemen:

The Buyer, the Servicers and the Sellers previously entered into a Servicer Notice and Pledge, dated as of June 8, 2011 (the “Existing Servicer Notice and Pledge”).

The parties hereto have requested that the Existing Servicer Notice and Pledge be amended and restated, in its entirety, on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

PennyMac Loan Services, LLC (the “Servicer”) is servicing certain mortgage loans for Sellers and Trust Subsidiaries (as defined below) pursuant to that certain Flow Servicing Agreement, dated as of August 4, 2009, between the Servicer and PennyMac Operating Partnership, L.P., that certain Servicing Agreement, dated as of February 25, 2011, by and between SWDNSI Trust Series 2010-3 and PennyMac Loan Services, LLC and that certain Servicing Agreement, dated as of February 25, 2011, by and between SWDNSI Trust Series 2010-4 and PennyMac Loan Services, LLC, as the same may be amended from time to time (the “Servicing Agreement”).  Pursuant to the Repurchase Agreement between Buyer, Guarantor and Sellers, the Servicer is hereby notified that Sellers have pledged to Buyer certain mortgage loans which are serviced by Servicer which are subject to a security interest in favor of Buyer (“Purchased Mortgage Loans”), have assigned certain REO Properties to PMC REO Financing Trust (“REO Subsidiary”) or any Trust Subsidiary and have assigned certain mortgage loans acquired by or transferred to a Trust Subsidiary (“Trust Mortgage Loans”) to SWDNSI Trust Series 2010-3 and SWDNSI Trust Series 2010-4 (each a “Trust Subsidiary”).

Section 1.  Servicing Rights and Grant of Security Interest.  (a) Servicer acknowledges that assets are being serviced on a servicing released basis.  In the event that Servicer is deemed to retain any rights to servicing, Buyer and Servicer hereby agree that in order to further secure the Sellers’ Obligations under the Repurchase Agreement, Servicer hereby grants, assigns and pledges to Buyer a fully perfected first priority security interest in all its rights to service (if any) related to the Purchased

L-1-1

Mortgage Loans, Trust Mortgage Loans and REO Properties and all proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created.

(b)The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Repurchase Agreement and Transactions thereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.

(c)In addition, Servicer hereby acknowledges that the Buyer has purchased the Purchased Mortgage Loans on a servicing released basis and Buyer shall have the same rights and remedies with respect to the Servicing Rights as it has with respect to the Repurchase Assets under the Repurchase Agreement.  Servicer acknowledges that REO Subsidiary and each Trust Subsidiary, as applicable, have acquired the REO Properties and Trust Mortgage Loans, as applicable on a servicing released basis.

(d)Servicer agrees to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Buyer’s security interest created hereby.  Furthermore, the Servicer hereby authorizes Buyer to file financing statements relating to the security interest set forth herein, as Buyer, at its option, may deem appropriate.

(e)Servicer agrees to the extent a deed for an REO Property is registered in the name of (a) a Seller, (b) the Servicer or (c) any prior owner or prior servicer for whom the Servicer is contractually permitted to act, in each case, it shall or shall cause to deliver for recordation (with a copy to Custodian) a deed in recordable form into the name of the REO Subsidiary or a Trust Subsidiary, as applicable, within the period of time generally necessary in the applicable jurisdiction for the Servicer, acting in accordance with the Servicing Guidelines.

(f)Servicer waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations under the Repurchase Agreement or security interest hereunder and notice or proof of reliance by Buyer upon this Servicer Notice and Pledge.  Servicer hereby waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Sellers or Servicer with respect the Obligations.

(g)Buyer shall have all rights and remedies against the Servicer as set forth herein, in the Repurchase Agreement and the UCC.

(h)With respect to the Servicing Agreement, Servicer agrees that it shall not, without the prior written consent of Buyer, (i) amend the amount of the “Servicing Fee” as defined therein; (ii) amend the priority of payments thereof, if any, (iii) amend any other provision that would materially and adversely affect Buyer, (iv) waive any prepayment premiums or charges in connection with any prepayments in full or (v) withdraw any reimbursements for advances or any servicing fees from the collection account thereunder prior to the Buyer’s receipt of funds in accordance with Section 7 of the Repurchase Agreement, and hereby agrees that Servicer’s rights thereto are subordinate and junior to such payments required under Section 7.

Section 2.Act as Servicer. (a)   Pursuant to the Servicing Agreement and this Servicer Notice, Servicer will remit (i) all collections on the Purchased Mortgage Loans to the following account:

L-1-2

PennyMac Corp. for the benefit of Credit Suisse First

Boston Mortgage Capital LLC

Depository: City National Bank

ABA#: 122016066

Account Name: PMC Sellers Account

Account #: 555-062508

PennyMac Corp. for the benefit of Credit Suisse First

Boston Mortgage Capital LLC

Depository: City National Securities, Inc.

ABA#: 122016066

Account Name: PMC Sellers Account

Account #: TPS000299

PennyMac Mortgage Investment Trust Holdings I, LLC for

the benefit of Credit Suisse First Boston Mortgage Capital

LLC

Depository: City National Bank

ABA#: 122016066

Account Name: PMITH Sellers Account

Account #: 555-062516

PennyMac Mortgage Investment Trust Holdings I, LLC for

the benefit of Credit Suisse First Boston Mortgage Capital

LLC

Depository: City National Securities, Inc.

ABA#: 122016066

Account Name: PMITH Sellers Account

Account #: TPS000280

(ii) all collections on the assets owned by REO Subsidiary to the following account:

PMC REO Financing Trust for the benefit of Credit Suisse

First Boston Mortgage Capital LLC

Depository: City National Bank

ABA#: 122016066

Account Name: REO Account

Account #:555-063024

PMC REO Financing Trust for the benefit of Credit Suisse

First Boston Mortgage Capital LLC

Depository: City National Securities, Inc.

ABA#: 122016066

Account Name: REO Account

Account #: TPS000264

(iii) all collections on the assets owned by SWDNSI Trust Series 2010-3 to the following account:

L-1-3

SWDNSI Trust Series 2010-3 Trust Account for the benefit of Credit

Suisse First Boston Mortgage Capital LLC as buyer

Depository: Citibank, N.A.

ABA#: 021-000-089

Account Name: SWDNSI Trust Series 2010-3 Trust Account for the benefit of Credit Suisse First Boston Mortgage Capital LLC as buyer

Account #:108926

and (iv) all collections on the assets owned by SWDNSI Trust Series 2010-4 to the following account:

SWDNSI Trust Series 2010-4 for the benefit of Credit Suisse

First Boston Mortgage Capital LLC

Depository: Citibank, N.A.

ABA#: 021-000-089

Account Name: SWDNSI Trust Series 2010-4 Trust Account for the

benefit of Credit Suisse First Boston Mortgage Capital LLC as buyer

Account #:108927

Servicer’s obligation hereunder to remit such collections to such account may not be altered, modified, revoked, amended or otherwise changed without the prior written consent of Buyer or as otherwise provided in this notice.

Following receipt of Notice of Event of Default from Buyer, Servicer shall follow the instructions of Buyer with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties, and shall deliver to Buyer any information with respect to the Purchased Mortgage Loans, Trust Mortgage Loans and REO Properties reasonably requested by Buyer.

(b)To the extent that Servicer obtains possession of any documents related to the Purchased Mortgage Loans, Trust Mortgage Loans or REO Properties, it will hold such documents in trust for the benefit of the Buyer.

(c)Notwithstanding any contrary information which may be delivered to the Servicer by Sellers, the Servicer may conclusively rely on any information or Notice of Event of Default delivered by Buyer, and Sellers shall indemnify and hold the Servicer harmless for any and all claims asserted against it for any actions taken in good faith by the Servicer in connection with the delivery of such information or Notice of Event of Default.

Section 3.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

Section 4.Entire Agreement; Severability.  This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

L-1-4

Section 5.Governing Law; Jurisdiction; Waiver of Trial by Jury.  (a) This Servicer Notice and Pledge shall be CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

(b)SELLERS AND SERVICER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING.  SERVICER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION THEY MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

(c)SELLERS AND SERVICER HEREBY WAIVE TRIAL BY JURY.

Section 6.Amendment and Restatement.  The terms and provisions of the Existing Servicer Notice and Pledge shall be amended and restated in their entirety by the terms and provisions of this servicer notice and pledge (the “Servicer Notice and Pledge”) and shall supersede all provisions of the Existing Servicer Notice and Pledge as of the date hereof.  From and after the date hereof, all references made to the Existing Servicer Notice and Pledge in any Program Agreement or in any other instrument or document shall, without more, be deemed to refer to this Servicer Notice and Pledge.

[remainder of page intentionally left blank]

L-1-5

IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

Credit Suisse First Boston Mortgage Capital LLC, as Buyer

By:
	Name:
	Title:

L-1-6

PennyMac Loan Services, LLC, as Servicer
By:
	Name:
	Title:
PennyMac Corp., as a Seller
By:
	Name:
	Title:
PennyMac Mortgage Investment Trust Holdings I, LLC, as a Seller
By:
	Name:
	Title:

L-1-7

EXHIBIT L-2

FORM OF SERVICER NOTICE

August 25, 2011

Specialized Loan Servicing LLC, as Servicer
Suite 300
8742 Lucent Boulevard
Highlands Ranch, CO 80129
Attention:  General Counsel

Re:Amended and Restated Master Repurchase Agreement, dated as of August 25, 2011 (the “Repurchase Agreement”), by and among PennyMac Corp. (“PennyMac Corp.”), PennyMac Mortgage Investment Trust Holdings I, LLC (“PMITH,” together with PennyMac Corp., the “Sellers” and each individually, a “Seller”), PennyMac Mortgage Investment Trust (the “Guarantor”)  and Credit Suisse First Boston Mortgage Capital LLC (the “Buyer”).

Ladies and Gentlemen:

Specialized Loan Servicing LLC (the “Servicer”) is servicing certain mortgage loans for Sellers pursuant to (a) that certain Servicing Agreement, dated as of December 20, 2010 (the “Series 2010-3 Servicing Agreement”), between the Servicer and SWDNSI Trust Series 2010-3 (“Series 2010-3”) and (b) that certain Servicing Agreement, dated as of December 20, 2010 (the “Series 2010-4 Servicing Agreement”, and collectively with the Series 2010-4 Servicing Agreement, the “Servicing Agreements” and each a “Servicing Agreement”), between the Servicer and SWDNSI Trust Series 2010-4 (“Series 2010-4” and, collectively with Series 2010-3, the “Trust Subsidiaries” and each a “Trust Subsidiary”).  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Repurchase Agreement.

Pursuant to the Repurchase Agreement between Buyer and Sellers, the Servicer is hereby notified that each Seller has assigned certain REO Properties (“Trust REO Properties”) to a Trust Subsidiary and have assigned certain mortgage loans (“Trust Mortgage Loans”) acquired by or transferred to a Trust Subsidiary.

Upon receipt of a Notice of Event of Default from Buyer (“Notice of Event of Default”) Servicer shall (i) use commercially reasonable efforts to follow the instructions of Buyer with respect to the Trust Mortgage Loans and Trust REO Properties including, without limitation, remitting all funds with respect to such Trust Mortgage Loans and Trust REO Properties to any account specified by Buyer excluding funds to which Servicer is entitled with respect to Series 2010-3 and Series 2010-4, individually, under the Servicing Agreements and (ii) deliver to Buyer any information with respect to the Trust Mortgage Loans and Trust REO Properties reasonably requested by Buyer, with respect to Series 2010-3, at the sole cost and expense of PennyMac Corp., and, with respect to Series 2010-4, at the sole cost and expense of PMITH.

L-2-1

Notwithstanding any contrary information which may be delivered to the Servicer by Sellers, the Servicer may conclusively rely on any information or Notice of Event of Default delivered by Buyer, and, with respect to Series 2010-3, PennyMac Corp., and, with respect to Series 2010-4, PMITH shall indemnify and hold the Servicer harmless for any and all claims, costs and expenses asserted against it for any actions taken in good faith by the Servicer in connection with the delivery of such information or Notice of Event of Default; provided, however, that the applicable Seller shall not be required to indemnify the Servicer against any such liability attributable to the willful misconduct, bad faith or gross negligence of the Servicer.

For the avoidance of doubt, the undersigned hereby acknowledge and agree that, following receipt of a Notice of Event of Default, the Servicer may continue to withdraw funds from the P & I Custodial Account (as defined in the Servicing Agreements) pursuant to Section 6.03(b) of the applicable Servicing Agreement, including, without limitation, to reimburse itself unreimbursed Servicing Advances (as defined in the Servicing Agreements) and any unpaid Servicing Fees (as defined in the Servicing Agreements) with respect to each of Series 2010-3 and Series 2010-4, individually.

[SIGNATURE PAGES FOLLOW]

L-2-2

Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt.  Any notices to Buyer should be delivered to the following addresses:  Eleven Madison Avenue, New York, New York 10010; Attention: Margaret Dellafera; Telephone: 212-325-6471.

Very truly yours,

Credit Suisse First Boston Mortgage

Capital LLC, as Buyer

By:

Name:

Title:

ACKNOWLEDGED:

Specialized Loan Servicing LLC

as Servicer

By:

Title:

Telephone:

Facsimile:

ACKNOWLEDGED:

L-2-3

SWDNSI TRUST SERIES 2010-3
By:	PNMAC Capital Management, LLC,
	as Administrator
By:
Name:	David M. Walker
Title:	Chief Credit Officer
SWDNSI TRUST SERIES 2010-4
By:	PNMAC Capital Management, LLC,
	as Administrator
By:
Name:	David M. Walker
Title:	Chief Credit Officer
ACKNOWLEDGED:
PENNYMAC CORP.,
as Seller, with respect to Series 2010-3
By:
Name:	David M. Walker
Title:	Chief Credit Officer
PENNYMAC MORTGAGE INVESTMENT
TRUST HOLDINGS I, LLC,
as Seller, with respect to Series 2010-4
By:
Name:	David M. Walker
Title:	Chief Credit Officer

L-2-4

EXHIBIT M

LOAN ACTIVITY REPORT

loanid servicernm srvloanid loanidprevious lien armorfix loantype fname lname staddress city state zip proptype units ownocc doctype originator origdate fpdate mtdate origterm amortterm origbal origrate origpandi schedrterm ramortterm  curbal rate pandi piti firstmtgbal secmtgbal secmtgcd modified modtype moddate lossmittype bkflag bkfiledate bkchapter fcflag fcstart fclstatus fcjudgedt fcnotsdate fcsaledate fcjudicial balloon paid2date escflag escadvbal escrowbal corpadvbal suspense fpadate fradate npadate nradate indexcd margin pfreq rfreq perfloor percap initfloor initcap lifefloor lifecap teaser pmipct mitype pmico appval ltv cltv appform curfico curficodt curficometh frontendratio backendratio delqstring paystatmba nextpmtduedt cash1 reoflag dpbal uncollectedextendedbalanceflag pppflag pppterm pppdesc inttype negamflag negampct pmtadjcap pmtrecast recastdt dualam ioflag ioterm nxtduedate pifflag datadate BPO-QSV BPO-FMV BPO-Date HAMP Rewards SERVICE_FEE DIL Charge Loan Sales Charge Liquidation Charge Loan Boarding Charge Modification Charge ModificationProgram FirstNewPaymentDate NewMaturityDate NewAmortizationTerm NewInterestRate NewUPB NewPILoanAmount ForbearedAmount NewPI CapitalizationAmount

M-1

EX-10.32

Exhibit 10.32

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

CITIGROUP GLOBAL MARKETS REALTY CORP
390 Greenwich Street 5th Floor
New York, NY 10013

As of July 12, 2011

TO:	PennyMac Corp. (“PMC” or “Purchaser”)
FROM:	Citigroup Global Markets Realty Corp. (“Citigroup” or “Seller”)
RE:	Sale of Assets to PMC

This letter agreement will serve as the commitment by Seller to sell and by Purchaser to purchase, on a mandatory delivery basis, without recourse, certain first lien, fixed-rate and adjustable-rate, conventional, residential mortgage loans (the “Mortgage Loans”) and certain residential real property including land and improvements, together with all buildings, fixtures and attachments thereto (the “REO Properties”, and together with the Mortgage Loans, the “Assets”) set forth on Schedule 1 attached hereto under the terms set forth below.  Purchaser will purchase all of Seller’s right, title and interest in the Assets.  The terms and provisions of this transaction, including the purchase price for the Assets, are described below.  Capitalized terms used herein and not defined shall have the meanings assigned thereto in the Agreement.

1.	Closing Date:	The Purchaser may purchase any Asset on any date following the date hereof, which date shall be deemed a “Closing Date.” Any such Assets purchased on any Closing Date shall be mutually agreed upon in writing by the parties hereto. Any such Closing Date shall be agreed upon between the parties hereto in writing, but in no event shall any Closing Date be later than December 26, 2011 (the “End Date”); provided, however, that in the event that aggregate Original Purchase Price for all the Assets has decreased by thirty-five percent (35%) or more due solely to the receipt of any principal and interest collections on such Asset (collectively, “Proceeds”) and/or liquidation proceeds by the Seller or sales to the Purchaser hereunder, the “End Date” for purposes of this letter agreement shall be June 22, 2012.
2.	Transfer Date:	August 4, 2011, or such other date as may be mutually agreed upon by Citigroup and the Initial Seller under the Interim Servicing Agreement, dated as of June 29, 2011 (“Interim Servicing Agreement”), by and among such Initial Seller, as servicer thereunder, Citigroup and PMC, as successor servicer thereunder. The “Initial Seller” shall mean the large money center bank from which Citigroup purchased the Assets.

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

3.	Aggregate Delivery Balance:	$347,692,993.00 (less any amounts attributable to Mortgage Loans that are repurchased by Initial Seller pursuant to the terms and provisions of the Purchase Agreement).
4.	Purchase Price Percentage:	For each Asset, the Base Purchase Price Percentage plus a percentage equal to (i) in the event the related Closing Date shall occur within ***(**) days from the date hereof, ***%, (ii) in the event the related Closing Date shall occur within a period of *** (***) to *** (***) days from the date hereof, ***%, (iii) in the event the related Closing Date shall occur within a period of *** (***) to *** (***) days from the date hereof, ***%, (iv) in the event the related Closing Date shall occur within a period of *** (***) to *** (***) days from the date hereof, ***%, (v) in the event the related Closing Date shall occur within a period of *** (***) to *** (***) days from the date hereof, ***%, or (vi) in the event the related Closing Date shall occur within a period of *** (***) to *** (***) days from the date hereof, ***%. For purposes of this letter agreement, the “Base Purchase Price Percentage” shall mean, with respect to each Asset, the purchase price percentage set forth on Schedule 1.
5.	Purchase Price:	The purchase price for each Asset purchased on any related Closing Date (the “Purchase Price”) shall be equal to (a) (i) the unpaid principal balance of such Asset as of June 27, 2011 (the “Original Cut-off Date”), multiplied by (ii) the related Purchase Price Percentage less (b) any Proceeds received following ***, 2011 (the “Original Closing Date”). In connection with the payment of the Purchase Price, Purchaser shall pay any and all Reimbursement Amounts to Seller. If the amount in clause (b) above exceeds the amount in clause (a) above (net of any related Reimbursement Amounts), Seller shall remit such excess amount to Purchaser. The Purchase Price for any Assets or the excess amount after application of the Purchase Price shall be paid to Seller or Purchaser, as applicable, in immediately available funds by wire transfer on the related Closing Date.
6.	Reimbursement Amounts	With respect to each Asset, the sum of (a) any and all out-of-pocket costs and expenses incurred by Citigroup with respect to such Asset arising out of or relating to this letter agreement, the Servicing Agreement, the Purchase Agreement or the Interim Servicing Agreement, including, but not limited to, servicing, corporate and escrow advances, servicing reimbursement made by Citigroup, any servicing fees paid by Citigroup, any costs and expenses incurred by Citigroup in

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

		connection with its due diligence review of the Assets (allocated based upon the number of Assets) and any other amounts paid to Initial Seller under the Purchase Agreement or the Interim Servicing Agreement (other than the Original Purchase Price for the Assets) or to PMC under the Servicing Agreement that did not arise from ***thereunder and (b) Citigroup’s Cost of Carry for such Asset. For purposes of this letter agreement, the “Original Purchase Price” shall have the meaning ascribed to the term “Purchase Price” in the Purchase Agreement.
7.	Cost of Carry:	An amount equal to the “cost of carry” imputed to Citigroup in connection with any Asset purchased under the Purchase Agreement and held by Seller equal to the product of (x) the sum of (a) the Original Purchase Price for such Asset as reduced monthly by remittances of principal on the Asset received by Citigroup and (b) any and all Reimbursement Amounts incurred by Citigroup (other than the Cost of Carry) with respect to such Asset and (y) LIBOR plus *** (***) basis points per annum. For the purposes hereunder, “LIBOR” shall mean the rate determined daily by Citigroup on the basis of the offered rate for one-month U.S. dollar deposits, as such rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on such date (rounded up to the nearest whole multiple of 1/16%); provided that if such rate does not appear on Reuters Screen LIBOR01 Page, the rate for such date will be the rate determined by reference to such other comparable publicly available service publishing such rates as may be selected by the Citigroup in its sole discretion and communicated to PMC.
8.	Liquidated Assets:	With respect to any Liquidated Asset, in the month following the liquidation date of such Asset, following any required reconciliation that shall be performed on such Asset by the parties, the Purchaser shall remit to Citigroup an amount equal to (a) the product of (i) the Liquidation Percentage and (ii) the unpaid principal balance of such Asset as of the Original Cut-off Date, minus (b) the difference between (i) the total amount of liquidation proceeds received on such Asset and (ii) the sum of (1) the Original Purchase Price for such Asset, plus (2) any and all Reimbursement Amounts for such Asset, minus (3) any Proceeds on such Asset received following the Original Closing Date; provided, however, if the amount in clause (b) above exceeds the amount in clause (a) above, Citigroup shall remit such excess amount to Purchaser.

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

		For the purposes of this letter agreement, “Liquidated Asset” shall mean an Asset for which all amounts expected to be recovered (exclusive of the possibility of recovery from deficiency judgments or default judgment) have been recovered by the servicer, whether by way of disposition of an REO Property, refinance, offer and compromise, charge-off or other means of liquidation.
9.	Liquidation Percentage:	The positive difference between (i) the ***calculated as of the liquidation date as if such Liquidated Asset was ***on such liquidation date and (ii) the ***in respect of such Asset.
10.	Assignment Agreement:	The Assets will be sold pursuant to a separate assignment, assumption and recognition agreement to be entered into among Seller, Purchaser and Initial Sellers (the “Assignment Agreement”) pursuant to which Seller will assign its rights and obligations with respect to the Assets under that certain Mortgage Loan Purchase Agreement, dated as of June 29, 2011 (the “Purchase Agreement”), among Citigroup, as purchaser thereunder and Initial Sellers, as sellers thereunder. The Assignment Agreement shall include indemnification from PMC to Citigroup identical to that contained in Section 2(l) in the Purchase Agreement.
11.	Servicing Agreement:	PMC and Citigroup will, prior to the Transfer Date, enter into a mutually acceptable servicing agreement pursuant to which PMC will service or cause to be serviced the Assets (the “Servicing Agreement”). PMC shall purchase the Mortgage Servicing Rights (“MSRs”) relating to the Assets prior to the Transfer Date. PennyMac Loan Services, LLC (“PLS”) shall sub-service the Assets for PMC in accordance with standards set forth in the Servicing Agreement and shall be entitled, on a monthly basis, to withdraw funds from the related collection account established under the Servicing Agreement to pay itself any related servicing fees and to reimburse itself for any permitted corporate, escrow or servicing advances made pursuant to the Servicing Agreement prior to any other withdrawal therefrom. In the event that, in any month, the funds in the collection account are insufficient for the related servicer to pay itself such servicing fees and to reimburse itself for such permitted corporate, escrow or servicing advances, Citigroup shall remit to the servicer the amount of such shortfall as set forth in the Servicing Agreement.
12.	Further Assurances:	Purchaser and Seller further agree that upon reasonable request they shall do such other and further acts and deeds, and shall execute, acknowledge and deliver and record such other documents and instruments as may be reasonably necessary

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

		from time to time to evidence, confirm or carry out the intent and purposes of this letter agreement.
13.	Expenses:	Notwithstanding anything to the contrary contained herein, each party will bear its own costs, fees and expenses (including the costs, fees and expenses of its attorneys). Purchaser will bear the cost of the delivery of the collateral files to the custodian; the costs of preparing and recording the assignments from Seller to Purchaser (including intervening assignments necessary to perfect title to Purchaser) and endorsing notes to Purchaser, as required; the costs of notifying the mortgagors, hazard, flood and mortgage insurance companies, and others, as necessary, and the costs of shipping all Asset records to Purchaser.
14.	Entire Agreement:	This letter agreement sets forth the entire understanding of the parties relating to the subject matter hereof to date and supersedes and cancels any prior communications, understandings and agreements between the parties. This letter agreement may not be amended or modified except by the parties in writing. This letter agreement may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute but one and the same agreement.
15.	Liquidated Damages:	If for any reason Purchaser fails to purchase any Asset by the End Date, in addition to any other amounts owed under this letter agreement, Purchaser shall, as liquidated damages for such failure, remit to Seller an amount equal to (a) the product of (i) the Spread Percentage and (ii) the unpaid principal balance of such Asset as of the Original Cut-off Date, minus (b) the difference between (i) the fair market value of the Assets (as determined pursuant to a third party indicative bid obtained by Citigroup within a reasonable period of time following the related Break-up Date) or, with respect to any Liquidated Asset, the total amount of liquidation proceeds received on such Asset and (ii) the sum of (1) the Original Purchase Price for such Asset, (2) any and all Reimbursement Amounts for such Asset, minus (3) any Proceeds on such Asset received following the Original Closing Date; provided, however, if the amount in clause (b) above exceeds the amount in clause (a) above, Seller shall remit such excess amount to Purchaser. Purchaser shall promptly provide Citigroup with any information on the Assets that it requires in connection with Citigroup’s obtaining the related third party indicative bid.

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

		For purposes of this letter agreement, the “Break-up Date” shall mean the earlier to occur of (i) the date on which ***in ***of its ***or ***to ***an ***as ***under this letter agreement and (ii) the ***.
16.	Spread Percentage:	The positive difference between (i) the ***calculated as of the Break-up Date as if such Asset was ***on the Break-up Date and (ii) the ***in respect of such Asset.
17.	Disposition of Assets:	Purchaser acknowledges and agrees that Seller shall, in its sole discretion, be permitted to sell or dispose of any Asset (or otherwise obtain a third party indicative bid for the Assets within a reasonable period of time following any Break-up Date) at any price and at any time that it, in its sole discretion, deems reasonable and Purchaser waives any right to object to or contest the price obtained by Seller in the sale, disposition and/or third party indicative bid of any Asset.
18.	Severability:	If any provision hereof is found by a court of competent jurisdiction to be prohibited or unenforceable, such provision shall be ineffective only to the extent of such prohibition or unenforceability, and such prohibition or enforceability shall not invalidate the balance of such provision to the extent it is not prohibited or unenforceable, nor invalidate the other provisions hereof.
19.	Governing Law:	The parties agree that this letter agreement shall be construed in accordance with and governed by the laws of the State of New York, excluding its rules of conflicts of laws but including the New York General Obligations Law Sections 5-1401 and 5-1402. The parties consent to the exclusive jurisdiction of the following courts in connection with any dispute between the Parties arising from or in connection with this letter agreement (i) United States District Court for the Southern District of New York; and (ii) Supreme Court, New York County, New York. Purchaser hereby irrevocably waives any objection to venue of any action between the parties in the courts described herein, whether pursuant to the doctrine of forum non conveniens or otherwise. In the event Seller commences legal proceedings against Purchaser in any of the courts set forth above, Purchaser waives any objection to the selection of that court and shall not seek to change venue to any other court.
20.	Arm’s Length Transaction:	Each party acknowledges that it has participated in the negotiation of this letter agreement, and agrees that no provision of this letter agreement shall be construed against or interpreted to the disadvantage of any party by any court or

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

		other governmental or judicial authority by reason of such party having or being deemed to have structured, dictated or drafted such provision. All of the terms of this letter agreement were negotiated at arm’s length, and were prepared and executed without fraud, duress, undue influence or coercion of any kind exerted by either party upon the other. The execution and delivery of this letter agreement is the free and voluntary act of Seller and Purchaser.
21.	Confidentiality:	Each party agrees for itself and its respective directors, officers, employees, agents, representatives, subsidiaries and affiliates, to keep the terms of this letter agreement confidential and to not disclose any such terms to anyone except: (a) in connection with the enforcement of this letter agreement, (b) to the parties’ respective attorneys, accountants and/or regulators who have specific need for the information; or (c) in response to or to otherwise comply with appropriate legal process, law, regulation or governmental agency request.
22.	Miscellaneous:	The rights granted hereunder shall be cumulative with the rights provided under the Assignment Agreement and shall inure to the benefit of Seller and its successors and assigns. For the purpose of facilitating the execution of this letter agreement, and for other purposes, this letter agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties. The original documents shall be promptly delivered, if requested.

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

Please acknowledge your acceptance and agreement to the foregoing by signing and returning this letter agreement via email and overnight courier to Peter Steinmetz (email: peter.steinmetz@citi.com) at Citigroup Global Markets Realty Corp., 390 Greenwich Street, 5th Floor, New York, NY 10013.  Thank-you.

		Very Truly Yours,
		CITIGROUP GLOBAL MARKETS REALTY CORP.
		BY:	/s/ Kira Granovskaya
		NAME: Kira Granovskaya
		TITLE: Vice President
CONFIRMED AND AGREED TO:
PENNYMAC CORP.
BY:	/s/ Vandad Fartaj
NAME:	Vandad Fartaj
TITLE:	Chief Investment Officer

Confirmation (July 2011)

Schedule 1

Assets

EX-31.1

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Exhibit 31.1

CERTIFICATION

I, Stanford L. Kurland, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2011

/s/ STANFORD L. KURLAND
Stanford L. Kurland
Chairman of the Board and
Chief Executive Officer

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Exhibit 31.1

CERTIFICATION

EX-31.2

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Exhibit 31.2

CERTIFICATION

I, Anne D. McCallion, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2011

/s/ ANNE D. MCCALLION
Anne D. McCallion
Chief Financial Officer

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Exhibit 31.2

CERTIFICATION

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust (the "Company") for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stanford L. Kurland, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ STANFORD L. KURLAND
Stanford L. Kurland
Chairman of the Board and Chief Executive Officer

November 4, 2011

        A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Mortgage Investment Trust and will be retained by PennyMac Mortgage Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust (the "Company") for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Anne D. McCallion, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ANNE D. MCCALLION
Anne D. McCallion
Chief Financial Officer

November 4, 2011

        A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Mortgage Investment Trust and will be retained by PennyMac Mortgage Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Net gain (loss) on investments:
Mortgage-backed securities	$ (791)	$ 596	$ (2,106)	$ 446
Mortgage loans	32,311	7,578	65,594	18,677
Total Net gain (loss) on investments	31,520	8,174	63,488	19,123
Interest income:
Short-term investments	24	10	82	77
Mortgage backed securities	651	1,229	2,719	3,780
Mortgage loans	9,164	2,607	21,211	6,445
Total Interest income	9,839	3,846	24,012	10,302
Net gain (loss) on mortgage loans acquired for sale	84	(17)	207	11
Results of real estate acquired in settlement of loans	352	637	1,527	972
Net servicing fee income	14		17
Other income	176	16	240	17
Net investment income	41,985	12,656	89,491	30,425
Expenses
Interest	5,225	251	10,473	251
Loan servicing fees	4,473	885	9,992	1,561
Management fees	2,288	1,237	5,750	3,650
Compensation	1,567	573	3,831	2,212
Professional services	1,656	628	3,648	1,121
Other	1,898	992	4,631	2,096
Total expenses	17,107	4,566	38,325	10,891
Income before provision for income taxes	24,878	8,090	51,166	19,534
Provision for income taxes	4,350	361	6,376	2,400
Net income	$ 20,528	$ 7,729	$ 44,790	$ 17,134
Earnings per share
Basic (in dollars per share)	$ 0.73	$ 0.46	$ 1.72	$ 1.02
Diluted (in dollars per share)	$ 0.73	$ 0.45	$ 1.72	$ 1.01
Weighted average shares outstanding
Basic (in shares)	27,847	16,796	25,782	16,756
Diluted (in shares)	28,138	17,069	26,065	17,029
Dividends declared per share (in dollars per share)	$ 0.50	$ 0.35	$ 0.92	$ 0.35

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data	Total	Common stock	Additional paid-in capital	Retained earnings (accumulated deficit)
Balance at Dec. 31, 2009	$ 313,798	$ 167	$ 315,514	$ (1,883)
Balance (in shares) at Dec. 31, 2009		16,735,317
Increase (Decrease) in Shareholders' Equity
Net income	17,134			17,134
Share based compensation	1,589	1	1,588
Share-based compensation (in shares)		97,026
Dividends declared	(5,891)			(5,891)
Underwriting and offering costs	(150)		(150)
Balance at Sep. 30, 2010	326,480	168	316,952	9,360
Balance (in shares) at Sep. 30, 2010		16,832,343
Balance at Dec. 31, 2010	319,913	168	317,175	2,570
Balance (in shares) at Dec. 31, 2010		16,832,343
Increase (Decrease) in Shareholders' Equity
Net income	44,790
Share based compensation	2,812	1	2,811
Share-based compensation (in shares)		88,711
Dividends declared	(25,610)			(25,610)
Proceeds from offerings of common shares	197,162	110	197,052
Proceeds from offerings of common shares (in shares)		10,953,500
Underwriting and offering costs	(8,404)		(8,404)
Balance at Sep. 30, 2011	$ 530,663	$ 279	$ 508,634	$ 21,750
Balance (in shares) at Sep. 30, 2011		27,874,554

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

Note 18—Income Taxes

        The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. Therefore, PMT generally will not be subject to corporate federal or state income tax to the extent that qualifying distributions are made to shareholders and the Company meets REIT requirements including certain asset, income, distribution and share ownership tests. The Company believes that it has met the distribution requirements, as it has declared dividends sufficient to distribute substantially all of its taxable income. Taxable income will generally differ from net income. The primary differences between net income and the REIT taxable income (before deduction for qualifying distributions) is the income of the taxable REIT subsidiaries ("TRSs") and the method of determining the income or loss related to valuation of the mortgage loans owned by the qualified REIT subsidiary ("QRS"). Other than the TRS income and the QRS loan valuation differences, the other differences between REIT book income and REIT taxable income are not material.

        In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital.

        The Company has elected to treat two of its subsidiaries as TRSs. Income from the TRSs is only included as a component of REIT taxable income to the extent that the TRS makes dividend distributions of income to the REIT. No such dividend distributions were made in the quarters ended September 30, 2011 and 2010. A TRS is subject to corporate federal and state income tax. Accordingly, a provision for income taxes for the TRSs is included in the accompanying consolidated statements of income.

        The Company files U.S. federal and state income tax returns for both the REIT and TRSs. These returns for 2009 and forward are subject to examination by the respective tax authorities. No returns are currently under examination.

        The following table details the Company's provision for income taxes which relates primarily to the TRSs, for the periods presented:

				Quarter ended September 30,					Nine months ended September 30,
				2011			2010		2011			2010
				(in thousands)
Current expense (benefit):
		Federal		$	3,815		$	268	$	6,114		$	1,815
		State			1,350			93		2,093			630
			Total current		5,165			361		8,207			2,445
Deferred expense (benefit):
		Federal			(605	)		—		(1,359	)		—
		State			(210	)		—		(472	)		—
Total deferred expense					(815	)		—		(1,831	)
		Valuation allowance			—			—		—			(45	)
	Total provision for income taxes			$	4,350		$	361	$	6,376		$	2,400

        The provision for deferred income taxes for the quarter ended September 30, 2011 relates to net unrealized valuation losses on REO. There was no provision for deferred income taxes for the quarter ended September 30, 2010.

        The following table is a reconciliation of the Company's provision for income taxes at statutory rates to the provision for income taxes at the Company's effective rate:

	Quarter ended September 30,												Nine months ended September 30,
	2011						2010						2011						2010
	Amount			Rate			Amount			Rate			Amount			Rate			Amount			Rate
	(dollars in thousands)
Federal provision for income taxes at statutory tax rate	$	8,707			35.0	%	$	2,831			35.0	%	$	17,908			35.0	%	$	6,837			35.0	%
Effect of non-taxable REIT income		(5,028	)		(20.2	)%		(2,460	)		(19.9	)%		(12,682	)		(24.8	)%		(4,800	)		(24.6	)%
Provision for state income taxes, net of federal benefit		741			3.0	%		61			3.2	%		1,053			2.1	%		410			2.1	%
Other		(70	)		(0.3	)%		(71	)		0.7	%		97			0.2	%		(2	)		(0.0	)%
Valuation allowance		—			—			—			0.0	%		—			—			(45	)		(0.2	)%
Provision for income taxes	$	4,350			17.5	%	$	361			19.0	%	$	6,376			12.5	%	$	2,400			12.3	%

        At September 30, 2011 and September 30, 2010, the Company has no unrecognized tax benefits and does not anticipate any increase in unrecognized tax benefits. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company's policy to record such accruals in the Company's income tax accounts. No such accruals existed at September 30, 2011 or at September 30, 2010.

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash	$ 11,975	$ 45,447
Short-term investments	30,743
Mortgage-backed securities at fair value	86,702	119,872
Mortgage loans acquired for sale at fair value	40,850	3,966
Mortgage loans at fair value	715,272	364,250
Mortgage loans under a forward purchase agreement at fair value	152,908
Real estate acquired in settlement of loans	60,108	29,685
Real estate acquired in settlement of loans under a forward purchase agreement	9,798
Mortgage servicing rights:
at fair value	532
at lower of amortized cost or fair value	104
Principal and interest collections receivable	6,720	8,249
Principal and interest collections receivable under a forward purchase agreement	9,735
Interest receivable	2,132	978
Due from affiliates	7,203	2,115
Other assets	20,712	14,533
Total assets	1,155,494	589,095
LIABILITIES
Accounts payable and accrued liabilities	1,096	9,080
Unsettled mortgage-backed securities purchases	17,205
Loans sold under agreements to repurchase	345,969	147,422
Securities sold under agreements to repurchase at fair value	62,843	101,202
Borrowings under forward purchase agreement	163,755
Real estate acquired in settlement of loans financed under agreements to repurchase	12,814
Contingent underwriting fees payable	5,883	5,883
Payable to affiliates	13,435	5,595
Income tax payable	1,831
Total liabilities	624,831	269,182
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares of beneficial interest-authorized, 500,000,000 shares of $0.01 par value; issued and outstanding, 27,874,554 and 16,832,343 shares at September 30, 2011 and December 31, 2010, respectively	279	168
Additional paid-in capital	508,634	317,175
Retained earnings	21,750	2,570
Total shareholders' equity	530,663	319,913
Total liabilities and shareholders' equity	$ 1,155,494	$ 589,095

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Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Note 21—Recently Issued Accounting Pronouncements

        In May 2011, the Financial Accounting Standards Board issued an Accounting Standards Update ("ASU"), ASU 2011-04 to the Fair Value Measurements topic of the Accounting Standards Codification ("ASC"). ASU 2011-04 eliminates unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards, expands the disclosure requirements of the Fair Value Measurements and Disclosure topic of the ASC for fair value measurements and makes other amendments, including:

• •

  limiting the highest-and-best-use valuation premise concepts only to measuring the fair value of nonfinancial assets;

  •

  permitting an exception to fair value measurement principles for financial assets and financial liabilities (and derivatives) with offsetting positions in market risks or counterparty credit risk when several criteria are met. When the criteria are met, an entity can measure the fair value of the net risk position;

  •

  clarifying that premiums or discounts that reflect size as a characteristic of the reporting entity's holding rather than as a characteristic of the asset or liability (for example, a control premium when measuring the fair value of a controlling interest) are not permitted in a fair value measurement; and

  •

  prescribing a model for measuring the fair value of an instrument classified in shareholders' equity; this model is consistent with the guidance on measuring the fair value of liabilities.

        ASU 2011-04 expands the Fair Value Measurements topic's disclosure requirements, particularly for fair value measurements categorized in Level 3 of the fair value hierarchy: (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place (e.g., how the entity decides its valuation policies and procedures, as well as changes in its analyses of fair value measurements, from period to period), and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs.

        ASU 2011-04 is applicable to the Company for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have a material effect on the Company's financial statements.

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Mortgage Loans Acquired for Sale at Fair Value

9 Months Ended

Sep. 30, 2011

Mortgage Loans Acquired for Sale at Fair Value

Mortgage Loans Acquired for Sale at Fair Value

Note 7—Mortgage Loans Acquired for Sale at Fair Value

        Mortgage loans acquired for sale at fair value is comprised of recently originated mortgage loans purchased by the Company for resale.

        Following is a summary of the distribution of the Company's mortgage loans acquired for sale at fair value as of the dates presented:

		September 30, 2011					December 31, 2010
Loan Type		Fair value			Unpaid principal balance		Fair value		Unpaid principal balance
		(in thousands)
Government insured or guaranteed		$	10,833		$	10,051	$	3,212	$	3,115
Fixed-rate:
	Agency-eligible		27,886			26,494		754		750
	Jumbo loans		2,601			2,557		—		—
			41,320			39,102		3,966		3,865
Pipeline and other hedging derivatives, net			(470	)		—		—		—
		$	40,850		$	39,102	$	3,966	$	3,865

        Mortgage loans acquired for sale at fair value totaling $40.5 million and $2.7 million were pledged to secure sales of loans under agreements to repurchase at September 30, 2011 and December 31, 2010, respectively.

        The Company is exposed to price risk relative to its mortgage loans acquired for sale as well as to the commitments it makes to acquire loans from correspondent lenders. The Company is exposed to price risk from the time a commitment to purchase a loan is made to a correspondent lender to the time the purchased mortgage loan is sold. During this period, the Company is exposed to losses if mortgage rates rise, because the value of the purchase commitment or mortgage loan acquired for sale declines. The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in interest rates.

        To manage this price risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the value of the Company's interest rate lock commitments and inventory of mortgage loans acquired for sale. The Company does not use derivative financial instruments for purposes other than in support of its risk management activities.

        The Company records all derivative financial instruments at fair value. The Company had the following derivative financial instruments recorded within the mortgage loan balances on the balance sheet as of September 30, 2011:

			September 30, 2011
Instrument			Notional amount		Fair value
Interest rate lock commitments			$	319,156	$	1,205
Hedging derivatives:
		MBS Put Options		38,000		72
		MBS Call Options		2,000		—
				40,000		72
	Forward sales contracts			215,382		(1,747	)
			$	574,538	$	(470	)

        As of September 30, 2011, the Company had $975,000 on deposit with its derivatives counterparties.

        The Company did not have any derivative contracts at December 31, 2010.

        The following table summarizes the activity for derivative contracts used to hedge the Company's interest rate lock commitments and inventory of mortgage loans acquired for sale at notional value:

	Balance, Beginning of Period		Additions		Dispositions/ Expirations			Balance, End of Period
	(in thousands)
Quarter ended September 30, 2011
Options	$	1,500	$	41,500	$	(3,000	)	$	40,000
Forward sales contracts	$	11,115	$	314,345	$	(110,078	)	$	215,382
Nine months ended September 30, 2011
Options	$	—	$	43,000	$	(3,000	)	$	40,000
Forward sales contracts	$	—	$	352,290	$	(136,908	)	$	215,382

        The Company did not have any derivative contracts during the three and nine months ended September 30, 2010.

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Subsequent Events

9 Months Ended

Sep. 30, 2011

Subsequent Events

Subsequent Events

Note 22—Subsequent Events

        Management has evaluated all events or transactions through the date the Company issued these financial statements. During this period:

• •

  On October 26, 2011, the Company's Board of Trustees declared a cash dividend of $0.50 per share payable on November 30, 2011 to holders of record of the Company's common shares as of November 16, 2011.

  •

  On October 11, 2011, the Company entered into a forward purchase agreement through CGM for approximately $35.1 million in fair value of distressed mortgage assets. The pending transaction is subject to changes in the loans allocated to us by PCM, continuing due diligence, customary closing conditions, and our obtaining additional capital adequate to fund the transaction. There can be no assurance that the committed amount will ultimately be acquired or that the transaction will be completed at all.

  •

  During October of 2011, the Company purchased loans subject to its forward purchase agreement with CGM with fair values totaling $19.2 million.

  •

  On November 1, 2011, the Company entered into an amendment (the "Amendment") to its master repurchase agreement, dated November 2, 2010 (the "Loan Repo Facility"), with Credit Suisse First Boston Mortgage Capital LLC ("CSFB"), pursuant to which PMC may sell, and later repurchase, newly originated mortgage loans. The Loan Repo Facility is used to fund newly originated mortgage loans that are purchased from correspondent lenders by PMC and held for sale and/or securitization. The Loan Repo Facility is committed for a period of 364 days, and the obligations of PMC are fully guaranteed by the Company and the Operating Partnership.

• • Under the terms of the Amendment, the maximum aggregate purchase price provided for in the Loan Repo Facility was increased from $75 million to $150 million and the termination date was extended until October 30, 2012. Through PMC, the Company is also required to pay CSFB a commitment fee for the Loan Repo Facility, as well as certain other administrative costs and expenses in connection with CSFB's structuring, management and ongoing administration of the Loan Repo Facility. All other terms and conditions of the Loan Repo Facility and the related guaranty remain the same in all material respects.

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Regulatory Net Worth Requirement

9 Months Ended

Sep. 30, 2011

Regulatory Net Worth Requirement

Regulatory Net Worth Requirement

Note 20—Regulatory Net Worth Requirement

        PennyMac Corp. ("PMC"), an indirect subsidiary of the Company, is a seller-servicer for Fannie Mae. Fannie Mae's approval required PMC to deposit $5.0 million in a pledged cash account to secure its performance under its master agreement with Fannie Mae. The pledged cash is included in Other assets in the consolidated balance sheets at September 30, 2011 and December 31, 2010.

        To retain its status as an approved seller-servicer, PMC is required to meet Fannie Mae's capital standards, which require PMC to maintain a minimum net worth of $2.5 million. Management believes PMC complies with Fannie Mae's net worth requirement as of September 30, 2011.

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Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase

9 Months Ended

Sep. 30, 2011

Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase

Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase

Note 12—Real Estate Acquired in Settlement of Loans Financed Under Agreements to Repurchase

        Following is a summary of financial information relating to REO financed under agreements to repurchase as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	12,814		$	—	$	12,814		$	—
	Unused amount(1)	$	87,186		$	—	$	87,186		$	—
Weighted-average interest rate at end of period			3.99	%		—		3.99	%		—
Weighted-average interest rate during the period(2)			4.76	%		—		4.71	%		—
Average balance of REO sold under agreements to repurchase		$	12,663		$	—	$	4,725		$	—
Maximum daily amount outstanding		$	16,797		$	—	$	16,797		$	—
Total interest expense		$	279		$	—	$	319		$	—
Fair value of REO held in a consolidated subsidiary whose stock is pledged to secure agreements to repurchase at period-end		$	26,102		$	—	$	26,102		$	—

(1)

The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered REO eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

(2)

Weighted-average interest rate during the period excludes the effect of amortization of debt issuance costs of $125,000 and $150,000 during the quarter and nine months ended September 30, 2011, respectively.

        The repurchase agreement collateralized by REO has an average term of approximately 8.5 months at September 30, 2011.

        The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's REO sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	13,273		June 11, 2012

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the REOs securing those agreements decreases.

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Transactions with Related Parties

9 Months Ended

Sep. 30, 2011

Transactions with Related Parties

Transactions with Related Parties

Note 3—Transactions with Related Parties

        The Company is managed externally by PCM under the terms of a management agreement that expires on August 4, 2012 and will be automatically renewed for a one-year term each anniversary date thereafter unless previously terminated. If the Company terminates the management agreement without cause, or PCM terminates the management agreement upon a default by the Company in its performance of any material term in the management agreement, PMT will be obligated to pay a termination fee to PCM. As more fully described in the Company's Annual Report, certain of the underwriting costs incurred in the Company's initial public offering ("IPO") were paid on PMT's behalf by PCM and a portion of the underwriting discount was deferred by agreement with the underwriters of the offering. Under circumstances where the termination fee is payable, as discussed in Note 15—Shareholders' Equity, PMT will reimburse PCM the underwriting costs.

        PMT pays PCM a base management fee and may pay a performance incentive fee, both payable quarterly and in arrears. Following is a summary of management fee expense and the related liability recorded by the Company for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(in thousands)
Base management fee	$	2,288		$	1,237		$	5,750		$	3,650
Performance incentive fee		—			—			—			—
Total management fee incurred during the period		2,288			1,237			5,750			3,650
Fee paid during the period		(2,018	)		(2,413	)		(4,795	)		(3,582	)
Fee outstanding at beginning of period		1,913			2,413			1,228			1,169
Fee outstanding at end of period	$	2,183		$	1,237		$	2,183		$	1,237

        Both the management and termination fees are more fully described in Note 4—Transactions with Related Parties to the Company's Annual Report.

        The Company, through the Operating Partnership, also has a loan servicing agreement with PLS. Servicing fee rates are based on the risk characteristics of the mortgage loans serviced and total servicing compensation is established at levels that management believes are competitive with those charged by other servicers or specialty servicers, as applicable.

        Servicing fee rates for nonperforming loans are expected to range between 30 and 100 basis points per year on the unpaid principal balance of the mortgage loans serviced on the Company's behalf. PLS is also entitled to certain customary market-based fees and charges, including boarding and de-boarding fees, liquidation and disposition fees, assumption, modification and origination fees, and late charges, as well as interest on funds on deposit in custodial accounts. In the event PLS either effects a refinancing of a loan on the Company's behalf and not through a third party lender and the resulting loan is readily saleable, or originates a loan to facilitate the disposition of real estate that the Company has acquired in settlement of a loan, PLS is entitled to receive from the Company market-based fees and compensation.

        PLS, on behalf of the Company, currently participates in HAMP (and other similar mortgage loan modification programs), which establishes standard loan modification guidelines for "at risk" homeowners and provides incentive payments to certain participants, including loan servicers, for achieving modifications and successfully remaining in the program. The loan servicing agreement entitles PLS to retain any incentive payments made to it and to which it is entitled under HAMP; provided, however, that with respect to any such incentive payments paid to PLS under HAMP in connection with a mortgage loan modification for which the Company previously paid PLS a modification fee, PLS shall reimburse the Company an amount equal to the lesser of such modification fee or such incentive payments.

        In connection with the Company's correspondent lending business, by which the Company acquires mortgage loans originated by correspondent lenders for resale to the Agencies (as defined in Note 5—Fair Value) and other investors, PLS is entitled to base servicing fees, which range from 5 to 20 basis points per year of the unpaid principal balance of such loans, and other customary market-based fees and charges as described above. PLS also provides certain mortgage banking services, including fulfillment and disposition-related services, to the Company for a fulfillment fee based on a percentage of the unpaid principal balance of the mortgage loans. The fulfillment fee for such services is currently 50 basis points. Since November 1, 2010, the Company has collected interest income and a sourcing fee of three basis points for each mortgage loan it purchases from a correspondent lender and sells to PLS for ultimate disposition to a third party where the Company is not approved or licensed to sell to such third party. The sourcing fees collected by the Company during the quarter and nine months ended September 30, 2011 amounted to $41,000 and $53,000, respectively. During the quarter and nine months ended September 30, 2011, the Company recorded fulfillment fees totaling $263,000 and $336,000, respectively. During the quarter and nine months ended September 30, 2010, the Company recorded fulfillment fees totaling $38,000.

        The Company paid servicing fees to PLS as described above and as provided in its loan servicing agreement and recorded other expenses, including common overhead expenses incurred on its behalf by PCM and its affiliates, in accordance with the terms of its management agreement.

        Following is a summary of those expenses for the periods presented:

		Quarter ended September 30,				Nine months ended September 30,
		2011		2010		2011		2010
		(in thousands)
Loan servicing and fulfillment fees payable to PLS		$	2,107	$	644	$	7,163	$	1,267
Reimbursement of expenses incurred on PMT's behalf:
	Compensation		155		101		413		307
	Other		809		157		1,721		506
			964		258		2,134		813
Reimbursement of common overhead incurred by PCM and its affiliates			988		497		2,517		978
		$	4,059	$	1,399	$	11,814	$	3,058
Payments made during the period		$	2,273	$	2,432	$	8,476	$	2,680

        During the Company's startup period and through the quarter ended March 31, 2010, PCM and its affiliates did not charge the Company for its proportionate share of common overhead expenses. Such expenses totaled approximately $500,000 for the quarter ended March 31, 2010. No other charges were waived by PCM during the Company's startup period and through the quarter ended March 31, 2010. Management believes that PCM does not intend to waive recovery of common overhead costs in the future.

        Amounts due to affiliates are summarized below as of the dates presented:

	September 30, 2011		December 31, 2010
	(in thousands)
Contingent offering costs	$	2,941	$	2,941
Management fee		2,183		1,228
Expenses		8,311		1,426
	$	13,435	$	5,595

        Amounts due from affiliates totaled $7.2 million and $2.1 million at September 30, 2011 and December 31, 2010, respectively, and represent amounts receivable pursuant to loan sales to PLS and reimbursable expenses paid on the affiliates' behalf by the Company.

        Private National Mortgage Acceptance Company, LLC held 75,000 of the Company's common shares of beneficial interest at both September 30, 2011 and December 31, 2010.

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Real Estate Acquired in Settlement of Loans

9 Months Ended

Sep. 30, 2011

Real Estate Acquired in Settlement of Loans

Real Estate Acquired in Settlement of Loans

Note 9—Real Estate Acquired in Settlement of Loans

        Following is a summary of the activity in REO for the periods presented:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Balance at beginning of period		$	48,872		$	13,241		$	29,685		$	—
Purchases			914			—			2,424			1,238
Transfers from mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value			36,857			18,460			82,680			31,762
Results of REO:
	Valuation adjustments, net		(2,779	)		(645	)		(6,764	)		(502	)
	Gain on sale, net		3,131			1,249			8,291			1,441
			352			604			1,527			939
Sales proceeds			(17,089	)		(6,193	)		(46,410	)		(7,827	)
Balance at period end		$	69,906		$	26,112		$	69,906		$	26,112

        At September 30, 2011, REO totaling $13.9 million was financed under agreements to repurchase and a forward purchase agreement and $26.0 million was held in a consolidated subsidiary of the Company whose stock was pledged to secure financing of the real estate held in that subsidiary. The assets of the consolidated subsidiary are solely REO. At December 31, 2010, no REO was pledged to secure repurchase agreements.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies.

Commitments and Contingencies

Note 14—Commitments and Contingencies

        From time to time, the Company may be involved in various proceedings, claims and legal actions arising in the ordinary course of business. As of September 30, 2011, the Company was not involved in any such proceedings, claims or legal actions that would be reasonably likely to have a material adverse effect on the Company.

Mortgage Loan Commitments

        The following table summarizes the Company's outstanding contractual loan commitments as of the date presented:

		September 30, 2011
		(in thousands)
Correspondent lending:
	Commitments to purchase mortgage loans	$	319,156
Other mortgage loans:
	Commitments to purchase mortgage loans	$	337,837

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Loans Sold Under Agreements to Repurchase

9 Months Ended

Sep. 30, 2011

Loans Sold Under Agreements to Repurchase.

Loans Sold Under Agreements to Repurchase

Note 10—Loans Sold Under Agreements to Repurchase

        Following is a summary of financial information relating to loans sold under agreements to repurchase as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	345,969		$	—	$	345,969		$	—
	Unused amount(1)	$	219,031		$	—	$	219,031		$	—
Weighted-average interest rate at end of period			3.67	%		—		3.67	%		—
Weighted-average interest rate during the period(2)			3.83	%		—		3.63	%		—
Average balance of loans sold under agreements to repurchase		$	276,352		$	—	$	231,452		$	—
Maximum daily amount outstanding		$	345,969		$	—	$	345,969		$	—
Total interest expense		$	3,105		$	—	$	7,782		$	—
Fair value of loans and REO securing agreements to repurchase at period-end		$	703,051		$	—	$	703,051		$	—

(1)

The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

(2)

Weighted-average interest rate during the period excludes the effect of amortization of debt issuance costs of $398,000 and $1.4 million during the quarter and nine months ended September 30, 2011, respectively.

        The repurchase agreements collateralized by loans have an average remaining term of approximately 3.2 months at September 30, 2011.

        The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's loans sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Citibank, N.A.	$	254,226	December 8, 2011
Wells Fargo Bank, N.A.	$	76,824	February 27, 2012
Credit Suisse First Boston Mortgage Capital LLC	$	25,856	January 8, 2012

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the loans securing those agreements decreases. The Company had no margin deposits with its loan repurchase agreement counterparties at September 30, 2011 and on December 31, 2010. Margin deposits are included in Other assets in the consolidated balance sheets.

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Mortgage Loans at Fair Value and Mortgage Loans Under a Forward Purchase Agreement at Fair Value

9 Months Ended

Sep. 30, 2011

Mortgage Loans at Fair Value and Mortgage Loans Under a Forward Purchase Agreement at Fair Value

Mortgage Loans at Fair Value and Mortgage Loans Under a Forward Purchase Agreement at Fair Value

Note 8—Mortgage Loans at Fair Value and Mortgage Loans Under a Forward Purchase Agreement at Fair Value

        Mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value are comprised of all mortgage loans not acquired for immediate resale. Such loans may be sold at a later date pursuant to a management determination that such a sale represents the most advantageous liquidation strategy for the identified loan.

        Following is a summary of the distribution of the Company's mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value as of the dates presented:

		September 30, 2011				December 31, 2010
Loan Type		Fair value		Unpaid principal balance		Fair value		Unpaid principal balance
		(in thousands)
Nonperforming loans		$	678,180	$	1,310,766	$	278,008	$	521,326
Performing loans:
	Fixed		94,818		160,409		49,444		73,256
	ARM/Hybrid		74,120		124,311		31,916		54,430
	Interest rate step-up		20,914		36,068		4,813		7,831
	Balloon		148		225		69		93
			190,000		321,013		86,242		135,610
		$	868,180	$	1,631,779	$	364,250	$	656,936

        At September 30, 2011, approximately 73% of the mortgage loan portfolio consisted of mortgage loans that were originated between 2005 and 2007. Approximately 72% of the estimated fair value of the mortgage loans in this portfolio is comprised of loans with unpaid-principal-balance-to-current-property-value ratios in excess of 100% at September 30, 2011.

        The mortgage loan portfolio consists of mortgage loans originated throughout the United States with loans secured by California real estate comprising approximately 27% of the loan portfolio's estimated fair value at September 30, 2011. The mortgage loan portfolio contains loans from New York and Florida that each represent 5% or more of the portfolio's estimated fair value at September 30, 2011.

        At December 31, 2010, approximately 94% of the mortgage loan portfolio consisted of mortgage loans that were originated between 2005 and 2007. Over 67% of the estimated fair value of the mortgage loans in this portfolio was comprised of loans with unpaid-principal-balance-to-current-property-value ratios in excess of 100% at December 31, 2010. The mortgage loan portfolio consisted of mortgage loans originated throughout the United States with loans secured by California real estate comprising approximately 27% of the loan portfolio's estimated fair value at December 31, 2010. The mortgage loan portfolio contained loans from Florida, Illinois and New York that each represented 5% or more of the portfolio's estimated fair value at December 31, 2010.

        At September 30, 2011, mortgage loans in this portfolio totaling $811.4 million were either pledged to secure sales of loans under agreements to repurchase or subject to borrowings under a forward purchase agreement. At December 31, 2010, mortgage loans at fair value totaling $326.9 million either pledged to secure sales of loans under agreements to repurchase. The Company did not have mortgage loans under a forward purchase agreement at December 31, 2010.

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2011

Organization and Basis of Presentation

Organization and Basis of Presentation

Note 1—Organization and Basis of Presentation

        PennyMac Mortgage Investment Trust ("PMT" or the "Company") was organized in Maryland on May 18, 2009, and began operations on August 4, 2009, when it completed its initial offerings of common shares of beneficial interest ("shares"). The Company is a specialty finance company, which, through its subsidiaries (all of which are wholly-owned), invests primarily in residential mortgage loans and mortgage-related assets.

        The Company's primary investment objective is to maximize the value of the mortgage loans that it acquires, a substantial portion of which may be distressed and acquired at discounts to their unpaid principal balances, either through loan modification programs, special servicing and other initiatives focused on keeping borrowers in their homes, or, when necessary, through timely acquisition and liquidation of the property securing the loan. Accordingly, management has concluded that the Company operates as a single segment.

        The Company believes that it qualifies, and has elected to be taxed, as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), beginning with its taxable period ended on December 31, 2009. To maintain its tax status as a REIT, the Company plans to distribute at least 90% of its taxable income in the form of qualifying distributions to shareholders.

        The Company is externally managed by an affiliate, PNMAC Capital Management, LLC ("PCM"), an investment adviser registered with the Securities and Exchange Commission (the "SEC") that specializes in and focuses on residential mortgage loans. Under the terms of a management agreement, PCM is paid a management fee with a base component and a performance incentive component. Determination of the amount of management fees is discussed in Note 3—Transactions with Related Parties.

        The Company conducts substantially all of its operations and makes substantially all of its investments through its subsidiary, PennyMac Operating Partnership, L.P. (the "Operating Partnership"), and the Operating Partnership's subsidiaries. A subsidiary of the Company is the sole general partner, and the Company is the sole limited partner, of the Operating Partnership.

        The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the SEC's instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by U.S. GAAP for complete financial statements. The interim consolidated information should be read together with our Annual Report on Form 10-K for the year ended December 31, 2010 (the "Annual Report").

        Preparation of financial statements in compliance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.

        In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods ended September 30, 2011 are not necessarily indicative of the results for the year ending December 31, 2011.

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Earnings Per Share

9 Months Ended

Sep. 30, 2011

Earnings Per Share

Earnings Per Share

Note 4—Earnings Per Share

        Basic earnings per share is determined using net income divided by the weighted-average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common shareholders by the weighted-average shares outstanding, assuming all potentially dilutive common shares were issued. In periods in which the Company records a loss, potentially dilutive shares are excluded from the diluted loss per share calculation, as their effect on loss per share is anti-dilutive.

        During the nine months ended September 30, 2011, the Company made grants of restricted share units which entitle the recipients to receive dividends during the vesting period on a basis equivalent to the dividends paid to holders of common shares. Unvested share-based compensation awards containing nonforfeitable rights to dividends or dividend equivalents (collectively, "dividends") are participating securities and are included in the basic earnings per share calculation using the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends.

        The following table summarizes the basic and diluted earnings per share calculations for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(in thousands except per share amounts)
Basic earnings per share:
	Net income	$	20,528		$	7,729	$	44,790		$	17,134
	Effect of participating securities—share-based compensation instruments		(234	)		—		(478	)		—
	Net income attributable to common shareholders	$	20,294		$	7,729	$	44,312		$	17,134
	Weighted-average shares outstanding		27,847			16,796		25,782			16,756
	Basic earnings per share	$	0.73		$	0.46	$	1.72		$	1.02
Diluted earnings per share:
	Net income	$	20,528		$	7,729	$	44,790		$	17,134
	Weighted-average shares outstanding		27,847			16,796		25,782			16,756
	Dilutive potential common shares—shares issuable under share-based compensation plan		291			273		283			273
	Diluted weighted-average number of common shares outstanding		28,138			17,069		26,065			17,029
	Diluted earnings per common share	$	0.73		$	0.45	$	1.72		$	1.01

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Fair Value

9 Months Ended

Sep. 30, 2011

Fair Value

Fair Value

Note 5—Fair Value

        The Company's financial statements include assets and liabilities that are measured based on their estimated fair values. The application of fair value estimates may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its estimated fair value as discussed in the following paragraphs.

• Fair Value Accounting Elections

        Management identified all of its financial assets, including the short-term investments, mortgage-backed securities ("MBS") and mortgage loans, as well as its securities sold under agreements to repurchase and its mortgage servicing rights ("MSRs") relating to loans with interest rates of more than 4.5% that were acquired as a result of its correspondent lending operations to be accounted for at estimated fair value so such changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company's investment performance.

        For MSRs relating to loans with interest rates of less than or equal to 4.5% that were acquired as a result of the Company's correspondent lending operations, management has concluded that such assets present different risks to the Company than MSRs relating to loans with interest rates of more than 4.5% and therefore require a different risk management approach. Management's risk management efforts relating to these assets are aimed at moderating the effects of non-interest rate risks on fair value, such as the effect of changes in home prices on the assets' values. Management has identified these assets for accounting at the lower of amortized cost or fair value. Management's risk management efforts in connection with MSRs relating to loans with interest rates of more than 4.5% are aimed at moderating the effects of changes in interest rates on the assets' values.

        For loans sold under agreements to repurchase subject to agreements made beginning in December 2010, REO financed through agreements to repurchase beginning in June 2011 and borrowings under a forward purchase agreement beginning in July 2011, management has determined that historical cost accounting is more appropriate because under this method debt issuance costs are amortized over the term of the debt, thereby reflecting the debt issuance expense over the periods benefiting from the usage of the debt.

• Financial Statement Items Measured at Fair Value on a Recurring Basis

        Following is a summary of financial statement items that are measured at estimated fair value on a recurring basis as of the dates presented:

		September 30, 2011
		Level 1		Level 2		Level 3		Total
		(in thousands)
Assets:
	Short-term investments	$	30,743	$	—	$	—	$	30,743
	Mortgage-backed securities at fair value		—		—		86,702		86,702
	Mortgage loans acquired for sale at fair value		—		40,850		—		40,850
	Mortgage loans at fair value		—		—		715,272		715,272
	Mortgage loans under a forward purchase agreement at fair value		—		—		152,908		152,908
	Mortgage servicing rights at fair value		—		—		532		532
		$	30,743	$	40,850	$	955,414	$	1,027,007
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—	$	62,843	$	62,843
		$	—	$	—	$	62,843	$	62,843

		December 31, 2010
		Level 1		Level 2		Level 3		Total
		(in thousands)
Assets:
	Mortgage-backed securities at fair value	$	—	$	—	$	119,872	$	119,872
	Mortgage loans acquired for sale at fair value		—		3,966		—		3,966
	Mortgage loans at fair value		—		—		364,250		364,250
		$	—	$	3,966	$	484,122	$	488,088
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—	$	101,202	$	101,202
		$	—	$	—	$	101,202	$	101,202

        The Company's MBS, mortgage loans (mortgage loans at fair value and mortgage loans under a forward purchase agreement at fair value), MSRs and securities sold under agreements to repurchase were measured using Level 3 inputs.

        The following is a summary of changes in items measured using Level 3 inputs on a recurring basis for the periods presented:

		Quarter ended September 30, 2011
		Mortgage- backed securities			Mortgage loans			Mortgage servicing rights			Total
		(in thousands)
Assets:
Balance, June 30, 2011		$	82,421		$	657,223		$	180		$	739,824
Purchases			22,179			264,749			—			286,928
Repayments			(12,843	)		(52,684	)		—			(65,527	)
Accrual of unearned discounts			385			—			—			385
Transfers of mortgage loans to REO			—			(36,857	)		—			(36,857	)
Sales			(4,649	)		—			—			(4,649	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			3,210			—			3,210
Servicing received as proceeds from sales of mortgage loans			—			—			362			362
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			10,640			—			10,640
	Other factors		(791	)		21,899			(10	)		21,098
			(791	)		32,539			(10	)		31,738
Balance, September 30, 2011		$	86,702		$	868,180		$	532		$	955,414
Changes in fair value recognized during the period relating to assets still held at September 30, 2011		$	(791	)	$	24,070		$	(10	)	$	23,269

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, June 30, 2011	$	70,978
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		258,608
Repurchases		(266,743	)
Balance, September 30, 2011	$	62,843
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2011	$	—

		Quarter ended September 30, 2010
		Mortgage-backed securities			Mortgage loans			Total
		(in thousands)
Assets:
Balance, June 30, 2010		$	103,164		$	197,216		$	300,380
Purchases			52,319			72,675			124,994
Repayments			(19,787	)		(16,940	)		(36,727	)
Accrual of unearned discounts			757			—			757
Transfers of mortgage loans to REO			—			(18,460	)		(18,460	)
Sales			—			(1,960	)		(1,960	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			55			55
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			2,408			2,408
	Other factors		596			5,170			5,766
			596			7,578			8,174
Balance, September 30, 2010		$	137,049		$	240,164		$	377,213
Changes in fair value recognized during the period relating to assets still held at September 30, 2010		$	596		$	3,842		$	4,438

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, June 30, 2010	$	31,362
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		210,586
Repurchases		(125,809	)
Balance, September 30, 2010	$	116,139
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2010	$	—

		Nine months ended September 30, 2011
		Mortgage- backed securities			Mortgage loans			Mortgage servicing rights			Total
		(in thousands)
Assets:
Balance, December 31, 2010		$	119,872		$	364,250		$	—		$	484,122
Purchases			22,179			625,152			—			647,331
Repayments			(47,008	)		(107,835	)		—			(154,843	)
Accrual of unearned discounts			1,759			—			—			1,759
Transfers of mortgage loans to REO			—			(82,680	)		—			(82,680	)
Sales			(7,994	)		(2,570	)		—			(10,564	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			3,521			—			3,521
Servicing received as proceeds from sales of mortgage loans			—			—			539			539
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			23,642			—			23,642
	Other factors		(2,106	)		44,700			(7	)		42,587
			(2,106	)		68,342			(7	)		66,229
Balance, September 30, 2011		$	86,702		$	868,180		$	532		$	955,414
Changes in fair value recognized during the period relating to assets still held at September 30, 2011		$	(2,106	)	$	48,336		$	(7	)	$	46,223

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, December 31, 2010	$	101,202
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		1,081,542
Repurchases		(1,119,901	)
Balance, September 30, 2011	$	62,843
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2011	$	—

		Nine months ended September 30, 2010
		Mortgage- backed securities			Mortgage loans			Total
		(in thousands)
Assets:
Balance, December 31, 2009		$	83,771		$	26,046		$	109,817
Purchases			89,217			270,757			359,974
Repayments			(38,703	)		(40,797	)		(79,500	)
Accrual of unearned discounts			2,318			—			2,318
Transfers of mortgage loans to REO			—			(31,762	)		(31,762	)
Sales			—			(2,851	)		(2,851	)
Addition of unpaid interest to mortgage loan balances in loan modifications			—			74			74
Changes in fair value included in income arising from:
	Changes in instrument-specific credit risk		—			3,190			3,190
	Other factors		446			15,507			15,953
			446			18,697			19,143
Balance, September 30, 2010		$	137,049		$	240,164		$	377,213
Changes in fair value recognized during the period relating to assets still held at September 30, 2010		$	446		$	9,153		$	9,599

	Securities sold under agreements to repurchase
	(in thousands)
Liabilities:
Balance, December 31, 2009	$	—
Changes in fair value included in income		—
Sales of securities under agreements to repurchase		241,948
Repurchases		(125,809	)
Balance, September 30, 2010	$	116,139
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2010	$	—

        Following are the fair values and related principal amounts due upon maturity of mortgage loans accounted for under the fair value option as of the dates presented:

	September 30, 2011
	Fair value		Principal amount due upon maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	230,850	$	360,115	$	(129,265	)
90 or more days delinquent(1)		678,180		1,310,766		(632,586	)
	$	909,030	$	1,670,881	$	(761,851	)

	December 31, 2010
	Fair value		Principal amount due upon maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	90,208	$	139,475	$	(49,267	)
90 or more days delinquent(1)		278,008		521,326		(243,318	)
	$	368,216	$	660,801	$	(292,585	)

(1)

Loans delinquent 90 or more days are placed on nonaccrual status and previously accrued interest is reversed.

        Following are the changes in fair value included in current period income by consolidated statement of income line item for financial statement items accounted for under the fair value option:

		Changes in fair value included in current period income Quarter ended September 30,
		2011													2010
		Interest income		Gain (loss) on investments			Net gain (loss) on mortgage loans acquired for sale		Net servicing fee income			Total			Interest income		Gain (loss) on investments		Net gain (loss) on mortgage loans acquired for sale			Total
		(in thousands)
Assets:
	Short-term money market investments	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—
	Mortgage-backed securities at fair value		385		(791	)		—		—			(406	)		757		596		—			1,353
	Mortgage loans acquired for sale at fair value		—		—			84		—			84			—		—		(17	)		(17	)
	Mortgage loans at fair value		—		32,311			—		—			32,311			—		7,578		—			7,578
	Mortgage servicing rights at fair value		—		—			—		(10	)		(10	)		—		—		—			—
		$	385	$	31,520		$	84	$	(10	)	$	31,979		$	757	$	8,174	$	(17	)	$	8,914
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—
		$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—

		Changes in fair value included in current period income Nine months ended September 30,
		2011													2010
		Interest income		Gain (loss) on investments			Net gain (loss) on mortgage loans acquired for sale		Net servicing fee income			Total			Interest income		Gain (loss) on investments		Net gain (loss) on mortgage loans acquired for sale		Total
		(in thousands)
Assets:
	Short-term money market investments	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—
	Mortgage-backed securities at fair value		1,759		(2,106	)		—		—			(347	)		2,318		446		—		2,764
	Mortgage loans acquired for sale at fair value		—		—			207		—			207			—		—		11		11
	Mortgage loans at fair value		—		65,594			—		—			65,594			—		18,677		—		18,677
	Mortgage servicing rights at fair value		—		—			—		(7	)		(7	)		—		—		—		—
		$	1,759	$	63,488		$	207	$	(7	)	$	65,447		$	2,318	$	19,123	$	11	$	21,452
Liabilities:
	Securities sold under agreements to repurchase at fair value	$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—
		$	—	$	—		$	—	$	—		$	—		$	—	$	—	$	—	$	—

• Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

  Real Estate Acquired in Settlement of Loans

        The Company measures its investment in REO at management's estimates of the respective properties' fair values less cost to sell on a nonrecurring basis. The value of the REO is initially established as the lesser of (a) either the fair value of the loan at the date of transfer or the purchase price of the property, or (b) the fair value of the real estate less estimated costs to sell as of the date of transfer. REO may be subsequently revalued due to the Company receiving greater access to the property, the property being held for an extended period or management receiving indications that the property's value may not be supported by developing market conditions. Any subsequent change in fair value to a level that is less than or equal to the value at which the property was initially recorded is recognized in Results of real estate acquired in settlement of loans in the consolidated statements of income.

        Real estate acquired in settlement of loans is summarized below:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Carrying value at period end		$	69,906		$	26,112		$	69,906		$	26,112
Transfers from mortgage loans during the period		$	36,857		$	18,460		$	82,680		$	31,762
Remeasurements of REO at fair value during the period:
	Fair value after remeasurement	$	29,008		$	2,994		$	27,627		$	3,059
	Net remeasurement losses recognized in Results of real estate acquired in settlement of loans	$	(2,740	)	$	(562	)	$	(4,513	)	$	(766	)

• Mortgage Servicing Rights at Lower of Amortized Cost or Fair Value

        The Company evaluates its MSRs at lower of amortized cost or fair value with reference to the assets' fair value. For purposes of performing its MSR impairment evaluation, the Company stratifies its MSR at lower of amortized cost or fair value based on the loans' underlying interest rates. Loans are grouped into note rate pools of fifty basis points for note rates between 3% and 4.5% and a single pool for note rates below 3%. If the fair value of MSRs in any of the note rate pools is below the amortized cost of the MSRs for that pool reduced by any existing valuation allowance, those MSRs are impaired.

        When MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted using a valuation allowance. If the value of the MSRs subsequently increases, the restoration of value is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a reduction in the valuation allowance.

        Management periodically reviews the various impairment strata to determine whether the value of the impaired MSRs in a given stratum is likely to recover. When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance. No impairment was recorded during the three and nine month periods ended September 30, 2011.

• Fair Value of Financial Instruments Carried at Amortized Cost

        In November and December 2010 and in June, July and September 2011, the Company entered into new debt facilities to finance its investment in nonperforming loans and REO in the form of repurchase agreements and borrowings under a forward purchase agreement. As discussed in Fair Value Accounting Elections above, management designated these agreements to be accounted for at amortized cost. Management has concluded that the estimated fair value of loans sold under agreements to repurchase, REO financed under agreements to repurchase and borrowings under a forward purchase agreement approximates the agreements' carrying values due to the agreements' short terms and variable interest rates.

• Valuation Techniques

        The following describes the methods used in estimating the fair values of Level 2 and Level 3 financial statement items:

• Mortgage-Backed Securities

        Non-Agency MBS are categorized as "Level 3" financial statement items. Fair value of non-Agency MBS is estimated using broker indications of value. Agency MBS refers to securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae") (Freddie Mac and Fannie Mae are each referred to as an "Agency" and, collectively, as the "Agencies"). For indications of value received, PCM's Capital Markets and Valuation staff reviews the price indications provided by non-affiliate brokers for completeness, accuracy and consistency across all similar bonds managed by PCM. Bond-level analytics such as yield, weighted average life and projected prepayment and default speeds of the underlying collateral are computed. The reasonableness of the brokers' indications of value and of changes in value from period to period is evaluated in light of the analytical review performed and considering market conditions. The review of the Capital Markets and Valuation staff is reported to PCM's Valuation Committee as part of their review and approval of monthly valuation results. PCM does not intend to adjust its fair value estimates to amounts different than the brokers' indications of value.

        Following is a quantitative summary of key inputs used by PCM's valuation staff to evaluate the reasonableness of the fair value of MBS:

		Range (Weighted Average)
Security Class	Key Inputs(1)	September 30, 2011	December 31, 2010
Non-Agency subprime	Discount rate	3.6% - 18.6%	2.9% - 17.3%
		(9.8)%	(4.5)%
	Prepayment speed(2)	0.2% - 10.4%	0.1% - 5.3%
		(4.8)%	(1.5)%
	Default speed(3)	4.6% - 15.1%	3.6% - 19.2%
		(12.2)%	(10.5)%
	Collateral remaining loss percentage(4)	23.7% - 65.4%	12.1% - 56.6%
		(43.3)%	(36.9)%
Non-Agency Alt-A	Discount rate	5.4% - 30.9%	5.0% - 11.4%
		(6.7)%	(7.1)%
	Prepayment speed(2)	1.6% - 10.5%	0.9% - 10.1%
		(8.5)%	(6.7)%
	Default speed(3)	3.6% - 15.6%	4.2% - 21.2%
		(12.3)%	(12.3)%
	Collateral remaining loss percentage(4)	7.9% - 38.8%	10.5% - 41.1%
		(24.3)%	(22.8)%
Non-Agency prime jumbo	Discount rate	6.4% - 6.4%	2.7% - 2.7%
		(6.4)%	(2.7)%
	Prepayment speed(2)	14.5% - 14.5%	14.7% - 14.7%
		(14.5)%	(14.7)%
	Default speed(3)	1.4% - 1.4%	1.5% - 1.5%
		(1.4)%	(1.5)%
	Collateral remaining loss percentage(4)	0.8% - 0.8%	0.6% - 0.6%
		(0.8)%	(0.6)%

(1)

Key inputs are those used to evaluate broker indications of value.

(2)

Prepayment speed is measured using 1 year Voluntary Conditional Prepayment Rate ("CPR").

(3)

Default speed is measured using 1 year Constant Default Rate ("CDR").

(4)

The projected future losses on the loans in the collateral groups paying to each bond as a percentage of the current balance of the loans.

        Interest income on MBS is recognized over the life of the security using the interest method and is included in the consolidated statement of income under the caption Interest income—mortgage-backed securities. Changes in fair value arising from amortization of purchase premiums and accrual of unearned discounts are recognized as a component of interest income.

• Mortgage Loans

        Fair value of mortgage loans is estimated based on whether the mortgage loans are saleable into active markets with established counterparties and transparent pricing:

• •

  Mortgage loans that are saleable into active markets, comprised of the Company's mortgage loans acquired for sale at fair value, are categorized as "Level 2" financial statement items and their fair values are estimated using their quoted market or contracted price or market price equivalent.

  •

  Loans that are not saleable into active markets are categorized as "Level 3" financial statement items, and their fair values are estimated using a discounted cash flow valuation model. Inputs to the model include current interest rates, loan amount, payment status and property type, and forecasts of future interest rates, home prices, prepayment speeds, default and loss severities. The valuation process includes the computation by stratum of loan population and a review for reasonableness of various measures such as weighted average life, projected prepayment and default speeds, and projected default and loss percentages. The valuation staff computes the impact on the valuation of changes in input variables such as interest rates, home prices, and delinquency status in order to assess the reasonableness of changes in the loan valuation.

• • Changes in fair value attributable to changes in instrument-specific credit risk are measured by the change in the respective loan's delinquency status at period-end from the later of the beginning of the period or acquisition date.

        Following is a quantitative summary of key inputs used in the valuation of mortgage loans at fair value:

	Range (Weighted Average)
Key Inputs	September 30, 2011	December 31, 2010
Discount rate	9.1% - 20.7%	9.1% - 18.7%
	(14.5)%	(13.8)%
Twelve-month projected housing price index change	-8.5% - 10.6%	-18.4% - 10.7%
	(-1.2)%	(-2.4)%
Prepayment speed(1)	0.3% - 6.4%	0.2% - 7.5%
	(2.0)%	(2.8)%
Total prepayment speed (Life Total CPR)(2)	0.6% - 35.8%	0.4% - 38.6%
	(28.1)%	(31.9)%

(1)

Prepayment speed is measured using Life Voluntary Conditional Prepayment Rate.

(2)

Total prepayment speed is measured using Life Total Conditional Prepayment Rate.

        Management incorporates lack of liquidity into its fair value estimates based on the type of asset or liability measured and the valuation method used. For example, for mortgage loans where the significant inputs have become unobservable due to illiquidity in the markets for distressed mortgage loans or non-Agency, non-conforming mortgage loans, a discounted cash flow technique is used to estimate fair value. This technique incorporates forecasting of expected cash flows discounted at an appropriate market discount rate that is intended to reflect the lack of liquidity in the market.

        Interest income on loans is recognized over the life of the loan using its contractual interest rate and is included in the consolidated statements of income under the caption Interest income—mortgage loans. Accrual of interest earned but not yet collected is suspended and all previously accrued interest is reversed for loans when they become 90 days delinquent, or when, in management's opinion, a full recovery of income and principal becomes doubtful. Accrual of interest is resumed when the loan becomes contractually current.

• Real Estate Acquired in Settlement of Loans

        REO is measured based on its fair value on a nonrecurring basis and is categorized as a "Level 3" financial statement item. Fair value of REO is estimated using a current estimate of value from a broker's price opinion or a full appraisal. REO values are reviewed by PCM's staff appraisers when the Company obtains multiple indications of value and there is a significant discrepancy between the values received. PCM's staff appraisers will attempt to resolve the discrepancy between the indications of value. In circumstances where the appraisers are not able to generate adequate data to support a value conclusion, the staff appraisers will order an additional appraisal to resolve the property's value. Changes in fair value of REO are included in the consolidated statements of income under the caption Results of real estate acquired in settlement of loans.

• Mortgage Servicing Rights

        MSRs are categorized as "Level 3" financial statement items. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting servicing cash flows discounted at a rate that management assumes market participants would use in their determinations of value. The key assumptions used in the estimation of the fair value of MSRs include prepayment and default rates of the underlying loans, the applicable discount rate, and cost to service loans. The results of the estimates of fair value of MSRs are reported to PCM's Valuation Committee as part of their review and approval of monthly valuation results. Changes in the fair value of MSRs are included in the consolidated statements of income under the caption Net servicing fee income.

        Following is a quantitative summary of key inputs used in the valuation of mortgage servicing rights as of September 30, 2011:

	Range (Weighted Average)
Key Inputs	At Fair Value	At Amortized Cost
Discount rate	9.2% - 17.9%	9.2% - 9.5%
	(10.7)%	(9.4)%
Prepayment speed(1)	6.1% - 54.4%	5.6% - 12.6%
	(13.1)%	(6.7)%
Average life (in years)	1.9 - 8.0	3.7 - 8.1
	(5.8)	(7.6)
Cost of servicing	$68 - $140	$68 - $68
	$(81)	$(68)

(1)

Prepayment speed is measured using CPR.

        The Company had no mortgage servicing rights as of December 31, 2010.

• Securities Sold Under Agreements to Repurchase

        Fair value of securities sold under agreements to repurchase is based on the accrued cost of the agreements, which approximates fair value, due to the agreements' short maturities.

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 02, 2011
Document and Entity Information
Entity Registrant Name	PennyMac Mortgage Investment Trust
Entity Central Index Key	0001464423
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,874,200
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

XML

Borrowings Under a Forward Purchase Agreement

9 Months Ended

Sep. 30, 2011

Borrowings Under a Forward Purchase Agreement

Borrowings Under a Forward Purchase Agreement

Note 13—Borrowings Under a Forward Purchase Agreement

        Following is a summary of financial information relating to borrowings under a forward purchase agreement as of and for the periods presented:

		Quarter ended September 30,					Nine months ended September 30,
		2011			2010		2011			2010
		(dollar amounts in thousands)
Period end:
	Balance	$	163,755		$	—	$	163,755		$	—
	Interest rate		3.87	%		—		3.87	%		—
Weighted-average interest rate during the period			4.48	%		—		4.48	%		—
Average balance of borrowings under a forward purchase agreement		$	146,708		$	—	$	49,440		$	—
Maximum daily amount outstanding		$	173,398				$	173,398
Total interest expense		$	1,680		$	—	$	1,680		$	—
Fair value of underlying loans and REO at period-end		$	162,706		$	—	$	162,706		$	—

        The forward purchase agreement has an average term of approximately 8.9 months at September 30, 2011.

        At September 30, 2011, there was no amount at risk (the fair value of the mortgage loans pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's borrowings under a forward purchase agreement.

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Mortgage-Backed Securities at Fair Value

9 Months Ended

Sep. 30, 2011

Mortgage-Backed Securities at Fair Value

Mortgage-Backed Securities at Fair Value

Note 6—Mortgage-Backed Securities at Fair Value

        Investments in MBS were as follows as of the dates presented:

		September 30, 2011
				Credit rating
		Total		AAA		AA		A		BBB		Non-investment grade		Not rated		Market Yield
		(in thousands)
Security collateral type:
	Non-Agency subprime	$	70,242	$	—	$	—	$	—	$	15,671	$	54,571	$	—		9.90	%
	Non-Agency Alt-A		10,123		483		5,599		—		—		4,041		—		6.65	%
	Non-Agency prime jumbo		6,337		—		6,337		—		—		—		—		6.41	%
		$	86,702	$	483	$	11,936	$		$	15,671	$	58,612	$	—		9.28	%

		December 31, 2010
				Credit rating
		Total		AAA		AA		A		BBB		Non-investment grade		Not rated		Market Yield
		(in thousands)
Security collateral type:
	Non-Agency subprime	$	93,783	$	382	$	5,627	$	2,134	$	2,532	$	79,138	$	3,970		4.50	%
	Non-Agency Alt-A		15,824		649		6,750		—		14		8,411		—		7.10	%
	Non-Agency prime jumbo		10,265		—		10,265		—		—		—		—		2.70	%
		$	119,872	$	1,031	$	22,642	$	2,134	$	2,546	$	87,549	$	3,970		(4.69	)%

        All of the Company's MBS had remaining contractual maturities of more than ten years at September 30, 2011 and at December 31, 2010. At September 30, 2011, the Company had pledged $69.5 million of its MBS and at December 31, 2010, the Company had pledged all of its MBS to secure agreements to repurchase.

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Net Gain on Mortgage Loans Acquired For Sale

9 Months Ended

Sep. 30, 2011

Net Gain on Mortgage Loans Acquired For Sale

Net Gain on Mortgage Loans Acquired For Sale

Note 16—Net Gain on Mortgage Loans Acquired For Sale

        Net gain (loss) on mortgage loans acquired for sale is summarized below for the periods presented:

		Quarter ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
		(in thousands)
Cash gain (loss) on sale:
	Loan proceeds	$	(63	)	$	(28	)	$	(73	)	$	(23	)
	Hedging activities		(929	)		—			(1,013	)		20
			(992	)		(28	)		(1,086	)		(3	)
Mortgage servicing rights received as proceeds on sale			466			—			643			—
Provision for representations and warranties on loans sold			(21	)		(5	)		(32	)		(5	)
Change in fair value relating to loans and hedging instruments acquired for sale at period-end:
	Loans		1,067			60			1,151			63
	Hedging instruments		(436	)		(44	)		(469	)		(44	)
			631			16			682			19
		$	84		$	(17	)	$	207		$	11

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities
Net income	$ 44,790	$ 17,134
Adjustments to reconcile net income to net cash used by operating activities:
Net loss (gain) on mortgage backed securities	2,106	(446)
Net gain on mortgage loans	(65,594)	(18,677)
Accrual of unearned discounts on mortgage backed securities	(1,759)	(2,318)
Net gain on mortgage loans acquired for sale	(207)	(11)
Results of real estate acquired in settlement of loans	(1,527)	(972)
Change in fair value and amortization of mortgage servicing rights	7
Amortization of credit facility commitment fees	1,142
Accrual of costs related to forward purchase agreement	2,222
Share based compensation expense	2,812	1,589
Purchases of mortgage loans acquired for sale	(294,410)	(27,696)
Sales of mortgage loans acquired for sale	257,060	22,984
Decrease (increase) in principal and interest collections receivable	1,529	(16,077)
Increase in Principal and interest collections receivable under a forward purchase agreement	(9,735)
Increase in interest receivable	(4,675)	(337)
Increase in due from affiliates	(5,088)	(100)
(Increase) decrease in other assets	(8,103)	(3,462)
Decrease increase in accounts payable and accrued liabilities	(10,764)	255
Increase in payable to affiliates	7,840	449
Increase in income taxes payable	1,831
Net cash used by operating activities	(80,523)	(27,685)
Cash flows from investing activities
Net (increase) decrease in short-term investments	(30,743)	213,628
Purchases of mortgage backed securities at fair value	(4,974)	(89,217)
Repayments of mortgage backed securities at fair value	47,008	38,703
Sales of mortgage backed securities at fair value	7,994
Purchases of mortgage loans at fair value	(453,309)	(270,757)
Repayments of mortgage loans at fair value	87,795	40,797
Sales of mortgage loans at fair value	2,570	2,851
Repayments of mortgage loans under forward purchase agreement at fair value	20,040
Purchases of real estate acquired in settlement of loans	(1,510)	(1,238)
Sales of real estate acquired in settlement of loans	46,410	7,827
Decrease (Incresae) in margin deposits	735
Net cash used by investing activities	(277,984)	(57,406)
Cash flows from financing activities
Sales of loans under agreements to repurchase	516,522
Repurchases of loans sold under agreements to repurchase	(317,975)
Sales of securities under agreements to repurchase	1,081,542	241,948
Repurchases of securities sold under agreements to repurchase	(1,119,901)	(125,809)
Repayment of borrowings under a forward purchase agreement	(11,115)
Sales of real estate acquired in settlement of loans financed under agreements to repurchase	17,108
Repurchases of real estate acquired in settlement of loans financed under agreements to repurchase	(4,294)
Proceeds from issuance of common shares	197,162
Payment of underwriting and offering costs	(8,404)	(150)
Payment of dividends	(25,610)	(5,891)
Net cash provided by financing activities	325,035	110,098
Net (decrease) increase in cash	(33,472)	25,007
Cash at beginning of period	45,447	54
Cash at end of period	$ 11,975	$ 25,061

XML

Share-Based Compensation Plan

9 Months Ended

Sep. 30, 2011

Share-Based Compensation Plan

Share-Based Compensation Plan

Note 17—Share-Based Compensation Plan

        The Company's equity incentive plan allows for grants of equity-based awards up to a total of 8% of PMT's issued and outstanding shares on a diluted basis at the time of the award. Restricted share units have been awarded to trustees and officers of the Company and to employees of PCM and its affiliates at no cost to the grantees. Such awards generally vest over a one- to four-year period. Expense relating to awards is included in the consolidated statements of income under the caption Compensation.

        The table below summarizes restricted share unit activity and compensation expense for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(in thousands, except share data)
Number of shares:
Outstanding at beginning of period		606,320			371,210			272,984			374,810
Granted		—			—			340,500			23,600
Vested		(82,811	)		(97,026	)		(88,711	)		(97,026	)
Canceled		(14,200	)		(1,200	)		(15,464	)		(28,400	)
Outstanding at end of period		509,309			272,984			509,309			272,984
Expense recorded during the period	$	1,148		$	368		$	2,812		$	1,589
Unamortized compensation cost at period-end	$	4,106
At September 30, 2011:
Weighted average grant date fair value per share	$	14.66
Shares available for future awards(1)		1,762,000

(1)

Based on shares outstanding as of September 30, 2011. Total shares available for future awards may be adjusted in accordance with the equity incentive plan based on future issuances of PMT's shares as described above.

XML

Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2011

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 19—Supplemental Cash Flow Information

		Nine months ended September 30,
		2011		2010
		(in thousands)
Income taxes paid		$	3,841	$	2,521
Interest paid		$	9,249	$	123
Non-cash investing activities:
	Transfer of mortgage loans to REO	$	82,680	$	31,762
	Addition of unpaid interest to mortgage loan balances in loan modifications	$	3,521	$	74
	Receipt of MSRs as proceeds from sales of loans	$	643	$	—
	Purchase of mortgage loans financed through a forward purchase agreement	$	171,796	$	—
	Purchase of REO financed through a forward purchase agreement	$	914	$	—
	Unsettled purchases of MBS	$	17,205	$	—
Non-cash financing activities:
	Purchase of mortgage loans financed through a forward purchase agreement	$	171,796	$	—
	Purchase of REO financed through a forward purchase agreement	$	914	$	—

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Concentration of Risks

9 Months Ended

Sep. 30, 2011

Concentration of Risks

Concentration of Risks

Note 2—Concentration of Risks

        As discussed in Note 1—Organization and Basis of Presentation above, PMT's operations and investing activities are centered in real estate-related assets, a substantial portion of which are distressed at acquisition. Because of the Company's investment strategy, many of the mortgage loans in its targeted asset class are purchased at discounts reflecting their distressed state or perceived higher risk of default, as well as a greater likelihood of collateral documentation deficiencies. PCM validates key information provided by the sellers that is necessary to determine the value of the acquired asset. A substantial portion of the non-correspondent lending loans purchased by the Company has been acquired from or through one or more subsidiaries of Citigroup Inc.

        Through its management agreement with PCM and its loan servicing agreements with its loan servicers, including an affiliate, PennyMac Loan Services, LLC ("PLS"), PMT works with borrowers to perform loss mitigation activities. Such activities include the use of loan modification programs (such as the U.S. Departments of the Treasury and Housing and Urban Development's Home Affordable Modification Program, or HAMP) and workout options that PCM believes have the highest probability of successful resolution for both borrowers and PMT. Loan modification or resolution may include PMT accepting a reduction of the principal balances of certain mortgage loans in its investment portfolio. When loan modifications and other efforts are unable to cure distressed loans, the Company's objective is to effect timely acquisition and liquidation of the property securing the mortgage loan.

        Because of the Company's investment focus, PMT is exposed, to a greater extent than traditional mortgage investors, to the risks that borrowers may be in economic distress and/or may have become unemployed, bankrupt or otherwise unable or unwilling to make payments when due, and to the effects of fluctuations in the residential real estate market on the performance of its investments. Factors influencing these risks include, but are not limited to:

• •

  changes in the overall economy, unemployment rates and residential real estate values in the markets where the properties securing the Company's mortgage loans are located;

  •

  PCM's ability to identify, and the Company's loan servicers' ability to execute, optimal resolutions of problem mortgage loans;

  •

  the accuracy of valuation information obtained during the Company's due diligence activities;

  •

  PCM's ability to effectively model, and to develop appropriate model assumptions that properly anticipate, future outcomes;

  •

  the level of government support for problem loan resolution and the effect of current and future proposed and enacted legislative and regulatory changes on the Company's ability to effect cures or resolutions to distressed loans; and

  •

  regulatory, judicial, and legislative support of the foreclosure process, and the resulting impact on the Company's ability to acquire and liquidate the real estate securing its portfolio of distressed mortgage loans in a timely manner or at all.

        Due to these uncertainties, there can be no assurance that risk management activities identified and executed on PMT's behalf will prevent significant losses arising from the Company's investments in real estate-related assets.

        On July 12, 2011, the Company entered into a forward purchase agreement with Citigroup Global Markets Realty Corp. ("CGM"), a subsidiary of Citigroup Inc., to purchase certain nonperforming residential mortgage loans and residential real property acquired in settlement of loans (collectively, the "CGM Assets"). The CGM Assets were acquired by CGM from an unaffiliated money-center bank. The initial purchase price under the forward commitment is $172.7 million. Subsequent adjustments may increase the purchase price to $174.4 million based on the date the purchase is settled. The Company also pays CGM a cost of carry on the CGM Assets pending purchase through the date such CGM Assets are ultimately acquired. The Company recognized the assets subject to the transaction and the related liability. The CGM Assets are serviced by PLS.

        The CGM Assets are included on the Company's consolidated balance sheet as Mortgage loans under a forward purchase agreement at fair value and the related liability is included as Borrowings under a forward purchase agreement. The CGM Assets are being held by CGM within a separate trust entity deemed a variable interest entity. The Company's interest in the CGM Assets is deemed to be contractually segregated from all other interests in the trust as a silo. The silo consists of the CGM Assets and its related liability. The Company directs all of the activities that drive the economic results of the CGM Assets. All of the changes in the fair value and cash flows of the CGM Assets are attributable solely to the Company, and such cash flows can only be used to settle the related liability.

        As a result of consolidating the silo, the consolidated statements of income of the Company include net gain on mortgage loans of $10.0 million, interest income on mortgage loans of $625,000, interest expense on borrowings of $1.7 million and loan servicing fees expense of $648,000 for the three and nine months ended September 30, 2011. The Company received repayments of mortgage loans totaling $20.0 million and repaid borrowings under the forward purchase agreement totaling $11.1 million during the three and nine months ended September 30, 2011. The Company has no other variable interests in the trust entity, or other exposure to the creditors of the trust entity which could expose the Company to loss.

        Including the CGM Assets, the Company purchased $627.5 million and $272.0 million at fair value of mortgage loans and real estate acquired in settlement of loans ("REO") for its investment portfolio during the nine months ended September 30, 2011 and 2010, respectively. Of those totals, $556.8 million and $260.5 million, respectively, were purchased from or through one or more subsidiaries of Citigroup Inc.

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Securities Sold Under Agreements to Repurchase at Fair Value

9 Months Ended

Sep. 30, 2011

Securities Sold Under Agreements to Repurchase at Fair Value

Securities Sold Under Agreements to Repurchase at Fair Value

Note 11—Securities Sold Under Agreements to Repurchase at Fair Value

        Following is a summary of financial information relating to securities sold under agreements to repurchase at fair value as of and for the periods presented:

	Quarter ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(dollar amounts in thousands)
Period-end balance	$	62,843		$	116,139		$	62,843		$	116,139
Weighted-average interest rate at end of period		0.97	%		1.36	%		0.97	%		1.36	%
Weighted-average interest rate during the period		0.96	%		1.45	%		1.14	%		1.45	%
Average balance of securities sold under agreements to repurchase	$	65,364		$	67,642		$	80,020		$	22,795
Maximum daily amount outstanding	$	70,978		$	121,047		$	101,202		$	121,047
Total interest expense	$	161		$	251		$	692		$	251
Fair value of securities securing agreements to repurchase at period-end	$	69,500		$	137,049		$	69,500		$	137,049

        The repurchase agreements collateralized by securities have an average remaining term of 12 days. All securities underlying repurchase agreements are held by the buyer. All agreements collateralized by MBS are to repurchase the same or substantially identical securities.

        The amount at risk (the fair value of the securities pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's securities sold under agreements to repurchase is summarized by counterparty below as of September 30, 2011:

Counterparty	Amount at risk		Weighted average repurchase agreement maturity
	(in thousands)
Wells Fargo Bank, N.A.	$	9,687		October 11, 2011

        The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value of the MBS securing those agreements decreases. As of September 30, 2011 and December 31, 2010, the Company had $3.0 million and $4.8 million, respectively, on deposit with its securities repurchase agreement counterparties. Margin deposits are included in Other assets in the consolidated balance sheets.

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Shareholders' Equity

9 Months Ended

Sep. 30, 2011

Shareholders' Equity

Shareholders' Equity

Note 15—Shareholders' Equity

        On February 16, 2011, the Company issued and sold 9,500,000 common shares in an underwritten public offering at a price of $18 per share, for net proceeds of approximately $163.8 million after the underwriting discount and estimated offering expenses and the reimbursement of certain expenses. On March 3, 2011, the Company issued and sold an additional 1,425,000 common shares at a price of $18 per share pursuant to the exercise of an over-allotment option by the public offering's underwriters and received $24.6 million of proceeds after the underwriting discount and reimbursement of certain expenses.

        On November 19, 2010, the Company entered into a Controlled Equity Offering Sales Agreement (the "2010 Sales Agreement") with Cantor Fitzgerald & Co. During the nine months ended September 30, 2011, the Company sold a total of 28,500 of its common shares under the 2010 Sales Agreement at a weighted average price of $18.34 per share, providing net proceeds to the Company of approximately $512,000, net of sales commissions. The sales agent received a total of approximately $10,000, which represents an average commission of approximately 2.0% of the gross sales price.

        As more fully described in the Company's Annual Report, certain of the underwriting costs incurred in the Company's IPO were paid on PMT's behalf by PCM and a portion of the underwriting discount was deferred by agreement with the underwriters of the offering. Reimbursement to PCM and payment to the underwriters of the deferred underwriting discount are both contingent on PMT's performance during any full four calendar quarter period during the 24 full calendar quarters after the date of the completion of its IPO, August 4, 2009. If PMT meets the specified performance levels during any full four calendar quarter period during the 24-quarter period, the Company will reimburse PCM approximately $2.9 million of underwriting costs paid by PCM on the offering date and pay the underwriters approximately $5.9 million in deferred underwriting discount. If this requirement is not satisfied by the end of such 24-quarter period, the Company's obligation to reimburse PCM and make the conditional payment of the underwriting discount will terminate. Management has concluded that this contingency is probable of being met during the 24-quarter period and has recognized a liability for reimbursement to PCM and payment of the contingent underwriting discount as a reduction of additional paid-in capital.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
CONSOLIDATED BALANCE SHEETS
Common shares, authorized shares	500,000,000	500,000,000
Common shares, par value (in dollars per share)	$ 0.01	$ 0.01
Common shares, issued shares	27,874,554	16,832,343
Common shares, outstanding shares	27,874,554	16,832,343