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, 2016
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: 001-35916
PennyMac Financial Services, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware |
|
80-0882793 |
(State or other jurisdiction of |
|
(IRS Employer |
incorporation or organization) |
|
Identification No.) |
|
|
|
6101 Condor Drive, Moorpark, California |
|
93021 |
(Address of principal executive offices) |
|
(Zip Code) |
(818) 224-7442
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
|
|
|
Large accelerated filer ☐ |
|
Accelerated filer ☒ |
|
|
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
(Do not check if a smaller reporting company) |
|
|
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 6, 2016 |
Class A Common Stock, $0.0001 par value |
|
22,047,491 |
Class B Common Stock, $0.0001 par value |
|
50 |
PENNYMAC FINANCIAL SERVICES, INC.
FORM 10-Q
March 31, 2016
|
|
|
|
Page |
|
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
||
|
||
|
|
|
|
||
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
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, 2015, filed with the SEC on March 10, 2016.
Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:
|
· |
|
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; |
|
· |
|
the licensing and operational requirements of states and other jurisdictions applicable to our businesses, to which our bank competitors are not subject; |
|
· |
|
foreclosure delays and changes in foreclosure practices; |
|
· |
|
certain banking regulations that may limit our business activities; |
|
· |
|
our dependence on the multi-family and commercial real estate sectors for future originations and investments in commercial mortgage loans and other commercial real estate related loans; |
|
· |
|
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; |
|
· |
|
purchase opportunities for mortgage servicing rights (“MSRs”) and our success in winning bids; |
|
· |
|
changes in prevailing interest rates; |
3
|
· |
|
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; |
|
· |
|
any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all; |
|
· |
|
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 obligation to indemnify PMT and certain investment funds if our services fail to meet certain criteria or characteristics or under other circumstances; |
|
· |
|
decreases in the historical 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 certain advised entities; |
|
· |
|
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; and |
|
· |
|
our ability to mitigate cybersecurity risks and cyber incidents. |
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.
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.
4
PART I. FINANCIAL INFORMATIO N
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET S (UNAUDITED)
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
2016 |
|
2015 |
|
||
|
(in thousands, except share amounts) |
|
||||
ASSETS |
|
|
|
|
|
|
Cash (includes $95,826 and $93,757 pledged to creditors) |
$ |
|
|
$ |
|
|
Short-term investments at fair value |
|
|
|
|
|
|
Mortgage loans held for sale at fair value (includes $1,632,074 and $1,079,489 pledged to creditors) |
|
|
|
|
|
|
Derivative assets |
|
|
|
|
|
|
Servicing advances, net (includes $40,770 and $33,458 valuation allowance) |
|
|
|
|
|
|
Carried Interest due from Investment Funds pledged to creditors |
|
|
|
|
|
|
Investment in PennyMac Mortgage Investment Trust at fair value |
|
|
|
|
|
|
Mortgage servicing rights (includes $594,403 and $660,247 at fair value; $1,332,775 and $803,560 pledged to creditors) |
|
|
|
|
|
|
Real estate acquired in settlement of loans |
|
|
|
|
— |
|
Furniture, fixtures, equipment and building improvements, net (includes $11,356 and $14,034 pledged to creditors) |
|
|
|
|
|
|
Capitalized software, net (includes $541 and $783 pledged to creditors) |
|
|
|
|
|
|
Note receivable from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
Receivable from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
Receivable from Investment Funds |
|
|
|
|
|
|
Deferred tax asset |
|
|
|
|
|
|
Mortgage loans eligible for repurchase |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total assets |
$ |
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
Assets sold under agreements to repurchase |
$ |
|
|
$ |
|
|
Mortgage loan participation and sale agreements |
|
|
|
|
|
|
Notes payable |
|
|
|
|
|
|
Obligations under capital lease |
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
Derivative liabilities |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
Mortgage servicing liabilities at fair value |
|
|
|
|
|
|
Payable to Investment Funds |
|
|
|
|
|
|
Payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
|
|
|
|
|
|
Liability for mortgage loans eligible for repurchase |
|
|
|
|
|
|
Liability for losses under representations and warranties |
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Class A common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 22,047,491 and 21,990,831 shares, respectively |
|
|
|
|
|
|
Class B common stock—authorized 1,000 shares of $0.0001 par value; issued and outstanding, 50 and 51 shares, respectively |
|
— |
|
|
— |
|
Additional paid-in capital |
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders |
|
|
|
|
|
|
Noncontrolling interest in Private National Mortgage Acceptance Company, LLC |
|
|
|
|
|
|
Total stockholders' equity |
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
|
|
$ |
|
|
The accompanying notes are an integral part of these financial statements.
5
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOM E (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands, except earnings per share) |
|
||||
Revenues |
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value: |
|
|
|
|
|
|
|
From non-affiliates |
|
$ |
|
|
$ |
|
|
Recapture payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan origination fees |
|
|
|
|
|
|
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Net mortgage loan servicing fees: |
|
|
|
|
|
|
|
Mortgage loan servicing fees |
|
|
|
|
|
|
|
From non-affiliates |
|
|
|
|
|
|
|
From PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
From Investment Funds |
|
|
|
|
|
|
|
Ancillary and other fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, impairment and change in fair value of mortgage servicing rights |
|
|
|
|
|
|
|
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net mortgage loan servicing fees |
|
|
|
|
|
|
|
Management fees: |
|
|
|
|
|
|
|
From PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
From Investment Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carried Interest from Investment Funds |
|
|
|
|
|
|
|
Net interest expense: |
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
From non-affiliates |
|
|
|
|
|
|
|
From PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
To non-affiliates |
|
|
|
|
|
|
|
To PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
|
|
|
|
|
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Result of real estate acquired in settlement of loans |
|
|
|
|
|
— |
|
Other |
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Compensation |
|
|
|
|
|
|
|
Servicing |
|
|
|
|
|
|
|
Technology |
|
|
|
|
|
|
|
Loan origination |
|
|
|
|
|
|
|
Professional services |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Total expenses |
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
|
|
Diluted |
|
$ |
|
|
$ |
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
6
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUIT Y (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock |
|
Noncontrolling |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
interest in Private |
|
|
|
|
||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
National Mortgage |
|
Total |
|
|||
|
|
Number of |
|
Par |
|
|
paid-in |
|
Retained |
|
Acceptance |
|
stockholders' |
|
|||||
|
|
shares |
|
value |
|
|
capital |
|
earnings |
|
Company, LLC |
|
equity |
|
|||||
|
|
(in thousands) |
|
||||||||||||||||
Balance at December 31, 2014 |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stock and unit-based compensation |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
Distributions |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Issuance of common stock in settlement of directors' fees |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Balance at March 31, 2015 |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015 |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stock and unit-based compensation |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
Issuance of common stock in settlement of directors' fees |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Balance at March 31, 2016 |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
The accompanying notes are an integral part of these financial statements.
7
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW S (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Cash flow from operating activities |
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
$ |
|
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
|
|
|
|
|
|
|
Accrual of servicing rebate payable to Investment Funds |
|
|
|
|
|
|
|
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
|
|
|
|
|
|
|
Carried Interest from Investment Funds |
|
|
|
|
|
|
|
Amortization of debt issuance costs and commitment fees relating to financing facilities |
|
|
|
|
|
|
|
Capitalization of interest on mortgage loans held for sale at fair value |
|
|
|
|
|
|
|
Accrual of interest on excess servicing spread financing |
|
|
|
|
|
|
|
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Change in fair value of real estate acquired in settlement in loans |
|
|
|
|
|
— |
|
Stock and unit-based compensation expense |
|
|
|
|
|
|
|
Provision for servicing advance losses |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
Purchase of mortgage loans held for sale from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Originations of mortgage loans held for sale |
|
|
|
|
|
|
|
Purchase of mortgage loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale |
|
|
|
|
|
|
|
Sale and principal payments of mortgage loans held for sale |
|
|
|
|
|
|
|
Sale of loans held for sale to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Repurchase of mortgage loans and real estate acquired in settlement of loans subject to representations and warranties |
|
|
|
|
|
|
|
Decrease (increase) in servicing advances |
|
|
|
|
|
|
|
Decrease (increase) in receivable from Investment Funds |
|
|
|
|
|
|
|
Decrease in receivable from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Decrease in deferred tax asset |
|
|
|
|
|
|
|
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
|
|
— |
|
|
|
|
Increase in other assets |
|
|
|
|
|
|
|
(Decrease) increase in accounts payable and accrued expenses |
|
|
|
|
|
|
|
Decrease in payable to Investment Funds |
|
|
|
|
|
|
|
(Decrease) increase in payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
|
Decrease (increase) in short-term investments |
|
|
|
|
|
|
|
Purchase of mortgage servicing rights |
|
|
|
|
|
|
|
Net settlement of derivative financial instruments used for hedging |
|
|
|
|
|
|
|
Purchase of furniture, fixtures, equipment and building improvements |
|
|
|
|
|
|
|
Acquisition of capitalized software |
|
|
|
|
|
|
|
Increase in margin deposits and restricted cash |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
Sale of assets under agreements to repurchase |
|
|
|
|
|
|
|
Repurchase of assets sold under agreements to repurchase |
|
|
|
|
|
|
|
Issuance of mortgage loan participation certificates |
|
|
|
|
|
|
|
Repayment of mortgage loan participation certificates |
|
|
|
|
|
|
|
Advances on notes payable |
|
|
|
|
|
— |
|
Repayment of notes payable |
|
|
|
|
|
|
|
Issuance of excess servicing spread financing |
|
|
— |
|
|
|
|
Repayment of excess servicing spread financing |
|
|
|
|
|
|
|
Repurchase of excess servicing spread financing |
|
|
|
|
|
— |
|
Repayments of obligations under capital lease |
|
|
|
|
|
|
|
Payment of debt issuance costs |
|
|
|
|
|
— |
|
Distribution to Private National Mortgage Acceptance Company, LLC members |
|
|
— |
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
Net increase in cash |
|
|
|
|
|
|
|
Cash at beginning of period |
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
|
|
$ |
|
|
The accompanying notes are an integral part of these financial statements.
8
PENNYMAC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT S (UNAUDITED)
Note 1—Organization and Basis of Presentation
PennyMac Financial Services, Inc. (“PFSI” or the “Company”) was formed as a Delaware corporation on December 31, 2012. Pursuant to a reorganization, the Company became a holding corporation and its primary asset is an equity interest in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac and operates and controls all of the businesses and affairs of PennyMac subject to the consent rights of other members under certain circumstances, 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 (including correspondent production and consumer direct lending) and mortgage loan servicing. PennyMac’s investment management activities and a portion of its mortgage loan servicing activities are conducted on behalf of investment vehicles that invest in residential mortgage loans and related assets. PennyMac’s primary wholly owned subsidiaries are:
|
· |
|
PNMAC Capital Management, LLC (“PCM”) —a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM enters into investment management agreements with entities that invest in residential mortgage loans and related assets. |
Presently, PCM has management agreements with PennyMac Mortgage Investment Trust (“PMT”), a publicly held real estate investment trust (“REIT”), PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P., (the “Master Fund”), both registered under the Investment Company Act of 1940, as amended, an affiliate of these registered funds and PNMAC Mortgage Opportunity Fund Investors, LLC (collectively, the “Investment Funds”). Together, the Investment Funds and PMT are referred to as the “Advised Entities.”
|
· |
|
PennyMac Loan Services, LLC (“PLS”) —a Delaware limited liability company that services residential mortgage loans on behalf of non-affiliates and the Advised Entities, purchases and originates 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 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 an “Agency” and collectively the “Agencies”).
|
· |
|
PNMAC Opportunity Fund Associates, LLC (“PMOFA”) —a Delaware limited liability company and the general partner of the Master Fund. PMOFA is entitled to incentive fees representing allocations of profits (“Carried Interest”) from the Master Fund . |
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 SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. The interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
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, but are not necessarily
9
indicative of the results of operations to be anticipated for the full year ending December 31, 2016. Intercompany accounts and transactions have been eliminated.
Preparation of financial statements in compliance with GAAP requires management to make estimates and judgments 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.
Note 2—Concentration of Risk
A substantial portion of the Company’s activities relate to the Advised Entities. Fees charged to these entities (generally comprised of fulfillment fees, mortgage loan servicing fees, management fees and Carried Interest) totaled 30% and 26% of total net revenue for the quarters ended March 31, 2016 and 2015, respectively.
Note 3—Transactions with Affiliates
Transactions with PMT
Operating Activities
Mortgage Loan Production Activities
Following is a summary of mortgage lending and sourcing activity between the Company and PMT:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Fulfillment fee revenue |
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Sourcing fees paid |
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans purchased from PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Tax service fee from PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Mortgage servicing rights and excess servicing spread recapture recognized |
|
$ |
|
|
$ |
|
|
Mortgage banking and warehouse service fees paid by PMT |
|
$ |
|
|
$ |
— |
|
10
Mortgage Loan Servicing Activities
Following is a summary of mortgage loan servicing fees earned from PMT:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
Mortgage loan servicing fees relating to PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
Mortgage loans acquired for sale at fair value: |
|
|
|
|
|
|
|
Base and supplemental |
|
$ |
|
|
$ |
|
|
Activity-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans at fair value: |
|
|
|
|
|
|
|
Base and supplemental |
|
|
|
|
|
|
|
Activity-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights: |
|
|
|
|
|
|
|
Base and supplemental |
|
|
|
|
|
|
|
Activity-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Investment Management Activities
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.
Following is a summary of the base management and performance incentive fees earned from PMT:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
Management fees: |
|
|
|
|
|
|
|
Base |
|
$ |
|
|
$ |
|
|
Performance incentive |
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
The term of the management agreement, as amended, expires on February 1, 2017, subject to automatic renewal for additional 18 ‑month periods, unless terminated earlier in accordance with the terms of the management agreement.
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 before termination.
11
Expense Reimbursement
PMT reimburses the Company for other expenses, including common overhead expenses incurred on its behalf by the Company, in accordance with the terms of its management agreement. Such amounts are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Reimbursement of: |
|
|
|
|
|
|
|
Common overhead incurred by the Company (1) |
|
$ |
|
|
$ |
|
|
Expenses incurred on PMT's behalf |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Payments and settlements during the period (2) |
|
$ |
|
|
$ |
|
|
|
(1) |
|
On December 15, 2015, the Company and PMT amended their management agreement to provide that the total costs and expenses incurred by the Company in any quarter and reimbursable by PMT is capped at an amount equal to the product of (A) 70 basis points (0.0070), multiplied by (B) PMT’s shareholders’ equity (as defined in the management agreement) as of the last day of such quarter, divided by four (4). |
|
(2) |
|
Payments and settlements include payments for operating, investment and financing activities itemized in this Note and netting settlements made pursuant to master netting agreements between the Company and PMT. |
Amounts due from and payable to PMT are summarized below:
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Receivable from PMT: |
|
|
|
|
|
|
|
Management fees |
|
$ |
|
|
$ |
|
|
Servicing fees |
|
|
|
|
|
|
|
Correspondent production fees |
|
|
|
|
|
|
|
Fulfillment fees |
|
|
|
|
|
|
|
Allocated expenses |
|
|
|
|
|
|
|
Conditional reimbursement |
|
|
|
|
|
|
|
Expenses incurred on PMT's behalf |
|
|
|
|
|
|
|
Interest on note receivable |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Payable to PMT: |
|
|
|
|
|
|
|
Deposits made by PMT to fund servicing advances |
|
$ |
|
|
|
|
|
MSR recapture payable |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Conditional Reimbursement of Underwriting Fees
In connection with its initial public offering of common shares on August 4, 2009 (“IPO”), PMT conditionally agreed to reimburse the Company up to $2.9 million for underwriting fees paid to the IPO underwriters by the Company on PMT’s behalf. The Company received reimbursement payments from PMT totaling $157,000 for the quarter ended March 31, 2015. The Company received no reimbursement from PMT during the quarter ended March 31, 2016.
In the event a termination fee is payable to the Company under the management agreement, and the Company has not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.
12
Investing Activities
Following is a summary of investing activities between the Company and PMT:
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
2016 |
|
2015 |
|
||
|
(in thousands) |
|
||||
Note receivable from PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
Interest income |
$ |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Common shares of beneficial interest of PennyMac Mortgage Investment Trust : |
|
|
|
|
|
|
Activity during the period: |
|
|
|
|
|
|
Dividends received from PennyMac Mortgage Investment Trust |
$ |
|
|
$ |
|
|
Change in fair value of investment in PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
||
|
|
2016 |
|
2015 |
||
|
|
(in thousands) |
||||
|
|
|
|
|
|
|
Note receivable from PennyMac Mortgage Investment Trust: |
$ |
|
|
$ |
|
|
Common shares of beneficial interest of PennyMac Mortgage Investment Trust : |
|
|
|
|
|
|
Fair value |
$ |
|
|
$ |
|
|
Number of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
Following is a summary of financing activities between the Company and PMT:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Excess servicing spread financing: |
|
|
|
|
|
|
|
Issuance: |
|
|
|
|
|
|
|
Cash |
|
$ |
— |
|
$ |
|
|
Pursuant to recapture agreement |
|
$ |
|
|
$ |
|
|
Repayment |
|
$ |
|
|
$ |
|
|
Repurchase |
|
$ |
|
|
$ |
— |
|
Change in fair value |
|
$ |
|
|
$ |
|
|
Interest expense |
|
$ |
|
|
$ |
|
|
Excess servicing spread recapture |
|
$ |
|
|
$ |
|
|
13
Investment Funds
Amounts due from and payable to the Investment Funds are summarized below:
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Carried Interest due from Investment Funds: |
|
|
|
|
|
|
|
PNMAC Mortgage Opportunity Fund, LLC |
|
$ |
|
|
$ |
|
|
PNMAC Mortgage Opportunity Fund Investors, LLC |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Receivable from Investment Funds: |
|
|
|
|
|
|
|
Management fees |
|
$ |
|
|
$ |
|
|
Mortgage loan servicing fees |
|
|
|
|
|
|
|
Mortgage loan servicing rebate |
|
|
|
|
|
|
|
Expense reimbursements |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Payable to Investment Funds—Servicing advances |
|
$ |
|
|
$ |
|
|
Exchanged Private National Mortgage Acceptance Company, LLC Unitholders
The Company entered into a tax receivable agreement with PennyMac’s existing unitholders on the date of the IPO that will provide for the payment by PFSI to PennyMac’s exchanged unitholders an amount equal to 85% of the amount of the benefits, if any, that PFSI is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from such unitholders’ exchanges 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. Based on the PennyMac unitholder exchanges to date, the Company has recorded a $74.3 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of March 31, 2016 and December 31, 2015. The Company made payments under the tax receivable agreement totaling $ 4.3 million during the quarter ended March 31, 2015. There were no payments made during the period ended March 31, 2016.
Note 4—Earnings Per Share of Common Stock
Basic earnings per share of common stock is determined using net income attributable to the Company’s common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is determined by dividing diluted net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all potentially dilutive shares of common stock were issued.
The Company applies the treasury stock method to determine the dilutive weighted average shares of common stock represented by the non-vested unit and stock-based compensation awards. The diluted earnings per share calculation assumes the exchange of these PennyMac Class A units for shares of common stock. Accordingly, earnings attributable to the Company’s common stockholders is also adjusted to include the earnings allocated to the PennyMac Class A units after taking into account the income taxes that would be applicable to the shares of common stock assumed to be exchanged.
14
The following table summarizes the basic and diluted earnings per share calculations:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands, except per share amounts) |
|
||||
Basic earnings per share of common stock: |
|
|
|
|
|
|
|
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
|
$ |
|
|
$ |
|
|
Weighted average shares of common stock outstanding |
|
|
|
|
|
|
|
Basic earnings per share of common stock |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share of common stock: |
|
|
|
|
|
|
|
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
|
$ |
|
|
$ |
|
|
Effect of net income attributable to PennyMac Class A units exchangeable to common stock, net of income taxes |
|
|
|
|
|
|
|
Diluted net income attributable to common stockholders |
|
$ |
|
|
$ |
|
|
Weighted average shares of common stock outstanding |
|
|
|
|
|
|
|
Dilutive shares: |
|
|
|
|
|
|
|
PennyMac Class A units exchangeable to common stock |
|
|
|
|
|
|
|
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock |
|
|
— |
|
|
|
|
Common shares issuable under stock-based compensation plan |
|
|
|
|
|
|
|
Diluted weighted average shares of common stock outstanding |
|
|
|
|
|
|
|
Diluted earnings per share of common stock |
|
$ |
|
|
$ |
|
|
The following table summarizes the anti-dilutive weighted-average number of outstanding stock options and performance-based restricted stock units (“RSUs”):
|
|
|
|
|
|
|
Quarter ended March 31, |
|
|||
|
2016 |
|
2015 |
|
|
|
(in thousands) |
|
|||
Stock options (1) |
|
|
|
|
|
Performance-based RSUs (2) |
|
|
|
|
|
Total potentially dilutive common stock equivalents |
|
|
|
|
|
|
(1) |
|
During the quarters ended March 31, 2016 and 2015, certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices of $15.80 and $18.39 per share respectively, were anti-dilutive. |
|
(2) |
|
During the quarters ended March 31, 2016 and 2015, certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds had not been achieved. |
Note 5—Loan Sales and Servicing Activities
The Company originates or purchases and sells mortgage loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the mortgage loans sold in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the mortgage loans sold.
15
The following table summarizes cash flows between the Company and transferees as a result of the sale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Cash flows: |
|
|
|
|
|
|
|
Sales proceeds |
|
$ |
|
|
$ |
|
|
Servicing fees received (1) |
|
$ |
|
|
$ |
|
|
Net servicing advances |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
Demeber 31,
|
|
||
|
|
(in thousands) |
|
||||
Unpaid principal balance of mortgage loans outstanding at end of period |
|
$ |
|
|
$ |
|
|
Delinquencies: |
|
|
|
|
|
|
|
30-89 days |
|
$ |
|
|
$ |
|
|
90 days or more: |
|
|
|
|
|
|
|
Not in foreclosure |
|
$ |
|
|
$ |
|
|
In foreclosure or bankruptcy |
|
$ |
|
|
$ |
|
|
Foreclosed |
|
$ |
|
|
$ |
|
|
|
(1) |
|
Net of guarantee fees paid to the Agencies. |
The unpaid principal balance (“UPB”) of the Company’s mortgage loan servicing portfolio is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
|||||||
|
|
|
|
Contract |
|
|
|
|||
|
|
Servicing |
|
servicing and |
|
Total |
|
|||
|
|
rights owned |
|
subservicing |
|
loans serviced |
|
|||
|
|
(in thousands) |
|
|||||||
Investor: |
|
|
|
|
|
|
|
|
|
|
Non-affiliated entities |
|
$ |
|
|
$ |
— |
|
$ |
|
|
Affiliated entities |
|
|
— |
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Amount subserviced for the Company (1) |
|
$ |
|
|
$ |
— |
|
$ |
|
|
Delinquent mortgage loans: |
|
|
|
|
|
|
|
|
|
|
30 days |
|
$ |
|
|
$ |
|
|
$ |
|
|
60 days |
|
|
|
|
|
|
|
|
|
|
90 days or more : |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
|
|
|
|
|
|
|
|
|
In foreclosure or bankruptcy |
|
|
|
|
|
|
|
|
|
|
Foreclosed |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Custodial funds managed by the Company (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Certain of the mortgage loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers. Mortgage loans are subserviced for the Company on a transitional basis when the Company has obtained the rights to service the mortgage loans but servicing of the loans has not yet transferred to the Company’s servicing system. |
|
(2) |
|
Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns interest on certain of the custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interest income in the Company’s consolidated statements of income. |
16
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||
|
|
|
|
Contract |
|
|
|
|||
|
|
Servicing |
|
servicing and |
|
Total |
|
|||
|
|
rights owned |
|
subservicing |
|
loans serviced |
|
|||
|
|
(in thousands) |
|
|||||||
Investor: |
|
|
|
|
|
|
|
|
|
|
Non-affiliated entities |
|
$ |
|
|
$ |
— |
|
$ |
|
|
Affiliated entities |
|
|
— |
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Amount subserviced for the Company (1) |
|
$ |
|
|
$ |
— |
|
$ |
|
|
Delinquent mortgage loans: |
|
|
|
|
|
|
|
|
|
|
30 days |
|
$ |
|
|
$ |
|
|
$ |
|
|
60 days |
|
|
|
|
|
|
|
|
|
|
90 days or more |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
|
|
|
|
|
|
|
|
|
In foreclosure or bankruptcy |
|
|
|
|
|
|
|
|
|
|
Foreclosed |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Custodial funds managed by the Company (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Certain of the mortgage loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers. Mortgage loans are subserviced for the Company on a transitional basis when the Company has obtained the rights to service the loans but servicing of the loans has not yet been transferred to the Company’s servicing system. |
|
(2) |
|
Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns interest on custodial funds it manages on behalf of the mortgage loans’ investors, included in Interest income in the Company’s consolidated statements of income. |
Following is a summary of the geographical distribution of mortgage loans included in the Company’s servicing portfolio for the top five and all other states as measured by UPB:
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
State |
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
California |
|
$ |
|
|
$ |
|
|
Texas |
|
|
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
Florida |
|
|
|
|
|
|
|
Maryland |
|
|
|
|
|
|
|
All other states |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Note 6—Netting of Financial Instruments
The Company uses derivative financial instruments to manage exposure to interest rate risk for the interest rate lock commitments (“IRLCs”) it makes to purchase or originate mortgage loans at specified interest rates, its inventory of mortgage loans held for sale and MSRs. 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.
17
Following are summaries of derivative assets and related netting amounts.
Offsetting of Derivative Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
||||||||||||||
|
|
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) |
|
||||||||||||||||
Derivative assets not subject to a master netting arrangement - IRLCs |
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
Derivative assets subject to a master netting arrangement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Forward sale contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Mortgage-backed security ("MBS") put options |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Netting |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Derivative Assets, Financial Assets, and 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, 2016 |
|
December 31, 2015 |
|
||||||||||||||||||||
|
|
|
|
|
Gross amount not |
|
|
|
|
|
|
|
Gross amount not |
|
|
|
|
||||||||
|
|
|
|
|
offset in the |
|
|
|
|
|
|
|
offset in the |
|
|
|
|
||||||||
|
|
|
|
|
consolidated |
|
|
|
|
|
|
|
consolidated |
|
|
|
|
||||||||
|
|
|
|
|
balance sheet |
|
|
|
|
|
|
|
balance sheet |
|
|
|
|
||||||||
|
|
Net amount |
|
|
|
|
|
|
|
|
|
|
Net amount |
|
|
|
|
|
|
|
|
|
|
||
|
|
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 |
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
RJ O'Brien |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Fannie Mae |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Jefferies & Co. |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
JP Morgan |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
BNP Paribas |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Citibank, N.A. |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Morgan Stanley Bank, N.A. |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Wells Fargo Bank, N.A. |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Nomura |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Goldman Sachs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Others |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
18
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. As discussed above, all derivatives with the exception of IRLCs are subject to master netting arrangements. The mortgage loans sold under agreements to repurchase do not qualify for netting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
||||||||||||||
|
|
|
|
|
|
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) |
|
||||||||||||||||
Derivative liabilities not subject to a master netting arrangement - IRLCs |
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
Derivative liabilities subject to a master netting arrangement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Forward sale contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Netting |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans sold under agreements to repurchase: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Unamortized debt issuance costs |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
19
Derivative Liabilities, Financial Liabilities, 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, 2016 |
|
December 31, 2015 |
|
||||||||||||||||||||
|
|
|
|
|
Gross amount |
|
|
|
|
|
|
|
Gross amount |
|
|
|
|
||||||||
|
|
|
|
|
not offset in the |
|
|
|
|
|
|
|
not offset in the |
|
|
|
|
||||||||
|
|
|
|
|
consolidated |
|
|
|
|
|
|
|
consolidated |
|
|
|
|
||||||||
|
|
|
|
|
balance sheet |
|
|
|
|
|
|
|
balance sheet |
|
|
|
|
||||||||
|
|
Net amount |
|
|
|
|
|
|
|
Net amount |
|
Net amount |
|
|
|
|
|
|
|
Net amount |
|
||||
|
|
of liabilities |
|
|
|
|
|
|
|
of liabilities |
|
of liabilities |
|
|
|
|
|
|
|
of liabilities |
|
||||
|
|
in the |
|
|
|
|
Cash |
|
in the |
|
in the |
|
|
|
|
Cash |
|
in the |
|
||||||
|
|
consolidated |
|
Financial |
|
collateral |
|
consolidated |
|
consolidated |
|
Financial |
|
collateral |
|
consolidated |
|
||||||||
|
|
balance sheet |
|
instruments |
|
pledged |
|
balance sheet |
|
balance sheet |
|
instruments |
|
pledged |
|
balance sheet |
|
||||||||
|
|
(in thousands) |
|
||||||||||||||||||||||
Interest rate lock commitments |
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
Bank of America, N.A. |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Credit Suisse First Boston Mortgage Capital LLC |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Morgan Stanley Bank, N.A. |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Citibank, N.A. |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Royal Bank of Canada |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Barclays |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Daiwa Capital Markets |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Bank of Oklahoma |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Goldman Sachs |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Deutsche Bank |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Bank of New York Mellon |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
JP Morgan |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
BNP Paribas |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Others |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
Note 7—Fair Value
The Company’s consolidated financial statements include assets and liabilities that are measured based on their fair values. The application of fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its fair value as discussed in the following paragraphs.
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 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. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and other inputs. |
|
· |
|
Level 3—Prices determined using significant unobservable inputs. In situations where observable inputs are unavailable (for example, when there is little or no market activity for an asset or liability at the end of the period), 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 financial statement items, 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 financial statement items and their fair values. Likewise, due to the
20
general illiquidity of some of these financial statement items, subsequent transactions may be at values significantly different from those reported.
Fair Value Accounting Elections
Management identified all of its non-cash financial assets, its originated MSRs relating to loans with initial interest rates of more than 4.5% and purchased MSRs subject to excess servicing spread financing (“ESS”) 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. Management has also elected to account for its ESS financing at fair value as a means of hedging the related MSRs’ fair value risk.
The Company’s subsequent accounting for MSRs and mortgage servicing liabilities (“MSLs”) are based on the class of MSRs or MSLs. Originated MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5% are accounted for using the amortization me thod. Originated MSRs relating to mortgage loans with initial interest rates of more than 4.5% and purchased MSRs financed in part by ESS and MSLs are accounted for at fair value with changes in fair value recorded in current period income.
21
Financial Statement Items Measured at Fair Value on a Recurring Basis
Following is a summary of financial statement items that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
Mortgage loans held for sale at fair value |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Forward sales contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
MBS put options |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Total derivative assets before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Total derivative assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Mortgage servicing rights at fair value |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Forward sales contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Total derivative liabilities before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Total derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing liabilities |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. |
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
Mortgage loans held for sale at fair value |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Forward sales contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
MBS put options |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Total derivative assets before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Total derivative assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Mortgage servicing rights at fair value |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Forward purchase contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Forward sales contracts |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Total derivative liabilities before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Total derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing liabilities |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. |
23
As shown above, all or a portion of the Company’s mortgage loans held for sale, IRLCs, MSRs, MSLs and ESS are measured using Level 3 fair value inputs. Following are roll forwards of these items for the quarters ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016 |
|
||||||||||
|
|
Mortgage |
|
Net interest |
|
Mortgage |
|
|
|
|
|||
|
|
loans held |
|
rate lock |
|
servicing |
|
|
|
|
|||
|
|
for sale |
|
commitments (1) |
|
rights |
|
|
Total |
|
|||
|
|
(in thousands) |
|
||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Purchases |
|
|
|
|
|
— |
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Interest rate lock commitments issued, net |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
|
|
|
|
— |
|
|
|
|
|
|
|
Other factors |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Balance, March 31, 2016 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Changes in fair value recognized during the period relating to assets still held at March 31, 2016 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
For the purpose of this table, the IRLC asset and liability positions are shown net. |
|
(2) |
|
Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification or borrower reperformance or resolution of deficiencies. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016 |
|
|||||||
|
|
Excess |
|
|
|
|
|
|
||
|
|
servicing |
|
Mortgage |
|
|
|
|
||
|
|
spread |
|
servicing |
|
|
|
|
||
|
|
financing |
|
liabilities |
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
|
|
Accrual of interest on excess servicing spread |
|
|
|
|
|
— |
|
|
|
|
Repayment |
|
|
|
|
|
— |
|
|
|
|
Repurchase |
|
|
|
|
|
— |
|
|
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
|
— |
|
|
|
|
|
|
|
Changes in fair value included in income |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2016 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Changes in fair value recognized during the period relating to liabilities still held at March 31, 2016 |
|
$ |
|
|
$ |
|
|
$ |
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2015 |
|
||||||||||
|
|
Mortgage |
|
Net interest |
|
Mortgage |
|
|
|
|
|||
|
|
loans held |
|
rate lock |
|
servicing |
|
|
|
|
|||
|
|
for sale |
|
commitments (1) |
|
rights |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Purchases |
|
|
|
|
|
— |
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Repayments |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Interest rate lock commitments issued, net |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Changes in fair value included in income arising from: |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Other factors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Balance, March 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Changes in fair value recognized during the period relating to assets still held at March 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
For the purpose of this table, the interest rate lock asset and liability positions are shown net. |
|
(2) |
|
Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification or borrower reperformance or resolution of deficiencies. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2015 |
|
|||||||
|
|
Excess |
|
|
|
|
|
|||
|
|
servicing |
|
Mortgage |
|
|
|
|||
|
|
spread |
|
servicing |
|
|
|
|||
|
|
financing |
|
liabilities |
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Issuance of excess servicing spread financing |
|
|
|
|
|
— |
|
|
|
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment |
|
|
|
|
|
— |
|
|
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
|
— |
|
|
|
|
|
|
|
Accrual of interest on excess servicing spread |
|
|
|
|
|
— |
|
|
|
|
Repayments |
|
|
|
|
|
— |
|
|
|
|
Changes in fair value included in income |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Changes in fair value recognized during the period relating to liabilities still held at March 31, 2015 |
|
$ |
|
|
$ |
|
|
$ |
|
|
The information used in the preceding roll forwards represents activity for any financial statement items identified as using “Level 3” significant fair value inputs at either the beginning or the end of the periods presented. The Company had transfers among the fair value levels arising from transfers of IRLCs to mortgage loans held for sale at fair value upon purchase or funding of the respective mortgage loans and from the return to salability in the active secondary market of certain mortgage loans held for sale. Such mortgage loans become saleable into the active secondary market due to curing of the loans’ defects through borrower reperformance, modification of the loan or resolution of deficiencies contained in the borrowers’ credit file.
25
Financial Statement Items Measured at Fair Value for under the Fair Value Option
Net changes in fair values included in income for financial statement items 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, |
||||||||||||||||
|
|
2016 |
|
2015 |
||||||||||||||
|
|
Net gains on |
|
|
|
|
|
|
|
Net gains on |
|
|
|
|
|
|
||
|
|
mortgage |
|
Net mortgage |
|
|
|
|
mortgage |
|
Net mortgage |
|
|
|
||||
|
|
loans held |
|
loan |
|
|
|
|
loans held |
|
loan |
|
|
|
||||
|
|
for sale at |
|
servicing |
|
|
|
|
for sale at |
|
servicing |
|
|
|
||||
|
|
fair value |
|
fees |
|
Total |
|
fair value |
|
fees |
|
Total |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale at fair value |
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
Mortgage servicing rights at fair value |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
Mortgage servicing liabilities at fair value |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
Following are the fair value and related principal amounts due upon maturity of assets accounted for under the fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
|||||||
|
|
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
|
amount |
|
|
|
|
|
|
|
Fair |
|
due upon |
|
|
|
|
||
|
|
value |
|
maturity |
|
Difference |
|
|||
|
|
(in thousands) |
|
|||||||
Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
Current through 89 days delinquent |
|
$ |
|
|
$ |
|
|
$ |
|
|
90 days or more delinquent: |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
|
|
|
|
|
|
|
|
|
In foreclosure |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||
|
|
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
|
amount |
|
|
|
|
|
|
|
Fair |
|
due upon |
|
|
|
|
||
|
|
value |
|
maturity |
|
Difference |
|
|||
|
|
(in thousands) |
|
|||||||
Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
Current through 89 days delinquent |
|
$ |
|
|
$ |
|
|
$ |
|
|
90 days or more delinquent: |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
|
|
|
|
|
|
|
|
|
In foreclosure |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
26
Financial Statement Items Measured at Fair Value on a Nonrecurring Basis
Following is a summary of financial statement items that were measured at fair value on a nonrecurring basis during the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
Real estate acquired in settlement of loans |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
|
|
$ |
— |
|
$ |
— |
|
$ |
|
|
$ |
|
|
The following table summarizes the total gains (losses) on assets measured at fair value on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
(in thousands) |
||||||
Mortgage servicing rights at lower of amortized cost or fair value |
|
$ |
|
|
$ |
|
|
Real estate acquired in settlement of loans |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
|
Fair Value of Financial Instruments Carried at Amortized Cost
The Company’s Cash as well as its Carried Interest due from Investment Funds , Assets sold under agreements to repurchase , Mortgage loan participation and sale agreements , Notes payable , Obligations under capital lease, Note receivable from PMT and amounts receivable from and payable to the Advised Entities are carried at amortized cost.
Cash is measured using a “Level 1” fair value input.
The Company has concluded that the carrying value of the Carried Interest due from Investment Funds approximates its fair value as the balance represents the amount distributable to the Company at the balance sheet date assuming liquidation of the Investment Funds.
The Company’s borrowings carried at amortized cost do not have observable inputs and the fair value is measured using management’s estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as “Level 3” fair value financial statement items as of March 31, 2016 and December 31, 2015 due to the lack of observable inputs to estimate their fair values.
The Company has concluded that the fair value of the receivables from and payables to the Advised Entities and the Note receivable from PMT approximates the carrying value due to their short terms and/or variable interest rates.
Valuation Techniques and Inputs
Most of the Company’s financial assets, a portion of its MSRs and its MSLs and ESS liabilities are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and all of its MSRs, ESS and MSLs are “Level 3” fair value financial statement items which require the 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 financial statement items, management has assigned the responsibility for estimating the fair value of these items to specialized staff and subjects the valuation
27
process to significant senior management oversight. The Company’s Financial Analysis and Valuation group (the “FAV group”) is responsible for estimating the fair values of “Level 3” fair value financial statement items other than IRLCs and maintaining its valuation policies and procedures.
With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees and approves the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value financial statement items, 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 PFSI’s chief executive, financial, operating, risk and asset/liability management officers.
The FAV group is responsible for reporting to the Company’s senior management valuation committee on a monthly basis on the changes in the valuation of the “Level 3” fair value financial statement items, 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.
With respect to IRLCs, the Company has assigned responsibility for developing fair values 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.
Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value financial statement items:
Mortgage Loans Held for Sale
Most of the Company’s mortgage loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value financial statement items and their fair values are determined using their quoted market or contracted selling price or market price equivalent.
Certain of the Company’s mortgage loans may become non-saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a mortgage loan with an identified defect. The Company may also purchase certain delinquent government guaranteed or insured mortgage loans from Ginnie Mae guaranteed pools in its mortgage loan servicing portfolio. The Company’s right to purchase such mortgage loans arises as the result of the borrower’s failure to make payments for at least three consecutive months preceding the month 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. To the extent such mortgage loans have not become saleable into another Ginnie Mae guaranteed security by becoming current either through the borrower’s reperformance or through completion of a modification of the mortgage loan’s terms, the Company measures such mortgage loans along with mortgage loans with identified defects using “Level 3” fair value inputs.
The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value mortgage loans held for sale at fair value are discount rates, home price projections, voluntary prepayment speeds and total prepayment speeds. Significant changes in any of those inputs in isolation could result in a significant change to the mortgage loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.
28
Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of mortgage loans held for sale at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
Key inputs |
|
March 31, 2016 |
|
December 31, 2015 |
|
Discount rate |
|
|
|
|
|
Range |
|
2.5% – 8.3% |
|
2.5% – 9.1% |
|
Weighted average |
|
3.1% |
|
2.8% |
|
Twelve-month projected housing price index change |
|
|
|
|
|
Range |
|
2.1% – 5.1% |
|
1.8% – 5.0% |
|
Weighted average |
|
3.8% |
|
3.7% |
|
Voluntary prepayment / resale speed (1) |
|
|
|
|
|
Range |
|
0.6% – 18.6% |
|
0.6% – 20.1% |
|
Weighted average |
|
14.8% |
|
16.6% |
|
Total prepayment speed (2) |
|
|
|
|
|
Range |
|
0.8% – 37.3% |
|
0.7% – 37.6% |
|
Weighted average |
|
29.1% |
|
30.9% |
|
(1) Voluntary prepayment speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).
(2) Total prepayment speed is measured using Life Total CPR.
Changes in fair value attributable to changes in instrument specific credit risk are measured by reference to the change in the respective mortgage loan’s delinquency status at period end from the later of the beginning of the period or acquisition date. Changes in fair value of mortgage loans held for sale are included in Net gains on mortgage 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 a “Level 3” fair value financial statement item. The Company estimates the fair value of an IRLC based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the mortgage loans and the probability that the mortgage loan will fund or be 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 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 IRLC, the principal and interest payment components of which have decreased in fair value. Changes in fair value of IRLCs are included in Net gains on mortgage loans held for sale at fair value in the Consolidated statements of income.
29
Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of IRLCs:
|
|
|
|
|
|
|
|
|
|
|
|
Key inputs |
|
March 31, 2016 |
|
December 31, 2015 |
|
Pull-through rate |
|
|
|
|
|
Range |
|
47.4% – 100.0% |
|
54.1% – 100.0% |
|
Weighted average |
|
86.8% |
|
90.1% |
|
Mortgage servicing rights value expressed as: |
|
|
|
|
|
Servicing fee multiple |
|
|
|
|
|
Range |
|
1.1 – 5.8 |
|
1.0 – 5.8 |
|
Weighted average |
|
4.3 |
|
4.4 |
|
Percentage of unpaid principal balance |
|
|
|
|
|
Range |
|
0.2% – 2.9% |
|
0.2% – 3.8% |
|
Weighted average |
|
1.3% |
|
1.5% |
|
Hedging Derivatives
The remaining derivative financial instruments held or issued by the Company are categorized as “Level 1” or “Level 2” fair value financial statement items. The Company estimates the fair value of commitments to sell and purchase mortgage loans based on observable MBS prices. The Company estimates the fair value of MBS options based on observed interest rate volatilities in the MBS market. Changes in fair value of hedging derivatives are included in Net gains on mortgage loans held for sale at fair value in the consolidated statements of income.
Mortgage Servicing Rights
MSRs are categorized as “Level 3” fair value financial statement items. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting net servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key inputs used in the estimation of the fair value of MSRs include the prepayment rates of the underlying mortgage loans, the applicable discount rate or pricing spread, and the per-loan annual cost to service the respective mortgage loans. Changes in the fair value of MSRs are included in Net servicing fees — Amortization, impairment and change in fair value of mortgage servicing rights in the consolidated statements of income.
30
Following are the key “Level 3” fair value inputs used in determining the fair value of MSRs at the time of initial recognition, excluding MSR purchases:
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||||
|
|
2016 |
|
2015 |
|
||||
|
|
Fair |
|
Amortized |
|
Fair |
|
Amortized |
|
|
|
value |
|
cost |
|
value |
|
cost |
|
|
|
(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands) |
|
||||||
MSR and pool characteristics: |
|
|
|
|
|
|
|
|
|
Amount recognized |
|
$4,468 |
|
$96,314 |
|
$2,675 |
|
$67,281 |
|
Unpaid principal balance of underlying mortgage loans |
|
$367,807 |
|
$6,984,172 |
|
$241,518 |
|
$5,137,085 |
|
Weighted average servicing fee rate (in basis points) |
|
33 |
|
33 |
|
31 |
|
33 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
|
|
|
|
Range |
|
7.2% – 9.8% |
|
7.2% – 12.8% |
|
7.3% - 14.4% |
|
6.8% - 15.9% |
|
Weighted average |
|
8.7% |
|
8.9% |
|
10.7% |
|
9.8% |
|
Annual total prepayment speed (2) |
|
|
|
|
|
|
|
|
|
Range |
|
4.1% – 52.3% |
|
3.8% – 48.0% |
|
7.6% - 62.4% |
|
7.6% - 39.4% |
|
Weighted average |
|
13.2% |
|
11.1% |
|
11.9% |
|
8.9% |
|
Life (in years) |
|
|
|
|
|
|
|
|
|
Range |
|
1.3 – 11.7 |
|
1.5 – 11.9 |
|
1.1 – 7.3 |
|
1.8 – 7.3 |
|
Weighted average |
|
6.4 |
|
7.2 |
|
6.1 |
|
6.9 |
|
Per-loan annual cost of servicing |
|
|
|
|
|
|
|
|
|
Range |
|
$68 – $95 |
|
$68 – $95 |
|
$59 – $82 |
|
$58 – $82 |
|
Weighted average |
|
$82 |
|
$82 |
|
$74 |
|
$75 |
|
|
(1) |
|
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”) curve for purposes of discounting cash flows relating to MSRs. |
|
(2) |
|
Prepayment speed is measured using Life Total CPR. |
31
Following is a quantitative summary of key inputs used in the valuation and assessment for impairment of the Company’s MSRs at period end and the effect on fair value from adverse changes in those inputs (weighted averages are based upon UPB):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
||||
|
|
Fair |
|
Amortized |
|
Fair |
|
Amortized |
|
|
|
value |
|
cost |
|
value |
|
cost |
|
|
|
(Carrying value, unpaid principal balance of underlying |
|
||||||
|
|
mortgage loans and effect on fair value amounts in thousands) |
|
||||||
MSR and pool characteristics: |
|
|
|
|
|
|
|
|
|
Carrying value |
|
$594,403 |
|
$742,679 |
|
$660,247 |
|
$751,688 |
|
Unpaid principal balance of underlying mortgage loans |
|
$51,921,008 |
|
$60,915,870 |
|
$54,182,477 |
|
$56,420,227 |
|
Weighted average note interest rate |
|
4.1% |
|
3.8% |
|
4.1% |
|
3.8% |
|
Weighted average servicing fee rate (in basis points) |
|
32 |
|
32 |
|
32 |
|
32 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
|
|
|
|
Range |
|
7.2% – 13.8% |
|
7.2% – 12.5% |
|
7.2% – 14.1% |
|
7.2% – 12.8% |
|
Weighted average |
|
8.7% |
|
8.7% |
|
8.9% |
|
8.9% |
|
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
|
5% adverse change |
|
($9,718) |
|
($12,423) |
|
($11,115) |
|
($13,467) |
|
10% adverse change |
|
($19,116) |
|
($24,432) |
|
($21,857) |
|
($26,472) |
|
20% adverse change |
|
($37,010) |
|
($47,287) |
|
($42,293) |
|
($51,183) |
|
Average life (in years) |
|
|
|
|
|
|
|
|
|
Range |
|
1.7 – 9.3 |
|
0.4 – 9.2 |
|
1.9 – 9.0 |
|
1.8 – 9.1 |
|
Weighted average |
|
6.4 |
|
6.5 |
|
6.9 |
|
7.4 |
|
Prepayment speed (3) |
|
|
|
|
|
|
|
|
|
Range |
|
6.3% – 46.9% |
|
6.9% – 91.8% |
|
5.3% – 43.8% |
|
5.7% – 46.7% |
|
Weighted average |
|
11.9% |
|
12.3% |
|
9.7% |
|
9.5% |
|
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
|
5% adverse change |
|
($12,601) |
|
($17,044) |
|
($12,475) |
|
($14,360) |
|
10% adverse change |
|
($24,706) |
|
($33,381) |
|
($24,499) |
|
($28,197) |
|
20% adverse change |
|
($47,537) |
|
($64,093) |
|
($47,286) |
|
($54,406) |
|
Annual per-loan cost of servicing |
|
|
|
|
|
|
|
|
|
Range |
|
$68 – $91 |
|
$68 – $91 |
|
$68 – $97 |
|
$68 – $95 |
|
Weighted average |
|
$84 |
|
$82 |
|
$86 |
|
$84 |
|
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
|
5% adverse change |
|
($6,288) |
|
($5,647) |
|
($6,812) |
|
($5,725) |
|
10% adverse change |
|
($12,575) |
|
($11,294) |
|
($13,624) |
|
($11,451) |
|
20% adverse change |
|
($25,150) |
|
($22,588) |
|
($27,247) |
|
($22,901) |
|
|
(1) |
|
The Company applies a pricing spread to the United States Dollar LIBOR curve for purposes of discounting cash flows relating to MSRs. |
|
(2) |
|
For MSRs carried at fair value, an adverse change in one of the above-mentioned key inputs is expected to result in a reduction in fair value which will be recognized in income. For MSRs carried at lower of amortized cost or fair value, an adverse change in one of the above-mentioned key inputs may result in recognition of MSR impairment. The extent of the recognized MSR impairment will depend on the relationship of fair value to the carrying value of such MSRs. |
|
(3) |
|
Prepayment speed is measured using Life Total CPR. |
The preceding sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of various models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as earnings forecasts.
32
Excess Servicing Spread Financing at Fair Value
The Company categorizes ESS as a “Level 3” fair value financial statement item. The Company uses a discounted cash flow approach to estimate the fair value of ESS. The key inputs used in the estimation of ESS fair value include pricing spread 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 necessarily directly related.
ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally slow mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing ESS’ fair value, which is owed to PMT. Increases in the fair value of ESS decrease income and are included in Net mortgage loan servicing fees.
Interest expense for ESS is accrued using the interest method based upon the expected cash flows from the ESS through the expected life of the underlying mortgage loans. Other changes in fair value are recorded in Amortization, impairment and change in fair value of mortgage servicing rights .
Following are the key inputs used in estimating the fair value of ESS:
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2016 |
|
2015 |
|
|
|
|
|
|
|
Carrying value (in thousands) |
|
$321,976 |
|
$412,425 |
|
ESS and pool characteristics: |
|
|
|
|
|
Unpaid principal balance of underlying mortgage loans (in thousands) |
|
$38,076,993 |
|
$51,966,405 |
|
Average servicing fee rate (in basis points) |
|
34 |
|
32 |
|
Average excess servicing spread (in basis points) |
|
19 |
|
17 |
|
Key inputs: |
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
Range |
|
4.8% – 6.5% |
|
4.8% – 6.5% |
|
Weighted average |
|
5.8% |
|
5.7% |
|
Average life (in years) |
|
|
|
|
|
Range |
|
1.8 – 9.3 |
|
1.4 – 9.0 |
|
Weighted average |
|
6.8 |
|
6.9 |
|
Annualized prepayment speed (2) |
|
|
|
|
|
Range |
|
6.2% – 44.5% |
|
5.2% – 52.4% |
|
Weighted average |
|
11.0% |
|
9.6% |
|
(1) The Company applies a pricing spread to the United States Dollar LIBOR curve for purposes of discounting cash flows relating to ESS.
(2) Prepayment speed is measured using Life Total CPR.
Note 8—Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value include the following:
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Government-insured or guaranteed |
|
$ |
|
|
$ |
|
|
Conventional conforming |
|
|
|
|
|
|
|
Delinquent mortgage loans purchased from Ginnie Mae pools serviced by the Company |
|
|
|
|
|
|
|
Mortgage loans repurchased pursuant to representations and warranties |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Fair value of mortgage loans pledged to secure: |
|
|
|
|
|
|
|
Mortgage loans sold under agreements to repurchase |
|
$ |
|
|
$ |
|
|
Mortgage loan participation and sale agreements |
|
$ |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
33
Note 9—Derivative Financial Instruments
The Company had the following derivative financial instruments recorded on its consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
||||||||||||
|
|
|
|
Fair value |
|
|
|
Fair value |
|
||||||||
|
|
Notional |
|
Derivative |
|
Derivative |
|
Notional |
|
Derivative |
|
Derivative |
|
||||
Instrument |
|
amount |
|
assets |
|
liabilities |
|
amount |
|
assets |
|
liabilities |
|
||||
|
|
(in thousands) |
|
||||||||||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward sales contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS put options |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put options on interest rate futures sale contracts |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
Total derivatives before netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
Deposits placed with derivative counterparties, net |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
The following table summarizes the notional value activity for derivative contracts used in the Company’s hedging activities:
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016 |
|
||||||
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
beginning of |
|
|
|
Dispositions/ |
|
end of |
|
Instrument |
|
period |
|
Additions |
|
expirations |
|
period |
|
|
|
(in thousands) |
|
||||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
Forward sale contracts |
|
|
|
|
|
(35,208,331) |
|
|
|
MBS put options |
|
|
|
|
|
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2015 |
|
||||||
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
beginning of |
|
|
|
Dispositions/ |
|
end of |
|
Instrument |
|
period |
|
Additions |
|
expirations |
|
period |
|
|
|
(in thousands) |
|
||||||
Forward purchase contracts |
|
|
|
|
|
|
|
|
|
Forward sale contracts |
|
|
|
|
|
|
|
|
|
MBS put options |
|
|
|
|
|
|
|
|
|
Put options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
Call options on interest rate futures purchase contracts |
|
|
|
|
|
|
|
|
|
Put options on interest rate futures sale contracts |
|
|
|
|
|
— |
|
|
|
Call options on interest rate futures sale contracts |
|
— |
|
|
|
|
|
— |
|
34
Following are the gains and (losses) recognized by the Company on derivative financial instruments and the income statement line items where such gains and losses are included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
Hedged item |
|
Income statement line |
|
2016 |
|
2015 |
|
||
|
|
|
|
(in thousands) |
|
||||
Interest rate lock commitments and mortgage loans held for sale |
|
Net gains on mortgage loans held for sale |
|
$ |
|
|
$ |
|
|
Mortgage servicing rights |
|
Net mortgage loan servicing fees |
|
$ |
|
|
$ |
|
|
Note 10—Mortgage Servicing Rights
Carried at Fair Value:
The activity in MSRs carried at fair value is as follows:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Additions: |
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value due to: |
|
|
|
|
|
|
|
Changes in valuation inputs used in valuation model (1) |
|
|
|
|
|
|
|
Other changes in fair value (2) |
|
|
|
|
|
|
|
Total change in fair value |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
Fair value of mortgage servicing rights pledged to secure: |
|
|
|
|
|
|
|
Assets sold under agreements to repurchase |
|
$ |
|
|
$ |
— |
|
Note payable |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Principally reflects changes in discount rates and prepayment speed inputs, primarily due to changes interest rates. |
|
(2) |
|
Represents changes due to realization of cash flows. |
35
Carried at Lower of Amortized Cost or Fair Value:
The activity in MSRs carried at the lower of amortized cost or fair value is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
||||
Amortized cost: |
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Valuation allowance: |
|
|
|
|
|
|
|
Balance at beginning of period |
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
Balance at end of period |
|
|
|
|
|
|
|
Mortgage servicing rights, net |
|
$ |
|
|
$ |
|
|
Fair value of mortgage servicing rights at beginning of period |
|
$ |
|
|
$ |
|
|
Fair value of mortgage servicing rights at end of period |
|
$ |
|
|
$ |
|
|
Fair value of mortgage servicing rights pledged to secure: |
|
|
|
|
|
|
|
Assets sold under agreements to repurchase |
|
$ |
|
|
$ |
— |
|
Note payable |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
— |
|
The following table summarizes the Company’s estimate of future amortization of its existing MSRs. This estimate was developed with the inputs applicable to the March 31, 2016 valuation of MSRs. The inputs underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time.
|
|
|
|
|
|
|
Estimated MSR |
|
|
Twelve month period ending March 31, |
|
amortization |
|
|
|
|
(in thousands) |
|
|
2017 |
|
$ |
|
|
2018 |
|
|
|
|
2019 |
|
|
|
|
2020 |
|
|
|
|
2021 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
36
Servicing fees relating to MSRs are recorded in Net mortgage loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; late charges and other ancillary fees relating to MSRs are recorded in Net servicing fees—Loan servicing fees—Ancillary and other fees on the Company’s consolidated statements of income. The fees are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Contractual servicing fees |
|
$ |
|
|
$ |
|
|
Ancillary and other fees: |
|
|
|
|
|
|
|
Late charges |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Liabilities Carried at Fair Value:
The activity in mortgage servicing liabilities carried at fair value is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
|
|
|
|
|
|
Change in fair value |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Note 11—Carried Interest Due from Investment Funds
The activity in the Company’s Carried Interest due from Investment Funds is summarized as follows:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Carried Interest recognized during the period |
|
|
|
|
|
|
|
Proceeds received during the period |
|
|
— |
|
|
— |
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
The amount of the Carried Interest that will be received by the Company depends on the Investment Funds’ future performance. As a result, the amount of Carried Interest recorded by the Company is based on the cash flows that would be produced assuming termination of the Investment Funds at period end and may be reduced in future periods based on the performance of the Investment Funds in those periods. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of any reduction to Carried Interest will be limited to the amounts previously recognized.
Management expects the Carried Interest to be collected by the Company when the Investment Funds liquidate. The Investment Fund limited liability company and limited partnership agreements specify that the funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion.
Note 12—Borrowings
The borrowing facilities described throughout this Note 12 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, 2016.
37
Assets Sold Under Agreement to Repurchase
The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by mortgage loans held for sale at fair value or MSRs. Eligible mortgage loans and participation certificates secured by MSRs and advances are sold at advance rates based on the collateral sold. Interest is charged at a rate based on the buyer’s overnight cost of funds rate for two agreements and on LIBOR for the other four agreements. Loans and MSRs financed under these agreements may be re-pledged by the lenders.
Financial data pertaining to assets sold under agreements to repurchase are as follows:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(dollars in thousands) |
|||||
During the period: |
|
|
|
|
|
|
|
Average balance of assets sold under agreements to repurchase |
|
$ |
|
|
$ |
|
|
Weighted average interest rate (1) |
|
|
|
|
|
|
|
Total interest expense |
|
$ |
|
|
$ |
|
|
Maximum daily amount outstanding |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2016 |
|
2015 |
|
||
|
|
(dollars in thousands) |
|||||
Carrying value: |
|
|
|
|
|
|
|
Unpaid principal balance |
|
$ |
|
|
$ |
|
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Unused amount (2) |
|
$ |
|
|
$ |
|
|
Fair value of assets securing repurchase agreements |
|
|
|
|
|
|
|
Mortgage loans |
|
$ |
|
|
$ |
|
|
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Weighted average interest rate |
|
|
|
|
|
|
|
Margin deposits placed with counterparties (3) |
|
$ |
|
|
$ |
|
|
|
(1) |
|
Excludes the effect of amortization of commitment fees totaling $1.8 million and $ 1.0 million for the quarters ended March 31, 2016 and 2015, respectivel y. |
|
(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 sold. |
|
(3) |
|
Margin deposits are included in Other assets on the Company’s consolidated balance sheet. |
Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:
|
|
|
|
|
Remaining maturity at March 31, 2016 |
|
Balance |
|
|
|
|
(in thousands) |
|
|
Within 30 days |
|
$ |
|
|
Over 30 to 90 days |
|
|
|
|
Over 90 days |
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
|
|
|
Total loans sold under agreements to repurchase |
|
$ |
|
|
Weighted average maturity (in months) |
|
|
|
|
38
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 mortgage loans held for sale sold under agreements to repurchase is summarized by counterparty below as of March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
maturity of advances |
|
|
|
|
|
|
|
|
under repurchase |
|
|
|
Counterparty |
|
Amount at risk |
|
agreement |
|
Facility maturity |
|
|
|
|
(in thousands) |
|
|
|
|
|
|
Credit Suisse First Boston Mortgage Capital LLC |
|
$ |
|
|
June 9, 2016 |
|
September 27, 2016 |
|
Credit Suisse First Boston Mortgage Capital LLC |
|
$ |
|
|
June 9, 2016 |
|
March 30, 2017 |
|
Bank of America, N.A. |
|
$ |
|
|
June 20, 2016 |
|
March 29, 2017 |
|
Morgan Stanley Bank, N.A. |
|
$ |
|
|
May 21, 2016 |
|
July 26, 2016 |
|
Citibank, N.A. |
|
$ |
|
|
May 14, 2016 |
|
October 20, 2016 |
|
The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the fair value (as determined by the applicable lender) of the assets securing those agreements decreases.
Mortgage Loan Participation and Sale Agreement
One of the borrowing facilities secured by mortgage loans held for sale is in the form of a mortgage loan participation and sale agreement. 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 the 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 and 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 and sale agreement is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(dollars in thousands) |
|
||||
During the period: |
|
|
|
|
|
|
|
Average balance |
|
$ |
|
|
$ |
|
|
Weighted average interest rate (1) |
|
|
|
|
|
|
|
Total interest expense |
|
$ |
|
|
$ |
|
|
Maximum daily amount outstanding |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(dollars in thousands) |
|
||||
Carrying value: |
|
|
|
|
|
|
|
Unpaid principal balance |
|
$ |
|
|
$ |
|
|
Unamortized debt issuance costs |
|
|
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Weighted average interest rate |
|
|
|
|
|
|
|
Mortgage loans pledged to secure mortgage loan participation and sale agreement |
|
$ |
|
|
$ |
|
|
|
(1) |
|
Excludes the effect of amortization of facility fees totaling $78,000 and $98,000 for the quarters ended March 31, 2016 and 2015, respective ly. |
39
Notes Payable
The Company entered into a revolving credit agreement classified as a note payable, dated as of December 30, 2015, pursuant to which the lenders have agreed to make revolving loans in an amount not to exceed $100,000,000. As of March 31, 2016, $50.0 million was outstanding related to this note payable. Interest on the note payable accrues at an annual rate of interest equal to, at the election of the Company, either an alternate base rate or LIBOR plus the applicable contract margin. The maturity date of the note payable is 364 days following the date of the revolving credit agreement. The proceeds of the loans are to be used solely for working capital and general corporate purposes of the Company and its subsidiaries.
As of March 31, 2016, a second note payable, with a balance of $78.8 million of principal outstanding, is secured by MSRs relating to certain mortgage loans in the Company’s servicing portfolio. Interest is charged at a rate based on LIBOR plus the applicable contract margin.
Notes payable are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(dollars in thousands) |
|||||
During the period: |
|
|
|
|
|
|
|
Average balance |
|
$ |
|
|
$ |
|
|
Weighted average interest rate (1) |
|
|
|
|
|
|
|
Total interest expense |
|
$ |
|
|
$ |
|
|
Maximum daily amount outstanding |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
Carrying value: |
|
|
|
|
|
|
|
Unpaid principal balance |
|
$ |
|
|
$ |
|
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Assets pledged to secure notes payable: |
|
|
|
|
|
|
|
Mortgage servicing rights |
|
$ |
|
|
$ |
|
|
Cash |
|
$ |
|
|
$ |
|
|
Carried Interest |
|
$ |
|
|
$ |
|
|
|
(1) |
|
Excluding the effect of amortization of debt issuance costs totaling $ 654,000 during the quarter ended March 31, 2016. |
40
Obligations under Capital Lease
In December 2015, the Company entered into a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on December 9, 2019 and bears interest at a spread over one month LIBOR.
Obligations under capital lease are summarized below:
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
||||
|
|
2016 |
|
2015 |
||
|
|
(dollars in thousands) |
||||
During the period: |
|
|
|
|
|
|
Average balance |
|
$ |
|
|
$ |
— |
Weighted average interest rate |
|
|
|
|
|
— |
Total interest expense |
|
$ |
|
|
$ |
— |
Maximum daily amount outstanding |
|
$ |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
||
|
|
2016 |
|
2015 |
||
|
|
(in thousands) |
||||
Unpaid principal balance |
|
$ |
|
|
$ |
|
Assets pledged to secure obligations under capital lease: |
|
|
|
|
|
|
Furniture, fixtures and equipment |
|
$ |
|
|
$ |
|
Capitalized software |
|
$ |
|
|
$ |
|
Excess Servicing Spread Financing
In conjunction with the Company’s purchase from non-affiliates of certain MSRs relating to pools of Agency-backed residential mortgage loans, the Company has entered into sale and assignment agreements with PMT which are treated as financings and are carried at fair value with changes in fair value recognized in current period income. Under these agreements, the Company sold to PMT the right to receive ESS cash flows relating to certain MSRs. The Company retained a fixed base servicing fee and all ancillary income associated with servicing the mortgage loans. The Company continues to be the servicer of the mortgage loans and provides all servicing functions, including the responsibility to make servicing advances.
Following is a summary of ESS:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
For cash |
|
|
— |
|
|
|
|
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Accrual of interest |
|
|
|
|
|
|
|
Repayment |
|
|
|
|
|
|
|
Repurchase |
|
|
|
|
|
— |
|
Change in fair value |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
On February 29, 2016, the Company and PMT terminated that certain master spread acquisition and MSR servicing agreement that the parties entered into effective February 1, 2013 (the “2/1/13 Spread Acquisition Agreement”) and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, the Company reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by the Company to PMT under the 2/1/13 Spread Acquisition Agreement and then subject to such 2/1/13 Spread Acquisition Agreement. On February 29, 2016, the Company also reacquired from PMT all of its right, title and interest in and to all of the Freddie Mac ESS previously sold to PMT by the Company. During the quarter ended March 31, 2016, the amount of ESS sold by PMT to the Company under these reacquisitions was $59.0 million.
41
Note 13—Liability for Losses Under Representations and Warranties
Following is a summary of activity in the Company’s liability for representations and warranties:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
Provision for losses on mortgage loans sold |
|
|
|
|
|
|
|
Incurred losses |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans subject to representations and warranties at period end |
|
$ |
|
|
$ |
|
|
Note 14 —Income Taxes
The Company’s effective tax rates for the quarters ended March 31, 2016 and 2015 were 11.9% and 11.5%, respectively. The difference between the Company’s effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into the Company’s shares, the portion of the Company’s income that will be subject to corporate federal and state statutory tax rates will increase, which will in turn increase the Company’s effective income tax rate.
Note 15—Noncontrolling Interest
During the quarter ended March 31, 2016, PennyMac unitholders exchanged 3, 220 Class A units for the Company’s Class A common stock. The effect of the exchanges reduced the percentage of the Noncontrolling interest in Private National Mortgage Acceptance Company, LLC from 71.1% at December 31, 2015 to 71.0% at March 31, 2016.
During the quarter ended March 31, 2015, PennyMac unitholders exchanged 44,000 units for the Company’s Class A common stock. The effect of the exchanges reduced the percentage of the Noncontrolling interest in Private National Mortgage Acceptance Company, LLC from 71.6% at December 31, 2014 to 71.5% at March 31, 2015.
Net income attributable to the Company’s common stockholders and the effects of changes in noncontrolling ownership interest in PennyMac are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands, except share amounts) |
|
||||
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
|
$ |
|
|
$ |
|
|
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (Class A shares issued, 3,220, and 44,000 shares during the quarters ended March 31, 2016 and 2015, respectively) |
|
$ |
|
|
$ |
|
|
42
Note 16—Net Gains on Mortgage Loans Held for Sale
Net gains on mortgage loans held for sale at fair value is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Cash (loss) gain: |
|
|
|
|
|
|
|
Mortgage loans |
|
$ |
|
|
$ |
|
|
Hedging activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash gain: |
|
|
|
|
|
|
|
From non-affiliates: |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
|
|
|
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
|
|
|
|
|
|
Provision for losses relating to representations and warranties on loans sold |
|
|
|
|
|
|
|
Change in fair value relating to mortgage loans and hedging derivatives held at period end: |
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
|
Mortgage loans |
|
|
|
|
|
|
|
Hedging derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapture payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Note 17—Net Interest Expense
Net interest expense is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Interest income: |
|
|
|
|
|
|
|
From non-affiliates: |
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
|
|
Mortgage loans held for sale at fair value |
|
|
|
|
|
|
|
Custodial funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
To non-affiliates: |
|
|
|
|
|
|
|
Assets sold under agreements to repurchase |
|
|
|
|
|
|
|
Mortgage loan participation and sale agreements |
|
|
|
|
|
|
|
Notes payable |
|
|
|
|
|
|
|
Obligations under capital lease |
|
|
|
|
|
— |
|
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations |
|
|
|
|
|
|
|
Interest on mortgage loan impound deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
43
Note 18—Stock-based Compensation
Following is a summary of the stock-based compensation expense by type of instrument awarded:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Performance-based RSUs |
|
$ |
|
|
$ |
|
|
Stock options |
|
|
|
|
|
|
|
Time-based RSUs |
|
|
|
|
|
|
|
Exchangeable PNMAC units |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Following is a summary of equity award activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016 |
|
|||||||
|
|
|
|
Performance- |
|
Time-based |
|
|||
|
|
Stock options |
|
based RSUs |
|
RSUs |
|
|||
|
|
(in thousands) |
|
|||||||
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
— |
|
|
— |
|
|
|
|
Exercised |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited or canceled |
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2015 |
|
|||||||
|
|
|
|
Performance- |
|
Time-based |
|
|||
|
|
Stock options |
|
based RSUs |
|
RSUs |
|
|||
|
|
(in thousands) |
|
|||||||
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
— |
|
|
— |
|
|
|
|
Exercised |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited or canceled |
|
|
|
|
|
|
|
|
— |
|
March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
Hfs10
Note 19—Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Cash paid for interest |
|
$ |
|
|
$ |
|
|
Cash paid for income taxes |
|
$ |
|
|
$ |
|
|
Non-cash investing activity: |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
$ |
|
|
$ |
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
$ |
|
|
$ |
|
|
Mortgage servicing rights transferred to PMT pursuant to a recapture agreement |
|
$ |
|
|
$ |
— |
|
Non-cash financing activity: |
|
|
|
|
|
|
|
Transfer of excess servicing spread pursuant to recapture agreement with PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Issuance of common stock in settlement of director fees |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
44
Note 20—Regulatory Capital and Liquidity Requirements
The Company, through PLS and PennyMac, is required to maintain specified levels of liquidity and equity to remain a seller/servicer in good standing with the Agencies. Such requirements generally are tied to the size of the Company’s loan servicing portfolio or loan origination volume.
The Agencies’ capital and liquidity requirements, the calculations of which are specified by each Agency, are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency capital / liquidity |
|
||||||||||
|
|
March 31, 2016 |
|
December 31, 2015 |
|
||||||||
Agency–company subject to requirement |
|
Balance (1) |
|
Requirement |
|
Balance (1) |
|
Requirement |
|
||||
|
|
(in thousands) |
|
||||||||||
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Freddie Mac - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Ginnie Mae - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Ginnie Mae - PennyMac |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
HUD - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Liquidity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae / Freddie Mac - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Ginnie Mae - PLS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Calculated in compliance with the respective Agency’s requirements. |
Noncompliance with the respective Agencies’ requirements can result in the respective Agency taking various remedial actions up to and including removing PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency. PennyMac and PLS had Agency capital and liquidity in excess of the respective Agencies’ requirements at March 31, 2016.
Note 21—Commitments and Contingencies
Litigation
The business of the Company involves the collection of numerous accounts, as well as the validation of liens and compliance with various state and federal lending and servicing laws. Accordingly, the Company may be involved in proceedings, claims, and legal actions arising in the ordinary course of business. As of March 31, 2016, the Company was not involved in any legal proceedings, claims, or actions that in management’s view would be reasonably likely to have a material adverse effect on the Company.
Commitments to Fund and Sell Mortgage Loans
|
|
|
|
|
|
|
March 31, 2016 |
|
|
|
|
(in thousands) |
|
|
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust |
|
$ |
|
|
Commitments to fund mortgage loans |
|
|
|
|
|
|
$ |
|
|
Commitments to sell mortgage loans |
|
$ |
|
|
Note 22—Segments and Related Information
The Company operates in three segments: loan production, loan servicing and investment management.
Two of the segments are in the mortgage banking business: loan production and loan servicing. The loan production segment performs mortgage loan origination, acquisition and sale activities. The loan servicing segment performs servicing of newly originated mortgage loans, execution and management of (“early buyout loans” or “EBO”) and
45
servicing of mortgage loans sourced and managed by the investment management segment, 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, managing correspondent production activities for PMT and managing the acquired assets for the Advised Entities.
Financial highlights by segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016 |
|
|||||||||||||
|
|
Mortgage Banking |
|
Investment |
|
|
|
|
||||||||
|
|
Production |
|
Servicing |
|
Total |
|
Management |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|||||||||||||
Revenues: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
Mortgage loan origination fees |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Net mortgage loan servicing fees |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Management fees |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Carried Interest from Investment Funds |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes and non-segment activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-segment activities (2) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Income (loss) before provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Segment assets at period end (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
All revenues are from external customers. |
|
(2) |
|
Relates to parent Company interest expense eliminated in consolidation. |
|
(3) |
|
Excludes parent Company assets, which consist primarily of deferred tax asset of $ 14.6 million and working capital of $4.5 million. |
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2015 |
|
|||||||||||||
|
|
Mortgage Banking |
|
Investment |
|
|
|
|
||||||||
|
|
Production |
|
Servicing |
|
Total |
|
Management |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|||||||||||||
Revenues: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
Mortgage loan origination fees |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Net mortgage loan servicing fees |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Management fees |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Carried Interest from Investment Funds |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Segment assets at period end (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
(1) All revenues are from external customers.
(2) Excludes parent Company assets, which consist primarily of deferred tax assets of $42.1 million.
Note 23—Recently Issued Accounting Pronouncements
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU 2015-02 effective January 1, 2016. The adoption of ASU 2015-02 had no effect on the Company’s consolidated financial statements.
On January 5, 2016, the FASB issued ASU No. 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 affects the accounting for equity investments, financial liabilities under the fair value option, the presentation and disclosure requirements for financial instruments, and the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.
The classification and measurement guidance will be effective for the Company in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted for certain provisions. Company is currently assessing the potential effect that the adoption of ASU 2016-01 will have on its consolidated financial statements.
On February 25, 2016, the FASB issued ASU No. 2016-02 , Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.
47
ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain lease arrangements for which it is the lessee. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.
In March of 2016, The FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, including:
|
· |
|
Modifies the accounting for income taxes relating to share-based payments. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) will be recognized as income tax expense or benefit in the consolidated income statement. The tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur. An entity will recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Under current GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the consolidated income statement in the period they reduce income taxes payable. |
|
· |
|
Changes the classification of excess tax benefits on the consolidated statement of cash flows. In the consolidated statement of cash flows, excess tax benefits will be classified along with other income tax cash flows as an operating activity. Under current GAAP, excess tax benefits are separated from other income tax cash flows and classified as a financing activity. |
|
· |
|
Changes the requirement to estimate the number of awards that are expected to vest. Under ASC 2016-09, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest as presently required or account for forfeitures when they occur. Under current GAAP, accruals of compensation cost are based on the number of awards that are expected to vest. |
|
· |
|
Changes the tax withholding requirements for share-based payment awards to qualify for equity accounting. The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. Under current GAAP, for an award to qualify for equity classification is that an entity cannot partially settle the award in cash in excess of the employer’s minimum statutory withholding requirements. |
|
· |
|
Establishes GAAP for the classification of employee taxes paid when an employer withholds shares for tax withholding purposes. Cash paid by an employer when directly withholding shares for tax- withholding purposes should be classified as a financing activity. This guidance establishes GAAP related to the classification of withholding taxes in the statement of cash flows as there is no such guidance under current GAAP. |
ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is currently assessing the potential effect that the adoption of ASU 2016-09 will have on its consolidated financial statements.
Note 24—Subsequent Events
On May 3, 2016, the Company through its subsidiary, Private National Mortgage Acceptance Company, LLC (“PennyMac”), entered into Schedule Number 002 (the “Schedule”) pursuant to that certain Master Lease Agreement , dated as of December 9, 2015 (the “Master Lease”), with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the terms of the Master Lease, the Company may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by the Company’s indirect controlled subsidiary, PennyMac Loan Services, LLC. Pursuant to the Schedule, PennyMac is financing equipment with an aggregate cost of approximately $12.7 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At
48
the expiration of the three-year term, the Company is obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. PennyMac has elected to treat the Master Lease as a capital lease obligation.
49
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation s
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 and 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 of Private National Mortgage Acceptance Company, LLC (“PennyMac”) and are its sole managing member. PennyMac was founded in 2008 by members of our executive leadership team and two strategic partners, BlackRock Mortgage Ventures, LLC and HC Partners, LLC, formerly known as Highfields Capital Investments, LLC, together with its affiliates.
We conduct our business in three segments: loan production, loan servicing (together, these two activities comprise our mortgage banking activities) and investment management. 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 (“GSE”). It is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), a lender/servicer of the Veterans Administration (“VA”) and the U.S. Department of Agriculture (“USDA”), and a servicer for the Home Affordable Modification Program (“HAMP”). 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.
Our investment management subsidiary, PNMAC Capital Management, LLC (“PCM”), is a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisors Act of 1940, as amended, PCM manages PennyMac Mortgage Investment Trust (“PMT”), a mortgage real estate investment trust, listed on the New York Stock Exchange under the ticker symbol PMT, PNMAC
50
Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, LP, both registered under the Investment Company Act of 1940 (“Investment Company Act”), as amended, an affiliate of these Funds and PNMAC Mortgage Opportunity Fund Investors, LLC. We refer to these funds collectively as our “Investment Funds” and, together with PMT, as our “Advised Entities.”
Mortgage Banking
Loan Production
Our loan production segment sources mortgage loans through two channels: correspondent production and consumer direct lending.
In correspondent production we manage, on behalf of PMT and for our own account, the acquisition of newly originated, prime credit quality, first-lien residential mortgage loans that have been underwritten to investor guidelines. PMT acquires, from approved correspondent sellers, newly originated mortgage loans, including both conventional and government-insured or guaranteed residential mortgage loans that qualify for inclusion in securitizations that are guaranteed by the Agencies. For conventional mortgage loans, we perform fulfillment activities for PMT and earn a fulfillment fee for each mortgage loan purchased by PMT. In the case of government insured mortgage loans, we purchase them from PMT at PMT’s cost plus a sourcing fee and fulfill them for our own account.
Through our consumer direct lending channel, we originate new prime credit quality, first-lien residential conventional and government-insured or guaranteed mortgage loans on a national basis to allow customers to purchase or refinance their homes. The consumer direct model relies on the Internet and call center-based staff to acquire and interact with customers across the country. We do not have a “brick and mortar” branch network and have been developing our consumer direct operations with call centers strategically positioned across the United States.
For loans originated through our consumer direct lending channel, we conduct our own fulfillment, earn interest income and gains or losses during the holding period and upon the sale or securitization of these loans, and retain the associated MSRs (subject to sharing with PMT a portion of such MSRs or cash with respect to certain consumer direct originated loans that refinance loans for which the related mortgage servicing rights (“MSRs”) or excess servicing spread (“ESS”) was held by PMT).
Our loan production activity is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
Unpaid principal balance of mortgage loans purchased and originated for sale: |
|
|
|
|
|
|
|
Government-insured or guaranteed mortgage loans acquired from PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Mortgage loans sourced through our consumer direct channel |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Loan Servicing
Our mortgage loan servicing segment performs mortgage loan administration, collection, and default management activities, including the collection and remittance of mortgage loan payments; response to customer inquiries; accounting for principal and interest; holding custodial (impounded) funds for the payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising foreclosures and property dispositions. We service a diverse portfolio of mortgage loans both as the owner of MSRs and on behalf of other MSR or mortgage owners. We provide servicing for conventional and government-insured or guaranteed mortgage loans (“prime servicing”), as well as servicing for distressed mortgage loans that have been acquired as investments by our Advised Entities (“special servicing”). As of March 31, 2016, the portfolio of mortgage loans that we serviced or subserviced totaled approximately $164.9 billion in unpaid principal balance (“UPB”).
51
Investment Management
We are an investment manager through our subsidiary, PCM. PCM currently manages the Advised Entities. The Advised Entities had combined net assets of approximately $1.6 billion as of March 31, 2016. For these activities, we earn management fees as a percentage of net assets and incentive compensation based on the entities’ performance.
Observations on Current Market Conditions
Our business is affected by macroeconomic conditions in the United States, including economic growth, unemployment rates, the residential housing market and interest rate levels and expectations. The U.S. economy continues to grow, albeit at a slower pace, as reflected in recent economic data. During the first quarter of 2016, real U.S. gross domestic product expanded at an annual rate of 0.5% compared to 0.6% for the first quarter of 2015 and 1.4% for the fourth quarter of 2015. The national seasonally adjusted unemployment rate was 5.0% at March 31, 2016 compared to 5.0% at December 31, 2015 and 5.5% at March 31, 2015. Delinquency rates on residential real estate loans remain elevated compared to historical rates, but have been steadily declining. As reported by the Federal Reserve Bank, during the fourth quarter of 2015, the delinquency rate on residential real estate loans held by commercial banks was 5.1%, a reduction from 6.1% during the first quarter of 2015.
Residential real estate activity appears to be expanding. The seasonally adjusted annual rate of existing home sales for March 2016 was 1.5% higher than for March 2015, and the national median existing home price for all housing types was $222,700, a 5.7% increase from March 2015 (Source: National Association of Realtors ® ). On a national level, foreclosure filings during March 2016 decreased by 7.8% as compared to March 2015. However, foreclosure activity is expected to remain above historical average levels through 2016 and beyond.
Changes in fixed-rate residential mortgage loan interest rates generally follow changes in long-term U.S. Treasury yields. Thirty-year fixed mortgage interest rates ranged from a low of 3.62% to a high of 3.97% during the first quarter of 2016 while during the first quarter of 2015, thirty-year fixed mortgage interest rates ranged from a low of 3.59% to a high of 3.86% (Source: Freddie Mac’s Weekly Primary Mortgage Market Survey). Interest rates generally declined in the first quarter of 2016 and generally increased in the first of 2015. This impacted MSR and other interest rate sensitive asset valuations and production activity.
Mortgage lenders originated an estimated $380 billion of home loans during the first quarter of 2016, down 6.2% from the first quarter of 2015. Total mortgage originations are forecast to be somewhat lower in 2016 versus 2015, with current industry estimates for 2016 averaging $1.6 trillion (Source: average of Fannie Mae, Freddie Mac and Mortgage Bankers Association forecasts).
We believe there is long-term market opportunity for the production of non-Agency jumbo mortgage loans. However, most new jumbo mortgage loans are either being originated or purchased by banks, and the current market for jumbo mortgage loan securitizations is limited, as evidenced by weak demand and inconsistent pricing observed over the past twelve months. Prime jumbo MBS securitizations totaled $1.0 billion in UPB during the first quarter of 2016, a decrease from $4.2 billion during the first quarter of 2015. During the three months ended March 31, 2016, we produced approximately $7 million in UPB of jumbo loans compared to $62 million in UPB of jumbo loans produced during the three months ended March 31, 2015.
In our capacity as an investment manager, we expect to see a continued supply of distressed whole loans; however, we believe the pricing for recent transactions has been less attractive for buyers. We remain patient and selective for PMT in making new investments in distressed mortgage loans and we continue to monitor the market to assess best execution opportunities for distressed portfolio investments held by the Advised Entities.
52
Results of Operations
Our results of operations are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Revenues: |
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
|
$ |
|
|
$ |
|
|
Mortgage loan origination fees |
|
|
|
|
|
|
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
Net mortgage loan servicing fees |
|
|
|
|
|
|
|
Management fees |
|
|
|
|
|
|
|
Carried Interest from Investment Funds |
|
|
|
|
|
|
|
Net interest expense |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes by segment: |
|
|
|
|
|
|
|
Mortgage banking: |
|
|
|
|
|
|
|
Production |
|
$ |
|
|
$ |
|
|
Servicing |
|
|
|
|
|
|
|
Total mortgage banking |
|
|
|
|
|
|
|
Investment management |
|
|
|
|
|
|
|
Non-segment activities (1) |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
|
During the period: |
|
|
|
|
|
|
|
Interest rate lock commitments issued |
|
$ |
|
|
$ |
|
|
Fair value of mortgage loans purchased and originated for sale: |
|
|
|
|
|
|
|
Government-insured or guaranteed loans acquired from PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Mortgage loans originated through consumer direct channel |
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
At period end: |
|
|
|
|
|
|
|
Unpaid principal balance of mortgage loan servicing portfolio: |
|
|
|
|
|
|
|
Owned: |
|
|
|
|
|
|
|
Mortgage servicing rights |
|
$ |
|
|
$ |
|
|
Mortgage servicing liabilities |
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subserviced |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Net assets of Advised Entities: |
|
|
|
|
|
|
|
PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Investment Funds |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
Relates to parent Company interest expense eliminated in consolidation. |
Net income decreased $20.6 million during the quarter ended March 31, 2016, when compared to the same period in 2015. The decrease in net income during the quarter ended March 31, 2016 was primarily due to a decrease in net mortgage loan servicing fees caused by a significant decrease in fair value and increase in impairment of our MSRs, net of ESS and hedging gains.
53
Net Gains on Mortgage Loans Held for Sale at Fair Value
During the quarter ended March 31, 2016, we recognized net gains on mortgage loans held for sale at fair value totaling $91.5 million, an increase of $16.1 million from the same period in 2015. The increase was due to growth in the volume of mortgage loans that we committed to purchase or originate and an improvement in production margins resulting from an increase in volume of our consumer direct channel, which earns higher margins than our correspondent production channel.
Most of our mortgage loan production currently is centered in government-insured or guaranteed loans. Over recent periods, the margins on correspondent government-insured or guaranteed mortgage loans have tended to be higher than those on conventional correspondent production. Government-insured or guaranteed mortgage lending is not as competitive as conventional conforming mortgage lending due to the added complexity involved in the origination and servicing of government-insured or guaranteed mortgage loans. We source the majority of our government-insured or guaranteed mortgage loan production through PMT. PMT is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed mortgage loans. We purchase the government-insured or guaranteed mortgage loans that PMT acquires through its correspondent lending activities and pay PMT a sourcing fee of three basis points on the UPB of such mortgage loans.
Our net gains on mortgage loans held for sale at fair value include both cash and non-cash elements. We receive proceeds on sale that include both cash and our estimate of the fair value of the MSRs and mortgage servicing liabilities created and incurred in such transactions. During the quarters ended March 31, 2016 and 2015, the net gains on mortgage loans held for sale at fair value included $95.4 million and $67.0 million, respectively, in fair value of MSRs received as part of proceeds on sales, net of mortgage servicing liabilities incurred. We also recognize a liability for our estimate of the losses we expect to incur in the future as a result of claims made against us in connection with the representations and warranties that we made in the loan sales transactions. During the quarters ended March 31, 2016 and 2015, we included provisions for losses relating to the representations and warranties we provided totaling $2.1 million and $1.5 million, respectively, in our Net gains on mortgage loans held for sale at fair value .
54
Our net gains on mortgage loans held for sale are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Cash (loss) gain: |
|
|
|
|
|
|
|
Mortgage loans |
|
$ |
|
|
$ |
|
|
Hedging activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash gain: |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
|
|
|
|
|
|
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
|
|
|
|
|
|
Provision for losses relating to representations and warranties on mortgage loans sold |
|
|
|
|
|
|
|
Change in fair value relating to mortgage loans and derivative financial instruments outstanding at period end: |
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
|
Mortgage loans |
|
|
|
|
|
|
|
Hedging derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapture payable to PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
During the period: |
|
|
|
|
|
|
|
Unpaid principal balance of mortgage loans sold |
|
$ |
|
|
$ |
|
|
Interest rate lock commitments issued: |
|
|
|
|
|
|
|
Conventional mortgage loans |
|
$ |
|
|
$ |
|
|
Government-insured or guaranteed mortgage loans |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Period end: |
|
|
|
|
|
|
|
Mortgage loans held for sale at fair value |
|
$ |
|
|
$ |
|
|
Commitments to fund and purchase mortgage loans |
|
$ |
|
|
$ |
|
|
Provision for Losses on Representations and Warranties
We record our estimate of the losses that we expect to incur in the future as a result of claims against us in connection with the representations and warranties we provide to the purchasers and insurers of the mortgage loans we sell in our Net gains on sale of mortgage loans held for sale at fair value . Our agreements with the purchasers and insurers include representations and warranties related to the mortgage 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 mortgage 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 mortgage loans with identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit loss on the mortgage loans. Our credit loss may be reduced by any recourse we have to correspondent lenders that sold such mortgage loans 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 lender.
The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, mortgage loan repurchase rates, the severity of loss in the event of defaults and the probability of reimbursement by the correspondent mortgage 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 as a component of Net gains on mortgage loans held for sale at fair value totaling $2.1 million during the quarter ended March 31, 2016, compared to $1.5 million during the quarter ended March 31, 2015. The increase in provision for losses under representations and warranties during the quarter ended March 31, 2016 compared to the same period in 2015 was primarily due to an increase in the volume of mortgage loan sales activity.
55
Following is a summary of mortgage loan repurchase and loss activity and the UPB of mortgage loans subject to representations and warranties:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
During the period: |
|
|
|
|
|
|
|
Indemnification activity |
|
|
|
|
|
|
|
Mortgage loans indemnified by PFSI at beginning of period |
|
$ |
|
|
$ |
|
|
New indemnifications |
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
Indemnified mortgage loans repurchased |
|
|
— |
|
|
— |
|
Indemnified mortgage loans repaid or refinanced |
|
|
|
|
|
— |
|
Mortgage loans indemnified by PFSI at end of period |
|
$ |
|
|
$ |
|
|
Repurchase activity |
|
|
|
|
|
|
|
Total mortgage loans repurchased by PFSI |
|
$ |
|
|
$ |
|
|
Less: |
|
|
|
|
|
|
|
Mortgage loans repurchased by correspondent lenders |
|
|
|
|
|
|
|
Mortgage loans repaid by borrowers or resold with defects resolved |
|
|
|
|
|
|
|
Net mortgage loans repurchased by PFSI with losses chargeable to liability for representations and warranties |
|
$ |
|
|
$ |
|
|
Losses charged to liability for representations and warranties |
|
$ |
|
|
$ |
|
|
Period end: |
|
|
|
|
|
|
|
Unpaid principal balance of mortgage loans subject to representations and warranties |
|
$ |
|
|
$ |
|
|
Liability for representations and warranties |
|
$ |
|
|
$ |
|
|
During the quarter ended March 31, 2016, we repurchased mortgage loans totaling $6.9 million in UPB . We recorded losses of $484,000 net of recoveries from correspondent lenders, as a result of these repurchases. As the outstanding balance of mortgage loans we purchase and sell subject to representations and warranties increases and the loans sold continue to season, we expect the level of repurchase activity to increase.
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable management judgment. The level of mortgage 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 mortgage loans. Our estimate of the liability for representations and warranties is developed by our credit administration staff. The liability estimate is reviewed and approved by our senior management credit committee which includes the senior executives of the Company and of the loan production, loan servicing and credit risk management areas. We did not record any adjustments to previously recorded liabilities for representations and warranties during any of the periods presented.
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current UPB of mortgage loans sold by us to date represents the maximum exposure to repurchases related to representations and warranties.
Other mortgage loan production-related revenues
Loan origination fees increased $ 5.8 million during the quarter ended March 31, 2016, compared to the same period in 2015 primarily due to growth in the volume of correspondent purchases in our loan production activities.
56
Fulfillment fees from PMT, which represent fees we collect for services we perform on behalf of PMT in connection with its acquisition, packaging and sale of mortgage loans, are calculated as a percentage of the UPB of the mortgage loans we fulfill for PMT. Fulfillment fees increased $69,000 during the quarter ended March 31, 2016 compared to the same period in 2015. The effect of the increase in volume of mortgage loans we fulfilled for PMT was offset by a reduction in the average fulfillment fee rate we charged during 2016 as compared to 2015 resulting from contractual discretionary reductions in fulfillment fees made to facilitate certain transactions.
Summarized below are our fulfillment fees:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Fulfillment fee revenue |
|
$ |
|
|
$ |
|
|
Unpaid principal balance of mortgage loans fulfilled |
|
$ |
|
|
$ |
|
|
Average fulfillment fee rate (in basis points) |
|
|
|
|
|
|
|
Net mortgage loan servicing fees
Our net mortgage loan servicing fees are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Net mortgage loan servicing fees: |
|
|
|
|
|
|
|
Mortgage loan servicing fees: |
|
|
|
|
|
|
|
From non-affiliates |
|
$ |
|
|
$ |
|
|
From PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
From Investment Funds |
|
|
|
|
|
|
|
Ancillary and other fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
|
|
|
|
|
|
|
Net loan servicing fees |
|
$ |
|
|
$ |
|
|
Average mortgage loan servicing portfolio |
|
$ |
|
|
$ |
|
|
Following is a summary of our mortgage loan servicing portfolio in UPB:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Mortgage loans serviced at period end: |
|
|
|
|
|
|
|
Prime servicing: |
|
|
|
|
|
|
|
Owned |
|
|
|
|
|
|
|
Mortgage servicing rights |
|
|
|
|
|
|
|
Originated |
|
$ |
|
|
$ |
|
|
Acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing liabilities–Originated |
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subserviced for Advised Entities |
|
|
|
|
|
|
|
Total prime servicing |
|
|
|
|
|
|
|
Special servicing–Subserviced for Advised Entities |
|
|
|
|
|
|
|
Total special servicing |
|
|
|
|
|
|
|
Total mortgage loans serviced |
|
$ |
|
|
$ |
|
|
57
During the first quarter of 2016, loan servicing fees increased $ 42.0 million compared to the same period in 2015, primarily due to an increase in mortgage loan servicing fees from nonaffiliates resulting from growth in our portfolio of MSRs .
Amortization, impairment and change in fair value of mortgage servicing rights are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Amortization and realization of cash flows |
|
$ |
|
|
$ |
|
|
Change in fair value of mortgage servicing rights and mortgage servicing liabilities carried at fair value and provision for impairment of mortgage servicing rights carried at lower of amortized cost or fair value |
|
|
|
|
|
|
|
Change in fair value of excess servicing spread |
|
|
|
|
|
|
|
Hedging gains |
|
|
|
|
|
|
|
Total fair value adjustments, net of hedging results |
|
|
|
|
|
|
|
Total amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
|
$ |
|
|
$ |
|
|
Average mortgage servicing rights balances: |
|
|
|
|
|
|
|
At lower of amortized cost or fair value |
|
$ |
|
|
$ |
|
|
At fair value |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Mortgage servicing rights at period end: |
|
|
|
|
|
|
|
At lower of amortized cost or fair value |
|
$ |
|
|
$ |
|
|
At fair value |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Amortization, impairment and change in fair value of mortgage servicing rights increased $25.7 million during the quarter ended March 31, 2016, compared to the same period in 2015. This increase was primarily due to increased amortization of a growing mortgage servicing asset and increased impairment of MSRs resulting from the effect on fair value of the decreasing interest rate environment that prevailed during the first quarter of 2016.
Management fees and Carried Interest
Management fees and Carried Interest are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|||||
Management fees: |
|
|
|
|
|
|
|
PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
Base management fee |
|
$ |
|
|
$ |
|
|
Performance incentive fee |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Investment Funds |
|
|
|
|
|
|
|
Total management fees |
|
|
|
|
|
|
|
Carried Interest |
|
|
|
|
|
|
|
Total management fees and Carried Interest |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Net assets of Advised Entities at period end: |
|
|
|
|
|
|
|
PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Investment Funds |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
58
Management fees from PMT decreased $ 1.7 million during the quarter ended March 31, 2016, compared to the same period in 2015. The decrease was primarily due to:
|
· |
|
a decrease in base management fees of $378,000 due to a decrease in PMT’s shareholders’ equity upon which its base management fee is based; and |
|
· |
|
a decrease in performance incentive fees of $1.3 million resulting from a decline in PMT’s financial performance over the four-quarter period for which incentive fees were calculated. |
Management fees from the Investment Funds decreased $ 926,000 during the quarter ended March 31, 2016, compared to the same period in 2015. The decrease was due to a reduction in the Investment Funds’ net asset values as a result of continued distributions to the Investment Funds’ investors following the end of the Investment Funds’ commitment period.
Carried Interest from Investment Funds decreased $ 640,000 during the quarter ended March 31, 2016, compared to the same period in 2015 primarily due to reduced performance of the Investment Funds’
assets during the quarter ended March 31, 2016 as compared to the quarter ended March 31, 2015.
Other revenues
Net interest expense increased $4.6 million during the quarter ended March 31, 2016, compared to the quarter ended March 31, 2015 due to growth in financing of our investments in non-interest earning assets, primarily MSRs.
The results of our holdings of common shares of PMT, which is included in Changes in fair value of investment in and dividends received from PMT are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Dividends received from PennyMac Mortgage Investment Trust |
|
$ |
|
|
$ |
|
|
Change in fair value of investment in PennyMac Mortgage Investment Trust |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Fair value of PennyMac Mortgage Investment Trust shares at period end |
|
$ |
|
|
$ |
|
|
Change in fair value of investment in and dividends received from PMT decreased $ 193, 000 during the quarter ended March 31, 2016, compared to the same period in 2015 due to both a decrease in the fair value of our investment in PMT and a decrease in dividends received from PMT. We held 75,000 common shares of PMT during each of the periods ended March 31, 2016 and 2015.
Expenses
Our compensation expense is summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Salaries and wages |
|
$ |
|
|
$ |
|
|
Incentive compensation |
|
|
|
|
|
|
|
Taxes and benefits |
|
|
|
|
|
|
|
Stock and unit-based compensation |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Head count: |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Period end |
|
|
|
|
|
|
|
Compensation expense increased $ 10.2 million, or 17.5% during the quarter ended March 31, 2016 compared to the same period in 2015. The increase in compensation expense was primarily due to the development of and growth
59
in our mortgage banking segments. Incentive compensation decreased primarily due to our reduced profitability during the quarter ended March 31, 2016 as compared to the quarter ended March 31, 2015.
Servicing expense increased $11.2 million during the quarter ended March 31, 2016 compared to the same period in 2015. The increase was primarily due to growth in our mortgage servicing portfolio and to increased servicing advance losses relating to delinquent government-insured or guaranteed mortgage loans that we service.
Technology expense increased $ 1.9 million during the quarter ended March 31, 2016 compared to the same period in 2015 primarily due to increased software costs as part of our continued investment in loan production and expansion of our servicing infrastructure.
Expenses Allocated to PMT
PMT reimburses us for other expenses, including common overhead expenses incurred on its behalf by us, in accordance with the terms of our management agreement with PMT. The expense amounts presented in our consolidated statements of income are net of these allocations.
Common overhead expense amounts allocated to PMT during the periods ended March 31, 2016 and 2015 are summarized below:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 (1) |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Technology |
|
$ |
|
|
$ |
|
|
Occupancy |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Total expenses |
|
$ |
|
|
$ |
|
|
|
(1) |
|
On December 15, 2015, we and PMT amended our management agreement to provide that the total costs and expenses incurred by us in any quarter and reimbursable by PMT is capped at an amount equal to the product of (A) 70 basis points (0.0070), multiplied by (B) PMT’s shareholders’ equity (as defined in the management agreement) as of the last day of such quarter, divided by four (4). |
Provision for Income Taxes
Our effective tax rates were 11.9% during the quarter ended March 31, 2016 compared to 11.5% during the same period in 2015. The difference between our effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into our shares, we expect an increase in allocated earnings that will be subject to corporate federal and state statutory tax rates, which will in turn increase our effective income tax rate.
60
Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
ASSETS |
|
|
|
|
|
|
|
Cash and short-term investments |
|
$ |
|
|
$ |
|
|
Mortgage loans held for sale at fair value |
|
|
|
|
|
|
|
Servicing advances, net |
|
|
|
|
|
|
|
Receivable from affiliates |
|
|
|
|
|
|
|
Carried Interest due from Investment Funds |
|
|
|
|
|
|
|
Mortgage servicing rights |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Borrowings |
|
$ |
|
|
$ |
|
|
Payable to affiliates |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
|
Total assets increased $ 476.0 m illion from $3.5 billion at December 31, 2015 to $ 4.0 billion at March 31, 2016. The increase was primarily due to an increase of $ 552.8 million in mortgage loans held for sale at fair value, resulting from growth in our mortgage loan production.
Total liabilities increased by $ 445.1 m illion from $2.4 billion as of December 31, 2015 to $ 2.9 billion as of March 31, 2016. The increase was primarily attributable to an increase of $ 582.2 million in borrowings to fund growth in our inventory of mortgage loans held for sale at fair value and MSRs.
Cash Flows
Our cash flows for the quarters ended March 31, 2016 and 2015 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
|||||||
|
|
2016 |
|
2015 |
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||
Cash flow activities: |
|
|
|
|
|
|
|
|
|
|
Operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
Investing |
|
|
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
|
|
|
|
Net cash flows |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our cash flows resulted in a net increase in cash of $11.1 million during the quarter ended March 31, 2016. The increase was due to cash used in our operating offset by cash provided by our investing and financing activities exceeding cash used in our operating activities.
Operating activities
Net cash used in operating activities totaled $ 516.9 million and $ 168.5 million during the quarters ended March 31, 2016 and 2015, respectively, primarily due to the growth of our inventory of mortgage loans held for sale at fair value.
61
Investing activities
Net cash provided by investing activities during the quarter ended March 31, 2016 totaled $ 41.8 million primarily due to $38.6 million in net settlements of derivative financial instruments received in our hedging of MSRs and to a $18.1 million reduction in short-term investments. Net cash used in investing activities during the quarter ended March 31, 2015 totaled $ 58.4 million primarily due to our purchase of MSRs during the period.
Financing activities
Net cash provided by financing activities totaled $ 486.2 m illion and $ 232.7 million during the quarters ended March 31, 2016 and 2015, respectively, primarily due to increased financing for the growth in our inventory of mortgage loans held for sale at fair value. In the quarter ended March 31, 2015, financing proceeds were also used for investments in MSRs.
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), 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 borrowings, proceeds from and issuance of ESS and/or additional equity offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.
Our current leverage strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of assets sold under agreements to repurchase, sales of mortgage loan participation certificates, a note payable, a revolving credit agreement, ESS and a capital lease. All of our borrowings other than ESS and the capital lease have short-term maturities and provide for terms of approximately one year. We will continue to finance most of our assets on a short-term basis until long-term financing becomes more available. 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.
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 outstanding, maximum and ending balances:
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
|
|
(in thousands) |
|
||||
Repurchase agreements outstanding: |
|
|
|
|
|
|
|
Average balance |
|
$ |
|
|
$ |
|
|
Maximum daily balance |
|
$ |
|
|
$ |
|
|
Balance at period end |
|
$ |
|
|
$ |
|
|
Our secured financing agreements at PLS require us to comply with various financial covenants. The most significant financial covenants currently include the following:
|
· |
|
positive net income during each calendar quarter; |
|
· |
|
a minimum in unrestricted cash and cash equivalents of $20 million; |
|
· |
|
a minimum tangible net worth of $200 million; |
|
· |
|
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 similar to those being financed under of our existing secured financing agreements. |
With respect to servicing performed for PMT, PLS is also subject to certain covenants under its debt agreements. Covenants of PLS in PMT’s debt agreements are equally or sometimes less restrictive than the covenants described above.
62
In addition to the covenants noted above, our revolving credit agreement and capital lease contain additional financial covenants including, but not limited to,
|
· |
|
a minimum of cash and carried interest equal to the amount borrowed under the revolving credit agreement; |
|
· |
|
a minimum of unrestricted cash and cash equivalents equal to $25 million; |
|
· |
|
a minimum tangible net worth of $500 million; |
|
· |
|
a minimum asset coverage ratio (the ratio of the total asset amount to the total commitment) of 2.5; and |
|
· |
|
a maximum ratio of total indebtedness to tangible net worth ratio of 5:1. |
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 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 FHFA and GNMA for Agency seller/servicers. Effective December 31, 2015, FHFA and Ginnie Mae have established new minimum liquidity requirements and revised their net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae and Freddie Mac and Ginnie Mae for its approved single-family issuers, as summarized below:
|
· |
|
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 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 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. |
We believe that we are currently in compliance with the applicable Agency requirements.
We have purchased portfolios of MSRs and have financed them in part through the sale to PMT of the right to receive ESS. The outstanding amount of the ESS financing is based on the current valuation of such ESS and amounts received on the underlying mortgage loans.
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.
63
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, 2016, we have not entered into any off-balance sheet arrangements or guarantees.
Contractual Obligations
As of March 31, 2016, we had on-balance contractual obligations of $1.7 billion to finance assets under agreements to repurchase and $246.6 million to finance assets under our mortgage loan participation and sale agreement. We also had contractual obligations of $127.7 million relating to notes payable. Additionally, the Company entered into ESS transactions and a capital lease transaction secured by certain fixed assets and capitalized software of which $12.1 million was outstanding as of March 31, 2016. We also lease our primary office facilities under an agreement that expires on February 28, 2017 and we license certain software to support our loan servicing operations.
Payment obligations under these agreements are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|||||||||||||
|
|
|
|
Less than |
|
1-3 |
|
3-5 |
|
More than |
|
|||||
Contractual obligations |
|
Total |
|
1 year |
|
years |
|
years |
|
5 years |
|
|||||
|
|
(in thousands) |
|
|||||||||||||
Assets sold under agreements to repurchase |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Mortgage loan participation and sale agreements |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
Notes payable |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
Obligations under capital lease |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust (1) |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Anticipated interest payments related to excess servicing spread financing at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses (2) |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
Office leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
(1) |
|
The ESS financing obligation payable to PMT does not have a stated contractual maturity date and will pay down as the underlying MSRs receive the excess servicing fee rate due to PMT. |
|
(2) |
|
Software licenses include both volume and activity based fees that are dependent on the number of loans serviced during each period and include a base fee of approximately $820,000 per month. Estimated payments for software licenses above are based on the number of loans currently serviced by us, which totaled approximately 870,000 at March 31, 2016. Future amounts due may significantly fluctuate based on changes in the number of loans serviced by us. For the quarter ended March 31, 2016, software license fees totaled $3.2 million. All figures contained in this footnote are in actual amounts and not in thousands (in contrast to the table above). |
64
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, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
maturity of |
|
|
|
|
|
|
|
|
advances under |
|
|
|
Counterparty |
|
Amount at risk |
|
repurchase agreement |
|
Facility Maturity |
|
|
|
|
(in thousands) |
|
|
|
|
|
|
Credit Suisse First Boston Mortgage Capital, LLC |
|
$ |
|
|
June 9, 2016 |
|
September 27, 2016 |
|
Credit Suisse First Boston Mortgage Capital LLC |
|
$ |
|
|
June 9, 2016 |
|
March 30, 2017 |
|
Bank of America, N.A. Gestation Agreement |
|
$ |
|
|
June 20, 2016 |
|
March 29, 2017 |
|
Morgan Stanley |
|
$ |
|
|
May 21, 2016 |
|
July 26, 2016 |
|
Citibank, N.A. |
|
$ |
|
|
May 14, 2016 |
|
October 20, 2016 |
|
Management Agreements
PMT Management Agreement
We externally manage and advise PMT pursuant to a management agreement. Our management agreement with PMT requires us to oversee PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees. We are responsible for PMT’s day-to-day management and perform such services and activities related to PMT’s assets and operations as may be appropriate. Pursuant to our management agreement, we collect 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 shareholders’ equity up to $2 billion, (ii) 1.375% per year of shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of PMT’s shareholders’ equity in excess of $5 billion. |
|
· |
|
The performance incentive fee is calculated 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 calculated quarterly and 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 computed in accordance with U.S. GAAP and certain other non ‑cash charges determined after discussions between us 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 four ‑quarter period.
The “high watermark” starts at zero and is adjusted quarterly. The quarterly adjustment 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,
65
the threshold amounts required for us 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 in PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.
Under our management agreement, we are entitled to reimbursement of our organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf. Additionally, on December 15, 2015, we amended our management agreement to provide that the total overhead costs and expenses incurred by us in any quarter and reimbursable by PMT is capped at an amount as defined in the management agreement.
The term of the management agreement, as amended, expires on February 1, 2017, subject to automatic renewal for additional 18 ‑month periods, unless terminated earlier in accordance with the terms of the management agreement.
In the event of termination by PMT, we 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 us, in each case during the 24-month period before termination.
Investment Funds Management Agreements
We have investment management agreements with the Investment Funds pursuant to which we receive management fees consisting of base management fees and carried interest. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the limited liability company and limited partnership agreements that govern the Investment Funds.
Loan Servicing Agreements
PMT Loan Servicing Agreement
We have a loan servicing agreement with PMT, pursuant to which we provide loan servicing for its portfolio of residential mortgage loans. The servicing agreement provides for servicing fees payable to us based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or whether the underlying mortgage property has become REO.
|
· |
|
The base servicing fee rates for distressed whole mortgage loans are charged based on a monthly per ‑loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or whether the underlying mortgage property has become REO. Presently, the base servicing fee rates for distressed whole mortgage loans range from $30 per month for current loans up to $125 per month for mortgage loans that are in foreclosure. The base servicing fee rate for REO and REO rentals is $75 and $30 per month, respectively. To the extent that we rent PMT’s REO under its REO rental program, we collect an REO rental fee of $30 per month per REO and a property management fee in an amount equal to our 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 we provide property management services directly. |
|
· |
|
The base servicing fee rates for non ‑distressed mortgage loans subserviced by us on PMT’s behalf are also calculated through a monthly per ‑loan dollar amount, with the actual dollar amount for each mortgage loan based on whether the mortgage loan is a fixed ‑rate or adjustable ‑rate loan. The base servicing fee rates for mortgage loans subserviced on PMT’s behalf are $7.50 per month for fixed ‑rate mortgage loans and $8.50 per month for adjustable rate mortgage loans. To the extent that these mortgage loans become delinquent, we are entitled to an additional servicing fee per mortgage loan falling within a range of $10 to $55 per month based on the delinquency, bankruptcy and foreclosure status of the mortgage loan or $75 per month if the underlying mortgaged property becomes REO. |
|
· |
|
We are required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement because PMT does not have any |
66
employees or infrastructure. For these services, we receive a supplemental servicing fee of $25 per month for each distressed whole loan and, through August 31, 2015, received a supplemental servicing fee of $3.25 per month for each non ‑distressed subserviced mortgage loan. With respect to non ‑distressed subserviced mortgage loans, the supplemental servicing fee was subject to a cap of $700,000 per quarter. The supplemental servicing fee for non-distressed subserviced mortgage loans was eliminated, effective as of September 1, 2015. We are also entitled to reimbursement for all customary, good faith reasonable and necessary out ‑of ‑pocket expenses incurred in performance of our servicing obligations. |
|
· |
|
We, on behalf of PMT, currently participate in the Home Affordable Modification Program (“HAMP”) of the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development (“HUD”) (and other similar mortgage loan modification programs). HAMP establishes standard loan modification guidelines for “at risk” homeowners and provides incentive payments to certain participants, including mortgage loan servicers, for achieving modifications and successfully remaining in the program. The mortgage loan servicing agreement entitles us to retain any incentive payments made to us and to which we are entitled under HAMP; provided, however, that with respect to any such incentive payments paid to us under HAMP in connection with a mortgage loan modification for which PMT previously paid us a modification fee, we shall reimburse PMT an amount equal to the incentive payments. |
We also remain entitled to market ‑based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and late charges relating to loans we service for PMT.
Investment Funds Loan Servicing Agreements
We have also entered into loan servicing agreements with the Investment Funds. Our servicing agreements with the Investment Funds generally provide for fee revenue, which varies depending on the type and quality of the loans being serviced. We are also entitled to certain customary market-based fees and charges. This arrangement was modified, effective January 1, 2012, with respect to one of the Investment Funds. At that time, we settled our accrued servicing fee rebate and amended our servicing agreement with such fund to charge scheduled servicing fees in place of the previous “at cost” servicing arrangement.
Mortgage Banking and Warehouse Services Agreement
We have also entered into a mortgage banking and warehouse services agreement (the “MBWS agreement”), pursuant to which we provide PMT with certain mortgage banking services, including fulfillment and disposition-related services, with respect to loans acquired by PMT from correspondent lenders, and certain warehouse lending services, including fulfillment and administrative services, with respect to loans financed by PMT for its warehouse lending clients.
The MBWS agreement provides for a fulfillment fee paid to us based on the type of mortgage loan that PMT acquires. The fulfillment fee is equal to a percentage of the UPB of mortgage loans purchased by PMT, with the addition of potential fee rate discounts applicable to PMT’s monthly purchase volume in excess of designated thresholds. We have also agreed to provide such services exclusively for PMT’s benefit, and we and our affiliates are prohibited from providing such services for any other third party.
Presently, the applicable fulfillment fee percentages are (i) 0.50% for conventional mortgage loans, (ii) 0.88% for loans saleable in accordance with the Ginnie Mae Mortgage ‑Backed Securities Guide, and (iii) 0.50% for all other mortgage loans not contemplated above; provided, however, that we may, in our sole discretion, reduce the amount of the applicable fulfillment fee and credit the amount of such reduction to the reimbursement otherwise due as described below. This reduction may only be credited to the reimbursement applicable to the month in which the related mortgage loan was funded.
In the event that PMT purchases mortgage loans with a total UPB in any month greater than $2.5 billion and less than $5 billion, we have agreed to discount the amount of such fulfillment fees by reimbursing PMT an amount equal to the product of (i) 0.025%, (ii) the amount of UPB in excess of $2.5 billion, and (iii) the percentage of the total UPB relating to mortgage loans for which we collected fulfillment fees in such month. In the event PMT purchases mortgage loans with a total UPB in any month greater than $5 billion, we have agreed to further discount the amount of fulfillment fees by reimbursing PMT an amount equal to the product of (i) 0.05%, (ii) the amount of UPB in excess of
67
$5 billion, and (iii) the percentage of the total UPB relating to mortgage loans for which we collected fulfillment fees in such month.
PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the MBWS agreement, we currently purchase loans saleable in accordance with the Ginnie Mae Mortgage ‑Backed Securities Guide “as is” and without recourse of any kind to PMT at its cost, plus accrued interest and a sourcing fee of three basis points, in each case on the UPB of the loan, less loan administrative fees collected by PMT from the seller.
In consideration for the mortgage banking services provided by us with respect to PMT’s acquisition of mortgage loans under PLS’s early purchase program, we are entitled to fees (i) accruing at a rate equal to $1,500 per year per early purchase facility administered by us, and (ii) in the amount of $35 for each mortgage loan PMT acquires. In consideration for the warehouse services provided by us with respect to mortgage loans that PMT finances for its warehouse lending clients, with respect to each facility, we are entitled to fees (i) accruing at a rate equal to $40,000 per annum for each of the first twenty (20) warehouse lending facilities active in any month and $10,000 per annum for each additional warehouse lending facility active in any month, and (ii) in the amount of $50 for each mortgage loan that PMT finances thereunder. Where PMT has entered into both an early purchase agreement and a warehouse lending agreement with the same client, we shall only be entitled to one $25,000 per year fee and, with respect to any mortgage loan that becomes subject to both such agreements, only one $50 per mortgage loan fee.
The term of the MBWS agreement expires on February 1, 2017, subject to automatic renewal for additional 18 ‑month periods, unless terminated earlier in accordance with the terms of the agreement.
MSR Recapture Agreement
Pursuant to the terms of a MSR recapture agreement, as amended, if we refinance through our consumer direct lending business mortgage loans for which PMT previously held the MSRs, we are generally required to transfer and convey to one of PMT’s wholly ‑owned subsidiaries, without cost to PMT, the MSRs with respect to new mortgage loans originated in those refinancings (or, under certain circumstances, other mortgage loans) that have a total UPB that is not less than 30% of the total UPB of all such mortgage loans so originated.
Where the fair value of the aggregate MSRs to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair market value instead of transferring such MSRs. The MSR recapture agreement expires, unless terminated earlier in accordance with the agreement, on February 1, 2017, subject to automatic renewal for additional 18 ‑month periods.
Spread Acquisition and MSR Servicing Agreements
Effective February 1, 2013, we entered into a master spread acquisition and MSR servicing agreement (the “2/1/13 Spread Acquisition Agreement”), pursuant to which we previously sold to PMT or one of its wholly owned subsidiaries the rights to receive certain ESS from MSRs acquired by us from banks and other third party financial institutions. We were generally required to service or subservice the related mortgage loans for the applicable agency or investor. We only used the 2/1/13 Spread Acquisition Agreement for the purpose of selling ESS relating to Fannie Mae MSRs. The specific terms of each transaction under the 2/1/13 Spread Acquisition Agreement were subject to the terms thereof, as modified and supplemented by the terms of a confirmation executed in connection with such transaction.
To the extent we refinanced any of the mortgage loans relating to the ESS sold to PMT, the 2/1/13 Spread Acquisition Agreement contained recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair value of the aggregate ESS to be transferred for the applicable month was less than $200,000, we were, at our option, permitted to pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.
On February 29, 2016, the parties terminated the 2/1/13 Spread Acquisition Agreement and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, we reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by us to PMT and then subject to such 2/1/13 Spread Acquisition Agreement.
68
On December 19, 2014, we entered into a second master spread acquisition and MSR servicing agreement with PMT (the “12/19/14 Spread Acquisition Agreement”). The terms of the 12/19/14 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Freddie Mac MSRs under the 12/19/14 Spread Acquisition Agreement.
To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 12/19/14 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair market value in lieu of transferring such ESS.
On February 29, 2016, we reacquired from PMT all of its right, title and interest in and to all of the Freddie Mae ESS previously sold by us to PMT and then subject to such 12/19/14 Spread Acquisition Agreement. The 12/19/14 Spread Acquisition Agreement remains in full force and effect.
On April 30, 2015, we amended and restated a third master spread acquisition and MSR servicing agreement with PMT (the “4/30/15 Spread Acquisition Agreement”). The terms of the 4/30/15 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement and the 12/19/14 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Ginnie Mae MSRs under the 4/30/15 Spread Acquisition Agreement. The primary purpose of the amendment and restatement to the 4/30/15 Spread Agreement was to evidence the ownership of the ESS under participation certificates and to otherwise incorporate the terms of previously executed amendments.
To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 4/30/15 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. However, under the 4/30/15 Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the refinanced mortgage loans, we are 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 equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the modified mortgage loans, the 4/30/15 Spread Acquisition Agreement contains provisions that require us to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.
In connection with our entry into the 4/30/15 Spread Acquisition Agreement, we were also required to (i) amend and restate the terms of a loan and security agreement (the “LSA”) with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), pursuant to which we pledged to CSFB all of our rights and interests in the Ginnie Mae MSRs we own or acquire, enabling us to finance certain of such MSRs and servicing advance receivables, and (ii) enter into a separate acknowledgement agreement with respect thereto, by and among Ginnie Mae, CSFB and us. Under the terms of the amendment and restatement to the LSA, the maximum loan amount was increased from $257 million to $407 million. The $150 million increase was implemented for the purpose of facilitating the financing of ESS by PMT. On November 10, 2015, the LSA was further amended and restated to convert the form of the borrowing into a repurchase agreement (as amended and restated, the “MSR Repo”). The aggregate loan amount outstanding under the MSR Repo and relating to advances outstanding with PMT is guaranteed in full by PMT.
Separately, as a condition to permitting us to transfer to PMT the ESS relating to a portion of our pledged Ginnie Mae MSRs, CSFB required PMT to enter into a Security and Subordination Agreement (the “Security Agreement”), pursuant to which PMT pledged to CSFB its rights under the 4/30/15 Spread Acquisition Agreement and its interest in any ESS purchased thereunder. CSFB’s lien on the ESS remains subordinate to the rights and interests of Ginnie Mae pursuant to the provisions of the 4/30/15 Spread Acquisition Agreement and the terms of the acknowledgement agreement.
The Security Agreement permits CSFB to liquidate PMT’s ESS along with the related MSRs to the extent there exists an event of default under the MSR Repo, and it contains certain trigger events, including breaches of representations, warranties or covenants and defaults under other of PMT’s credit facilities, that would require us to either (i) repay in full the outstanding loan amount under the MSR Repo or (ii) repurchase the ESS from PMT at fair
69
value. To the extent we are unable to repay the loan under the MSR Repo or repurchase the ESS, an event of default would exist under the MSR Repo, thereby entitling CSFB to liquidate the ESS and the related MSRs. In the event the ESS is liquidated as a result of certain actions 69 or inactions by us, PMT generally would be entitled to seek indemnity from us under the 4/30/15 Spread Acquisition Agreement.
Note Receivable from PMT
In connection with certain of the amendments and restatements described above, we entered into an underlying loan and security agreement with PMT, dated as of April 30, 2015, pursuant to which PMT may borrow up to $150 million from us for the purpose of financing ESS (the “Underlying LSA”).
The principal amount of the borrowings under the Underlying LSA is based upon a percentage of the market value of the ESS pledged by PMT, subject to the $150 million sublimit described above. Pursuant to the Underlying LSA, PMT granted us a security interest in all of its right, title and interest in, to and under the ESS pledged to secure the borrowings.
We have agreed with PMT in connection with the Underlying LSA that PMT is required to repay us the principal amount of borrowings plus accrued interest to the date of such repayment, and we are required, in turn, to repay CSFB the corresponding amount under the MSR Repo. Interest accrues on the note receivable from PMT relating to the Underlying LSA at a rate based on CSFB’s cost of funds under the MSR Repo. PMT was also required to pay us a fee for the structuring of the Underlying LSA in an amount equal to the portion of the corresponding fee paid by us to CSFB allocable to the increase in the maximum loan amount under the MSR Repo resulting from the ESS financing.
Loan Purchase Agreements
We have entered into a mortgage loan purchase agreement and a flow commercial mortgage loan purchase agreement with PMT. Currently, we use the mortgage loan purchase agreement for the purpose of selling to PMT prime jumbo residential mortgage loans originated by us through our consumer direct lending business. We use the flow commercial mortgage loan purchase agreement for the purpose of selling to PMT small balance commercial mortgage loans, including multifamily mortgage loans, originated by us as part of our commercial lending business. Each of the loan purchase agreements contains customary terms and provisions, including representations and warranties, covenants, repurchase remedies and indemnities. The purchase prices paid to us by PMT for such loans are market-based.
Reimbursement Agreement
In connection with the IPO of PMT’s common shares on August 4, 2009, we entered into an agreement with PMT pursuant to which PMT agreed to reimburse us for the $2.9 million payment that it made to the underwriters in such offering (the “Conditional Reimbursement”) if PMT satisfied certain performance measures over a specified period of time. Effective February 1, 2013, the parties amended the terms of the reimbursement agreement to provide for the reimbursement to us of the Conditional Reimbursement if PMT is required to pay us performance incentive fees under the management agreement at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The reimbursement of the Conditional Reimbursement is subject to a maximum reimbursement in any particular 12 month period of $1.0 million and the maximum amount that may be reimbursed under the agreement is $2.9 million.
In the event the termination fee is payable to us under the management agreement and we have not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.
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, a mortgage loan participation and sale agreement, two notes payable, ESS and a capital lease. The borrower under each of these facilities is PLS with the exception of the revolving credit agreement which is classified as a note payable and the capital lease, in which the borrower is PennyMac. All PLS obligations as previously noted are guaranteed by PennyMac.
70
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, 2016, 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.
All of the borrowings discussed above have short-term maturities that expire as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
Total |
|
Committed |
|
|
|
|||
Counterparty (1) |
|
indebtedness (2) |
|
facility size |
|
Facility |
|
Maturity date |
|
|||
|
|
(in thousands) |
|
|
|
|||||||
Credit Suisse First Boston Mortgage Capital LLC |
|
$ |
|
|
$ |
|
|
$ |
|
|
September 27, 2016 |
|
Credit Suisse First Boston Mortgage Capital LLC |
|
$ |
|
|
$ |
|
|
$ |
|
|
March 30, 2017 |
|
Bank of America, N.A. |
|
$ |
|
|
$ |
|
|
$ |
|
|
March 29, 2017 |
|
Bank of America, N.A. Mortgage Loan and
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
March 29, 2017 |
|
Citibank, N.A. |
|
$ |
|
|
$ |
|
|
$ |
|
|
October 20, 2016 |
|
Morgan Stanley Bank, N.A. |
|
$ |
|
|
$ |
|
|
$ |
|
|
July 26, 2016 |
|
Barclays Bank PLC |
|
$ |
|
|
$ |
|
|
$ |
|
|
December 2, 2016 |
|
Barclays Bank PLC |
|
$ |
— |
|
$ |
|
|
$ |
|
|
December 2, 2016 |
|
Credit Suisse AG |
|
$ |
|
|
$ |
|
|
$ |
|
|
December 28, 2016 |
|
|
(1) |
|
The borrowing with Credit Suisse First Boston Mortgage Capital LLC (with a committed amount of $407 million) is in the form of sales of participation certificates representing beneficial ownership in MSRs and ESS under agreements to repurchase. The borrowings with Credit Suisse First Boston Mortgage Capital LLC (with a committed amount of $300 million), Bank of America, N.A. (with a committed amount of $225 million), Citibank, N.A. and Morgan Stanley Bank, N.A. are in the form of sales of mortgage loans under agreements to repurchase. The borrowing with Bank of America, N.A. (with a total facility size of $250 million) is in the form of a mortgage loan participation and sale agreement. The borrowing with Barclays Bank PLC (with a total facility size of $100 million) is in the form of a note payable secured by MSRs. The borrowings with Barclays Bank PLC (with a total facility size of $300 million) is in the form of sales of assets under agreements to repurchase and a mortgage loan participation and sale agreement. The borrowing with Credit Suisse First AG (with a committed amount of $100 million) is in the form of a revolving credit agreement. |
|
(2) |
|
Represents outstanding indebtedness reduced by cash collateral as of March 31, 2016. |
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 credit risk, interest rate risk, prepayment risk, inflation risk and market value risk.
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 assumptions used; and do not incorporate other factors that would affect our overall
71
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 accounted for using the amortization method as of March 31, 2016, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing spread shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment speed shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
The following tables summarize the estimated change in fair value of MSRs accounted for using the fair value method as of March 31, 2016, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing spread shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment speed shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-loan servicing cost shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
72
Excess Servicing Spread Financing
The following tables summarize the estimated change in fair value of our excess servicing spread financing accounted for using the fair value method as of March 31, 2016, given several shifts in pricing spreads and prepayment speed (decrease in the liabilities’ values increases net income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing spread shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment speed shift in % |
|
-20% |
|
-10% |
|
-5% |
|
+5% |
|
+10% |
|
+20% |
|
||||||
|
|
(dollar amounts in thousands) |
|
||||||||||||||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Change in fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
Item 3. Quantitative and Qualitative Disclosures About Market Ris k
In response to this Item 3, the information set forth on pages 70 to 72 of this Report is incorporated herein by reference.
Item 4. Controls and Procedure s
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.
Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the three months ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
73
From time to time, we may be involved in various legal proceedings, claims and actions arising in the ordinary course of business. As of March 31, 2016 , we were not involved in any such legal proceedings, claims or actions that management believes would be reasonably likely to have a material adverse effect on us .
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, 2015, filed with the SEC on March 10, 2016 and our Quarterly Reports on Form 10-Q filed thereafter.
Item 2. Unregistered Sales of Equity Securities and Use of Proceed s
None.
Item 3. Defaults Upon Senior Securitie s
None.
Item 4. Mine Safety Disclosure s
Not applicable.
On May 3, 2016, we, through our subsidiary, Private National Mortgage Acceptance Company, LLC (“PennyMac”), entered into Schedule Number 002 (the “Schedule”) pursuant to that certain Master Lease Agreement, dated as of December 9, 2015 (the “Master Lease”), with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the terms of the Master Lease, we may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by our indirect controlled subsidiary, PennyMac Loan Services, LLC. Pursuant to the Schedule, PennyMac is financing equipment with an aggregate cost of approximately $12.7 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At the expiration of the three-year term, we are obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. PennyMac has elected to treat the Master Lease as a capital lease obligation as defined in Item 303(a)(5)(ii)(C) of Regulation S-K (17 CFR 229.303(a)(5)(ii)(C)).
The foregoing description of the Schedule and the Master Lease does not purport to be complete and is qualified in its entirety by reference to the full text of the Schedule, which has been filed as an exhibit to this Report, and the full text of the Master Lease, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on December 14, 2015..
74
Exhibit
|
|
Exhibit Description |
3.1 |
|
Amended and Restated Certificate of Incorporation of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
3.2 |
|
Amended and Restated Bylaws of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 19, 2013). |
|
|
|
4.1 |
|
Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Amendment No. 4 to Form S-1 Registration Statement as filed with the SEC on April 29, 2013). |
|
|
|
10.1 |
|
Fourth Amended and Restated Limited Liability Company Agreement of Private National Mortgage Acceptance Company, LLC, dated as of May 8, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.2 |
|
Exchange Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and Private National Mortgage Acceptance Company, LLC and the Company Unitholders (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.3 |
|
Tax Receivable Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. Private National Mortgage Acceptance Company, LLC and each of the Members (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.4 |
|
Registration Rights Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and the Holders (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.5 |
|
Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and BlackRock Mortgage Ventures, LLC (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.6 |
|
Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and HC Partners LLC (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.7† |
|
PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.8† |
|
PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 16, 2013). |
|
|
|
10.9† |
|
PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Executive Officers (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.10† |
|
PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Other Eligible Participants (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
75
|
|
|
10.11† |
|
PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on June 17, 2013). |
|
|
|
10.12† |
|
Form of PennyMac Financial Services, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.8 of the Registrant’s Amendment No. 2 to Form S-1 Registration Statement as filed with the SEC on April 5, 2013). |
|
|
|
10.13† |
|
Employment Agreement, dated December 8, 2015, among Stanford L. Kurland, Private National Mortgage Acceptance Company, LLC and PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). |
|
|
|
10.14† |
|
Employment Agreement, dated December 8, 2015, among David A. Spector, Private National Mortgage Acceptance Company, LLC and PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). |
|
|
|
10.15 |
|
Mortgage Banking and Warehouse Services Agreement, effective as of February 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.9 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.16 |
|
Amendment No. 1 to Mortgage Banking and Warehouse Services Agreement, dated as of March 1, 2013, by and between PennyMac Loan Services LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.31 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
|
|
10.17 |
|
Amendment No. 2 to Mortgage Banking and Warehouse Services Agreement, dated as of August 14, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 19, 2013). |
|
|
|
10.18 |
|
Amendment No. 3 to Mortgage Banking and Warehouse Services Agreement, dated as of December 15, 2015, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 16, 2015). |
|
|
|
10.19 |
|
Second Amended and Restated Flow Servicing Agreement, dated as of March 1, 2013, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.30 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
|
|
10.20 |
|
Amendment No. 1 to Second Amended and Restated Flow Servicing Agreement, dated as of November 14, 2013, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on November 20, 2013). |
|
|
|
10.21 |
|
Amendment No. 2 to Second Amended and Restated Flow Servicing Agreement, dated as of June 1, 2014, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.22 |
|
Amendment No. 3 to Second Amended and Restated Flow Servicing Agreement, dated as of December 11, 2014, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.22 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
76
10.23 |
|
Amendment No. 4 to Second Amended and Restated Flow Servicing Agreement, dated as of March 31, 2015, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
|
|
10.24 |
|
Amendment No. 5 to Second Amended and Restated Flow Servicing Agreement, dated as of September 1, 2015, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.25 |
|
MSR Recapture Agreement, effective as of February 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.11 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.26 |
|
Amendment No. 1 to MSR Recapture Agreement, dated as of August 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.21 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
10.27 |
|
Amended and Restated Management Agreement, dated as of February 1, 2013, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.12 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.28 |
|
Amendment Number One to Amended and Restated Management Agreement, dated as of December 15, 2015, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2015). |
|
|
|
10.29 |
|
Amended and Restated Underwriting Fee Reimbursement Agreement, dated as of February 1, 2013, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.13 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.30 |
|
Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013 (incorporated by reference to Exhibit 10.26 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.31 |
|
Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of September 30, 2013 (incorporated by reference to Exhibit 10.25 of the Registrant’s Form S-1/A Registration Statement as filed with the SEC on October 23, 2013). |
|
|
|
10.32 |
|
Amendment No. 2 to Master Spread Acquisition and MSR Servicing Agreement, dated as of November 14, 2013, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.27 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013). |
|
|
|
10.33 |
|
Amendment No. 3 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 19, 2014, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
77
|
|
|
10.34 |
|
Amendment No. 4 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.32 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
|
|
10.35 |
|
Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC dated as of December 30, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K/A as filed with the SEC on March 21, 2014). |
|
|
|
10.36 |
|
Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, dated as of June 1, 2014, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.31 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.37 |
|
Amendment No. 2 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.35 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
|
|
10.38 |
|
Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of April 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015). |
|
|
|
10.39 |
|
Amendment No. 1 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of August 26, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.37 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.40 |
|
Amendment No. 2 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.40 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.41 |
|
Master Spread Acquisition and MSR Servicing Agreement, dated as of December 19, 2014, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 1.01 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 24, 2014). |
|
|
|
10.42 |
|
Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.38 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
|
|
10.43 |
|
Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Co., LLC and PennyMac Loan Services, LLC, dated August 1, 2010 (incorporated by reference to Exhibit 10.14 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
|
|
10.45 |
|
Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Co., LLC (incorporated by reference to Exhibit 10.41 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
78
|
|
|
|
|
|
10.46 |
|
Second Amended and Restated Flow Servicing Agreement, dated as of August 1, 2008, as amended effective as of January 1, 2012, by and between PNMAC Mortgage Opportunity Fund Investors, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.15 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.47 |
|
Amendment No. 1 to the Second Amended and Restated Flow Servicing Agreement, dated as of December 5, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund Investors, LLC (incorporated by reference to Exhibit 10.43 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 ). |
|
|
|
10.48 |
|
Amended and Restated Flow Servicing Agreement, dated as of August 1, 2010, by and between PNMAC Mortgage Opportunity Fund, LP and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.27 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
|
|
10.49 |
|
Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.45 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.50 |
|
Investment Management Agreement, as amended and restated May 26, 2011, by and between PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.16 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.51 |
|
Investment Management Agreement, dated as of August 1, 2008, between PNMAC Mortgage Opportunity Fund Investors, LLC and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.17 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.52 |
|
Master Repurchase Agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.18 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.53 |
|
Amendment No. 1 to Master Repurchase Agreement, dated as of July 21, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
10.54 |
|
Amendment No. 2 to Master Repurchase Agreement, dated as of March 23, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
10.55 |
|
Amendment No. 3 to Master Repurchase Agreement, dated as of August 28, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
10.56 |
|
Amendment No. 4 to Master Repurchase Agreement, dated as of January 3, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
79
10.57 |
|
Amendment No. 5 to Master Repurchase Agreement, dated as of March 28, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
10.58 |
|
Amendment No. 6 to Master Repurchase Agreement, dated as of January 31, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on February 6, 2014). |
|
|
|
10.59 |
|
Amendment No. 7 to Master Repurchase Agreement, dated as of March 27, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.44 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
10.60 |
|
Amendment No. 8 to Master Repurchase Agreement, dated as of August 13, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.48 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014). |
|
|
|
10.61 |
|
Amendment No. 9 to Master Repurchase Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.49 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.62 |
|
Amendment No. 10 to Master Repurchase Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC. |
|
|
|
10.63 |
|
Guaranty, dated as of March 17, 2011, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A (incorporated by reference to Exhibit 10.50 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.64 |
|
Master Repurchase Agreement, dated as of June 26, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.20 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.65 |
|
Amendment Number One to the Master Repurchase Agreement, dated as of December 31, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.21 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.66 |
|
Amendment Number Two to the Master Repurchase Agreement, dated April 17, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.40 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
10.67 |
|
Amendment Number Three to the Master Repurchase Agreement, dated June 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.41 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
10.68 |
|
Amendment Number Four to the Master Repurchase Agreement, dated July 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.42 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
80
10.69 |
|
Amendment Number Five to the Master Repurchase Agreement, dated February 5, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.50 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
10.70 |
|
Amendment Number Six to the Master Repurchase Agreement, dated February 25, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.51 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
10.71 |
|
Amendment Number Seven to the Master Repurchase Agreement, dated July 24, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.54 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.72 |
|
Amendment Number Eight to the Master Repurchase Agreement, dated August 7, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.55 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.73 |
|
Amendment Number Nine to the Master Repurchase Agreement, dated September 8, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.58 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014). |
|
|
|
10.74 |
|
Amendment Number Ten to the Master Repurchase Agreement, dated July 6, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.69 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.75 |
|
Amendment Number Eleven to the Master Repurchase Agreement, dated August 3, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 5, 2015). |
|
|
|
10.76 |
|
Amendment Number Twelve to the Master Repurchase Agreement, dated September 7, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.77 |
|
Amendment Number Thirteen to the Master Repurchase Agreement, dated October 22, 2015, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on October 28, 2015). |
|
|
|
10.78 |
|
Guaranty Agreement, dated as of June 26, 2012, by Private National Mortgage Acceptance Company, LLC in favor of Citibank, N.A (incorporated by reference to Exhibit 10.61 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.79 |
|
Second Amended and Restated Loan and Security Agreement, dated as of March 27, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.22 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
10.80 |
|
Amendment No. 1 to Second Amended and Restated Loan Security Agreement, dated as of December 12, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
81
|
|
|
10.81 |
|
Amendment No. 2 to Second Amended and Restated Loan Security Agreement, dated as of March 22, 2013, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
|
|
|
10.82 |
|
Amendment No. 3 to Second Amended and Restated Loan Security Agreement, dated as of December 30, 2013, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on January 3, 2014). |
|
|
|
10.83 |
|
Amendment No. 4 to Second Amended and Restated Loan Security Agreement, dated as of October 31, 2014 among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.66 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.84 |
|
Third Amended and Restated Loan and Security Agreement, dated as of March 27, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 2, 2015). |
|
|
|
10.85 |
|
Amendment No. 1 to Third Amended and Restated Loan and Security Agreement, dated as of June 5, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.78 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.86 |
|
Amendment No. 2 to Third Amended and Restated Loan and Security Agreement, dated as of July 27, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.79 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.87 |
|
Amendment No. 3 to Third Amended and Restated Loan and Security Agreement, dated as of August 26, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.83 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.88 |
|
Master Spread Participation Agreement, dated as of March 27, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.73 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
|
|
10.89 |
|
Amendment No. 1 to Master Spread Participation Agreement, dated as of August 26, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.85 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.90 |
|
Amended and Restated Master Spread Participation Agreement, dated as of November 10, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC as the Initial Participant (incorporated by reference to Exhibit 10.189 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015) . |
|
|
|
10.91 |
|
Loan and Security Agreement, dated as of April 30, 2015, among PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015). |
|
|
|
10.92 |
|
Amendment No. 1 to Loan and Security Agreement, dated as of October 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.87 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
82
10.93 |
|
Amendment No. 2 to Loan and Security Agreement, dated as of November 10, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.92 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.94 |
|
Amendment No. 3 to Loan and Security Agreement, dated as of December 15, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.93 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.95 |
|
Amendment No. 4 to Loan and Security Agreement, dated as of January 28, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.94 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.96 |
|
Amendment No. 5 to Loan and Security Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC. |
|
|
|
10.97 |
|
Second Amended and Restated Guaranty, dated as of March 27, 2015, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 2, 2015). |
|
|
|
10.98 |
|
Third Amended and Restated Guaranty (Participation Certificates and Servicing), dated as of November 10, 2015, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on November 16, 2015). |
|
|
|
10.99 |
|
Master Repurchase Agreement (Participation Certificates and Servicing), dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 16, 2015). |
|
|
|
10.100 |
|
Amended and Restated Master Repurchase Agreement, dated as of May 3, 2013, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.36 of the Registrant’s Amendment No. 5 to Form S-1 Registration Statement as filed with the SEC on May 7, 2013). |
|
|
|
10.101 |
|
Amendment No. 1 to Amended and Restated Master Repurchase Agreement, dated as of September 5, 2013, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.47 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
10.102 |
|
Amendment No. 2 to Amended and Restated Master Repurchase Agreement, dated as of January 10, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.58 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
10.103 |
|
Amendment No. 3 to Amended and Restated Master Repurchase Agreement, dated as of March 13, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.59 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
83
10.104 |
|
Amendment No. 4 to Amended and Restated Master Repurchase Agreement, dated as of April 30, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 5, 2014). |
|
|
|
10.105 |
|
Amendment No. 5 to Amended and Restated Master Repurchase Agreement, dated as of May 22, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.65 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.106 |
|
Amendment No. 6 to Amended and Restated Master Repurchase Agreement, dated as of June 3, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.66 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.107 |
|
Amendment No. 7 to Amended and Restated Master Repurchase Agreement, dated as of October 31, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.75 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.108 |
|
Amendment No. 8 to Amended and Restated Master Repurchase Agreement, dated as of December 23, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.76 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.109 |
|
Amendment No. 9 to Amended and Restated Master Repurchase Agreement, dated as of October 30, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.98 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
|
|
|
10.110 |
|
Amendment No. 10 to Amended and Restated Master Repurchase Agreement, dated as of November 10, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.108 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.111 |
|
Amendment No. 11 to Amended and Restated Master Repurchase Agreement, dated as of December 15, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.109 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.112 |
|
Amendment No. 12 to Amended and Restated Master Repurchase Agreement, dated as of January 28, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.110 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.113 |
|
Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 6, 2016). |
|
|
|
84
10.114 |
|
Guaranty, dated as of August 14, 2009, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.77 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 ). |
|
|
|
10.115 |
|
Master Repurchase Agreement, dated as of July 2, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013). |
|
|
|
10.116 |
|
Amendment Number One to the Master Repurchase Agreement, dated as of August 26, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.49 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
|
|
|
10.117 |
|
Amendment Number Two to the Master Repurchase Agreement, dated as of January 28, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.63 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
|
|
|
10.118 |
|
Amendment Number Three to the Master Repurchase Agreement, dated as of June 30, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.70 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.119 |
|
Amendment Number Four to the Master Repurchase Agreement, dated as of June 29, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.98 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.120 |
|
Amendment Number Five to the Master Repurchase Agreement, dated as of July 27, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 27, 2015). |
|
|
|
10.121 |
|
Amendment Number Six to the Master Repurchase Agreement, dated as of November 9, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.118 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.122 |
|
Guaranty Agreement, dated as of July 2, 2013, by Private National Mortgage Acceptance Company, LLC in favor of Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013). |
|
|
|
10.123 |
|
Mortgage Loan Participation Purchase and Sale Agreement, dated as of August 13, 2014, by and among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Bank of America, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.124 |
|
Amendment No. 1 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.84 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
|
|
10.125 |
|
Amendment No. 2 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 22, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.122 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
85
10.126 |
|
Amendment No. 3 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC. |
|
|
|
|
|
|
10.127 |
|
Amended and Restated Guaranty, dated as of August 13, 2014, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A. (incorporated by reference to Exhibit 10.73 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
|
|
10.128 |
|
Mortgage Loan Purchase Agreement, dated as of September 25, 2012, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.124 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.129 |
|
Flow Sale Agreement, dated as of June 16, 2015, by and between PennyMac Corp. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.104 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
|
|
|
10.130 |
|
Flow Commercial Mortgage Loan Purchase Agreement, dated as of December 1, 2015, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.126 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.131 |
|
Servicing Agreement, dated as of July 13, 2015, between PennyMac Corp., PennyMac Holdings, LLC, any other parties signing this Agreement as owner of Mortgage Loans listed in Schedule I and any New Owners, PennyMac Loan Services, LLC, and Midland Loan Services, a division of PNC Bank, National Association (incorporated by reference to Exhibit 10.127 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.132 |
|
Commercial Mortgage Servicing Oversight Agreement, dated as of December 15, 2015, among PennyMac Corp., PennyMac Holdings, LLC, and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.128 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
|
|
|
10.133 |
|
Master Repurchase Agreement, dated as of December 4, 2015, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). |
|
|
|
10.134 |
|
Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 4, 2015, between PennyMac Loan Services, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). |
|
|
|
10.135 |
|
Loan and Security Agreement, dated as of December 4, 2015, among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). |
|
|
|
10.136 |
|
Amendment Number One to the Loan and Security Agreement, dated as of February 26, 2016, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on March 3, 2016) |
|
|
|
10.137 |
|
Master Lease Agreement No. 30350-90000, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). |
86
87
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 9, 2016 |
By: |
/S/ STANFORD L. KURLAND |
|
|
Stanford L. Kurland |
|
|
Chairman of the Board of Directors and Chief Executive Officer |
|
|
|
Dated: May 9, 2016 |
By: |
/S/ ANNE D. McCALLION |
|
|
Anne D. McCallion |
|
|
Chief Financial Officer |
88
EXECUTION
AMENDMENT NO. 3
TO MORTGAGE LOAN PARTICIPATION PURCHASE AND SALE AGREEMENT
Amendment No. 3 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 29, 2016 (this “ Amendment ”), by and among Bank of America, N.A. (“ Purchaser ”), PennyMac Loan Services, LLC (“ Seller ”) and Private National Mortgage Acceptance Company, LLC (“ Guarantor ”).
RECITALS
Purchaser, Guarantor and Seller are parties to that certain Mortgage Loan Participation Purchase And Sale Agreement, dated as of August 13, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “ Existing MLPSA ”; and as further amended by this Amendment, the “ MLPSA ”). The Guarantor is a party to that certain Amended and Restated Guaranty (as amended, restated, supplemented or otherwise modified from time to time, the “ Guaranty ”), dated as of August 13, 2014, made by Guarantor in favor of Purchaser.
Purchaser, Seller and Guarantor have agreed, subject to the terms and conditions of this Amendment, that the Existing MLPSA be amended to reflect certain agreed upon revisions to the terms of the Existing MLPSA. As a condition precedent to amending the Existing MLPSA, Purchaser has required Guarantor to ratify and affirm the Guaranty on the date hereof.
Accordingly, Purchaser, Seller and Guarantor hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing MLPSA is hereby amended as follows:
Section 1. Definitions . Section 1 of the Existing MLPSA is hereby amended by:
1.1 deleting the definitions of “ Discount Rate ”, “ Effective Date ”, “ Expiration Date ”, and “ Security Issuance Failure ” in their entirety and replacing them with the following:
“ Discount Rate ”: With respect to each Participation Certificate, a discount rate determined as of the related Purchase Date equal to (a) the greater of (i) One-Month LIBOR, and (ii) the LIBOR Floor, plus (b) the Applicable Percentage. Notwithstanding the foregoing, under no circumstances shall the Discount Rate be less than zero.
“ Effective Date ”: March 29, 2016 .
“ Expiration Date ”: The earlier of (i) March 29, 2017, (ii) at Purchaser’s option, upon the occurrence of an Event of Default, and (iii) the date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law .
“ Security Issuance Failure ”: The Failure of the Security (a) to be issued for any reason within the reasonable control of the Seller (as determined by Purchaser in its sole good faith discretion), including but not limited to Seller’s failure to perform any of its obligations under this Agreement or any other Program Document or failure to perform
in Strict Compliance with the related Agency Program, (b) to be issued for any reason outside of the reasonable control of the Seller (as determined by Purchaser in its sole good faith discretion), including, but not limited to, third party systems failures, or (c) to be Delivered to Purchaser or its designee (such designee being properly notified it is holding such Security for Purchaser); provided, that solely with respect to clauses (b) and (c) a Security Issuance Failure shall not have occurred to the extent (i) Seller has performed its obligations under this Agreement and each other Program Document; (ii) Seller has performed in Strict Compliance with the related Agency Program; (iii) such failure to be issued or Delivered arises solely from the acts or omissions of a party other than the Seller (as determined by Purchaser in its sole good faith discretion) and (iv) such failure is cured within one (1) Business Day of Seller’s notice or knowledge of such failure.
1.2 adding the following definition in its proper alphabetical order:
“ LIBOR Floor ”: 0%.
Section 2. Events of Default. Section 6(e) of the Existing MLPSA is hereby amended by deleting the “.” at the end of subclause (xii) and adding the following:
(xiii) Seller’s or Guarantor’s audited financial statements or notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or Guarantor, as applicable, as a “going concern” or reference of similar import;
(xiv) Seller has, without the express written consent of Purchaser, entered into any settlement with, or consented to the issuance of a consent order by, any Governmental Authority in which the fines, penalties, settlement amounts or any other amounts owed by Seller thereunder exceeds $5,000,000 in the aggregate.
An Event of Default shall be deemed to be continuing unless expressly waived by Purchaser in writing.
Section 3. Fees and Expenses . Seller hereby agrees to pay to Purchaser, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Purchaser in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
Section 4. Conditions Precedent . This Amendment shall become effective as of the date hereof (the “ Amendment Effective Date ”), subject to the satisfaction of the following conditions precedent:
4.1 Delivered Documents . On the Amendment Effective Date, the Purchaser shall have received this Amendment, executed and delivered by a duly authorized officer of Purchaser, Seller and Guarantor.
2
4.2 Facility Fee . Seller shall have paid to Purchaser in immediately available funds that portion of the Facility Fee due and payable on the Amendment Effective Date.
Section 5. Limited Effect . Except as expressly amended and modified by this Amendment, the Existing MLPSA shall continue to be, and shall remain, in full force and effect in accordance with its terms.
Section 6. Counterparts . This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.
Section 7. Severability . Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
Section 8. GOVERNING LAW . THE AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 9. Reaffirmation of Guaranty . The Guarantor hereby (i) agrees that the liability of Guarantor or rights of Purchaser under the Guaranty shall not be affected as a result of this Amendment, (ii) ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and (iii) acknowledges and agrees that such Guaranty is and shall continue to be in full force and effect.
[SIGNATURE PAGE FOLLOWS]
3
IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
|
Bank of America, N.A ., as Purchaser |
|
|
|
|
|
|
|
|
By: |
/s/ Adam Robitshek |
|
|
Name: Adam Robitshek |
|
|
Title: Vice President |
|
|
|
|
|
|
|
PENNYMAC LOAN SERVICES, LLC , as |
|
|
Seller |
|
|
|
|
|
By: |
/s/ Pamela Marsh |
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
|
|
|
|
|
|
|
PRIVATE NATIONAL MORTGAGE |
|
|
ACCEPTANCE COMPANY, LLC , as |
|
|
Guarantor |
|
|
|
|
|
By: |
/s/ Pamela Marsh |
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
Signature Page to Amendment No. 3 to Mortgage Loan Participation Purchase and Sale Agreement
|
|
|
|
|
|
|
|
|
Schedule (Lease Intended as Security) |
|
|
Schedule |
|
Banc of America Leasing & Capital, LLC |
|
to Master Lease Agreement |
|
|
Number 002 |
This Schedule (“ Schedule ”), dated as of May 4, 2016 , between Banc of America Leasing & Capital, LLC (“ Lessor ”) and Private National Mortgage Acceptance Company, LLC (“ Lessee ”) is executed pursuant to Master Lease Agreement Number 30350-90000 dated December 9, 2015 (the “ Master Lease ”), incorporated in this Schedule by this reference. Unless otherwise defined in this Schedule, capitalized terms used in this Schedule have the respective meanings assigned to such terms in the Master Lease. If any provision of this Schedule conflicts with any provision of the Master Lease, the provisions contained in this Schedule shall prevail. Lessee hereby authorizes Lessor to insert the serial numbers and other identification data of the Equipment, dates, and other omitted factual matters or descriptions in this Schedule.
1. Description of Equipment; Location. The Equipment subject to this Schedule, which has a cost to Lessor in the aggregate of $12,651,408.36 , which may include taxes, shipping, installation and other related expenses, if any (collectively “ Lessor’s Cost ”), are as follows:
Location of Equipment . The Equipment will be located or (in the case of over-the-road vehicles) based at the following locations:
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Address |
|
City |
|
County |
|
State |
|
ZIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See attached Exhibit A |
|
|
|
|
2. Acceptance . Lessee acknowledges and represents that the Equipment (a) has been delivered to, received and inspected by Lessee, (b) is in good operating order, repair, condition and appearance, (c) is of the manufacture, design and capacity selected by Lessee and are suitable for the purposes for which the Equipment are leased, and are acceptable and satisfactory to Lessee, (d) do not require any additions or modifications to make them suitable for use, other than ancillary modifications or additions normally made by lessees of similar assets, and are available for use and lease by Lessee and Lessor, and (e) have been irrevocably accepted as “Equipment” leased by Lessee under this Schedule as of the date written below (the “ Acceptance Date ”). Lessee hereby authorizes and directs Lessor to reimburse Lessee or pay Vendors for the purchase price of the Equipment in accordance with Vendors’ invoices therefor, receipt and approval of which are hereby reaffirmed by Lessee.
3. Lease Term . The original Lease Term for the Lease of Equipment under this Schedule consist of: (i) an “ Interim Term ” (if any) beginning on the Acceptance Date, and continuing through and including the day preceding the Base Date; and (ii) a “ Base Term ” of thirty-six ( 36 ) months, beginning on May 4, 2016 (the “ Base Date ”).
4. Rent. Rent payable under this Schedule consists of: (i) “Interim Rent”, which shall be due Lessor for each day of the interim Term and shall equal the daily equivalent of the initial Base Rent, and payable on the Base Date; and (ii) “Base Rent”, which shall be payable in arrears in thirty-six (36) consecutive monthly installments of the payment amount and interest (the “ Payments ”) commencing on _ June 4, 2016 _ ( the “Initial Payment” ). Each Payment shall be in the principal amount of $ 351,428.01 , plus interest as described in the following paragraph, and due and payable on the same day of the month as the Initial Payment set forth above in each succeeding payment period (each, a “ Payment Date ”) during the Lease Term. All interest hereunder shall be calculated on the basis of a year of 360 days comprised of 12 months of 30 days each.
Interest shall accrue on the entire Lessor’s Cost of this Schedule outstanding for any calendar month or portion thereof as reduced by each Payment of principal, at a per annum rate of interest equal to (i) two percent (2%) plus the rate of interest equal to the “average of interbank offered rates for dollar deposits in the London Market based on quotations of sixteen (16) major banks” for a term of thirty days as published in the Wall Street Journal under a heading entitled “Money Rates, London Interbank Offered Rates (LIBOR)” or any future or substitute heading, on the fifteenth day of the month preceding the month in which the Payment Date occurs for the applicable Payment, or (ii) if less, the highest rate of interest permitted by applicable law (the “ Interest Rate ”) .
Page 1 of 3
5. Tax Exemption; Personal Property Taxes. Lessor will invoice Lessee for all sales and use taxes as and when due and payable in accordance with applicable law, unless Lessee timely delivers to Lessor a valid exemption certificate with respect to such taxes. Delivery of such certificate shall constitute Lessee’s representation and warranty that no such taxes shall become due and payable with respect to the Equipment, and Lessee shall indemnify and hold harmless Lessor from and against any and all liability or damages, including late charges and interest which Lessor may incur by reason of the assessment of such taxes. Notwithstanding any provision to the contrary in this Lease, Lessee shall file directly with all appropriate taxing authorities all declarations, returns, inventories and other documentation with respect to any personal property taxes due or to become due with respect to the Equipment (“ Taxes ”) and shall pay on or before the date when due all such Taxes assessed, billed or otherwise payable with respect to such Equipment directly to such taxing authorities. Upon request by Lessor, Lessee shall provide Lessor with copies of satisfactory documentation and proof of payment of such Taxes, and any penalties and interest thereon, and any other liabilities and damages that Lessor may incur arising out of the failure of Lessee to pay when due such Taxes. The indemnity and covenants set forth herein shall continue in full force and effect and shall survive the expiration or earlier termination of this Lease.
6. Status of Lease as “Lease Intended as Security.” Any provision of the Master Lease to the contrary notwithstanding, Lessor and Lessee acknowledge and agree that the Lease of Equipment under this Schedule is and is intended to be a transaction which creates a security interest in personal property in favor of Lessor, and shall be construed to constitute a lease intended as security for all commercial law and federal income and state tax purposes. Lessee and Lessor further acknowledge and agree that: (i) any right, title or interest of Lessor in and to the Equipment is held for collateral security purposes and that Lessor shall be entitled to all of the rights and remedies of a secured party under Article 9 of the UCC and otherwise provided under applicable law; (ii) Section 7(c) of the Master Lease shall not be applicable to the Lease evidenced by this Schedule; (iii) Lessee shall be treated for both federal and state income tax purposes as the owner of the Equipment and shall be entitled to take all of the tax benefits (including, without limitation, all depreciation deductions) that may be available with respect to the Equipment; (iv) upon the payment and performance of all of Lessee’s Obligations under this Schedule, and provided that there then exists no Event of Default, Lessee shall not be obligated to return the Equipment to Lessor pursuant to the provisions of Section 8 of the Master Lease; and (v) the last sentence of Section 12(a) of the Master Lease as it relates to the Lease evidenced by this Schedule is deleted and replaced with the following: “ Any payments received by Lessor after the occurrence of an Event of Default, including proceeds of any disposition of Equipment, shall be applied in the following order: (A) to all costs, and (including Attorneys’ Fees), charges and expenses incurred in taking, removing, holding, repairing and selling or leasing the Equipment or other Collateral or enforcing the provisions hereof ; (B) to the extent not previously paid by Lessee, to pay Lessor for any damages then remaining unpaid hereunder; and (C) the balance, if any, shall be paid to Lessee and/or other parties lawfully entitled thereto.”
7. Further Representations and Agreements. Lessee represents, warrants and agrees as follows: (a) all representations and warranties of Lessee contained in the Master Lease are restated as of the Acceptance Date and are true and correct as of such date; (b) there has been no material adverse change in the operations, business, properties or condition (financial or otherwise) of Lessee or any Guarantor since November 16, 2015; (c) there exists no Default or Event of Default as of the Acceptance Date; and (d) the operation and maintenance of any Equipment in the ordinary course by Lessee do not require the entry into any software or other intellectual property rights agreement with any licensor or other person, except as disclosed to Lessor in writing prior to the Acceptance Date.
8. End of Lease Term Purchase. At the end of the Base Term, or within 15 days thereafter, Lessee shall purchase the Equipment on an “AS IS, WHERE IS” quitclaim basis, without representations or warranties of any kind, express or implied, for the cash amount of one dollar ($1.00) (“ Purchase Price ”). Lessee shall pay Lessor the Purchase Price on or before the expiration of the Base Term in immediately available funds.
BANC OF AMERICA LEASING & CAPITAL, LLC |
Private National Mortgage Acceptance Company, LLC |
By: |
/c/ Terri J. Preston |
|
By: |
/c/ Pamela Marsh |
Printed Name: |
Terri J. Preston |
|
Printed Name: |
Pamela Marsh |
Title: |
Vice President, BALC |
|
Title: |
Managing Director, Treasurer |
|
|
Acceptance Date: |
May 4, 2016 |
Where multiple counterpart originals of this Schedule have been executed by Lessee and Lessor, only the counterpart marked “Lessor’s Copy” shall be deemed chattel paper evidencing the Lease of Equipment subject to this Schedule, and a security interest in such chattel paper and Lease may be perfected through the transfer and possession of the “Lessor’s Copy” of such Schedule only, without the need
Page 2 of 3
to transfer possession of the Master Lease, any Related Agreement or any other document executed and delivered in connection with this Lease.
Page 3 of 3
EXECUTION
AMENDMENT NO. 10
TO MASTER REPURCHASE AGREEMENT
Amendment No. 10 to Master Repurchase Agreement, dated as of March 29, 2016 (this “ Amendment ”), by and among Bank of America, N.A. (“ Buyer ”), PennyMac Loan Services, LLC (“ Seller ”) and Private National Mortgage Acceptance Company, LLC (the “ Guarantor ”).
RECITALS
Buyer, Seller and Guarantor are parties to that certain Master Repurchase Agreement, dated as of March 17, 2011 (as amended, restated, supplemented or otherwise modified from time to time, the “ Existing Master Repurchase Agreement ”; and as further amended by this Amendment, the “ Master Repurchase Agreement ”). The Guarantor is a party to that certain Amended and Restated Guaranty, dated as of August 13, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “ Guaranty ”), made by Guarantor in favor of Buyer.
Buyer, Seller and Guarantor have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement. As a condition precedent to amending the Existing Master Repurchase Agreement, Buyer has required Guarantor to ratify and affirm the Guaranty on the date hereof.
Accordingly, Buyer, Seller and Guarantor hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
Section 1. Definitions . Section 2 of the Existing Master Repurchase Agreement is hereby amended by:
1.1 deleting the definitions of “ Mortgage File ” and “ Mortgage Loan ” in their entirety and replacing them with the following:
“ Mortgage File ” means, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and set forth in Exhibit 12 to the Custodial Agreement.
“ Mortgage Loan ” means any mortgage loan of a Type identified on any schedule attached to the Transactions Terms Letter, which mortgage loan may be either a Dry Loan or a Wet Mortgage Loan which is a fixed or floating rate, one to four family residential mortgage loan evidenced by a promissory note and secured by a mortgage, which satisfies the requirements set forth in (a) the Underwriting Guidelines and (b) Section 13(b) hereof; provided, however, that, except as expressly approved in writing by Buyer, Mortgage Loans shall not include any High Cost Mortgage Loans.
1.2 adding the following definition in its proper alphabetical order:
“ TILA-RESPA Integrated Disclosure Rule ” means the Truth-in-Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Financial Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.
Section 2. Events of Default . Section 15 of the Existing Master Repurchase Agreement is hereby amended by:
2.1 deleting subsection (r)(3) in its entirety and replacing it with the following:
(3) (A) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (B) a determination that a Plan is “at risk” (within the meaning of Section 303 of ERISA) or any Lien in favor of the PBGC or a Plan shall arise on the assets of Seller or any ERISA Affiliate, (C) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of Buyer, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (D) Seller, Guarantor or any ERISA Affiliate shall file an application for a minimum funding waiver under section 302 of ERISA or section 412 of the Code with respect to any Plan, (E) any obligation for post-retirement medical costs (other than as required by COBRA) exists, or (F) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (A) through (F) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect or (G) the assets of Seller, Guarantor, any Subsidiary of Seller or Guarantor, or any ERISA Affiliate become plan assets within the meaning of 29 CFR 2510.3-101 as modified by section 3(42) of ERISA.
2.2 adding the following new subsection:
(s) Settlements . Seller has, without the express written consent of Buyer, entered into any settlement with, or consented to the issuance of a consent order by, any Governmental Authority in which the fines, penalties, settlement amounts or any other amounts owed by Seller thereunder exceeds $5,000,000 in the aggregate.
Section 3. Reports . Section 17 of the Existing Master Repurchase Agreement is hereby amended by deleting subsection (a)(3) in its entirety and replacing it with the following:
(3) as soon as available and in any event within ninety (90) days after the end of each fiscal year of Guarantor and Seller, the consolidated balance sheets of Guarantor and its consolidated Subsidiaries and the balance sheet of Seller, each as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for Guarantor and its consolidated Subsidiaries and Seller for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an unqualified opinion thereon of independent certified public
2
accountants of recognized national standing, which opinion and the scope of audit shall be acceptable to Buyer in its sole discretion, shall have no “going concern” qualification and shall state that said consolidated financial statements or financial statements, as applicable, fairly present the consolidated financial condition or financial condition, as applicable, and results of operations of Guarantor and its respective consolidated Subsidiaries or Seller, as applicable, as at the end of, and for, such fiscal year in accordance with GAAP;
Section 4. Notice Information . Section 20 of the Existing Master Repurchase Agreement is hereby amended by deleting the notice information for Buyer, Seller and Guarantor in its entirety and replacing it with the following:
|
|
|
If to Seller: |
|
|
|
PennyMac Loan Services, LLC |
|
3043 Townsgate Road |
|
Westlake Village, California 91361 |
|
Attention: Pamela Marsh/Kevin Chamberlain |
|
Phone Number: (805) 330-6059/(818) 746-2877 |
|
E-mail: pamela.marsh@pnmac.com; kevin.chamberlain@pnmac.com |
|
|
|
If to Guarantor: |
|
|
|
Private National Mortgage Acceptance Company, LLC |
|
3043 Townsgate Road |
|
Westlake Village, California 91361 |
|
Attention: Pamela Marsh/Kevin Chamberlain |
|
Phone Number: (805) 330-6059/(818) 746-2877 |
|
E-mail: pamela.marsh@pnmac.com; kevin.chamberlain@pnmac.com |
|
|
|
If to Buyer: |
|
|
|
|
|
31303 Agoura Road |
|
Mail Code: CA6-917-02-63 |
|
Westlake Village, California 91361 |
|
Attention: Adam Gadsby, Managing Director |
|
Telephone: (818) 225-6541 |
|
Facsimile: (213) 457-8707 |
|
Email: Adam.Gadsby@baml.com |
|
|
|
With copies to: |
|
|
|
Bank of America, N.A. |
|
One Bryant Park, 11th Floor |
|
Mail Code: NY1-100-11-01 |
|
New York, New York 10036 |
3
|
|
|
Attention: Eileen Albus, Director, Mortgage Finance |
|
Telephone: (646) 855-0946 |
|
Facsimile: (646) 855-5050 |
|
Email: Eileen.Albus@baml.com |
|
|
|
Bank of America, N.A. |
|
One Bryant Park |
|
Mail Code: NY1-100-17-01 |
|
New York, New York 10036 |
|
Attention: Amie Davis, Assistant General Counsel |
|
Telephone: (646) 855-0183 |
|
Fax: (704) 409-0337 |
|
E-mail: Amie.Davis@bankofamerica.com |
Section 5. Periodic Due Diligence Review . Section 35 of the Existing Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
35. Periodic Due Diligence Review
Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to Seller and the Mortgage Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable (but no less than one (1) Business Day’s) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession or under the control of Seller and/or Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may purchase Mortgage Loans from Seller based solely upon the information provided by Seller to Buyer in the Asset Data Record and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Mortgage Loans purchased in a Transaction, including, without limitation, ordering Broker’s price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan. Buyer may underwrite such Mortgage Loans itself or engage a third party underwriter, approved by Buyer in its sole discretion, to perform such underwriting. Seller agrees to cooperate with Buyer and any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or
4
under the control, of Seller. Seller further agrees that Seller shall pay all out-of-pocket costs and expenses incurred by Buyer in connection with Buyer’s activities pursuant to this Section 35 (“ Due Diligence Costs ”) ; provided that such Due Diligence Costs shall be subject to the Due Diligence Cap per calendar year. For the avoidance of doubt, the Due Diligence Cap shall apply solely to costs incurred by Buyer in connection with its due diligence of Seller and Guarantor in connection with the extension of the Effective Date and Buyer’s review of the Mortgage Files, credit files and servicing files related to Purchased Mortgage Loans prior to the Effective Date. Such Due Diligence Cap shall not apply to the extent Buyer requests the review of additional Purchased Mortgage Loans or if a Default or Event of Default shall have occurred, in which case Buyer shall have the right to perform due diligence, at the sole expense of Seller without regard to the Due Diligence Cap .
Section 6. Representations and Warranties . Schedule 1 of the Existing Master Repurchase Agreement is hereby amended by:
6.1 adding the following paragraph at the beginning of such schedule:
Representations and Warranties Concerning Purchased Mortgage Loans . Seller represents and warrants to and covenants with Buyer that the following are true and correct with respect to each Purchased Mortgage Loan as of the related Purchase Date through and until the date on which such Purchased Mortgage Loan is repurchased by Seller. With respect to those representations and warranties which are made to the best of Seller’s knowledge, if it is discovered by Seller or Buyer that the substance of such representation and warranty is inaccurate, notwithstanding Seller’s lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty.
6.2 adding the following new clause:
(kkk) TRID Compliance . To the extent applicable, effective with respect to applications taken on or after October 3, 2015, each Mortgage Loan was originated in compliance with the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure Rule.
Section 7. Fees and Expenses . Seller hereby agrees to pay to Buyer, on demand, any and all reasonable out-of-pocket fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
Section 8. Conditions Precedent . This Amendment shall become effective as of the date hereof, upon Buyer’s receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer, Seller and Guarantor.
5
Section 9. Limited Effect . Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
Section 10. Counterparts . This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.
Section 11. Severability . Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
Section 12. GOVERNING LAW . THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 13. Reaffirmation of Guaranty . The Guarantor hereby (i) agrees that the liability of Guarantor or rights of Buyer under the Guaranty shall not be affected as a result of this Amendment, (ii) ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and (iii) acknowledges and agrees that such Guaranty is and shall continue to be in full force and effect.
[SIGNATURE PAGE FOLLOWS]
6
IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
|
BANK OF AMERICA, N.A., |
|
|
|
as Buyer |
|
|
|
|
|
|
|
By: |
/s/ Adam Robitshek |
|
|
Name: Adam Robitshek |
|
|
Title: Vice President |
|
|
|
|
|
|
|
Pennymac Loan Services, LLC , |
|
|
|
as Seller |
|
|
|
|
|
|
|
By: |
/s/ Pamela Marsh |
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
|
|
|
|
|
|
|
|
|
|
Private National Mortgage |
|
|
|
Acceptance Company, LLC , |
|
|
as Guarantor |
|
|
|
|
|
|
|
By: |
/s/ Pamela Marsh |
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
Signature Page to Amendment No. 10 to Master Repurchase Agreement
UNDERLYING ESS LSA |
EXECUTION |
AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
(PARTICIPATION CERTIFICATES AND SERVICING)
This Amendment No. 5 to Loan and Security Agreement (this “ Amendment ”) is made as of March 31, 2016 by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (“ CS ”), PENNYMAC LOAN SERVICES, LLC (the “ Lender ”) and PENNYMAC HOLDINGS, LLC (the “ Borrower ”).
Lender and Borrower previously entered into a Loan and Security Agreement, dated as of April 30, 2015 (as amended by Amendment No. 1 to Loan and Security Agreement, dated as of October 30, 2015, Amendment No. 2 to Loan and Security Agreement, dated as of November 10, 2015, Amendment No. 3 to Loan and Security Agreement, dated as of December 15, 2015, and by Amendment No. 4 to Loan and Security Agreement, dated as of January 28, 2016 the “ Existing Agreement ”, and as further amended by this Amendment, the “ Agreement ”).
Lender, Borrower and CS have agreed, subject to the terms and conditions of this Amendment, that the Existing Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Agreement.
Accordingly, Lender, Borrower and CS hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Agreement is hereby amended as follows:
SECTION 1. Definitions . Section 1.01 of the Existing Agreement is hereby amended by deleting the definition of “ Termination Date ” in its entirety and replacing it with the following in its proper alphabetical order:
“Termination Date” means the earliest of (a) September 27, 2016; and (b) the Obligations having become immediately due and payable pursuant to Section 7.03 of the Loan Agreement.
SECTION 2. Conditions Precedent . This Amendment shall become effective as of the date hereof (the “ Amendment Effective Date ”), subject to the satisfaction of the following conditions precedent:
2.1 Delivered Documents . On the Amendment Effective Date, Lender shall have received the following documents, each of which shall be satisfactory to Lender in form and substance:
(a) this Amendment, executed and delivered by the duly authorized officers of the Lender and Borrower; and
(b) such other documents as Lender or counsel to Lender may reasonably request.
SECTION 3. Representations and Warranties . Borrower hereby represents and warrants to Lender that Borrower is in compliance with all the terms and provisions set forth in
the Agreement on its part to be observed or performed, and that no Event of Default under the Agreement has occurred or is continuing and hereby confirms and reaffirms the representations and warranties contained in Article III of the Agreement.
SECTION 4. Limited Effect . Except as expressly amended and modified by this Amendment, the Existing Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 5. Severability . Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 6. Counterparts . This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 7. GOVERNING LAW . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
2
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers or trustees as of the date first above written.
|
CREDIT SUISSE FIRST BOSTON |
|
|
|
MORTGAGE CAPITAL LLC |
|
|
|
|
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
Signature Page to Amendment No. 5 to Loan and Security Agreement
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers or trustees as of the date first above written.
|
PENNYMAC HOLDINGS, LLC |
|
|
|
|
|
|
|
|
By: |
|
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
|
|
|
|
|
|
|
PENNYMAC LOAN SERVICES, LLC |
|
|
|
|
|
|
|
|
By: |
|
|
|
Name: Pamela Marsh |
|
|
Title: Managing Director, Treasurer |
Signature Page to Amendment No. 5 to Loan and Security Agreement
CERTIFICATION
I, Stanford L. Kurland, 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. [Intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];
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 9, 2016 |
|
|
|
/S/ Stanford L. Kurland |
|
Stanford L. Kurland |
|
Chairman of the Board and Chief Executive Officer |
|
CERTIFICATION
I, Anne D. McCallion, 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. [Intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];
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 9, 2016 |
|
|
|
/S/ Anne D. McCallion |
|
Anne D. McCallion |
|
Chief Financial Officer |
|
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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanford L. Kurland, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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.
5 |
|
/S/ Stanford L. Kurkland |
|
Stanford L. Kurland |
|
Chairman of the Board and Chief Executive Officer |
|
May 9, 2016 |
|
|
|
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.
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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anne D. McCallion, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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.
|
|
/S/ Anne D. McCallion |
|
Anne D. McCallion |
|
Chief Financial Officer |
|
May 9, 2016
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.