10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

☐ 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: 001-38727

PennyMac Financial Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware	83-1098934
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

3043 Townsgate Road, Westlake Village, California	91361
(Address of principal executive offices)	(Zip Code)

(818) 224-7442

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	PFSI	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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 May 4, 2021
Common Stock, $0.0001 par value	66,734,198

PENNYMAC FINANCIAL SERVICES, INC.

FORM 10-Q

March 31, 2021

TABLE OF CONTENTS

		Page
	Special Note Regarding Forward-Looking Statements	3
PART I. FINANCIAL INFORMATION		6
Item 1.	Financial Statements (Unaudited):	6
	Consolidated Balance Sheets	6
	Consolidated Statements of Income	7
	Consolidated Statements of Changes in Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4.	Controls and Procedures	76
PART II. OTHER INFORMATION		77
Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	79

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“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 the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021.

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

● our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, and pandemics, such as COVID-19;

● failure to modify, resell or refinance early buyout loans and or defaults of early buyout loans beyond our expectations;

● the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate;

● lawsuits or governmental actions if we do not comply with the laws and regulations applicable to our businesses;

● the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau (“CFPB”) and its enforcement of these regulations;

● our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines;

● changes to government mortgage modification programs;

● foreclosure delays and changes in foreclosure practices;

● the licensing and operational requirements of states and other jurisdictions applicable to our businesses, to which our bank competitors are not subject;

● our ability to manage third-party service providers and vendors and their compliance with laws, regulations and investor requirements;

3

● changes in macroeconomic and U.S. real estate market conditions;

● difficulties inherent in growing loan production volume;

● difficulties inherent in adjusting the size of our operations to reflect changes in business levels;

● maintaining sufficient capital and liquidity to support business growth including compliance with financial covenants;

● changes in prevailing interest rates;

● our substantial amount of indebtedness;

● increases in loan delinquencies and defaults;

● our reliance on PennyMac Mortgage Investment Trust (“PMT”) as a significant source of financing for, and revenue related to, our mortgage banking business;

● our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances;

● our exposure to counterparties that are unwilling or unable to honor contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans;

● our ability to realize the anticipated benefit of potential future acquisitions of mortgage servicing rights (“MSRs”);

● our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances;

● decreases in the returns on the assets that we select and manage for our clients, and our resulting management and incentive fees;

● the extensive amount of regulation applicable to our investment management segment;

● conflicts of interest in allocating our services and investment opportunities among ourselves and PMT;

● the effect of public opinion on our reputation;

● our recent growth;

● our ability to effectively identify, manage, monitor and mitigate financial risks;

● our initiation of new business activities or expansion of existing business activities;

● our ability to detect misconduct and fraud;

● our ability to effectively deploy new information technology applications and infrastructure;

● our ability to mitigate cybersecurity risks and cyber incidents;

● our ability to pay dividends to our stockholders; and

● our organizational structure and certain requirements in our charter documents.

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, results of operations and/or financial condition.

4

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.

5

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31,		December 31,
	2021		2020
	(in thousands, except share amounts)
ASSETS
Cash	$	441,870	$	532,716
Short-term investments at fair value		24,850		15,217
Loans held for sale at fair value (includes $13,267,667 and $11,457,678 pledged to creditors)		13,385,789		11,616,400
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		—		80,862
Derivative assets		530,852		711,238
Servicing advances, net (includes valuation allowance of $156,315 and $181,433; $373,110 and $413,484 pledged to creditors)		550,150		579,528
Mortgage servicing rights at fair value (includes $3,265,073 and $2,577,964 pledged to creditors)		3,268,910		2,581,174
Operating lease right-of-use assets		74,795		74,934
Investment in PennyMac Mortgage Investment Trust at fair value		1,470		1,105
Receivable from PennyMac Mortgage Investment Trust		68,644		87,005
Loans eligible for repurchase		12,312,393		14,625,447
Other (includes $114,342 and $166,418 pledged to creditors)		638,257		692,169
Total assets	$	31,297,980	$	31,597,795
LIABILITIES
Assets sold under agreements to repurchase	$	10,848,477	$	9,654,797
Mortgage loan participation purchase and sale agreements		518,747		521,477
Obligations under capital lease		10,468		11,864
Notes payable secured by mortgage servicing assets		1,296,285		1,295,840
Unsecured senior notes		1,288,198		645,820
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		—		131,750
Derivative liabilities		68,557		42,638
Mortgage servicing liabilities at fair value		46,026		45,324
Accounts payable and accrued expenses		355,429		308,398
Operating lease liabilities		96,069		94,193
Payable to PennyMac Mortgage Investment Trust		164,469		140,306
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		35,165		35,165
Income taxes payable		751,855		622,700
Liability for loans eligible for repurchase		12,312,393		14,625,447
Liability for losses under representations and warranties		38,428		32,688
Total liabilities		27,830,566		28,208,407
Commitments and contingencies – Note 16
STOCKHOLDERS’ EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 66,961,401 and 70,905,532 shares, respectively		7		7
Additional paid-in capital		762,585		1,047,052
Retained earnings		2,704,822		2,342,329
Total stockholders' equity		3,467,414		3,389,388
Total liabilities and stockholders’ equity	$	31,297,980	$	31,597,795

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

6

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Quarter ended March 31,
	2021		2020
	(in thousands, except per share amounts)
Revenues
Net gains on loans held for sale at fair value:
From non-affiliates	$	768,589	$	266,366
From PennyMac Mortgage Investment Trust		(14,248)		77,916
		754,341		344,282
Loan origination fees:
From non-affiliates		95,845		53,591
From PennyMac Mortgage Investment Trust		8,192		3,980
		104,037		57,571
Fulfillment fees from PennyMac Mortgage Investment Trust		60,835		41,940
Net loan servicing fees:
Loan servicing fees:
From non-affiliates		210,753		198,653
From PennyMac Mortgage Investment Trust		19,093		14,521
Other		29,599		28,755
		259,445		241,929
Change in fair value of mortgage servicing rights and mortgage servicing liabilities		223,463		(1,035,213)
Change in fair value of excess servicing spread financing payable to PennyMac Mortgage Investment Trust		(1,037)		14,522
Mortgage servicing rights hedging results		(442,151)		1,036,570
		(219,725)		15,879
Net loan servicing fees		39,720		257,808
Net interest (expense) income:
Interest income:
From non-affiliates		81,694		71,346
From PennyMac Mortgage Investment Trust		387		1,218
		82,081		72,564
Interest expense:
To non-affiliates		106,433		59,538
To PennyMac Mortgage Investment Trust		1,280		1,974
		107,713		61,512
Net interest (expense) income		(25,632)		11,052
Management fees from PennyMac Mortgage Investment Trust		8,449		9,055
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		401		(857)
Results of real estate acquired in settlement of loans		780		(707)
Other		1,755		1,681
Total net revenues		944,686		721,825
Expenses
Compensation		258,829		168,436
Loan origination		87,392		46,004
Technology		33,672		19,107
Servicing		19,183		42,166
Professional services		13,286		13,404
Occupancy and equipment		9,038		8,038
Other		17,278		9,940
Total expenses		438,678		307,095
Income before provision for income taxes		506,008		414,730
Provision for income taxes		129,140		108,487
Net income	$	376,868	$	306,243
Earnings per share
Basic	$	5.45	$	3.89
Diluted	$	5.15	$	3.73
Weighted average shares outstanding
Basic		69,113		78,689
Diluted		73,117		82,008
Dividend declared per share	$	0.20	$	0.12

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

7

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

	Quarter ended March 31, 2021
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, December 31, 2020	70,906	$	7	$	1,047,052	$	2,342,329	$	3,389,388
Net income	—		—		—		376,868		376,868
Stock-based compensation	707		—		4,001		—		4,001
Issuance of common stock in settlement of directors' fees	1		—		51		—		51
Repurchase of common stock	(4,653)		—		(288,519)		—		(288,519)
Common stock dividend ($0.20 per share)	—		—		—		(14,375)		(14,375)
Balance, March 31, 2021	66,961	$	7	$	762,585	$	2,704,822	$	3,467,414

	Quarter ended March 31, 2020
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, December 31, 2019	78,515	$	8	$	1,335,107	$	726,392	$	2,061,507
Net income	—		—		—		306,243		306,243
Stock-based compensation	912		—		10,185		—		10,185
Issuance of common stock in settlement of directors' fees	1		—		48		—		48
Repurchase of common stock	(238)		—		(4,121)		—		(4,121)
Common stock dividend ($0.12 per share)	—		—		—		(9,733)		(9,733)
Balance, March 31, 2020	79,190	$	8	$	1,341,219	$	1,022,902	$	2,364,129

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

8

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash flow from operating activities
Net income	$	376,868	$	306,243
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on loans held for sale at fair value		(754,341)		(344,282)
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread		(222,426)		1,020,691
Mortgage servicing rights hedging results		442,151		(1,036,570)
Capitalization of interest and advance on loans held for sale at fair value		(90,177)		(18,131)
Accrual of interest on excess servicing spread financing payable to PennyMac Mortgage Investment Trust		1,280		1,974
Amortization of debt issuance costs		7,297		2,209
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust		(365)		875
Results of real estate acquired in settlement in loans		(780)		707
Stock-based compensation expense		10,877		12,368
(Reversal of) Provision for servicing advance losses		(20,536)		3,806
Impairment of capitalized software		728		—
Depreciation and amortization		7,632		5,352
Amortization of right-of-use assets		3,382		2,985
Purchase of loans held for sale from PennyMac Mortgage Investment Trust		(18,420,615)		(14,509,209)
Origination of loans held for sale		(14,314,637)		(4,954,316)
Purchase of loans held for sale from non-affiliates		(1,443,255)		(620,859)
Purchase of loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale		(4,355,102)		(2,299,262)
Sale to non-affiliates and principal payments of loans held for sale		37,268,200		19,337,017
Sale to PennyMac Mortgage Investment Trust of loans held for sale		—		2,246,127
Repurchase of loans subject to representations and warranties		(17,986)		(16,282)
Sale of real estate acquired in settlement of loans		4,946		9,459
Decrease in servicing advances		48,372		18,467
Decrease (increase) in receivable from PennyMac Mortgage Investment Trust		14,878		(10,133)
Decrease in other assets		22,912		628
Increase in accounts payable and accrued expenses		46,896		21,866
Decrease in operating lease liabilities		(4,066)		(3,469)
Increase (decrease) in payable to PennyMac Mortgage Investment Trust		10,696		(17,019)
Increase in income taxes payable		129,155		108,474
Net cash used in operating activities		(1,248,016)		(730,284)
Cash flow from investing activities
(Increase) decrease in short-term investments		(9,633)		72,727
Net change in assets purchased from PMT under agreement to resell		80,862		7,746
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights		(527,458)		942,005
Purchase of mortgage servicing rights		—		(24,104)
Purchase of furniture, fixtures, equipment and leasehold improvements		(2,738)		(994)
Acquisition of capitalized software		(10,056)		(14,108)
Decrease in margin deposits		245,505		132,953
Net cash (used in) provided by investing activities		(223,518)		1,116,225
Cash flow from financing activities
Sale of assets under agreements to repurchase		35,805,822		20,510,531
Repurchase of assets sold under agreements to repurchase		(34,613,141)		(20,205,416)
Issuance of mortgage loan participation purchase and sale certificates		6,339,539		5,273,329
Repayment of mortgage loan participation purchase and sale certificates		(6,342,269)		(5,242,527)
Repayment of obligations under capital lease		(1,396)		(2,665)
Issuance of unsecured senior notes		650,000		—
Repayment of excess servicing spread financing		(134,624)		(9,308)
Payment of debt issuance costs		(13,475)		(3,388)
Issuance of common stock pursuant to exercise of stock options		1,670		3,082
Payment of withholding taxes relating to stock-based compensation		(8,546)		(5,265)
Payment of dividend to holders of common stock		(14,375)		(9,733)
Repurchase of common stock		(288,519)		(4,121)
Net cash provided by financing activities		1,380,686		304,519
Net (decrease) increase in cash and restricted cash		(90,848)		690,460
Cash and restricted cash at beginning of quarter		532,781		188,578
Cash and restricted cash at end of quarter	$	441,933	$	879,038
Cash and restricted cash at end of quarter are comprised of the following:
Cash	$	441,870	$	878,826
Restricted cash included in Other assets		63		212
	$	441,933	$	879,038

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

9

PENNYMAC FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) is a holding corporation and its primary assets are direct and indirect equity interests in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac, and it operates and controls all of the businesses and affairs of PennyMac, and consolidates the financial results of PennyMac and its subsidiaries.

PennyMac is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PennyMac’s mortgage banking activities consist of residential mortgage loan production and servicing. PennyMac’s investment management activities and a portion of its loan servicing activities are conducted on behalf of PennyMac Mortgage Investment Trust (“PMT”), a publicly-traded real estate mortgage investment trust that invests primarily in mortgage-related assets. PennyMac’s primary wholly owned subsidiaries are:

● PennyMac Loan Services, LLC (“PLS”) — a Delaware limited liability company that services portfolios of residential mortgage loans on behalf of non-affiliates and PMT, purchases, originates and sells new prime credit quality residential mortgage loans and engages in other mortgage banking activities for its own account and the account of PMT.

PLS is approved as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and as an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”). PLS is a licensed Federal Housing Administration (“FHA”) Nonsupervised Title II Lender with the U.S. Department of Housing and Urban Development (“HUD”) and a lender/servicer with the Veterans Administration (“VA”) and U.S. Department of Agriculture (“USDA”) (each of the above an “Agency” and collectively the “Agencies”).

● PNMAC Capital Management, LLC (“PCM”)— a Delaware limited liability company registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management agreement with PMT.

Note 2—Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the Securities and Exchange Commission’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 GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods presented, but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2021. Intercompany accounts and transactions have been eliminated.

Preparation of financial statements in compliance with GAAP requires management to make judgments and estimates 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.

10

Note 3—Concentration of Risk

A substantial portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, change in fair value of excess servicing spread financing (“ESS”), net interest, management fees, and change in fair value of investment in and dividends received from PMT) totaled 9% and 22% of total net revenue for the quarters ended March 31, 2021 and 2020, respectively.

Note 4—Related Party Transactions

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.

Through June 30, 2020, pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinanced mortgage loans for which PMT previously held the MSRs, the Company was generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs related to all such mortgage loans. On June 30, 2020, the MSR recapture agreement was amended and restated for a term of five years (the “2020 MSR Recapture Agreement”).

Effective July 1, 2020, the 2020 MSR Recapture Agreement changes the recapture fee payable by the Company to a tiered amount equal to:

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;

● 35% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 15% and up to 30%; and

● 30% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 30%.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month. The Company has also agreed to allocate sufficient resources to target a recapture rate of 15%.

The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee.

Through June 30, 2020, pursuant to the terms of a mortgage banking services agreement, the monthly fulfillment fee was an amount equal to:

a) no greater than the product of (i) 0.35% and (ii) the aggregate initial unpaid principal balance (the “Initial UPB”) of all mortgage loans purchased in such month, plus

b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided, however, that no fulfillment fee was due or payable to the Company with respect to any mortgage loans underwritten to the Ginnie Mae Mortgage-Backed Securities (“MBS”) Guide.

11

PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and, through June 30, 2020, a sourcing fee ranging from two to three and one-half basis points, generally based on the average number of calendar days mortgage loans are held by PMT before being purchased by the Company. While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

Effective July 1, 2020, the fulfillment fees and sourcing fees were revised as follows:

● Fulfillment fees shall not exceed the following:

(i) the number of loan commitments multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus

(ii) $315 multiplied by the number of purchased loans that are sold to Fannie Mae and Freddie Mac up to the and including 16,500 per quarter and $195 multiplied by the number of such purchased loans in excess of 16,500 per quarter, plus

(iii) $750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae and Freddie Mac; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans.

● Sourcing fees charged to PLS range from one to two basis points, generally based on the average number of calendar days the loans are held by PMT before purchase by PLS.

Following is a summary of loan production activities, including MSR recapture between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT (primarily cash)	$	—	$	81,224
Mortgage servicing rights and excess servicing spread recapture incurred		(14,248)		(3,308)
	$	(14,248)	$	77,916
Sale of loans held for sale to PMT	$	—	$	2,246,127
Tax service fees earned from PMT included in Loan origination fees	$	8,192	$	3,980
Fulfillment fee revenue	$	60,835	$	41,940
Sourcing fees included in cost of loans purchased from PMT	$	1,738	$	4,161
Unpaid principal balance of loans purchased from PMT	$	17,559,575	$	13,870,280

Loan Servicing

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of MSRs. The Servicing Agreement provides for servicing fees of per-loan monthly amounts based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or the real estate acquired in settlement of loans (“REO”). The Company also remains entitled to customary ancillary income and market-based fees and charges relating to loans it services for PMT. These include boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

12

Prime Servicing

● The base servicing fees for non-distressed loans are calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that non-distressed loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $10 to $55 per month based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO. The Company is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees.

● Effective July 1, 2020, the Company also receives certain fees for COVID-19-related forbearance and modification activities provided for under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Special Servicing (Distressed loans)

● The base servicing fee rates for distressed loans range from $30 per month for current loans up to $95 per month for loans in foreclosure proceedings. The base servicing fee rate for REO is $75 per month.

● Because PMT has a small number of employees and limited infrastructure, the Company is required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement. For these services, the Company receives a supplemental servicing fee of $25 per month for each distressed loan. The Company is entitled to reimbursement for all customary, good faith reasonable and necessary out-of-pocket expenses incurred by the Company in the performance of its servicing obligations.

● The Company is also entitled to certain activity-based fees for distressed loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a full modification or liquidation and $500 for a deed-in-lieu of foreclosure. The Company is not entitled to earn more than one liquidation fee, reperformance fee or modification fee per loan in any 18-month period.

● To the extent the Company facilitates rentals of PMT's REO under its REO rental program, the Company collects an REO rental fee of $30 per month per REO, an REO property lease renewal fee of $100 per lease renewal, and a property management fee in an amount equal to the Company’s cost if property management services and/or any related software costs are outsourced to a third-party property management firm or 9% of gross rental income if the Company provides property management services directly. The Company is also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.

● Except as otherwise provided in the MSR recapture agreement, when the Company effects a refinancing of a loan on behalf of PMT and not through a third-party lender and the resulting loan is readily saleable, or the Company originates a loan to facilitate the disposition of a REO, the Company is entitled to receive from PMT market-based fees and compensation consistent with pricing and terms the Company offers unaffiliated parties on a retail basis.

● The Company is entitled to retain any incentive payments made to it and to which it is entitled under the U.S. Department of Treasury’s Home Affordable Modification Plan; provided, however, that with respect to any such incentive payments paid to the Company in connection with a loan modification for which PMT previously paid the Company a modification fee, the Company is required to reimburse PMT an amount equal to the incentive payments.

13

Following is a summary of loan servicing fees earned from PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	543	$	536
Distressed loans		137		300
Mortgage servicing rights		18,413		13,685
	$	19,093	$	14,521

On June 30, 2020, the Servicing Agreement was amended and restated for a term of five years (the “2020 Servicing Agreement”). The terms of the 2020 Servicing Agreement are substantially similar to those in the prior servicing agreement except that they now include the fees described above relating to COVID-19 related forbearance and modification activities provided for under the CARES Act.

Investment Management Activities

The Company has a management agreement with PMT (“Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees, for which PFSI collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

● The base management fee is calculated quarterly and is equal to the sum of (i) 1.5% per year of PMT’s average shareholders’ equity up to $2 billion, (ii) 1.375% per year of PMT’s average shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of PMT’s average shareholders’ equity in excess of $5 billion.

● The performance incentive fee is calculated quarterly at a defined annualized percentage of the amount by which PMT’s “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of return on “equity.”

The performance incentive fee is equal to the sum of: (a) 10% of the amount by which PMT’s “net income” for the quarter exceeds (i) an 8% return on equity plus the “high watermark,” up to (ii) a 12% return on PMT’s “equity”; plus (b) 15% of the amount by which PMT’s “net income” for the quarter exceeds (i) a 12% return on PMT’s “equity” plus the “high watermark,” up to (ii) a 16% return on PMT’s “equity”; plus (c) 20% of the amount by which PMT’s “net income” for the quarter exceeds a 16% return on “equity” plus the “high watermark.”

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.

“Equity” is the weighted average of the issue price per common share of all of PMT’s public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the rolling four-quarter period.

14

The “high watermark” is the quarterly adjustment that reflects the amount by which the “net income” (stated as a percentage of return on “equity”) in that quarter exceeds or falls short of the lesser of 8% and the average Fannie Mae 30-year MBS yield (the “Target Yield”) for the four quarters then ended. If the “net income” is lower than the Target Yield, the high watermark is increased by the difference. If the “net income” is higher than the Target Yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amounts required for the Company to earn a performance incentive fee are adjusted cumulatively based on the performance of PMT’s “net income” over (or under) the Target Yield, until the “net income” in excess of the Target Yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned.

The base management fee and the performance incentive fee are both receivable quarterly in arrears. The performance incentive fee may be paid in cash or a combination of cash and PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.

In the event of termination of the Management Agreement between PMT and the Company, the Company may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by the Company, in each case during the 24-month period immediately preceding the date of termination.

Following is a summary of the base management and performance incentive fees earned from PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Base management	$	8,449	$	9,055
Performance incentive		—		—
	$	8,449	$	9,055

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $120,000 per fiscal quarter through June 30, 2020.

PMT is also required to pay its pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Company and its affiliates required for PMT’s and its subsidiaries’ operations. These expenses are allocated based on the ratio of PMT’s proportion of gross assets compared to all remaining gross assets managed by the Company as calculated at each fiscal quarter end.

On June 30, 2020, the Management Agreement was amended and restated for a term of five years (the “2020 Management Agreement”). The terms of the 2020 Management Agreement are materially consistent with those of the prior management agreement, except that, effective July 1, 2020, PMT’s reimbursement of PCM’s and its affiliates’ compensation expenses was increased from $120,000 to $165,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by the Company or its affiliates.

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The Company received reimbursements from PMT for expenses as follows:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	571	$	1,540
Compensation		165		120
Expenses incurred on PMT's behalf, net		1,336		1,271
	$	2,072	$	2,931
Payments and settlements during the quarter (1)	$	112,741	$	33,683

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Investing Activities

Master Repurchase Agreement

On December 19, 2016, the Company, through PLS, entered into a master repurchase agreement with one of PMT’s wholly-owned subsidiaries, PennyMac Holdings, LLC (“PMH”) (the “PMH Repurchase Agreement”), pursuant to which PMH may borrow from the Company for the purpose of financing PMH’s participation certificates representing beneficial ownership in ESS. PLS then re-pledges such participation certificates to PNMAC GMSR ISSUER TRUST (the “Issuer Trust”) under a master repurchase agreement by and among PLS, the Issuer Trust and PennyMac, as guarantor (the “PC Repurchase Agreement”). The Issuer Trust was formed for the purpose of allowing PLS to finance MSRs and ESS relating to such MSRs (the “GNMA MSR Facility). In the first quarter of 2021, PLS repurchased the ESS from PMH at fair market value, effectively terminating the borrowing arrangements allowing PMH to finance its participation certificates representing beneficial ownership in ESS. Such ESS is now included in PLS's participation certificates representing beneficial ownership in ESS.

In connection with the GNMA MSR Facility, PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of the PC Repurchase Agreement. In return, the Issuer Trust (a) has issued to PLS, pursuant to the terms of an indenture, the Series 2016-MSRVF1 Variable Funding Note, dated December 19, 2016, known as the “PNMAC GMSR ISSUER TRUST MSR Collateralized Notes, Series 2016-MSRVF1” (the “VFN”), and (b) has issued and may, from time to time pursuant to the terms of any supplemental indenture, issue to institutional investors additional term notes, in each case secured on a pari passu basis by the participation certificates relating to the MSRs and ESS. The maximum principal balance of the VFN is $1,000,000,000.

The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest.

Following is a summary of investing activities between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	387	$	1,218
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust	$	401	$	(857)

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	March 31,		December 31,
	2021		2020
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—	$	80,862
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,470	$	1,105
Number of shares		75		75

Financing Activities

Spread Acquisition and MSR Servicing Agreements

The Company has a master spread acquisition and MSR servicing agreement with PMT (the “Spread Acquisition Agreement”) which was amended and restated effective December 19, 2016, pursuant to which the Company may sell to PMT, from time to time, the right to receive participation certificates representing beneficial ownership in ESS arising from Ginnie Mae MSRs acquired by the Company, in which case the Company generally would be required to service or subservice the related mortgage loans for Ginnie Mae. The primary purpose of the amendment and restatement was to facilitate the continued financing of the ESS owned by PMT in connection with the parties’ participation in the GNMA MSR Facility.

To the extent the Company refinances any of the mortgage loans relating to the ESS it has issued, the Spread Acquisition Agreement also contains recapture provisions requiring that the Company transfer to PMT, at no cost, the ESS relating to a certain percentage of the unpaid principal balance of the newly originated mortgage loans. However, under the Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the refinanced mortgage loans, the Company is also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the modified mortgage loans, the Spread Acquisition Agreement contains provisions that require the Company to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, the Company may, at its option, settle its obligation to PMT in cash in an amount equal to such fair market value in lieu of transferring such ESS.

During the quarter ended March 31, 2021, the Company repurchased ESS from PMT and repaid its outstanding ESS financing payable to PMT.

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Following is a summary of financing activities between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Excess servicing spread financing:
Balance at beginning of quarter	$	131,750	$	178,586
Issuance pursuant to recapture agreement		557		379
Accrual of interest		1,280		1,974
Repayment		(134,624)		(9,308)
Change in fair value		1,037		(14,522)
Balance at end of quarter	$	—	$	157,109
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	614	$	381

Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:

	March 31,		December 31,
	2021		2020
	(in thousands)
Receivable from PMT:
Allocated expenses and expenses incurred on PMT's behalf	$	23,325	$	38,142
Fulfillment fees		17,347		20,873
Correspondent production fees		12,937		13,065
Management fees		8,449		8,686
Servicing fees		6,586		6,213
Interest on assets purchased under agreements to resell		—		26
	$	68,644	$	87,005
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	156,948	$	132,154
Mortgage servicing rights recapture payable		—		296
Other		7,521		7,856
	$	164,469	$	140,306

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

On May 8, 2013, the Company entered into a tax receivable agreement with certain former owners of PennyMac that provides for the payment from time to time by the Company to PennyMac’s exchanged unitholders of an amount equal to 85% of the amount of the net tax benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from exchanges of ownership interests in PennyMac and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.

Although a reorganization in November 2018 eliminated the potential for unitholders to exchange any additional units subject to this tax receivable agreement, the Company continues to be subject to the agreement and will be required to make payments, to the extent any of the tax benefits specified above are deemed to be realized, under the tax receivable agreement to those certain prior owners of PennyMac who effected exchanges of ownership interests in PennyMac for the Company’s common stock prior to the closing of the reorganization.

The Company has recorded $35.2 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of March 31, 2021 and December 31, 2020. The Company did not make any payments during the quarters ended March 31, 2021 and 2020.

.

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Note 5—Loan Sales and Servicing Activities

The Company, through PLS, originates or purchases and sells loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.

The following table summarizes cash flows between the Company and transferees as a result of the sale of loans in transactions where the Company maintains continuing involvement with the loans as servicer:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash flows:
Sales proceeds	$	37,268,200	$	19,337,017
Servicing fees received (1)	$	195,782	$	166,556

(1) Net of guarantee fees paid to the Agencies.

The following table summarizes unpaid principal balance (the “UPB”) of the loans sold by the Company in which it maintains continuing involvement in the form of owned servicing obligations:

	March 31,		December 31,
	2021		2020
	(in thousands)
Unpaid principal balance of loans outstanding	$	211,289,054	$	199,655,361
Delinquencies (1):
30-89 days	$	4,045,731	$	6,041,366
90 days or more:
Not in foreclosure	$	15,506,434	$	17,799,621
In foreclosure	$	539,603	$	581,683
Foreclosed	$	9,207	$	10,893
Bankruptcy	$	1,204,192	$	1,230,696
Delinquent loans in COVID-19 pandemic-related forbearance:
30-89 days	$	1,695,953	$	2,626,617
90 days or more		10,022,093		12,181,174
	$	11,718,046	$	14,807,791

(1) Includes delinquent loans in COVID-19 pandemic-related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

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The following tables summarize the UPB of the Company’s loan servicing portfolio:

	March 31, 2021
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	211,289,054	$	—	$	211,289,054
Purchased		36,252,669		—		36,252,669
		247,541,723		—		247,541,723
PennyMac Mortgage Investment Trust		—		188,324,162		188,324,162
Loans held for sale		12,959,016		—		12,959,016
	$	260,500,739	$	188,324,162	$	448,824,901
Delinquent loans (1):
30 days	$	3,407,163	$	664,887	$	4,072,050
60 days		1,668,346		267,050		1,935,396
90 days or more:
Not in foreclosure		18,900,569		3,827,814		22,728,383
In foreclosure		699,268		31,423		730,691
Foreclosed		10,790		24,320		35,110
	$	24,686,136	$	4,815,494	$	29,501,630
Bankruptcy	$	1,647,331	$	158,684	$	1,806,015
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,109,541	$	226,321	$	1,335,862
60 days		1,035,462		198,455		1,233,917
90 days or more		12,828,212		3,046,256		15,874,468
	$	14,973,215	$	3,471,032	$	18,444,247
Custodial funds managed by the Company (2)	$	12,007,827	$	6,571,084	$	18,578,911

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

20

	December 31, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	199,655,361	$	—	$	199,655,361
Purchased		41,612,940		—		41,612,940
		241,268,301		—		241,268,301
PennyMac Mortgage Investment Trust		—		174,418,591		174,418,591
Loans held for sale		11,063,938		—		11,063,938
	$	252,332,239	$	174,418,591	$	426,750,830
Delinquent loans (1):
30 days	$	5,217,949	$	901,965	$	6,119,914
60 days		2,393,267		348,416		2,741,683
90 days or more:
Not in foreclosure		21,781,226		4,473,217		26,254,443
In foreclosure		751,586		33,312		784,898
Foreclosed		12,938		37,131		50,069
	$	30,156,966	$	5,794,041	$	35,951,007
Bankruptcy	$	1,698,418	$	153,179	$	1,851,597
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,745,257	$	334,498	$	2,079,755
60 days		1,479,753		259,019		1,738,772
90 days or more		14,904,052		3,690,505		18,594,557
	$	18,129,062	$	4,284,022	$	22,413,084
Custodial funds managed by the Company (2)	$	10,660,517	$	6,086,725	$	16,747,242

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

Following is a summary of the geographical distribution of loans included in the Company’s loan servicing portfolio for the top five and all other states as measured by UPB:

	March 31,		December 31,
State	2021		2020
	(in thousands)
California	$	63,423,866	$	60,591,363
Florida		37,181,908		35,360,190
Texas		36,781,005		34,591,419
Virginia		27,728,760		26,209,701
Maryland		21,105,934		19,974,809
All other states		262,603,428		250,023,348
	$	448,824,901	$	426,750,830

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Note 6—Fair Value

Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the significant inputs used to determine fair value. These levels are:

● Level 1—Quoted prices in active markets for identical assets or liabilities.

● Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.

● Level 3— Prices determined using significant unobservable inputs. In situations where observable inputs are unavailable, unobservable inputs may be used. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances.

As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

Fair Value Accounting Elections

The Company identified its MSRs, its mortgage servicing liabilities (“MSLs”) and all of its non-cash financial assets other than Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance. The Company has also identified its ESS financing to be accounted for at fair value as a means of hedging the related MSRs’ fair value risk.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a summary of assets and liabilities that are measured at fair value on a recurring basis:

	March 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	24,850	$	—	$	—	$	24,850
Loans held for sale at fair value		—		8,183,724		5,202,065		13,385,789
Derivative assets:
Interest rate lock commitments		—		—		362,923		362,923
Forward purchase contracts		—		14,318		—		14,318
Forward sales contracts		—		333,198		—		333,198
MBS put options		—		99,670		—		99,670
Swaption purchase contracts		—		50,973		—		50,973
Put options on interest rate futures purchase contracts		27,133		—		—		27,133
Call options on interest rate futures purchase contracts		1,539		—		—		1,539
Total derivative assets before netting		28,672		498,159		362,923		889,754
Netting		—		—		—		(358,902)
Total derivative assets		28,672		498,159		362,923		530,852
Mortgage servicing rights at fair value		—		—		3,268,910		3,268,910
Investment in PennyMac Mortgage Investment Trust		1,470		—		—		1,470
	$	54,992	$	8,681,883	$	8,833,898	$	17,211,871
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	24,983	$	24,983
Forward purchase contracts		—		192,793		—		192,793
Forward sales contracts		—		32,729		—		32,729
MBS put options		—		34,873		—		34,873
Put options on interest rate futures sale contracts		15,881		—		—		15,881
Call options on interest rate futures sale contracts		1,061		—		—		1,061
Total derivative liabilities before netting		16,942		260,395		24,983		302,320
Netting		—		—		—		(233,763)
Total derivative liabilities		16,942		260,395		24,983		68,557
Mortgage servicing liabilities at fair value		—		—		46,026		46,026
	$	16,942	$	260,395	$	71,009	$	114,583

23

	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	15,217	$	—	$	—	$	15,217
Loans held for sale at fair value		—		6,941,231		4,675,169		11,616,400
Derivative assets:
Interest rate lock commitments		—		—		679,961		679,961
Forward purchase contracts		—		133,267		—		133,267
Forward sales contracts		—		1,451		—		1,451
MBS put options		—		14,302		—		14,302
Swaption purchase contracts		—		11,939		—		11,939
Put options on interest rate futures purchase contracts		5,520		—		—		5,520
Call options on interest rate futures purchase contracts		1,391		—		—		1,391
Total derivative assets before netting		6,911		160,959		679,961		847,831
Netting		—		—		—		(136,593)
Total derivative assets		6,911		160,959		679,961		711,238
Mortgage servicing rights at fair value		—		—		2,581,174		2,581,174
Investment in PennyMac Mortgage Investment Trust		1,105		—		—		1,105
	$	23,233	$	7,102,190	$	7,936,304	$	14,925,134
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	131,750	$	131,750
Derivative liabilities:
Interest rate lock commitments		—		—		2,935		2,935
Forward purchase contracts		—		1,276		—		1,276
Forward sales contracts		—		251,149		—		251,149
Total derivative liabilities before netting		—		252,425		2,935		255,360
Netting		—		—		—		(212,722)
Total derivative liabilities		—		252,425		2,935		42,638
Mortgage servicing liabilities at fair value		—		—		45,324		45,324
	$	—	$	252,425	$	180,009	$	219,712

24

As shown above, all or a portion of the Company’s loans held for sale, Interest Rate Lock Commitments (“IRLCs”), MSRs, ESS and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of assets and liabilities measured at fair value using “Level 3” inputs at either the beginning or the end of the period presented:

	Quarter ended March 31, 2021
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, December 31, 2020	$	4,675,169	$	677,026	$	2,581,174	$	7,933,369
Purchases and issuances, net		4,156,681		477,933		—		4,634,614
Capitalization of interest and advances		90,165		—		—		90,165
Sales and repayments		(928,901)		—		—		(928,901)
Mortgage servicing rights resulting from loan sales		—		—		470,533		470,533
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		48,154		—		—		48,154
Other factors		—		(179,613)		217,203		37,590
		48,154		(179,613)		217,203		85,744
Transfers from Level 3 to Level 2		(2,839,121)		—		—		(2,839,121)
Transfers to real estate acquired in settlement of loans		(82)		—		—		(82)
Transfers to loans held for sale		—		(637,406)		—		(637,406)
Balance, March 31, 2021	$	5,202,065	$	337,940	$	3,268,910	$	8,808,915
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2021	$	104,132	$	337,940	$	217,203	$	659,275

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2021
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2020	$	131,750	$	45,324	$	177,074
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		557		—		557
Accrual of interest		1,280		—		1,280
Repayments		(134,624)		—		(134,624)
Mortgage servicing liabilities resulting from loan sales		—		6,962		6,962
Changes in fair value included in income		1,037		(6,260)		(5,223)
Balance, March 31, 2021	$	—	$	46,026	$	46,026
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2021	$	—	$	(6,260)	$	(6,260)

25

	Quarter ended March 31, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, March 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Purchases and issuances, net		1,641,231		341,980		—		25,760		2,008,971
Capitalization of interest and advances		18,027		—		—		—		18,027
Sales and repayments		(738,928)		—		—		—		(738,928)
Mortgage servicing rights resulting from loan sales		—		—		—		282,315		282,315
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(7,523)		—		—		—		(7,523)
Other factors		—		199,918		—		(1,041,168)		(841,250)
		(7,523)		199,918		—		(1,041,168)		(848,773)
Transfers from Level 3 to Level 2		(489,407)		—		—		—		(489,407)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Transfers to loans held for sale		—		(363,354)		—		—		(363,354)
Balance, March 31, 2020	$	806,587	$	315,194	$	8,187	$	2,193,697	$	3,323,665
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2020	$	(11,856)	$	315,194	$	—	$	(1,041,168)	$	(737,830)

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, March 31, 2019	$	178,586	$	29,140	$	207,726
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		379		—		379
Accrual of interest		1,974		—		1,974
Repayments		(9,308)		—		(9,308)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(14,522)		(5,955)		(20,477)
Balance, March 31, 2020	$	157,109	$	29,761	$	186,870
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2020	$	(14,522)	$	(5,955)	$	(20,477)

The Company had transfers among the fair value levels arising from transfers of IRLCs to loans held for sale at fair value upon purchase or funding of the respective loans and from the return to salability in the active secondary market of certain loans held for sale.

26

Assets and Liabilities Measured at Fair Value under the Fair Value Option

Net changes in fair values included in income for assets and liabilities carried at fair value as a result of management’s election of the fair value option by income statement line item are summarized below:

	Quarter ended March 31,
	2021						2020
	Net gains on		Net				Net gains on		Net
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
Assets:
Loans held for sale	$	650,119	$	—	$	650,119	$	398,718	$	—	$	398,718
Mortgage servicing rights		—		217,203		217,203		—		(1,041,168)		(1,041,168)
	$	650,119	$	217,203	$	867,322	$	398,718	$	(1,041,168)	$	(642,450)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	(1,037)	$	(1,037)	$	—	$	14,522	$	14,522
Mortgage servicing liabilities		—		6,260		6,260		—		5,955		5,955
	$	—	$	5,223	$	5,223	$	—	$	20,477	$	20,477

Following are the fair value and related principal amounts due upon maturity of loans held for sale:

	March 31, 2021						December 31, 2020
			Principal						Principal
			amount						amount
	Fair		due upon				Fair		due upon
Loans held for sale	value		maturity		Difference		value		maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	13,013,597	$	12,580,255	$	433,342	$	11,304,308	$	10,743,814	$	560,494
90 days or more delinquent:
Not in foreclosure		340,185		344,853		(4,668)		275,419		280,595		(5,176)
In foreclosure		32,007		33,908		(1,901)		36,673		39,529		(2,856)
	$	13,385,789	$	12,959,016	$	426,773	$	11,616,400	$	11,063,938	$	552,462

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a summary of assets that were measured at fair value on a nonrecurring basis:

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2021	$	—	$	—	$	2,568	$	2,568
December 31, 2020	$	—	$	—	$	1,450	$	1,450

The following table summarizes the (losses) gains recognized on assets when they were remeasured at fair value on a nonrecurring basis:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Real estate acquired in settlement of loans	$	(412)	$	(3,980)

27

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Obligations under capital lease, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.

These assets and liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these assets and liabilities other than the 2018-GTI Term Notes and 2018-GT2 Term Notes included in Notes payable secured by mortgage servicing assets and the Unsecured senior notes approximate their carrying values due to their short terms and/or variable interest rates.

The Company estimates the fair value of the Notes payable secured by mortgage servicing assets and the Unsecured senior notes based on non-affiliate broker indications of fair value. The fair value and carrying value of these notes are summarized below:

	March 31, 2021				December 31, 2020
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,296,344	$	1,296,285	$	1,268,304	$	1,295,840
Unsecured senior notes	$	1,290,250	$	1,288,198	$	685,750	$	645,820

Valuation Governance

Most of the Company’s financial assets, and all of its MSRs, ESS, derivative liabilities and MSLs, are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and derivative liabilities and all of its MSRs, ESS, and MSLs are “Level 3” fair value assets and liabilities which require use of unobservable inputs that are significant to the estimation of the items’ fair values. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances.

Due to the difficulty in estimating the fair values of “Level 3” fair value assets and liabilities, the Company has assigned the responsibility for estimating the fair value of these items to specialized staff and subjects the valuation process to significant senior management oversight. The Company’s Financial Analysis and Valuation group (the “FAV group”) is the Company’s specialized staff responsible for estimating the fair values of “Level 3” fair value assets and liabilities other than IRLCs.

With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes the Company’s chief financial, investment, operating and risk officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.

The FAV group is responsible for reporting to the Company’s senior management valuation committee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its valuations, the FAV group presents an analysis of the effect on the valuation of changes to the significant inputs to the models.

The Company has assigned responsibility for developing the fair values of IRLCs to its Capital Markets Risk Management staff. The fair values developed by the Capital Markets Risk Management staff are reviewed by the Company’s Capital Markets Operations group.

28

Valuation Techniques and Inputs

Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities:

Loans Held for Sale

Most of the Company’s loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value assets. The fair values of “Level 2” fair value loans are determined using their contracted selling price or quoted market price or market price equivalent.

Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:

● Government guaranteed or insured loans purchased by the Company from Ginnie Mae guaranteed pools in its loan servicing portfolio. The Company’s right to purchase government guaranteed or insured loans arises as the result of the loan being at least three months delinquent on the date of repurchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such repurchased loans may be resold to investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed security. Such eligibility occurs when the repurchased loans become current either through the borrower’s reperformance or through completion of a modification of the loan’s terms or after six months of timely payments following the completion of certain types of payment deferral programs.

● Loans that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect.

The Company uses a discounted cash flow model to estimate the fair value of its “Level 3” fair value loans held for sale. The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value loans held for sale are discount rates, home price projections, voluntary prepayment/resale and total prepayment speeds. Significant changes in any of those inputs in isolation could result in a significant change to the loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.

29

Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of loans held for sale:

	March 31, 2021		December 31, 2020
Fair value (in thousands)	$	5,202,065	$	4,675,169
Key inputs (1):
Discount rate:
Range		2.6% – 9.2%		2.8% – 9.2%
Weighted average		2.6%		2.8%
Twelve-month projected housing price index change:
Range		3.9% – 4.9%		2.7% – 3.5%
Weighted average		4.4%		3.0%
Voluntary prepayment/resale speed (2):
Range		0.3% – 29.5%		0.4% – 31.3%
Weighted average		21.2%		21.9%
Total prepayment speed (3):
Range		0.3% – 40.2%		0.5% – 42.9%
Weighted average		28.1%		29.2%

(1) Weighted average inputs are based on the fair value of the “Level 3” loans.

(2) Voluntary prepayment/resale speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).

(3) Total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments/resale and default rates.

Changes in fair value of loans held for sale attributable to changes in the loan’s instrument-specific credit risk are measured with reference to the change in the respective loan’s delinquency status and performance history at period end from the later of the beginning of the period or acquisition date. Changes in fair value of loans held for sale are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.

Derivative Financial Instruments

Interest Rate Lock Commitments

The Company categorizes IRLCs as “Level 3” fair value assets or liabilities. The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and the probability that the loan will be funded or purchased (the “pull-through rate”).

The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rate and the MSR component of the Company’s estimate of the fair value of the mortgage loans it has committed to purchase. Significant changes in the pull-through rate or the MSR component of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurement. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value, but increase the pull-through rate for the loan principal and interest payment cash flow component, which has decreased in fair value. Changes in fair value of IRLCs are included in Net gains on loans held for sale at fair value in the consolidated statements of income.

30

Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

	March 31, 2021		December 31, 2020
Fair value (in thousands) (1)	$	337,940	$	677,026
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.1% – 100%
Weighted average		85.5%		82.7%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		(10.0) – 6.4		0.7 – 5.3
Weighted average		4.1		3.6
Percentage of loan commitment amount
Range		(2.1)% – 3.2%		0.1% – 2.6%
Weighted average		1.3%		1.2%

(1) For purpose of this table, IRLC asset and liability positions are shown net.

(2) Weighted average inputs are based on the committed amounts.

Hedging Derivatives

Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.

Changes in the fair value of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Hedging results, as applicable, in the consolidated statements of income.

Mortgage Servicing Rights

MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable pricing spread (discount rate), prepayment rates, and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

31

Following are the key inputs used in determining the fair value of MSRs received by the Company when it retains the obligation to service the mortgage loans it sells:

	Quarter ended March 31,
	2021		2020
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	470,533	$	282,315
Unpaid principal balance of underlying loans	$	34,943,254	$	18,330,384
Weighted average servicing fee rate (in basis points)		34		40
Key inputs (1):
Pricing spread (2):
Range		8.0% – 16.9%		6.8% – 15.6%
Weighted average		9.6%		8.2%
Annual total prepayment speed (3):
Range		6.2% – 12.9%		9.1% – 49.8%
Weighted average		7.8%		14.5%
Equivalent average life (in years):
Range		4.1 – 9.0		1.5 – 7.8
Weighted average		8.5		5.9
Per-loan annual cost of servicing:
Range		$81 – $117		$77 – $100
Weighted average		$104		$97

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to the United States Dollar London Interbank Offered Rate (“LIBOR”)/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

32

Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:

	March 31, 2021	December 31, 2020
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 3,268,910	$ 2,581,174
Pool characteristics:
Unpaid principal balance of underlying loans	$ 244,367,930	$ 238,410,809
Weighted average note interest rate	3.5%	3.6%
Weighted average servicing fee rate (in basis points)	34	35
Key inputs (1):
Pricing spread (2):
Range	6.8% – 16.8%	8.0% – 17.6%
Weighted average	9.2%	10.1%
Effect on fair value of:
5% adverse change	($58,358)	($46,356)
10% adverse change	($114,643)	($90,936)
20% adverse change	($221,392)	($175,137)
Annual total prepayment speed (3):
Range	7.2% – 31.1%	10.1% – 32.9%
Weighted average	9.8%	13.7%
Equivalent average life (in years):
Range	2.9 – 8.4	2.3 – 7.7
Weighted average	7.2	6.0
Effect on fair value of:
5% adverse change	($64,416)	($66,536)
10% adverse change	($126,698)	($130,253)
20% adverse change	($245,247)	($249,843)
Annual per-loan cost of servicing:
Range	$79 – $118	$79 – $117
Weighted average	$108	$107
Effect on fair value of:
5% adverse change	($30,559)	($25,482)
10% adverse change	($61,117)	($50,964)
20% adverse change	($122,235)	($101,929)

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

The preceding sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as earnings forecasts.

33

Excess Servicing Spread Financing at Fair Value

ESS is categorized as a “Level 3” fair value liability. Because ESS is a claim to a portion of the cash flows from MSRs, the fair value measurement of the ESS is similar to that of MSRs. The Company uses the same discounted cash flow approach to measuring the ESS as it uses to measure MSRs except that certain inputs relating to the cost to service the mortgage loans underlying the MSRs and certain ancillary income are not included as these cash flows do not accrue to the holder of the ESS.

The key inputs used in the estimation of ESS fair value include pricing spread (discount rate) and prepayment speed. Significant changes to either of those inputs in isolation could result in a significant change in the fair value of ESS. Changes in these key inputs are not directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally discourage mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing the fair value of this financing. Changes in the fair value of ESS are included in Net loan servicing fees—Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust. During the quarter ended March 31, 2021, the Company repaid its outstanding ESS financing payable to PMT.

Following are the key inputs used in determining the fair value of ESS financing:

	December 31,
	2020
Fair value (in thousands)	$ 131,750
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 15,833,050
Average servicing fee rate (in basis points)	34
Average excess servicing spread (in basis points)	19
Key inputs (1):
Pricing spread (2):
Range	4.9% – 5.3%
Weighted average	5.1%
Annual total prepayment speed (3):
Range	9.6% – 18.3%
Weighted average	11.7%
Equivalent average life (in years):
Range	2.3 – 6.6
Weighted average	5.8

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to ESS.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Mortgage Servicing Liabilities

MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable pricing spread (discount rate), prepayment rates, and the annual per-loan cost to service the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

34

Following are the key inputs used in determining the fair value of MSLs:

		March 31,		December 31,
		2021		2020
Fair value (in thousands)	$	46,026	$	45,324
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	3,173,793	$	2,857,492
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.9%		7.6%
Annual total prepayment speed (2)		30.5%		33.3%
Equivalent average life (in years)		3.8		3.2
Annual per-loan cost of servicing	$	293	$	305

(1) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSLs.

(2) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Note 7—Loans Held for Sale at Fair Value

Loans held for sale at fair value include the following:

	March 31,		December 31,
Loan type	2021		2020
	(in thousands)
Government-insured or guaranteed	$	6,722,768	$	5,683,786
Conventional conforming		1,460,956		1,257,445
Purchased from Ginnie Mae pools serviced by the Company		5,182,311		4,661,378
Repurchased pursuant to representations and warranties		19,754		13,791
	$	13,385,789	$	11,616,400
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	12,726,461	$	10,912,178
Mortgage loan participation purchase and sale agreements		541,206		545,500
	$	13,267,667	$	11,457,678

Note 8—Derivative Financial Instruments

The Company holds and issues derivative financial instruments in connection with its operating activities. Derivative financial instruments are created as a result of certain of the Company’s operations and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created as a result of the Company’s operations are IRLCs that are created when the Company commits to purchase or originate a loan for sale.

The Company also engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of the its assets. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of loans held for sale and the portion of its MSRs not financed with ESS.

The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

35

Derivative Notional Amounts and Fair Value of Derivatives

The Company had the following derivative financial instruments recorded on its consolidated balance sheets:

	March 31, 2021					December 31, 2020
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount (1)	assets		liabilities		amount (1)	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	17,668,145	$	362,923	$	24,983	20,624,535	$	679,961	$	2,935
Used for hedging purposes (2):
Forward purchase contracts	34,644,744		14,318		192,793	31,689,543		133,267		1,276
Forward sales contracts	52,739,511		333,198		32,729	50,438,967		1,451		251,149
MBS put options	11,750,000		99,670		34,873	12,025,000		14,302		—
Swaption purchase contracts	7,150,000		50,973		—	3,375,000		11,939		—
Put options on interest rate futures purchase contracts	6,950,000		27,133		—	4,750,000		5,520		—
Call options on interest rate futures purchase contracts	2,500,000		1,539		—	850,000		1,391		—
Put options on interest rate futures sale contracts	4,100,000		—		15,881	—		—		—
Call options on interest rate futures sale contracts	1,575,000		—		1,061	—		—		—
Treasury futures purchase contracts	830,000		—		—	1,065,000		—		—
Treasury futures sale contracts	1,705,000		—		—	1,555,000		—		—
Interest rate swap futures purchase contracts	4,240,000		—		—	4,801,700		—		—
Interest rate swap futures sale contracts	750,000		—		—	711,700		—		—
Total derivatives before netting			889,754		302,320			847,831		255,360
Netting			(358,902)		(233,763)			(136,593)		(212,722)
		$	530,852	$	68,557		$	711,238	$	42,638
Deposits (received from) placed with derivative counterparties, net		$	(125,139)				$	76,129

(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2) All of the derivatives used for hedging purposes are interest rate derivatives and are used as economic hedges.

36

Derivative Balances and Netting of Financial Instruments

The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts:

	March 31, 2021						December 31, 2020
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements - IRLCs	$	362,923	$	—	$	362,923	$	679,961	$	—	$	679,961
Derivatives subject to master netting arrangements:
Forward purchase contracts		14,318		—		14,318		133,267		—		133,267
Forward sale contracts		333,198		—		333,198		1,451		—		1,451
MBS put options		99,670		—		99,670		14,302		—		14,302
Swaption purchase contracts		50,973		—		50,973		11,939		—		11,939
Put options on interest rate futures purchase contracts		27,133		—		27,133		5,520		—		5,520
Call options on interest rate futures purchase contracts		1,539		—		1,539		1,391		—		1,391
Netting		—		(358,902)		(358,902)		—		(136,593)		(136,593)
		526,831		(358,902)		167,929		167,870		(136,593)		31,277
	$	889,754	$	(358,902)	$	530,852	$	847,831	$	(136,593)	$	711,238

Derivative Assets, Financial Instruments, and Cash Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for netting.

	March 31, 2021								December 31, 2020
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	362,923	$	—	$	—	$	362,923	$	679,961	$	—	$	—	$	679,961
JPMorgan Chase Bank, N.A.		56,606		—		—		56,606		17,149		—		—		17,149
Morgan Stanley Bank, N.A.		53,548		—		—		53,548		2,443		—		—		2,443
Wells Fargo Bank, N.A.		18,524		—		—		18,524		—		—		—		—
RJ O'Brien		11,730		—		—		11,730		6,910		—		—		6,910
Bank of America, N.A.		10,013		—		—		10,013		—		—		—		—
Citibank, N.A.		9,685		—		—		9,685		2,026		—		—		2,026
Goldman Sachs		4,203		—		—		4,203		—		—		—		—
Others		3,620		—		—		3,620		2,749		—		—		2,749
	$	530,852	$	—	$	—	$	530,852	$	711,238	$	—	$	—	$	711,238

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Offsetting of Derivative Liabilities and Financial Liabilities

Following is a summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts. Assets sold under agreements to repurchase do not qualify for netting.

	March 31, 2021						December 31, 2020
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements – Interest rate lock commitments	$	24,983	$	—	$	24,983	$	2,935	$	—	$	2,935
Derivatives subject to a master netting arrangement:
Forward purchase contracts		192,793		—		192,793		1,276		—		1,276
Forward sale contracts		32,729		—		32,729		251,149		—		251,149
MBS put options		34,873		—		34,873		—		—		—
Put options on interest rate futures sale contracts		15,881		—		15,881		—		—		—
Call options on interest rate futures sale contracts		1,061		—		1,061		—		—		—
Netting		—		(233,763)		(233,763)		—		(212,722)		(212,722)
		277,337		(233,763)		43,574		252,425		(212,722)		39,703
Total derivatives		302,320		(233,763)		68,557		255,360		(212,722)		42,638
Assets sold under agreements to repurchase:
Amount outstanding		10,856,677		—		10,856,677		9,663,995		—		9,663,995
Unamortized debt issuance costs		(8,200)		—		(8,200)		(9,198)		—		(9,198)
		10,848,477		—		10,848,477		9,654,797		—		9,654,797
	$	11,150,797	$	(233,763)	$	10,917,034	$	9,910,157	$	(212,722)	$	9,697,435

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Derivative Liabilities, Financial Instruments, and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not qualify under the accounting guidance for netting. All assets sold under agreements to repurchase are secured by sufficient collateral or have fair value that exceeds the liability amount recorded on the consolidated balance sheets.

	March 31, 2021								December 31, 2020
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	24,983	$	—	$	—	$	24,983	$	2,935	$	—	$	—	$	2,935
Credit Suisse First Boston Mortgage Capital LLC		2,824,198		(2,805,703)		—		18,495		3,947,752		(3,943,149)		—		4,603
JPMorgan Chase Bank, N.A.		2,841,831		(2,841,831)		—		—		2,752,279		(2,752,279)		—		—
Bank of America, N.A.		1,317,580		(1,317,580)		—		—		634,523		(626,550)		—		7,973
Goldman Sachs		895,437		(895,437)		—		—		—		—		—		—
Citibank, N.A.		787,322		(787,322)		—		—		505,625		(505,625)		—		—
Barclays Capital		738,528		(730,340)		—		8,188		596,729		(596,729)		—		—
Morgan Stanley Bank, N.A.		562,172		(562,172)		—		—		331,546		(331,546)		—		—
Royal Bank of Canada		434,487		(434,487)		—		—		406,348		(406,348)		—		—
BNP Paribas		308,754		(308,754)		—		—		337,823		(336,545)		—		1,278
Wells Fargo Bank, N.A.		173,051		(173,051)		—		—		169,085		(165,224)		—		3,861
Mizuho Securities		8,107		—		—		8,107		6,491		—		—		6,491
Nomura Securities International, Inc.		2,264		—		—		2,264		—		—		—		—
Mitsubishi UFJ Securities		3,305		—		—		3,305		—		—		—		—
Federal Home Loan Mortgage Corporation		—		—		—		—		12,928		—		—		12,928
Others		3,215		—		—		3,215		2,569		—		—		2,569
	$	10,925,234	$	(10,856,677)	$	—	$	68,557	$	9,706,633	$	(9,663,995)	$	—	$	42,638

Following are the gains (losses) recognized by the Company on derivative financial instruments and the income statement lines where such gains and losses are included:

		Quarter ended March 31,
Derivative activity	Income statement line	2021		2020
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	(339,086)	$	178,543
Hedged item:
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	462,538	$	(225,557)
Mortgage servicing rights	Net loan servicing fees–Hedging results	$	(442,151)	$	1,036,570

(1) Represents net (decrease) increase in fair value of IRLCs from the beginning to the end of the quarter. Amounts recognized at the date of commitment and fair value changes recognized during the quarter until purchase of the underlying loans are shown in the rollforward of IRLCs for the quarter in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	2,581,174	$	2,926,790
Additions:
Resulting from loan sales		470,533		282,315
Purchases		—		25,760
		470,533		308,075
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		312,890		(915,862)
Other changes in fair value (2)		(95,687)		(125,306)
Total change in fair value		217,203		(1,041,168)
Balance at end of quarter	$	3,268,910	$	2,193,697
	March 31,		December 31,
	2021		2020
	(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	3,265,073	$	2,577,964

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

(2) Represents changes due to realization of cash flows.

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	45,324	$	29,140
Mortgage servicing liabilities resulting from loan sales		6,962		6,576
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		6,764		4,432
Other changes in fair value (2)		(13,024)		(10,387)
Total change in fair value		(6,260)		(5,955)
Balance at end of quarter	$	46,026	$	29,761

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

(2) Represents changes due to realization of cash flows.

40

Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Contractual servicing fees	$	210,753	$	198,653
Other fees:
Late charges		7,931		12,613
Other		7,854		4,850
	$	226,538	$	216,116

Note 10—Leases

The Company has operating lease agreements relating to its facilities. The Company’s operating lease agreements have remaining terms ranging from less than one year to ten years; some of the operating lease agreements include options to extend the term for up to five years. None of the Company’s operating lease agreements require the Company to make variable lease payments.

The Company’s lease agreements are summarized below:

	Quarter ended March 31,
	2021		2020
Lease expense:
Operating leases	$	4,366	$	3,932
Short-term leases		50		256
Net lease expense included in Occupancy and equipment	$	4,416	$	4,188
Other information:
Payments for operating leases	$	5,036	$	4,440
Operating lease right-of-use assets recognized	$	3,243	$	1,534
Period end weighted averages:
Remaining lease term (in years)		6.2		6.9
Discount rate		4.1%		4.3%

Lease payments of the Company’s operating lease liabilities are summarized below:

Twelve months ended March 31,	Operating leases
	(in thousands)
2022	$	19,690
2023		18,526
2024		17,488
2025		15,765
2026		14,933
Thereafter		24,065
Total lease payments		110,467
Less imputed interest		(14,398)
Operating lease liability	$	96,069

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Note 11—Other Assets

Other assets are summarized below:

		March 31,		December 31,
	2021		2020
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Margin deposits		89,417		116,881
Capitalized software, net		85,371		81,434
Furniture, fixture, equipment and building improvements, net		32,714		32,217
Real estate acquired in settlement of loans		9,616		12,158
Other		318,869		296,425
	$	638,257	$	692,169
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		6,778		7,675
Furniture, fixture, equipment and building improvements, net		5,294		5,689
	$	114,342	$	166,418

Note 12—Short-Term Borrowings

The borrowing facilities described throughout these Notes 12 and 13 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio, profitability and liquidity. Management believes that the Company was in compliance with these covenants as of March 31, 2021.

Assets Sold Under Agreements to Repurchase

The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by loans held for sale at fair value or participation certificates backed by MSRs. Eligible loans and participation certificates backed by MSRs are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on LIBOR. Loans and MSRs financed under these agreements may be re-pledged by the lenders.

On April 1, 2020, the Company issued a series of variable funding notes, the Series 2020-SPIADVF1 Notes (“GMSR Servicing Advance Notes”), to be sold under agreement to repurchase pursuant to a Master Repurchase Agreement, dated as of April 1, 2020, with Credit Suisse First Boston Mortgage Capital LLC, acting as administrative agent on behalf of Credit Suisse AG, Cayman Islands Branch, as buyer (the “GMSR Servicing Advances Repurchase Agreement”).

The GMSR Servicing Advances Repurchase Agreement provides the Company with financing secured by its servicing advances to pay, in accordance with the Ginnie Mae requirements, in the event borrowers are delinquent: (i) regularly scheduled monthly principal and interest to mortgage-backed securities holders; (ii) taxes, homeowner’s insurance, and other escrowed items; and (iii) other expenses related to servicing delinquent loans as specified by (A) state and federal laws and (B) government agencies, including the FHA, the VA, and the USDA.

The borrowing capacity under the GMSR Servicing Advances Repurchase Agreement, shared with VFN financing capacity, is $600 million, all of which is committed and may be used to finance the servicing advances related to delinquent FHA, VA, and USDA loans, including delinquencies caused by forbearance provided to the borrower in accordance with the CARES Act. The VFN is described in Note 4—Related Party Transactions—Investing Activities.

42

Assets sold under agreements to repurchase are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	8,432,579		$	3,139,328
Weighted average interest rate (1)		2.17	%		3.07	%
Total interest expense	$	52,179		$	25,684
Maximum daily amount outstanding	$	10,856,677		$	4,446,795

		March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	10,856,677		$	9,663,995
Unamortized debt issuance costs		(8,200)			(9,198)
	$	10,848,477		$	9,654,797
Weighted average interest rate		1.93	%		1.90	%
Available borrowing capacity (2):
Committed	$	67,463		$	372,803
Uncommitted		3,700,860			2,163,202
	$	3,768,323		$	2,536,005
Fair value of assets securing repurchase agreements:
Loans held for sale	$	12,726,461		$	10,912,178
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—		$	80,862
Servicing advances (3)	$	373,110		$	413,484
Mortgage servicing rights (3)	$	3,105,051		$	2,490,267
Deposits (3)	$	102,270		$	153,054
Margin deposits placed with counterparties (4)	$	10,875		$	5,625

(1) Excludes the effect of amortization of net issuance costs of $6.2 million and $1.6 million for the quarters ended March 31, 2021 and 2020, respectively,

(2) The amount the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed.

(3) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, and the Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

(4) Margin deposits are included in Other assets on the Company’s consolidated balance sheets.

Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:

Remaining maturity at March 31, 2021	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	2,712,890
Over 30 to 90 days		5,075,748
Over 90 to 180 days		428,639
Over 180 days to one year		2,639,400
Total assets sold under agreements to repurchase	$	10,856,677
Weighted average maturity (in months)		5.1

43

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s assets sold under agreements to repurchase is summarized by counterparty below as of March 31, 2021:

			Weighted average
Counterparty	Amount at risk		maturity of advances	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	2,069,444	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	592,940	April 18, 2021	April 23, 2021
Bank of America, N.A.	$	501,873	May 3, 2021	June 9, 2021
JP Morgan Chase Bank, N.A.	$	282,086	November 1, 2021	September 30, 2022
JP Morgan Chase Bank, N.A.	$	15,597	April 7, 2021	April 7, 2021
BNP Paribas	$	252,959	June 14, 2021	July 30, 2021
Barclays Bank PLC	$	94,629	June 19, 2021	November 3, 2022
Goldman Sachs	$	53,150	June 7, 2021	December 23, 2022
Citibank, N.A.	$	41,738	June 16, 2021	August 3, 2021
Morgan Stanley Bank, N.A.	$	33,515	June 16, 2021	November 2, 2022
Royal Bank of Canada	$	30,200	July 19, 2021	March 14, 2022
Wells Fargo Bank, N.A.	$	20,988	June 11, 2021	October 6, 2022

(1) The calculation of the amount at risk includes the VFN and the Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, and the Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

The Company is subject to margin calls during the period the repurchase agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the fair value (as determined by the applicable lender) of the assets securing those agreements decreases.

Mortgage Loan Participation Purchase and Sale Agreements

Certain of the borrowing facilities secured by loans held for sale are in the form of mortgage loan participation purchase and sale agreements. Participation certificates, each of which represents an undivided beneficial ownership interest in mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae, are sold to a lender pending the securitization of the mortgage loans and sale of the resulting securities. A commitment to sell the securities resulting from the pending securitization between the Company and a non-affiliate is also assigned to the lender at the time a participation certificate is sold.

The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs and a holdback amount that is based on a percentage of the purchase price. The holdback amount is not required to be paid to the Company until the settlement of the security and its delivery to the lender.

The mortgage loan participation purchase and sale agreements are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	276,561		$	247,811
Weighted average interest rate (1)		1.34	%		2.64	%
Total interest expense	$	1,095		$	1,810
Maximum daily amount outstanding	$	528,844		$	530,220

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $173,000 for the quarters ended March 31, 2021 and 2020, respectively.

44

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	518,747		$	521,477
Unamortized debt issuance costs		—			—
	$	518,747		$	521,477
Weighted average interest rate		1.36	%		1.39	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	541,206		$	545,500

Corporate Revolving Line of Credit

The Company, through its subsidiary PennyMac, entered into an amended and restated credit agreement on November 18, 2016, as amended (the “Credit Agreement”) under which PennyMac established a revolving line of credit in an amount not to exceed $150 million. PennyMac did not borrow under the revolving line of credit during the periods presented and terminated the Credit Agreement on September 29, 2020 concurrent with the issuance the Unsecured Senior Notes described below.

Note 13—Long-Term Debt

Obligations Under Capital Lease

The Company has a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on June 13, 2022 and bears interest at a spread over one-month LIBOR.

Obligations under capital lease are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	11,340		$	19,406
Weighted average interest rate		2.13	%		3.36	%
Total interest expense	$	59		$	167
Maximum daily amount outstanding	$	11,864		$	20,810

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Unpaid principal balance	$	10,468		$	11,864
Weighted average interest rate		2.11	%		2.15	%
Assets pledged to secure obligations under capital lease:
Capitalized software	$	6,778		$	7,675
Furniture, fixtures and equipment	$	5,294		$	5,689

45

Notes Payable Secured by Mortgage Servicing Assets

Term Notes

The Company, through the Issuer Trust described in Note 4—Related Party Transactions—Investing Activities, issued term notes (the “Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The Term Notes rank pari passu with each other and with the VFN issued by the Issuer Trust to PLS and are secured by certain participation certificates relating to Ginnie Mae MSRs and ESS that are financed pursuant to the GNMA MSR Facility.

Following is a summary of the issued and outstanding Term Notes:

Issuance date	Principal balance		Stated interest rate (1)	Stated Maturity date (2)
	(in thousands)		(Annual)
February 28, 2018 (the "GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The Term Notes’ indentures provide the Company with the option to extend the maturity of the Term Notes by two years after the stated maturity.

MSR Note Payable

On February 1, 2018, the Company issued a note payable that is secured by Freddie Mac MSRs. Interest is charged at a rate based on LIBOR plus the applicable contract margin. The facility expires on March 31, 2023. The maximum amount that the Company may borrow under the note payable is $600 million, less any amount outstanding under the agreement to repurchase pursuant to which the Company finances the VFN. The Company did not borrow under this note payable during the periods presented.

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Notes payable secured by mortgage servicing assets are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.88	%		4.43	%
Total interest expense	$	9,888		$	14,846

(1) Excludes the effect of amortization of debt issuance costs totaling $544,000 and $445,000 for the quarters ended March 31, 2021 and 2020, respectively.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(3,715)			(4,160)
	$	1,296,285		$	1,295,840
Weighted average interest rate		2.87	%		2.93	%
Assets pledged to secure notes payable (1):
Servicing advances	$	373,110		$	413,484
Mortgage servicing rights	$	3,047,056		$	2,421,326
Deposits	$	102,270		$	153,054

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

Unsecured Senior Notes

The Company issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinated indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinated to any future secured indebtedness of the Company to the extent of the fair value of collateral securing such indebtedness.

The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of PFSI’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinated indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinated to any future secured indebtedness of the guarantors to the extent of the fair value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinated to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.

47

Following is a summary of the Unsecured Notes issued:

Issuance date	Principal balance		Coupon rate	Maturity date
	(in thousands)		(Annual)
September 29, 2020	$	500,000	5.38%	October 15, 2025
October 19, 2020		150,000	5.38%	October 15, 2025
February 11, 2021		650,000	4.25%	February 15, 2029
	$	1,300,000

Before October 15, 2022 or February 15, 2024 for the Unsecured Note issued during 2020 and 2021, respectively, the Company may, at its option redeem earlier in accordance with the terms of the Unsecured Notes:

● some or all of the Unsecured Notes at a price equal to 100% of the principal amount of the Unsecured Notes redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, plus a make-whole premium; and

● up to 40% of the aggregate principal amount of the Unsecured Notes with an amount equal to or less than the net proceeds from certain equity offerings at a redemption price of 105.375% and 104.25% for the Unsecured Notes issued during 2020, and 2021, respectively, plus accrued and unpaid interest to, but excluding, the redemption date.

● If a “change of control” (as defined in the indenture under which the Unsecured Notes were issued) occurs, the holders of the Unsecured Notes may require the Company to purchase for cash all or a portion of their Unsecured Notes at a purchase price equal to 101% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest to, but excluding, the repurchase date.

	Quarter ended
	March 31, 2021
	(dollars in thousands)
Average balance	$	1,003,889
Weighted average coupon rate (1)		4.91	%
Total interest expense	$	12,670

(1) Excludes the effect of amortization of debt issuance costs totaling $347,000.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	650,000
Unamortized debt issuance costs, net of issuance premiums		(11,802)			(4,180)
	$	1,288,198		$	645,820
Weighted average coupon rate		4.81	%		5.38	%

Maturities of Long-Term Debt

Maturities of long-term debt obligations (based on final maturity dates) are as follows:

	Twelve months ended March 31,
	2022		2023		2024		2025		2026		Thereafter		Total
	(in thousands)
Obligations under capital lease	$	8,374	$	2,094	$	—	$	—	$	—	$	—	$	10,468
Notes payable secured by mortgage servicing assets		—		650,000		650,000		—		—		—		1,300,000
Unsecured Notes		—		—		—		—		650,000		650,000		1,300,000
Total	$	8,374	$	652,094	$	650,000	$	—	$	650,000	$	650,000	$	2,610,468

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Note 14—Liability for Losses Under Representations and Warranties

Following is a summary of the Company’s liability for losses under representations and warranties:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	32,688	$	21,446
Provision for losses on loans sold:
Resulting from sales of loans		10,053		3,712
Reduction in liability due to change in estimate		(3,685)		(1,676)
Losses incurred, net		(628)		(280)
Balance at end of quarter	$	38,428	$	23,202
Unpaid principal balance of loans subject to representations and warranties at end of quarter	$	220,865,034	$	186,517,598

Note 15—Income Taxes

The Company’s effective income tax rates were 25.5% and 26.2% for the quarters ended March 31, 2021 and 2020, respectively. The lower effective income tax rate during the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily due to a higher net permanent tax deduction for equity compensation in the quarter ended March 31, 2021.

The CARES Act, passed in March 2020, introduced a number of tax law changes which are generally taxpayer favorable and in December 2020, the Taxpayer Certainty and Disaster Tax Relief Act was signed into law. No material changes in our effective income tax rates resulted from either Act.

Note 16—Commitments and Contingencies

Litigation

From time to time, the Company may be a party to legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into the Reorganization without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and was approved on February 11, 2021. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

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On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. Consequently, on April 27, 2020, PennyMac dismissed its federal court action without prejudice to pursue those claims in arbitration as well. While no assurance can be provided at to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending.

Regulatory Matters

The Company and/or its subsidiaries are subject to various state and federal regulations related to its loan production and servicing operations by the various states it operates in as well as federal agencies such as the Consumer Financial Protection Bureau, HUD, and the FHA and is subject to the requirements of the Agencies to which it sells loans and for which it performs loan servicing activities. As a result, the Company may become involved in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by such various federal, state and local regulatory bodies.

On January 7, 2021, PLS received a letter from the CFPB notifying PLS that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the CFPB’s Office of Enforcement was considering recommending that the CFPB take legal action against PLS for alleged violations of the Real Estate Settlement Procedures Act and Truth in Lending Act. The CFPB's examination covered the period from March 2015 through September 2016. Should the CFPB commence an action, it may seek restitution, civil monetary penalties, injunctive relief, or other corrective action, the extent of which remains uncertain at this time. Notably, certain of the alleged violations were originally self-identified by PLS and remediated prior to the CFPB's examination, and all alleged violations were fully remediated as of August 2017. PLS confirmed these remediation actions as well as full restitution to any affected borrowers in its response to the NORA letter submitted on February 8, 2021. While the NORA process remains open and pending at this time, and there can be no assurance as to the nature or extent of any actions taken by the CFPB with regard to these alleged violations, the Company does not believe that the ultimate resolution of this matter will have a material adverse effect on its financial statements or operations.

Commitments to Purchase and Fund Mortgage Loans

The Company’s commitments to purchase and fund loans totaled $17.7 billion as of March 31, 2021.

Note 17—Stockholders’ Equity

In February 2021, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $500 million to $1 billion.

Following is a summary of activity under the stock repurchase program:

	Quarter ended March 31,				Cumulative
	2021		2020		total (1)
	(in thousands)
Shares of common stock repurchased		4,653		238		14,359
Cost of shares of common stock repurchased	$	288,519	$	4,121	$	640,946

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program from inception through March 31, 2021.

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Note 18—Net Gains on Loans Held for Sale

Net gains on loans held for sale at fair value is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
From non-affiliates:
Cash gains (losses):
Loans	$	82,712	$	111,757
Hedging activities		736,225		(122,666)
		818,937		(10,909)
Non-cash gains:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		463,571		275,739
Provisions for losses relating to representations and warranties:
Pursuant to loan sales		(10,053)		(3,712)
Reductions in liability due to change in estimate		3,685		1,676
Changes in fair values of loans and derivatives held at quarter end:
Interest rate lock commitments		(339,086)		178,543
Loans		105,222		(72,080)
Hedging derivatives		(273,687)		(102,891)
		768,589		266,366
From PennyMac Mortgage Investment Trust (1)		(14,248)		77,916
	$	754,341	$	344,282

(1) Gains on sale of loans to PMT are described in Note 4–Related Party Transactions.

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Note 19—Net Interest Income

Net interest income is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	987	$	1,711
Loans held for sale at fair value		74,824		46,426
Placement fees relating to custodial funds		5,883		23,209
		81,694		71,346
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		387		1,218
		82,081		72,564
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		52,179		25,684
Mortgage loan participation purchase and sale agreements		1,095		1,810
Obligations under capital lease		59		167
Notes payable secured by mortgage servicing assets		9,888		14,846
Unsecured senior notes		12,670		—
Corporate revolving line of credit		—		503
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		29,436		14,871
Interest on mortgage loan impound deposits		1,106		1,657
		106,433		59,538
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		1,280		1,974
		107,713		61,512
	$	(25,632)	$	11,052

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Note 20—Stock-based Compensation

As of March 31, 2021, the Company had one stock-based compensation plan. Following is a summary of the stock-based compensation activity:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Grants:
Units:
Performance-based restricted share units ("RSUs")		310		422
Stock options		249		273
Time-based RSUs		171		304
Grant date fair value:
Performance-based RSUs	$	18,234	$	14,768
Stock options		5,116		2,770
Time-based RSUs		10,064		10,662
Total	$	33,414	$	28,200
Vestings and exercises:
Performance-based RSUs vested		640		603
Stock options exercised		88		180
Time-based RSUs vested		305		348
Compensation expense	$	10,877	$	12,368

Note 21—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined by dividing net income by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per share of common stock is determined by dividing net income by the weighted average number of shares of common stock outstanding, assuming all dilutive securities were issued.

Potentially dilutive securities include non-vested stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.

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

	Quarter ended March 31,
	2021		2020
	(in thousands, except per share amounts)
Net income	$	376,868	$	306,243
Weighted average basic shares of common stock outstanding		69,113		78,689
Effect of dilutive securities:
Common shares issuable under stock-based compensation plan		4,004		3,319
Weighted average shares of common stock applicable to diluted earnings per share		73,117		82,008
Basic earnings per share of common stock	$	5.45	$	3.89
Diluted earnings per share of common stock	$	5.15	$	3.73

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Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding performance-based RSUs and stock options excluded from the calculation of diluted earnings per share:

	Quarter ended March 31,
	2021		2020
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		120		162
Time-based RSUs		—		117
Stock options (2)		97		105
Total anti-dilutive shares and units		217		384
Weighted average exercise price of anti-dilutive stock options (2)	$	58.85	$	35.03

(1) Certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds included in such RSUs have not been achieved.

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

Note 22—Supplemental Cash Flow Information

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash paid for interest	$	112,730	$	64,527
(Refunds received) cash paid for income taxes, net	$	(15)	$	13
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	470,533	$	282,315
Unsettled portion of MSR acquisitions	$	—	$	1,656
Operating right-of-use assets recognized	$	3,243	$	1,534
Non-cash financing activity:
Mortgage servicing liabilities resulting from loan sales	$	6,962	$	6,576
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	557	$	379
Issuance of common stock in settlement of directors' fees	$	51	$	48

Note 23—Regulatory Capital and Liquidity Requirements

The Company, through PLS and PennyMac, is required to maintain specified levels of capital and liquidity to remain a seller/servicer in good standing with the Agencies. Such capital and liquid asset requirements generally are tied to the size of the Company’s loan servicing portfolio, loan origination volume and delinquency rates.

The Company is subject to financial eligibility requirements established by the Federal Housing Finance Agency (“FHFA”) for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac. The eligibility requirements include:

● tangible net worth of $2.5 million plus 25 basis points of the UPB of the Company’s total 1-4 unit servicing portfolio, excluding mortgage loans subserviced for others;

● a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB less 70% of such nonperforming Agency servicing UPB in excess of 600 basis points where the underlying loans are in COVID-19 forbearance but were current at the time they entered forbearance.

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The Company is also subject to financial eligibility requirements for Ginnie Mae single-family issuers. The eligibility requirements include net worth of $2.5 million plus 35 basis points of PLS' outstanding Ginnie Mae single-family obligations and a liquidity requirement equal to the greater of $1.0 million or 10 basis points of PLS' outstanding Ginnie Mae single-family securities.

The Agencies’ capital and liquidity requirements, the calculations of which are specified by each Agency, are summarized below:

	March 31, 2021						December 31, 2020
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	4,964,124		$	653,752		$	4,454,680		$	633,331
Ginnie Mae – PLS	$	4,466,186		$	963,805		$	3,794,112		$	1,058,641
HUD – PLS	$	4,466,186		$	2,500		$	3,794,112		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	444,973		$	86,640		$	506,096		$	84,444
Ginnie Mae – PLS	$	444,973		$	215,218		$	506,096		$	215,722
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		14	%		6	%		12	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		16	%		6	%		14	%		6	%

(1) Calculated in compliance with the respective Agency’s requirements.

Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency.

Note 24—Segments

The Company operates in three segments: production, servicing and investment management.

Two of the segments are in the mortgage banking business: production and servicing. The production segment performs loan origination, acquisition and sale activities. The servicing segment performs servicing of loans, execution and management of early buyout loan transactions and servicing of loans sourced and managed by the investment management segment for PMT, including executing the loan resolution strategy identified by the investment management segment relating to distressed mortgage loans.

The investment management segment represents the activities of the Company’s investment manager, which include sourcing, performing diligence, bidding and closing investment asset acquisitions and managing the acquired assets and correspondent production activities for PMT.

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Financial performance and results by segment are as follows:

	Quarter ended March 31, 2021
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	515,963	$	238,378	$	754,341	$	—	$	754,341
Loan origination fees		104,037		—		104,037		—		104,037
Fulfillment fees from PennyMac Mortgage Investment Trust		60,835		—		60,835		—		60,835
Net loan servicing fees		—		39,720		39,720		—		39,720
Net interest income (expense):
Interest income		29,531		52,550		82,081		—		82,081
Interest expense		38,072		69,638		107,710		3		107,713
		(8,541)		(17,088)		(25,629)		(3)		(25,632)
Management fees		—		—		—		8,449		8,449
Other		597		1,197		1,794		1,142		2,936
Total net revenue		672,891		262,207		935,098		9,588		944,686
Expenses		309,996		120,463		430,459		8,219		438,678
Income before provision for income taxes	$	362,895	$	141,744	$	504,639	$	1,369	$	506,008
Segment assets at quarter end	$	8,886,460	$	22,393,249	$	31,279,709	$	18,271	$	31,297,980

(1) All revenues are from external customers.

	Quarter ended March 31, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	316,635	$	27,647	$	344,282	$	—	$	344,282
Loan origination fees		57,571		—		57,571		—		57,571
Fulfillment fees from PennyMac Mortgage Investment Trust		41,940		—		41,940		—		41,940
Net loan servicing fees		—		257,808		257,808		—		257,808
Net interest income (expense):
Interest income		26,585		45,979		72,564		—		72,564
Interest expense		20,157		41,346		61,503		9		61,512
		6,428		4,633		11,061		(9)		11,052
Management fees		—		—		—		9,055		9,055
Other		(10)		(680)		(690)		807		117
Total net revenue		422,564		289,408		711,972		9,853		721,825
Expenses		182,433		118,566		300,999		6,096		307,095
Income before provision for income taxes	$	240,131	$	170,842	$	410,973	$	3,757	$	414,730
Segment assets at quarter end	$	5,686,878	$	5,186,188	$	10,873,066	$	18,067	$	10,891,133

(1) All revenues are from external customers.

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Note 25—Subsequent Events

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

● On May 6, 2021, the Company announced that its board of directors declared a cash dividend of $0.20 per common share. The dividend will be paid on May 27, 2021 to common shareholders of record as of May 17, 2021.

● On April 28, 2021, the Company, through three of its wholly-owned subsidiaries, PLS, PennyMac, and PFSI ISSUER TRUST – FMSR (“PFSI Issuer”), entered into a structured finance transaction, allowing PLS to finance Fannie Mae MSRs and ESS (the “FNMA MSR Facility”). In connection with the FNMA MSR Facility, PLS pledges and/or sells to PFSI Issuer participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of a master repurchase agreement and the PFSI Issuer issues to PLS the PFSI ISSUER TRUST - FMSR Collateralized Notes, Series 2021-MSRVF. In addition, the PFSI Issuer may issue to institutional investors term notes secured on a pari passu basis by the participation certificates relating to the MSRs and ESS.

● All agreements to repurchase assets that matured before the date of this Report were extended or renewed.

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

Cautionary Statement Regarding Forward-Looking Statements

The following discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements including the related notes of PennyMac Financial Services, Inc. (“PFSI”) included within this Quarterly Report on Form 10-Q.

Statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date hereof and we assume no obligation to update or supplement any forward-looking statements.

Overview

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to the words “we,” “us,” “our” and the “Company” refer to PFSI.

Our Company

We are a specialty financial services firm with a comprehensive mortgage platform and integrated business primarily focused on the production and servicing of U.S. residential mortgage loans (activities which we refer to as mortgage banking) and the management of investments related to the U.S. mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and our management’s experience across all aspects of the mortgage business will allow us to profitably grow these activities and capitalize on other related opportunities as they arise in the future.

We operate and control all of the business and affairs and consolidate the financial results of Private National Mortgage Acceptance Company, LLC (“PennyMac”). We conduct our business in three segments: production, servicing (together, production and servicing comprise our mortgage banking activities) and investment management.

● The production segment performs loan origination, acquisition and sale activities.

● The servicing segment performs loan servicing for both newly originated loans we are holding for sale and loans we service for others, including for PMT.

● The investment management segment represents our investment management activities, which include the activities associated with investment asset acquisitions and dispositions such as sourcing, due diligence, negotiation and settlement.

Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC (“PLS”), is a non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each of which is a government-sponsored entity. PLS is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), and a lender/servicer of the Veterans Administration (“VA”) and the U.S. Department of Agriculture (“USDA”). We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Guam and the U.S. Virgin Islands, and originate loans in 49 states and the District of Columbia, either because PLS is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction.

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Our investment management subsidiary is PNMAC Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management contract with PennyMac Mortgage Investment Trust (“PMT”), a mortgage real estate investment trust listed on the New York Stock Exchange under the ticker symbol PMT.

Results of Operations

Our results of operations are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands, except per share amounts)
Revenues:
Net gains on loans held for sale at fair value	$	754,341		$	344,282
Loan origination fees		104,037			57,571
Fulfillment fees from PennyMac Mortgage Investment Trust		60,835			41,940
Net loan servicing fees		39,720			257,808
Net interest (expense) income		(25,632)			11,052
Management fees		8,449			9,055
Other		2,936			117
Total net revenue		944,686			721,825
Expenses:
Compensation		258,829			168,436
Loan origination		87,392			46,004
Technology		33,672			19,107
Servicing		19,183			42,166
Other		39,602			31,382
Total expenses		438,678			307,095
Income before provision for income taxes		506,008			414,730
Provision for income taxes		129,140			108,487
Net income	$	376,868		$	306,243
Earnings per share
Basic	$	5.45		$	3.89
Diluted	$	5.15		$	3.73
Return on average common stockholders' equity		43.4	%		56.0	%
Income before provision for income taxes by segment:
Mortgage banking:
Production	$	362,895		$	240,131
Servicing		141,744			170,842
Total mortgage banking		504,639			410,973
Investment management		1,369			3,757
	$	506,008		$	414,730
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") (1)	$	674,308		$	302,322
During the quarter:
Interest rate lock commitments issued	$	36,118,713		$	24,804,994
At end of quarter:
Interest rate lock commitments outstanding	$	17,668,145		$	9,377,614
Unpaid principal balance of loan servicing portfolio:
Owned:
Mortgage servicing rights	$	244,367,930		$	231,484,161
Mortgage servicing liabilities		3,173,793			2,635,734
Loans held for sale		12,959,016			5,276,688
		260,500,739			239,396,583
Subserviced for PMT		188,324,162			144,830,043
	$	448,824,901		$	384,226,626
Net assets of PennyMac Mortgage Investment Trust	$	2,357,143		$	1,823,368
Book value per share	$	51.78		$	29.85

(1) To provide investors with information in addition to our results as determined by accounting principles generally accepted in the United States (“GAAP”), we disclose Adjusted EBITDA as a non-GAAP measure. Adjusted EBITDA is a measure that is frequently used in our industry to measure performance and we believe that this measure provides supplemental information that is useful to investors. Adjusted EBITDA is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net income, or any other performance measure calculated in accordance with GAAP.

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We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of MSRs and MSLs due to changes in valuation inputs used in valuation model, increase (decrease) in fair value of ESS payable to PMT, hedging losses (gains) associated with MSRs, stock-based compensation and interest expense on corporate debt or corporate revolving credit facilities and capital leases.

We believe that the presentation of Adjusted EBITDA provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. However, other companies may define Adjusted EBITDA differently, and as a result, our measures of Adjusted EBITDA may not be directly comparable to those of other companies.

Adjusted EBITDA measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

a) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

b) they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

c) they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

Because of these limitations, Adjusted EBITDA measures are not intended as alternatives to net income as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Net income	$	376,868	$	306,243
Provision for income taxes		129,140		108,487
Income before provisions for income taxes		506,008		414,730
Depreciation and amortization		7,632		5,352
(Increase) decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in valuation model		(306,126)		920,294
Increase (decrease) in fair value of ESS payable to PennyMac Mortgage Investment Trust		1,037		(14,522)
Hedging losses (gains) associated with MSRs		442,151		(1,036,570)
Stock‑based compensation		10,877		12,368
Interest expense on corporate debt or corporate revolving credit facilities and capital lease		12,729		670
Adjusted EBITDA	$	674,308	$	302,322

Beginning the year ended December 31, 2020, the United States has been significantly impacted by the ongoing effects of the COVID-19 pandemic (the “Pandemic” or “COVID-19”) and the effects of market and government responses to the Pandemic. These developments have resulted in continued economic uncertainty, financial hardships and unemployment for many existing borrowers.

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As part of its response to the Pandemic, the federal government included requirements in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that we provide borrowers with loans we service for the Agencies with substantial payment forbearance. As a result of this requirement, we have seen a large increase in delinquencies in our servicing portfolio which has increased our cost to service those loans and may require us to finance substantial amounts of advances of principal and interest payments to the investors holding these loans, as well as property taxes, insurance and other costs to protect investors’ interest in the properties collateralizing the loans. As of March 31, 2021, 5.7% of loans in our predominately government-insured or guaranteed MSR portfolio were in forbearance plans and delinquent resulting in an increase in the level of servicing advances we have been required to make in order to fund borrower delinquencies.

The Pandemic has had a mixed effect on the earnings of our servicing segment by reducing the amount of placement fees we earn on custodial deposits related to these loans and increasing our cost to service due to higher delinquency and default rates, offset by gains we recognize when we are able to modify and resell previously delinquent government loans.

In our production segment, gain on sale margins reflect both the strong but moderating demand for loans discussed above as well as growth in loan production from our consumer direct and broker direct channels. The mortgage origination market for 2020 was estimated at $4.0 trillion and current forecasts estimate of the origination market range from $3.3 trillion to $4.0 trillion for 2021. The increase in demand for mortgage loans in 2020, combined with constraints on mortgage industry origination capacity that existed before the Pandemic allowed us to realize higher gain-on sale margins in our production segment in 2020. As industry capacity has adjusted to demand and recent increase in market interest rates have moderated demand, our gain on sale margins have moderated from 2020 levels.

The current environment caused by the Pandemic in the United States is historically unprecedented and the source of much uncertainty surrounding future economic and market prospects and the ongoing effects on our future prospects are difficult to anticipate. For further discussion of the potential impacts of the Pandemic please also see the section entitled “Risk Factors” in Part II. Item 1A. and in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021.

For the quarter ended March 31, 2021, income before provision for income taxes increased $91.3 million compared to the same period in 2020. The increases were primarily due to an increase in production income (Net gains on loans held for sale at fair value, Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust) which reflects higher production volume, partially offset by a decrease in Net loan servicing fees primarily due to decrease in changes in the fair value of our MSRs, MSLs and ESS, net of hedging results and an increase in total expenses. The increase in total expenses was mainly due to increases in compensation and loan origination expenses reflecting the continuing growth of our mortgage banking activities.

Net Gains on Loans Held for Sale at Fair Value

During the quarter ended March 31, 2021, we recognized Net gains on loans held for sale at fair value totaling $754.3 million, an increase of $410.1 million compared to the same period in 2020. The increase was primarily due to an increase in both production volume and gain on sale margins during the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020.

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Our net gains on loans held for sale are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
From non-affiliates:
Cash gains (losses):
Loans	$	82,712	$	111,757
Hedging activities		736,225		(122,666)
Total cash gains (losses)		818,937		(10,909)
Non-cash gains:
Change in fair value of loans and derivative financial instruments outstanding at end of quarter:
Interest rate lock commitments		(339,086)		178,543
Loans		105,222		(72,080)
Hedging derivatives		(273,687)		(102,891)
		(507,551)		3,572
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		463,571		275,739
Provisions for losses relating to representations and warranties:
Pursuant to loan sales		(10,053)		(3,712)
Reductions in liability due to change in estimate		3,685		1,676
Total non-cash gains		(50,348)		277,275
Total gains on sale from non-affiliates		768,589		266,366
From PennyMac Mortgage Investment Trust (primarily cash)		(14,248)		77,916
	$	754,341	$	344,282
During the quarter:
Interest rate lock commitments issued:
Government-insured or guaranteed mortgage loans	$	25,146,879	$	19,029,138
Conventional mortgage loans		10,971,834		5,765,876
Jumbo mortgage loans		—		8,304
Home equity lines of credit		—		1,676
	$	36,118,713	$	24,804,994
At end of quarter:
Loans held for sale at fair value	$	13,385,789	$	5,541,987
Commitments to fund and purchase loans	$	17,668,145	$	9,377,614

Our gains on loans held for sale include both cash and non-cash elements. We recognize a significant portion of our gains on loans held for sale when we make a commitment to purchase or fund a mortgage loan. We recognize this gain in the form of an interest rate lock commitment. We adjust our initial gain amount as the loan purchase or origination process progresses until the loan is either funded or cancelled. We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur liabilities for mortgage servicing liabilities (which represent the fair value of the costs we expect to incur in excess of the fees we receive for early buyout of delinquent loans (“EBO loans”) we have resold) and for the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions.

Non-cash elements of gain on sale of loans held for sale

The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 61% of our gain on sale of loans held for sale at fair value for the quarter ended March 31, 2021 as compared to 79% for the same period in 2020. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. How we measure and update our measurements of IRLCs, MSRs and MSLs is detailed in Note 6 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.

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Our agreements with the purchasers and insurers include representations and warranties related to the loans we sell. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.

In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit losses on the loans. Our credit losses may be reduced by any recourse we have to correspondent originators that sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent seller.

Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current UPB of loans sold by us and subject to representation and warranty liability to date represents the maximum exposure to repurchases related to representations and warranties.

The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, purchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying loans. Our estimate of the liability for representations and warranties is developed by our credit administration staff and approved by our senior management credit committee which includes our senior executives and senior management in our loan production, loan servicing and credit risk management areas. 

The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and review our liability estimate on a periodic basis.

We recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $10.1 million for the quarter ended March 31, 2021, compared to $3.7 million for the quarter ended March 31, 2020. The increase in the provision relating to current loan sales is primarily attributable to increased sales of loans supplemented by increased loss assumptions relating to our securitizations of early buyout loans. We also recorded reductions in the liability of $3.7 million during the quarter ended March 31, 2021 compared to $1.7 million during the quarter ended March 31, 2020. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.

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Following is a summary of loan repurchase activity and the UPB of loans subject to representations and warranties:

	Quarter ended March 31,
	2021		2020
	(in thousands)
During the quarter:
Indemnification activity:
Loans indemnified by PFSI at beginning of quarter	$	13,788	$	15,366
New indemnifications		2,155		879
Less indemnified loans sold, repaid or refinanced		1,704		—
Loans indemnified by PFSI at end of quarter	$	14,239	$	16,245
Repurchase activity:
Total loans repurchased by PFSI	$	17,986	$	16,282
Less:
Loans repurchased by correspondent lenders		8,689		6,153
Loans repaid by borrowers or resold with defects resolved		2,649		1,446
Net loans repurchased with losses chargeable to liability for representations and warranties	$	6,648	$	8,683
Net losses charged to liability for representations and warranties	$	628	$	280
At end of quarter:
Unpaid principal balance of loans subject to representations and warranties	$	220,865,034	$	186,517,598
Liability for representations and warranties	$	38,428	$	23,202

During the quarter ended March 31, 2021, we repurchased loans totaling $18.0 million in UPB. We recorded losses of $628,000 net of recoveries during the quarter ended March 31, 2021. If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase.

Loan origination fees

Loan origination fees increased $46.5 million during the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020. The increase was primarily due to an increase in volume of loans we produced.

Fulfillment fees from PennyMac Mortgage Investment Trust

Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees were calculated as a percentage of the UPB of the loans we fulfilled for PMT through June 30, 2020. Effective July 1, 2020, fulfillment fees are calculated based on the number of loans we fulfill for PMT.

Fulfillment fees increased $18.9 million during the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020. The increase compared to the quarter ended March 31, 2020 was primarily due to an increase in PMT’s loan production volume, partially offset by the effect of the amendment to the fulfillment fee structure noted above.

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Net Loan Servicing Fees

Following is a summary of our net loan servicing fees:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Net loan servicing fees:
Loan servicing fees:
From non-affiliates	$	210,753	$	198,653
From PennyMac Mortgage Investment Trust		19,093		14,521
Other		29,599		28,755
		259,445		241,929
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results		(219,725)		15,879
Net loan servicing fees	$	39,720	$	257,808
Average loan servicing portfolio	$	437,825,970	$	377,294,965

Change in fair value of mortgage servicing rights and excess servicing spread are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Realization of cash flows	$	(82,663)	$	(114,919)
Other changes in fair value of mortgage servicing rights and mortgage servicing liabilities		306,126		(920,294)
Change in fair value of excess servicing spread		(1,037)		14,522
Hedging results		(442,151)		1,036,570
Total change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results	$	(219,725)	$	15,879
Average balances:
Mortgage servicing rights	$	2,931,683	$	2,562,205
Mortgage servicing liabilities	$	46,060	$	29,384
Excess servicing spread financing	$	87,451	$	169,195
At end of quarter:
Mortgage servicing rights	$	3,268,910	$	2,193,697
Mortgage servicing liabilities	$	46,026	$	29,761
Excess servicing spread financing	$	—	$	157,109

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Following is a summary of our loan servicing portfolio:

	March 31,		December 31,
	2021		2020
	(in thousands)
Loans serviced
Prime servicing:
Owned:
Mortgage servicing rights
Originated	$	208,189,112	$	196,873,590
Acquired		36,178,818		41,537,219
		244,367,930		238,410,809
Mortgage servicing liabilities		3,173,793		2,857,492
Loans held for sale		12,959,016		11,063,938
		260,500,739		252,332,239
Subserviced for PMT		188,279,019		174,360,317
Total prime servicing		448,779,758		426,692,556
Special servicing subserviced for PMT		45,143		58,274
Total loans serviced	$	448,824,901	$	426,750,830
Delinquencies:
Owned servicing:
30-89 days (1)	$	5,075,509	$	7,611,216
90 days or more (1)		19,610,627		22,545,750
	$	24,686,136	$	30,156,966
Delinquent loans in COVID-19 pandemic-related forbearance:
30-89 days	$	2,145,003	$	3,225,010
90 days or more		12,828,212		14,904,052
	$	14,973,215	$	18,129,062
Subserviced for PMT:
30-89 days (1)	$	931,937	$	1,250,381
90 days or more (1)		3,883,557		4,543,660
	$	4,815,494	$	5,794,041
Delinquent loans in COVID-19 pandemic-related forbearance:
30-89 days	$	424,776	$	593,517
90 days or more		3,046,256		3,690,505
	$	3,471,032	$	4,284,022

(1) Includes delinquent loans in COVID-19 pandemic-related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

Net loan servicing fees decreased $218.1 million during the quarter ended March 31, 2021 compared to the same period in 2020. The decrease was due to a decrease of $235.6 million in fair value changes relating to MSRs, mortgage servicing liabilities (“MSLs”), and ESS, net of hedging results, partially offset by an increase of $17.5 million in loan servicing fees resulting from an increase in our average servicing portfolio during the quarter ended March 31, 2021 compared to the same period in 2020. The decrease of $235.6 million is primarily due to a decrease of $1.5 billion in hedging activities, partially offset by an increase of $1.2 billion in changes in fair value of MSRs and MSLs, reflecting the effect on prepayment experience and expectations on the fair value of our investments in MSRs of increasing interest rates during the quarter ended March 31, 2021 as compared to decreasing interest rates during the quarter ended March 31, 2020.

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Net Interest (Expense) Income

Net interest (expense) income decreased $36.7 million during the quarter ended March 31, 2021 compared to the same period in 2020. The decrease was primarily due to:

● a decrease in placement fees we receive relating to custodial funds that we manage due to decreased earning rates;

● an increase in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of increased borrower refinancing activity due to the lower interest rate environment; and

● introduction of interest on Unsecured Notes issued during the period from September 2020 to February 2021.

Management fees

Management fees are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Management fees:
PennyMac Mortgage Investment Trust:
Base management	$	8,449	$	9,055
Performance incentive		—		—
	$	8,449	$	9,055

Management fees decreased $0.6 million during the quarter ended March 31, 2021 compared to the same period in 2020. The decrease was due to the decreases in PMT’s average shareholders’ equity, upon which its base management fees are based. The decrease in PMT’s average shareholders’ equity during 2021 as compared to 2020 is the result of the loss PMT incurred during the quarter ended March 31, 2020. PMT’s shareholders’ equity has substantially recovered during the twelve months ended March 31, 2021.

Expenses

Compensation

Compensation expenses are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Salaries and wages	$	143,700	$	89,315
Incentive compensation		72,655		45,981
Taxes and benefits		31,597		20,772
Stock and unit-based compensation		10,877		12,368
	$	258,829	$	168,436
Head count:
Average		6,882		4,289
Year end		7,075		4,458

Compensation expense increased $90.4 million during the quarter ended March 31, 2021 compared to the same period in 2020. The increase was primarily due to growth in head count made to accommodate the growth in our loan production and servicing activities.

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Loan origination

Loan origination expense increased $41.4 million during the quarter ended March 31, 2021 compared to the same period in 2020. The increase was primarily resulting from increased consumer and broker direct lending activities during the quarter ended March 31, 2021 compared to the same period during 2020.

Technology

Technology expense increased $14.6 million during the quarter ended March 31, 2021 compared to the same period in 2020. The increases were primarily due to growth in our loan servicing operations and continued investment in our loan production and servicing infrastructure.

Servicing

Servicing expenses decreased $23.0 million during the quarter ended March 31, 2021 compared to the same period in 2020. This decrease in servicing expense was primarily due to reversal of the provision for estimated servicing advances losses recorded in prior periods in amount of $20.5 million during the quarter ended March 31, 2021. The reduction reflects the recent improvements in the performance of our servicing portfolio.

Provision for Income Taxes

Our effective income tax rates were 25.5% during the quarter ended March 31, 2021 compared to 26.2% during the same period in 2020. The lower effective income tax rate during the quarter ended March 31, 2021 compared to the same period in 2020 was primarily resulting from a higher net permanent tax deduction for equity compensation in the quarter ended March 31, 2021.

Balance Sheet Analysis

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

	March 31,		December 31,
	2021		2020
	(in thousands)
ASSETS
Cash and short-term investments	$	466,720	$	547,933
Loans held for sale at fair value		13,385,789		11,616,400
Derivative assets		530,852		711,238
Servicing advances, net		550,150		579,528
Investments in and advances to affiliates		70,114		168,972
Mortgage servicing rights		3,268,910		2,581,174
Loans eligible for repurchase		12,312,393		14,625,447
Other		713,052		767,103
Total assets	$	31,297,980	$	31,597,795
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt	$	11,367,224	$	10,176,274
Long-term debt		2,594,951		2,085,274
Liability for loans eligible for repurchase		12,312,393		14,625,447
Income taxes payable		751,855		622,700
Other		804,143		698,712
Total liabilities		27,830,566		28,208,407
Stockholders' equity		3,467,414		3,389,388
Total liabilities and stockholders' equity	$	31,297,980	$	31,597,795

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Total assets decreased $299.8 million from $31.6 billion at December 31, 2020 to $31.3 billion at March 31, 2021. The decrease was primarily due to a decrease of $2.3 billion in loans eligible for repurchase, $180.4 million in derivative assets, $98.9 million investments in and advances to affiliates, partially offset by an increase of $1.8 billion in loans held for sale at fair value and $687.7 million in MSRs.

Total liabilities decreased $377.8 million from $28.2 billion at December 31, 2020 to $27.8 billion at March 31, 2021. The decrease was primarily due to the decrease in liability for loans eligible for repurchase, partially offset by an increase in borrowings to finance the growth in our inventory of loans held for sale.

Cash Flows

Our cash flows for the quarters ended March 31, 2021 and 2020 are summarized below:

	Quarter ended March 31,
	2021		2020		Change
	(in thousands)
Operating	$	(1,248,016)	$	(730,284)	$	(517,732)
Investing		(223,518)		1,116,225		(1,339,743)
Financing		1,380,686		304,519		1,076,167
Net (decrease) increase in cash and restricted cash	$	(90,848)	$	690,460	$	(781,308)

Our cash flows resulted in a net decrease in cash and restricted cash of $90.8 million during the quarters ended March 31, 2021 as discussed below.

Operating activities

Net cash used in operating activities totaled $1.2 billion during the quarter ended March 31, 2021 compared with net cash used in operating activities totaled $730.2 million during the same period in 2020. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans as shown below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash flows from:
Loans held for sale	$	(1,283,395)	$	(816,784)
Other operating sources		35,379		86,500
	$	(1,248,016)	$	(730,284)

Investing activities

Net cash used in investing activities during the quarter ended March 31, 2021 totaled $223.5 million primarily due to $527.5 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, partially offset by a $245.5 million decrease in margin deposits. Net cash provided by investing activities during the quarter ended March 31, 2020 totaled $1.1 billion, primarily due to $942.0 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and a decrease in margin deposits of $133.0 million.

Financing activities

Net cash provided by financing activities totaled $1.4 billion during the quarter ended March 31, 2021, primarily due to an increase of $1.8 billion in borrowings to finance the growth in our loans held for sale, partially offset by $288.5 million of repurchase of our common stock and $134.6 million of repayment of ESS financing. Net cash provided by financing activities totaled $304.5 million during the quarter ended March 31, 2020, primarily to finance the growth in our inventory of mortgage loans held for sale.

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Liquidity and Capital Resources

Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings, proceeds from and issuance of equity or debt offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.

The effect of the Pandemic on our operations, liquidity and capital resources remain uncertain and difficult to predict, for further discussion of the potential impacts of the Pandemic please also see the section entitled “Risk Factors” in Part II. Item 1A. and in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021.

The CARES Act allows borrowers with federally-backed loans to request temporary payment forbearance in response to the increased borrower hardships resulting from the COVID-19 pandemic and may require us as the servicer to advance principal and interest to investors for up to four months on Fannie Mae and Freddie Mac loans and longer on Ginnie Mae and other government agency backed loans, as well as advancing property taxes, insurance premiums and other expenses. In April 2020, the Company entered into a new Ginnie Mae servicing advance financing transaction allowing the Company to borrow $600 million in excess of our currently outstanding MSR term notes against Ginnie Mae MSRs and servicing advances. The Ginnie Mae servicing advances eligible for financing include advances made to support regularly scheduled monthly principal and interest to mortgage-backed securities holders, taxes, homeowners insurance and escrowed items and other costs related to servicing delinquent loans. We are also in ongoing discussions with our lending partners to align our servicing advance assets and financing capacity, and to further diversify our financing alternatives.

The COVID-19 pandemic has significantly increased the number of loans that are delinquent in our Ginnie Mae MSR portfolio. The Ginnie Mae guidelines provides us with the option to purchase loans that are at least three months delinquent out of the underlying Ginnie Mae securities as an alternative to continuing to advance principal and interest payments to the holders of the Ginnie Mae securities. We refer to such loans as “early buyout” or EBO loans.

During the quarter ended March 31, 2021, we repurchased $4.1 billion in UPB of EBO loans from our Ginnie Mae MSR portfolio. Our objective is to work with the borrowers to cure the loan delinquency through either borrower reperformance or modification of the loans’ terms. When curing the delinquency is not feasible, we work to settle the loan and collect our claims from the applicable insurer or guarantor. When we are able to cure the delinquency, we are able to re-deliver the cured loan into another Ginnie Mae guaranteed security. Depending on the method used to cure a borrower delinquency, the Ginnie Mae program may require at least a six month period of timely borrower payments before we are able to re-deliver the loan. Therefore, regardless of whether we cure or settle the repurchased loan, our investment in the EBO loans may require a substantial holding period.

Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable, a capital lease and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for terms of approximately one year. Because a significant portion of our current debt facilities consists 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. On February 11, 2021, we issued $650 million of long-term Unsecured Notes that mature on February 15, 2029. We used the proceeds from the 2021 Unsecured Notes financing to repay some of our existing short-term borrowings.

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Our repurchase agreements represent the sales of assets together with agreements for us to buy back the respective assets at a later date. The table below presents the average, maximum daily and ending balances:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Average balance	$	8,432,579	$	3,139,328
Maximum daily balance	$	10,856,677	$	4,446,795
Balance at quarter end	$	10,856,677	$	4,446,795

The differences between the average and maximum daily balances on our repurchase agreements reflect the fluctuations throughout the month of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.

Our secured financing agreements at PLS require us to comply with various financial covenants. The most significant financial covenants currently include the following:

● a minimum in unrestricted cash and cash equivalents of $40 million;

● a minimum tangible net worth of $1.25 billion;

● a maximum ratio of total liabilities to tangible net worth of 10:1; and

● at least one other warehouse or repurchase facility that finances amounts and assets that are similar to those being financed under certain of our existing secured financing agreements.

With respect to servicing performed for PMT, PLS is also subject to certain covenants under PMT’s debt agreements. Covenants in PMT’s debt agreements are equally, or sometimes less, restrictive than the covenants described above.

In addition to the covenants noted above, the indenture governing our Unsecured Notes contains covenants that limit our and our restricted subsidiaries’ ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things:

● pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments;

● incur, assume or guarantee additional debt or issue preferred stock;

● incur liens on assets;

● merge or consolidate with another person or sell all or substantially all of our assets to another person;

● transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries;

● enter into transactions with affiliates; and

● allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us.

Although these financial covenants limit the amount of indebtedness that we may incur and affect 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.

Our debt financing agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value (as determined by the

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applicable lender) of the assets subject to the related financing agreement. 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.

We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for its approved single-family issuers, as summarized below:

● Effective June 30, 2020, FHFA liquidity requirement is equal to 0.035% (3.5 basis points) of total Agency servicing UPB plus an incremental 200 basis points of the amount by which total nonperforming Agency servicing UPB (reduced by 70% of the UPB of nonperforming Agency loans that are in COVID-19 payment forbearance and were current when they entered such forbearance) exceeds 6% of the applicable Agency servicing UPB; allowable assets to satisfy liquidity requirement include cash and cash equivalents (unrestricted), certain investment-grade securities that are available for sale or held for trading including Agency mortgage-backed securities, obligations of Fannie Mae or Freddie Mac, and U.S. Treasury obligations, and unused and available portions of committed servicing advance lines;

● FHFA net worth requirement is a minimum net worth of $2.5 million plus 0.25% (25 basis points) of UPB for total 1-4 unit residential mortgage loans serviced and a tangible net worth/total assets ratio greater than or equal to 6%;

● Ginnie Mae single-family issuer minimum liquidity requirement is equal to the greater of $1.0 million or 0.10% (10 basis points) of the issuer’s outstanding Ginnie Mae single-family securities, which must be met with cash and cash equivalents; and

● Ginnie Mae net worth requirement is equal to $2.5 million plus 0.35% (35 basis points) of the issuer’s outstanding Ginnie Mae single-family obligations.

On January 31, 2020, FHFA proposed changes to the eligibility requirements, which would increase the tangible net worth requirement to $2.5 million plus 35 basis points of the UPB of loans serviced for Ginnie Mae and 25 basis points of the UPB of all other 1-4 unit loans serviced, and increase the liquidity requirement to 4 basis points of the aggregate UPB serviced for Fannie Mae and Freddie Mac and 10 basis points of the UPB serviced for Ginnie Mae plus 300 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 4% of total Agency servicing UPB. On June 15, 2020, FHFA announced that it will be re-proposing changes to these requirements.

We believe that we are currently in compliance with the applicable Agency requirements.

On February 4, 2021, our Board of Directors increased our common stock repurchase program from $500 million to $1 billion. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through March 31, 2021, we have repurchased $640.9 million of shares under our stock repurchase program.

We continue to explore a variety of means of financing our continued growth, including debt financing through bank warehouse lines of credit, bank loans, repurchase agreements, securitization transactions and corporate debt. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or whether such efforts will be successful.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Guarantees

As of March 31, 2021, we have not entered into any off-balance sheet arrangements.

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Debt Obligations

As described further above in “Liquidity and Capital Resources,” we currently finance certain of our assets through borrowings with major financial institution counterparties in the form of sales of assets under agreements to repurchase, mortgage loan participation purchase and sale agreements, notes payable and a capital lease. The borrower under each of these facilities is PLS or the Issuer Trust with the exception of the capital lease where the borrower is PennyMac. All PLS obligations as previously noted are guaranteed by PennyMac.

Under the terms of these agreements, PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of March 31, 2021, we believe we were in compliance in all material respects with these covenants.

The agreements also contain margin call provisions that, upon notice from the applicable lender, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. 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.

In addition, the agreements contain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, servicer termination events and defaults, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements.

Our debt obligations have the following size and maturities:

	Outstanding		Total		Committed
Lender	indebtedness (1)		facility size (2)		facility (2)		Maturity date (2)
	(dollar amounts in thousands)
Assets sold under agreements to repurchase
Credit Suisse First Boston Mortgage Capital LLC (3)	$	2,755,703	$	4,950,000	$	650,000	March 31, 2023
Credit Suisse First Boston Mortgage Capital LLC (3)	$	50,000	$	50,000	$	50,000	March 31, 2023
JPMorgan Chase Bank, N.A.	$	2,639,400	$	3,000,000	$	—	September 30, 2022
JPMorgan Chase Bank, N.A.	$	202,431	$	750,000	$	50,000	June 6, 2021
Bank of America, N.A.	$	1,317,580	$	1,800,000	$	500,000	June 9, 2021
Goldman Sachs Bank USA	$	895,437	$	1,000,000	$	500,000	December 23, 2022
Citibank, N.A.	$	787,322	$	1,000,000	$	650,000	August 3, 2021
Barclays Bank PLC	$	730,340	$	750,000	$	375,000	November 3, 2022
Morgan Stanley Bank, N.A.	$	562,172	$	600,000	$	300,000	November 2, 2022
Royal Bank of Canada	$	434,487	$	1,000,000	$	500,000	March 14, 2022
BNP Paribas	$	308,754	$	375,000	$	200,000	July 30, 2021
Wells Fargo Bank, N.A.	$	173,051	$	350,000	$	175,000	October 6, 2022
Mortgage loan participation purchase and sale agreements
Bank of America, N.A.	$	518,747	$	550,000	$	—	June 9, 2021
Notes payable
GMSR 2018-GT1 Notes	$	650,000	$	650,000			February 25, 2023
GMSR 2018-GT2 Notes	$	650,000	$	650,000			August 25, 2023
Unsecured Senior Notes - 5.375%	$	650,000	$	650,000			October 15, 2025
Unsecured Senior Notes - 4.25%	$	650,000	$	650,000			February 15, 2029
Credit Suisse AG (3)	$	—	$	—	$	—	March 31, 2023
Obligations under capital lease
Banc of America Leasing and Capital LLC	$	10,468	$	25,000	$	—	June 13, 2022

(1) Outstanding indebtedness as of March 31, 2021.

(2) Total facility size, committed facility and maturity date include contractual changes through the date of this Report.

(3) The borrowing of $50 million with Credit Suisse First Boston Mortgage Capital LLC is in the form of a sale of a variable funding note under an agreement to repurchase up to a maximum of $600 million, less any amount utilized

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under the Credit Suisse AG note payable, an agreement to repurchase relating to the financing of Fannie Mae MSRs and an agreement to repurchase relating to the financing of GNMA servicing advances.

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 our assets sold under agreements to repurchase is summarized by counterparty below as of March 31, 2021:

			Weighted average
			maturity of
			advances under
Counterparty	Amount at risk		repurchase agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	2,069,444	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	592,940	April 18, 2021	April 23, 2021
Bank of America, N.A.	$	501,873	May 3, 2021	June 9, 2021
JP Morgan Chase Bank, N.A.	$	282,086	November 1, 2021	September 30, 2022
JP Morgan Chase Bank, N.A.	$	15,597	April 7, 2021	April 7, 2021
BNP Paribas	$	252,959	June 14, 2021	July 30, 2021
Barclays Bank PLC	$	94,629	June 19, 2021	November 3, 2022
Goldman Sachs	$	53,150	June 7, 2021	December 23, 2022
Citibank, N.A.	$	41,738	June 16, 2021	August 3, 2021
Morgan Stanley Bank, N.A.	$	33,515	June 16, 2021	November 2, 2022
Royal Bank of Canada	$	30,200	July 19, 2021	March 14, 2022
Wells Fargo Bank, N.A.	$	20,988	June 11, 2021	October 6, 2022

(1) The borrowing facility with Credit Suisse First Boston Mortgage Capital LLC is in the form of a sale of a variable funding note under an agreement to repurchase.

(2) The borrowing facility with Credit Suisse First Boston Mortgage Capital LLC is in the form of an asset sale under agreement to repurchase.

All debt financing arrangements that matured between March 31, 2021 and the date of this Report have been renewed or extended and are described in Note 12—Short-Term Borrowings to the accompanying consolidated financial statements.

Item 3. 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 fair value risk, interest rate risk and prepayment risk.

Fair Value Risk

Our IRLCs, mortgage loans held for sale, MSRs and MSLs are reported at their fair values. The fair value of these assets fluctuates primarily due to changes in interest rates. The fair value risk we face is primarily attributable to interest rate risk and prepayment risk.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in interest rates affect both the fair value of, and interest income we earn from, our mortgage-related investments and our derivative financial instruments. This effect is most pronounced with fixed-rate mortgage assets.

In general, rising interest rates negatively affect the fair value of our IRLCs, inventory of mortgage loans held for sale and ESS financing and positively affect the fair value of our MSRs. Changes in interest rate significantly influence the prepayment speeds of the loans underlying our investments in MSRs and ESS, which can have a significant effect on their fair values. Changes in interest rate are most prominently reflected in the prepayment speeds of the loans

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underlying our investments in MSRs and ESS and the discount rate used in their valuation.

Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Presently our debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.

Prepayment Risk

To the extent that the actual prepayment rate on the mortgage loans underlying our MSRs differs from what we projected when we initially recognized these assets and liabilities when we measure fair value as of the end of each reporting period, the carrying value of these assets and liabilities will be affected. In general, a decrease in the principal balances of the mortgage loans underlying our MSRs or an increase in prepayment expectations will decrease our estimates of the fair value of the MSRs, thereby reducing net servicing income, partially offset by the beneficial effect on net servicing income of a corresponding reduction in the fair value of our MSLs and ESS.

Risk Management Activities

We engage in risk management activities primarily in an effort to mitigate the effect of changes in interest rates on the fair value of our assets. To manage this price risk, we use derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair value of our assets, primarily prepayment exposure on our MSR investments as well as IRLCs and our inventory of loans held for sale. Our objective is to minimize our hedging expense and maximize our loss coverage based on a given hedge expense target. We do not use derivative financial instruments other than IRLCs and repurchase agreement derivatives (both of which arise from our operations) for purposes other than in support of our risk management activities.

Our strategies are reviewed daily within a disciplined risk management framework. We use a variety of interest rate and spread shifts and scenarios and define target limits for market value and liquidity loss in those scenarios. With respect to our IRLCs and inventory of loans held for sale, we use MBS forward sale contracts to lock in the price at which we will sell the mortgage loans or resulting MBS, and further use MBS put options to mitigate the risk of our IRLCs not closing at the rate we expect. With respect to our MSRs, we seek to mitigate mortgage-based loss exposure utilizing MBS forward purchase and sale contracts, address exposures to smaller interest rate shifts with Treasury and interest rate swap futures, and use options and swaptions to achieve target coverage levels for larger interest rate shocks.

Fair Value Sensitivities

The following sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated variables; do not incorporate changes to other variables; are subject to the accuracy of various models and inputs used; 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 following estimates should not be viewed as earnings forecasts.

Mortgage Servicing Rights

The following tables summarize the estimated change in fair value of MSRs as of March 31, 2021, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:

Change in fair value attributable to shift in:	-20%		-10%		-5%		+5%		+10%		+20%
	(in thousands)
Pricing spread	$	256,427	$	123,374	$	60,539	$	(58,358)	$	(114,643)	$	(221,392)
Prepayment speed	$	281,231	$	135,666	$	66,656	$	(64,416)	$	(126,698)	$	(245,247)
Annual per-loan cost of servicing	$	122,235	$	61,117	$	30,559	$	(30,559)	$	(61,117)	$	(122,235)

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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, as amended (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 within the Company 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 Rule 13a-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.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company. Set forth below are material updates to legal proceedings of the Company.

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into the Reorganization without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and was approved on February 11, 2021. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. Consequently, on April 27, 2020, PennyMac dismissed its federal court action without prejudice to pursue those claims in arbitration as well. While no assurance can be provided at to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending.

On January 7, 2021, PLS received a letter from the CFPB notifying PLS that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the CFPB’s Office of Enforcement was considering recommending that the CFPB take legal action against PLS for alleged violations of the Real Estate Settlement Procedures Act and Truth in Lending Act. The CFPB's examination covered the period from March 2015 through September 2016. Should the CFPB commence an action, it may seek restitution, civil monetary penalties, injunctive relief, or other corrective action, the extent of which remains uncertain at this time. Notably, certain of the alleged violations were originally self-identified by PLS and remediated prior to the CFPB's examination, and all alleged violations were fully remediated as of August 2017. PLS confirmed these remediation actions as well as full restitution to any affected borrowers in its response to the NORA letter on February 8, 2021. While the NORA process remains open and pending at this time, and there can be no assurance as to the nature or extent of any actions taken by the CFPB with regard to these alleged violations, we do not believe that the ultimate resolution of this matter will have a material adverse effect on our financial statements or operations.

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Item 1A. Risk Factors

There have been 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, 2020, filed with the SEC on February 25, 2021.

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

There were no sales of unregistered equity securities during the quarter ended March 31, 2021.

The following table summarizes information about our stock repurchase during the quarter ended March 31, 2021:

	Total number of shares purchased		​ Average price paid per share		Total number of shares purchased as part of publicly announced plans or program (1)		Approximate dollar value of shares that may yet be purchased under the plans or program (1)
January 1, 2021 – January 31, 2021		1,056,614	$	58.47		1,056,614	$	85,794,120
February 1, 2021 – February 28, 2021		1,421,298	$	62.56		1,421,298	$	496,881,686
March 1, 2021 – March 31, 2021		2,174,889	$	63.37		2,174,889	$	359,054,021
Total		4,652,801	$	62.01		4,652,801	$	359,054,021

(1) In February 2021, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $500 million to $1 billion. The stock repurchase program does not require the Company to purchase a specific number of shares, and the timing and amount of any shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Stock repurchases may be effected through privately negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The stock repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

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Item 6. Exhibits

		Incorporated by Reference from the Below-Listed Form (Each Filed under SEC File Number 15-68669 or 001-38727)
Exhibit No.	Exhibit Description	Form	Filing Date
2.1	Contribution Agreement and Plan of Merger, dated as of August 2, 2018, by and among PennyMac Financial Services, Inc., New PennyMac Financial Services, Inc., New PennyMac Merger Sub, LLC, Private National Mortgage Acceptance Company, LLC, and the Contributors.	8-K12B	November 1, 2018
3.1	Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.1.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.2	Amended and Restated Bylaws of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.2.1	Amendment to Amended and Restated Bylaws of PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.).	10-Q	November 4, 2019
4.1	Indenture, dated as of February 11, 2021, among PennyMac Financial Services, Inc., the guarantors party thereto and U.S. Bank, National Association, as trustee, relating to the 4.250% Senior Notes due 2029.	8-K	February 11, 2021
4.2	Form of Global Note for 4.250% Senior Notes due 2029 (included in Exhibit 4.1).	8-K	February 11, 2021
4.3	Base Indenture, dated as of April 28, 2021, by and among PFSI ISSUER TRUST - FMSR, as Issuer, Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, PennyMac Loan Services, LLC, as Servicer and Administrator, and Credit Suisse First Boston Mortgage Capital LLC, as Administrative Agent.	8-K	May 3, 2021
10.1	Master Repurchase Agreement, dated as of April 28, 2021, by and among PFSI ISSUER TRUST - FMSR, as Buyer, PennyMac Loan Services, LLC, as Seller, and Private National Mortgage Acceptance Company, LLC, as Guarantor.	8-K	May 3, 2021
10.2	Guaranty, dated as of April 28, 2021, by Private National Mortgage Acceptance Company, LLC, on behalf of PFSI ISSUER TRUST – FMSR for the benefit of Credit Suisse AG, Cayman Islands Branch and any other buyers under the MSRVF1 Repurchase Agreement of the same date.	8-K	May 3, 2021
10.3	Master Repurchase Agreement, dated as of April 28, 2021, by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse AG, Cayman Islands Branch, as Buyer, and PennyMac Loan Services, LLC, as Seller.	8-K	May 3, 2021
10.4	Guaranty, dated as of April 28, 2021, made by Private National Mortgage Acceptance Company, LLC on behalf of PennyMac Loan Services, LLC for the benefit of the holders of the notes issued pursuant to the Base Indenture of the same date.	8-K	May 3, 2021
10.5	Amendment No. 1 to the Fourth Amended and Restated Flow Servicing Agreement, dated as of March 9, 2021, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P.	*

79

		Incorporated by Reference from the Below-Listed Form (Each Filed under SEC File Number 15-68669 or 001-38727)
Exhibit No.	Exhibit Description	Form	Filing Date
10.6	Amendment No. 2 to the Amended and Restated Series 2020-SPIADVF1 Indenture Supplement, dated as of April 1, 2021, among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC and Credit Suisse First Boston Mortgage Capital LLC.	*
10.7	Amendment No. 4 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of April 1, 2021, among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC and Credit Suisse First Boston Mortgage Capital LLC.	*
10.8†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Stock Option Award Agreement (2021).	*
31.1	Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of David A. Spector 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 Daniel S. Perotti 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, formatted in Inline XBRL: (i) the Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (ii) the Consolidated Statements of Income for the quarters ended March 31, 2021 and March 31, 2020, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2021 and March 31, 2020, (iv) the Consolidated Statements of Cash Flows for the quarters ended March 31, 2021 and March 31, 2020 and (v) the Notes to the Consolidated Financial Statements.
101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

*Filed herewith

**The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

†Indicates management contract or compensatory plan or arrangement.

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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 FINANCIAL SERVICES, INC.
	(Registrant)
Dated: May 6, 2021	By:	/s/ DAVID A. SPECTOR
		David A. Spector
		Chairman and Chief Executive Officer
Dated: May 6, 2021	By:	/s/ DANIEL S. PEROTTI
		Daniel S. Perotti
		Senior Managing Director and Chief Financial Officer

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EX-10.5

Exhibit 10.5

AMENDMENT NO. 1

TO FOURTH AMENDED AND RESTATED

FLOW SERVICING AGREEMENT

This Amendment No. 1 is entered into as of March 9, 2021 to the Fourth Amended and Restated Flow Servicing Agreement (this “Amendment”) dated June 30, 2020 and effective as of July 1, 2020, by and between PennyMac Loan Services, LLC, a Delaware limited liability company (the “Servicer”), and PennyMac Operating Partnership, L.P., a Delaware limited partnership (the “Owner”).

RECITALS

WHEREAS, the Servicer and the Owner are parties to that certain Fourth Amended and Restated Flow Servicing Agreement, dated as of June 30, 2020 (the “Existing Servicing Agreement” and, as amended by this Amendment, the “Servicing Agreement”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Servicing Agreement.

WHEREAS, the Servicer and the Owner have agreed, subject to the terms and conditions of this Amendment, that the Existing Servicing Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Servicing Agreement.

NOW, THEREFORE, in consideration of the mutual premises and mutual obligations set forth herein, the Servicer and the Owner hereby agree that the Existing Servicing Agreement is hereby amended as follows:

SECTION 1. Amendments.

1.1Section 3.02 of the Existing Servicing Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

Except as provided in Section 3.11 of this Agreement, in the event of any conflict between the other provisions of this Agreement, in so far as they may relate to any Agency Mortgage Loan, and the terms of the related Guide, the terms of such Guide shall control.

1.2The following new Section 3.11 is added to the Existing Servicing Agreement:

In the event of any conflict between this Agreement or the Guide and the Acknowledgment Agreement dated March 9, 2021, by and among the Federal Home Loan Mortgage Corporation, PennyMac Corp., and Citibank, N.A. (the “Acknowledgment Agreement”), the provisions of the Acknowledgment Agreement shall prevail.  To the extent the terms and provisions of this Agreement conflict with the terms and provisions of Modified Guide Exhibit 33, the terms and provisions of Modified Guide Exhibit 33 shall control.

SECTION 2.Conditions Precedent. This Amendment shall become effective as of the date first set forth above (the “Amendment Effective Date”), subject to the satisfaction of the following conditions precedent:

2.1Delivered Documents. On or prior to the Amendment Effective Date,

each party shall have received the following documents, each of which shall be satisfactory to such party in form and substance:

a) this Amendment, executed and delivered by duly authorized officers of the Servicer and the Owner; and

b) such other documents as such party or counsel to such party may reasonably request.

2.2Representations and Warranties. On or prior to the Amendment Effective Date, each party shall be in compliance in all material respects with all the terms and provisions set forth in the Existing Servicing Agreement on its part to be observed or performed.

SECTION 3.Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Servicing Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 5.Counterparts. This Amendment may be executed in one or more counterparts and by different parties hereto on separate counterparts, each of which, when so executed, shall constitute one and the same agreement.

SECTION 6.Conflicts. The parties hereto agree that in the event there is any conflict between the terms of this Amendment, and the terms of the Existing Servicing Agreement, the provisions of this Amendment shall control.

[SIGNATURE PAGE FOLLOWS]

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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 date first above written.

PENNYMAC OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
(Owner)
By: PENNYMAC GP OP, INC.,
its General Partner
By:	/s/ Daniel S. Perotti
Name:	Daniel S. Perotti
Title:	Senior Managing Director and
	Chief Financial Officer
PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company
(Servicer)
By:		/s/ Steve Bailey
Name:		Steve Bailey
Title:		Senior Managing Director and
		Chief Mortgage Operations Officer

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EX-10.6

Exhibit 10.6

EXECUTION VERSION

===================================================================

PNMAC GMSR ISSUER TRUST,

as Issuer

and

CITIBANK, N.A.,

as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

and

PENNYMAC LOAN SERVICES, LLC,

as Administrator and as Servicer

and

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and consented to by

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Noteholder

__________

AMENDMENT NO. 2

Dated as of April 1, 2021

to the

SERIES 2020-SPIADVF1 INDENTURE SUPPLEMENT

Dated as of April 1, 2020

__________

PNMAC GMSR ISSUER TRUST

MSR COLLATERALIZED NOTES,

SERIES 2020-SPIADVF1

===================================================================

AMENDMENT NO. 2 TO AMENDED AND RESTATED SERIES 2020-SPIADVF1 INDENTURE SUPPLEMENT

This Amendment No. 2 to the Amended and Restated Series 2020-SPIADVF1 Indenture Supplement (this “Amendment”) is dated as of April 1, 2021, by and among PNMAC GMSR ISSUER TRUST, as issuer (the “Issuer”), CITIBANK, N.A. (“Citibank”), as indenture trustee (the “Indenture Trustee”), PENNYMAC LOAN SERVICES, LLC, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (the “Administrative Agent”), and is consented to by CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB”), as the sole noteholder of 100% of the Series 2020-SPIADVF1 Note (the “Noteholder”).

RECITALS

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent are parties to that certain Third Amended and Restated Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Series 2020-SPIADVF1 Indenture Supplement, dated as of April 1, 2020 (as amended by Amendment No. 1, dated as of August 25, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”, and together with the Base Indenture, the “Indenture”), among the Issuer, Citibank, the Servicer, the Administrator and the Administrative Agent.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture;

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer, the Administrative Agent and the Noteholder have agreed, subject to the terms and conditions of this Amendment, that the Series 2020-SPIADVF1 Indenture Supplement be amended to reflect certain agreed upon revisions to the terms of the Series 2020-SPIADVF1 Indenture Supplement;

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base

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Indenture and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”); provided, that no such Authorization Opinion shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement;

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with (unless 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion);

WHEREAS, pursuant to Section 11.1 of the Trust Agreement, prior to the execution of any amendment to any Transaction Documents to which the Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreement and that all conditions precedent have been met;

WHEREAS, pursuant to Section 4.1(a)(iii) of the Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreement) (unless an Event of Default has occurred and is continuing), the Administrative Agent and the Series Required Noteholders of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 12.1 thereof);

WHEREAS, the Series 2020-SPIADVF1 Note (the “Series 2020-SPIADVF1 Note”), was issued to PennyMac Loan Services, LLC (“PLS”) pursuant to the terms of the Series 2020-SPIADVF1 Indenture Supplement, and was purchased by CSCIB under the Master Repurchase Agreement, dated as of April 1, 2020 (as amended by Amendment No. 1, dated as of April 24, 2020, and Amendment No. 2, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”), by and among the Administrative Agent, CSCIB, as buyer, and PLS, as seller, pursuant to which PLS sold all of rights, title and interest in the Series 2020-SPIADVF1 Note to CSCIB;

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner and (ii) pursuant to the Series 2020-SPIADVF1 Indenture Supplement, with respect to the Series 2020-SPIADVF1 Note, any Action provided by the Base Indenture or the Series 2020-SPIADVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2020-SPIADVF1 Note under the Series 2020-SPIADVF1 Repurchase Agreement;

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WHEREAS, pursuant to Section 10 of the Series 2020-SPIADVF1 Indenture Supplement, the parties hereto may enter into an amendment to supplement, amend or revise any term or provision of the Series 2020-SPIADVF1 Indenture Supplement pursuant to the terms and provisions of Section 12.2 of the Base Indenture with the consent of the Noteholder of 100% of the Series 2020-SPIADVF1 Note; and

WHEREAS, as of the date hereof, the Series 2020-SPIADVF1 Note is not rated by any Note Rating Agency.

NOW, THEREFORE, the Issuer, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Series 2020-SPIADVF1 Indenture Supplement is hereby amended as follows:

Section 1.Amendment to the Series 2020-SPIADVF1 Indenture Supplement.

(a)Section 2 of the Series 2020-SPIADVF1 Indenture Supplement is hereby amended by deleting the definition of “Note Interest Rate” in its entirety and replacing it with the following:

“Note Interest Rate” means, with respect to any Interest Accrual Period, the sum of (a) the greater of (i) LIBOR Rate and (ii) 0.25% plus (b) the Margin.

Section 2.No Note Rating Agency.  As of the date hereof and prior to the execution of this Amendment, the Series 2020-SPIADVF1 Note is not rated by any Note Rating Agency.

Section 3.Conditions to Effectiveness of this Amendment.  This Amendment shall become effective (i) upon the execution and delivery of this Amendment by all parties hereto (the “Amendment Effective Date”) and (ii) upon delivery of the Issuer Tax Opinion pursuant to Section 12.2 of the Base Indenture and Opinion of Counsel pursuant to Section 11.1 of the Trust Agreement.

Section 4.Consent, Acknowledgment and Waiver.  By execution of this Amendment, CSCIB, as Noteholder of 100% of the Series 2020-SPIADVF1 Note, hereby consents to this Amendment.  The Noteholder certifies that it is the sole Noteholder of the Series 2020-SPIADVF1 Note with the right to instruct the Indenture Trustee.  In addition, the Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of the Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by Noteholder of this Amendment should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Amendment shall become effective on the Amendment Effective Date.  The Noteholder further hereby instructs the Indenture Trustee to execute this Amendment, thereby waiving the requirement for the delivery of the Authorization Opinion and the Officer’s Certificate pursuant to Sections 1.3 and 12.3 of the Base Indenture.

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Section 5.Representations and Warranties.  The Issuer hereby represents and warrants to the Indenture Trustee, the Administrative Agent and the Noteholder that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.

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

Section 7.No Recourse.  It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer in this Amendment and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment or any other related documents.

Section 8.Successors and Assigns.  This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 9.GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 10.Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15

4

U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

Section 11.Entire Agreement.  The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 12.Recitals.  The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness.  The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder.)  In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

[Signature Pages Follow]

5

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

PNMAC GMSR ISSUER TRUST, as Issuer
By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee
By:	/s/ Mary Emily Pagano
Name:	Mary Emily Pagano
Title:	Assistant Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to Series 2020-SPIADVF1 Indenture Supplement]

PENNYMAC LOAN SERVICES, LLC, as Servicer, as Administrator and sole Owner
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to Series 2020-SPIADVF1 Indenture Supplement]

CITIBANK, N.A., as Indenture Trustee, and not in its individual capacity
By:	/s/ Valerie Delgado
Name:	Valerie Delgado
Title:	Senior Trust Officer

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to Series 2020-SPIADVF1 Indenture Supplement]

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to Series 2020-SPIADVF1 Indenture Supplement]

CONSENTED TO BY:
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Noteholder of 100% of the Series 2020-SPIADVF1 Note
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to Series 2020-SPIADVF1 Indenture Supplement]

EX-10.7

Exhibit 10.7

EXECUTION VERSION

PNMAC GMSR ISSUER TRUST,

as Issuer

and

CITIBANK, N.A.,

as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

and

PENNYMAC LOAN SERVICES, LLC,

as Administrator and as Servicer

and

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and consented to by

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Noteholder

AMENDMENT NO. 4

Dated as of April 1, 2021

to the

AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

Dated as of February 28, 2018

PNMAC GMSR ISSUER TRUST

MSR COLLATERALIZED NOTES,

SERIES 2016-MSRVF1

AMENDMENT NO. 4 TO AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

This Amendment No. 4 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement (this “Amendment”) is dated as of April 1, 2021, by and among PNMAC GMSR ISSUER TRUST, as issuer (the “Issuer”), CITIBANK, N.A. (“Citibank”), as indenture trustee (the “Indenture Trustee”), PENNYMAC LOAN SERVICES, LLC (“PLS”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (the “Administrative Agent”), and is consented to by CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB”), as the sole noteholder of 100% of the Series 2016-MSRVF1 Note (the “Noteholder”).

RECITALS

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent are parties to that certain Third Amended and Restated Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of February 28, 2018 (as amended by Amendment No. 1, dated as of August 10, 2018, Amendment No. 2, dated as of April 24, 2020, Amendment No. 3, dated as of August 25, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”, and together with the Base Indenture, the “Indenture”), among the Issuer, Citibank, the Servicer, the Administrator and the Administrative Agent.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture;

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer, the Administrative Agent and the Noteholder have agreed, subject to the terms and conditions of this Amendment, that the Series 2016-MSRVF1 Indenture Supplement be amended to reflect certain agreed upon revisions to the terms of the Series 2016-MSRVF1 Indenture Supplement;

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the

1

execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”); provided, that no such Authorization Opinion shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement;

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with (unless 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion);

WHEREAS, pursuant to Section 11.1 of the Trust Agreement, prior to the execution of any amendment to any Transaction Documents to which the Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreement and that all conditions precedent have been met;

WHEREAS, pursuant to Section 4.1(a)(iii) of the Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreement) (unless an Event of Default has occurred and is continuing), the Administrative Agent and the Series Required Noteholders of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 12.1 thereof);

WHEREAS, the Series 2016-MSRVF1 Note (the “Series 2016-MSRVF1 Note”), was issued to PennyMac Loan Services, LLC (“PLS”) pursuant to the terms of the Series 2016-MSRVF1 Indenture Supplement, and was purchased by CSCIB under the Master Repurchase Agreement, dated as of December 19, 2016 (as amended by Amendment No. 1, dated as of February 28, 2019, Amendment No. 2, dated as of April 1, 2020, Amendment No. 3, dated as of April 24, 2020, and Amendment No. 4, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”), by and among the Administrative Agent, CSCIB, as buyer, and PLS, as seller, pursuant to which PLS sold all of rights, title and interest in the Series 2016-MSRVF1 Note to CSCIB;

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner and (ii) pursuant to the Series 2016-MSRVF1 Indenture Supplement, with respect to the Series 2016-MSRVF1 Note, any Action provided by the Base Indenture or the Series 2016-MSRVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the

2

buyer of the Series 2016-MSRVF1 Note under the Series 2016-MSRVF1 Repurchase Agreement;

WHEREAS, pursuant to Section 10 of the Series 2016-MSRVF1 Indenture Supplement, the parties hereto may enter into an amendment to supplement, amend or revise any term or provision of the Series 2016-MSRVF1 Indenture Supplement pursuant to the terms and provisions of Section 12.2 of the Base Indenture with the consent of the Noteholder of 100% of the Series 2016-MSRVF1 Note; and

WHEREAS, as of the date hereof, the Series 2016-MSRVF1 Note is not rated by any Note Rating Agency.

NOW, THEREFORE, the Issuer, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Series 2016-MSRVF1 Indenture Supplement is hereby amended as follows:

Section 1.Amendment to the Series 2016-MSRVF1 Indenture Supplement.

(a)Section 2 of the Series 2016-MSRVF1 Indenture Supplement is hereby amended by deleting the definition of “Note Interest Rate” in its entirety and replacing it with the following:

“Note Interest Rate” means, with respect to any Interest Accrual Period, the sum of (a) the greater of (i) LIBOR Rate and (ii) 0.25% plus (b) the Margin.

Section 2.No Note Rating Agency.  As of the date hereof and prior to the execution of this Amendment, the Series 2016-MSRVF1 Note is not rated by any Note Rating Agency.

Section 3.Conditions to Effectiveness of this Amendment.  This Amendment shall become effective (i) upon the execution and delivery of this Amendment by all parties hereto (the “Amendment Effective Date”) and (ii) upon delivery of the Issuer Tax Opinion pursuant to Section 12.2 of the Base Indenture and Opinion of Counsel pursuant to Section 11.1 of the Trust Agreement.

Section 4.Consent, Acknowledgment and Waiver.  By execution of this Amendment, CSCIB, as Noteholder of 100% of the Series 2016-MSRVF1 Note, hereby consents to this Amendment.  The Noteholder certifies that it is the sole Noteholder of the Series 2016-MSRVF1 Note with the right to instruct the Indenture Trustee.  In addition, the Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of the Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by Noteholder of this Amendment should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Amendment shall become effective on the Amendment Effective Date.  The Noteholder further hereby instructs the Indenture Trustee to execute this Amendment, thereby waiving the

3

requirement for the delivery of the Authorization Opinion and the Officer’s Certificate pursuant to Sections 1.3 and 12.3 of the Base Indenture.

Section 5.Representations and Warranties.  The Issuer hereby represents and warrants to the Indenture Trustee, the Administrative Agent and the Noteholder that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.

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

Section 7.No Recourse.  It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer in this Amendment and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment or any other related documents.

Section 8.Successors and Assigns.  This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 9.GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 10.Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such

4

counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

Section 11.Entire Agreement.  The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 12.Recitals.  The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness.  The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder.)  In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

[Signature Pages Follow]

5

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

PNMAC GMSR ISSUER TRUST, as Issuer
By:	Wilmington Savings Fund Society, FSB,
not in its individual capacity but solely as
Owner Trustee
By:	/s/ Mary Emily Pagano
Name:	Mary Emily Pagano
Title:	Assistant Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 4 to A&R Series 2016-MSRVF1 Indenture Supplement]

PENNYMAC LOAN SERVICES, LLC,
as Servicer, as Administrator and sole Owner
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR ISSUER TRUST – Amendment No. 4 to A&R Series 2016-MSRVF1 Indenture Supplement]

CITIBANK, N.A., as Indenture Trustee, and
not in its individual capacity
By:	/s/ Valerie Delgado
Name:	Valerie Delgado
Title:	Senior Trust Officer

[PNMAC GMSR ISSUER TRUST – Amendment No. 4 to A&R Series 2016-MSRVF1 Indenture Supplement]

CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, as
Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 4 to A&R Series 2016-MSRVF1 Indenture Supplement]

CONSENTED TO BY:
CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH, as Noteholder of 100% of the Series
2016-MSRVF1 Note
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR ISSUER TRUST – Amendment No. 4 to A&R Series 2016-MSRVF1 Indenture Supplement]

EX-10.8

Exhibit 10.8

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

STOCK OPTION AWARD AGREEMENT

THIS AGREEMENT is dated as of February 25, 2021, between PennyMac Financial Services, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and the individual identified in Section 1 below (the “Recipient”).

1.Grant of Option.  Pursuant and subject to the Company’s 2013 Equity Incentive Plan (as the same may be amended from time to time, the “Plan”), the Company grants to you, the Recipient identified in the table below, an option (this “Option”) to purchase from the Company all or any part of a total of the number of  shares identified in the table below (the “Optioned Shares”) of Common Stock, par value $0.0001 per share, in the Company (the “Stock”), at the exercise price per share set out in the table below.

Recipient
Number of Optioned Shares
Exercise Price Per Share	$58.85
Grant Date	February 25, 2021
Vesting Commencement Date	February 25, 2021
Expiration Date	February 24, 2031

2.Character of Option.  This Option is not intended to be treated as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

3.Expiration of Option.  This Option shall expire at 5:00 p.m. PDT on the Expiration Date or, if earlier, the earliest of the dates specified in whichever of the following applies:

(a)If the termination of your employment or other association is on account of your death or Disability (as defined below in Section 4), the first anniversary of the date your employment ends.

(b)If the termination of your employment or other association is due to any reason other than death, Disability, Retirement (as defined below in Section 4) or termination for cause, three (3) months after your employment or other association ends.

(c)If the Company terminates your employment or other association for cause, or at the termination of your employment or other association the Company had grounds to terminate your employment or other association for cause (whether then or thereafter determined), immediately upon the termination of your employment or other association.

4.Vesting of Option; Retirement, Death and Disability.

(a)Until this Option expires, you may exercise it as to the number of Optioned Shares which have vested ( “Vested Shares”), in full or in part, at any time on or after the applicable exercise date or dates identified in the remainder of this Section.  However, during any period that this Option remains outstanding after your employment or other association with the Company and its Affiliates ends other than by reason of Retirement, you may exercise it only as to Optioned Shares which are Vested Shares immediately prior to the end of your employment or other association.  The procedure for exercising this Option is described in Section 7.1(e) of the Plan.

(b)One-third (1/3) of the Optioned Shares shall become Vested Shares on each of the first, second, and third anniversaries of the Vesting Commencement Date specified above, with any fractions rounded down except on the final installment.

(c)If your employment or other association with the Company is terminated due to Retirement (as defined below) and the Company does not have grounds to terminate your employment or other association for cause, and provided you have executed and continue to comply with the terms of an agreement not to provide services as an employee, director, consultant, agent, or otherwise, to any of the Company’s direct competitors for a period of two (2) years from the date of your Retirement Date (the “Retirement Date”), then the Optioned Shares shall continue to become Vested Shares after the Retirement Date in accordance with the original terms of this Option; provided, however, that (i) if the Retirement Date occurs during the nine-month period immediately following the Grant Date, then this Option shall be forfeited; and (ii) if the Retirement Date occurs during the three-month period prior to the first anniversary of the Grant Date, then one-third of the Optioned Shares shall vest on the first anniversary of the Grant Date (pro-rated based on (A) the number of full months of the Recipient’s employment from the Grant Date through the Retirement Date divided by (B) twelve (12)) and the remaining Optioned Shares shall be forfeited.  “Retirement” shall mean voluntary termination of employment after the age of sixty (60) with at least ten (10) years of combined service to the Company and/or any of its subsidiaries; provided, however, that if you elect to terminate your employment in connection with a Retirement, you must provide the Company with a minimum of (x) six (6) months prior written notice of such Retirement if your title is at the senior vice president level and above, or (y) three (3) months prior written notice of such Retirement if your title is at the first vice president level and below.

(d)Notwithstanding anything to the contrary in Section 3 above, if your employment or other association with the Company is terminated due to any other reason, including death or Disability, then this Option shall be forfeited as to any unvested Optioned Shares as of the date of such termination. “Disability” shall mean the inability to engage in any substantial gainful occupation to which the relevant individual is suited by education, training or experience, by reason of any medically determinable physical or mental impairment, which condition can be expected to result in death or otherwise continue for a period of not less than twelve (12) consecutive months.

5.Transfer of Option.  You may not transfer this Option except by will or the laws of descent and distribution or pursuant to Section 9, and, during your lifetime, only you may exercise this Option.

2

6.Community Property.  To the extent the you reside in a jurisdiction in which community property rules apply, without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, you shall be treated as agent and attorney-in-fact for that interest held or claimed by your spouse with respect to this Option and any Optioned Shares and the parties hereto shall act in all matters as if the Recipient was the sole owner of this Option and (following exercise) any such Optioned Shares.  This appointment is coupled with an interest and is irrevocable.

7.Incorporation of Plan Terms.  This Option is granted subject to all of the applicable terms and provisions of the Plan, including but not limited to the limitations on the Company’s obligation to deliver Optioned Shares upon exercise set forth in Section 10 (Settlement of Awards).

8.Miscellaneous.  This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof and shall be binding upon and inure to the benefit of any successor or assign of the Company and any executor, administrator, trustee, guardian, or other legal representative of you.  Capitalized terms used but not defined herein shall have the meaning assigned under the Plan.  The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.  This Agreement, including the Plan, constitute the entire agreement of the parties with respect to the subject matter hereof.  This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same instrument.  In making proof of this Agreement it shall not be necessary to produce or account for more than one such counterpart.  You acknowledge that you have reviewed and understand the Plan and this Agreement in their entirety, and have had an opportunity to obtain the advice of counsel prior to executing this Agreement.  You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Agreement.

9.Designation of Beneficiary.  The Recipient may designate one or more beneficiaries with respect to any Options under this Agreement, provided that such designation is made on a form provided by the Company (attached as Exhibit A) and such beneficiaries are family members of the Recipient or a trust established by the Recipentfor estate planning purposes.

10.Tax Consequences.  The Company makes no representation or warranty as to the tax treatment to you of your receipt or exercise of this Option or upon your sale or other disposition of the Optioned Shares.  You should rely on your own tax advisors for such advice.

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the date first above written.

PENNYMAC FINANCIAL SERVICES, INC.

3

EXHIBIT A

PENNYMAC FINANCIAL SERVICES, INC. 2013 EQUITY INCENTIVE PLAN

BENEFICIARY DESIGNATION

In accordance with the terms and conditions of the PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (the "Plan"), I hereby designate the following as my primary beneficiary(ies) to receive any payments or distributions under the Plan:

Name and Address
(If Trust - Name of Trust and
Trustee) Social Sec. #
(If Trust – Tax ID
#) Relationship Date of Birth Percentage

In the event the above-named primary beneficiary(ies) predecease(s) me, I designate the following as contingent beneficiary(ies):

Name and Address
(If Trust - Name of Trust and
Trustee) Social Sec. #
(If Trust – Tax ID
#) Relationship Date of Birth Percentage

I expressly revoke all prior designations of beneficiary(ies), reserve the right to change my beneficiary(ies) and agree the rights of beneficiary(ies) shall be subject to the terms of the Plan.  In the event there is no beneficiary living at the time of my death, I understand the amounts payable under the Plan will be paid to my estate.

Date:
	(Signature)
	(Print or type name)

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, David A. Spector, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc.;

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)) 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 Directors (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: May 6, 2021
By:	/s/ David A. Spector
	David A. Spector
	Chairman and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Daniel S. Perotti, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc.;

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)) 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 Directors (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: May 6, 2021
By:	/s/ Daniel S. Perotti
	Daniel S. Perotti
	Senior Managing Director and Chief Financial Officer (Principal Financial Officer)

EX-32.1

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 Financial Services, Inc. (the “Company”) for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Spector, 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, to the best of my knowledge, 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.

Date: May 6, 2021
By:	/s/ David A. Spector
	David A. Spector
	Chairman and Chief Executive Officer (Principal Executive Officer)

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 Financial Services, Inc. and will be retained by PennyMac Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

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 Financial Services, Inc. (the “Company”) for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel S. Perotti, 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, to the best of my knowledge, 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.

Date: May 6, 2021
By:	/s/ Daniel S. Perotti
	Daniel S. Perotti
	Senior Managing Director and Chief Financial Officer (Principal Financial Officer)

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 Financial Services, Inc. and will be retained by PennyMac Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 04, 2021
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-38727
Entity Registrant Name	PennyMac Financial Services, Inc.
Entity Central Index Key	0001745916
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	83-1098934
Entity Address, Address Line One	3043 Townsgate Road
Entity Address, City or Town	Westlake Village
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91361
City Area Code	818
Local Phone Number	224-7442
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	PFSI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		66,734,198
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
ASSETS
Cash	$ 441,870	$ 532,716
Short-term investments at fair value	24,850	15,217
Loans held for sale at fair value (includes $13,267,667 and $11,457,678 pledged to creditors)	13,385,789	11,616,400
Derivative assets	530,852	711,238
Servicing advances, net (includes valuation allowance of $156,315 and $181,433; $373,110 and $413,484 pledged to creditors)	550,150	579,528
Mortgage servicing rights at fair value (includes $3,265,073 and $2,577,964 pledged to creditors)	3,268,910	2,581,174
Operating lease right-of-use assets	74,795	74,934
Loans eligible for repurchase	12,312,393	14,625,447
Other (includes $114,342 and $166,418 pledged to creditors)	638,257	692,169
Total assets	31,297,980	31,597,795
LIABILITIES
Assets sold under agreements to repurchase	10,848,477	9,654,797
Mortgage loans participation purchase and sale agreements	518,747	521,477
Obligations under capital lease	10,468	11,864
Notes payable secured by mortgage servicing assets	1,296,285	1,295,840
Unsecured senior notes	1,288,198	645,820
Derivative liabilities	68,557	42,638
Mortgage servicing liabilities at fair value	46,026	45,324
Accounts payable and accrued expenses	355,429	308,398
Operating lease liabilities	96,069	94,193
Income taxes payable	751,855	622,700
Liability for loans eligible for repurchase	12,312,393	14,625,447
Liability for losses under representations and warranties	38,428	32,688
Total liabilities	27,830,566	28,208,407
Commitments and contingencies - Note 16
STOCKHOLDERS' EQUITY
Additional paid-in capital	762,585	1,047,052
Retained earnings	2,704,822	2,342,329
Total stockholders' equity	3,467,414	3,389,388
Total liabilities and stockholders' equity	31,297,980	31,597,795
Common Stock
STOCKHOLDERS' EQUITY
Common stock - authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 66,961,401 and 70,905,532 shares respectively	7	7
PMT
ASSETS
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		80,862
Investment in PennyMac Mortgage Investment Trust at fair value	1,470	1,105
Receivable from PennyMac Investment Trust	68,644	87,005
LIABILITIES
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		131,750
Payable to PennyMac Mortgage Investment Trust	164,469	140,306
Private National Mortgage Acceptance Company, LLC
LIABILITIES
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	$ 35,165	$ 35,165

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Mortgage loans held for sale, pledged to creditors	$ 13,267,667	$ 11,457,678
Servicing advances, net, valuation allowance	156,315	181,433
Servicing advances pledged to creditors	373,110	413,484
Mortgage servicing rights pledged to creditors	3,265,073	2,577,964
Other assets pledged to creditors	$ 114,342	$ 166,418
Common Stock
Common stock, shares authorized	200,000,000	200,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares issued	66,961,401	70,905,532
Common stock, shares outstanding	66,961,401	70,905,532

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CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net gains on loans held for sale at fair value:
From non-affiliates	$ 768,589	$ 266,366
Net gains on loans held for sale at fair value	754,341	344,282
Loan origination fees from non-affiliates	95,845	53,591
Loan origination fees	104,037	57,571
Loan servicing fees
From non-affiliates	210,753	198,653
Other	29,599	28,755
Loan servicing fees	259,445	241,929
Change in fair value of mortgage servicing rights and mortgage servicing liabilities	(223,463)	1,035,213
Mortgage servicing rights hedging results	(442,151)	1,036,570
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust	(219,725)	15,879
Net loan servicing fees	39,720	257,808
Interest income:
From non-affiliates	81,694	71,346
Interest income	82,081	72,564
Interest expense:
To non-affiliates	106,433	59,538
Interest expense	107,713	61,512
Net interest (expense) income	(25,632)	11,052
Management fees, net:
Management fees	8,449	9,055
Result of real estate acquired in settlement of loans	780	(707)
Other	1,755	1,681
Total net revenue	944,686	721,825
Expenses
Compensation	258,829	168,436
Loan origination	87,392	46,004
Technology	33,672	19,107
Servicing	19,183	42,166
Professional services	13,286	13,404
Occupancy and equipment	9,038	8,038
Other	17,278	9,940
Total expenses	438,678	307,095
Income before provision for income taxes	506,008	414,730
Provision for income taxes	129,140	108,487
Net income	376,868	306,243
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$ 376,868	$ 306,243
Earnings per share
Basic (in dollars per share)	$ 5.45	$ 3.89
Diluted (in dollars per share)	$ 5.15	$ 3.73
Weighted-average shares outstanding
Basic (in shares)	69,113	78,689
Diluted (in shares)	73,117	82,008
Dividend declared per share (in dollars per share)	$ 0.20	$ 0.12
PMT
Net gains on loans held for sale at fair value:
From PennyMac Mortgage Investment Trust	$ (14,248)	$ 77,916
Loan origination fees from PennyMac Mortgage Investment Trust	8,192	3,980
Fulfillment fees from PennyMac Mortgage Investment Trust	60,835	41,940
Loan servicing fees
Loan servicing fees from affiliates	19,093	14,521
Changes in fair value included in income	(1,037)	14,522
Interest income:
From PennyMac Mortgage Investment Trust	387	1,218
Interest expense:
To PennyMac Mortgage Investment Trust	1,280	1,974
Management fees, net:
Management fees	8,449	9,055
Change in fair value of investment in and dividends received from affiliate	$ 401	$ (857)

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock.	Additional paid-in capital	Retained earnings	Common Stock	Total
Balance at Dec. 31, 2019	$ 8	$ 1,335,107	$ 726,392		$ 2,061,507
Balance (in shares) at Dec. 31, 2019	78,515
Changes in stockholders' equity
Net income			306,243		306,243
Stock and unit-based compensation		10,185			10,185
Stock and unit-based compensation (in shares)	912
Issuance of common stock in settlement of director fees					48
Issuance of common stock in settlement of directors' fees		48			48
Issuance of common stock in settlement of directors' fees (in shares)	1
Repurchase of common stock		(4,121)		$ (4,121)	(4,121)
Repurchase of common stock (in shares)	(238)			(238)
Common stock dividends			(9,733)		(9,733)
Balance at Mar. 31, 2020	$ 8	1,341,219	1,022,902		2,364,129
Balance (in shares) at Mar. 31, 2020	79,190
Balance at Dec. 31, 2020	$ 7	1,047,052	2,342,329		3,389,388
Balance (in shares) at Dec. 31, 2020	70,906
Changes in stockholders' equity
Net income			376,868		376,868
Stock and unit-based compensation		4,001			4,001
Stock and unit-based compensation (in shares)	707
Issuance of common stock in settlement of director fees		51			51
Issuance of common stock in settlement of director fees (in shares)	1
Repurchase of common stock		(288,519)		$ (288,519)	(288,519)
Repurchase of common stock (in shares)	(4,653)			(4,653)
Common stock dividends			(14,375)		(14,375)
Balance at Mar. 31, 2021	$ 7	$ 762,585	$ 2,704,822		$ 3,467,414
Balance (in shares) at Mar. 31, 2021	66,961

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock dividends (in dollars per share)	$ 0.20	$ 0.12

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flow from operating activities
Net income	$ 376,868	$ 306,243
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on loans held for sale at fair value	(754,341)	(344,282)
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread	(222,426)	1,020,691
Mortgage servicing rights hedging gains	442,151	(1,036,570)
Capitalization of interest and advance on loans held for sale at fair value	(90,177)	(18,131)
Amortization of debt issuance cost	7,297	2,209
Results of real estate acquired in settlement of loans	(780)	707
Stock based compensation expense	10,877	12,368
(Reversal of) Provision for servicing advance losses	(20,536)	3,806
Impairment of capitalized software	728
Depreciation and amortization	7,632	5,352
Amortization of right-to-use assets	3,382	2,985
Origination of loans held for sale	(14,314,637)	(4,954,316)
Purchase of loans held for sale from non-affiliates	(1,443,255)	(620,859)
Purchase of loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale	(4,355,102)	(2,299,262)
Sale to non-affiliates and principal payments of loans held for sale	37,268,200	19,337,017
Repurchase of loans subject to representations and warranties	(17,986)	(16,282)
Sale of real estate acquired in settlement of loans	4,946	9,459
Decrease in servicing advances	48,372	18,467
Decrease in other assets	22,912	628
Increase in accounts payable and accrued expenses	46,896	21,866
Decrease in operating lease liabilities	(4,066)	(3,469)
Net cash used in operating activities	(1,248,016)	(730,284)
Cash flow from investing activities
(Increase) decrease in short-term investments	(9,633)	72,727
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights	(527,458)	942,005
Purchase of mortgage servicing rights		(24,104)
Purchase of furniture, fixtures, equipment and leasehold improvements	(2,738)	(994)
Acquisition of capitalized software	(10,056)	(14,108)
Increase in margin deposits	245,505	132,953
Net cash (used in) provided by investing activities	(223,518)	1,116,225
Cash flow from financing activities
Sale of assets under agreements to repurchase	35,805,822	20,510,531
Repurchase of assets sold under agreements to repurchase	(34,613,141)	(20,205,416)
Issuance of mortgage loan participation purchase and sale certificates	6,339,539	5,273,329
Repayment of mortgage loan participation purchase and sale certificates	(6,342,269)	(5,242,527)
Repayments of obligations under capital lease	(1,396)	(2,665)
Issuance of unsecured senior notes	650,000
Repayment of excess servicing spread financing	(134,624)	(9,308)
Payment of debt issuance costs	(13,475)	(3,388)
Issuance of common stock pursuant to exercise of stock options	1,670	3,082
Payment of withholding taxes relating to stock-based compensation	(8,546)	(5,265)
Payment of dividend to holders of common stock	(14,375)	(9,733)
Repurchase of common stock	(288,519)	(4,121)
Net cash provided by financing activities	1,380,686	304,519
Net (decrease) increase in cash and restricted cash	(90,848)	690,460
Cash and restricted cash at beginning of year	532,781	188,578
Cash and restricted cash at end of year	441,933	879,038
Cash	441,870	878,826
Restricted cash included in Other assets	63	212
PMT
Adjustments to reconcile net income to net cash used in operating activities:
Accrual of interest on excess servicing spread financing payable to PennyMac Mortgage Investment Trust	1,280	1,974
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust	(365)	875
Purchase of loans held for sale from PennyMac Mortgage Investment Trust	(18,420,615)	(14,509,209)
Sale to Penny Mac Mortgage Investment Trust of loans held for sale		2,246,127
Decrease (increase) in receivable from affiliates	14,878	(10,133)
Increase (decrease) in payable to affiliate	10,696	(17,019)
Increase in income taxes payable	129,155	108,474
Cash flow from investing activities
Net change in assets purchased from PMT under agreement to resell	$ 80,862	$ 7,746

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Organization

3 Months Ended

Mar. 31, 2021

Organization

Organization

PENNYMAC FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) is a holding corporation and its primary assets are direct and indirect equity interests in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac, and it operates and controls all of the businesses and affairs of PennyMac, and consolidates the financial results of PennyMac and its subsidiaries.

PennyMac is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PennyMac’s mortgage banking activities consist of residential mortgage loan production and servicing. PennyMac’s investment management activities and a portion of its loan servicing activities are conducted on behalf of PennyMac Mortgage Investment Trust (“PMT”), a publicly-traded real estate mortgage investment trust that invests primarily in mortgage-related assets. PennyMac’s primary wholly owned subsidiaries are:

● PennyMac Loan Services, LLC (“PLS”) — a Delaware limited liability company that services portfolios of residential mortgage loans on behalf of non-affiliates and PMT, purchases, originates and sells new prime credit quality residential mortgage loans and engages in other mortgage banking activities for its own account and the account of PMT.

PLS is approved as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and as an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”). PLS is a licensed Federal Housing Administration (“FHA”) Nonsupervised Title II Lender with the U.S. Department of Housing and Urban Development (“HUD”) and a lender/servicer with the Veterans Administration (“VA”) and U.S. Department of Agriculture (“USDA”) (each of the above an “Agency” and collectively the “Agencies”).

● PNMAC Capital Management, LLC (“PCM”)— a Delaware limited liability company registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management agreement with PMT.

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Basis of Presentation and Recently Adopted Accounting Pronouncement

3 Months Ended

Mar. 31, 2021

Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation and Recently Adopted Accounting Pronouncements

Note 2—Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the Securities and Exchange Commission’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 GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods presented, but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2021. Intercompany accounts and transactions have been eliminated.

Preparation of financial statements in compliance with GAAP requires management to make judgments and estimates 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.

XML

Concentration of Risk

3 Months Ended

Mar. 31, 2021

Concentration of Risk

Concentration of Risk

Note 3—Concentration of Risk

A substantial portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, change in fair value of excess servicing spread financing (“ESS”), net interest, management fees, and change in fair value of investment in and dividends received from PMT) totaled 9% and 22% of total net revenue for the quarters ended March 31, 2021 and 2020, respectively.

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Related Party Transactions

3 Months Ended

Mar. 31, 2021

Related Party Transactions

Related Party Transactions

Note 4—Related Party Transactions

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.

Through June 30, 2020, pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinanced mortgage loans for which PMT previously held the MSRs, the Company was generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs related to all such mortgage loans. On June 30, 2020, the MSR recapture agreement was amended and restated for a term of five years (the “2020 MSR Recapture Agreement”).

Effective July 1, 2020, the 2020 MSR Recapture Agreement changes the recapture fee payable by the Company to a tiered amount equal to:

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;

● 35% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 15% and up to 30%; and

● 30% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 30%.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month. The Company has also agreed to allocate sufficient resources to target a recapture rate of 15%.

The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee.

Through June 30, 2020, pursuant to the terms of a mortgage banking services agreement, the monthly fulfillment fee was an amount equal to:

a) no greater than the product of (i) 0.35% and (ii) the aggregate initial unpaid principal balance (the “Initial UPB”) of all mortgage loans purchased in such month, plus

b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided, however, that no fulfillment fee was due or payable to the Company with respect to any mortgage loans underwritten to the Ginnie Mae Mortgage-Backed Securities (“MBS”) Guide.

PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and, through June 30, 2020, a sourcing fee ranging from two to three and one-half basis points, generally based on the average number of calendar days mortgage loans are held by PMT before being purchased by the Company. While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

Effective July 1, 2020, the fulfillment fees and sourcing fees were revised as follows:

● Fulfillment fees shall not exceed the following:

(i) the number of loan commitments multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus

(ii) $315 multiplied by the number of purchased loans that are sold to Fannie Mae and Freddie Mac up to the and including 16,500 per quarter and $195 multiplied by the number of such purchased loans in excess of 16,500 per quarter, plus

(iii) $750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae and Freddie Mac; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans.

● Sourcing fees charged to PLS range from one to two basis points, generally based on the average number of calendar days the loans are held by PMT before purchase by PLS.

Following is a summary of loan production activities, including MSR recapture between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT (primarily cash)	$	—	$	81,224
Mortgage servicing rights and excess servicing spread recapture incurred		(14,248)		(3,308)
	$	(14,248)	$	77,916
Sale of loans held for sale to PMT	$	—	$	2,246,127
Tax service fees earned from PMT included in Loan origination fees	$	8,192	$	3,980
Fulfillment fee revenue	$	60,835	$	41,940
Sourcing fees included in cost of loans purchased from PMT	$	1,738	$	4,161
Unpaid principal balance of loans purchased from PMT	$	17,559,575	$	13,870,280

Loan Servicing

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of MSRs. The Servicing Agreement provides for servicing fees of per-loan monthly amounts based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or the real estate acquired in settlement of loans (“REO”). The Company also remains entitled to customary ancillary income and market-based fees and charges relating to loans it services for PMT. These include boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Prime Servicing

● The base servicing fees for non-distressed loans are calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that non-distressed loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $10 to $55 per month based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO. The Company is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees.

● Effective July 1, 2020, the Company also receives certain fees for COVID-19-related forbearance and modification activities provided for under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Special Servicing (Distressed loans)

● The base servicing fee rates for distressed loans range from $30 per month for current loans up to $95 per month for loans in foreclosure proceedings. The base servicing fee rate for REO is $75 per month.

● Because PMT has a small number of employees and limited infrastructure, the Company is required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement. For these services, the Company receives a supplemental servicing fee of $25 per month for each distressed loan. The Company is entitled to reimbursement for all customary, good faith reasonable and necessary out-of-pocket expenses incurred by the Company in the performance of its servicing obligations.

● The Company is also entitled to certain activity-based fees for distressed loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a full modification or liquidation and $500 for a deed-in-lieu of foreclosure. The Company is not entitled to earn more than one liquidation fee, reperformance fee or modification fee per loan in any 18-month period.

● To the extent the Company facilitates rentals of PMT's REO under its REO rental program, the Company collects an REO rental fee of $30 per month per REO, an REO property lease renewal fee of $100 per lease renewal, and a property management fee in an amount equal to the Company’s cost if property management services and/or any related software costs are outsourced to a third-party property management firm or 9% of gross rental income if the Company provides property management services directly. The Company is also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.

● Except as otherwise provided in the MSR recapture agreement, when the Company effects a refinancing of a loan on behalf of PMT and not through a third-party lender and the resulting loan is readily saleable, or the Company originates a loan to facilitate the disposition of a REO, the Company is entitled to receive from PMT market-based fees and compensation consistent with pricing and terms the Company offers unaffiliated parties on a retail basis.

● The Company is entitled to retain any incentive payments made to it and to which it is entitled under the U.S. Department of Treasury’s Home Affordable Modification Plan; provided, however, that with respect to any such incentive payments paid to the Company in connection with a loan modification for which PMT previously paid the Company a modification fee, the Company is required to reimburse PMT an amount equal to the incentive payments.

Following is a summary of loan servicing fees earned from PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	543	$	536
Distressed loans		137		300
Mortgage servicing rights		18,413		13,685
	$	19,093	$	14,521

On June 30, 2020, the Servicing Agreement was amended and restated for a term of five years (the “2020 Servicing Agreement”). The terms of the 2020 Servicing Agreement are substantially similar to those in the prior servicing agreement except that they now include the fees described above relating to COVID-19 related forbearance and modification activities provided for under the CARES Act.

Investment Management Activities

The Company has a management agreement with PMT (“Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees, for which PFSI collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

● The base management fee is calculated quarterly and is equal to the sum of (i) 1.5% per year of PMT’s average shareholders’ equity up to $2 billion, (ii) 1.375% per year of PMT’s average shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of PMT’s average shareholders’ equity in excess of $5 billion.

● The performance incentive fee is calculated quarterly at a defined annualized percentage of the amount by which PMT’s “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of return on “equity.”

The performance incentive fee is equal to the sum of: (a) 10% of the amount by which PMT’s “net income” for the quarter exceeds (i) an 8% return on equity plus the “high watermark,” up to (ii) a 12% return on PMT’s “equity”; plus (b) 15% of the amount by which PMT’s “net income” for the quarter exceeds (i) a 12% return on PMT’s “equity” plus the “high watermark,” up to (ii) a 16% return on PMT’s “equity”; plus (c) 20% of the amount by which PMT’s “net income” for the quarter exceeds a 16% return on “equity” plus the “high watermark.”

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.

“Equity” is the weighted average of the issue price per common share of all of PMT’s public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the rolling four-quarter period.

The “high watermark” is the quarterly adjustment that reflects the amount by which the “net income” (stated as a percentage of return on “equity”) in that quarter exceeds or falls short of the lesser of 8% and the average Fannie Mae 30-year MBS yield (the “Target Yield”) for the four quarters then ended. If the “net income” is lower than the Target Yield, the high watermark is increased by the difference. If the “net income” is higher than the Target Yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amounts required for the Company to earn a performance incentive fee are adjusted cumulatively based on the performance of PMT’s “net income” over (or under) the Target Yield, until the “net income” in excess of the Target Yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned.

The base management fee and the performance incentive fee are both receivable quarterly in arrears. The performance incentive fee may be paid in cash or a combination of cash and PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.

In the event of termination of the Management Agreement between PMT and the Company, the Company may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by the Company, in each case during the 24-month period immediately preceding the date of termination.

Following is a summary of the base management and performance incentive fees earned from PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Base management	$	8,449	$	9,055
Performance incentive		—		—
	$	8,449	$	9,055

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $120,000 per fiscal quarter through June 30, 2020.

PMT is also required to pay its pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Company and its affiliates required for PMT’s and its subsidiaries’ operations. These expenses are allocated based on the ratio of PMT’s proportion of gross assets compared to all remaining gross assets managed by the Company as calculated at each fiscal quarter end.

On June 30, 2020, the Management Agreement was amended and restated for a term of five years (the “2020 Management Agreement”). The terms of the 2020 Management Agreement are materially consistent with those of the prior management agreement, except that, effective July 1, 2020, PMT’s reimbursement of PCM’s and its affiliates’ compensation expenses was increased from $120,000 to $165,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by the Company or its affiliates.

The Company received reimbursements from PMT for expenses as follows:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	571	$	1,540
Compensation		165		120
Expenses incurred on PMT's behalf, net		1,336		1,271
	$	2,072	$	2,931
Payments and settlements during the quarter (1)	$	112,741	$	33,683

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Investing Activities

Master Repurchase Agreement

On December 19, 2016, the Company, through PLS, entered into a master repurchase agreement with one of PMT’s wholly-owned subsidiaries, PennyMac Holdings, LLC (“PMH”) (the “PMH Repurchase Agreement”), pursuant to which PMH may borrow from the Company for the purpose of financing PMH’s participation certificates representing beneficial ownership in ESS. PLS then re-pledges such participation certificates to PNMAC GMSR ISSUER TRUST (the “Issuer Trust”) under a master repurchase agreement by and among PLS, the Issuer Trust and PennyMac, as guarantor (the “PC Repurchase Agreement”). The Issuer Trust was formed for the purpose of allowing PLS to finance MSRs and ESS relating to such MSRs (the “GNMA MSR Facility). In the first quarter of 2021, PLS repurchased the ESS from PMH at fair market value, effectively terminating the borrowing arrangements allowing PMH to finance its participation certificates representing beneficial ownership in ESS. Such ESS is now included in PLS's participation certificates representing beneficial ownership in ESS.

In connection with the GNMA MSR Facility, PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of the PC Repurchase Agreement. In return, the Issuer Trust (a) has issued to PLS, pursuant to the terms of an indenture, the Series 2016-MSRVF1 Variable Funding Note, dated December 19, 2016, known as the “PNMAC GMSR ISSUER TRUST MSR Collateralized Notes, Series 2016-MSRVF1” (the “VFN”), and (b) has issued and may, from time to time pursuant to the terms of any supplemental indenture, issue to institutional investors additional term notes, in each case secured on a pari passu basis by the participation certificates relating to the MSRs and ESS. The maximum principal balance of the VFN is $1,000,000,000.

The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest.

Following is a summary of investing activities between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	387	$	1,218
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust	$	401	$	(857)

	March 31,		December 31,
	2021		2020
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—	$	80,862
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,470	$	1,105
Number of shares		75		75

Financing Activities

Spread Acquisition and MSR Servicing Agreements

The Company has a master spread acquisition and MSR servicing agreement with PMT (the “Spread Acquisition Agreement”) which was amended and restated effective December 19, 2016, pursuant to which the Company may sell to PMT, from time to time, the right to receive participation certificates representing beneficial ownership in ESS arising from Ginnie Mae MSRs acquired by the Company, in which case the Company generally would be required to service or subservice the related mortgage loans for Ginnie Mae. The primary purpose of the amendment and restatement was to facilitate the continued financing of the ESS owned by PMT in connection with the parties’ participation in the GNMA MSR Facility.

To the extent the Company refinances any of the mortgage loans relating to the ESS it has issued, the Spread Acquisition Agreement also contains recapture provisions requiring that the Company transfer to PMT, at no cost, the ESS relating to a certain percentage of the unpaid principal balance of the newly originated mortgage loans. However, under the Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the refinanced mortgage loans, the Company is also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the modified mortgage loans, the Spread Acquisition Agreement contains provisions that require the Company to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, the Company may, at its option, settle its obligation to PMT in cash in an amount equal to such fair market value in lieu of transferring such ESS.

During the quarter ended March 31, 2021, the Company repurchased ESS from PMT and repaid its outstanding ESS financing payable to PMT.

Following is a summary of financing activities between the Company and PMT:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Excess servicing spread financing:
Balance at beginning of quarter	$	131,750	$	178,586
Issuance pursuant to recapture agreement		557		379
Accrual of interest		1,280		1,974
Repayment		(134,624)		(9,308)
Change in fair value		1,037		(14,522)
Balance at end of quarter	$	—	$	157,109
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	614	$	381

Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:

	March 31,		December 31,
	2021		2020
	(in thousands)
Receivable from PMT:
Allocated expenses and expenses incurred on PMT's behalf	$	23,325	$	38,142
Fulfillment fees		17,347		20,873
Correspondent production fees		12,937		13,065
Management fees		8,449		8,686
Servicing fees		6,586		6,213
Interest on assets purchased under agreements to resell		—		26
	$	68,644	$	87,005
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	156,948	$	132,154
Mortgage servicing rights recapture payable		—		296
Other		7,521		7,856
	$	164,469	$	140,306

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

On May 8, 2013, the Company entered into a tax receivable agreement with certain former owners of PennyMac that provides for the payment from time to time by the Company to PennyMac’s exchanged unitholders of an amount equal to 85% of the amount of the net tax benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from exchanges of ownership interests in PennyMac and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.

Although a reorganization in November 2018 eliminated the potential for unitholders to exchange any additional units subject to this tax receivable agreement, the Company continues to be subject to the agreement and will be required to make payments, to the extent any of the tax benefits specified above are deemed to be realized, under the tax receivable agreement to those certain prior owners of PennyMac who effected exchanges of ownership interests in PennyMac for the Company’s common stock prior to the closing of the reorganization.

The Company has recorded $35.2 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of March 31, 2021 and December 31, 2020. The Company did not make any payments during the quarters ended March 31, 2021 and 2020.

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Loan Sales and Servicing Activities

3 Months Ended

Mar. 31, 2021

Loan Sales and Servicing Activities

Loan Sales and Servicing Activities

Note 5—Loan Sales and Servicing Activities

The Company, through PLS, originates or purchases and sells loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.

The following table summarizes cash flows between the Company and transferees as a result of the sale of loans in transactions where the Company maintains continuing involvement with the loans as servicer:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash flows:
Sales proceeds	$	37,268,200	$	19,337,017
Servicing fees received (1)	$	195,782	$	166,556

(1) Net of guarantee fees paid to the Agencies.

The following table summarizes unpaid principal balance (the “UPB”) of the loans sold by the Company in which it maintains continuing involvement in the form of owned servicing obligations:

	March 31,		December 31,
	2021		2020
	(in thousands)
Unpaid principal balance of loans outstanding	$	211,289,054	$	199,655,361
Delinquencies (1):
30-89 days	$	4,045,731	$	6,041,366
90 days or more:
Not in foreclosure	$	15,506,434	$	17,799,621
In foreclosure	$	539,603	$	581,683
Foreclosed	$	9,207	$	10,893
Bankruptcy	$	1,204,192	$	1,230,696
Delinquent loans in COVID-19 pandemic-related forbearance:
30-89 days	$	1,695,953	$	2,626,617
90 days or more		10,022,093		12,181,174
	$	11,718,046	$	14,807,791

(1) Includes delinquent loans in COVID-19 pandemic-related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

The following tables summarize the UPB of the Company’s loan servicing portfolio:

	March 31, 2021
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	211,289,054	$	—	$	211,289,054
Purchased		36,252,669		—		36,252,669
		247,541,723		—		247,541,723
PennyMac Mortgage Investment Trust		—		188,324,162		188,324,162
Loans held for sale		12,959,016		—		12,959,016
	$	260,500,739	$	188,324,162	$	448,824,901
Delinquent loans (1):
30 days	$	3,407,163	$	664,887	$	4,072,050
60 days		1,668,346		267,050		1,935,396
90 days or more:
Not in foreclosure		18,900,569		3,827,814		22,728,383
In foreclosure		699,268		31,423		730,691
Foreclosed		10,790		24,320		35,110
	$	24,686,136	$	4,815,494	$	29,501,630
Bankruptcy	$	1,647,331	$	158,684	$	1,806,015
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,109,541	$	226,321	$	1,335,862
60 days		1,035,462		198,455		1,233,917
90 days or more		12,828,212		3,046,256		15,874,468
	$	14,973,215	$	3,471,032	$	18,444,247
Custodial funds managed by the Company (2)	$	12,007,827	$	6,571,084	$	18,578,911

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

	December 31, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	199,655,361	$	—	$	199,655,361
Purchased		41,612,940		—		41,612,940
		241,268,301		—		241,268,301
PennyMac Mortgage Investment Trust		—		174,418,591		174,418,591
Loans held for sale		11,063,938		—		11,063,938
	$	252,332,239	$	174,418,591	$	426,750,830
Delinquent loans (1):
30 days	$	5,217,949	$	901,965	$	6,119,914
60 days		2,393,267		348,416		2,741,683
90 days or more:
Not in foreclosure		21,781,226		4,473,217		26,254,443
In foreclosure		751,586		33,312		784,898
Foreclosed		12,938		37,131		50,069
	$	30,156,966	$	5,794,041	$	35,951,007
Bankruptcy	$	1,698,418	$	153,179	$	1,851,597
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,745,257	$	334,498	$	2,079,755
60 days		1,479,753		259,019		1,738,772
90 days or more		14,904,052		3,690,505		18,594,557
	$	18,129,062	$	4,284,022	$	22,413,084
Custodial funds managed by the Company (2)	$	10,660,517	$	6,086,725	$	16,747,242

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

Following is a summary of the geographical distribution of loans included in the Company’s loan servicing portfolio for the top five and all other states as measured by UPB:

	March 31,		December 31,
State	2021		2020
	(in thousands)
California	$	63,423,866	$	60,591,363
Florida		37,181,908		35,360,190
Texas		36,781,005		34,591,419
Virginia		27,728,760		26,209,701
Maryland		21,105,934		19,974,809
All other states		262,603,428		250,023,348
	$	448,824,901	$	426,750,830

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Fair Value

3 Months Ended

Mar. 31, 2021

Fair Value

Fair Value

Note 6—Fair Value

Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the significant inputs used to determine fair value. These levels are:

● Level 1—Quoted prices in active markets for identical assets or liabilities.

● Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.

● Level 3— Prices determined using significant unobservable inputs. In situations where observable inputs are unavailable, unobservable inputs may be used. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances.

As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

Fair Value Accounting Elections

The Company identified its MSRs, its mortgage servicing liabilities (“MSLs”) and all of its non-cash financial assets other than Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance. The Company has also identified its ESS financing to be accounted for at fair value as a means of hedging the related MSRs’ fair value risk.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a summary of assets and liabilities that are measured at fair value on a recurring basis:

	March 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	24,850	$	—	$	—	$	24,850
Loans held for sale at fair value		—		8,183,724		5,202,065		13,385,789
Derivative assets:
Interest rate lock commitments		—		—		362,923		362,923
Forward purchase contracts		—		14,318		—		14,318
Forward sales contracts		—		333,198		—		333,198
MBS put options		—		99,670		—		99,670
Swaption purchase contracts		—		50,973		—		50,973
Put options on interest rate futures purchase contracts		27,133		—		—		27,133
Call options on interest rate futures purchase contracts		1,539		—		—		1,539
Total derivative assets before netting		28,672		498,159		362,923		889,754
Netting		—		—		—		(358,902)
Total derivative assets		28,672		498,159		362,923		530,852
Mortgage servicing rights at fair value		—		—		3,268,910		3,268,910
Investment in PennyMac Mortgage Investment Trust		1,470		—		—		1,470
	$	54,992	$	8,681,883	$	8,833,898	$	17,211,871
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	24,983	$	24,983
Forward purchase contracts		—		192,793		—		192,793
Forward sales contracts		—		32,729		—		32,729
MBS put options		—		34,873		—		34,873
Put options on interest rate futures sale contracts		15,881		—		—		15,881
Call options on interest rate futures sale contracts		1,061		—		—		1,061
Total derivative liabilities before netting		16,942		260,395		24,983		302,320
Netting		—		—		—		(233,763)
Total derivative liabilities		16,942		260,395		24,983		68,557
Mortgage servicing liabilities at fair value		—		—		46,026		46,026
	$	16,942	$	260,395	$	71,009	$	114,583

	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	15,217	$	—	$	—	$	15,217
Loans held for sale at fair value		—		6,941,231		4,675,169		11,616,400
Derivative assets:
Interest rate lock commitments		—		—		679,961		679,961
Forward purchase contracts		—		133,267		—		133,267
Forward sales contracts		—		1,451		—		1,451
MBS put options		—		14,302		—		14,302
Swaption purchase contracts		—		11,939		—		11,939
Put options on interest rate futures purchase contracts		5,520		—		—		5,520
Call options on interest rate futures purchase contracts		1,391		—		—		1,391
Total derivative assets before netting		6,911		160,959		679,961		847,831
Netting		—		—		—		(136,593)
Total derivative assets		6,911		160,959		679,961		711,238
Mortgage servicing rights at fair value		—		—		2,581,174		2,581,174
Investment in PennyMac Mortgage Investment Trust		1,105		—		—		1,105
	$	23,233	$	7,102,190	$	7,936,304	$	14,925,134
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	131,750	$	131,750
Derivative liabilities:
Interest rate lock commitments		—		—		2,935		2,935
Forward purchase contracts		—		1,276		—		1,276
Forward sales contracts		—		251,149		—		251,149
Total derivative liabilities before netting		—		252,425		2,935		255,360
Netting		—		—		—		(212,722)
Total derivative liabilities		—		252,425		2,935		42,638
Mortgage servicing liabilities at fair value		—		—		45,324		45,324
	$	—	$	252,425	$	180,009	$	219,712

As shown above, all or a portion of the Company’s loans held for sale, Interest Rate Lock Commitments (“IRLCs”), MSRs, ESS and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of assets and liabilities measured at fair value using “Level 3” inputs at either the beginning or the end of the period presented:

	Quarter ended March 31, 2021
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, December 31, 2020	$	4,675,169	$	677,026	$	2,581,174	$	7,933,369
Purchases and issuances, net		4,156,681		477,933		—		4,634,614
Capitalization of interest and advances		90,165		—		—		90,165
Sales and repayments		(928,901)		—		—		(928,901)
Mortgage servicing rights resulting from loan sales		—		—		470,533		470,533
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		48,154		—		—		48,154
Other factors		—		(179,613)		217,203		37,590
		48,154		(179,613)		217,203		85,744
Transfers from Level 3 to Level 2		(2,839,121)		—		—		(2,839,121)
Transfers to real estate acquired in settlement of loans		(82)		—		—		(82)
Transfers to loans held for sale		—		(637,406)		—		(637,406)
Balance, March 31, 2021	$	5,202,065	$	337,940	$	3,268,910	$	8,808,915
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2021	$	104,132	$	337,940	$	217,203	$	659,275

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2021
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2020	$	131,750	$	45,324	$	177,074
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		557		—		557
Accrual of interest		1,280		—		1,280
Repayments		(134,624)		—		(134,624)
Mortgage servicing liabilities resulting from loan sales		—		6,962		6,962
Changes in fair value included in income		1,037		(6,260)		(5,223)
Balance, March 31, 2021	$	—	$	46,026	$	46,026
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2021	$	—	$	(6,260)	$	(6,260)

	Quarter ended March 31, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, March 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Purchases and issuances, net		1,641,231		341,980		—		25,760		2,008,971
Capitalization of interest and advances		18,027		—		—		—		18,027
Sales and repayments		(738,928)		—		—		—		(738,928)
Mortgage servicing rights resulting from loan sales		—		—		—		282,315		282,315
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(7,523)		—		—		—		(7,523)
Other factors		—		199,918		—		(1,041,168)		(841,250)
		(7,523)		199,918		—		(1,041,168)		(848,773)
Transfers from Level 3 to Level 2		(489,407)		—		—		—		(489,407)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Transfers to loans held for sale		—		(363,354)		—		—		(363,354)
Balance, March 31, 2020	$	806,587	$	315,194	$	8,187	$	2,193,697	$	3,323,665
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2020	$	(11,856)	$	315,194	$	—	$	(1,041,168)	$	(737,830)

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, March 31, 2019	$	178,586	$	29,140	$	207,726
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		379		—		379
Accrual of interest		1,974		—		1,974
Repayments		(9,308)		—		(9,308)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(14,522)		(5,955)		(20,477)
Balance, March 31, 2020	$	157,109	$	29,761	$	186,870
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2020	$	(14,522)	$	(5,955)	$	(20,477)

The Company had transfers among the fair value levels arising from transfers of IRLCs to loans held for sale at fair value upon purchase or funding of the respective loans and from the return to salability in the active secondary market of certain loans held for sale.

Assets and Liabilities Measured at Fair Value under the Fair Value Option

Net changes in fair values included in income for assets and liabilities carried at fair value as a result of management’s election of the fair value option by income statement line item are summarized below:

	Quarter ended March 31,
	2021						2020
	Net gains on		Net				Net gains on		Net
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
Assets:
Loans held for sale	$	650,119	$	—	$	650,119	$	398,718	$	—	$	398,718
Mortgage servicing rights		—		217,203		217,203		—		(1,041,168)		(1,041,168)
	$	650,119	$	217,203	$	867,322	$	398,718	$	(1,041,168)	$	(642,450)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	(1,037)	$	(1,037)	$	—	$	14,522	$	14,522
Mortgage servicing liabilities		—		6,260		6,260		—		5,955		5,955
	$	—	$	5,223	$	5,223	$	—	$	20,477	$	20,477

Following are the fair value and related principal amounts due upon maturity of loans held for sale:

	March 31, 2021						December 31, 2020
			Principal						Principal
			amount						amount
	Fair		due upon				Fair		due upon
Loans held for sale	value		maturity		Difference		value		maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	13,013,597	$	12,580,255	$	433,342	$	11,304,308	$	10,743,814	$	560,494
90 days or more delinquent:
Not in foreclosure		340,185		344,853		(4,668)		275,419		280,595		(5,176)
In foreclosure		32,007		33,908		(1,901)		36,673		39,529		(2,856)
	$	13,385,789	$	12,959,016	$	426,773	$	11,616,400	$	11,063,938	$	552,462

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a summary of assets that were measured at fair value on a nonrecurring basis:

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2021	$	—	$	—	$	2,568	$	2,568
December 31, 2020	$	—	$	—	$	1,450	$	1,450

The following table summarizes the (losses) gains recognized on assets when they were remeasured at fair value on a nonrecurring basis:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Real estate acquired in settlement of loans	$	(412)	$	(3,980)

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Obligations under capital lease, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.

These assets and liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these assets and liabilities other than the 2018-GTI Term Notes and 2018-GT2 Term Notes included in Notes payable secured by mortgage servicing assets and the Unsecured senior notes approximate their carrying values due to their short terms and/or variable interest rates.

The Company estimates the fair value of the Notes payable secured by mortgage servicing assets and the Unsecured senior notes based on non-affiliate broker indications of fair value. The fair value and carrying value of these notes are summarized below:

	March 31, 2021				December 31, 2020
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,296,344	$	1,296,285	$	1,268,304	$	1,295,840
Unsecured senior notes	$	1,290,250	$	1,288,198	$	685,750	$	645,820

Valuation Governance

Most of the Company’s financial assets, and all of its MSRs, ESS, derivative liabilities and MSLs, are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and derivative liabilities and all of its MSRs, ESS, and MSLs are “Level 3” fair value assets and liabilities which require use of unobservable inputs that are significant to the estimation of the items’ fair values. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances.

Due to the difficulty in estimating the fair values of “Level 3” fair value assets and liabilities, the Company has assigned the responsibility for estimating the fair value of these items to specialized staff and subjects the valuation process to significant senior management oversight. The Company’s Financial Analysis and Valuation group (the “FAV group”) is the Company’s specialized staff responsible for estimating the fair values of “Level 3” fair value assets and liabilities other than IRLCs.

With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes the Company’s chief financial, investment, operating and risk officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.

The FAV group is responsible for reporting to the Company’s senior management valuation committee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its valuations, the FAV group presents an analysis of the effect on the valuation of changes to the significant inputs to the models.

The Company has assigned responsibility for developing the fair values of IRLCs to its Capital Markets Risk Management staff. The fair values developed by the Capital Markets Risk Management staff are reviewed by the Company’s Capital Markets Operations group.

Valuation Techniques and Inputs

Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities:

Loans Held for Sale

Most of the Company’s loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value assets. The fair values of “Level 2” fair value loans are determined using their contracted selling price or quoted market price or market price equivalent.

Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:

● Government guaranteed or insured loans purchased by the Company from Ginnie Mae guaranteed pools in its loan servicing portfolio. The Company’s right to purchase government guaranteed or insured loans arises as the result of the loan being at least three months delinquent on the date of repurchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such repurchased loans may be resold to investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed security. Such eligibility occurs when the repurchased loans become current either through the borrower’s reperformance or through completion of a modification of the loan’s terms or after six months of timely payments following the completion of certain types of payment deferral programs.

● Loans that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect.

The Company uses a discounted cash flow model to estimate the fair value of its “Level 3” fair value loans held for sale. The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value loans held for sale are discount rates, home price projections, voluntary prepayment/resale and total prepayment speeds. Significant changes in any of those inputs in isolation could result in a significant change to the loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.

Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of loans held for sale:

	March 31, 2021		December 31, 2020
Fair value (in thousands)	$	5,202,065	$	4,675,169
Key inputs (1):
Discount rate:
Range		2.6% – 9.2%		2.8% – 9.2%
Weighted average		2.6%		2.8%
Twelve-month projected housing price index change:
Range		3.9% – 4.9%		2.7% – 3.5%
Weighted average		4.4%		3.0%
Voluntary prepayment/resale speed (2):
Range		0.3% – 29.5%		0.4% – 31.3%
Weighted average		21.2%		21.9%
Total prepayment speed (3):
Range		0.3% – 40.2%		0.5% – 42.9%
Weighted average		28.1%		29.2%

(1) Weighted average inputs are based on the fair value of the “Level 3” loans.

(2) Voluntary prepayment/resale speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).

(3) Total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments/resale and default rates.

Changes in fair value of loans held for sale attributable to changes in the loan’s instrument-specific credit risk are measured with reference to the change in the respective loan’s delinquency status and performance history at period end from the later of the beginning of the period or acquisition date. Changes in fair value of loans held for sale are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.

Derivative Financial Instruments

Interest Rate Lock Commitments

The Company categorizes IRLCs as “Level 3” fair value assets or liabilities. The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and the probability that the loan will be funded or purchased (the “pull-through rate”).

The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rate and the MSR component of the Company’s estimate of the fair value of the mortgage loans it has committed to purchase. Significant changes in the pull-through rate or the MSR component of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurement. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value, but increase the pull-through rate for the loan principal and interest payment cash flow component, which has decreased in fair value. Changes in fair value of IRLCs are included in Net gains on loans held for sale at fair value in the consolidated statements of income.

Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

	March 31, 2021		December 31, 2020
Fair value (in thousands) (1)	$	337,940	$	677,026
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.1% – 100%
Weighted average		85.5%		82.7%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		(10.0) – 6.4		0.7 – 5.3
Weighted average		4.1		3.6
Percentage of loan commitment amount
Range		(2.1)% – 3.2%		0.1% – 2.6%
Weighted average		1.3%		1.2%

(1) For purpose of this table, IRLC asset and liability positions are shown net.

(2) Weighted average inputs are based on the committed amounts.

Hedging Derivatives

Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.

Changes in the fair value of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Hedging results, as applicable, in the consolidated statements of income.

Mortgage Servicing Rights

MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable pricing spread (discount rate), prepayment rates, and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

Following are the key inputs used in determining the fair value of MSRs received by the Company when it retains the obligation to service the mortgage loans it sells:

	Quarter ended March 31,
	2021		2020
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	470,533	$	282,315
Unpaid principal balance of underlying loans	$	34,943,254	$	18,330,384
Weighted average servicing fee rate (in basis points)		34		40
Key inputs (1):
Pricing spread (2):
Range		8.0% – 16.9%		6.8% – 15.6%
Weighted average		9.6%		8.2%
Annual total prepayment speed (3):
Range		6.2% – 12.9%		9.1% – 49.8%
Weighted average		7.8%		14.5%
Equivalent average life (in years):
Range		4.1 – 9.0		1.5 – 7.8
Weighted average		8.5		5.9
Per-loan annual cost of servicing:
Range		$81 – $117		$77 – $100
Weighted average		$104		$97

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to the United States Dollar London Interbank Offered Rate (“LIBOR”)/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:

	March 31, 2021	December 31, 2020
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 3,268,910	$ 2,581,174
Pool characteristics:
Unpaid principal balance of underlying loans	$ 244,367,930	$ 238,410,809
Weighted average note interest rate	3.5%	3.6%
Weighted average servicing fee rate (in basis points)	34	35
Key inputs (1):
Pricing spread (2):
Range	6.8% – 16.8%	8.0% – 17.6%
Weighted average	9.2%	10.1%
Effect on fair value of:
5% adverse change	($58,358)	($46,356)
10% adverse change	($114,643)	($90,936)
20% adverse change	($221,392)	($175,137)
Annual total prepayment speed (3):
Range	7.2% – 31.1%	10.1% – 32.9%
Weighted average	9.8%	13.7%
Equivalent average life (in years):
Range	2.9 – 8.4	2.3 – 7.7
Weighted average	7.2	6.0
Effect on fair value of:
5% adverse change	($64,416)	($66,536)
10% adverse change	($126,698)	($130,253)
20% adverse change	($245,247)	($249,843)
Annual per-loan cost of servicing:
Range	$79 – $118	$79 – $117
Weighted average	$108	$107
Effect on fair value of:
5% adverse change	($30,559)	($25,482)
10% adverse change	($61,117)	($50,964)
20% adverse change	($122,235)	($101,929)

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

The preceding sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as earnings forecasts.

Excess Servicing Spread Financing at Fair Value

ESS is categorized as a “Level 3” fair value liability. Because ESS is a claim to a portion of the cash flows from MSRs, the fair value measurement of the ESS is similar to that of MSRs. The Company uses the same discounted cash flow approach to measuring the ESS as it uses to measure MSRs except that certain inputs relating to the cost to service the mortgage loans underlying the MSRs and certain ancillary income are not included as these cash flows do not accrue to the holder of the ESS.

The key inputs used in the estimation of ESS fair value include pricing spread (discount rate) and prepayment speed. Significant changes to either of those inputs in isolation could result in a significant change in the fair value of ESS. Changes in these key inputs are not directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally discourage mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing the fair value of this financing. Changes in the fair value of ESS are included in Net loan servicing fees—Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust. During the quarter ended March 31, 2021, the Company repaid its outstanding ESS financing payable to PMT.

Following are the key inputs used in determining the fair value of ESS financing:

	December 31,
	2020
Fair value (in thousands)	$ 131,750
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 15,833,050
Average servicing fee rate (in basis points)	34
Average excess servicing spread (in basis points)	19
Key inputs (1):
Pricing spread (2):
Range	4.9% – 5.3%
Weighted average	5.1%
Annual total prepayment speed (3):
Range	9.6% – 18.3%
Weighted average	11.7%
Equivalent average life (in years):
Range	2.3 – 6.6
Weighted average	5.8

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to ESS.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Mortgage Servicing Liabilities

MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable pricing spread (discount rate), prepayment rates, and the annual per-loan cost to service the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

Following are the key inputs used in determining the fair value of MSLs:

		March 31,		December 31,
		2021		2020
Fair value (in thousands)	$	46,026	$	45,324
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	3,173,793	$	2,857,492
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.9%		7.6%
Annual total prepayment speed (2)		30.5%		33.3%
Equivalent average life (in years)		3.8		3.2
Annual per-loan cost of servicing	$	293	$	305

(1) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSLs.

(2) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

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Loans Held for Sale at Fair Value

3 Months Ended

Mar. 31, 2021

Loans Held for Sale at Fair Value

Loans Held for Sale at Fair Value

Note 7—Loans Held for Sale at Fair Value

Loans held for sale at fair value include the following:

	March 31,		December 31,
Loan type	2021		2020
	(in thousands)
Government-insured or guaranteed	$	6,722,768	$	5,683,786
Conventional conforming		1,460,956		1,257,445
Purchased from Ginnie Mae pools serviced by the Company		5,182,311		4,661,378
Repurchased pursuant to representations and warranties		19,754		13,791
	$	13,385,789	$	11,616,400
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	12,726,461	$	10,912,178
Mortgage loan participation purchase and sale agreements		541,206		545,500
	$	13,267,667	$	11,457,678

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2021

Derivative Financial Instruments

Derivative Financial Instruments

Note 8—Derivative Financial Instruments

The Company holds and issues derivative financial instruments in connection with its operating activities. Derivative financial instruments are created as a result of certain of the Company’s operations and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created as a result of the Company’s operations are IRLCs that are created when the Company commits to purchase or originate a loan for sale.

The Company also engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of the its assets. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of loans held for sale and the portion of its MSRs not financed with ESS.

The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

Derivative Notional Amounts and Fair Value of Derivatives

The Company had the following derivative financial instruments recorded on its consolidated balance sheets:

	March 31, 2021					December 31, 2020
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount (1)	assets		liabilities		amount (1)	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	17,668,145	$	362,923	$	24,983	20,624,535	$	679,961	$	2,935
Used for hedging purposes (2):
Forward purchase contracts	34,644,744		14,318		192,793	31,689,543		133,267		1,276
Forward sales contracts	52,739,511		333,198		32,729	50,438,967		1,451		251,149
MBS put options	11,750,000		99,670		34,873	12,025,000		14,302		—
Swaption purchase contracts	7,150,000		50,973		—	3,375,000		11,939		—
Put options on interest rate futures purchase contracts	6,950,000		27,133		—	4,750,000		5,520		—
Call options on interest rate futures purchase contracts	2,500,000		1,539		—	850,000		1,391		—
Put options on interest rate futures sale contracts	4,100,000		—		15,881	—		—		—
Call options on interest rate futures sale contracts	1,575,000		—		1,061	—		—		—
Treasury futures purchase contracts	830,000		—		—	1,065,000		—		—
Treasury futures sale contracts	1,705,000		—		—	1,555,000		—		—
Interest rate swap futures purchase contracts	4,240,000		—		—	4,801,700		—		—
Interest rate swap futures sale contracts	750,000		—		—	711,700		—		—
Total derivatives before netting			889,754		302,320			847,831		255,360
Netting			(358,902)		(233,763)			(136,593)		(212,722)
		$	530,852	$	68,557		$	711,238	$	42,638
Deposits (received from) placed with derivative counterparties, net		$	(125,139)				$	76,129

(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2) All of the derivatives used for hedging purposes are interest rate derivatives and are used as economic hedges.

Derivative Balances and Netting of Financial Instruments

The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts:

	March 31, 2021						December 31, 2020
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements - IRLCs	$	362,923	$	—	$	362,923	$	679,961	$	—	$	679,961
Derivatives subject to master netting arrangements:
Forward purchase contracts		14,318		—		14,318		133,267		—		133,267
Forward sale contracts		333,198		—		333,198		1,451		—		1,451
MBS put options		99,670		—		99,670		14,302		—		14,302
Swaption purchase contracts		50,973		—		50,973		11,939		—		11,939
Put options on interest rate futures purchase contracts		27,133		—		27,133		5,520		—		5,520
Call options on interest rate futures purchase contracts		1,539		—		1,539		1,391		—		1,391
Netting		—		(358,902)		(358,902)		—		(136,593)		(136,593)
		526,831		(358,902)		167,929		167,870		(136,593)		31,277
	$	889,754	$	(358,902)	$	530,852	$	847,831	$	(136,593)	$	711,238

Derivative Assets, Financial Instruments, and Cash Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for netting.

	March 31, 2021								December 31, 2020
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	362,923	$	—	$	—	$	362,923	$	679,961	$	—	$	—	$	679,961
JPMorgan Chase Bank, N.A.		56,606		—		—		56,606		17,149		—		—		17,149
Morgan Stanley Bank, N.A.		53,548		—		—		53,548		2,443		—		—		2,443
Wells Fargo Bank, N.A.		18,524		—		—		18,524		—		—		—		—
RJ O'Brien		11,730		—		—		11,730		6,910		—		—		6,910
Bank of America, N.A.		10,013		—		—		10,013		—		—		—		—
Citibank, N.A.		9,685		—		—		9,685		2,026		—		—		2,026
Goldman Sachs		4,203		—		—		4,203		—		—		—		—
Others		3,620		—		—		3,620		2,749		—		—		2,749
	$	530,852	$	—	$	—	$	530,852	$	711,238	$	—	$	—	$	711,238

Offsetting of Derivative Liabilities and Financial Liabilities

Following is a summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts. Assets sold under agreements to repurchase do not qualify for netting.

	March 31, 2021						December 31, 2020
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements – Interest rate lock commitments	$	24,983	$	—	$	24,983	$	2,935	$	—	$	2,935
Derivatives subject to a master netting arrangement:
Forward purchase contracts		192,793		—		192,793		1,276		—		1,276
Forward sale contracts		32,729		—		32,729		251,149		—		251,149
MBS put options		34,873		—		34,873		—		—		—
Put options on interest rate futures sale contracts		15,881		—		15,881		—		—		—
Call options on interest rate futures sale contracts		1,061		—		1,061		—		—		—
Netting		—		(233,763)		(233,763)		—		(212,722)		(212,722)
		277,337		(233,763)		43,574		252,425		(212,722)		39,703
Total derivatives		302,320		(233,763)		68,557		255,360		(212,722)		42,638
Assets sold under agreements to repurchase:
Amount outstanding		10,856,677		—		10,856,677		9,663,995		—		9,663,995
Unamortized debt issuance costs		(8,200)		—		(8,200)		(9,198)		—		(9,198)
		10,848,477		—		10,848,477		9,654,797		—		9,654,797
	$	11,150,797	$	(233,763)	$	10,917,034	$	9,910,157	$	(212,722)	$	9,697,435

Derivative Liabilities, Financial Instruments, and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not qualify under the accounting guidance for netting. All assets sold under agreements to repurchase are secured by sufficient collateral or have fair value that exceeds the liability amount recorded on the consolidated balance sheets.

	March 31, 2021								December 31, 2020
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	24,983	$	—	$	—	$	24,983	$	2,935	$	—	$	—	$	2,935
Credit Suisse First Boston Mortgage Capital LLC		2,824,198		(2,805,703)		—		18,495		3,947,752		(3,943,149)		—		4,603
JPMorgan Chase Bank, N.A.		2,841,831		(2,841,831)		—		—		2,752,279		(2,752,279)		—		—
Bank of America, N.A.		1,317,580		(1,317,580)		—		—		634,523		(626,550)		—		7,973
Goldman Sachs		895,437		(895,437)		—		—		—		—		—		—
Citibank, N.A.		787,322		(787,322)		—		—		505,625		(505,625)		—		—
Barclays Capital		738,528		(730,340)		—		8,188		596,729		(596,729)		—		—
Morgan Stanley Bank, N.A.		562,172		(562,172)		—		—		331,546		(331,546)		—		—
Royal Bank of Canada		434,487		(434,487)		—		—		406,348		(406,348)		—		—
BNP Paribas		308,754		(308,754)		—		—		337,823		(336,545)		—		1,278
Wells Fargo Bank, N.A.		173,051		(173,051)		—		—		169,085		(165,224)		—		3,861
Mizuho Securities		8,107		—		—		8,107		6,491		—		—		6,491
Nomura Securities International, Inc.		2,264		—		—		2,264		—		—		—		—
Mitsubishi UFJ Securities		3,305		—		—		3,305		—		—		—		—
Federal Home Loan Mortgage Corporation		—		—		—		—		12,928		—		—		12,928
Others		3,215		—		—		3,215		2,569		—		—		2,569
	$	10,925,234	$	(10,856,677)	$	—	$	68,557	$	9,706,633	$	(9,663,995)	$	—	$	42,638

Following are the gains (losses) recognized by the Company on derivative financial instruments and the income statement lines where such gains and losses are included:

		Quarter ended March 31,
Derivative activity	Income statement line	2021		2020
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	(339,086)	$	178,543
Hedged item:
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	462,538	$	(225,557)
Mortgage servicing rights	Net loan servicing fees–Hedging results	$	(442,151)	$	1,036,570

(1) Represents net (decrease) increase in fair value of IRLCs from the beginning to the end of the quarter. Amounts recognized at the date of commitment and fair value changes recognized during the quarter until purchase of the underlying loans are shown in the rollforward of IRLCs for the quarter in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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Mortgage Servicing Rights and Mortgage Servicing Liabilities

3 Months Ended

Mar. 31, 2021

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	2,581,174	$	2,926,790
Additions:
Resulting from loan sales		470,533		282,315
Purchases		—		25,760
		470,533		308,075
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		312,890		(915,862)
Other changes in fair value (2)		(95,687)		(125,306)
Total change in fair value		217,203		(1,041,168)
Balance at end of quarter	$	3,268,910	$	2,193,697
	March 31,		December 31,
	2021		2020
	(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	3,265,073	$	2,577,964

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

(2) Represents changes due to realization of cash flows.

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	45,324	$	29,140
Mortgage servicing liabilities resulting from loan sales		6,962		6,576
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		6,764		4,432
Other changes in fair value (2)		(13,024)		(10,387)
Total change in fair value		(6,260)		(5,955)
Balance at end of quarter	$	46,026	$	29,761

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

(2) Represents changes due to realization of cash flows.

Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Contractual servicing fees	$	210,753	$	198,653
Other fees:
Late charges		7,931		12,613
Other		7,854		4,850
	$	226,538	$	216,116

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Leases

3 Months Ended

Mar. 31, 2021

Leases

Leases

Note 10—Leases

The Company has operating lease agreements relating to its facilities. The Company’s operating lease agreements have remaining terms ranging from less than one year to ten years; some of the operating lease agreements include options to extend the term for up to five years. None of the Company’s operating lease agreements require the Company to make variable lease payments.

The Company’s lease agreements are summarized below:

	Quarter ended March 31,
	2021		2020
Lease expense:
Operating leases	$	4,366	$	3,932
Short-term leases		50		256
Net lease expense included in Occupancy and equipment	$	4,416	$	4,188
Other information:
Payments for operating leases	$	5,036	$	4,440
Operating lease right-of-use assets recognized	$	3,243	$	1,534
Period end weighted averages:
Remaining lease term (in years)		6.2		6.9
Discount rate		4.1%		4.3%

Lease payments of the Company’s operating lease liabilities are summarized below:

Twelve months ended March 31,	Operating leases
	(in thousands)
2022	$	19,690
2023		18,526
2024		17,488
2025		15,765
2026		14,933
Thereafter		24,065
Total lease payments		110,467
Less imputed interest		(14,398)
Operating lease liability	$	96,069

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Other Assets

3 Months Ended

Mar. 31, 2021

Other Asset

Other Assets

Note 11—Other Assets

Other assets are summarized below:

		March 31,		December 31,
	2021		2020
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Margin deposits		89,417		116,881
Capitalized software, net		85,371		81,434
Furniture, fixture, equipment and building improvements, net		32,714		32,217
Real estate acquired in settlement of loans		9,616		12,158
Other		318,869		296,425
	$	638,257	$	692,169
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		6,778		7,675
Furniture, fixture, equipment and building improvements, net		5,294		5,689
	$	114,342	$	166,418

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Short-Term Borrowings

3 Months Ended

Mar. 31, 2021

Short-Term Borrowings

Short-Term Borrowings

Note 12—Short-Term Borrowings

The borrowing facilities described throughout these Notes 12 and 13 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio, profitability and liquidity. Management believes that the Company was in compliance with these covenants as of March 31, 2021.

Assets Sold Under Agreements to Repurchase

The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by loans held for sale at fair value or participation certificates backed by MSRs. Eligible loans and participation certificates backed by MSRs are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on LIBOR. Loans and MSRs financed under these agreements may be re-pledged by the lenders.

On April 1, 2020, the Company issued a series of variable funding notes, the Series 2020-SPIADVF1 Notes (“GMSR Servicing Advance Notes”), to be sold under agreement to repurchase pursuant to a Master Repurchase Agreement, dated as of April 1, 2020, with Credit Suisse First Boston Mortgage Capital LLC, acting as administrative agent on behalf of Credit Suisse AG, Cayman Islands Branch, as buyer (the “GMSR Servicing Advances Repurchase Agreement”).

The GMSR Servicing Advances Repurchase Agreement provides the Company with financing secured by its servicing advances to pay, in accordance with the Ginnie Mae requirements, in the event borrowers are delinquent: (i) regularly scheduled monthly principal and interest to mortgage-backed securities holders; (ii) taxes, homeowner’s insurance, and other escrowed items; and (iii) other expenses related to servicing delinquent loans as specified by (A) state and federal laws and (B) government agencies, including the FHA, the VA, and the USDA.

The borrowing capacity under the GMSR Servicing Advances Repurchase Agreement, shared with VFN financing capacity, is $600 million, all of which is committed and may be used to finance the servicing advances related to delinquent FHA, VA, and USDA loans, including delinquencies caused by forbearance provided to the borrower in accordance with the CARES Act. The VFN is described in Note 4—Related Party Transactions—Investing Activities.

Assets sold under agreements to repurchase are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	8,432,579		$	3,139,328
Weighted average interest rate (1)		2.17	%		3.07	%
Total interest expense	$	52,179		$	25,684
Maximum daily amount outstanding	$	10,856,677		$	4,446,795

		March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	10,856,677		$	9,663,995
Unamortized debt issuance costs		(8,200)			(9,198)
	$	10,848,477		$	9,654,797
Weighted average interest rate		1.93	%		1.90	%
Available borrowing capacity (2):
Committed	$	67,463		$	372,803
Uncommitted		3,700,860			2,163,202
	$	3,768,323		$	2,536,005
Fair value of assets securing repurchase agreements:
Loans held for sale	$	12,726,461		$	10,912,178
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—		$	80,862
Servicing advances (3)	$	373,110		$	413,484
Mortgage servicing rights (3)	$	3,105,051		$	2,490,267
Deposits (3)	$	102,270		$	153,054
Margin deposits placed with counterparties (4)	$	10,875		$	5,625

(1) Excludes the effect of amortization of net issuance costs of $6.2 million and $1.6 million for the quarters ended March 31, 2021 and 2020, respectively,

(2) The amount the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed.

(3) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, and the Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

(4) Margin deposits are included in Other assets on the Company’s consolidated balance sheets.

Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:

Remaining maturity at March 31, 2021	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	2,712,890
Over 30 to 90 days		5,075,748
Over 90 to 180 days		428,639
Over 180 days to one year		2,639,400
Total assets sold under agreements to repurchase	$	10,856,677
Weighted average maturity (in months)		5.1

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s assets sold under agreements to repurchase is summarized by counterparty below as of March 31, 2021:

			Weighted average
Counterparty	Amount at risk		maturity of advances	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	2,069,444	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	592,940	April 18, 2021	April 23, 2021
Bank of America, N.A.	$	501,873	May 3, 2021	June 9, 2021
JP Morgan Chase Bank, N.A.	$	282,086	November 1, 2021	September 30, 2022
JP Morgan Chase Bank, N.A.	$	15,597	April 7, 2021	April 7, 2021
BNP Paribas	$	252,959	June 14, 2021	July 30, 2021
Barclays Bank PLC	$	94,629	June 19, 2021	November 3, 2022
Goldman Sachs	$	53,150	June 7, 2021	December 23, 2022
Citibank, N.A.	$	41,738	June 16, 2021	August 3, 2021
Morgan Stanley Bank, N.A.	$	33,515	June 16, 2021	November 2, 2022
Royal Bank of Canada	$	30,200	July 19, 2021	March 14, 2022
Wells Fargo Bank, N.A.	$	20,988	June 11, 2021	October 6, 2022

(1) The calculation of the amount at risk includes the VFN and the Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, and the Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

The Company is subject to margin calls during the period the repurchase agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the fair value (as determined by the applicable lender) of the assets securing those agreements decreases.

Mortgage Loan Participation Purchase and Sale Agreements

Certain of the borrowing facilities secured by loans held for sale are in the form of mortgage loan participation purchase and sale agreements. Participation certificates, each of which represents an undivided beneficial ownership interest in mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae, are sold to a lender pending the securitization of the mortgage loans and sale of the resulting securities. A commitment to sell the securities resulting from the pending securitization between the Company and a non-affiliate is also assigned to the lender at the time a participation certificate is sold.

The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs and a holdback amount that is based on a percentage of the purchase price. The holdback amount is not required to be paid to the Company until the settlement of the security and its delivery to the lender.

The mortgage loan participation purchase and sale agreements are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	276,561		$	247,811
Weighted average interest rate (1)		1.34	%		2.64	%
Total interest expense	$	1,095		$	1,810
Maximum daily amount outstanding	$	528,844		$	530,220

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $173,000 for the quarters ended March 31, 2021 and 2020, respectively.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	518,747		$	521,477
Unamortized debt issuance costs		—			—
	$	518,747		$	521,477
Weighted average interest rate		1.36	%		1.39	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	541,206		$	545,500

Corporate Revolving Line of Credit

The Company, through its subsidiary PennyMac, entered into an amended and restated credit agreement on November 18, 2016, as amended (the “Credit Agreement”) under which PennyMac established a revolving line of credit in an amount not to exceed $150 million. PennyMac did not borrow under the revolving line of credit during the periods presented and terminated the Credit Agreement on September 29, 2020 concurrent with the issuance the Unsecured Senior Notes described below.

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Long-Term Debt

3 Months Ended

Mar. 31, 2021

Long-Term Debt.

Long-Term Debt

Note 13—Long-Term Debt

Obligations Under Capital Lease

The Company has a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on June 13, 2022 and bears interest at a spread over one-month LIBOR.

Obligations under capital lease are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	11,340		$	19,406
Weighted average interest rate		2.13	%		3.36	%
Total interest expense	$	59		$	167
Maximum daily amount outstanding	$	11,864		$	20,810

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Unpaid principal balance	$	10,468		$	11,864
Weighted average interest rate		2.11	%		2.15	%
Assets pledged to secure obligations under capital lease:
Capitalized software	$	6,778		$	7,675
Furniture, fixtures and equipment	$	5,294		$	5,689

Notes Payable Secured by Mortgage Servicing Assets

Term Notes

The Company, through the Issuer Trust described in Note 4—Related Party Transactions—Investing Activities, issued term notes (the “Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The Term Notes rank pari passu with each other and with the VFN issued by the Issuer Trust to PLS and are secured by certain participation certificates relating to Ginnie Mae MSRs and ESS that are financed pursuant to the GNMA MSR Facility.

Following is a summary of the issued and outstanding Term Notes:

Issuance date	Principal balance		Stated interest rate (1)	Stated Maturity date (2)
	(in thousands)		(Annual)
February 28, 2018 (the "GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The Term Notes’ indentures provide the Company with the option to extend the maturity of the Term Notes by two years after the stated maturity.

MSR Note Payable

On February 1, 2018, the Company issued a note payable that is secured by Freddie Mac MSRs. Interest is charged at a rate based on LIBOR plus the applicable contract margin. The facility expires on March 31, 2023. The maximum amount that the Company may borrow under the note payable is $600 million, less any amount outstanding under the agreement to repurchase pursuant to which the Company finances the VFN. The Company did not borrow under this note payable during the periods presented.

Notes payable secured by mortgage servicing assets are summarized below:

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.88	%		4.43	%
Total interest expense	$	9,888		$	14,846

(1) Excludes the effect of amortization of debt issuance costs totaling $544,000 and $445,000 for the quarters ended March 31, 2021 and 2020, respectively.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(3,715)			(4,160)
	$	1,296,285		$	1,295,840
Weighted average interest rate		2.87	%		2.93	%
Assets pledged to secure notes payable (1):
Servicing advances	$	373,110		$	413,484
Mortgage servicing rights	$	3,047,056		$	2,421,326
Deposits	$	102,270		$	153,054

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

Unsecured Senior Notes

The Company issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinated indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinated to any future secured indebtedness of the Company to the extent of the fair value of collateral securing such indebtedness.

The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of PFSI’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinated indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinated to any future secured indebtedness of the guarantors to the extent of the fair value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinated to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.

Following is a summary of the Unsecured Notes issued:

Issuance date	Principal balance		Coupon rate	Maturity date
	(in thousands)		(Annual)
September 29, 2020	$	500,000	5.38%	October 15, 2025
October 19, 2020		150,000	5.38%	October 15, 2025
February 11, 2021		650,000	4.25%	February 15, 2029
	$	1,300,000

Before October 15, 2022 or February 15, 2024 for the Unsecured Note issued during 2020 and 2021, respectively, the Company may, at its option redeem earlier in accordance with the terms of the Unsecured Notes:

● some or all of the Unsecured Notes at a price equal to 100% of the principal amount of the Unsecured Notes redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, plus a make-whole premium; and

● up to 40% of the aggregate principal amount of the Unsecured Notes with an amount equal to or less than the net proceeds from certain equity offerings at a redemption price of 105.375% and 104.25% for the Unsecured Notes issued during 2020, and 2021, respectively, plus accrued and unpaid interest to, but excluding, the redemption date.

● If a “change of control” (as defined in the indenture under which the Unsecured Notes were issued) occurs, the holders of the Unsecured Notes may require the Company to purchase for cash all or a portion of their Unsecured Notes at a purchase price equal to 101% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest to, but excluding, the repurchase date.

	Quarter ended
	March 31, 2021
	(dollars in thousands)
Average balance	$	1,003,889
Weighted average coupon rate (1)		4.91	%
Total interest expense	$	12,670

(1) Excludes the effect of amortization of debt issuance costs totaling $347,000.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	650,000
Unamortized debt issuance costs, net of issuance premiums		(11,802)			(4,180)
	$	1,288,198		$	645,820
Weighted average coupon rate		4.81	%		5.38	%

Maturities of Long-Term Debt

Maturities of long-term debt obligations (based on final maturity dates) are as follows:

	Twelve months ended March 31,
	2022		2023		2024		2025		2026		Thereafter		Total
	(in thousands)
Obligations under capital lease	$	8,374	$	2,094	$	—	$	—	$	—	$	—	$	10,468
Notes payable secured by mortgage servicing assets		—		650,000		650,000		—		—		—		1,300,000
Unsecured Notes		—		—		—		—		650,000		650,000		1,300,000
Total	$	8,374	$	652,094	$	650,000	$	—	$	650,000	$	650,000	$	2,610,468

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Liability for Losses Under Representations and Warranties

3 Months Ended

Mar. 31, 2021

Liability for Losses Under Representations and Warranties

Liability for Losses Under Representations and Warranties

Note 14—Liability for Losses Under Representations and Warranties

Following is a summary of the Company’s liability for losses under representations and warranties:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	32,688	$	21,446
Provision for losses on loans sold:
Resulting from sales of loans		10,053		3,712
Reduction in liability due to change in estimate		(3,685)		(1,676)
Losses incurred, net		(628)		(280)
Balance at end of quarter	$	38,428	$	23,202
Unpaid principal balance of loans subject to representations and warranties at end of quarter	$	220,865,034	$	186,517,598

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Taxes

Income Taxes

Note 15—Income Taxes

The Company’s effective income tax rates were 25.5% and 26.2% for the quarters ended March 31, 2021 and 2020, respectively. The lower effective income tax rate during the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily due to a higher net permanent tax deduction for equity compensation in the quarter ended March 31, 2021.

The CARES Act, passed in March 2020, introduced a number of tax law changes which are generally taxpayer favorable and in December 2020, the Taxpayer Certainty and Disaster Tax Relief Act was signed into law. No material changes in our effective income tax rates resulted from either Act.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies.

Commitments and Contingencies

Note 16—Commitments and Contingencies

Litigation

From time to time, the Company may be a party to legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into the Reorganization without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and was approved on February 11, 2021. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. Consequently, on April 27, 2020, PennyMac dismissed its federal court action without prejudice to pursue those claims in arbitration as well. While no assurance can be provided at to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending.

Regulatory Matters

The Company and/or its subsidiaries are subject to various state and federal regulations related to its loan production and servicing operations by the various states it operates in as well as federal agencies such as the Consumer Financial Protection Bureau, HUD, and the FHA and is subject to the requirements of the Agencies to which it sells loans and for which it performs loan servicing activities. As a result, the Company may become involved in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by such various federal, state and local regulatory bodies.

On January 7, 2021, PLS received a letter from the CFPB notifying PLS that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the CFPB’s Office of Enforcement was considering recommending that the CFPB take legal action against PLS for alleged violations of the Real Estate Settlement Procedures Act and Truth in Lending Act. The CFPB's examination covered the period from March 2015 through September 2016. Should the CFPB commence an action, it may seek restitution, civil monetary penalties, injunctive relief, or other corrective action, the extent of which remains uncertain at this time. Notably, certain of the alleged violations were originally self-identified by PLS and remediated prior to the CFPB's examination, and all alleged violations were fully remediated as of August 2017. PLS confirmed these remediation actions as well as full restitution to any affected borrowers in its response to the NORA letter submitted on February 8, 2021. While the NORA process remains open and pending at this time, and there can be no assurance as to the nature or extent of any actions taken by the CFPB with regard to these alleged violations, the Company does not believe that the ultimate resolution of this matter will have a material adverse effect on its financial statements or operations.

Commitments to Purchase and Fund Mortgage Loans

The Company’s commitments to purchase and fund loans totaled $17.7 billion as of March 31, 2021.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2021

Stockholders' Equity.

Stockholders' Equity

Note 17—Stockholders’ Equity

In February 2021, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $500 million to $1 billion.

Following is a summary of activity under the stock repurchase program:

	Quarter ended March 31,				Cumulative
	2021		2020		total (1)
	(in thousands)
Shares of common stock repurchased		4,653		238		14,359
Cost of shares of common stock repurchased	$	288,519	$	4,121	$	640,946

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program from inception through March 31, 2021.

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Net Gains on Loans Held for Sale

3 Months Ended

Mar. 31, 2021

Net Gains on Loans Held for Sale

Net Gains on Loans Held for Sale

Note 18—Net Gains on Loans Held for Sale

Net gains on loans held for sale at fair value is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
From non-affiliates:
Cash gains (losses):
Loans	$	82,712	$	111,757
Hedging activities		736,225		(122,666)
		818,937		(10,909)
Non-cash gains:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		463,571		275,739
Provisions for losses relating to representations and warranties:
Pursuant to loan sales		(10,053)		(3,712)
Reductions in liability due to change in estimate		3,685		1,676
Changes in fair values of loans and derivatives held at quarter end:
Interest rate lock commitments		(339,086)		178,543
Loans		105,222		(72,080)
Hedging derivatives		(273,687)		(102,891)
		768,589		266,366
From PennyMac Mortgage Investment Trust (1)		(14,248)		77,916
	$	754,341	$	344,282

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Net Interest Income

3 Months Ended

Mar. 31, 2021

Net Interest Income

Net Interest Income

Note 19—Net Interest Income

Net interest income is summarized below:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	987	$	1,711
Loans held for sale at fair value		74,824		46,426
Placement fees relating to custodial funds		5,883		23,209
		81,694		71,346
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		387		1,218
		82,081		72,564
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		52,179		25,684
Mortgage loan participation purchase and sale agreements		1,095		1,810
Obligations under capital lease		59		167
Notes payable secured by mortgage servicing assets		9,888		14,846
Unsecured senior notes		12,670		—
Corporate revolving line of credit		—		503
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		29,436		14,871
Interest on mortgage loan impound deposits		1,106		1,657
		106,433		59,538
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		1,280		1,974
		107,713		61,512
	$	(25,632)	$	11,052

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Stock-based Compensation

3 Months Ended

Mar. 31, 2021

Stock-based Compensation

Stock-based Compensation

Note 20—Stock-based Compensation

As of March 31, 2021, the Company had one stock-based compensation plan. Following is a summary of the stock-based compensation activity:

	Quarter ended March 31,
	2021		2020
	(in thousands)
Grants:
Units:
Performance-based restricted share units ("RSUs")		310		422
Stock options		249		273
Time-based RSUs		171		304
Grant date fair value:
Performance-based RSUs	$	18,234	$	14,768
Stock options		5,116		2,770
Time-based RSUs		10,064		10,662
Total	$	33,414	$	28,200
Vestings and exercises:
Performance-based RSUs vested		640		603
Stock options exercised		88		180
Time-based RSUs vested		305		348
Compensation expense	$	10,877	$	12,368

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Earnings Per Share of Common Stock

3 Months Ended

Mar. 31, 2021

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Note 21—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined by dividing net income by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per share of common stock is determined by dividing net income by the weighted average number of shares of common stock outstanding, assuming all dilutive securities were issued.

Potentially dilutive securities include non-vested stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.

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

	Quarter ended March 31,
	2021		2020
	(in thousands, except per share amounts)
Net income	$	376,868	$	306,243
Weighted average basic shares of common stock outstanding		69,113		78,689
Effect of dilutive securities:
Common shares issuable under stock-based compensation plan		4,004		3,319
Weighted average shares of common stock applicable to diluted earnings per share		73,117		82,008
Basic earnings per share of common stock	$	5.45	$	3.89
Diluted earnings per share of common stock	$	5.15	$	3.73

Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding performance-based RSUs and stock options excluded from the calculation of diluted earnings per share:

	Quarter ended March 31,
	2021		2020
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		120		162
Time-based RSUs		—		117
Stock options (2)		97		105
Total anti-dilutive shares and units		217		384
Weighted average exercise price of anti-dilutive stock options (2)	$	58.85	$	35.03

(1) Certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds included in such RSUs have not been achieved.

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 22—Supplemental Cash Flow Information

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash paid for interest	$	112,730	$	64,527
(Refunds received) cash paid for income taxes, net	$	(15)	$	13
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	470,533	$	282,315
Unsettled portion of MSR acquisitions	$	—	$	1,656
Operating right-of-use assets recognized	$	3,243	$	1,534
Non-cash financing activity:
Mortgage servicing liabilities resulting from loan sales	$	6,962	$	6,576
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	557	$	379
Issuance of common stock in settlement of directors' fees	$	51	$	48

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Regulatory Capital and Liquidity Requirements

3 Months Ended

Mar. 31, 2021

Regulatory Capital and Liquidity Requirements

Regulatory Capital and Liquidity Requirements

Note 23—Regulatory Capital and Liquidity Requirements

The Company, through PLS and PennyMac, is required to maintain specified levels of capital and liquidity to remain a seller/servicer in good standing with the Agencies. Such capital and liquid asset requirements generally are tied to the size of the Company’s loan servicing portfolio, loan origination volume and delinquency rates.

The Company is subject to financial eligibility requirements established by the Federal Housing Finance Agency (“FHFA”) for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac. The eligibility requirements include:

● tangible net worth of $2.5 million plus 25 basis points of the UPB of the Company’s total 1-4 unit servicing portfolio, excluding mortgage loans subserviced for others;

● a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB less 70% of such nonperforming Agency servicing UPB in excess of 600 basis points where the underlying loans are in COVID-19 forbearance but were current at the time they entered forbearance.

The Company is also subject to financial eligibility requirements for Ginnie Mae single-family issuers. The eligibility requirements include net worth of $2.5 million plus 35 basis points of PLS' outstanding Ginnie Mae single-family obligations and a liquidity requirement equal to the greater of $1.0 million or 10 basis points of PLS' outstanding Ginnie Mae single-family securities.

The Agencies’ capital and liquidity requirements, the calculations of which are specified by each Agency, are summarized below:

	March 31, 2021						December 31, 2020
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	4,964,124		$	653,752		$	4,454,680		$	633,331
Ginnie Mae – PLS	$	4,466,186		$	963,805		$	3,794,112		$	1,058,641
HUD – PLS	$	4,466,186		$	2,500		$	3,794,112		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	444,973		$	86,640		$	506,096		$	84,444
Ginnie Mae – PLS	$	444,973		$	215,218		$	506,096		$	215,722
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		14	%		6	%		12	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		16	%		6	%		14	%		6	%

(1) Calculated in compliance with the respective Agency’s requirements.

Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency.

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Segments

3 Months Ended

Mar. 31, 2021

Segments

Segments

Note 24—Segments

The Company operates in three segments: production, servicing and investment management.

Two of the segments are in the mortgage banking business: production and servicing. The production segment performs loan origination, acquisition and sale activities. The servicing segment performs servicing of loans, execution and management of early buyout loan transactions and servicing of loans sourced and managed by the investment management segment for PMT, including executing the loan resolution strategy identified by the investment management segment relating to distressed mortgage loans.

The investment management segment represents the activities of the Company’s investment manager, which include sourcing, performing diligence, bidding and closing investment asset acquisitions and managing the acquired assets and correspondent production activities for PMT.

Financial performance and results by segment are as follows:

	Quarter ended March 31, 2021
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	515,963	$	238,378	$	754,341	$	—	$	754,341
Loan origination fees		104,037		—		104,037		—		104,037
Fulfillment fees from PennyMac Mortgage Investment Trust		60,835		—		60,835		—		60,835
Net loan servicing fees		—		39,720		39,720		—		39,720
Net interest income (expense):
Interest income		29,531		52,550		82,081		—		82,081
Interest expense		38,072		69,638		107,710		3		107,713
		(8,541)		(17,088)		(25,629)		(3)		(25,632)
Management fees		—		—		—		8,449		8,449
Other		597		1,197		1,794		1,142		2,936
Total net revenue		672,891		262,207		935,098		9,588		944,686
Expenses		309,996		120,463		430,459		8,219		438,678
Income before provision for income taxes	$	362,895	$	141,744	$	504,639	$	1,369	$	506,008
Segment assets at quarter end	$	8,886,460	$	22,393,249	$	31,279,709	$	18,271	$	31,297,980

(1) All revenues are from external customers.

	Quarter ended March 31, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	316,635	$	27,647	$	344,282	$	—	$	344,282
Loan origination fees		57,571		—		57,571		—		57,571
Fulfillment fees from PennyMac Mortgage Investment Trust		41,940		—		41,940		—		41,940
Net loan servicing fees		—		257,808		257,808		—		257,808
Net interest income (expense):
Interest income		26,585		45,979		72,564		—		72,564
Interest expense		20,157		41,346		61,503		9		61,512
		6,428		4,633		11,061		(9)		11,052
Management fees		—		—		—		9,055		9,055
Other		(10)		(680)		(690)		807		117
Total net revenue		422,564		289,408		711,972		9,853		721,825
Expenses		182,433		118,566		300,999		6,096		307,095
Income before provision for income taxes	$	240,131	$	170,842	$	410,973	$	3,757	$	414,730
Segment assets at quarter end	$	5,686,878	$	5,186,188	$	10,873,066	$	18,067	$	10,891,133

(1) All revenues are from external customers.

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Subsequent Events

3 Months Ended

Mar. 31, 2021

Subsequent Events

Subsequent Events

Note 25—Subsequent Events

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

● On May 6, 2021, the Company announced that its board of directors declared a cash dividend of $0.20 per common share. The dividend will be paid on May 27, 2021 to common shareholders of record as of May 17, 2021.

● On April 28, 2021, the Company, through three of its wholly-owned subsidiaries, PLS, PennyMac, and PFSI ISSUER TRUST – FMSR (“PFSI Issuer”), entered into a structured finance transaction, allowing PLS to finance Fannie Mae MSRs and ESS (the “FNMA MSR Facility”). In connection with the FNMA MSR Facility, PLS pledges and/or sells to PFSI Issuer participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of a master repurchase agreement and the PFSI Issuer issues to PLS the PFSI ISSUER TRUST - FMSR Collateralized Notes, Series 2021-MSRVF. In addition, the PFSI Issuer may issue to institutional investors term notes secured on a pari passu basis by the participation certificates relating to the MSRs and ESS.

● All agreements to repurchase assets that matured before the date of this Report were extended or renewed.

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Related Party Transactions (Tables) - PMT

3 Months Ended

Mar. 31, 2021

Transactions with Affiliates

Summary of lending activity between the Company and affiliate

	Quarter ended March 31,
	2021		2020
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT (primarily cash)	$	—	$	81,224
Mortgage servicing rights and excess servicing spread recapture incurred		(14,248)		(3,308)
	$	(14,248)	$	77,916
Sale of loans held for sale to PMT	$	—	$	2,246,127
Tax service fees earned from PMT included in Loan origination fees	$	8,192	$	3,980
Fulfillment fee revenue	$	60,835	$	41,940
Sourcing fees included in cost of loans purchased from PMT	$	1,738	$	4,161
Unpaid principal balance of loans purchased from PMT	$	17,559,575	$	13,870,280

Summary of loan servicing fees earned from PMT

	Quarter ended March 31,
	2021		2020
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	543	$	536
Distressed loans		137		300
Mortgage servicing rights		18,413		13,685
	$	19,093	$	14,521

Summary of management fees earned

	Quarter ended March 31,
	2021		2020
	(in thousands)
Base management	$	8,449	$	9,055
Performance incentive		—		—
	$	8,449	$	9,055

Summary of reimbursement of expenses

	Quarter ended March 31,
	2021		2020
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	571	$	1,540
Compensation		165		120
Expenses incurred on PMT's behalf, net		1,336		1,271
	$	2,072	$	2,931
Payments and settlements during the quarter (1)	$	112,741	$	33,683

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Summary of investing activity between the Company and affiliate

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	387	$	1,218
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust	$	401	$	(857)

	March 31,		December 31,
	2021		2020
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—	$	80,862
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,470	$	1,105
Number of shares		75		75

Summary of financing activity between the Company and affiliate

	Quarter ended March 31,
	2021		2020
	(in thousands)
Excess servicing spread financing:
Balance at beginning of quarter	$	131,750	$	178,586
Issuance pursuant to recapture agreement		557		379
Accrual of interest		1,280		1,974
Repayment		(134,624)		(9,308)
Change in fair value		1,037		(14,522)
Balance at end of quarter	$	—	$	157,109
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	614	$	381

Summary of amounts due from and payable to affiliate

	March 31,		December 31,
	2021		2020
	(in thousands)
Receivable from PMT:
Allocated expenses and expenses incurred on PMT's behalf	$	23,325	$	38,142
Fulfillment fees		17,347		20,873
Correspondent production fees		12,937		13,065
Management fees		8,449		8,686
Servicing fees		6,586		6,213
Interest on assets purchased under agreements to resell		—		26
	$	68,644	$	87,005
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	156,948	$	132,154
Mortgage servicing rights recapture payable		—		296
Other		7,521		7,856
	$	164,469	$	140,306

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Loan Sales and Servicing Activities (Tables)

3 Months Ended

Mar. 31, 2021

Loan Sales and Servicing Activities

Summary of cash flows between the Company and transferees upon sale of loans in transactions

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash flows:
Sales proceeds	$	37,268,200	$	19,337,017
Servicing fees received (1)	$	195,782	$	166,556

(1) Net of guarantee fees paid to the Agencies.

Summary of sale of loans between the Company and transferees upon sale of loans in transactions

	March 31,		December 31,
	2021		2020
	(in thousands)
Unpaid principal balance of loans outstanding	$	211,289,054	$	199,655,361
Delinquencies (1):
30-89 days	$	4,045,731	$	6,041,366
90 days or more:
Not in foreclosure	$	15,506,434	$	17,799,621
In foreclosure	$	539,603	$	581,683
Foreclosed	$	9,207	$	10,893
Bankruptcy	$	1,204,192	$	1,230,696
Delinquent loans in COVID-19 pandemic-related forbearance:
30-89 days	$	1,695,953	$	2,626,617
90 days or more		10,022,093		12,181,174
	$	11,718,046	$	14,807,791

(1) Includes delinquent loans in COVID-19 pandemic-related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

Summary of servicing portfolio

	March 31, 2021
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	211,289,054	$	—	$	211,289,054
Purchased		36,252,669		—		36,252,669
		247,541,723		—		247,541,723
PennyMac Mortgage Investment Trust		—		188,324,162		188,324,162
Loans held for sale		12,959,016		—		12,959,016
	$	260,500,739	$	188,324,162	$	448,824,901
Delinquent loans (1):
30 days	$	3,407,163	$	664,887	$	4,072,050
60 days		1,668,346		267,050		1,935,396
90 days or more:
Not in foreclosure		18,900,569		3,827,814		22,728,383
In foreclosure		699,268		31,423		730,691
Foreclosed		10,790		24,320		35,110
	$	24,686,136	$	4,815,494	$	29,501,630
Bankruptcy	$	1,647,331	$	158,684	$	1,806,015
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,109,541	$	226,321	$	1,335,862
60 days		1,035,462		198,455		1,233,917
90 days or more		12,828,212		3,046,256		15,874,468
	$	14,973,215	$	3,471,032	$	18,444,247
Custodial funds managed by the Company (2)	$	12,007,827	$	6,571,084	$	18,578,911

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

	December 31, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	199,655,361	$	—	$	199,655,361
Purchased		41,612,940		—		41,612,940
		241,268,301		—		241,268,301
PennyMac Mortgage Investment Trust		—		174,418,591		174,418,591
Loans held for sale		11,063,938		—		11,063,938
	$	252,332,239	$	174,418,591	$	426,750,830
Delinquent loans (1):
30 days	$	5,217,949	$	901,965	$	6,119,914
60 days		2,393,267		348,416		2,741,683
90 days or more:
Not in foreclosure		21,781,226		4,473,217		26,254,443
In foreclosure		751,586		33,312		784,898
Foreclosed		12,938		37,131		50,069
	$	30,156,966	$	5,794,041	$	35,951,007
Bankruptcy	$	1,698,418	$	153,179	$	1,851,597
Delinquent loans in COVID-19 pandemic-related forbearance:
30 days	$	1,745,257	$	334,498	$	2,079,755
60 days		1,479,753		259,019		1,738,772
90 days or more		14,904,052		3,690,505		18,594,557
	$	18,129,062	$	4,284,022	$	22,413,084
Custodial funds managed by the Company (2)	$	10,660,517	$	6,086,725	$	16,747,242

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

Summary of the geographical distribution of loans for the top five and all other states as measured by the total unpaid principal balance (UPB)

	March 31,		December 31,
State	2021		2020
	(in thousands)
California	$	63,423,866	$	60,591,363
Florida		37,181,908		35,360,190
Texas		36,781,005		34,591,419
Virginia		27,728,760		26,209,701
Maryland		21,105,934		19,974,809
All other states		262,603,428		250,023,348
	$	448,824,901	$	426,750,830

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value

Summary of financial statement items measured at estimated fair value on a recurring basis

	March 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	24,850	$	—	$	—	$	24,850
Loans held for sale at fair value		—		8,183,724		5,202,065		13,385,789
Derivative assets:
Interest rate lock commitments		—		—		362,923		362,923
Forward purchase contracts		—		14,318		—		14,318
Forward sales contracts		—		333,198		—		333,198
MBS put options		—		99,670		—		99,670
Swaption purchase contracts		—		50,973		—		50,973
Put options on interest rate futures purchase contracts		27,133		—		—		27,133
Call options on interest rate futures purchase contracts		1,539		—		—		1,539
Total derivative assets before netting		28,672		498,159		362,923		889,754
Netting		—		—		—		(358,902)
Total derivative assets		28,672		498,159		362,923		530,852
Mortgage servicing rights at fair value		—		—		3,268,910		3,268,910
Investment in PennyMac Mortgage Investment Trust		1,470		—		—		1,470
	$	54,992	$	8,681,883	$	8,833,898	$	17,211,871
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	24,983	$	24,983
Forward purchase contracts		—		192,793		—		192,793
Forward sales contracts		—		32,729		—		32,729
MBS put options		—		34,873		—		34,873
Put options on interest rate futures sale contracts		15,881		—		—		15,881
Call options on interest rate futures sale contracts		1,061		—		—		1,061
Total derivative liabilities before netting		16,942		260,395		24,983		302,320
Netting		—		—		—		(233,763)
Total derivative liabilities		16,942		260,395		24,983		68,557
Mortgage servicing liabilities at fair value		—		—		46,026		46,026
	$	16,942	$	260,395	$	71,009	$	114,583

	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	15,217	$	—	$	—	$	15,217
Loans held for sale at fair value		—		6,941,231		4,675,169		11,616,400
Derivative assets:
Interest rate lock commitments		—		—		679,961		679,961
Forward purchase contracts		—		133,267		—		133,267
Forward sales contracts		—		1,451		—		1,451
MBS put options		—		14,302		—		14,302
Swaption purchase contracts		—		11,939		—		11,939
Put options on interest rate futures purchase contracts		5,520		—		—		5,520
Call options on interest rate futures purchase contracts		1,391		—		—		1,391
Total derivative assets before netting		6,911		160,959		679,961		847,831
Netting		—		—		—		(136,593)
Total derivative assets		6,911		160,959		679,961		711,238
Mortgage servicing rights at fair value		—		—		2,581,174		2,581,174
Investment in PennyMac Mortgage Investment Trust		1,105		—		—		1,105
	$	23,233	$	7,102,190	$	7,936,304	$	14,925,134
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	131,750	$	131,750
Derivative liabilities:
Interest rate lock commitments		—		—		2,935		2,935
Forward purchase contracts		—		1,276		—		1,276
Forward sales contracts		—		251,149		—		251,149
Total derivative liabilities before netting		—		252,425		2,935		255,360
Netting		—		—		—		(212,722)
Total derivative liabilities		—		252,425		2,935		42,638
Mortgage servicing liabilities at fair value		—		—		45,324		45,324
	$	—	$	252,425	$	180,009	$	219,712

Summary of roll forward of items measured using Level 3 inputs on a recurring basis

	Quarter ended March 31, 2021
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, December 31, 2020	$	4,675,169	$	677,026	$	2,581,174	$	7,933,369
Purchases and issuances, net		4,156,681		477,933		—		4,634,614
Capitalization of interest and advances		90,165		—		—		90,165
Sales and repayments		(928,901)		—		—		(928,901)
Mortgage servicing rights resulting from loan sales		—		—		470,533		470,533
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		48,154		—		—		48,154
Other factors		—		(179,613)		217,203		37,590
		48,154		(179,613)		217,203		85,744
Transfers from Level 3 to Level 2		(2,839,121)		—		—		(2,839,121)
Transfers to real estate acquired in settlement of loans		(82)		—		—		(82)
Transfers to loans held for sale		—		(637,406)		—		(637,406)
Balance, March 31, 2021	$	5,202,065	$	337,940	$	3,268,910	$	8,808,915
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2021	$	104,132	$	337,940	$	217,203	$	659,275

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2021
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2020	$	131,750	$	45,324	$	177,074
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		557		—		557
Accrual of interest		1,280		—		1,280
Repayments		(134,624)		—		(134,624)
Mortgage servicing liabilities resulting from loan sales		—		6,962		6,962
Changes in fair value included in income		1,037		(6,260)		(5,223)
Balance, March 31, 2021	$	—	$	46,026	$	46,026
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2021	$	—	$	(6,260)	$	(6,260)

	Quarter ended March 31, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, March 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Purchases and issuances, net		1,641,231		341,980		—		25,760		2,008,971
Capitalization of interest and advances		18,027		—		—		—		18,027
Sales and repayments		(738,928)		—		—		—		(738,928)
Mortgage servicing rights resulting from loan sales		—		—		—		282,315		282,315
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(7,523)		—		—		—		(7,523)
Other factors		—		199,918		—		(1,041,168)		(841,250)
		(7,523)		199,918		—		(1,041,168)		(848,773)
Transfers from Level 3 to Level 2		(489,407)		—		—		—		(489,407)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Transfers to loans held for sale		—		(363,354)		—		—		(363,354)
Balance, March 31, 2020	$	806,587	$	315,194	$	8,187	$	2,193,697	$	3,323,665
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2020	$	(11,856)	$	315,194	$	—	$	(1,041,168)	$	(737,830)

(1) For the purpose of this table, the IRLC asset and liability positions are shown net.

	Quarter ended March 31, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, March 31, 2019	$	178,586	$	29,140	$	207,726
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		379		—		379
Accrual of interest		1,974		—		1,974
Repayments		(9,308)		—		(9,308)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(14,522)		(5,955)		(20,477)
Balance, March 31, 2020	$	157,109	$	29,761	$	186,870
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2020	$	(14,522)	$	(5,955)	$	(20,477)

Summary of net gains (losses) from changes in fair values included in earnings for financial statement items carried at fair value

	Quarter ended March 31,
	2021						2020
	Net gains on		Net				Net gains on		Net
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
Assets:
Loans held for sale	$	650,119	$	—	$	650,119	$	398,718	$	—	$	398,718
Mortgage servicing rights		—		217,203		217,203		—		(1,041,168)		(1,041,168)
	$	650,119	$	217,203	$	867,322	$	398,718	$	(1,041,168)	$	(642,450)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	(1,037)	$	(1,037)	$	—	$	14,522	$	14,522
Mortgage servicing liabilities		—		6,260		6,260		—		5,955		5,955
	$	—	$	5,223	$	5,223	$	—	$	20,477	$	20,477

Schedule of fair value and related principal amounts due upon maturity of assets and liabilities accounted for under the fair value option

	March 31, 2021						December 31, 2020
			Principal						Principal
			amount						amount
	Fair		due upon				Fair		due upon
Loans held for sale	value		maturity		Difference		value		maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	13,013,597	$	12,580,255	$	433,342	$	11,304,308	$	10,743,814	$	560,494
90 days or more delinquent:
Not in foreclosure		340,185		344,853		(4,668)		275,419		280,595		(5,176)
In foreclosure		32,007		33,908		(1,901)		36,673		39,529		(2,856)
	$	13,385,789	$	12,959,016	$	426,773	$	11,616,400	$	11,063,938	$	552,462

Summary of financial statement items measured at estimated fair value on a nonrecurring basis

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2021	$	—	$	—	$	2,568	$	2,568
December 31, 2020	$	—	$	—	$	1,450	$	1,450

Summary of total gains (losses) on assets measured at estimated fair values on a nonrecurring basis

	Quarter ended March 31,
	2021		2020
	(in thousands)
Real estate acquired in settlement of loans	$	(412)	$	(3,980)

Summary of carrying value and fair value of debt

	March 31, 2021				December 31, 2020
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,296,344	$	1,296,285	$	1,268,304	$	1,295,840
Unsecured senior notes	$	1,290,250	$	1,288,198	$	685,750	$	645,820

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items, excluding MSR purchases

	Quarter ended March 31,
	2021		2020
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	470,533	$	282,315
Unpaid principal balance of underlying loans	$	34,943,254	$	18,330,384
Weighted average servicing fee rate (in basis points)		34		40
Key inputs (1):
Pricing spread (2):
Range		8.0% – 16.9%		6.8% – 15.6%
Weighted average		9.6%		8.2%
Annual total prepayment speed (3):
Range		6.2% – 12.9%		9.1% – 49.8%
Weighted average		7.8%		14.5%
Equivalent average life (in years):
Range		4.1 – 9.0		1.5 – 7.8
Weighted average		8.5		5.9
Per-loan annual cost of servicing:
Range		$81 – $117		$77 – $100
Weighted average		$104		$97

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to the United States Dollar London Interbank Offered Rate (“LIBOR”)/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Quantitative summary of key inputs used in the valuation of the MSRs at year end and the effect on estimated fair value from adverse changes in those inputs

Following is a quantitative summary of key inputs used in the valuation of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:

	March 31, 2021	December 31, 2020
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 3,268,910	$ 2,581,174
Pool characteristics:
Unpaid principal balance of underlying loans	$ 244,367,930	$ 238,410,809
Weighted average note interest rate	3.5%	3.6%
Weighted average servicing fee rate (in basis points)	34	35
Key inputs (1):
Pricing spread (2):
Range	6.8% – 16.8%	8.0% – 17.6%
Weighted average	9.2%	10.1%
Effect on fair value of:
5% adverse change	($58,358)	($46,356)
10% adverse change	($114,643)	($90,936)
20% adverse change	($221,392)	($175,137)
Annual total prepayment speed (3):
Range	7.2% – 31.1%	10.1% – 32.9%
Weighted average	9.8%	13.7%
Equivalent average life (in years):
Range	2.9 – 8.4	2.3 – 7.7
Weighted average	7.2	6.0
Effect on fair value of:
5% adverse change	($64,416)	($66,536)
10% adverse change	($126,698)	($130,253)
20% adverse change	($245,247)	($249,843)
Annual per-loan cost of servicing:
Range	$79 – $118	$79 – $117
Weighted average	$108	$107
Effect on fair value of:
5% adverse change	($30,559)	($25,482)
10% adverse change	($61,117)	($50,964)
20% adverse change	($122,235)	($101,929)

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSRs.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Mortgage servicing liabilities

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

		March 31,		December 31,
		2021		2020
Fair value (in thousands)	$	46,026	$	45,324
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	3,173,793	$	2,857,492
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.9%		7.6%
Annual total prepayment speed (2)		30.5%		33.3%
Equivalent average life (in years)		3.8		3.2
Annual per-loan cost of servicing	$	293	$	305

(1) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to MSLs.

(2) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Excess servicing spread financing

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

	December 31,
	2020
Fair value (in thousands)	$ 131,750
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 15,833,050
Average servicing fee rate (in basis points)	34
Average excess servicing spread (in basis points)	19
Key inputs (1):
Pricing spread (2):
Range	4.9% – 5.3%
Weighted average	5.1%
Annual total prepayment speed (3):
Range	9.6% – 18.3%
Weighted average	11.7%
Equivalent average life (in years):
Range	2.3 – 6.6
Weighted average	5.8

(1) Weighted average inputs are based on the UPB of the underlying loans.

(2) The Company applies a pricing spread to the United States Dollar LIBOR/swap curve for purposes of discounting cash flows relating to ESS.

(3) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided for informational purposes.

Interest rate lock commitments

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

	March 31, 2021		December 31, 2020
Fair value (in thousands) (1)	$	337,940	$	677,026
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.1% – 100%
Weighted average		85.5%		82.7%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		(10.0) – 6.4		0.7 – 5.3
Weighted average		4.1		3.6
Percentage of loan commitment amount
Range		(2.1)% – 3.2%		0.1% – 2.6%
Weighted average		1.3%		1.2%

(1) For purpose of this table, IRLC asset and liability positions are shown net.

(2) Weighted average inputs are based on the committed amounts.

Loans held for sale

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

	March 31, 2021		December 31, 2020
Fair value (in thousands)	$	5,202,065	$	4,675,169
Key inputs (1):
Discount rate:
Range		2.6% – 9.2%		2.8% – 9.2%
Weighted average		2.6%		2.8%
Twelve-month projected housing price index change:
Range		3.9% – 4.9%		2.7% – 3.5%
Weighted average		4.4%		3.0%
Voluntary prepayment/resale speed (2):
Range		0.3% – 29.5%		0.4% – 31.3%
Weighted average		21.2%		21.9%
Total prepayment speed (3):
Range		0.3% – 40.2%		0.5% – 42.9%
Weighted average		28.1%		29.2%

(1) Weighted average inputs are based on the fair value of the “Level 3” loans.

(2) Voluntary prepayment/resale speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).

(3) Total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments/resale and default rates.

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Loans Held for Sale at Fair Value (Tables)

3 Months Ended

Mar. 31, 2021

Loans Held for Sale at Fair Value

Summary of loans held for sale at fair value

	March 31,		December 31,
Loan type	2021		2020
	(in thousands)
Government-insured or guaranteed	$	6,722,768	$	5,683,786
Conventional conforming		1,460,956		1,257,445
Purchased from Ginnie Mae pools serviced by the Company		5,182,311		4,661,378
Repurchased pursuant to representations and warranties		19,754		13,791
	$	13,385,789	$	11,616,400
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	12,726,461	$	10,912,178
Mortgage loan participation purchase and sale agreements		541,206		545,500
	$	13,267,667	$	11,457,678

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Derivative Financial Instruments

Summary of derivative financial instruments

	March 31, 2021					December 31, 2020
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount (1)	assets		liabilities		amount (1)	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	17,668,145	$	362,923	$	24,983	20,624,535	$	679,961	$	2,935
Used for hedging purposes (2):
Forward purchase contracts	34,644,744		14,318		192,793	31,689,543		133,267		1,276
Forward sales contracts	52,739,511		333,198		32,729	50,438,967		1,451		251,149
MBS put options	11,750,000		99,670		34,873	12,025,000		14,302		—
Swaption purchase contracts	7,150,000		50,973		—	3,375,000		11,939		—
Put options on interest rate futures purchase contracts	6,950,000		27,133		—	4,750,000		5,520		—
Call options on interest rate futures purchase contracts	2,500,000		1,539		—	850,000		1,391		—
Put options on interest rate futures sale contracts	4,100,000		—		15,881	—		—		—
Call options on interest rate futures sale contracts	1,575,000		—		1,061	—		—		—
Treasury futures purchase contracts	830,000		—		—	1,065,000		—		—
Treasury futures sale contracts	1,705,000		—		—	1,555,000		—		—
Interest rate swap futures purchase contracts	4,240,000		—		—	4,801,700		—		—
Interest rate swap futures sale contracts	750,000		—		—	711,700		—		—
Total derivatives before netting			889,754		302,320			847,831		255,360
Netting			(358,902)		(233,763)			(136,593)		(212,722)
		$	530,852	$	68,557		$	711,238	$	42,638
Deposits (received from) placed with derivative counterparties, net		$	(125,139)				$	76,129

(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2) All of the derivatives used for hedging purposes are interest rate derivatives and are used as economic hedges.

Summaries of derivative assets and related netting amounts

	March 31, 2021						December 31, 2020
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements - IRLCs	$	362,923	$	—	$	362,923	$	679,961	$	—	$	679,961
Derivatives subject to master netting arrangements:
Forward purchase contracts		14,318		—		14,318		133,267		—		133,267
Forward sale contracts		333,198		—		333,198		1,451		—		1,451
MBS put options		99,670		—		99,670		14,302		—		14,302
Swaption purchase contracts		50,973		—		50,973		11,939		—		11,939
Put options on interest rate futures purchase contracts		27,133		—		27,133		5,520		—		5,520
Call options on interest rate futures purchase contracts		1,539		—		1,539		1,391		—		1,391
Netting		—		(358,902)		(358,902)		—		(136,593)		(136,593)
		526,831		(358,902)		167,929		167,870		(136,593)		31,277
	$	889,754	$	(358,902)	$	530,852	$	847,831	$	(136,593)	$	711,238

Summary of the amount of derivative asset positions by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	March 31, 2021								December 31, 2020
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	362,923	$	—	$	—	$	362,923	$	679,961	$	—	$	—	$	679,961
JPMorgan Chase Bank, N.A.		56,606		—		—		56,606		17,149		—		—		17,149
Morgan Stanley Bank, N.A.		53,548		—		—		53,548		2,443		—		—		2,443
Wells Fargo Bank, N.A.		18,524		—		—		18,524		—		—		—		—
RJ O'Brien		11,730		—		—		11,730		6,910		—		—		6,910
Bank of America, N.A.		10,013		—		—		10,013		—		—		—		—
Citibank, N.A.		9,685		—		—		9,685		2,026		—		—		2,026
Goldman Sachs		4,203		—		—		4,203		—		—		—		—
Others		3,620		—		—		3,620		2,749		—		—		2,749
	$	530,852	$	—	$	—	$	530,852	$	711,238	$	—	$	—	$	711,238

Summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts

	March 31, 2021						December 31, 2020
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements – Interest rate lock commitments	$	24,983	$	—	$	24,983	$	2,935	$	—	$	2,935
Derivatives subject to a master netting arrangement:
Forward purchase contracts		192,793		—		192,793		1,276		—		1,276
Forward sale contracts		32,729		—		32,729		251,149		—		251,149
MBS put options		34,873		—		34,873		—		—		—
Put options on interest rate futures sale contracts		15,881		—		15,881		—		—		—
Call options on interest rate futures sale contracts		1,061		—		1,061		—		—		—
Netting		—		(233,763)		(233,763)		—		(212,722)		(212,722)
		277,337		(233,763)		43,574		252,425		(212,722)		39,703
Total derivatives		302,320		(233,763)		68,557		255,360		(212,722)		42,638
Assets sold under agreements to repurchase:
Amount outstanding		10,856,677		—		10,856,677		9,663,995		—		9,663,995
Unamortized debt issuance costs		(8,200)		—		(8,200)		(9,198)		—		(9,198)
		10,848,477		—		10,848,477		9,654,797		—		9,654,797
	$	11,150,797	$	(233,763)	$	10,917,034	$	9,910,157	$	(212,722)	$	9,697,435

Summary of amount of derivative liabilities and assets sold under agreements to repurchase by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	March 31, 2021								December 31, 2020
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	24,983	$	—	$	—	$	24,983	$	2,935	$	—	$	—	$	2,935
Credit Suisse First Boston Mortgage Capital LLC		2,824,198		(2,805,703)		—		18,495		3,947,752		(3,943,149)		—		4,603
JPMorgan Chase Bank, N.A.		2,841,831		(2,841,831)		—		—		2,752,279		(2,752,279)		—		—
Bank of America, N.A.		1,317,580		(1,317,580)		—		—		634,523		(626,550)		—		7,973
Goldman Sachs		895,437		(895,437)		—		—		—		—		—		—
Citibank, N.A.		787,322		(787,322)		—		—		505,625		(505,625)		—		—
Barclays Capital		738,528		(730,340)		—		8,188		596,729		(596,729)		—		—
Morgan Stanley Bank, N.A.		562,172		(562,172)		—		—		331,546		(331,546)		—		—
Royal Bank of Canada		434,487		(434,487)		—		—		406,348		(406,348)		—		—
BNP Paribas		308,754		(308,754)		—		—		337,823		(336,545)		—		1,278
Wells Fargo Bank, N.A.		173,051		(173,051)		—		—		169,085		(165,224)		—		3,861
Mizuho Securities		8,107		—		—		8,107		6,491		—		—		6,491
Nomura Securities International, Inc.		2,264		—		—		2,264		—		—		—		—
Mitsubishi UFJ Securities		3,305		—		—		3,305		—		—		—		—
Federal Home Loan Mortgage Corporation		—		—		—		—		12,928		—		—		12,928
Others		3,215		—		—		3,215		2,569		—		—		2,569
	$	10,925,234	$	(10,856,677)	$	—	$	68,557	$	9,706,633	$	(9,663,995)	$	—	$	42,638

Summary of gains (losses) recognized on derivative financial instruments and the respective income statement line items

		Quarter ended March 31,
Derivative activity	Income statement line	2021		2020
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	(339,086)	$	178,543
Hedged item:
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	462,538	$	(225,557)
Mortgage servicing rights	Net loan servicing fees–Hedging results	$	(442,151)	$	1,036,570

(1) Represents net (decrease) increase in fair value of IRLCs from the beginning to the end of the quarter. Amounts recognized at the date of commitment and fair value changes recognized during the quarter until purchase of the underlying loans are shown in the rollforward of IRLCs for the quarter in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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Mortgage Servicing Rights and Mortgage Servicing Liabilities (Tables)

3 Months Ended

Mar. 31, 2021

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Schedule of activity in MSRs carried at fair value

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	2,581,174	$	2,926,790
Additions:
Resulting from loan sales		470,533		282,315
Purchases		—		25,760
		470,533		308,075
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		312,890		(915,862)
Other changes in fair value (2)		(95,687)		(125,306)
Total change in fair value		217,203		(1,041,168)
Balance at end of quarter	$	3,268,910	$	2,193,697
	March 31,		December 31,
	2021		2020
	(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	3,265,073	$	2,577,964

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

(2) Represents changes due to realization of cash flows.

Schedule of activity in mortgage servicing liability carried at fair value

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	45,324	$	29,140
Mortgage servicing liabilities resulting from loan sales		6,962		6,576
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		6,764		4,432
Other changes in fair value (2)		(13,024)		(10,387)
Total change in fair value		(6,260)		(5,955)
Balance at end of quarter	$	46,026	$	29,761

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

(2) Represents changes due to realization of cash flows.

Summary of servicing fees, late fees and ancillary and other fees relating to MSRs recorded on the consolidated statements of income

	Quarter ended March 31,
	2021		2020
	(in thousands)
Contractual servicing fees	$	210,753	$	198,653
Other fees:
Late charges		7,931		12,613
Other		7,854		4,850
	$	226,538	$	216,116

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases

Summary of Company's leases

	Quarter ended March 31,
	2021		2020
Lease expense:
Operating leases	$	4,366	$	3,932
Short-term leases		50		256
Net lease expense included in Occupancy and equipment	$	4,416	$	4,188
Other information:
Payments for operating leases	$	5,036	$	4,440
Operating lease right-of-use assets recognized	$	3,243	$	1,534
Period end weighted averages:
Remaining lease term (in years)		6.2		6.9
Discount rate		4.1%		4.3%

Schedule of maturities of operating lease liabilities

Twelve months ended March 31,	Operating leases
	(in thousands)
2022	$	19,690
2023		18,526
2024		17,488
2025		15,765
2026		14,933
Thereafter		24,065
Total lease payments		110,467
Less imputed interest		(14,398)
Operating lease liability	$	96,069

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2021

Other Asset

Summary of other assets

		March 31,		December 31,
	2021		2020
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Margin deposits		89,417		116,881
Capitalized software, net		85,371		81,434
Furniture, fixture, equipment and building improvements, net		32,714		32,217
Real estate acquired in settlement of loans		9,616		12,158
Other		318,869		296,425
	$	638,257	$	692,169
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	102,270	$	153,054
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		6,778		7,675
Furniture, fixture, equipment and building improvements, net		5,294		5,689
	$	114,342	$	166,418

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Short-Term Borrowings (Tables)

3 Months Ended

Mar. 31, 2021

Short-Term Borrowings

Summary of financial data pertaining to assets sold under agreements to repurchase

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	8,432,579		$	3,139,328
Weighted average interest rate (1)		2.17	%		3.07	%
Total interest expense	$	52,179		$	25,684
Maximum daily amount outstanding	$	10,856,677		$	4,446,795

		March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	10,856,677		$	9,663,995
Unamortized debt issuance costs		(8,200)			(9,198)
	$	10,848,477		$	9,654,797
Weighted average interest rate		1.93	%		1.90	%
Available borrowing capacity (2):
Committed	$	67,463		$	372,803
Uncommitted		3,700,860			2,163,202
	$	3,768,323		$	2,536,005
Fair value of assets securing repurchase agreements:
Loans held for sale	$	12,726,461		$	10,912,178
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	—		$	80,862
Servicing advances (3)	$	373,110		$	413,484
Mortgage servicing rights (3)	$	3,105,051		$	2,490,267
Deposits (3)	$	102,270		$	153,054
Margin deposits placed with counterparties (4)	$	10,875		$	5,625

(1) Excludes the effect of amortization of net issuance costs of $6.2 million and $1.6 million for the quarters ended March 31, 2021 and 2020, respectively,

(2) The amount the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed.

(3) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, and the Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

(4) Margin deposits are included in Other assets on the Company’s consolidated balance sheets.

Summary of maturities of outstanding advances under repurchase agreements by maturity date

Remaining maturity at March 31, 2021	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	2,712,890
Over 30 to 90 days		5,075,748
Over 90 to 180 days		428,639
Over 180 days to one year		2,639,400
Total assets sold under agreements to repurchase	$	10,856,677
Weighted average maturity (in months)		5.1

Summary of amount at risk relating to the assets sold under agreements to repurchase by counterparty

			Weighted average
Counterparty	Amount at risk		maturity of advances	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	2,069,444	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	592,940	April 18, 2021	April 23, 2021
Bank of America, N.A.	$	501,873	May 3, 2021	June 9, 2021
JP Morgan Chase Bank, N.A.	$	282,086	November 1, 2021	September 30, 2022
JP Morgan Chase Bank, N.A.	$	15,597	April 7, 2021	April 7, 2021
BNP Paribas	$	252,959	June 14, 2021	July 30, 2021
Barclays Bank PLC	$	94,629	June 19, 2021	November 3, 2022
Goldman Sachs	$	53,150	June 7, 2021	December 23, 2022
Citibank, N.A.	$	41,738	June 16, 2021	August 3, 2021
Morgan Stanley Bank, N.A.	$	33,515	June 16, 2021	November 2, 2022
Royal Bank of Canada	$	30,200	July 19, 2021	March 14, 2022
Wells Fargo Bank, N.A.	$	20,988	June 11, 2021	October 6, 2022

(1) The calculation of the amount at risk includes the VFN and the Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, and the Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

Summary of participating mortgage loans

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	276,561		$	247,811
Weighted average interest rate (1)		1.34	%		2.64	%
Total interest expense	$	1,095		$	1,810
Maximum daily amount outstanding	$	528,844		$	530,220

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $173,000 for the quarters ended March 31, 2021 and 2020, respectively.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	518,747		$	521,477
Unamortized debt issuance costs		—			—
	$	518,747		$	521,477
Weighted average interest rate		1.36	%		1.39	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	541,206		$	545,500

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2021

Long-Term Debt.

Summary of obligations under capital lease

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	11,340		$	19,406
Weighted average interest rate		2.13	%		3.36	%
Total interest expense	$	59		$	167
Maximum daily amount outstanding	$	11,864		$	20,810

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Unpaid principal balance	$	10,468		$	11,864
Weighted average interest rate		2.11	%		2.15	%
Assets pledged to secure obligations under capital lease:
Capitalized software	$	6,778		$	7,675
Furniture, fixtures and equipment	$	5,294		$	5,689

Summary of term notes issued

Issuance date	Principal balance		Stated interest rate (1)	Stated Maturity date (2)
	(in thousands)		(Annual)
February 28, 2018 (the "GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The Term Notes’ indentures provide the Company with the option to extend the maturity of the Term Notes by two years after the stated maturity.

Summary of note payable

	Quarter ended March 31,
	2021			2020
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.88	%		4.43	%
Total interest expense	$	9,888		$	14,846

(1) Excludes the effect of amortization of debt issuance costs totaling $544,000 and $445,000 for the quarters ended March 31, 2021 and 2020, respectively.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(3,715)			(4,160)
	$	1,296,285		$	1,295,840
Weighted average interest rate		2.87	%		2.93	%
Assets pledged to secure notes payable (1):
Servicing advances	$	373,110		$	413,484
Mortgage servicing rights	$	3,047,056		$	2,421,326
Deposits	$	102,270		$	153,054

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

Summary of Unsecured Notes issued

Issuance date	Principal balance		Coupon rate	Maturity date
	(in thousands)		(Annual)
September 29, 2020	$	500,000	5.38%	October 15, 2025
October 19, 2020		150,000	5.38%	October 15, 2025
February 11, 2021		650,000	4.25%	February 15, 2029
	$	1,300,000

Before October 15, 2022 or February 15, 2024 for the Unsecured Note issued during 2020 and 2021, respectively, the Company may, at its option redeem earlier in accordance with the terms of the Unsecured Notes:

Summary of unsecured notes payable

	Quarter ended
	March 31, 2021
	(dollars in thousands)
Average balance	$	1,003,889
Weighted average coupon rate (1)		4.91	%
Total interest expense	$	12,670

(1) Excludes the effect of amortization of debt issuance costs totaling $347,000.

	March 31,			December 31,
	2021			2020
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	650,000
Unamortized debt issuance costs, net of issuance premiums		(11,802)			(4,180)
	$	1,288,198		$	645,820
Weighted average coupon rate		4.81	%		5.38	%

Summary of maturities of Long-Term Debt

	Twelve months ended March 31,
	2022		2023		2024		2025		2026		Thereafter		Total
	(in thousands)
Obligations under capital lease	$	8,374	$	2,094	$	—	$	—	$	—	$	—	$	10,468
Notes payable secured by mortgage servicing assets		—		650,000		650,000		—		—		—		1,300,000
Unsecured Notes		—		—		—		—		650,000		650,000		1,300,000
Total	$	8,374	$	652,094	$	650,000	$	—	$	650,000	$	650,000	$	2,610,468

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Liability for Losses Under Representations and Warranties (Tables)

3 Months Ended

Mar. 31, 2021

Liability for Losses Under Representations and Warranties

Summary of repurchase activity

	Quarter ended March 31,
	2021		2020
	(in thousands)
Balance at beginning of quarter	$	32,688	$	21,446
Provision for losses on loans sold:
Resulting from sales of loans		10,053		3,712
Reduction in liability due to change in estimate		(3,685)		(1,676)
Losses incurred, net		(628)		(280)
Balance at end of quarter	$	38,428	$	23,202
Unpaid principal balance of loans subject to representations and warranties at end of quarter	$	220,865,034	$	186,517,598

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2021

Stockholders' Equity.

Summary of share repurchase activity

	Quarter ended March 31,				Cumulative
	2021		2020		total (1)
	(in thousands)
Shares of common stock repurchased		4,653		238		14,359
Cost of shares of common stock repurchased	$	288,519	$	4,121	$	640,946

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program from inception through March 31, 2021.

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Net Gains on Loans Held for Sale (Tables)

3 Months Ended

Mar. 31, 2021

Net Gains on Loans Held for Sale

Net Gains on Loans Held for Sale

	Quarter ended March 31,
	2021		2020
	(in thousands)
From non-affiliates:
Cash gains (losses):
Loans	$	82,712	$	111,757
Hedging activities		736,225		(122,666)
		818,937		(10,909)
Non-cash gains:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		463,571		275,739
Provisions for losses relating to representations and warranties:
Pursuant to loan sales		(10,053)		(3,712)
Reductions in liability due to change in estimate		3,685		1,676
Changes in fair values of loans and derivatives held at quarter end:
Interest rate lock commitments		(339,086)		178,543
Loans		105,222		(72,080)
Hedging derivatives		(273,687)		(102,891)
		768,589		266,366
From PennyMac Mortgage Investment Trust (1)		(14,248)		77,916
	$	754,341	$	344,282

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Net Interest Income (Tables)

3 Months Ended

Mar. 31, 2021

Net Interest Income

Summary of net interest income

	Quarter ended March 31,
	2021		2020
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	987	$	1,711
Loans held for sale at fair value		74,824		46,426
Placement fees relating to custodial funds		5,883		23,209
		81,694		71,346
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		387		1,218
		82,081		72,564
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		52,179		25,684
Mortgage loan participation purchase and sale agreements		1,095		1,810
Obligations under capital lease		59		167
Notes payable secured by mortgage servicing assets		9,888		14,846
Unsecured senior notes		12,670		—
Corporate revolving line of credit		—		503
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		29,436		14,871
Interest on mortgage loan impound deposits		1,106		1,657
		106,433		59,538
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		1,280		1,974
		107,713		61,512
	$	(25,632)	$	11,052

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Stock-based Compensation

Summary of the stock-based compensation activity

	Quarter ended March 31,
	2021		2020
	(in thousands)
Grants:
Units:
Performance-based restricted share units ("RSUs")		310		422
Stock options		249		273
Time-based RSUs		171		304
Grant date fair value:
Performance-based RSUs	$	18,234	$	14,768
Stock options		5,116		2,770
Time-based RSUs		10,064		10,662
Total	$	33,414	$	28,200
Vestings and exercises:
Performance-based RSUs vested		640		603
Stock options exercised		88		180
Time-based RSUs vested		305		348
Compensation expense	$	10,877	$	12,368

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Earnings Per Share of Common Stock (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share of Common Stock

Summary of basic and diluted earnings per share calculations

	Quarter ended March 31,
	2021		2020
	(in thousands, except per share amounts)
Net income	$	376,868	$	306,243
Weighted average basic shares of common stock outstanding		69,113		78,689
Effect of dilutive securities:
Common shares issuable under stock-based compensation plan		4,004		3,319
Weighted average shares of common stock applicable to diluted earnings per share		73,117		82,008
Basic earnings per share of common stock	$	5.45	$	3.89
Diluted earnings per share of common stock	$	5.15	$	3.73

Schedule of anti-dilutive shares outstanding

	Quarter ended March 31,
	2021		2020
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		120		162
Time-based RSUs		—		117
Stock options (2)		97		105
Total anti-dilutive shares and units		217		384
Weighted average exercise price of anti-dilutive stock options (2)	$	58.85	$	35.03

(1) Certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds included in such RSUs have not been achieved.

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Information

Schedule of supplemental cash flow information

	Quarter ended March 31,
	2021		2020
	(in thousands)
Cash paid for interest	$	112,730	$	64,527
(Refunds received) cash paid for income taxes, net	$	(15)	$	13
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	470,533	$	282,315
Unsettled portion of MSR acquisitions	$	—	$	1,656
Operating right-of-use assets recognized	$	3,243	$	1,534
Non-cash financing activity:
Mortgage servicing liabilities resulting from loan sales	$	6,962	$	6,576
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	557	$	379
Issuance of common stock in settlement of directors' fees	$	51	$	48

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Regulatory Capital and Liquidity Requirements (Tables)

3 Months Ended

Mar. 31, 2021

Regulatory Capital and Liquidity Requirements

Summary of agencies' capital and liquidity requirements by each agency

	March 31, 2021						December 31, 2020
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	4,964,124		$	653,752		$	4,454,680		$	633,331
Ginnie Mae – PLS	$	4,466,186		$	963,805		$	3,794,112		$	1,058,641
HUD – PLS	$	4,466,186		$	2,500		$	3,794,112		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	444,973		$	86,640		$	506,096		$	84,444
Ginnie Mae – PLS	$	444,973		$	215,218		$	506,096		$	215,722
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		14	%		6	%		12	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		16	%		6	%		14	%		6	%

(1) Calculated in compliance with the respective Agency’s requirements.

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Segments (Tables)

3 Months Ended

Mar. 31, 2021

Segments

Schedule of change in expense allocation, by segment

	Quarter ended March 31, 2021
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	515,963	$	238,378	$	754,341	$	—	$	754,341
Loan origination fees		104,037		—		104,037		—		104,037
Fulfillment fees from PennyMac Mortgage Investment Trust		60,835		—		60,835		—		60,835
Net loan servicing fees		—		39,720		39,720		—		39,720
Net interest income (expense):
Interest income		29,531		52,550		82,081		—		82,081
Interest expense		38,072		69,638		107,710		3		107,713
		(8,541)		(17,088)		(25,629)		(3)		(25,632)
Management fees		—		—		—		8,449		8,449
Other		597		1,197		1,794		1,142		2,936
Total net revenue		672,891		262,207		935,098		9,588		944,686
Expenses		309,996		120,463		430,459		8,219		438,678
Income before provision for income taxes	$	362,895	$	141,744	$	504,639	$	1,369	$	506,008
Segment assets at quarter end	$	8,886,460	$	22,393,249	$	31,279,709	$	18,271	$	31,297,980

(1) All revenues are from external customers.

	Quarter ended March 31, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	316,635	$	27,647	$	344,282	$	—	$	344,282
Loan origination fees		57,571		—		57,571		—		57,571
Fulfillment fees from PennyMac Mortgage Investment Trust		41,940		—		41,940		—		41,940
Net loan servicing fees		—		257,808		257,808		—		257,808
Net interest income (expense):
Interest income		26,585		45,979		72,564		—		72,564
Interest expense		20,157		41,346		61,503		9		61,512
		6,428		4,633		11,061		(9)		11,052
Management fees		—		—		—		9,055		9,055
Other		(10)		(680)		(690)		807		117
Total net revenue		422,564		289,408		711,972		9,853		721,825
Expenses		182,433		118,566		300,999		6,096		307,095
Income before provision for income taxes	$	240,131	$	170,842	$	410,973	$	3,757	$	414,730
Segment assets at quarter end	$	5,686,878	$	5,186,188	$	10,873,066	$	18,067	$	10,891,133

(1) All revenues are from external customers.

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Concentration of Risk (Details)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Sales Revenue | Customer Concentration Risk
Concentration of Risk
Percentage of total net revenue	9.00%	22.00%

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Related Party Transactions - Correspondent Production (Details) - USD ($)				3 Months Ended
	Jul. 01, 2020	Jun. 30, 2020	Sep. 12, 2016	Mar. 31, 2021	Mar. 31, 2020
Ginnie Mae Mortgage Backed Securities Guide Loan
Transactions with Affiliates
Threshold limit of loan commitment	$ 16,500
Maximum Multiplier factor for each pull through adjusted loan commitment	585
Multiplying factor for each pull through adjusted loan commitment in excess of threshold limit per quarter	355
Multiplying factor for number of purchased loans	315
Multiplying factor for number of purchased loans in excess of threshold limit per quarter	$ 195
Ginnie Mae Mortgage Backed Securities Guide Loan | Minimum
Transactions with Affiliates
Pull through factor as a percentage	80.00%
Ginnie Mae Mortgage Backed Securities Guide Loan | Maximum
Transactions with Affiliates
Pull through factor as a percentage	99.00%
Other mortgage loans
Transactions with Affiliates
Multiplying factor for number of purchased loans	$ 750
MBS Agreement
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.35%
Fulfillment fee as a percent of UPB of all other mortgage loans, excluding Ginnie Mae mortgage loans			0.50%
MSR Recapture Agreement
Transactions with Affiliates
Target recapture rate	15.00%
Lending activity between the entity and affiliate
Minimum percent of total UPB of loans originated from refinancing of loans which a related party previously held the MSR required to be transferred			30.00%
Related party transaction, renewal period		5 years
MSR Recapture Agreement | First 15%
Transactions with Affiliates
Percentage of fair market value.	40.00%
Percentage of recapture rate.	15.00%
MSR Recapture Agreement | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of fair market value.	35.00%
MSR Recapture Agreement | In excess of 30%
Transactions with Affiliates
Percentage of fair market value.	30.00%
Percentage of recapture rate.	30.00%
MSR Recapture Agreement | Minimum | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of recapture rate.	15.00%
MSR Recapture Agreement | Maximum | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of recapture rate.	30.00%
PMT
Lending activity between the entity and affiliate
Total of gain on sale of loans and MSR recapture				$ (14,248,000)	$ 77,916,000
Sale of loans held for sale to PMT					2,246,127,000
Fulfillment fee revenue				60,835,000	41,940,000
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust					2,246,127,000
PMT | MBS Agreement | Minimum
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.02%
PMT | MBS Agreement | Maximum
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.035%
PMT | Loan Lending
Lending activity between the entity and affiliate
Net gain on loans held for sale to PMT					81,224,000
Mortgage servicing rights and excess servicing spread recapture incurred				(14,248,000)	(3,308,000)
Total of gain on sale of loans and MSR recapture				(14,248,000)	77,916,000
Sale of loans held for sale to PMT					2,246,127,000
Tax service fee				8,192,000	3,980,000
Fulfillment fee revenue				60,835,000	41,940,000
Sourcing fees paid				1,738,000	4,161,000
Unpaid principal balance of loans purchased from PMT				$ 17,559,575,000	13,870,280,000
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust					$ 2,246,127,000
PLS | Minimum
Transactions with Affiliates
Sourcing fees (as a percent)	0.01%
PLS | Maximum
Transactions with Affiliates
Sourcing fees (as a percent)	0.02%
PLS | Ginnie Mae Mortgage Backed Securities Guide Loan
Transactions with Affiliates
Fulfilment fee payable	$ 0

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Related Party Transactions - Mortgage Loan Servicing (Details)			3 Months Ended
	Jun. 30, 2020	Sep. 12, 2016 USD ($) item	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)
Loan Servicing Agreement
Transactions with Affiliates
Base servicing fees per month for REO		$ 75
Rental fee per month per REO		30
Renewal fee, per lease renewal, on REO property		$ 100
Property management fees on REOs, as a percent of gross rental income		9.00%
Base servicing fees per month for fixed-rate non-distressed loans subserviced		$ 7.50
Base servicing fees per month for adjustable rate non-distressed loans subserviced		8.50
Supplemental fee per month for each distressed whole loan		25
Activity-based fee, percent, due to a streamline modification		750
Activity-based fee, percent, due to a liquidation		1,750
Activity-based fee due to a deed-in-lieu of foreclosure		$ 500
Maximum number of liquidation, reperformance, or modification fees that can be earned during earnable period | item		1
Liquidation, reperformance, or modification fees earnable period		18 months
Minimum | Loan Servicing Agreement
Transactions with Affiliates
Servicing fees amount per month for current loans		$ 30
Additional servicing fee amount per month for delinquent loans		10
Maximum | Loan Servicing Agreement
Transactions with Affiliates
Servicing fees amount per month for severely delinquent loans		95
Additional servicing fee amount per month for delinquent loans		$ 55
PMT
Summary of mortgage loan servicing fees earned
Loan servicing fees			$ 19,093,000	$ 14,521,000
PMT | Loan Servicing Agreement
Summary of mortgage loan servicing fees earned
Related party transaction, renewal period	5 years
PMT | Loans acquired for sale at fair value
Summary of mortgage loan servicing fees earned
Loan servicing fees			543,000	536,000
PMT | Loans at fair value
Summary of mortgage loan servicing fees earned
Loan servicing fees			137,000	300,000
PMT | Mortgage servicing rights
Summary of mortgage loan servicing fees earned
Loan servicing fees			$ 18,413,000	$ 13,685,000

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Related Party Transactions - Management Fees (Details) - USD ($)		3 Months Ended
	Sep. 12, 2016	Mar. 31, 2021	Mar. 31, 2020
Management Fee Revenue Abstract
Management fees		$ 8,449,000	$ 9,055,000
PMT
Management Fee Revenue Abstract
Management fees		8,449,000	9,055,000
PMT | Management Agreement
Transactions with Affiliates
Percentage of change in net income due to quarterly adjustments	8.00%
Management Fee Revenue Abstract
Base management fee		8,449,000	9,055,000
Management fees		$ 8,449,000	$ 9,055,000
PMT | Management Agreement | Maximum
Transactions with Affiliates
Percentage of performance incentive fee payable by issuance of common shares	50.00%
PMT | Management Agreement | Minimum
Transactions with Affiliates
High watermark	$ 0
PMT | Shareholders Equity Up To 2 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.50%
Base management fee shareholders' equity limit	$ 2,000,000,000
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.375%
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 5,000,000,000
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars | Minimum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 2,000,000,000
PMT | Shareholders Equity In Excess Of 5 Billion Dollars
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.25%
PMT | Shareholders Equity In Excess Of 5 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 5,000,000,000
PMT | Return on Shareholders Equity 8 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	10.00%
PMT | Return on Shareholders Equity 8 Percent | Maximum
Transactions with Affiliates
Percentage of return on affiliate's equity	12.00%
PMT | Return on Shareholders Equity 8 Percent | Minimum
Transactions with Affiliates
Percentage of return on affiliate's equity	8.00%
PMT | Return on Shareholders Equity 12 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	15.00%
Percentage of return on affiliate's equity	12.00%
PMT | Return on Shareholders Equity 12 Percent | Maximum
Transactions with Affiliates
Percentage of return on affiliate's equity	16.00%
PMT | Return on Shareholders Equity in Excess of 16 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	20.00%
Percentage of return on affiliate's equity	16.00%

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Related Party Transactions - Other Transactions, Reimbursement of Common Overhead Expenses (Details) - USD ($)			3 Months Ended
	Jul. 01, 2020	Sep. 12, 2016	Mar. 31, 2021	Mar. 31, 2020
PMT
Transactions with Affiliates
Expense reimbursement amount, per quarter, relating to personnel		$ 120,000
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			$ 2,072,000	$ 2,931,000
Payments and settlements during the year			112,741,000	33,683,000
PMT | Common overhead incurred
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			571,000	1,540,000
PMT | Compensation
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			165,000	120,000
PMT | Expenses incurred by related party (reporting entity), net
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			$ 1,336,000	$ 1,271,000
PCM
Transactions with Affiliates
Expense reimbursement amount, per quarter, relating to personnel	$ 165,000	$ 120,000
Related party transaction, renewal period	5 years

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Related Party Transactions - Investing Activities (Details) - USD ($)		3 Months Ended
	Dec. 19, 2016	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
PennyMac Holdings, L L C Repurchase Agreement
Transactions with Affiliates
Maximum principal balance of VFN	$ 1,000,000,000
PMT
Transactions with Affiliates
Common shares of beneficial interest owned		75,000
Repurchase agreement with PennyMac Mortgage Investment Trust:
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors				$ 80,862,000
Activity during the period:
Interest income on receivable from PennyMac Mortgage Investment Trust		$ 387,000	$ 1,218,000
Activity during the period:
Balance at end of period		401,000	(857,000)
Loans and Leases Receivable, Related Parties				80,862,000
Fair value of PennyMac Mortgage Investment Trust shares		$ 1,470,000		$ 1,105,000
Number of shares		75,000		75,000
PMT | PennyMac Holdings, L L C Repurchase Agreement
Activity during the period:
Interest income on receivable from PennyMac Mortgage Investment Trust		$ 387,000	1,218,000
Activity during the period:
Change in fair value of investment in Common shares of PennyMac Mortgage Investment Trust		$ 401,000	$ (857,000)

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Related Party Transactions - Financing Activities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Feb. 01, 2013
Financing activities:
Issuance pursuant to recapture agreement	$ 557,000	$ 379,000
Repayments	134,624,000	9,308,000
PMT
Financing activities:
Interest expense	1,280,000	1,974,000
Change in fair value	(1,037,000)	14,522,000
Excess servicing spread financing at fair value payable to affiliate			$ 131,750,000
PMT | 2/1/13 Spread Acquisition Agreement
Financing activities:
Maximum ESS recapture obligation				$ 200,000
Excess servicing spread financing | PMT
Financing activities:
Balance at the beginning of the period	131,750,000	178,586,000
Issuance pursuant to recapture agreement	557,000	379,000
Interest expense	1,280,000	1,974,000
Repayments	(134,624,000)	(9,308,000)
Change in fair value	1,037,000	(14,522,000)
Balance at the end of the period		157,109,000
Excess servicing spread recapture recognized	$ 614,000	$ 381,000

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Related Party Transactions - Amounts due from Affiliate (Details) - PMT - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Amounts due from affiliate
Allocated expenses	$ 23,325	$ 38,142
Fulfillment fees	17,347	20,873
Correspondent production fees	12,937	13,065
Management fees	8,449	8,686
Servicing fees	6,586	6,213
Interest on assets purchased under agreements to resell		26
Total due from affiliate	68,644	87,005
Payable to affiliate
Amounts advanced by PMT	156,948	132,154
MSR Recapture Payable to PMT		296
Other expenses	7,521	7,856
Payable to affiliates	$ 164,469	$ 140,306

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Related Party Transactions - Exchanged Private National Mortgage Acceptance Company, LLC Unitholders (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Transactions with Affiliates
Amount of tax benefits under the tax sharing agreement (as a percent)	85.00%
Payable to exchanged PNMAC unitholders under tax receivable agreement	$ 35.2		$ 35.2
Private National Mortgage Acceptance Company, LLC
Transactions with Affiliates
Payment of tax liability under the tax receivable agreement to Private National Mortgage Acceptance Company, LLC unitholders	$ 0.0	$ 0.0

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Loan Sales and Servicing Activities - Summary of Cash Flows with Transferees (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Cash flows:
Sales proceeds	$ 37,268,200	$ 19,337,017
Servicing fees received	195,782	$ 166,556
Period end information:
Unpaid principal balance of loans outstanding	211,289,054		$ 199,655,361
30-89 days	4,045,731		6,041,366
90 days or more - Not in foreclosure	15,506,434		17,799,621
90 days or more - In foreclosure	539,603		581,683
90 days or more - Foreclosed	9,207		10,893
Bankruptcy	1,204,192		1,230,696
30-89 days delinquent under CARES Act	1,695,953		2,626,617
90 days or more delinquent not in foreclosure under CARES Act	10,022,093		12,181,174
Total delinquent loans in COVID-19 pandemic related forbearance	$ 11,718,046		$ 14,807,791

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Loan Sales and Servicing Activities - Summary of Mortgage Servicing Portfolio (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Mortgage servicing portfolio
Loans held for sale	$ 12,959,016	$ 11,063,938
Total loans serviced	448,824,901	426,750,830
Delinquent loans:
30 days	4,072,050	6,119,914
60 days	1,935,396	2,741,683
90 days or more - Not in foreclosure	22,728,383	26,254,443
90 days or more - In foreclosure	730,691	784,898
90 days or more - Foreclosed	35,110	50,069
Total delinquent mortgage loans	29,501,630	35,951,007
Bankruptcy	1,806,015	1,851,597
Delinquent loans in COVID-19 related forbearance
30 days	1,335,862	2,079,755
60 days	1,233,917	1,738,772
90 days or more	15,874,468	18,594,557
Total delinquent loans in COVID-19 related forbearance	18,444,247	22,413,084
Custodial funds managed by the Company	18,578,911	16,747,242
Servicing rights owned
Mortgage servicing portfolio
Loans held for sale	12,959,016	11,063,938
Total loans serviced	260,500,739	252,332,239
Delinquent loans:
30 days	3,407,163	5,217,949
60 days	1,668,346	2,393,267
90 days or more - Not in foreclosure	18,900,569	21,781,226
90 days or more - In foreclosure	699,268	751,586
90 days or more - Foreclosed	10,790	12,938
Total delinquent mortgage loans	24,686,136	30,156,966
Bankruptcy	1,647,331	1,698,418
Delinquent loans in COVID-19 related forbearance
30 days	1,109,541	1,745,257
60 days	1,035,462	1,479,753
90 days or more	12,828,212	14,904,052
Total delinquent loans in COVID-19 related forbearance	14,973,215	18,129,062
Custodial funds managed by the Company	12,007,827	10,660,517
Contract servicing and subservicing
Mortgage servicing portfolio
Total loans serviced	188,324,162	174,418,591
Delinquent loans:
30 days	664,887	901,965
60 days	267,050	348,416
90 days or more - Not in foreclosure	3,827,814	4,473,217
90 days or more - In foreclosure	31,423	33,312
90 days or more - Foreclosed	24,320	37,131
Total delinquent mortgage loans	4,815,494	5,794,041
Bankruptcy	158,684	153,179
Delinquent loans in COVID-19 related forbearance
30 days	226,321	334,498
60 days	198,455	259,019
90 days or more	3,046,256	3,690,505
Total delinquent loans in COVID-19 related forbearance	3,471,032	4,284,022
Custodial funds managed by the Company	6,571,084	6,086,725
Non affiliated entities
Mortgage servicing portfolio
Originated	211,289,054	199,655,361
Purchased	36,252,669	41,612,940
Total loans serviced, excluding loans held for sale	247,541,723	241,268,301
Non affiliated entities | Servicing rights owned
Mortgage servicing portfolio
Originated	211,289,054	199,655,361
Purchased	36,252,669	41,612,940
Total loans serviced, excluding loans held for sale	247,541,723	241,268,301
Affiliated entities
Mortgage servicing portfolio
Advised entities	188,324,162	174,418,591
Affiliated entities | Contract servicing and subservicing
Mortgage servicing portfolio
Advised entities	$ 188,324,162	$ 174,418,591

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Loan Sales and Servicing Activities - Geographical Distribution of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Loan Sales and Servicing Activities
Total loans serviced	$ 448,824,901	$ 426,750,830
California
Loan Sales and Servicing Activities
Total loans serviced	63,423,866	60,591,363
Florida
Loan Sales and Servicing Activities
Total loans serviced	37,181,908	35,360,190
Texas
Loan Sales and Servicing Activities
Total loans serviced	36,781,005	34,591,419
Virginia
Loan Sales and Servicing Activities
Total loans serviced	27,728,760	26,209,701
Maryland
Loan Sales and Servicing Activities
Total loans serviced	21,105,934	19,974,809
All other states
Loan Sales and Servicing Activities
Total loans serviced	$ 262,603,428	$ 250,023,348

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Fair Value - Financial Statement Items Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Assets:
Short-term investments at fair value	$ 24,850	$ 15,217
Loans held for sale	13,385,789	11,616,400
Derivative assets:
Derivative asset, before netting	889,754	847,831
Netting	(358,902)	(136,593)
Total derivative assets	530,852	711,238
Derivative liabilities:
Derivative liability, before netting	302,320	255,360
Netting	(233,763)	(212,722)
Net amounts of liabilities presented in the consolidated balance sheet	68,557	42,638
Mortgage servicing liabilities	46,026	45,324
PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,470	1,105
Interest rate lock commitments
Derivative assets:
Total derivative assets	362,923	679,961
Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	14,318	133,267
Derivative liabilities:
Derivative liability, before netting	192,793	1,276
Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	333,198	1,451
Derivative liabilities:
Derivative liability, before netting	32,729	251,149
MBS put options
Derivative assets:
Derivative asset, before netting	99,670	14,302
Derivative liabilities:
Derivative liability, before netting	34,873
Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,539	1,391
Call options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	1,061
Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	27,133	5,520
Put options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	15,881
Level 3
Assets:
Loans held for sale	5,202,065	4,675,169
Level 3 | Interest rate lock commitments
Assets:
Loans held for sale	337,940	677,026
Recurring basis
Assets:
Short-term investments at fair value	24,850	15,217
Loans held for sale	13,385,789	11,616,400
Derivative assets:
Derivative asset, before netting	889,754	847,831
Netting	(358,902)	(136,593)
Total derivative assets	530,852	711,238
Mortgage servicing rights at fair value	3,268,910	2,581,174
Total assets	17,211,871	14,925,134
Derivative liabilities:
Derivative liability, before netting	302,320	255,360
Netting	(233,763)	(212,722)
Net amounts of liabilities presented in the consolidated balance sheet	68,557	42,638
Mortgage servicing liabilities	46,026	45,324
Total liabilities	114,583	219,712
Recurring basis | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,470	1,105
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate		131,750
Recurring basis | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	362,923	679,961
Derivative liabilities:
Derivative liability, before netting	24,983	2,935
Recurring basis | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	14,318	133,267
Derivative liabilities:
Derivative liability, before netting	192,793	1,276
Recurring basis | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	333,198	1,451
Derivative liabilities:
Derivative liability, before netting	32,729	251,149
Recurring basis | MBS put options
Derivative assets:
Derivative asset, before netting	99,670	14,302
Derivative liabilities:
Derivative liability, before netting	34,873
Recurring basis | Swaptions | Purchases
Derivative assets:
Derivative asset, before netting	50,973	11,939
Recurring basis | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,539	1,391
Recurring basis | Call options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	1,061
Recurring basis | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	27,133	5,520
Recurring basis | Put options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	15,881
Recurring basis | Level 1
Assets:
Short-term investments at fair value	24,850	15,217
Derivative assets:
Derivative asset, before netting	28,672	6,911
Total derivative assets	28,672	6,911
Total assets	54,992	23,233
Derivative liabilities:
Derivative liability, before netting	16,942
Net amounts of liabilities presented in the consolidated balance sheet	16,942
Total liabilities	16,942
Recurring basis | Level 1 | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,470	1,105
Recurring basis | Level 1 | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,539	1,391
Recurring basis | Level 1 | Call options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	1,061
Recurring basis | Level 1 | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	27,133	5,520
Recurring basis | Level 1 | Put options on interest rate futures | Sales
Derivative liabilities:
Derivative liability, before netting	15,881
Recurring basis | Level 2
Assets:
Loans held for sale	8,183,724	6,941,231
Derivative assets:
Derivative asset, before netting	498,159	160,959
Total derivative assets	498,159	160,959
Total assets	8,681,883	7,102,190
Derivative liabilities:
Derivative liability, before netting	260,395	252,425
Net amounts of liabilities presented in the consolidated balance sheet	260,395	252,425
Total liabilities	260,395	252,425
Recurring basis | Level 2 | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	14,318	133,267
Derivative liabilities:
Derivative liability, before netting	192,793	1,276
Recurring basis | Level 2 | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	333,198	1,451
Derivative liabilities:
Derivative liability, before netting	32,729	251,149
Recurring basis | Level 2 | MBS put options
Derivative assets:
Derivative asset, before netting	99,670	14,302
Derivative liabilities:
Derivative liability, before netting	34,873
Recurring basis | Level 2 | Swaptions | Purchases
Derivative assets:
Derivative asset, before netting	50,973	11,939
Recurring basis | Level 3
Assets:
Loans held for sale	5,202,065	4,675,169
Derivative assets:
Derivative asset, before netting	362,923	679,961
Total derivative assets	362,923	679,961
Mortgage servicing rights at fair value	3,268,910	2,581,174
Total assets	8,833,898	7,936,304
Derivative liabilities:
Derivative liability, before netting	24,983	2,935
Net amounts of liabilities presented in the consolidated balance sheet	24,983	2,935
Mortgage servicing liabilities	46,026	45,324
Total liabilities	71,009	180,009
Recurring basis | Level 3 | PMT
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate		131,750
Recurring basis | Level 3 | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	362,923	679,961
Derivative liabilities:
Derivative liability, before netting	$ 24,983	$ 2,935

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Fair Value - Level 3 Input Roll Forward, Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Mortgage servicing liabilities resulting from loan sales	$ 6,962	$ 6,576
Recurring basis
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period		3,455,505
Purchases and issuances, net		2,008,971
Capitalization of interest and advances		18,027
Sales and repayments		(738,928)
Mortgage servicing rights resulting from loan sales		282,315
Changes in fair value included in income arising from:
Changes in instrument specific credit risk		(7,523)
Other factors		(841,250)
Total changes in fair value included in income		(848,773)
Transfers from mortgage loans held for sale from Level 3 to Level 2		(489,407)
Transfers to real estate acquired in settlement of loans		(691)
Transfers from interest rate lock commitments to loans held for sale		(363,354)
Balance at the end of the period		3,323,665
Changes in fair value recognized during the period relating to assets still held at the end of the period		(737,830)
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	177,074	207,726
Issuances	557	379
Accrual of interest on excess servicing spread financing	1,280	1,974
Repayment		(9,308)
Settlement	(134,624)
Mortgage servicing liabilities resulting from loan sales	6,962	6,576
Changes in fair value included in income	(5,223)	(20,477)
Balance at the end of the period	46,026	186,870
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(6,260)	(20,477)
Recurring basis | Excess servicing spread financing
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	131,750	178,586
Issuances	557	379
Accrual of interest on excess servicing spread financing	1,280	1,974
Repayment		(9,308)
Settlement	(134,624)
Changes in fair value included in income	1,037	(14,522)
Balance at the end of the period		157,109
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period		(14,522)
Recurring basis | Mortgage servicing liabilities
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	45,324	29,140
Mortgage servicing liabilities resulting from loan sales	6,962	6,576
Changes in fair value included in income	(6,260)	(5,955)
Balance at the end of the period	46,026	29,761
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(6,260)	(5,955)
Recurring basis | Loans held for sale
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	4,675,169	383,878
Purchases and issuances, net	4,156,681	1,641,231
Capitalization of interest and advances	90,165	18,027
Sales and repayments	(928,901)	(738,928)
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	48,154	(7,523)
Total changes in fair value included in income	48,154	(7,523)
Transfers from mortgage loans held for sale from Level 3 to Level 2	(2,839,121)	(489,407)
Transfers to real estate acquired in settlement of loans	(82)	(691)
Balance at the end of the period	5,202,065	806,587
Changes in fair value recognized during the period relating to assets still held at the end of the period	104,132	(11,856)
Recurring basis | Interest rate lock commitments
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	677,026	136,650
Purchases and issuances, net	477,933	341,980
Changes in fair value included in income arising from:
Other factors	(179,613)	199,918
Total changes in fair value included in income	(179,613)	199,918
Transfers from interest rate lock commitments to loans held for sale	(637,406)	(363,354)
Balance at the end of the period	337,940	315,194
Changes in fair value recognized during the period relating to assets still held at the end of the period	337,940	315,194
Recurring basis | Repurchase agreement derivatives
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	2,581,174	8,187
Mortgage servicing rights resulting from loan sales	470,533
Changes in fair value included in income arising from:
Other factors	217,203
Total changes in fair value included in income	217,203
Balance at the end of the period	3,268,910	8,187
Changes in fair value recognized during the period relating to assets still held at the end of the period	217,203
Recurring basis | Mortgage servicing rights
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	7,933,369	2,926,790
Purchases and issuances, net	4,634,614	25,760
Capitalization of interest and advances	90,165
Sales and repayments	(928,901)
Mortgage servicing rights resulting from loan sales	470,533	282,315
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	48,154
Other factors	37,590	(1,041,168)
Total changes in fair value included in income	85,744	(1,041,168)
Transfers from mortgage loans held for sale from Level 3 to Level 2	(2,839,121)
Transfers to real estate acquired in settlement of loans	(82)
Transfers from interest rate lock commitments to loans held for sale	(637,406)
Balance at the end of the period	8,808,915	2,193,697
Changes in fair value recognized during the period relating to assets still held at the end of the period	$ 659,275	$ (1,041,168)

XML

Fair Value - Changes in Fair Value, Fair Value Option, Recurring Basis (Details) - Recurring basis - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Liabilities.
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	$ 5,223	$ 20,477
Liabilities. | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	5,223	20,477
Excess servicing spread financing
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	(1,037)	14,522
Excess servicing spread financing | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	(1,037)	14,522
Mortgage servicing liabilities
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	6,260	5,955
Mortgage servicing liabilities | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	6,260	5,955
Assets
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	867,322	(642,450)
Assets | Net gains on loans held for sale at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	650,119	398,718
Assets | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	217,203	(1,041,168)
Loans held for sale
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	650,119	398,718
Loans held for sale | Net gains on loans held for sale at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	650,119	398,718
Mortgage servicing rights at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	217,203	(1,041,168)
Mortgage servicing rights at fair value | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	$ 217,203	$ (1,041,168)

XML

Fair Value - Fair Value Option Maturities, Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Fair value
Total fair value	$ 13,385,789	$ 11,616,400
Recurring basis
Fair value
Total fair value	13,385,789	11,616,400
Loans held for sale | Recurring basis
Fair value
Current through 89 days delinquent	13,013,597	11,304,308
Not in foreclosure	340,185	275,419
In foreclosure	32,007	36,673
Total fair value	13,385,789	11,616,400
Principal amount due upon maturity
Current through 89 days delinquent	12,580,255	10,743,814
Not in foreclosure	344,853	280,595
In foreclosure	33,908	39,529
Total principal amount due upon maturity	12,959,016	11,063,938
Difference
Current through 89 days delinquent	433,342	560,494
Not in foreclosure	(4,668)	(5,176)
In foreclosure	(1,901)	(2,856)
Total difference	$ 426,773	$ 552,462

XML

Fair Value - Measurement Basis, Nonrecurring (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	$ 1,296,285		$ 1,295,840
Term Notes
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	1,296,285		1,295,840
Unsecured senior note
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	1,288,198		645,820
Nonrecurring basis
Financial statement items measured at fair value on a nonrecurring basis
Real estate acquired in settlement of loans	2,568		1,450
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Real estate acquired in settlement of loans	(412)	$ (3,980)
Nonrecurring basis | Level 3
Financial statement items measured at fair value on a nonrecurring basis
Real estate acquired in settlement of loans	2,568		1,450
Fair Values | Term Notes
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	1,296,344		1,268,304
Fair Values | Unsecured senior note
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	$ 1,290,250		$ 685,750

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Loans and IRLC (Details) $ in Thousands	Mar. 31, 2021 USD ($) item	Dec. 31, 2020 USD ($) item
Excess servicing spread financing
Loans held for sale | $	$ 13,385,789	$ 11,616,400
Level 3
Excess servicing spread financing
Loans held for sale | $	$ 5,202,065	$ 4,675,169
Loans held for sale | Discount rate | Level 3 | Minimum
Excess servicing spread financing
Input	2.6	2.8
Loans held for sale | Discount rate | Level 3 | Maximum
Excess servicing spread financing
Input	9.2	9.2
Loans held for sale | Discount rate | Level 3 | Weighted average
Excess servicing spread financing
Input	2.6	2.8
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Minimum
Excess servicing spread financing
Input	3.9	2.7
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Maximum
Excess servicing spread financing
Input	4.9	3.5
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Weighted average
Excess servicing spread financing
Input	4.4	3.0
Loans held for sale | Prepayment/resale speed | Level 3 | Minimum
Excess servicing spread financing
Input	0.3	0.4
Loans held for sale | Prepayment/resale speed | Level 3 | Maximum
Excess servicing spread financing
Input	29.5	31.3
Loans held for sale | Prepayment/resale speed | Level 3 | Weighted average
Excess servicing spread financing
Input	21.2	21.9
Loans held for sale | Total prepayment speed | Level 3 | Minimum
Excess servicing spread financing
Input	0.3	0.5
Loans held for sale | Total prepayment speed | Level 3 | Maximum
Excess servicing spread financing
Input	40.2	42.9
Loans held for sale | Total prepayment speed | Level 3 | Weighted average
Excess servicing spread financing
Input	28.1	29.2
Interest rate lock commitments | Level 3
Excess servicing spread financing
Loans held for sale | $	$ 337,940	$ 677,026
Interest rate lock commitments | Pull-through rate | Level 3 | Minimum
Excess servicing spread financing
Input	8.0	10.1
Interest rate lock commitments | Pull-through rate | Level 3 | Maximum
Excess servicing spread financing
Input	100	100
Interest rate lock commitments | Pull-through rate | Level 3 | Weighted average
Excess servicing spread financing
Input	85.5	82.7
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Minimum
Excess servicing spread financing
Input	(10.0)	0.7
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Maximum
Excess servicing spread financing
Input	6.4	5.3
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Weighted average
Excess servicing spread financing
Input	4.1	3.6
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Minimum
Excess servicing spread financing
Input	(2.1)	0.1
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Maximum
Excess servicing spread financing
Input	3.2	2.6
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Weighted average
Excess servicing spread financing
Input	1.3	1.2

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Rights - Initial Recognition (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2021 USD ($) item	Mar. 31, 2020 USD ($) item	Dec. 31, 2020 USD ($) item
Mortgage servicing rights
Inputs
Amount recognized | $	$ 470,533,000	$ 282,315,000
Fair Values | Mortgage servicing rights | Level 3 | Minimum
Inputs:
Annual per-loan cost of servicing | $	79		$ 79
Fair Values | Mortgage servicing rights | Level 3 | Maximum
Inputs:
Annual per-loan cost of servicing | $	118		117
Fair Values | Mortgage servicing rights | Level 3 | Weighted average
Inputs:
Annual per-loan cost of servicing | $	$ 108		$ 107
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Minimum
Inputs:
Input	6.8		8.0
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Maximum
Inputs:
Input			17.6
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Weighted average
Inputs:
Input	9.2		10.1
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Minimum
Inputs:
Input	7.2		10.1
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Maximum
Inputs:
Input	31.1		32.9
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Weighted average
Inputs:
Input	9.8		13.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Minimum
Inputs:
Input	2.9		2.3
Fair Values | Mortgage servicing rights | Life | Level 3 | Maximum
Inputs:
Input	8.4		7.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Weighted average
Inputs:
Input	7.2		6.0
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3
Inputs
Amount recognized | $	$ 470,533,000	282,315,000
Unpaid principal balance of underlying loans | $	$ 34,943,254,000	$ 18,330,384,000
Weighted-average servicing fee rate (as a percent)	0.34%	0.40%
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Minimum
Inputs:
Annual per-loan cost of servicing | $	$ 81	$ 77
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Maximum
Inputs:
Annual per-loan cost of servicing | $	117	100
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Weighted average
Inputs:
Annual per-loan cost of servicing | $	$ 104	$ 97
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Minimum
Inputs:
Input	8.0	6.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Maximum
Inputs:
Input	16.9	15.6
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Weighted average
Inputs:
Input	9.6	8.2
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Minimum
Inputs:
Input	6.2	9.1
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Maximum
Inputs:
Input	12.9	49.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Weighted average
Inputs:
Input	7.8	14.5
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Minimum
Inputs:
Input	4.1	1.5
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Maximum
Inputs:
Input	9.0	7.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Weighted average
Inputs:
Input	8.5	5.9

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Rights, Effect of Change In Inputs on Fair Value (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) item	Dec. 31, 2020 USD ($) item
MSR and pool characteristics
Carrying value	$ 3,268,910,000	$ 2,581,174,000
Mortgage servicing liabilities | Level 3
Prepayment speed
Annual per-loan cost of servicing	$ 293	305
Fair Values | Mortgage servicing liabilities | Pricing spread | Level 3 | Maximum
Inputs
Input | item	16.8
Fair Values | Mortgage servicing rights | Level 3
MSR and pool characteristics
Carrying value	$ 3,268,910,000	2,581,174,000
Unpaid principal balance of underlying loans	$ 244,367,930,000	$ 238,410,809,000
Weighted-average note interest rate (as a percent)	3.50%	3.60%
Weighted-average servicing fee rate (as a percent)	0.34%	0.35%
Pricing spread
Effect on fair value of 5% adverse change	$ (58,358,000)	$ (46,356,000)
Effect on fair value of 10% adverse change	(114,643,000)	(90,936,000)
Effect on fair value of 20% adverse change	(221,392,000)	(175,137,000)
Prepayment speed
Effect on fair value of 5% adverse change	(64,416,000)	(66,536,000)
Effect on fair value of 10% adverse change	(126,698,000)	(130,253,000)
Effect on fair value of 20% adverse change	(245,247,000)	(249,843,000)
Annual per-loan cost of servicing
Effect on fair value of 5% adverse change	(30,559,000)	(25,482,000)
Effect on fair value of 10% adverse change	(61,117,000)	(50,964,000)
Effect on fair value of 20% adverse change	(122,235,000)	(101,929,000)
Fair Values | Mortgage servicing rights | Level 3 | Minimum
Prepayment speed
Annual per-loan cost of servicing	79	79
Fair Values | Mortgage servicing rights | Level 3 | Maximum
Prepayment speed
Annual per-loan cost of servicing	118	117
Fair Values | Mortgage servicing rights | Level 3 | Weighted average
Prepayment speed
Annual per-loan cost of servicing	$ 108	$ 107
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Minimum
Inputs
Input | item	6.8	8.0
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Maximum
Inputs
Input | item		17.6
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Weighted average
Inputs
Input | item	9.2	10.1
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Minimum
Inputs
Input | item	7.2	10.1
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Maximum
Inputs
Input | item	31.1	32.9
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Weighted average
Inputs
Input | item	9.8	13.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Minimum
Inputs
Input | item	2.9	2.3
Fair Values | Mortgage servicing rights | Life | Level 3 | Maximum
Inputs
Input | item	8.4	7.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Weighted average
Inputs
Input | item	7.2	6.0

XML

Fair Value - Level 3 Unobservable Inputs, ESS (Details) - Excess servicing spread financing - Level 3 $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($) item
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value | $	$ 131,750
Unpaid principal balance of underlying mortgage loans | $	$ 15,833,050
Average servicing fee rate (as a percent)	0.34%
Average excess servicing spread (as a percent)	0.19%
Pricing spread | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	4.9
Pricing spread | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	5.3
Pricing spread | Weighted average
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	5.1
Annual total prepayment speed | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	9.6
Annual total prepayment speed | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	18.3
Annual total prepayment speed | Weighted average
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	11.7
Life | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	2.3
Life | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	6.6
Life | Weighted average
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	5.8

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Liabilities (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) item	Dec. 31, 2020 USD ($) item
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value	$ 46,026,000	$ 45,324,000
Mortgage servicing liabilities | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value	46,026,000	45,324,000
Unpaid principal balance of underlying loans	$ 3,173,793,000	$ 2,857,492,000
Servicing fee rate (as a percent)	0.25%	0.25%
Annual per-loan cost of servicing	$ 293	$ 305
Mortgage servicing liabilities | Pricing spread | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	7.9	7.6
Mortgage servicing liabilities | Annual total prepayment speed | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	30.5	33.3
Mortgage servicing liabilities | Life | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	3.8	3.2

XML

Loans Held for Sale at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	$ 13,385,789	$ 11,616,400
Fair value of loans pledged to secure assets sold under agreements to repurchase	12,726,461	10,912,178
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreement	541,206	545,500
Pledged Assets Separately Reported, Loans Pledged as Collateral, at Fair Value, Total	13,267,667	11,457,678
Government-insured or guaranteed
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	6,722,768	5,683,786
Conventional conforming
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	1,460,956	1,257,445
Purchased from Ginnie Mae pools serviced by the Company
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	5,182,311	4,661,378
Repurchased pursuant to representations and warranties
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	$ 19,754	$ 13,791

XML

Derivative Financial Instruments - Other Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Dec. 31, 2020
Derivative assets:
Derivative asset, before netting			$ 889,754	$ 847,831
Netting			(358,902)	(136,593)
Total derivative assets			530,852	711,238
Derivative liabilities:
Derivative liability, before netting			302,320	255,360
Netting			(233,763)	(212,722)
Net amounts of liabilities presented in the consolidated balance sheet			68,557	42,638
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	$ (442,151)	$ 1,036,570
Net gains on loans held for sale at fair value | Interest rate lock commitments and loans held for sale
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	462,538	(225,557)
Net loan servicing fees | Mortgage servicing rights
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	(442,151)	1,036,570
Margin Deposits
Derivative assets:
Collateral placed with (received from) derivative counterparties			(125,139)	76,129
Interest rate lock commitments
Derivative assets:
Total derivative assets			362,923	679,961
Interest rate lock commitments | Net gains on loans held for sale at fair value
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	(339,086)	$ 178,543
Forward contracts | Purchases
Derivative Instruments
Notional amount	31,689,543		34,644,744	31,689,543
Derivative assets:
Derivative asset, before netting			14,318	133,267
Derivative liabilities:
Derivative liability, before netting			192,793	1,276
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	31,689,543
Balance at end of period	34,644,744
Forward contracts | Sales
Derivative Instruments
Notional amount	50,438,967		52,739,511	50,438,967
Derivative assets:
Derivative asset, before netting			333,198	1,451
Derivative liabilities:
Derivative liability, before netting			32,729	251,149
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	50,438,967
Balance at end of period	52,739,511
MBS put options
Derivative Instruments
Notional amount	12,025,000		11,750,000	12,025,000
Derivative assets:
Derivative asset, before netting			99,670	14,302
Derivative liabilities:
Derivative liability, before netting			34,873
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	12,025,000
Balance at end of period	11,750,000
Swaptions | Purchases
Derivative Instruments
Notional amount	3,375,000		7,150,000	3,375,000
Derivative assets:
Derivative asset, before netting			50,973	11,939
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	3,375,000
Balance at end of period	7,150,000
Put options on interest rate futures | Purchases
Derivative Instruments
Notional amount	4,750,000		6,950,000	4,750,000
Derivative assets:
Derivative asset, before netting			27,133	5,520
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	4,750,000
Balance at end of period	6,950,000
Put options on interest rate futures | Sales
Derivative Instruments
Notional amount	4,100,000		4,100,000
Derivative liabilities:
Derivative liability, before netting			15,881
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at end of period	4,100,000
Call options on interest rate futures | Purchases
Derivative Instruments
Notional amount	850,000		2,500,000	850,000
Derivative assets:
Derivative asset, before netting			1,539	1,391
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	850,000
Balance at end of period	2,500,000
Call options on interest rate futures | Sales
Derivative Instruments
Notional amount	1,575,000		1,575,000
Derivative liabilities:
Derivative liability, before netting			1,061
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at end of period	1,575,000
Treasury future | Purchases
Derivative Instruments
Notional amount	1,065,000		830,000	1,065,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	1,065,000
Balance at end of period	830,000
Treasury future | Sales
Derivative Instruments
Notional amount	1,555,000		1,705,000	1,555,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	1,555,000
Balance at end of period	1,705,000
Interest rate swap futures | Purchases
Derivative Instruments
Notional amount	4,801,700		4,240,000	4,801,700
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	4,801,700
Balance at end of period	4,240,000
Interest rate swap futures | Sales
Derivative Instruments
Notional amount	711,700		750,000	711,700
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	711,700
Balance at end of period	750,000
Not designated as hedging instrument | Interest rate lock commitments
Derivative Instruments
Notional amount	20,624,535		17,668,145	20,624,535
Derivative assets:
Derivative asset, before netting			362,923	679,961
Derivative liabilities:
Derivative liability, before netting			$ 24,983	$ 2,935
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	20,624,535
Balance at end of period	$ 17,668,145

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Derivative Financial Instruments - Offsetting of Derivative Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	$ 526,831	$ 167,870
Gross amounts offset in the consolidated balance sheet	(358,902)	(136,593)
Net amounts of assets presented in the consolidated balance sheet	167,929	31,277
Total
Gross amounts of recognized assets	889,754	847,831
Net amounts of assets presented in the balance sheet	530,852	711,238
Interest rate lock commitments
Derivatives not subject to master netting arrangements
Gross amounts of recognized assets	362,923	679,961
Total
Net amounts of assets presented in the balance sheet	362,923	679,961
MBS put options
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	99,670	14,302
Net amounts of assets presented in the consolidated balance sheet	99,670	14,302
Total
Gross amounts of recognized assets	99,670	14,302
Swaptions
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	50,973	11,939
Net amounts of assets presented in the consolidated balance sheet	50,973	11,939
Swaptions | Purchases
Total
Gross amounts of recognized assets	50,973	11,939
Forward contracts | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	14,318	133,267
Net amounts of assets presented in the consolidated balance sheet	14,318	133,267
Total
Gross amounts of recognized assets	14,318	133,267
Forward contracts | Sales
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	333,198	1,451
Net amounts of assets presented in the consolidated balance sheet	333,198	1,451
Total
Gross amounts of recognized assets	333,198	1,451
Put options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	27,133	5,520
Net amounts of assets presented in the consolidated balance sheet	27,133	5,520
Total
Gross amounts of recognized assets	27,133	5,520
Call options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	1,539	1,391
Net amounts of assets presented in the consolidated balance sheet	1,539	1,391
Total
Gross amounts of recognized assets	$ 1,539	$ 1,391

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Derivative Financial Instruments - Offsetting of Derivative Assets - Derivative Assets, Financial Assets, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Total
Net amounts of assets presented in the balance sheet	$ 530,852	$ 711,238
Net amount	530,852	711,238
JP Morgan
Total
Net amounts of assets presented in the balance sheet	56,606	17,149
Net amount	56,606	17,149
RJ O'Brien
Total
Net amounts of assets presented in the balance sheet	11,730	6,910
Net amount	11,730	6,910
Morgan Stanley Bank
Total
Net amounts of assets presented in the balance sheet	53,548	2,443
Net amount	53,548	2,443
Citibank, N.A.
Total
Net amounts of assets presented in the balance sheet	9,685	2,026
Net amount	9,685	2,026
Goldman Sachs
Total
Net amounts of assets presented in the balance sheet	4,203
Net amount	4,203
Wells Fargo Bank, N.A.
Total
Net amounts of assets presented in the balance sheet	18,524
Net amount	18,524
Bank of America, N.A.
Total
Net amounts of assets presented in the balance sheet	10,013
Net amount	10,013
Other
Total
Net amounts of assets presented in the balance sheet	3,620	2,749
Net amount	3,620	2,749
Interest rate lock commitments
Total
Net amounts of assets presented in the balance sheet	362,923	679,961
Net amount	$ 362,923	$ 679,961

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Derivative Financial Instruments - Offsetting of Derivative Assets - Offsetting of Derivative and Financial Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	$ 277,337	$ 252,425
Netting	(233,763)	(212,722)
Net amounts of liabilities presented in the balance sheet	43,574	39,703
Total
Gross amounts of recognized liabilities	302,320	255,360
Net amounts of liabilities presented in the consolidated balance sheet	68,557	42,638
Mortgage loans sold under agreements to repurchase
Net amounts of liabilities presented in the consolidated balance sheet	10,856,677
Debt Issuance Costs
Debt issuance costs, gross	(8,200)	(9,198)
Debt issuance costs	(8,200)	(9,198)
Gross amounts of recognized liabilities	10,848,477	9,654,797
Net amount of liabilities in the consolidated balance sheet	10,848,477	9,654,797
Total
Gross amounts of recognized liabilities	11,150,797	9,910,157
Gross amounts offset in the consolidated balance sheet	(233,763)	(212,722)
Net amounts of liabilities presented in the consolidated balance sheet	10,925,234	9,706,633
Net amount of liabilities in the consolidated balance sheet	68,557	42,638
Receivable from Counterparties
Total
Net amounts of liabilities presented in the consolidated balance sheet	10,917,034	9,697,435
Assets sold under agreements to repurchase
Mortgage loans sold under agreements to repurchase
Gross amounts of recognized liabilities	10,856,677	9,663,995
Net amounts of liabilities presented in the consolidated balance sheet	10,856,677	9,663,995
Net amounts of liabilities presented in the consolidated balance sheet	10,856,677	9,663,995
Debt Issuance Costs
Debt issuance costs	(8,200)	(9,198)
Net amount of liabilities in the consolidated balance sheet	10,848,477	9,654,797
Forward contracts | Purchases
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	192,793	1,276
Net amounts of liabilities presented in the balance sheet	192,793	1,276
Total
Gross amounts of recognized liabilities	192,793	1,276
Forward contracts | Sales
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	32,729	251,149
Net amounts of liabilities presented in the balance sheet	32,729	251,149
Total
Gross amounts of recognized liabilities	32,729	251,149
Interest rate lock commitments
Derivatives not subject to master netting arrangements
Gross amounts of recognized liabilities	24,983	2,935
Total
Net amounts of liabilities presented in the consolidated balance sheet	24,983	2,935
Net amount of liabilities in the consolidated balance sheet	24,983	$ 2,935
MBS put options
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	34,873
Net amounts of liabilities presented in the balance sheet	34,873
Total
Gross amounts of recognized liabilities	34,873
Put options on interest rate futures | Sales
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	15,881
Net amounts of liabilities presented in the balance sheet	15,881
Total
Gross amounts of recognized liabilities	15,881
Call options on interest rate futures | Sales
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	1,061
Net amounts of liabilities presented in the balance sheet	1,061
Total
Gross amounts of recognized liabilities	$ 1,061

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Derivative Financial Instruments - Offsetting of Derivative Assets - Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	$ 10,925,234	$ 9,706,633
Financial instruments	(10,856,677)	(9,663,995)
Net amount of liabilities in the consolidated balance sheet	68,557	42,638
Credit Suisse First Boston Mortgage Capital LLC
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,824,198	3,947,752
Financial instruments	(2,805,703)	(3,943,149)
Net amount of liabilities in the consolidated balance sheet	18,495	4,603
JP Morgan
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,841,831	2,752,279
Financial instruments	(2,841,831)	(2,752,279)
Bank of America, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	1,317,580	634,523
Financial instruments	(1,317,580)	(626,550)
Net amount of liabilities in the consolidated balance sheet		7,973
Barclays
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	738,528	596,729
Financial instruments	(730,340)	(596,729)
Net amount of liabilities in the consolidated balance sheet	8,188
Citibank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	787,322	505,625
Financial instruments	(787,322)	(505,625)
Royal Bank of Canada
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	434,487	406,348
Financial instruments	(434,487)	(406,348)
BNP Paribas
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	308,754	337,823
Financial instruments	(308,754)	(336,545)
Net amount of liabilities in the consolidated balance sheet		1,278
Morgan Stanley Bank
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	562,172	331,546
Financial instruments	(562,172)	(331,546)
Wells Fargo Bank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	173,051	169,085
Financial instruments	(173,051)	(165,224)
Net amount of liabilities in the consolidated balance sheet		3,861
Federal National Mortgage Association
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet		12,928
Net amount of liabilities in the consolidated balance sheet		12,928
Mizuho Securities
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	8,107	6,491
Net amount of liabilities in the consolidated balance sheet	8,107	6,491
Goldman Sachs
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	895,437
Financial instruments	(895,437)
Nomura Securities International, Inc.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,264
Net amount of liabilities in the consolidated balance sheet	2,264
Mitsubishi UFJ Securities
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	3,305
Net amount of liabilities in the consolidated balance sheet	3,305
Other
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	3,215	2,569
Net amount of liabilities in the consolidated balance sheet	3,215	2,569
Interest rate lock commitments
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	24,983	2,935
Net amount of liabilities in the consolidated balance sheet	$ 24,983	$ 2,935

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Activity in MSRs at Fair Value (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Change in fair value due to:
Total change in fair value	$ (223,463)	$ 1,035,213
Mortgage servicing rights
Activity in MSRs carried at fair value
Balance at beginning of period	2,581,174	2,926,790
Additions - Resulting from loan sales	470,533	282,315
Additions - Purchases (purchase adjustments)		25,760
Additions	470,533	308,075
Change in fair value due to:
Changes in valuation inputs used in valuation model	312,890	(915,862)
Other changes in fair value	(95,687)	(125,306)
Total change in fair value	217,203	(1,041,168)
Balance at end of period	3,268,910	$ 2,193,697
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$ 3,265,073		$ 2,577,964

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Mortgage Servicing Liabilities Carried at FV (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Amortized cost:
Mortgage servicing liabilities resulting from loan sales	$ 6,962	$ 6,576
Mortgage servicing liabilities
Amortized cost:
Balance at beginning of period	45,324	29,140
Mortgage servicing liabilities resulting from loan sales	6,962	6,576
Changes in valuation inputs used in valuation model	6,764	4,432
Other changes in fair value	(13,024)	(10,387)
Total change in fair value	(6,260)	(5,955)
Balance at end of period	$ 46,026	$ 29,761

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Servicing, Late, Ancillary and Other Fees Relating to MSRs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Contractual servicing fees	$ 210,753	$ 198,653
Other fees:
Other	29,599	28,755
Mortgage servicing rights
Contractual servicing fees	210,753	198,653
Other fees:
Late charges	7,931	12,613
Other	7,854	4,850
Bank Servicing Fees	$ 226,538	$ 216,116

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Leases
Operating lease option to extend	true
Lease expenses:
Operating leases	$ 4,366	$ 3,932
Short-term leases	50	256
Total lease cost	4,416	4,188
Payments for operating leases	5,036	4,440
Right-of-use assets obtained in exchange for lease obligations	$ 3,243	$ 1,534
Remaining lease term (in year)	6 years 2 months 12 days	6 years 10 months 24 days
Discount rate (as a percent)	4.10%	4.30%
Operating lease liabilities
2022	$ 19,690
2023	18,526
2024	17,488
2025	15,765
2026	14,933
Thereafter	24,065
Total lease payments	110,467
Less imputed interest	(14,398)
Total	$ 96,069		$ 94,193
Minimum
Leases
Remaining operating lease term	1 year
Maximum
Leases
Remaining operating lease term	10 years
Operating lease renewal term	5 years

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Other Assets - Other (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Carrying value:
Deposits	$ 102,270	$ 153,054
Margin deposits	89,417	116,881
Capitalized software, net	85,371	81,434
Furniture, fixtures, equipment and building improvements, net	32,714	32,217
Real estate acquired in settlement of loans	9,616	12,158
Other	318,869	296,425
Other assets	638,257	692,169
Assets pledged to secure Obligation under capital lease:
Capitalized software, net	6,778	7,675
Furniture, fixture, equipment and building improvements, net	5,294	5,689
Assets securing capital lease	$ 114,342	$ 166,418

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Short-Term Borrowings - Assets Sold Under Agreement to Repurchase (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Apr. 01, 2020
During the period:
Total interest expense	$ 52,179,000	$ 25,684,000
Carrying value:
Unpaid principal balance	10,856,677,000
Unamortized debt issuance costs and premiums	(8,200,000)		$ (9,198,000)
Total loans sold under agreements to repurchase	10,848,477,000		9,654,797,000
Note Payable
During the period:
Average balance of assets sold under agreements to repurchase	1,300,000,000	1,300,000,000
Carrying value:
Amortization of debt issuance costs	544,000	445,000
Assets sold under agreements to repurchase
During the period:
Average balance of assets sold under agreements to repurchase	$ 8,432,579,000	$ 3,139,328,000
Weighted-average interest rate (as a percent)	2.17%	3.07%
Total interest expense	$ 52,179,000	$ 25,684,000
Maximum daily amount outstanding	10,856,677,000	4,446,795,000
Carrying value:
Unpaid principal balance	10,856,677,000		9,663,995,000
Unamortized debt issuance costs	(8,200,000)		(9,198,000)
Total loans sold under agreements to repurchase	$ 10,848,477,000		$ 9,654,797,000
Weighted average interest rate (as a percent)	1.93%		1.90%
Available borrowing capacity committed	$ 67,463,000		$ 372,803,000
Available borrowing capacity uncommitted	3,700,860,000		2,163,202,000
Available borrowing capacity	3,768,323,000		2,536,005,000
Margin deposits placed with counterparties	10,875,000		5,625,000
Amortization of debt issuance costs	6,200,000	$ 1,600,000
Assets sold under agreements to repurchase | Loans held for sale
Carrying value:
Fair value of assets pledged to secure	12,726,461,000		10,912,178,000
Assets sold under agreements to repurchase | Mortgage servicing rights
Carrying value:
Fair value of assets pledged to secure	3,105,051,000		2,490,267,000
Assets sold under agreements to repurchase | Servicing advances
Carrying value:
Fair value of assets pledged to secure	373,110,000		413,484,000
Assets sold under agreements to repurchase | Financing receivable
Carrying value:
Fair value of assets pledged to secure			80,862,000
Assets sold under agreements to repurchase | Deposits
Carrying value:
Fair value of assets pledged to secure	$ 102,270,000		$ 153,054,000
PLS | Credit Suisse First Boston Mortgage Capital LLC | Note Payable
Mortgage loans sold under agreement to repurchase
Maximum loan amount				$ 600,000,000

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Short-Term Borrowings - Maturities of Outstanding Advances Under Repurchase Agreements (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 10,856,677
Weighted-average maturity (in months)	5 months 3 days
Within 30 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 2,712,890
Over 30 to 90 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	5,075,748
Over 90 to 180 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	428,639
Over 180 days to one year
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 2,639,400

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Short-Term Borrowings - Mortgage Loans Sold Under Agreement to Repurchase by Counterparty (Details) - Assets sold under agreements to repurchase $ in Thousands	Mar. 31, 2021 USD ($)
Credit Suisse First Boston Mortgage Capital LLC Tranche Two
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 2,069,444
Credit Suisse First Boston Mortgage Capital LLC Tranche One
Mortgage loans sold under agreement to repurchase
Amount at risk	592,940
Bank of America, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	501,873
JP Morgan Chase Bank
Mortgage loans sold under agreement to repurchase
Amount at risk	282,086
JP Morgan
Mortgage loans sold under agreement to repurchase
Amount at risk	15,597
BNP Paribas
Mortgage loans sold under agreement to repurchase
Amount at risk	252,959
Barclays
Mortgage loans sold under agreement to repurchase
Amount at risk	94,629
Goldman Sachs
Mortgage loans sold under agreement to repurchase
Amount at risk	53,150
Citibank, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	41,738
Morgan Stanley Bank
Mortgage loans sold under agreement to repurchase
Amount at risk	33,515
Royal Bank of Canada
Mortgage loans sold under agreement to repurchase
Amount at risk	30,200
Wells Fargo Bank, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 20,988

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Short-Term Borrowings - Mortgage Loan Participation and Sale Agreement (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Nov. 01, 2018
During the period:
Total interest expense	$ 1,095,000	$ 1,810,000
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	518,747,000		$ 521,477,000
Fair value of loans pledged to secure	541,206,000		545,500,000
Mortgage Loan Participation and Sale Agreement member
During the period:
Average balance	$ 276,561,000	$ 247,811,000
Weighted-average interest rate (as a percent)	1.34%	2.64%
Total interest expense	$ 1,095,000	$ 1,810,000
Carrying value:
Unpaid principal balance of mortgage loan participation and sale agreement secured by mortgage loan participation certificates	518,747,000		521,477,000
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 518,747,000		$ 521,477,000
Weighted average interest rate (as a percent)	1.36%		1.39%
Fair value of loans pledged to secure	$ 541,206,000		$ 545,500,000
Amortization of debt issuance costs	172,000	173,000
Mortgage Loan Participation and Sale Agreement member | Maximum
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	528,844,000	530,220,000
Note Payable
Carrying value:
Unamortized debt issuance costs	(3,715,000)		(4,160,000)
Amortization of debt issuance costs	544,000	$ 445,000
Revolving credit agreement | Note Payable
Carrying value:
Maximum loan amount				$ 150,000,000
Increase in loan amount	$ 0		$ 0

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Long-Term Debt - Obligations Under Capital Lease (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Leases
Average balance	$ 11,340	$ 19,406
Weighted average interest rate	2.13%	3.36%
Total interest expense	$ 59	$ 167
Unpaid principal balance	$ 10,468		$ 11,864
Weighted average interest rate	2.11%		2.15%
Capitalized software pledged to creditors	$ 6,778		$ 7,675
Furniture, fixtures, equipment and building improvements pledged to creditors	5,294		$ 5,689
Maximum
Leases
Maximum daily amount outstanding	$ 11,864	$ 20,810

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Long-Term Debt - Note Payable (Details) - USD ($)		3 Months Ended		12 Months Ended
	Sep. 29, 2020	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Feb. 01, 2018
During the period:
Total interest expense		$ 9,888,000	$ 14,846,000
Unpaid principal balance		10,856,677,000
Unamortized debt issuance costs and premiums		(8,200,000)		$ (9,198,000)
Carrying value:
Notes payable		1,296,285,000		1,295,840,000
Notes payable
Maximum loan amount		1,300,000,000
Note Payable
During the period:
Average balance		$ 1,300,000,000	$ 1,300,000,000
Weighted-average interest rate (as a percent)		2.88%	4.43%
Total interest expense		$ 9,888,000	$ 14,846,000
Carrying value:
Unpaid principal balance		1,300,000,000		1,300,000,000
Unamortized debt issuance costs		(3,715,000)		(4,160,000)
Notes payable		$ 1,296,285,000		$ 1,295,840,000
Weighted-average interest rate (as a percent)		2.87%		2.93%
Amortization of Financing Costs		$ 544,000	$ 445,000
Note Payable | Credit Suisse AG
Long-Term debt
Maximum loan amount					$ 600,000,000
Note Payable | Mortgage servicing rights
Carrying value:
Assets pledged to secure		3,047,056,000		$ 2,421,326,000
Notes payable
Increase in loan amount		0		0
Note Payable | Servicing advances
Carrying value:
Assets pledged to secure		373,110,000		413,484,000
Note Payable | Deposits
Carrying value:
Assets pledged to secure		$ 102,270,000		153,054,000
Notes Payable Term Loan 2018-GT1
Notes payable
Debt instrument option to extend period		2 years
Notes Payable Term Loan 2018-GT1 | LIBOR
Notes payable
Maximum loan amount		$ 650,000,000
Interest rate spread		2.85%
Notes Payable Term Loan 2018-GT2
Notes payable
Debt instrument option to extend period		2 years
Notes Payable Term Loan 2018-GT2 | LIBOR
Notes payable
Maximum loan amount		$ 650,000,000
Interest rate spread		2.65%
Unsecured Senior Note
During the period:
Average balance		$ 1,003,889,000
Weighted-average interest rate (as a percent)		4.91%
Total interest expense		$ 12,670,000
Unpaid principal balance		1,300,000,000		650,000,000
Unamortized debt issuance costs and premiums		(11,802,000)		(4,180,000)
Debt Instrument Unamortized Premium And Debt Issuance Costs Net		$ 1,288,198,000		$ 645,820,000
Weighted average interest rate (as a percent)		4.81%		5.38%
Carrying value:
Amortization of Financing Costs		$ 347,000
Notes payable
Maximum loan amount		$ 1,300,000,000
Unsecured Senior Note | Before October 15, 2022
Notes payable
Redemption rate (as a percent)	100.00%
Unsecured Senior Note | Before October 15, 2022 with up to 40% principal redeemed
Notes payable
Redemption rate (as a percent)		105.375%	104.25%
Unsecured Senior Note | Change of Control
Notes payable
Redemption rate (as a percent)	101.00%
Unsecured Senior Note | Maximum | Before October 15, 2022 with up to 40% principal redeemed
Notes payable
Aggregate principal amount of notes that can be redeemed	40.00%
Unsecured Senior Notes One Due October 2025
Notes payable
Maximum loan amount		$ 500,000,000
Interest rate spread		5.38%
Unsecured Senior Notes Two Due October 2025
Notes payable
Maximum loan amount		$ 150,000,000
Interest rate spread		5.38%
Unsecured Senior Notes Due February 2029
Notes payable
Maximum loan amount		$ 650,000,000
Interest rate spread		4.25%

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Long-Term Debt - Maturities (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Long-Term debt
2022	$ 8,374
2023	652,094
2024	650,000
2026	650,000
Thereafter	650,000
Total	2,610,468
Obligations under capital lease
Long-Term debt
2022	8,374
2023	2,094
Total	10,468
Note Payable
Long-Term debt
2023	650,000
2024	650,000
Total	1,300,000
Unsecured Senior Note
Long-Term debt
2026	650,000
Thereafter	650,000
Total	$ 1,300,000

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Liability for Losses Under Representations and Warranties (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
During the year:
Balance at beginning of period	$ 32,688	$ 21,446
Provision for losses on loans sold resulting from sales of loans	10,053	3,712
Provision for losses on loans sold reduction in liability due to change in estimate	(3,685)	(1,676)
Losses incurred, net	(628)	(280)
Balance at end of period	38,428	23,202
Unpaid principal balance of loans subject to representations and warranties at end of period	$ 220,865,034	$ 186,517,598

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Reconciliation of the entity's provision for income taxes at statutory rates to the provision for income taxes at the entity's effective tax rate
Effective tax rate (as a percent)	25.50%	26.20%

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Commitments and Contingencies - Other (Details) - USD ($) $ in Thousands		3 Months Ended
	Oct. 24, 2018	Mar. 31, 2021
Contingencies
Total commitments to purchase and fund mortgage loans		$ 17,700,000
Garfield Action | Settled Litigation
Contingencies
Percent of shareholder approval for reorganization of the company (as a percent)	99.80%
Litigation settlement amount		$ 6,850

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Stockholders' Equity (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		46 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Feb. 28, 2021	Jun. 30, 2017
Stockholders' Equity
Cost of shares of common stock repurchased	$ 288,519	$ 4,121
Common Stock
Stockholders' Equity
Authorized stock repurchase amount				$ 1,000,000	$ 500,000
Shares of common stock repurchased	4,653	238	14,359
Cost of shares of common stock repurchased	$ 288,519	$ 4,121	$ 640,946

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Net Gains on Loans Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash gain(loss):
Loans	$ 82,712	$ 111,757
Hedging activities	736,225	(122,666)
Cash gain (loss), net of effects of cash hedging, on sale of loans held for sale	818,937	(10,909)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales	463,571	275,739
Provision for losses relating to representations and warranties on loans sold pursuant to loan sales	(10,053)	(3,712)
Provision for losses relating to representations and warranties on loans sold reduction in liability due to change in estimate	3,685	1,676
Change in fair value of loans and derivatives held at year end:
Interest rate lock commitments	(339,086)	178,543
Loans	105,222	(72,080)
Hedging derivatives	(273,687)	(102,891)
From non-affiliates	768,589	266,366
Recapture payable to PennyMac Mortgage Investment Trust	(14,248)	77,916
Net gains on loans held for sale at fair value	$ 754,341	$ 344,282

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Net Interest Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Interest income:
Cash and short-term investments	$ 987	$ 1,711
Loans held for sale at fair value	74,824	46,426
Placement fees relating to custodial funds	5,883	23,209
Interest income, excluding related parties	81,694	71,346
Interest income	82,081	72,564
Interest expense:
Assets sold under agreements to repurchase	52,179	25,684
Mortgage loan participation purchase and sale agreements	1,095	1,810
Obligations under capital lease	59	167
Notes payable	9,888	14,846
Unsecured senior notes	12,670
Corporate revolving line of credit		503
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations	29,436	14,871
Interest on mortgage loan impound deposits	1,106	1,657
Interest expense, non-affiliates	106,433	59,538
Interest expense	107,713	61,512
Net interest (expense) income	(25,632)	11,052
PMT
Interest income:
From PennyMac Mortgage Investment Trust	387	1,218
Interest expense:
To PennyMac Mortgage Investment Trust Excess servicing spread financing at fair value	1,280	1,974
Assets sold under agreements to repurchase
Interest expense:
Assets sold under agreements to repurchase	$ 52,179	$ 25,684

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Stock-based Compensation - Other (Details) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) item shares	Mar. 31, 2020 USD ($) shares
Stock-Based Compensation
Number of stock based compensation plans | item	1
Grant date fair value | $	$ 33,414	$ 28,200
Stock-based compensation expense | $	$ 10,877	$ 12,368
Stock Options
Stock-Based Compensation
Granted (in units)	249	273
Grant date fair value | $	$ 5,116	$ 2,770
Exercised (in units)	88	180
Performance-based RSUs
Stock-Based Compensation
Granted (in units)	310	422
Grant date fair value | $	$ 18,234	$ 14,768
Vested (in units)	640	603
Time-based RSUs
Stock-Based Compensation
Granted (in units)	171	304
Grant date fair value | $	$ 10,064	$ 10,662
Vested (in units)	305	348

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Earnings Per Share of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Diluted earnings per share of common stock:
Net income attributable to common stockholders	$ 376,868	$ 306,243
Weighted-average common stock outstanding applicable to basic earnings per share (in shares)	69,113	78,689
Effect of dilutive shares:
Common shares issuable under stock-based compensation plans (in shares)	4,004	3,319
Weighted-average shares of common stock applicable to diluted earnings per share (in shares)	73,117	82,008
Basic earnings per share of common stock (in dollars per share)	$ 5.45	$ 3.89
Diluted earnings per share of common stock (in dollars per share)	$ 5.15	$ 3.73
Total anti-dilutive shares and units (in shares)	217	384
Performance-based RSUs
Effect of dilutive shares:
Total anti-dilutive shares and units (in shares)	120	162
Time-based RSUs
Effect of dilutive shares:
Total anti-dilutive shares and units (in shares)		117
Stock Options
Effect of dilutive shares:
Total anti-dilutive shares and units (in shares)	97	105
Weighted-average exercise price of anti-dilutive stock options (in dollars per share)	$ 58.85	$ 35.03

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash paid for interest	$ 112,730	$ 64,527
(Refunds received) cash paid for income taxes, net	(15)	13
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	470,533	282,315
Unsettled portion of MSR acquisitions		1,656
Operating right-of-use assets recognized	3,243	1,534
Mortgage servicing liabilities resulting from loan sales	6,962	6,576
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	557	379
Issuance of common stock in settlement of director fees	$ 51	$ 48

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Regulatory Capital and Liquidity Requirements (Details) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
	Jun. 30, 2020	Mar. 31, 2021	Dec. 31, 2015	Dec. 31, 2020
Fannie Mae / Freddie Mac - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth		$ 4,964,124		$ 4,454,680
Capital Requirement		653,752		633,331
Liquidity		444,973		506,096
Liquidity requirement		$ 86,640		$ 84,444
Tangible net worth / Total assets ratio actual		16.00%		14.00%
Tangible net worth / Total assets ratio requirement		6.00%		6.00%
Ginnie Mae - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth		$ 4,466,186		$ 3,794,112
Capital Requirement		963,805		1,058,641
Liquidity		444,973		506,096
Liquidity requirement		$ 215,218		$ 215,722
Adjusted net worth / Total assets ratio actual		14.00%		12.00%
Adjusted net worth / Total assets ratio requirement		6.00%		6.00%
Ginnie Mae - PennyMac | 1-4 unit servicing portfolio
Regulatory Net Worth and Agency Capital Requirements
Net worth		$ 2,500
FHFA net worth requirement spread		0.35%
FHFA liquidity spread of UPB serviced		0.10%
Liquidity requirement		$ 1,000
HUD - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth		4,466,186		$ 3,794,112
Capital Requirement		$ 2,500		$ 2,500
Federal Housing Finance Agency
Regulatory Net Worth and Agency Capital Requirements
Net worth			$ 2,500
FHFA liquidity spread of UPB serviced	0.035%
FHFA additional liquidity spread of UPB in excess of set percent	2.00%
FHFA additional liquidity spread of UPB excluded	70.00%
Federal Housing Finance Agency | 1-4 unit servicing portfolio
Regulatory Net Worth and Agency Capital Requirements
FHFA net worth requirement spread			0.25%

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Segments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) segment	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Segments and Related Information
Number of segments | segment	3
Revenues:
Net gains on loans held for sale at fair value	$ 754,341	$ 344,282
Loan origination fees	104,037	57,571
Net loan servicing fees	39,720	257,808
Net interest income (expense):
Interest income	82,081	72,564
Interest expense, before non-segment activities	107,713	61,512
Net interest expense, before non-segment activities	(25,632)	11,052
Management fees	8,449	9,055
Other	2,936	117
Total net revenues, before non-segment activities	944,686	721,825
Expenses	438,678	307,095
Income before provision for income taxes	506,008	414,730
Assets:
Segment assets at year end	31,297,980		$ 31,597,795
PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	60,835	41,940
Net interest income (expense):
Management fees	$ 8,449	9,055
Mortgage banking
Segments and Related Information
Number of segments | segment	2
Operating segment
Assets:
Segment assets at year end	$ 31,297,980	10,891,133
Operating segment | Investment management
Net interest income (expense):
Interest expense, before non-segment activities	3	9
Net interest expense, before non-segment activities	(3)	(9)
Management fees	8,449	9,055
Other	1,142	807
Total net revenues, before non-segment activities	9,588	9,853
Expenses	8,219	6,096
Income before provision for income taxes	1,369	3,757
Assets:
Segment assets at year end	18,271	18,067
Operating segment | Mortgage banking
Revenues:
Net gains on loans held for sale at fair value	754,341	344,282
Loan origination fees	104,037	57,571
Net loan servicing fees	39,720	257,808
Net interest income (expense):
Interest income	82,081	72,564
Interest expense, before non-segment activities	107,710	61,503
Net interest expense, before non-segment activities	(25,629)	11,061
Other	1,794	(690)
Total net revenues, before non-segment activities	935,098	711,972
Expenses	430,459	300,999
Income before provision for income taxes	504,639	410,973
Assets:
Segment assets at year end	31,279,709	10,873,066
Operating segment | Mortgage banking | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	60,835	41,940
Operating segment | Mortgage banking Production
Revenues:
Net gains on loans held for sale at fair value	515,963	316,635
Loan origination fees	104,037	57,571
Net interest income (expense):
Interest income	29,531	26,585
Interest expense, before non-segment activities	38,072	20,157
Net interest expense, before non-segment activities	(8,541)	6,428
Other	597	(10)
Total net revenues, before non-segment activities	672,891	422,564
Expenses	309,996	182,433
Income before provision for income taxes	362,895	240,131
Assets:
Segment assets at year end	8,886,460	5,686,878
Operating segment | Mortgage banking Production | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	60,835	41,940
Operating segment | Mortgage banking Servicing
Revenues:
Net gains on loans held for sale at fair value	238,378	27,647
Net loan servicing fees	39,720	257,808
Net interest income (expense):
Interest income	52,550	45,979
Interest expense, before non-segment activities	69,638	41,346
Net interest expense, before non-segment activities	(17,088)	4,633
Other	1,197	(680)
Total net revenues, before non-segment activities	262,207	289,408
Expenses	120,463	118,566
Income before provision for income taxes	141,744	170,842
Assets:
Segment assets at year end	$ 22,393,249	$ 5,186,188

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Subsequent Events (Details) - Subsequent Event	May 06, 2021 $ / shares	Apr. 28, 2021 item
Subsequent Event
Dividends declared (in dollars per share) | $ / shares	$ 0.20
Mortgage servicing rights | Master Repurchase Agreement
Securities Repurchase Agreements
Number of subsidiaries entered into a Master Purchase Agreement | item		3