PennyMac Financial Services, Inc. (Form: 10-Q, Received: 05/07/2020 17:16:20)

Quarter ended March 31,

(in thousands)

Real estate acquired in settlement of loans

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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, 2020

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

For the transition period from to

Commission File Number: 001-38727

PennyMac Financial Services, Inc.

(formerly known as New PennyMac Financial Services, Inc.)

(Exact name of registrant as specified in its charter)


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


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

(818) 224-7442

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

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

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

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


Class		Outstanding at May 6, 2020
Common Stock, $0.0001 par value		79,232,448

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PENNYMAC FINANCIAL SERVICES, INC.

FORM 10-Q

March 31, 2020

TABLE OF CONTENTS


		Page
	Special Note Regarding Forward-Looking Statements	3

PART I. FINANCIAL INFORMATION		5

Item 1.	Financial Statements (Unaudited):	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Changes in Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71
Item 4.	Controls and Procedures	72

PART II. OTHER INFORMATION		73

Item 1.	Legal Proceedings	73
Item 1A.	Risk Factors	73
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76

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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, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2020.

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

our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, pandemics, including Covid-19 coronavirus pandemic, or other events;

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;

certain banking regulations that may limit our business activities;

foreclosure delays and changes in foreclosure practices;

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

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

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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;

any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all;

changes in prevailing interest rates;

increases in loan delinquencies and defaults;

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

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

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

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

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

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

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

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

the effect of public opinion on our reputation;

our recent growth;

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

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

our ability to detect misconduct and fraud;

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

our ability to mitigate cybersecurity risks and cyber incidents;

our ability to pay dividends to our stockholders; and

our organizational structure and certain requirements in our charter documents.

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

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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	March 31,		December 31,
	2020		2019
	(in thousands, except share amounts)
ASSETS
Cash (includes $773,361 and $52,599 pledged to creditors)	$	878,826	$	188,291
Short-term investments at fair value		1,884		74,611
Loans held for sale at fair value (includes $5,493,332 and $4,846,138 pledged to creditors)		5,541,987		4,912,953
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		99,766		107,512
Derivative assets		433,211		159,686
Servicing advances, net (includes valuation allowance of $80,784 and $82,157; $182,531 and $207,460 pledged to creditors)		299,550		331,169
Mortgage servicing rights at fair value (includes $2,163,928 and $2,920,603 pledged to creditors)		2,193,697		2,926,790
Real estate acquired in settlement of loans		20,197		20,326
Operating lease right-of-use assets		71,639		73,090
Furniture, fixtures, equipment and building improvements, net (includes $7,392 and $20,406 pledged to creditors)		29,177		30,480
Capitalized software, net (includes $10,606 and $12,192 pledged to creditors)		74,183		63,130
Investment in PennyMac Mortgage Investment Trust at fair value		797		1,672
Receivable from PennyMac Mortgage Investment Trust		56,223		48,159
Loans eligible for repurchase		980,618		1,046,527
Other		209,378		219,621
Total assets	$	10,891,133	$	10,204,017
LIABILITIES
Assets sold under agreements to repurchase	$	4,444,545	$	4,141,053
Mortgage loan participation purchase and sale agreements		528,750		497,948
Obligations under capital lease		18,145		20,810
Notes payable secured by mortgage servicing assets		1,294,514		1,294,070
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		157,109		178,586
Derivative liabilities		43,152		22,330
Operating lease liabilities		89,829		91,320
Accounts payable and accrued expenses		198,897		175,273
Mortgage servicing liabilities at fair value		29,761		29,140
Payable to PennyMac Mortgage Investment Trust		59,281		73,280
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		46,158		46,158
Income taxes payable		613,043		504,569
Liability for loans eligible for repurchase		980,618		1,046,527
Liability for losses under representations and warranties		23,202		21,446
Total liabilities		8,527,004		8,142,510

Commitments and contingencies – Note 14

STOCKHOLDERS’ EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 79,190,245 and 78,515,047 shares, respectively		8		8
Additional paid-in capital		1,341,219		1,335,107
Retained earnings		1,022,902		726,392
Total stockholders' equity		2,364,129		2,061,507
Total liabilities and stockholders’ equity	$	10,891,133	$	10,204,017

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

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PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Quarter ended March 31,
	2020		2019
	(in thousands, except per share amounts)
Revenues
Net gains on loans held for sale at fair value:
From non-affiliates	$	266,366	$	58,753
From PennyMac Mortgage Investment Trust		77,916		26,023
		344,282		84,776
Loan origination fees:
From non-affiliates		53,591		21,687
From PennyMac Mortgage Investment Trust		3,980		2,243
		57,571		23,930
Fulfillment fees from PennyMac Mortgage Investment Trust		41,940		27,574
Net loan servicing fees:
Loan servicing fees:
From non-affiliates		198,653		166,790
From PennyMac Mortgage Investment Trust		14,521		10,570
Other		28,755		22,017
		241,929		199,377
Change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results		1,357		(122,857)
Change in fair value of excess servicing spread financing payable to PennyMac Mortgage Investment Trust		14,522		4,051
		15,879		(118,806)
Net loan servicing fees		257,808		80,571
Net interest income:
Interest income:
From non-affiliates		71,346		56,537
From PennyMac Mortgage Investment Trust		1,218		1,796
		72,564		58,333
Interest expense:
To non-affiliates		59,538		34,477
To PennyMac Mortgage Investment Trust		1,974		3,066
		61,512		37,543
Net interest income		11,052		20,790
Management fees from PennyMac Mortgage Investment Trust		9,055		7,248
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		(857)		192
Results of real estate acquired in settlement of loans		(707)		274
Other		1,681		2,350
Total net revenues		721,825		247,705
Expenses
Compensation		168,436		106,600
Loan origination		46,004		14,497
Servicing		42,166		30,293
Technology		19,107		15,966
Professional services		13,404		5,881
Occupancy and equipment		8,038		6,776
Other		9,940		7,401
Total expenses		307,095		187,414
Income before provision for income taxes		414,730		60,291
Provision for income taxes		108,487		14,156
Net income	$	306,243	$	46,135
Earnings per share
Basic	$	3.89	$	0.59
Diluted	$	3.73	$	0.58
Weighted average shares outstanding
Basic		78,689		77,653
Diluted		82,008		79,286
Dividend declared per share	$	0.12	$	—

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

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PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)


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


	Quarter ended March 31, 2019
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, December 31, 2018	77,494	$	8	$	1,310,648	$	343,135	$	1,653,791
Net income	—		—		—		46,135		46,135
Stock-based compensation	820		—		1,180		—		1,180
Issuance of common stock in settlement of directors' fees	4		—		86		—		86
Balance, March 31, 2019	78,318	$	8	$	1,311,914	$	389,270	$	1,701,192

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

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PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Quarter ended March 31,
	2020		2019
	(in thousands)
Cash flow from operating activities
Net income	$	306,243	$	46,135
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on loans held for sale at fair value		(344,282)		(84,776)
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread		(15,879)		118,806
Capitalization of interest and advance on loans held for sale at fair value		(18,131)		(16,487)
Accrual of interest on excess servicing spread financing payable to PennyMac Mortgage Investment Trust		1,974		3,066
Amortization of net debt issuance costs and (premiums)		2,209		(6,570)
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust		875		(156)
Results of real estate acquired in settlement in loans		707		(274)
Stock-based compensation expense		12,368		4,531
Provision for servicing advance losses		3,806		4,820
Depreciation and amortization		5,352		3,159
Amortization of right-of-use assets		2,985		2,359
Purchase of loans held for sale from PennyMac Mortgage Investment Trust		(14,509,209)		(6,959,389)
Origination of loans held for sale		(4,954,316)		(1,542,056)
Purchase of loans held for sale from non-affiliates		(620,859)		(177,678)
Purchase of loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale		(2,299,262)		(941,154)
Sale to non-affiliates and principal payments of loans held for sale		19,337,017		8,536,430
Sale of loans held for sale to PennyMac Mortgage Investment Trust		2,246,127		884,510
Repurchase of loans subject to representations and warranties		(16,282)		(4,064)
Settlement of repurchase agreement derivatives		—		11,436
Decrease in servicing advances		18,467		24,087
Sale of real estate acquired in settlement of loans		9,459		2,075
(Increase) decrease in receivable from PennyMac Mortgage Investment Trust		(10,133)		2,775
Decrease (increase) in other assets		628		(38,676)
Decrease in operating lease liabilities		(3,469)		(2,977)
Increase in accounts payable and accrued expenses		21,866		10,483
Decrease in payable to PennyMac Mortgage Investment Trust		(17,019)		(28,752)
Increase in income taxes payable		108,474		14,090
Net cash used in operating activities		(730,284)		(134,247)
Cash flow from investing activities
Decrease (increase) in short-term investments		72,727		(31,548)
Net change in assets purchased from PMT under agreement to resell		7,746		5,096
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights		942,005		125,695
Purchase of mortgage servicing rights		(24,104)		(211,481)
Purchase of furniture, fixtures, equipment and leasehold improvements		(994)		(2,126)
Acquisition of capitalized software		(14,108)		(6,750)
Decrease in margin deposits		132,953		28,343
Net cash provided by (used in) investing activities		1,116,225		(92,771)
Cash flow from financing activities
Sale of assets under agreements to repurchase		20,510,531		8,382,013
Repurchase of assets sold under agreements to repurchase		(20,205,416)		(8,164,625)
Issuance of mortgage loan participation purchase and sale certificates		5,273,329		5,555,946
Repayment of mortgage loan participation purchase and sale certificates		(5,242,527)		(5,540,374)
Repayment of obligations under capital lease		(2,665)		(1,514)
Repayment of excess servicing spread financing		(9,308)		(10,552)
Payment of debt issuance costs		(3,388)		(1,536)
Issuance of common stock pursuant to exercise of stock options		3,082		1,283
Repurchase of common stock		(4,121)		—
Payment of withholding taxes relating to stock-based compensation		(5,265)		(4,634)
Payment of dividend to holders of common stock		(9,733)		—
Net cash provided by financing activities		304,519		216,007
Net increase (decrease) in cash and restricted cash		690,460		(11,011)
Cash and restricted cash at beginning of quarter		188,578		155,924
Cash and restricted cash at end of quarter	$	879,038	$	144,913
Cash and restricted cash at end of quarter are comprised of the following:
Cash	$	878,826	$	144,266
Restricted cash included in Other assets		212		647
	$	879,038	$	144,913

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

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PENNYMAC FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization

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

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

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

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

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 has an investment management agreement with PMT, which invests in mortgage-related assets and residential mortgage loans.

Note 2—Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the Securities and Exchange Commission’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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 indicative of income to be anticipated for the full year ending December 31, 2019. Intercompany accounts and transactions have been eliminated.

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

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Accounting Change

Effective January 1, 2020, the Company adopted FASB Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”), using the modified retrospective approach. The adoption of ASU 2016-13 did not have any effect on the Company’s consolidated statements of income, stockholder’s equity or cash flows.

Note 3—Concentration of Risk

A substantial portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, change in fair value of excess servicing spread financing (“ESS”), management fees, net interest, and change in fair value of investment in and dividends received from PMT) totaled 22% and 31% of total net revenue for the quarters ended March 31, 2020 and 2019, respectively.

Note 4—Transactions with Affiliates

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

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

Pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, which was amended and restated effective September 12, 2016, if the Company refinances mortgage loans for which PMT previously held the MSRs, the Company is generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs related to all such mortgage loans. The MSR recapture agreement expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

Pursuant to a mortgage banking services agreement, which was amended and restated effective September 12, 2016, the Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a fulfillment fee. Pursuant to the terms of the mortgage banking services agreement, the monthly fulfillment fee is an amount that shall equal (a) no greater than the product of (i) 0.35% and (ii) the aggregate initial unpaid principal balance (the “Initial UPB”) of all mortgage loans purchased in such month, plus (b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided, however, that no fulfillment fee shall be due or payable to the Company with respect to any mortgage loans underwritten to the Ginnie Mae Mortgage‑Backed Securities (“MBS”) Guide. PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, the Company currently purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and a sourcing fee ranging from two to three and one-half basis points, generally based on the average number of calendar days mortgage loans are held by PMT before being purchased by the Company. The Company purchases these mortgage loans “as is” and without recourse of any kind from PMT; however, where the Company has a claim for repurchase, indemnity or otherwise as against a correspondent seller, the Company is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT	$	81,224	$	27,146
Mortgage servicing rights and excess servicing spread recapture incurred		(3,308)		(1,123)
	$	77,916	$	26,023
Sale of loans held for sale to PMT	$	2,246,127	$	884,510

Tax service fees earned from PMT included in Loan origination fees	$	3,980	$	2,243

Fulfillment fee revenue	$	41,940	$	27,574
Unpaid principal balance of loans fulfilled for PMT subject to fulfillment fees	$	16,152,543	$	8,135,552

Sourcing fees paid to PMT	$	4,161	$	1,994
Unpaid principal balance of loans purchased from PMT	$	13,870,280	$	6,647,338

Loan Servicing

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), which was amended and restated effective September 12, 2016 and pursuant to which the Company provides servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of MSRs. The Servicing Agreement provides for servicing fees of per‑loan monthly amounts based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or the real estate acquired in settlement of loans (“REO”). The Company also remains entitled to customary ancillary income and market-based fees and charges relating to loans it services for PMT. These include boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Prime Servicing

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

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

Special Servicing

The base servicing fee rates for distressed whole loans range from $30 per month for current loans up to $85 per month for loans where the borrower has declared bankruptcy. The base servicing fee rate for REO is $75 per month.

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

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

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

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

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

The Servicing Agreement expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	536	$	239
Loans at fair value		300		463
Mortgage servicing rights		13,685		9,868
	$	14,521	$	10,570
Property management fees received from PMT included in Other income	$	—	$	123

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Investment Management Activities

The Company has a management agreement with PMT (“Management Agreement”), which was amended and restated effective September 12, 2016. Pursuant to the Management Agreement, the Company oversees PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees, for which it collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

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

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

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

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

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

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

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

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

The Management Agreement expires on September 12, 2020, subject to automatic renewal for additional
18-month periods, unless terminated earlier in accordance with the terms of the 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 immediately preceding the date of termination.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Base management	$	9,055	$	6,109
Performance incentive		—		1,139
	$	9,055	$	7,248

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company shall be reimbursed $120,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by the Company or its affiliates.

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

The Company received reimbursements from PMT for expenses as follows:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,540	$	1,236
Compensation		120		120
Expenses incurred on PMT's behalf, net		1,271		570
	$	2,931	$	1,926
Payments and settlements during the quarter (1)	$	33,683	$	15,189

(1)

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

Conditional Reimbursement of Underwriting Fees

In connection with its initial public offering of common shares of beneficial interest 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. 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. On February 1, 2019, the term of the reimbursement agreement was extended to February 1, 2023. The Company received $211,000 and $75,000 in reimbursement of underwriting fees from PMT during the quarters ended March 31, 2020 and 2019, respectively.

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Investing Activities

Master Repurchase Agreement

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

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

The principal amount paid by PLS for the participation certificates under the PMH Repurchase Agreement is based upon a percentage of the market value of the underlying ESS. Upon PMH’s repurchase of the participation certificates, PMH is required to repay PLS the principal amount relating thereto plus accrued interest (at a rate reflective of the current market and consistent with the weighted average note rate of the VFN and any outstanding Term Notes) to the date of such repurchase. PLS is then required to repay the Issuer Trust the corresponding amount under the PC Repurchase Agreement.

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

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	1,218	$	1,796
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received	$	18	$	36
Change in fair value of investment		(875)		156
	$	(857)	$	192


	March 31,		December 31,
	2020		2019
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	99,766	$	107,512
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	797	$	1,672
Number of shares		75		75

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Financing Activities

Spread Acquisition and MSR Servicing Agreements

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

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

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Excess servicing spread financing:
Issuance pursuant to recapture agreement	$	379	$	508
Repayment	$	9,308	$	10,552
Gain recognized	$	14,522	$	4,051
Interest expense	$	1,974	$	3,066
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	381	$	489

	March 31,		December 31,
	2020		2019
	(in thousands)
Excess servicing spread financing at fair value	$	157,109	$	178,586

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Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:


	March 31,		December 31,
	2020		2019
	(in thousands)
Receivable from PMT:
Fulfillment fees	$	17,366	$	18,285
Allocated expenses and expenses incurred on PMT's behalf		16,314		3,724
Management fees		9,055		10,579
Correspondent production fees		8,475		10,606
Servicing fees		4,929		4,659
Interest on assets purchased under agreements to resell		74		85
Conditional reimbursement		10		221
	$	56,223	$	48,159
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	55,769	$	70,520
Mortgage servicing rights recapture payable		151		149
Other		3,361		2,611
	$	59,281	$	73,280

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

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

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

Based on the PennyMac unitholder exchanges to date, the Company has recorded a $46.2 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of March 31, 2020 and December 31, 2019. The Company did not make any payments under the tax receivable agreement during the quarters ended March 31, 2020 and 2019.

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Note 5—Loan Sales and Servicing Activities

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

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Cash flows:
Sales proceeds	$	19,337,017	$	8,536,430
Servicing fees received (1)	$	166,556	$	137,148
Net servicing advance recoveries	$	15,209	$	24,176

(1)

Net of guarantee fees paid to the Agencies.

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


	March 31,		December 31,
	2020		2019
	(in thousands)
Unpaid principal balance of loans outstanding	$	175,709,882	$	168,842,011
Delinquencies:
30-89 days	$	8,314,858	$	7,947,560
90 days or more:
Not in foreclosure	$	2,837,903	$	3,237,563
In foreclosure	$	832,922	$	888,136
Foreclosed	$	18,541	$	15,387
Bankruptcy	$	1,364,331	$	1,343,816

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


	March 31, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	175,709,882	$	—	$	175,709,882
Purchased		58,410,013		—		58,410,013
		234,119,895		—		234,119,895
PennyMac Mortgage Investment Trust		—		144,830,043		144,830,043
Loans held for sale		5,276,688		—		5,276,688
	$	239,396,583	$	144,830,043	$	384,226,626
Subserviced for the Company (1)	$	2,343,828	$	—	$	2,343,828
Delinquent loans:
30 days	$	8,707,825	$	1,031,940	$	9,739,765
60 days		2,131,137		157,325		2,288,462
90 days or more:
Not in foreclosure		3,977,080		302,515		4,279,595
In foreclosure		1,088,058		58,922		1,146,980
Foreclosed		23,023		68,125		91,148
	$	15,927,123	$	1,618,827	$	17,545,950
Bankruptcy	$	1,943,407	$	146,205	$	2,089,612
Custodial funds managed by the Company (2)	$	7,576,973	$	3,935,103	$	11,512,076

(1)

Certain of the loans for which the Company has purchased the MSRs are subserviced on the Company’s behalf by other loan servicers on an interim basis when servicing of the loans has not yet been transferred to the Company’s loan servicing platform.

(2)

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

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	December 31, 2019
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	168,842,011	$	—	$	168,842,011
Purchased		59,703,547		—		59,703,547
		228,545,558		—		228,545,558
PennyMac Mortgage Investment Trust		—		135,414,668		135,414,668
Loans held for sale		4,724,006		—		4,724,006
	$	233,269,564	$	135,414,668	$	368,684,232
Delinquent loans:
30 days	$	7,987,132	$	857,660	$	8,844,792
60 days		2,490,797		172,263		2,663,060
90 days or more:
Not in foreclosure		4,070,482		274,592		4,345,074
In foreclosure		1,113,806		68,331		1,182,137
Foreclosed		18,315		89,421		107,736
	$	15,680,532	$	1,462,267	$	17,142,799
Bankruptcy	$	1,898,367	$	136,818	$	2,035,185
Custodial funds managed by the Company (1)	$	6,412,291	$	2,529,984	$	8,942,275

(1)

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


	March 31,		December 31,
State	2020		2019
	(in thousands)
California	$	58,058,528	$	57,311,867
Florida		31,714,639		28,940,696
Texas		29,709,362		27,909,821
Virginia		22,531,313		22,115,619
Maryland		17,282,260		16,829,320
All other states		224,930,524		215,576,909
	$	384,226,626	$	368,684,232

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Note 6—Fair Value

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

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

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

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

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

Fair Value Accounting Elections

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

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

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


	March 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	1,884	$	—	$	—	$	1,884
Loans held for sale at fair value		—		4,735,400		806,587		5,541,987
Derivative assets:
Interest rate lock commitments		—		—		317,621		317,621
Repurchase agreement derivatives		—		—		8,187		8,187
Forward purchase contracts		—		421,860		—		421,860
Forward sales contracts		—		23,346		—		23,346
MBS put options		—		4,062		—		4,062
Swaptions		—		36,696		—		36,696
Put options on interest rate futures purchase contracts		13,676		—		—		13,676
Call options on interest rate futures purchase contracts		24,434		—		—		24,434
Total derivative assets before netting		38,110		485,964		325,808		849,882
Netting		—		—		—		(416,671)
Total derivative assets		38,110		485,964		325,808		433,211
Mortgage servicing rights at fair value		—		—		2,193,697		2,193,697
Investment in PennyMac Mortgage Investment Trust		797		—		—		797
	$	40,791	$	5,221,364	$	3,326,092	$	8,171,576
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	157,109	$	157,109
Derivative liabilities:
Interest rate lock commitments		—		—		2,427		2,427
Forward purchase contracts		—		12,553		—		12,553
Forward sales contracts		—		334,111		—		334,111
Total derivative liabilities before netting		—		346,664		2,427		349,091
Netting		—		—		—		(305,939)
Total derivative liabilities		—		346,664		2,427		43,152
Mortgage servicing liabilities at fair value		—		—		29,761		29,761
	$	—	$	346,664	$	189,297	$	230,022

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	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	74,611	$	—	$	—	$	74,611
Loans held for sale at fair value		—		4,529,075		383,878		4,912,953
Derivative assets:
Interest rate lock commitments		—		—		138,511		138,511
Repurchase agreement derivatives		—		—		8,187		8,187
Forward purchase contracts		—		12,364		—		12,364
Forward sales contracts		—		17,097		—		17,097
MBS put options		—		3,415		—		3,415
Swaptions		—		2,409		—		2,409
Put options on interest rate futures purchase contracts		3,945		—		—		3,945
Call options on interest rate futures purchase contracts		1,469		—		—		1,469
Total derivative assets before netting		5,414		35,285		146,698		187,397
Netting		—		—		—		(27,711)
Total derivative assets		5,414		35,285		146,698		159,686
Mortgage servicing rights at fair value		—		—		2,926,790		2,926,790
Investment in PennyMac Mortgage Investment Trust		1,672		—		—		1,672
	$	81,697	$	4,564,360	$	3,457,366	$	8,075,712
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	178,586	$	178,586
Derivative liabilities:
Interest rate lock commitments		—		—		1,861		1,861
Forward purchase contracts		—		19,040		—		19,040
Forward sales contracts		—		18,045		—		18,045
Total derivative liabilities before netting		—		37,085		1,861		38,946
Netting		—		—		—		(16,616)
Total derivative liabilities		—		37,085		1,861		22,330
Mortgage servicing liabilities at fair value		—		—		29,140		29,140
	$	—	$	37,085	$	209,587	$	230,056

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As shown above, all or a portion of the Company’s loans held for sale, Interest Rate Lock Commitments (“IRLCs”), repurchase agreement derivatives, MSRs, ESS and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of these items for the quarters ended March 31, 2020 and 2019:


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

(1)

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


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

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	Quarter ended March 31, 2019
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, December 31, 2018	$	260,008	$	49,338	$	26,770	$	2,820,612	$	3,156,728
Purchases and issuances, net		784,262		56,983		9,855		227,772		1,078,872
Sales and repayments		(176,302)		—		(11,436)		—		(187,738)
Mortgage servicing rights resulting from loan sales		—		—		—		115,751		115,751
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(6,091)		—		—		—		(6,091)
Other factors		—		59,978		(557)		(259,045)		(199,624)
		(6,091)		59,978		(557)		(259,045)		(205,715)
Transfers from Level 3 to Level 2		(405,163)		—		—		—		(405,163)
Transfers to real estate acquired in settlement of loans		(1,181)		—		—		—		(1,181)
Transfers of interest rate lock commitments to loans held for sale		—		(100,234)		—		—		(100,234)
Balance, March 31, 2019	$	455,533	$	66,065	$	24,632	$	2,905,090	$	3,451,320
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2019	$	(3,540)	$	66,065	$	—	$	(259,045)	$	(196,520)

(1)

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


	Quarter ended March 31, 2019
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2018	$	216,110	$	8,681	$	224,791
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		508		—		508
Accrual of interest		3,066		—		3,066
Repayments		(10,552)		—		(10,552)
Mortgage servicing liabilities resulting from loan sales		—		794		794
Changes in fair value included in income		(4,051)		(1,631)		(5,682)
Balance, March 31, 2019	$	205,081	$	7,844	$	212,925
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2019	$	(4,051)	$	(1,631)	$	(5,682)

The information used in the preceding roll forwards represents activity for any assets and liabilities measured at fair value on a recurring basis and 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 loans held for sale at fair value upon purchase or funding of the respective loans and from the return to salability in the active secondary market of certain loans held for sale.

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

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


	Quarter ended March 31,
	2020						2019
	Net		Net gains on				Net		Net gains on
	loan		loans held				loan		loans held
	servicing		for sale at				servicing		for sale at
	fees		fair value		Total		fees		fair value		Total
	(in thousands)
Assets:
Loans held for sale	$	—	$	398,718	$	398,718	$	—	$	101,995	$	101,995
Mortgage servicing rights		(1,041,168)		—		(1,041,168)		(259,045)		—		(259,045)
	$	(1,041,168)	$	398,718	$	(642,450)	$	(259,045)	$	101,995	$	(157,050)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	14,522	$	—	$	14,522	$	4,051	$	—	$	4,051
Mortgage servicing liabilities		5,955		—		5,955		1,631		—		1,631
	$	20,477	$	—	$	20,477	$	5,682	$	—	$	5,682

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


	March 31, 2020						December 31, 2019
			Principal						Principal
			amount						amount
	Fair		due upon				Fair		due upon
Loans held for sale	value		maturity		Difference		value		maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	4,907,823	$	4,624,282	$	283,541	$	4,628,333	$	4,431,854	$	196,479
90 days or more delinquent:
Not in foreclosure		547,287		560,331		(13,044)		236,650		241,958		(5,308)
In foreclosure		86,877		92,075		(5,198)		47,970		50,194		(2,224)
	$	5,541,987	$	5,276,688	$	265,299	$	4,912,953	$	4,724,006	$	188,947

Assets Measured at Fair Value on a Nonrecurring Basis

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


Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2020	$	—	$	—	$	11,104	$	11,104
December 31, 2019	$	—	$	—	$	9,850	$	9,850

The following table summarizes the (losses) gains on assets measured at fair value on a nonrecurring basis:

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Fair Value of Financial Instruments Carried at Amortized Cost

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

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

The Company estimates the fair value of the Term Notes based on non-affiliate broker indications of fair value. The fair value and carrying value of the Term Notes are summarized below:


Term Notes	March 31, 2020		December 31, 2019
	(in thousands)
Fair value	$	978,250	$	1,303,047
Carrying value	$	1,294,514	$	1,294,070

Valuation Governance

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

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

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

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

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

Valuation Techniques and Inputs

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

Loans Held for Sale

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

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

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

The Company’s loans held for sale that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect.

Home equity lines of credit held for sale to PMT. At present, an active market with observable inputs that are significant to the estimation of fair value of home equity lines of credit does not exist.

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

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



	March 31, 2020		December 31, 2019
Fair value (in thousands)	$	806,587	$	383,878
Key inputs (1):
Discount rate:
Range		2.9% – 9.2%		3.0% – 9.2%
Weighted average		2.9%		3.0%
Twelve-month projected housing price index change:
Range		1.4% – 2.1%		2.6% – 3.2%
Weighted average		1.6%		2.8%
Voluntary prepayment/resale speed (2):
Range		0.4% – 21.2%		0.4% – 21.4%
Weighted average		18.8%		18.2%
Total prepayment speed (3):
Range		0.6% – 38.2%		0.5% – 39.2%
Weighted average		37.0%		36.2%

(1)

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

(2)

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

(3)

Total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments/resale and defaults.

Changes in fair value of loans held for sale attributable to changes in the loan’s instrument-specific credit risk are measured with reference to the change in the respective loan’s delinquency status and performance history at period

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end from the later of the prior period or acquisition date. Changes in fair value of loans held for sale are included in Net gains on loans held for sale at fair value in the Company’s consolidated statements of income.

Derivative Financial Instruments

Interest Rate Lock Commitments

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

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

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



	March 31, 2020		December 31, 2019
Fair value (in thousands) (1)	$	315,194	$	136,650
Key inputs (2):
Pull-through rate:
Range		11.8% – 100%		12.2% – 100%
Weighted average		78.9%		86.5%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		0.9 – 5.4		1.4 – 5.7
Weighted average		3.5		4.2
Percentage of unpaid principal balance:
Range		0.2% – 2.8%		0.3% – 2.8%
Weighted average		1.2%		1.6%

(1)

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

(2)

Weighted average inputs are based on the committed amounts.

Hedging Derivatives

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

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

Repurchase Agreement Derivatives

Through August 21, 2019, the Company had a master repurchase agreement that included incentives for financing loans approved for satisfying certain consumer relief characteristics. These incentives are classified for financial reporting purposes as embedded derivatives and are separated for reporting purposes from the master

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repurchase agreement. The Company classifies repurchase agreement derivatives as “Level 3” fair value assets. The significant unobservable inputs into the valuation of repurchase agreement derivative assets are the discount rate and the Company’s expected approval rate of the loans financed under the master repurchase agreement. The resulting ratio included in the Company’s fair value estimate was 99.0% at March 31, 2020 and December 31, 2019.

Mortgage Servicing Rights

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

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


	Quarter ended March 31,
	2020		2019
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	282,315	$	115,751
Unpaid principal balance of underlying loans	$	18,330,384	$	8,145,850
Weighted average servicing fee rate (in basis points)		40		39
Key inputs (1):
Pricing spread (2)
Range		6.8% – 15.6%		5.8% – 15.6%
Weighted average		8.2%		8.9%
Annual total prepayment speed (3)
Range		9.1% – 49.8%		5.8% – 73.0%
Weighted average		14.5%		15.3%
Equivalent average life (in years)
Range		1.5 – 7.8		0.8 – 10.2
Weighted average		5.9		5.8
Per-loan annual cost of servicing
Range		$77 – $100		$78 – $100
Weighted average		$97		$95

(1)

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

(2)

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

(3)

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

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


	March 31, 2020	December 31, 2019
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,193,697	$ 2,926,790
Pool characteristics:
Unpaid principal balance of underlying loans	$ 231,484,161	$ 225,787,103
Weighted average note interest rate	3.9%	3.9%
Weighted average servicing fee rate (in basis points)	35	35
Key inputs (1):
Pricing spread (2):
Range	8.3% – 18.1%	6.8% – 15.8%
Weighted average	10.7%	8.5%
Effect on fair value of:
5% adverse change	($38,151)	($44,561)
10% adverse change	($74,912)	($87,734)
20% adverse change	($144,545)	($170,155)
Annual total prepayment speed (3):
Range	9.7% – 27.9%	9.3% – 40.9%
Weighted average	16.5%	12.7%
Equivalent average life (in years)
Range	1.3 – 7.2	1.4 – 7.4
Weighted average	5.0	6.1
Effect on fair value of:
5% adverse change	($61,123)	($63,569)
10% adverse change	($119,166)	($124,411)
20% adverse change	($226,812)	($238,549)
Annual per-loan cost of servicing:
Range	$78 – $112	$77 – $100
Weighted average	$108	$97
Effect on fair value of:
5% adverse change	($24,995)	($24,516)
10% adverse change	($49,991)	($49,032)
20% adverse change	($99,981)	($98,065)

(1)

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

(2)

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

(3)

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

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

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Excess Servicing Spread Financing at Fair Value

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

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

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally discourage mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing its fair value. Changes in the fair value of ESS are included in Net loan servicing fees—Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust.

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


	March 31,	December 31,
	2020	2019
Fair value (in thousands)	$ 157,109	$ 178,586
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 19,153,856	$ 19,904,571
Average servicing fee rate (in basis points)	34	34
Average excess servicing spread (in basis points)	19	19
Key inputs (1):
Pricing spread (2):
Range	5.4% – 5.8%	3.0% – 3.3%
Weighted average	5.6%	3.1%
Annual total prepayment speed (3):
Range	8.7% – 14.9%	8.7% – 16.2%
Weighted average	11.9%	11.0%
Equivalent average life (in years)
Range	2.7 – 7.1	2.7 – 7.2
Weighted average	5.8	6.1

(1)

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

(2)

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

(3)

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

Mortgage Servicing Liabilities

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

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


		March 31,		December 31,
		2020		2019
Fair value (in thousands)	$	29,761	$	29,140
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	2,635,734	$	2,758,454
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		8.2%		8.2%
Annual total prepayment speed (2)		31.6%		29.2%
Equivalent average life (in years)		3.3		3.9
Annual per-loan cost of servicing	$	304	$	300

(1)

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

(2)

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

Note 7—Loans Held for Sale at Fair Value

Loans held for sale at fair value include the following:


	March 31,		December 31,
Loan type	2020		2019
	(in thousands)
Government-insured or guaranteed	$	3,998,657	$	4,222,010
Conventional conforming		735,615		307,065
Jumbo		1,128		—
Purchased from Ginnie Mae pools serviced by the Company		788,283		374,121
Repurchased pursuant to representations and warranties		17,961		9,244
Home equity lines of credit		343		513
	$	5,541,987	$	4,912,953
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	4,937,094	$	4,322,789
Mortgage loan participation purchase and sale agreements		556,238		523,349
	$	5,493,332	$	4,846,138

Note 8—Derivative Financial Instruments

The Company holds and issues derivative financial instruments in connection with its operating activities. Derivative financial instruments are created as a result of certain of the Company’s operations and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created as a result of the Company’s operations include:

IRLCs that are created when the Company commits to purchase or originate a loan for sale.

Derivatives that were embedded in a master repurchase agreement that provided for the Company to receive incentives for financing mortgage loans that satisfied certain consumer relief characteristics under the master repurchase agreement.

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

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

Derivative Notional Amounts and Fair Value of Derivatives

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


	March 31, 2020					December 31, 2019
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	9,377,614	$	317,621	$	2,427	7,122,316	$	138,511	$	1,861
Repurchase agreement derivatives			8,187		—			8,187		—
Used for hedging purposes:
Forward purchase contracts	20,480,331		421,860		12,553	13,618,361		12,364		19,040
Forward sales contracts	20,196,818		23,346		334,111	16,220,526		17,097		18,045
MBS put options	10,700,000		4,062		—	6,100,000		3,415		—
Swaption futures purchase contracts	6,800,000		36,696		—	1,750,000		2,409		—
Put options on interest rate futures purchase contracts	4,925,000		13,676		—	2,250,000		3,945		—
Call options on interest rate futures purchase contracts	1,925,000		24,434		—	750,000		1,469		—
Treasury futures purchase contracts	650,000		—		—	1,276,000		—		—
Treasury futures sale contracts	810,000		—		—	1,010,000		—		—
Interest rate swap futures purchase contracts	2,560,000		—		—	3,210,000		—		—
Total derivatives before netting			849,882		349,091			187,397		38,946
Netting			(416,671)		(305,939)			(27,711)		(16,616)
		$	433,211	$	43,152		$	159,686	$	22,330
Collateral placed with (received from) derivative counterparties, net		$	(110,732)				$	(11,095)

The following table summarizes notional amount activity for derivative contracts used in the Company’s hedging activities:


	Notional amounts, quarter ended March 31, 2020
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	13,618,361	112,859,449	(105,997,479)	20,480,331
Forward sale contracts	16,220,526	130,436,231	(126,459,939)	20,196,818
MBS put options	6,100,000	22,000,000	(17,400,000)	10,700,000
Swaption futures purchase contracts	1,750,000	7,900,000	(2,850,000)	6,800,000
Swaption futures sale contracts	—	2,850,000	(2,850,000)	—
Put options on interest rate futures purchase contracts	2,250,000	7,600,000	(4,925,000)	4,925,000
Call options on interest rate futures purchase contracts	750,000	3,540,000	(2,365,000)	1,925,000
Put options on interest rate futures sale contracts	—	4,925,000	(4,925,000)	—
Call options on interest rate futures sale contracts	—	2,365,000	(2,365,000)	—
Treasury futures purchase contracts	1,276,000	2,035,000	(2,661,000)	650,000
Treasury futures sale contracts	1,010,000	2,461,000	(2,661,000)	810,000
Interest rate swap futures purchase contracts	3,210,000	1,225,000	(1,875,000)	2,560,000
Interest rate swap futures sales contracts	—	1,875,000	(1,875,000)	—

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	Notional amounts, quarter ended March 31, 2019
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	6,657,026	52,621,845	(49,965,482)	9,313,389
Forward sale contracts	6,890,046	59,673,487	(58,980,528)	7,583,005
MBS put options	4,635,000	19,160,000	(14,370,000)	9,425,000
MBS call options	1,450,000	4,500,000	(2,600,000)	3,350,000
Put options on interest rate futures purchase contracts	3,085,000	6,675,000	(6,410,000)	3,350,000
Call options on interest rate futures purchase contracts	1,512,500	4,462,800	(3,725,300)	2,250,000
Put options on interest rate futures sale contracts	—	10,135,300	(10,135,300)	—
Treasury futures purchase contracts	835,000	4,111,200	(3,136,200)	1,810,000
Treasury futures sale contracts	1,450,000	2,761,200	(3,136,200)	1,075,000
Interest rate swap futures purchase contracts	625,000	400,000	—	1,025,000

Derivative Balances and Netting of Financial Instruments

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

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts:


	March 31, 2020						December 31, 2019
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements:
Interest rate lock commitments	$	317,621	$	—	$	317,621	$	138,511	$	—	$	138,511
Repurchase agreement derivatives		8,187		—		8,187		8,187		—		8,187
		325,808		—		325,808		146,698		—		146,698
Derivatives subject to master netting arrangements:
Forward purchase contracts		421,860		—		421,860		12,364		—		12,364
Forward sale contracts		23,346		—		23,346		17,097		—		17,097
MBS put options		4,062		—		4,062		3,415		—		3,415
Swaptions		36,696		—		36,696		2,409		—		2,409
Put options on interest rate futures purchase contracts		13,676		—		13,676		3,945		—		3,945
Call options on interest rate futures purchase contracts		24,434		—		24,434		1,469		—		1,469
Netting		—		(416,671)		(416,671)		—		(27,711)		(27,711)
		524,074		(416,671)		107,403		40,699		(27,711)		12,988
	$	849,882	$	(416,671)	$	433,211	$	187,397	$	(27,711)	$	159,686

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

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


	March 31, 2020								December 31, 2019
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	317,621	$	—	$	—	$	317,621	$	138,511	$	—	$	—	$	138,511
RJ O'Brien		38,109		—		—		38,109		5,414		—		—		5,414
JPMorgan Chase Bank, N.A.		27,313		—		—		27,313		2,196		—		—		2,196
Goldman Sachs		14,537		—		—		14,537		2,548		—		—		2,548
Citibank, N.A.		9,995		—		—		9,995		—		—		—		—
Deutsche Bank		7,894		—		—		7,894		9,138		—		—		9,138
Wells Fargo Bank, N.A.		5,848		—		—		5,848		—		—		—		—
Daiwa Capital Markets		3,084		—		—		3,084		—		—		—		—
Mizuho Securities		2,989		—		—		2,989		1,597		—		—		1,597
Federal National Mortgage Association		1,980		—		—		1,980		—		—		—		—
Others		3,841		—		—		3,841		282		—		—		282
	$	433,211	$	—	$	—	$	433,211	$	159,686	$	—	$	—	$	159,686

Offsetting of Derivative Liabilities and Financial Liabilities

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


	March 31, 2020						December 31, 2019
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements – Interest rate lock commitments	$	2,427	$	—	$	2,427	$	1,861	$	—	$	1,861
Derivatives subject to a master netting arrangement:
Forward purchase contracts		12,553		—		12,553		19,040		—		19,040
Forward sale contracts		334,111		—		334,111		18,045		—		18,045
Netting		—		(305,939)		(305,939)		—		(16,616)		(16,616)
		346,664		(305,939)		40,725		37,085		(16,616)		20,469
Total derivatives		349,091		(305,939)		43,152		38,946		(16,616)		22,330
Assets sold under agreements to repurchase:
Amount outstanding		4,446,795		—		4,446,795		4,141,680		—		4,141,680
Unamortized debt issuance cost, net		(2,250)		—		(2,250)		(627)		—		(627)
		4,444,545		—		4,444,545		4,141,053		—		4,141,053
	$	4,793,636	$	(305,939)	$	4,487,697	$	4,179,999	$	(16,616)	$	4,163,383

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Derivative Liabilities, Financial Instruments, and Collateral Held by Counterparty

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


	March 31, 2020								December 31, 2019
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	2,427	$	—	$	—	$	2,427	$	1,861	$	—	$	—	$	1,861
Credit Suisse First Boston Mortgage Capital LLC		1,552,669		(1,533,516)		—		19,153		1,235,430		(1,235,430)		—		—
JPMorgan Chase Bank, N.A.		870,965		(870,965)		—		—		936,172		(936,172)		—		—
Citibank, N.A.		657,315		(657,315)		—		—		655,831		(653,170)		—		2,661
Bank of America, N.A.		654,788		(643,834)		—		10,954		379,400		(374,190)		—		5,210
Morgan Stanley Bank, N.A.		296,497		(293,813)		—		2,684		582,941		(582,941)		—		—
Royal Bank of Canada		250,919		(250,919)		—		—		175,897		(175,897)		—		—
BNP Paribas		196,791		(196,433)		—		358		183,880		(183,880)		—		—
Federal National Mortgage Association		5,674		—		—		5,674		—		—		—		—
Mitsubishi UFJ Securities		1,396		—		—		1,396		—		—		—		—
Wells Fargo Bank, N.A.		—		—		—		—		11,212		—		—		11,212
Others		506		—		—		506		1,386		—		—		1,386
	$	4,489,947	$	(4,446,795)	$	—	$	43,152	$	4,164,010	$	(4,141,680)	$	—	$	22,330

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


		Quarter ended March 31,
Derivative activity	Income statement line	2020		2019
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value	$	178,543	$	16,727
Repurchase agreement derivatives	Interest expense	$	—	$	(557)
Hedged item:
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	(225,557)	$	(34,668)
Mortgage servicing rights	Net loan servicing fees–Change in fair value of mortgage servicing rights and mortgage servicing liabilities	$	1,036,570	$	134,557

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Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Balance at beginning of quarter	$	2,926,790	$	2,820,612
Additions:
Resulting from loan sales		282,315		115,751
Purchases		25,760		227,772
		308,075		343,523
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(915,862)		(161,638)
Other changes in fair value (2)		(125,306)		(97,407)
Total change in fair value		(1,041,168)		(259,045)
Balance at end of quarter	$	2,193,697	$	2,905,090

	March 31,		December 31,
	2020		2019
	(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	2,163,928	$	2,920,603

(1)

Principally reflects changes in discount rate and prepayment speed inputs, primarily due to changes in market interest rates, and servicing costs.

(2)

Represents changes due to realization of cash flows.

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Balance at beginning of quarter	$	29,140	$	8,681
Mortgage servicing liabilities resulting from loan sales		6,576		794
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		4,432		3,301
Other changes in fair value (2)		(10,387)		(4,932)
Total change in fair value		(5,955)		(1,631)
Balance at end of quarter	$	29,761	$	7,844

(1)

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

(2)

Represents changes due to realization of cash flows.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Contractual servicing fees	$	198,653	$	166,790
Other fees:
Late charges		12,613		9,812
Other		4,850		1,661
	$	216,116	$	178,263

Note 10—Leases

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

The Company’s lease agreements are summarized below:



	Quarter ended March 31,
	2020		2019
	(dollars in thousands)
Lease expense:
Operating leases	$	3,932	$	3,229
Short-term leases		256		217
Sublease income		—		(32)
Net lease expense included in Occupancy and equipment	$	4,188	$	3,414

Other information:
Cash payments for operating leases	$	4,440	$	3,846
Operating lease right-of-use assets recognized:
Upon adoption Accounting Standards Update 2016-02, Leases (Topic 842)	$	—	$	58,598
New leases		1,534		—
	$	1,534	$	58,598
Period end weighted averages:
Remaining lease term (in years)		6.9		6.3
Discount rate		4.3%		4.6%

The maturities of the Company’s operating lease liabilities are summarized below:


Twelve months ended March 31,	Operating leases
	(in thousands)
2021	$	17,111
2022		15,795
2023		14,509
2024		13,755
2025		11,643
Thereafter		32,758
Total lease payments		105,571
Less imputed interest		(15,742)
Total	$	89,829

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As of March 31, 2020, the Company had one operating lease that has not yet commenced with an undiscounted minimum payment commitment totaling $1.5 million. The lease is expected to commence in May 2020.

Note 11—Borrowings

The borrowing facilities described throughout this Note 11 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, 2020.

Assets Sold Under Agreements to Repurchase

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

Assets sold under agreements to repurchase are summarized below:


	Quarter ended March 31,
	2020			2019
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	3,139,328		$	1,437,957
Weighted average interest rate (1)		3.07	%		4.47	%
Total interest expense (2)	$	25,684		$	8,635
Maximum daily amount outstanding	$	4,446,795		$	2,152,588


		March 31,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	4,446,795		$	4,141,680
Unamortized debt issuance costs		(2,250)			(627)
	$	4,444,545		$	4,141,053
Weighted average interest rate		2.54	%		3.29	%
Available borrowing capacity (3):
Committed	$	—		$	125,810
Uncommitted		1,403,205			782,510
	$	1,403,205		$	908,320
Fair value of assets securing repurchase agreements:
Loans held for sale	$	4,937,094		$	4,322,789
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	99,766		$	107,512
Servicing advances (4)	$	182,531		$	207,460
Mortgage servicing rights (4)	$	2,151,501		$	2,902,721
Margin deposits placed with counterparties (5)	$	5,000		$	5,000

(1)

Excludes the effect of amortization of net issuance costs of $1.6 million and premiums of $7.4 million for the quarters ended March 31, 2020 and 2019, respectively.

(2)

In 2017, PFSI entered into a master repurchase agreement that provides the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $9.3 million of such incentives as reductions in Interest expense during the quarter ended March 31, 2019. The master repurchase agreement expired on August 21, 2019.

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(3)

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

(4)

Beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018-GT1 Notes and 2018-GT2 Notes described in Notes payable secured by mortgage servicing assets. The VFN financing is included in Assets sold under agreements to repurchase and 2018-GT1 Notes and 2018-GT2 Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

(5)

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

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


Remaining maturity at March 31, 2020	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	1,585,379
Over 30 to 90 days		2,614,849
Over 90 to 180 days		246,567
Total assets sold under agreements to repurchase	$	4,446,795
Weighted average maturity (in months)		1.2

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s assets sold under agreements to repurchase is summarized by counterparty below as of March 31, 2020:


			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	983,098	April 26, 2020	April 26, 2020
Credit Suisse First Boston Mortgage Capital LLC	$	245,618	April 24, 2020	April 24, 2020
JP Morgan Chase Bank, N.A.	$	97,688	June 1, 2020	October 9, 2020
Citibank, N.A.	$	67,788	April 10, 2020	August 4, 2020
Bank of America, N.A.	$	61,809	May 4, 2020	March 11, 2021
Morgan Stanley Bank, N.A.	$	26,408	June 12, 2020	August 21, 2020
Royal Bank of Canada	$	24,012	April 30, 2020	April 30, 2020
BNP Paribas	$	15,575	June 16, 2020	July 31, 2020

(1)

The calculation of the amount at risk includes the VFN and the Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018-GT1 Notes and 2018-GT2 Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and 2018-GT1 Notes and 2018-GT2 Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

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

Mortgage Loan Participation Purchase and Sale Agreements

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

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time a participation certificate is sold.

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

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


	Quarter ended March 31,
	2020			2019
	(dollars in thousands)
Average balance	$	247,811		$	236,667
Weighted average interest rate (1)		2.64	%		3.68	%
Total interest expense	$	1,810		$	2,311
Maximum daily amount outstanding	$	530,220		$	548,038

(1)

Excludes the effect of amortization of facility fees totaling $173,000 and $135,000 for the quarters ended March 31, 2020 and 2019, respectively.


	March 31,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	528,750		$	497,948
Unamortized debt issuance costs		—			—
	$	528,750		$	497,948
Weighted average interest rate		2.18	%		3.05	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	556,238		$	523,349

Obligations Under Capital Lease

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

Obligations under capital lease are summarized below:


	Quarter ended March 31,
	2020			2019
	(dollars in thousands)
Average balance	$	19,406		$	5,848
Weighted average interest rate		3.36	%		4.50	%
Total interest expense	$	167		$	66
Maximum daily amount outstanding	$	20,810		$	6,605


	March 31,			December 31,
	2020			2019
	(dollars in thousands)
Unpaid principal balance	$	18,145		$	20,810
Weighted average interest rate		3.18	%		3.74	%
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	7,392		$	20,406
Capitalized software	$	10,606		$	12,192

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Notes Payable Secured by Mortgage Servicing Assets

Term Notes

On February 28, 2018, the Company, through PNMAC GMSR ISSUER TRUST (the “Issuer Trust”), issued an aggregate principal amount of $650 million in Term Notes (the “2018-GT1 Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The 2018-GT1 Notes bear interest at a rate equal to one-month LIBOR plus 2.85% per annum. The 2018-GT1 Notes will mature on February 25, 2023 or, if extended pursuant to the terms of the related indenture supplement, February 25, 2025 (unless earlier redeemed in accordance with their terms). Concurrent with issuance of the 2018-GT1 Notes, the Company also redeemed certain notes previously issued by the Issuer Trust.

On August 10, 2018, the Company, through the Issuer Trust, issued an aggregate principal amount of $650 million in Term Notes (the “2018-GT2 Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The 2018-GT2 Notes bear interest at a rate equal to one-month LIBOR plus 2.65% per annum. The 2018-GT2 Notes will mature on August 25, 2023 or, if extended pursuant to the terms of the related indenture supplement, August 25, 2025 (unless earlier redeemed in accordance with their terms). Concurrent with the issuance of the 2018-GT2 Notes, the Company also redeemed certain notes previously issued by the Issuer Trust.

All of the Term Notes rank pari passu with each other and with the VFN issued by the Issuer Trust to PLS and are secured by certain participation certificates relating to Ginnie Mae MSRs and ESS that are financed pursuant to the GNMA MSR Facility.

MSR Note Payable

On February 1, 2018, the Company issued a note payable that is secured by Freddie Mac MSRs. Interest is charged at a rate based on LIBOR plus the applicable contract margin. The facility expires on April 24, 2020. The maximum amount that the Company may borrow under the note payable is $400 million, less any amount outstanding under the agreement to repurchase pursuant to which the Company finances the VFN. The Company did not borrow under this note payable during the quarters ended March 31, 2020 or 2019.

Notes payable are summarized below:


	Quarter ended March 31,
	2020			2019
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000
Weighted average interest rate (1)		4.43	%		5.25	%
Total interest expense	$	14,846		$	17,510
Maximum daily amount outstanding	$	1,300,000		$	1,300,000

(1)

Excludes the effect of amortization of debt issuance costs totaling $445,000 and $734,000 for the quarters ended March 31, 2020 and 2019, respectively.

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	March 31,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(5,486)			(5,930)
	$	1,294,514		$	1,294,070
Weighted average interest rate		4.38	%		4.46	%
Assets pledged to secure notes payable:
Servicing advances (1)	$	182,531		$	207,460
Mortgage servicing rights (1)	$	2,117,619		$	2,861,442

(1)

Beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018-GT1 Notes and 2018-GT2 Notes. The VFN financing is included in Assets sold under agreements to repurchase and 2018-GT1 Notes and 2018-GT2 Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheet.

Corporate Revolving Line of Credit

On November 1, 2018, the Company, through its subsidiary, PennyMac (the “Borrower”), entered into amendments (the "Amendments") to that certain (i) amended and restated credit agreement, dated as of November 18, 2016, by and among the Borrower, the lenders that are parties thereto and Credit Suisse AG, as administrative agent and collateral agent, and Credit Suisse Securities (USA) LLC, as sole bookrunner and sole lead arranger (the “Credit Agreement”); and (ii) amended and restated collateral and guaranty agreement, dated as of November 18, 2016, by and among the Borrower, as grantor, Credit Suisse AG, Cayman Islands Branch (“CS Cayman”), as collateral agent, and PNMAC Holdings, Inc. (formerly known as PennyMac Financial Services, Inc.) and certain of its subsidiaries, PCM, PLS and PNMAC Opportunity Fund Associates, LLC (“Associates”), as guarantors and grantors (“the “Guaranty”).

Pursuant to the Credit Agreement, the lenders have agreed to make revolving loans to the Borrower in an amount not to exceed $150 million. Interest on the loans shall accrue at a per annum rate of interest equal to, at the election of the Borrower, either LIBOR plus the applicable margin or an alternate base rate (as defined in the Credit Agreement). During the existence of certain events of default, interest shall accrue at a higher default rate. The proceeds of the loans are to be used solely for working capital and general corporate purposes of the Borrower and its subsidiaries.

The primary purposes of the Amendments were to (i) extend the maturity date of the Credit Agreement to October 31, 2019; (ii) name the Company as an additional guarantor under the Credit Agreement; and (iii) release Associates from its obligations as a guarantor under the Credit Agreement. Accordingly, the obligations of the Borrower under the Credit Agreement are now guaranteed by PFSI, PNMAC Holdings, Inc., PCM and PLS, and secured by a grant by each of the referenced grantors of its respective right, title and interest in and to limited and otherwise unencumbered (other than specified permitted encumbrances) specified contract rights, specified deposit accounts, all documents and instruments related to such specified contract rights and specified deposit accounts, and any and all proceeds and products thereof. All other terms and conditions of the Credit Agreement and Guaranty remain the same in all material respects. The Company did not borrow under this facility during the quarter ended March 31, 2020 or the year ended December 31, 2019.

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Corporate revolving line of credit is summarized below:


	Quarter ended March 31,
	2020		2019
	(dollars in thousands)
Interest expense (1)	$	503	$	485

	March 31,		December 31,
	2020		2019
	(dollars in thousands)
Carrying value	$	—	$	—
Unused amount	$	150,000	$	150,000
Cash pledged to secure corporate revolving line of credit	$	773,361	$	52,599

(1)

Interest expenses represent debt issuance costs and non-utilization fees.

Excess Servicing Spread Financing at Fair Value

In conjunction with the Company’s purchase from non-affiliates of certain MSRs on pools of Agency-backed residential mortgage loans, the Company has entered into sale and assignment agreements with PMT. 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 loans. The Company continues to be the servicer of the mortgage loans and retains all servicing obligations, including responsibility to make servicing advances.

Following is a summary of ESS:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Balance at beginning of quarter	$	178,586	$	216,110
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust pursuant to recapture agreement		379		508
Accrual of interest		1,974		3,066
Repayment		(9,308)		(10,552)
Change in fair value		(14,522)		(4,051)
Balance at end of quarter	$	157,109	$	205,081

Note 12—Liability for Losses Under Representations and Warranties

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Balance at beginning of quarter	$	21,446	$	21,155
Provision for losses on loans sold:
Resulting from sales of loans		3,712		1,067
Reduction in liability due to change in estimate		(1,676)		(4,210)
Losses incurred, net		(280)		(30)
Balance at end of quarter	$	23,202	$	17,982
Unpaid principal balance of loans subject to representations and warranties at end of quarter	$	186,517,598	$	133,698,782

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Note 13—Income Taxes

The Company’s effective income tax rates were 26.2% and 23.5% for the quarters ended March 31, 2020 and 2019, respectively. The increase in effective tax rate in the quarter ended March 31, 2020 compared to the same period in 2019 was due to reduced impact of the permanent and favorable tax adjustment for equity compensation in the quarter ended March 31, 2020 compared to the same period in 2019. The equity compensation deduction for tax purposes was lower by $0.4 million while the pretax income increased by $354.4 million, thereby reducing the effect of the tax adjustment on the effective tax rate.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), passed in March, 2020, introduced a number of tax law changes which are generally taxpayer favorable. Based on a preliminary analysis, the Company does not anticipate the recording of any material permanent differences resulting from the CARES Act.

Note 14—Commitments and Contingencies

Litigation

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

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into a corporate reorganization (the “Reorganization”), which the Company formed as a Delaware corporation on July 2, 2018, and became the top-level parent holding company for the consolidated PennyMac business on November 1, 2018, without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While no assurance can be provided as to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the Garfield Action is without merit and plans to vigorously defend the matter, which remains pending.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On April 6, 2020, the Florida State Court entered an order granting a motion to compel arbitration filed by the Company. On April 21, 2020, BKI filed a motion for reconsideration of the order compelling arbitration. On May 6, 2020, the

Florida State Court entered an order denying BKI's motion for reconsideration. Also on May 6, 2020, BKI filed a notice of appeal with respect to both orders. While no assurance can be provided as to the ultimate outcome of BKI Complaint or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending.

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Regulatory Matters

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

Commitments to Purchase and Fund Mortgage Loans

The Company’s commitments to purchase and fund loans totaled $9.4 billion as of March 31, 2020.

Note 15—Stockholders’ Equity

In June 2017, the Company’s board of directors authorized a stock repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock. Following is a summary of activity under the stock repurchase program:


	Quarter ended March 31,				Cumulative
	2020		2019		total (1)
	(in thousands)
Shares of common stock repurchased		238		—		1,054
Cost of shares of common stock repurchased	$	4,121	$	—	$	19,069

(1)

Amounts represent the total shares of common stock repurchased under the stock repurchase program through March 31, 2020.

Note 16—Net Gains on Loans Held for Sale

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
From non-affiliates:
Cash loss:
Loans	$	111,757	$	(41,242)
Hedging activities		(122,666)		(8,927)
		(10,909)		(50,169)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		275,739		114,957
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(3,712)		(1,067)
Reduction in liability due to change in estimate		1,676		4,210
Change in fair value of loans and derivatives held at quarter end:
Interest rate lock commitments		178,543		16,727
Loans		(72,080)		(164)
Hedging derivatives		(102,891)		(25,741)
		266,366		58,753
From PennyMac Mortgage Investment Trust		77,916		26,023
	$	344,282	$	84,776

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Note 17—Net Interest Income

Net interest income is summarized below:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	1,711	$	1,933
Loans held for sale at fair value		46,426		31,343
Placement fees relating to custodial funds		23,209		23,261
		71,346		56,537
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		1,218		1,796
		72,564		58,333

Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase (1)		25,684		8,635
Mortgage loan participation purchase and sale agreements		1,810		2,311
Obligations under capital lease		167		66
Notes payable		15,349		17,995
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		14,871		4,311
Interest on mortgage loan impound deposits		1,657		1,159
		59,538		34,477
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		1,974		3,066
		61,512		37,543
	$	11,052	$	20,790

(1)

In 2017, the Company entered into a master repurchase agreement that provided the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $9.3 million of such incentives as reductions of Interest expense during the quarter ended March 31, 2019. The master repurchase agreement expired on August 21, 2019.

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Note 18—Stock-based Compensation

As of March 31, 2020, the Company had one stock-based compensation plan. Following is a summary of the stock-based compensation activity:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Grants:
Units:
Performance-based RSUs		422		665
Stock options		273		344
Time-based RSUs		304		330
Grant date fair value:
Performance-based RSUs	$	14,768	$	15,253
Stock options		2,770		2,965
Time-based RSUs		10,662		7,545
Total	$	28,200	$	25,763
Vestings and exercises:
Performance-based RSUs vested		603		648
Stock options exercised		180		89
Time-based RSUs vested		348		291
Compensation expense	$	12,368	$	4,531

Note 19—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 net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all dilutive shares of common stock were issued.

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

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


	Quarter ended March 31,
	2020		2019
	(in thousands, except per share amounts)
Net income	$	306,243	$	46,135

Weighted average basic shares of common stock outstanding		78,689		77,653
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		3,319		1,633
Weighted average shares of common stock applicable to diluted earnings per share		82,008		79,286
Basic earnings per share of common stock	$	3.89	$	0.59
Diluted earnings per share of common stock	$	3.73	$	0.58

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



	Quarter ended March 31,
	2020		2019
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		162		1,279
Time-based RSUs		117		61
Stock options (2)		105		706
Total anti-dilutive shares and units		384		2,046
Weighted average exercise price of anti-dilutive stock options (2)	$	35.03	$	24.26

(1)

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

(2)

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

Note 20—Supplemental Cash Flow Information


	Quarter ended March 31,
	2020		2019
	(in thousands)
Cash paid for interest	$	64,527	$	33,952
Cash paid for income taxes, net	$	13	$	66
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	282,315	$	115,751
Mortgage servicing liabilities resulting from loan sales	$	6,576	$	794
Unsettled portion of MSR acquisitions	$	1,656	$	16,291
Operating right-of-use assets recognized	$	1,534	$	58,598
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	379	$	508
Issuance of common stock in settlement of director fees	$	48	$	86

Note 21—Regulatory Capital and Liquidity Requirements

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

The Company is subject to financial eligibility requirements established by the Federal Housing Finance Agency (“FHFA”) for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac. The eligibility requirements include tangible net worth of $2.5 million plus 25 basis points of the UPB of the Company’s total 1-4 unit servicing portfolio, excluding mortgage loans subserviced for others, and a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 600 basis points.

On January 31, 2020, FHFA proposed changes to the eligibility requirements, which would increase the tangible net worth requirement to $2.5 million plus 35 basis points of the UPB of loans serviced for Ginnie Mae and 25 basis points of the UPB of all other 1-4 unit loans serviced, and increase the liquidity requirement to 4 basis points of the aggregate UPB serviced for Fannie Mae and Freddie Mac and 10 basis points of the UPB serviced for Ginnie Mae plus 300 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 400 basis points.

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

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


	March 31, 2020						December 31, 2019
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	2,648,008		$	600,991		$	2,247,751		$	585,674
Ginnie Mae – PLS	$	2,324,574		$	931,240		$	1,907,398		$	910,456
HUD – PLS	$	2,324,574		$	2,500		$	1,907,398		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	875,336		$	81,942		$	257,794		$	79,991
Ginnie Mae – PLS	$	875,336		$	222,121		$	257,794		$	216,119
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		22	%		6	%		19	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		25	%		6	%		22	%		6	%

(1)

Calculated in compliance with the respective Agency’s requirements.

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

Note 22—Segments

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

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

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

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Financial performance and results by segment are as follows:


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

(1)

All revenues are from external customers.


	Quarter ended March 31, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	66,721	$	18,055	$	84,776	$	—	$	84,776
Loan origination fees		23,930		—		23,930		—		23,930
Fulfillment fees from PennyMac Mortgage Investment Trust		27,574		—		27,574		—		27,574
Net loan servicing fees		—		80,571		80,571		—		80,571
Net interest income (expense):
Interest income		14,369		43,964		58,333		—		58,333
Interest expense		3,915		33,621		37,536		7		37,543
		10,454		10,343		20,797		(7)		20,790
Management fees		—		—		—		7,248		7,248
Other		488		765		1,253		1,563		2,816
Total net revenue		129,167		109,734		238,901		8,804		247,705
Expenses		82,161		98,571		180,732		6,682		187,414
Income before provision for income taxes	$	47,006	$	11,163	$	58,169	$	2,122	$	60,291
Segment assets at quarter end	$	2,501,468	$	5,299,813	$	7,801,281	$	17,719	$	7,819,000

(1)

All revenues are from external customers.

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Note 23—Subsequent Events

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

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

The GMSR Servicing Advance Notes leverage an existing MSR financing facility to support a separately defined servicing advance facility within the existing structure and provide the Company enhanced ability to finance its servicing advance obligations to Ginnie Mae and its security holders as necessary and afford borrowers critical relief as required under the recently enacted CARES Act. Specifically, the GMSR Servicing Advances Repurchase Agreement provides the Company with financing secured by its servicing advances to pay, in accordance with the Ginnie Mae requirements, in the event borrowers are delinquent: (i) regularly scheduled monthly principal and bond interest to mortgage-backed securities holders; (ii) taxes, homeowner’s insurance, and other escrowed items; and (iii) other expenses related to servicing delinquent loans as specified by (A) state and federal laws and (B) government agencies, including the FHA, the VA, and the USDA.

On April 24, 2020, PLS amended and renewed its credit facilities with Credit Suisse First Boston Mortgage Capital LLC to (i) increase the borrowing capacity under the GMSR Servicing Advances Repurchase Agreement from $400 million to $600 million, all of which is committed and may be used to finance the servicing advances related to delinquent FHA, VA, and USDA loans, including delinquencies caused by forbearance in accordance with the CARES Act, and (ii) increase the maximum combined purchase price available to PLS under the Credit Suisse Credit Facilities from $2.0 billion to $2.25 billion, $1.5 billion of which is now available to finance Ginnie Mae EBO Loans. The maximum combined purchase price of the GMSR Servicing Spread Agreement, the Fannie Mae Servicing Spread Agreement and the Freddie Mac Servicing Spread Agreement may not exceed $400 million. After renewal, the maturity dates for the Credit Suisse Credit Facilities are April 23, 2021 or later, other than the Freddie Mac Servicing Spread Agreement, which matures on October 21, 2020.

On May 7, the Company announced that the board of directors declared a cash dividend of $0.12 per common share. The dividend will be paid on May 28, 2020 to common shareholders of record as of May 18, 2020.

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

Overview

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

Our Company

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

We operate and control all of the business and affairs and consolidate the financial results of Private National Mortgage Acceptance Company, LLC (“PennyMac”). 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 were formed as a Delaware corporation on July 2, 2018. We became the top-level parent holding company for the consolidated PennyMac business pursuant to a corporate reorganization (the “Reorganization”) that was consummated on November 1, 2018. Before the Reorganization, PNMAC Holdings, Inc. (formerly known as PennyMac Financial Services, Inc.) (“PNMAC Holdings”) was our top-level parent holding company and our public company registrant.

One result of the consummation of the Reorganization was that our equity structure was changed to create a single class of publicly-held common stock as opposed to the two classes that were in place before the Reorganization. For tax purposes, the Reorganization was to be treated as an integrated transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and/or a transfer described in Section 351(a) of the Internal Revenue Code. PNMAC Holdings’ financial statements remain our historical financial statements.

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We conduct our business in three segments: production, servicing (together, production and servicing comprise our mortgage banking activities) and investment management.

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

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

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

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

Our investment management subsidiary is 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 manages PennyMac Mortgage Investment Trust (“PMT”), a mortgage real estate investment trust listed on the New York Stock Exchange under the ticker symbol PMT.

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Results of Operations

Our results of operations are summarized below:


	Quarter ended March 31,
	2020			2019
	(dollars in thousands, except per share amounts)
Revenues:
Net gains on loans held for sale at fair value	$	344,282		$	84,776
Loan origination fees		57,571			23,930
Fulfillment fees from PennyMac Mortgage Investment Trust		41,940			27,574
Net loan servicing fees		257,808			80,571
Net interest income		11,052			20,790
Management fees		9,055			7,248
Other		117			2,816
Total net revenue		721,825			247,705
Expenses		307,095			187,414
Income before provision for income taxes		414,730			60,291
Provision for income taxes		108,487			14,156
Net income	$	306,243		$	46,135
Earnings per share
Basic	$	3.89		$	0.59
Diluted	$	3.73		$	0.58
Return on average common stockholders' equity		56.0	%		11.0	%
Income before provision for income taxes by segment:
Mortgage banking:
Production	$	240,131		$	47,006
Servicing		170,842			11,163
Total mortgage banking		410,973			58,169
Investment management		3,757			2,122
	$	414,730		$	60,291
During the quarter:
Interest rate lock commitments issued	$	24,804,994		$	10,134,199
Unpaid principal balance of loans fulfilled for PMT subject to fulfillment fees	$	16,152,543		$	8,135,552
At end of quarter:
Interest rate lock commitments outstanding	$	9,377,614		$	3,821,942
Unpaid principal balance of loan servicing portfolio:
Owned:
Mortgage servicing rights	$	231,484,161		$	219,834,361
Mortgage servicing liabilities		2,635,734			1,000,403
Loans held for sale		5,276,688			2,573,121
		239,396,583			223,407,885
Subserviced for PMT		144,830,043			101,287,428
	$	384,226,626		$	324,695,313

Net assets of PennyMac Mortgage Investment Trust	$	1,823,368		$	1,727,589
Book value per share	$	29.85		$	21.72

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During the quarter ended March 31, 2020, the United States was significantly impacted by the effects of the COVID-19 pandemic (the “Pandemic” or “COVID-19”) and the effects of market and government responses to the pandemic. These developments have triggered an economic recession in the United States. Initial unemployment claims totaled 26 million for the five weeks ended April 18 as compared to one million for the preceding five weeks.

This sudden and significant increase in unemployment has created financial hardships for many existing borrowers. As part of its response to the Pandemic, the federal government included requirements in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that we provide borrowers with substantial payment forbearance on loans we service subject to Agency securitizations. As a result of this requirement, we have seen and expect to further see a large increases in delinquencies in our servicing portfolio which will increase our cost to service those loans and require us to finance substantial amounts of advances of principal and interest payments to the holders of the securities holding those loans.

In the near term, or in subsequent quarters, we expect this development to have a negative effect on the earnings of our servicing segment before taking into account the effect of future developments on the valuation of our MSRs by, among other things, reducing servicing fee income, reducing our ability to earn gains on early buyout loans and reducing the amount of placement fees we earn on custodial deposits related to these loans, increasing our cost to service due to higher delinquency and default rates, as well as increased financing costs due to the need to advance funds on behalf of delinquent borrowers. These effects may be offset by growth in our loan servicing portfolio, increases in the servicing fees we earn from PMT for servicing the delinquent loans in its loan servicing portfolio and gains on early buyout loans as those borrowers reperform.

Before the onset of the Pandemic, the mortgage origination market was experiencing healthy demand owing to historically low interest rates in the United States. The government’s response to the onset of the Pandemic, including fiscal stimulus and infusions of additional liquidity by the Federal Reserve into financial markets acted to further lower market mortgage interest rates. These developments have acted to sustain heightened demand for new mortgage loans despite the slowdown in overall economic activity. The mortgage origination market for 2019 was estimated at $2.3 trillion; current forecasts estimate the origination market to approximate $2.4 trillion for 2020 and $2.2 trillion for 2021. However, the uncertainties and strains on many organizations introduced by the Pandemic have caused some market participants to scale back or exit mortgage loan production activities which, combined with constraints on mortgage industry origination capacity that existed before the Pandemic, has allowed us to realize higher gain-on sale margins in our production segment.

The Pandemic had a substantial negative effect on the investments of PMT. As a result, PMT recognized a net loss of $595 million. Because the effects of the Pandemic began to be realized during March of 2020, its effects on the base management fees were we earn from PMT were not significant. However, we expect base management fees to be significantly reduced in future periods and we do not expect to recognize performance incentive fees for the foreseeable future because of the losses PMT incurred during the quarter ended March 31, 2020.

The current environment caused by the Pandemic in the United States is historically unprecedented and the source of much uncertainty surrounding future economic and market prospects and the ongoing effects of this developing situation on our future prospects are difficult to anticipate, for further discussion of the potential impacts of the Pandemic please also see “Risk Factors” in Part II, Item 1A.

For the quarter ended March 31, 2020, income before provision for income taxes increased $354.4 million compared to the same period in 2019. The increase was primarily due to:

increases in production income (Net gains on loans held for sale at fair value, Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust); and

increases in Net loan servicing fees, partially offset by;

increases in total expenses.

The increases in production income reflect higher production volume and improved profit margins. The increase in Net loan servicing fees was due to a combination of increased loan servicing fees resulting from growth in

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our loan servicing portfolio and changes in the fair value of our MSRs, MSLs and ESS, net of hedging results, compared to the same period in 2019. The increases in total expenses were mainly due to increases in loan origination and compensation expenses, reflecting the continuing growth of our mortgage banking activities.

Net Gains on Loans Held for Sale at Fair Value

During the quarter ended March 31, 2020, we recognized Net gains on loans held for sale at fair value totaling $344.3 million, an increase of $259.5 million, compared to the same period in 2019. The increase was primarily due to the combined effects of decreasing interest rates on demand for loans and of reduced industry capacity on profit margins during 2020 as compared to 2019 as discussed above.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
From non-affiliates:
Cash loss:
Loans	$	111,757	$	(41,242)
Hedging activities		(122,666)		(8,927)
Total cash loss		(10,909)		(50,169)
Non-cash gain:
Change in fair value of loans and derivative financial instruments outstanding at year end:
Interest rate lock commitments		178,543		16,727
Loans		(72,080)		(164)
Hedging derivatives		(102,891)		(25,741)
		3,572		(9,178)
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		275,739		114,957
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(3,712)		(1,067)
Reduction in liability due to change in estimate		1,676		4,210
Total non-cash gain		277,275		108,922
Total gains on sale from non-affiliates		266,366		58,753
From PennyMac Mortgage Investment Trust		77,916		26,023
	$	344,282	$	84,776
During the quarter:
Interest rate lock commitments issued:
Government-insured or guaranteed mortgage loans	$	19,029,138	$	8,831,495
Conventional mortgage loans		5,765,876		1,301,243
Jumbo mortgage loans		8,304		—
Home equity lines of credit		1,676		1,461
	$	24,804,994	$	10,134,199
At end of quarter:
Loans held for sale at fair value	$	5,541,987	$	2,668,929
Commitments to fund and purchase loans	$	9,377,614	$	3,821,942

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Our gain on sale of loans held for sale includes both cash and non-cash elements. We receive proceeds on sale that include our estimate of the fair value of MSRs and we incur liabilities for mortgage servicing liabilities (which represents the fair value of the costs we expect to incur in excess of the fees we receive for early buyout of delinquent loans (“EBO loans”) we have resold) and for the fair value of our estimate of the losses we expect to incur relating to the representation and warranties we provide in our loan sale transactions.

Non-cash elements of gain on sale of loans

The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 79% of our gain on sale of loans at fair value for the quarters ended March 31, 2020, as compared to 128% for the quarter ended March 31, 2019. How we measure and update our measurements of MSRs and MSLs is detailed in Note 6 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.

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

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

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

We recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $3.7 million for the quarter ended March 31, 2020, compared to $1.1 million for the quarter ended March 31, 2019. We also recorded a reduction in the liability of $1.7 million during the quarter ended March 31, 2020, compared to $4.2 million during the quarter ended March 31, 2019. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims.

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
During the quarter:
Indemnification activity:
Loans indemnified by PFSI at beginning of quarter	$	15,366	$	8,899
New indemnifications		879		682
Less indemnified loans sold, repaid or refinanced		—		117
Loans indemnified by PFSI at end of quarter	$	16,245	$	9,464
Repurchase activity:
Total loans repurchased by PFSI	$	16,282	$	4,064
Less:
Loans repurchased by correspondent lenders		6,153		2,920
Loans repaid by borrowers or resold with defects resolved		1,446		907
Net loans repurchased with losses chargeable to liability for representations and warranties	$	8,683	$	237
Net losses charged to liability for representations and warranties	$	280	$	30

At end of quarter:
Unpaid principal balance of loans subject to representations and warranties	$	186,517,598	$	133,698,782
Liability for representations and warranties	$	23,202	$	17,982

During the quarter ended March 31, 2020, we repurchased loans totaling $16.3 million and we recorded losses of $280,000 net of recoveries. If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase.

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

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 and subject to representation and warranty liability to date represents the maximum exposure to repurchases related to representations and warranties.

Loan origination fees

Loan origination fees increased $33.6 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increase was primarily due to an increase in volume of loans we produced.

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Fulfillment fees from PennyMac Mortgage Investment Trust

Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees are calculated as a percentage of the UPB of the loans we fulfill for PMT.

Following is a summary of our fulfillment fees:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Fulfillment fee revenue	$	41,940	$	27,574
Unpaid principal balance of loans fulfilled subject to fulfillment fees	$	16,152,543	$	8,135,552
Average fulfillment fee rate (in basis points)		26		34

Fulfillment fees increased $14.4 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increase was primarily due to an increase in PMT’s loan production volume, partially offset by an increase in discretionary reductions in the fulfillment fee rate during the quarter ended March 31, 2020, compared to the same period in 2019.

Net Loan Servicing Fees

Following is a summary of our net loan servicing fees:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Net loan servicing fees:
Loan servicing fees:
From non-affiliates	$	198,653	$	166,790
From PennyMac Mortgage Investment Trust		14,521		10,570
Other		28,755		22,017
		241,929		199,377
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results		15,879		(118,806)
Net loan servicing fees	$	257,808	$	80,571
Average loan servicing portfolio	$	377,294,965	$	308,212,285

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


	Quarter ended March 31,
	2020		2019
	(in thousands)
Realization of cash flows	$	(114,919)	$	(92,475)
Other changes in fair value of mortgage servicing rights and mortgage servicing liabilities		(920,294)		(164,939)
Change in fair value of excess servicing spread		14,522		4,051
Hedging results		1,036,570		134,557
Total change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results	$	15,879	$	(118,806)
Average balances:
Mortgage servicing rights	$	2,562,205	$	2,843,028
Mortgage servicing liabilities	$	29,384	$	8,188
Excess servicing spread financing	$	169,195	$	211,661
At quarter end:
Mortgage servicing rights	$	2,193,697	$	2,905,090
Mortgage servicing liabilities	$	29,761	$	7,844
Excess servicing spread financing	$	157,109	$	205,081

Following is a summary of our loan servicing portfolio:



	March 31,		December 31,
	2020		2019
	(in thousands)
Loans serviced
Prime servicing:
Owned:
Mortgage servicing rights
Originated	$	173,171,678	$	166,188,825
Acquired		58,312,483		59,598,279
		231,484,161		225,787,104
Mortgage servicing liabilities		2,635,734		2,758,454
Loans held for sale		5,276,688		4,724,006
		239,396,583		233,269,564
Subserviced for PMT		144,734,874		135,288,944
Total prime servicing		384,131,457		368,558,508
Special servicing for PMT		95,169		125,724
Total loans serviced	$	384,226,626	$	368,684,232

Net loan servicing fees increased $177.2 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increase was due to an increase of $134.7 million in changes in fair value of MSRs and mortgage servicing liabilities (“MSLs”), net of hedging results and ESS fair value changes, and an increase of $42.6 million in loan servicing fees for the quarter ended March 31, 2020, resulting from an increase in our average servicing portfolio of 22% for the quarter ended March 31, 2020, compared to the same period in 2019.

As discussed above, the decreasing interest rate environment, along with expectations of higher costs to service loans in the coming months and increased returns demanded by market participants in response to the uncertainties created by the Pandemic, resulted in a 36% reduction in fair value (as measured by the December 31, 2019 fair value) of our investment in MSRs. This reduction in fair value was offset by our hedging results and change in fair value of ESS.

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There can be no assurance that our hedging activities will continue to perform in a like manner in the future. As discussed above, we expect the effects of the Pandemic and the requirements of the CARES Act to reduce our servicing income and to increase our servicing expenses due to the increased number of delinquent loans, and significant levels of forbearance that we have and continue to grant, as well as the resolution of loans that we expect to ultimately default as the result of the Pandemic.

Net Interest Income

Net interest income decreased $9.7 million during the quarter ended March 31, 2020, compared to the same period in 2019. The decrease was primarily due to:

increases in interest expense on repurchase agreements, reflecting the expiration of a master repurchase agreement in August 2019 that provided us with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. We recorded $9.3 million of such incentives as reductions in Interest expense during the quarter ended March 31, 2019. An increase in average borrowing balances during the quarter ended March 31, 2020 to fund a higher volume of loan inventory compared to the same period in 2019 also contributed to the increase in the interest expense; and

increases in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of the lower interest rates in 2020 as compared to 2019, partially offset by;

increases in interest income on loans held for sale due to larger average loan inventory balances during the quarter ended March 31, 2020 as compared to 2019.

Management fees and Carried Interest

Management fees and Carried Interest are summarized below:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Management fees:
PennyMac Mortgage Investment Trust:
Base management	$	9,055	$	6,109
Performance incentive		—		1,139
	$	9,055	$	7,248
Net assets of PMT at end of quarter	$	1,823,368	$	1,727,589

Management fees increased $1.8 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increase was due to an increase of $2.9 million in base management fees, reflecting the increase in PMT’s average shareholders’ equity upon which its base management fees are based, partially offset by a decrease of $1.1 million in incentive fees due to the loss PMT incurred during the quarter ended March 31, 2020 compared to the same period in 2019. As discussed above, because the effects of the Pandemic began to be realized during March of 2020, its effects on the base management fees we earn from PMT were not significant. However, in future periods we expect base management fees to be significantly reduced and we do not expect to recognize performance incentive fees for the foreseeable future because of the losses PMT incurred during the quarter ended March 31, 2020.

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Expenses

Compensation

Our compensation expense is summarized below:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Salaries and wages	$	89,315	$	67,058
Incentive compensation		45,981		19,175
Taxes and benefits		20,772		15,836
Stock and unit-based compensation		12,368		4,531
	$	168,436	$	106,600
Head count:
Average		4,289		3,461
Quarter end		4,458		3,459

Compensation expense increased $61.8 million during the quarter ended March 31 2020, compared to the same period in 2019. The increase was primarily due to increases in incentive compensation resulting from performance-based incentives in our mortgage banking business and higher than expected attainment of profitability targets along with increases in salaries and wages due to increased average headcounts resulting from the growth in our mortgage banking activities.

Loan origination

Loan origination expense increased $31.5 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increase was primarily due to increases in wholesale brokerage fees and loan file compilation expenses, resulting from increased consumer and broker direct lending activities, as well as an increase in discounts offered to generate sufficient incentives for borrowers to refinance during the quarter ended March 31, 2020 compared to the same period during 2019.

Servicing

Servicing expenses increased $11.9 million during the quarter ended March 31, 2020, compared to the same period in 2019. The increases were primarily due to increased purchases of EBO loans from Ginnie Mae guaranteed pools for the quarter ended March 31, 2020, compared to the same period in 2019. During the quarter ended March 31, 2020, we purchased $920.6 million in UPB of EBO loans, compared to $351.7 million during the same period in 2019.

The EBO program reduces the ongoing cost of servicing defaulted loans that have been sold into Ginnie Mae MBS when we purchase and either sell the defaulted loans or finance them with debt at interest rates below the Ginnie Mae MBS pass-through rates. While the EBO program reduces the ultimate cost of servicing such loan pools, it results in loss recognition when the loans are purchased. We recognize the loss because purchasing the mortgage loans from their Ginnie Mae pools causes us to write off accumulated non-reimbursable interest advances, net of interest receivable from the loans’ insurer or guarantor at the debenture rate of interest we receive from the insurer or guarantor while the loan is in default.

Provision for Income Taxes

Our effective income tax rate was 26.2% during the quarter ended March 31, 2020, compared to 23.5% during the quarter ended March 31, 2019. The increase in effective tax rate in the quarter ended March 31, 2020 compared to the same period in 2019 was primarily due to the lower impact of the permanent and favorable tax adjustment for equity compensation in the quarter ended March 31, 2020 compared to the same period in 2019.

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Balance Sheet Analysis

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


	March 31,		December 31,
	2020		2019
	(in thousands)
ASSETS
Cash and short-term investments	$	880,710	$	262,902
Loans held for sale at fair value		5,541,987		4,912,953
Servicing advances, net		299,550		331,169
Investments in and advances to affiliates		156,786		157,343
Mortgage servicing rights		2,193,697		2,926,790
Loans eligible for repurchase		980,618		1,046,527
Other		837,785		566,333
Total assets	$	10,891,133	$	10,204,017

LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt	$	4,973,295	$	4,639,001
Long-term debt		1,469,768		1,493,466
Liability for loans eligible for repurchase		980,618		1,046,527
Income taxes payable		613,043		504,569
Other		490,280		458,947
Total liabilities		8,527,004		8,142,510
Stockholders' equity		2,364,129		2,061,507
Total liabilities and stockholders' equity	$	10,891,133	$	10,204,017

Total assets increased $687.1 million from $10.2 billion at December 31, 2019 to $10.9 billion at March 31, 2020. The increase was primarily due to increases of $629.0 million in loans held for sale at fair value resulting from an increase in loan production volume, $ 690.5 million in cash, and $273.5 million in derivative assets, partially offset by a decrease of $733.1 million in MSRs. We increased our holding of cash during the quarter ended March 31, 2020 due to cash collected from our hedging activities combined with an increase in our short-term borrowings. Historically, we used excess cash to pay down borrowings, but in response to the uncertainties surrounding the Pandemic, we determined to maintain greater cash liquidity.

Total liabilities increased $384.5 million from $8.1 billion at December 31, 2019 to $8.5 billion at March 31, 2020. The increase was primarily attributable to an increase in borrowings required to finance a larger inventory of loans held for sale.

Cash Flows

Our cash flows for the nine months ended March 31, 2020 and 2019 are summarized below:


	Quarter ended March 31,
	2020		2019		Change
	(in thousands)
Operating	$	(730,284)	$	(134,247)	$	(596,037)
Investing		1,116,225		(92,771)		1,208,996
Financing		304,519		216,007		88,512
Net increase (decrease) in cash and restricted cash	$	690,460	$	(11,011)	$	701,471

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Our cash flows resulted in a net increase in cash and restricted cash of $690.5 million during the quarter ended March 31, 2020 as discussed below.

Operating activities

Net cash used in operating activities totaled $730.3 million during the quarter ended March 31, 2020 compared with $134.2 million during the same period in 2019. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans as shown below:


	Quarter ended March 31,
	2020		2019
	(in thousands)
Cash flows from:
Loans held for sale	$	(816,784)	$	(203,401)
Other operating sources		86,500		69,154
	$	(730,284)	$	(134,247)

Investing activities

Net cash provided by investing activities during the quarter ended March 31, 2020 totaled $1.1 billion primarily due to $942.0 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, and a decrease in margin deposits of $133.0 million. Net cash used in investing activities during the quarter ended March 31, 2019 totaled $92.8 million primarily due to the purchase of MSRs totaling $211.5 million, partially offset by a $125.7 million net settlement of derivative financial instruments used to hedge our investment in MSRs.

Financing activities

Net cash provided by financing activities totaled $304.5 million during the quarter ended March 31, 2020, primarily to finance the growth in our inventory of mortgage loans held for sale. Net cash provided by financing activities totaled $216.0 million during the quarter ended March 31, 2019, primarily to finance the growth in our inventory of mortgage loans held for sale.

Liquidity and Capital Resources

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

The impact of the Pandemic on our operations, liquidity and capital resources remain uncertain and difficult to predict, for further discussion of the potential impacts of the Pandemic please also see “Risk Factors” in Part II, Item 1A.

Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, ESS financing, notes payable (including a revolving credit agreement) and a capital lease. Most of our borrowings have short-term maturities and provide for terms of approximately one year. Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.

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


	Quarter ended March 31,
	2020		2019

Average balance	$	3,139,328	$	1,437,957
Maximum daily balance	$	4,446,795	$	2,152,588
Balance at year end	$	4,446,795	$	2,152,588

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

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

positive net income during one of the two most recent calendar quarters;

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

a minimum tangible net worth of $1.25 billion;

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

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

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

In addition to the covenants noted above, PennyMac’s revolving credit agreement and capital lease contain additional financial covenants including, but not limited to,

a minimum of cash equal to the amount borrowed under the revolving credit agreement;

a minimum of unrestricted cash and cash equivalents equal to $40 million;

a minimum of tangible net worth of $1.25 billion;

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.

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

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 (including nonperforming Agency loans that are in payment forbearance) exceeds 6% of the applicable Agency servicing UPB; allowable assets to satisfy liquidity requirement include cash and cash equivalents (unrestricted), certain investment-grade securities that are available for sale or held for trading including Agency mortgage-backed securities, obligations of Fannie Mae or Freddie Mac, and U.S. Treasury obligations, and unused and available portions of committed servicing advance lines;

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

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

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

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 is based on the current fair value of such ESS and amounts received on the underlying mortgage loans.

In June 2017, our board of directors approved a stock repurchase program that allows us to repurchase up to $50 million of our common stock using open market stock purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. We intend to finance the stock repurchase program through cash on hand. From inception through March 31, 2020, we have repurchased $19.1 million of shares under our stock repurchase program.

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

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Guarantees

As of March 31, 2020, we have not entered into any off-balance sheet arrangements.

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Contractual Obligations

As of March 31, 2020, we had contractual obligations aggregating $16.2 billion, comprised of borrowings, commitments to purchase and originate mortgage loans and a payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under a tax receivable agreement. We also lease our office facilities.

Payment obligations under these agreements are summarized below:


	Payments due by year
			Less than		1-3		3-5		More than
Contractual obligations	Total		1 year		years		years		5 years
	(in thousands)
Commitments to purchase and originate loans	$	9,377,614	$	9,377,614	$	—	$	—	$	—
Short-term debt		4,975,545		4,975,545		—		—		—
Long-term debt		1,475,254		7,677		660,468		650,000		157,109
Interest on long-term debt		233,173		66,321		126,480		21,156		19,216
Office leases		107,070		17,739		30,798		25,649		32,884
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		46,158		12,192		—		—		33,966
Total	$	16,214,814	$	14,457,088	$	817,746	$	696,805	$	243,175

Debt Obligations

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

Under the terms of these agreements, PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of March 31, 2020, we believe we were in compliance in all material respects with these covenants.

The agreements also contain margin call provisions that, upon notice from the applicable lender, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.

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

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The borrowings have maturities as follows:


	Outstanding		Total		Committed
Lender	indebtedness (1)		facility size (2)		facility (2)		Maturity date (2)
	(dollar amounts in thousands)
Assets sold under agreements to repurchase
Credit Suisse First Boston Mortgage Capital LLC (3)	$	1,483,516	$	1,650,000	$	300,000	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC (3)	$	50,000	$	600,000	$	600,000	April 23, 2021
JPMorgan Chase Bank, N.A.	$	870,965	$	750,000	$	50,000	October 9, 2020
Citibank, N.A.	$	657,315	$	700,000	$	300,000	August 4, 2020
Bank of America, N.A.	$	643,834	$	800,000	$	500,000	March 11, 2021
Morgan Stanley Bank, N.A.	$	293,813	$	800,000	$	100,000	August 21, 2020
Royal Bank of Canada	$	250,919	$	350,000	$	20,000	July 31, 2020
BNP Paribas	$	196,433	$	200,000	$	100,000	July 31, 2020
Mortgage loan participation purchase and sale agreements
Bank of America, N.A.	$	528,750	$	550,000	$	—	March 11, 2021
Notes payable
GMSR 2018-GT1 Term Note	$	650,000	$	650,000			February 25, 2023
GMSR 2018-GT2 Term Note	$	650,000	$	650,000			August 25, 2023
Credit Suisse AG	$	—	$	150,000	$	—	October 30, 2020
Credit Suisse AG (3)	$	—	$	—	$	—	October 21, 2020
Obligations under capital lease
Banc of America Leasing and Capital LLC	$	18,145	$	25,000	$	—	June 13, 2022

(1)

Outstanding indebtedness as of March 31, 2020.

(2)

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

(3)

The borrowing of $50 million with Credit Suisse First Boston Mortgage Capital LLC is in the form of a sale of a variable funding note under an agreement to repurchase up to a maximum of $600 million, less any amount utilized under the Credit Suisse AG note payable and an agreement to repurchase relating to the financing of Fannie Mae MSRs.

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, 2020:


			Weighted average
			maturity of
			advances under
Counterparty	Amount at risk		repurchase agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	983,098	April 26, 2020	April 26, 2020
Credit Suisse First Boston Mortgage Capital LLC (2)	$	245,618	April 24, 2020	April 24, 2020
JP Morgan Chase Bank, N.A.	$	97,688	June 1, 2020	October 9, 2020
Citibank, N.A.	$	67,788	April 10, 2020	August 4, 2020
Bank of America, N.A.	$	61,809	May 4, 2020	March 11, 2021
Morgan Stanley Bank, N.A.	$	26,408	June 12, 2020	August 21, 2020
Royal Bank of Canada	$	24,012	April 30, 2020	April 30, 2020
BNP Paribas	$	15,575	June 16, 2020	July 31, 2020

(1)

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

(2)

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

All debt financing arrangements that matured between March 31, 2020 and the date of this Report have been renewed or extended and are described in Note 11—Borrowings to the accompanying consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market based risks. The primary market risks that we are exposed to are credit risk, interest rate risk, prepayment risk, inflation risk and fair 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 financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the following estimates should not be viewed as earnings forecasts.

Mortgage Servicing Rights

The following tables summarize the estimated change in fair value of MSRs as of March 31, 2020, 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	$	2,361,847		$	2,274,488		$	2,233,317		$	2,155,546		$	2,118,785		$	2,049,152
Change in fair value:
$	$	168,150		$	80,791		$	39,620		$	(38,151)		$	(74,912)		$	(144,545)
%		7.7	%		3.7	%		1.8	%		(1.7)	%		(3.4)	%		(6.6)	%


Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)

Fair value	$	2,473,758		$	2,326,093		$	2,258,122		$	2,132,574		$	2,074,531		$	1,966,885
Change in fair value:
$	$	280,061		$	132,396		$	64,425		$	(61,123)		$	(119,166)		$	(226,812)
%		12.8	%		6.0	%		2.9	%		(2.8)	%		(5.4)	%		(10.3)	%


Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)

Fair value	$	2,293,679		$	2,243,688		$	2,218,692		$	2,168,702		$	2,143,706		$	2,093,716
Change in fair value:
$	$	99,981		$	49,991		$	24,995		$	(24,995)		$	(49,991)		$	(99,981)
%		4.6	%		2.3	%		1.1	%		(1.1)	%		(2.3)	%		(4.6)	%

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Excess Servicing Spread Financing

The following tables summarize the estimated change in fair value of our ESS accounted for using the fair value method as of March 31, 2020, 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	$	164,444		$	160,695		$	158,882		$	155,375		$	153,677		$	150,390
Change in fair value:
$	$	7,335		$	3,586		$	1,773		$	(1,735)		$	(3,432)		$	(6,719)
%		4.7	%		2.3	%		1.1	%		(1.1)	%		(2.2)	%		(4.3)	%


Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)

Fair value	$	173,255		$	164,819		$	160,879		$	153,500		$	150,043		$	143,549
Change in fair value:
$	$	16,146		$	7,709		$	3,769		$	(3,609)		$	(7,066)		$	(13,561)
%		10.3	%		4.9	%		2.4	%		(2.3)	%		(4.5)	%		(8.6)	%

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we believe will improve the efficiency and effectiveness of controls, ensure sufficient precision of controls, and appropriately mitigate the risk of material misstatement in the financial statements.

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There have been no changes in our internal control over financial reporting since December 31, 2019 that have materially affected, or are reasonably likely to material affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware, captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into the Reorganization without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While no assurance can be provided as to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the Garfield Action is without merit and plans to vigorously defend the matter, which remains pending.

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020, except for the following:

Our business, financial condition and results of operations have been, and will likely continue to be, adversely affected by the emergence of the COVID-19 pandemic.

The COVID-19 pandemic has created unprecedented economic, financial and public health disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition and results of operations. The extent to which COVID-19 continues to negatively affect our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to COVID-19.

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The federal government enacted the CARES Act, which allows borrowers with federally-backed loans to request temporary payment forbearance in response to the increased borrower hardships resulting from COVID-19. As a result of the CARES Act forbearance requirements, we expect to record additional increases in delinquencies in our servicing portfolio that may require us to finance substantial amounts of advances of principal and interest payments to the holders of the securities holding those loans, as well as advances of property taxes, insurance premiums and other expenses to protect investors’ interests in the properties securing the loans.. We also expect the effects of the CARES Act forbearance requirements to reduce our servicing income and increase our servicing expenses due to the increased number of delinquent loans, significant levels of forbearance that we have granted and continue to grant, as well as the resolution of loans that we expect to ultimately default as the result of COVID-19.

Financial markets have experienced substantial volatility and reduced liquidity, resulting in unprecedented federal government intervention to lower the federal funds rate to near zero and support market liquidity by purchasing assets in many financial markets, including the mortgage-backed securities market. The CARES Act forbearance requirements and the decline in financial markets have negatively impacted the fair value of our servicing assets. In addition, the CARES Act forbearance requirements and the decline in financial markets have materially and negatively impacted the book value of PMT and, as a result, our net assets under management. Consequently, we expect PMT base management fees to be significantly reduced, and we do not expect to earn performance incentive fees from PMT for the foreseeable future. Further market volatility may result in additional declines in the value of our servicing assets, lower base management fees and make it increasingly difficult to optimize our hedging activities. Also, our liquidity and/or regulatory capital could be adversely impacted by volatility and disruptions in the capital and credit markets. In addition, if we fail to meet or satisfy any of the covenants in our repurchase agreements or other financing arrangements as a result of the impact of the COVID-19 pandemic, we would be in default under these agreements, which could result in a cross-default or cross-acceleration under other financing arrangements, and our lenders could elect to declare outstanding amounts due and payable (or such amounts may automatically become due and payable), terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral.

We may also have difficulty accessing debt and equity capital on attractive terms, or at all, as a result of the impact of the COVID-19 pandemic, which may adversely affect our access to capital necessary to fund our operations or address maturing liabilities on a timely basis. This includes renewals of our existing credit facilities with our lenders who are also adversely impacted by the volatility and dislocations in the financial markets and may not be willing to continue to extend us credit on the same terms, or on favorable terms, or at all.

In addition, our business could be disrupted if we are unable to operate due to changing governmental restrictions such as travel bans and quarantines placed on our employees or operations, including, successfully operating our business from remote locations, ensuring the protection of our employees’ health and maintaining our information technology infrastructure.

Governmental authorities have taken additional measures to stabilize the financial markets and support the economy. The success of these measures are unknown and they may not be sufficient to address the current market dislocations or avert severe and prolonged reductions in economic activity. We may also face increased risks of disputes with our business partners, litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19. The scope and duration of COVID-19 and the efficacy of the extraordinary measures put in place to address it are currently unknown. Even after COVID-19 subsides, the economy may not fully recover for some time and we may be materially and adversely affected by a prolonged recession or economic downturn.

To the extent the COVID-19 pandemic adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors.”

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If forbearances resulting from the COVID-19 pandemic and the CARES Act are determined to be delinquent by the FHFA and the Agencies, it will significantly impact our liquidity and financial condition.

As described in Liquidity and Capital Resources, the FHFA establishes certain liquidity requirements for Agency and Ginnie Mae loan servicers that are generally tied to the UPB of loans serviced by such loan servicer for the Agencies. To the extent that the percentage of seriously delinquent loans ("SDQ"), i.e., loans that are 90 days or more delinquent, exceeds defined thresholds, the liquidity requirements for loan servicers increase materially. If the FHFA and the Agencies determine that forbearances resulting from COVID-19 are delinquent for the purposes of the SDQ thresholds and the associated liquidity requirements, we expect that the significant number of such forbearances will result in delinquencies that exceed the SDQ thresholds. Exceeding such SDQ thresholds would result in substantially higher liquidity requirements, as well as a reduction in the advance rates applicable to our MSR financing structure that are tied to such SDQ thresholds, all of which may materially impact our results of operations and financial condition, and the market value of our common shares.

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

There were no sales of unregistered equity securities during the quarter ended March 31, 2020.

The following table summarizes information about our stock repurchases during the quarter ended March 31, 2020:


	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or program (1)		Approximate dollar value of shares that may yet be purchased under the plans or program (1)
January 1, 2020 – January 31, 2020		—	$	—		—	$	35,051,668
February 1, 2020 – February 29, 2020		—	$	—		—	$	35,051,668
March 1, 2020 – March 31, 2020		238,133	$	17.31		238,133	$	30,930,481
Total		283,133	$	17.31		283,133	$	30,930,481

(1)

As disclosed in our current report on Form 8-K filed on June 21, 2017, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $50.0 million of our outstanding Class A common stock. The stock repurchase program does not require us to purchase a specific number of shares, and the timing and amount of any shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Stock repurchases may be effected through negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The stock repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

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Item 6. Exhibits


		Incorporated by Reference from the Below-Listed Form (Each Filed under SEC File Number 15-68669 or 001-38727)
Exhibit No.	Exhibit Description	Form	Filing Date
2.1	Contribution Agreement and Plan of Merger, dated as of August 2, 2018, by and among PennyMac Financial Services, Inc., New PennyMac Financial Services, Inc., New PennyMac Merger Sub, LLC, Private National Mortgage Acceptance Company, LLC, and the Contributors.	8-K12B	November 1, 2018

3.1	Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018

3.1.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018

3.2	Amended and Restated Bylaws of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018

3.2.1	Amendment to Amended and Restated Bylaws of PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.).	10-Q	November 4, 2019

10.1#	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.	8-K	May 14, 2013

10.2#	Master Repurchase Agreement, dated as of December 19, 2016, by and among PNMAC GMSR ISSUER TRUST, PennyMac Loan Services, LLC, and Private National Mortgage Acceptance Company, LLC.	8-K	December 21, 2016

10.3#	Master Repurchase Agreement, dated as of December 19, 2016, by and among, Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, and PennyMac Loan Services, LLC.	8-K	December 21, 2016

10.4#	Guaranty, dated as of December 19, 2016, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC.	10-Q	November 7, 2017

10.5	Amended and Restated Stockholder Agreement, dated as of November 1, 2018, among PennyMac Financial Services, Inc., New PennyMac Financial Services, Inc. and HC Partners, LLC.	8-K12B	November 1, 2018

10.6	Second Amended and Restated Stockholder Agreement, dated February 12, 2020, by and among PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.) and BlackRock Mortgage Ventures, LLC.	8-K	February 13, 2020

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10.7	Amendment No. 8 to the Third Amended and Restated Master Repurchase Agreement, dated as of March 6, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Alpine Securitization LTD, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.	8-K	March 11, 2020

10.8	Amendment No. 9 to the Third Amended and Restated Master Repurchase Agreement, dated as of April 1, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Alpine Securitization LTD, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.	8-K	April 7, 2020

10.9	Amendment No. 10 to Third Amended and Restated Master Repurchase Agreement, dated as of April 24, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Alpine Securitization LTD, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.	*

10.10	Master Repurchase Agreement, dated as of April 1, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch and PennyMac Loan Services, LLC.	8-K	April 7, 2020

10.11	Amended and Restated Guaranty, dated April 1, 2020, made by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC.	8-K	April 7, 2020

10.12	Series 2020-SPIADVF1 Indenture Supplement, dated as of April 1, 2020, to Third Amended and Restated Base Indenture, dated as of April 1, 2020, by and among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC and Credit Suisse First Boston Mortgage Capital LLC.	8-K	April 7, 2020

10.13	Third Amended and Restated Base Indenture, dated as of April 1, 2020, by and among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC, Credit Suisse First Boston Mortgage Capital LLC and Pentalpha Surveillance LLC.	8-K	April 7, 2020

10.14	Amended and Restated Master Repurchase Agreement, dated as of April 1, 2020, by and among PNMAC GMSR ISSUER TRUST, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.	8-K	April 7, 2020

10.15	Amendment No. 2 to Master Repurchase Agreement, dated as of April 1, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch and PennyMac Loan Services, LLC.	*

10.16	Joint Amendment No. 2 to Loan and Security Agreement and Amendment No. 1 to Pricing Side Letter, dated as of April 1, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Private National Mortgage Acceptance Company, LLC and PennyMac Loan Services, LLC.	*

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10.17^	Joint Amendment No. 1 to the Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 1 to the Pricing Side Letter, dated as of April 24, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse Ag, Cayman Islands Branch and PennyMac Loan Services, LLC.	*

10.18^	Joint Amendment No. 3 to the Series 2016-MSRVF1 Repurchase Agreement and Amendment No. 2 to the Pricing Side Letter, dated as of April 24, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch and PennyMac Loan Services, LLC.	*

10.19^	Joint Amendment No. 1 to the MSR PC Repo Agreement and Amendment No. 2 to the Pricing Side Letter, dated as of April 24, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.	*

10.20	Consent Letter regarding Series 2020-SPIADVF1 Indenture Supplement, dated as of April 24, 2020, by and among PennyMacLoan Services, LLC and Credit Suisse First Boston Mortgage Capital LLC.	*

10.21^	Amendment No. 2 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of April 24, 2020, by and among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC, and Credit Suisse First Boston Mortgage Capital LLC.	*

10.22^	Joint Amendment No. 3 to Loan and Security Agreement and Amendment No. 2 to Pricing Side Letter, dated as of April 24, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Private National Mortgage Acceptance Company, LLC and PennyMac Loan Services, LLC.	*

10.23†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Stock Option Award Agreement (2020).	*

10.24†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Subject to Continued Service Award Agreement (Net Share Withholding) (2020).	*

10.25†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Subject to Continued Service Award Agreement for Non Employee Directors (2020).	*

10.26†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Subject to Performance Components Award Agreement (Sale to Cover) (2020).	*

10.27†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Subject to Continued Service Award Agreement (Sale to Cover) (2020).	*

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10.28†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Subject to Performance Components Award Agreement (Net Share Withholding) (2020).	*


31.1	Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*

31.2	Certification of Andrew S. Chang pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*

32.1	Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**

32.2	Certification of Andrew S. Chang pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**

101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (ii) the Consolidated Statements of Income for the quarters ended March 31, 2020 and March 31, 2019, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2020 and March 31, 2019, (iv) the Consolidated Statements of Cash Flows for the quarters ended March 31, 2020 and March 31, 2019 and (v) the Notes to the Consolidated Financial Statements.

# Refiled herewith to provide an updated hyperlink to the appropriate prior filing.

^ Portions of the exhibit have been redacted.

* Filed herewith

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

† Indicates management contract or compensatory plan or arrangement.

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SIGNATURES

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

	PENNYMAC FINANCIAL SERVICES, INC.
	(Registrant)

Dated: May 7, 2020	By:	/s/ DAVID A. SPECTOR
		David A. Spector
		President and Chief Executive Officer

Dated: May 7, 2020	By:	/s/ ANDREW S. CHANG
		Andrew S. Chang
		Senior Managing Director and Chief Financial Officer

Exhibit 10.9

PLS REGULAR FACILITY

EXECUTION

AMENDMENT NO. 10 TO

THIRD AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

Amendment No. 10 to Third Amended and Restated Master Repurchase Agreement, dated as of April 24, 2020 (this “Amendment”), among Credit Suisse First Boston Mortgage Capital LLC (the “Administrative Agent”), Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (a “Buyer”), Alpine Securitization LTD (a “Buyer”), PennyMac Loan Services, LLC (the “Seller”) and Private National Mortgage Acceptance Company, LLC (the “Guarantor”).

RECITALS

The Administrative Agent, the Buyers, the Seller and the Guarantor are parties to that certain Third Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017 (as amended by Amendment No. 1, dated as of June 1, 2017, Amendment No. 2, dated as of December 20, 2017, Amendment No. 3, dated as of February 1, 2018, Amendment No. 4, dated as of April 27, 2018, Amendment No. 5, dated as of February 11, 2019, Amendment No. 6, dated as of April 26, 2019, Amendment No. 7, dated as of September 11, 2019, Amendment No. 8, dated as of March 6, 2020, and Amendment No. 9, dated as of April 1, 2020, the “Existing Repurchase Agreement”, and as further amended by this Amendment, the “Repurchase Agreement”), and the related Second Amended and Restated Pricing Side Letter, dated as of April 28, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”). The Guarantor is party to that certain Amended and Restated Guaranty, dated as of April 28, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), by the Guarantor in favor of Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Guaranty, as applicable.

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

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

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

1.1 deleting the definition of “Termination Date” in its entirety and replacing it with the following:

“Termination Date” means the earlier of (a) April 23, 2021, and (b) the date of the occurrence of an Event of Default.

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1.2 adding the following definitions in their proper alphabetical order:

“E-Sign” means the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq.

“UETA” means the Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999.

1.3 deleting the definition of “GNMA Advances” and any and all references thereto in their entirety.

SECTION 2. Conditions Precedent. Section 10(b) of the Existing Repurchase Agreement is hereby amended by deleting clause (5) thereof in its entirety and replacing it with the following:

(5) Requirements of Law. Neither Administrative Agent nor Buyers shall have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent or any Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer to enter into Transactions with a Pricing Rate based on the Reference Rate.

SECTION 3. Non-assignability. Section 22(b) of the Existing Repurchase Agreement is hereby amended by deleting the reference to Section 7 therein and replacing it with a reference to Section 11.

SECTION 4. Counterparts. Section 31 of the Existing Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:

31. Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement in a Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement. The parties agree that this Agreement, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the E-Sign, UETA and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service providers with appropriate document access tracking, electronic signature tracking and document retention as may be approved by the Administrative Agent in its sole discretion.

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SECTION 5. General Interpretive Principles. Section 40(h) of the Existing Repurchase Agreement is hereby amended by deleting the reference to Section 5-107(7) and replacing it with a reference to Section 1-201(b)(20).

SECTION 6. Authorized Representatives. Schedule 2 to the Existing Repurchase Agreement is hereby amended by deleting such schedule in its entirety and replacing it with Annex A hereto.

SECTION 7. 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:

7.1 Delivered Documents. On the Amendment Effective Date, the Administrative Agent on behalf of Buyers shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:

(a) this Amendment, executed and delivered by duly authorized officers of the Administrative Agent, the Buyers, the Seller and the Guarantor;

(b) Amendment No. 10 to Second Amended and Restated Pricing Side Letter, executed and delivered by duly authorized officers of the Administrative Agent, the Buyers, the Seller and the Guarantor; and

SECTION 8. Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyers that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of Repurchase Agreement.

SECTION 9. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

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. Counterparts may be delivered electronically. Facsimile, documents executed, scanned and transmitted electronically and electronic signatures shall be deemed original signatures for purposes of this Amendment and all matters related thereto, with such facsimile, scanned and electronic signatures having the same legal effect as original signatures. The parties agree that this Amendment, any addendum or amendment hereto or any other document necessary for the consummation of the transaction contemplated by this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act (“E-Sign Act”), Title 15, United States Code, Sections 7001 et seq., the Uniform

-3-

Electronic Transaction Act (“UETA”) and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service providers with appropriate document access tracking, electronic signature tracking and document retention as may be reasonably chosen by a signatory hereto.

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

SECTION 13. Reaffirmation of Guaranty. The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of the Seller to Administrative Agent and Buyers under the Repurchase Agreement and related Program Agreements, as amended hereby.

[Remainder of page intentionally left blank]

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

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Margaret Dellafera
		Name: Margaret Dellafera
		Title: Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Committed Buyer and as a Buyer


	By:	/s/ Margaret Dellafera
		Name: Margaret Dellafera
		Title: Vice President


	By:	/s/ Ernest Calabrese
		Name: Ernest Calabrese
		Title: Authorized Signatory


	ALPINE SECURITIZATION LTD, as a Buyer, by Credit Suisse AG, New York Branch as Attorney-in-Fact


	By:	/s/ Jason Ruchelsman
		Name: Jason Ruchelsman
		Title: Director


	By:	/s/ Kevin Quinn
		Name: Kevin Quinn
		Title: Vice President

Signature Page to Amendment No. 10 to Third Amended and Restated Master Repurchase Agreement

	PENNYMAC LOAN SERVICES, LLC, as Seller


	By:	/s/ Pamela Marsh using an electronic signature
		Name: Pamela Marsh
		Title: Senior Managing Director and Treasurer


	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By:	/s/ Pamela Marsh using an electronic signature
		Name: Pamela Marsh
		Title: Senior Managing Director and Treasurer

Signature Page to Amendment No. 10 to Third Amended and Restated Master Repurchase Agreement

Annex A
to the Amendment

ADMINISTRATIVE AGENT AND BUYER AUTHORIZATIONS

Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Administrative Agent and/or Buyers under this Agreement:

Name	Title	Signature
Margaret Dellafera	Vice President
Elie Chau	Vice President
Robert Durden	Vice President
Ron Tarantino	Vice President
Pete Sack	Vice President
Kwaw De Graft-Johnson	Vice President
Dominic Obaditch	Vice President
Sean Walker	Vice President
Ernest Calabrese	Vice President
Jonathan Braus	Vice President
Charles Trombley	Vice President

Signature Page to Amendment No. 10 to Third Amended and Restated Master Repurchase Agreement

Exhibit 10.15

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

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Buyer

and

PENNYMAC LOAN SERVICES, LLC,

as Seller

and acknowledged by

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

as Guarantor

__________

AMENDMENT NO. 2

Dated as of April 1, 2020

to the

Master Repurchase Agreement

Dated as of December 19, 2016

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

AMENDMENT NO. 2 TO

MASTER REPURCHASE AGREEMENT

April 1, 2020

This Amendment No. 2 (this “Amendment”) to the Series 2016-VF1 Repurchase Agreement (defined below), is entered into as of April 1, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent (the “Administrative Agent”), Credit Suisse AG, Cayman Islands Branch, as buyer (“Buyer”), and PennyMac Loan Services, LLC (“PLS”), as seller (“Seller”), and is acknowledged by Private National Mortgage Acceptance Company, LLC, as guarantor (“Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Series 2016-VF1 Repurchase Agreement or the Base Indenture (defined below), as applicable.

W I T N E S S E T H:

WHEREAS, Buyer, Seller and the Administrative Agent have entered into that certain Master Repurchase Agreement, dated as of December 19, 2016, as amended by Amendment No. 1, dated as of February 28, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-VF1 Repurchase Agreement”);

WHEREAS, the Guarantor is party to that certain Amended and Restated Guaranty (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), dated as of the date hereof, by the Guarantor in favor of Buyer;

WHEREAS, Buyer, Seller and Administrative Agent have agreed, subject to the terms of this Amendment, that the Series 2016-VF1 Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Series 2016-VF1 Repurchase Agreement;

WHEREAS, as a condition precedent to amending the Series 2016-VF1 Repurchase Agreement, Buyer has required the Guarantor to ratify and affirm the Guaranty on the date hereof;

WHEREAS, PNMAC GMSR Issuer Trust, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PLS, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), the Administrative Agent and Pentalpha Surveillance LLC, as credit manager, are parties to that certain Third Amended and Restated Base Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), as supplemented by the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as February 28, 2018, as amended by Amendment No. 1, dated as of August 10, 2018, by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent (as may be

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further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”);

WHEREAS, pursuant to Section 10.3(e)(iii) of the Base Indenture, so long as any Note is Outstanding and until all obligations have been paid in full, PLS shall not consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent; and

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

WHEREAS, the Series 2016-VF1 Repurchase Agreement is a Transaction Document.

NOW, THEREFORE, in consideration of the premises and mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller, Buyer and the Administrative Agent agree as follows:

SECTION 1. Amendments. The Series 2016-VF1 Repurchase Agreement is hereby amended as follows:

(a) Section 1.01 of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting the definitions of “Applicable Lending Office,” “Base Indenture,” “MLRA Pricing Side Letter,” “Mortgage Loan Repurchase Agreement,” clause (e) of the definition of “Obligations,” “Other Repurchase Agreements,” “Pledged Repurchase Asset,” “Purchase Price,” “Repurchase Documents,” and “VFN Guaranty” in their entirety and replacing them with the following:

“Applicable Lending Office” means the “lending office” of Buyer (or of an Affiliate of Buyer) designated in Section 10.05 hereof or such other office of Buyer (or of an Affiliate of Buyer) as Buyer may from time to time specify to Seller in writing as the office by which the Transactions are to be made and/or maintained.

“Base Indenture” means the Third Amended and Restated Base Indenture, dated as of April 1, 2020, among Buyer, Citibank, N.A., as indenture trustee, as

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calculation agent, as paying agent and as securities intermediary, Seller, as administrator and as servicer, CSFB, as administrative agent, and the Credit Manager, including the schedules and exhibits thereto, as amended, restated, supplemented or otherwise modified from time to time.

“MLRA Pricing Side Letter” has the meaning assigned to the term in the Pricing Side Letter.

“Mortgage Loan Repurchase Agreement” has the meaning assigned to the term in the Pricing Side Letter.

“Obligations” … (e) all of Seller’s and PNMAC’s, as guarantor, obligations under the Other Repurchase Agreements and other Repurchase Documents.

“Other Repurchase Agreements” means the Mortgage Loan Repurchase Agreement and the Series 2020-SPIADVF1 Repurchase Agreement.

“Purchase Price” means on any date of determination:

(i) the price at which each Purchased Asset (or portion thereof) is transferred by Seller to Buyer, which shall equal the Asset Value of such Purchased Asset on the related Purchase Date, minus

(ii) the sum of (a) any Repurchase Price paid with respect to such Purchased Asset pursuant to Section 2.03, plus (b) any Additional Note Payment made with respect to such Purchased Asset pursuant to Section 4.4(b) or Section 4.5(e) of the Indenture, plus (c) any Redemption Amount paid pursuant to Section 13.1 of the Indenture, plus (d) any amounts paid or applied with respect to such Purchased Asset pursuant to Section 2.05.

“Repurchase Documents” means any or all of the “Program Agreements” as defined in each Other Repurchase Agreement.

“Subordinate Pledge Assets” has the meaning set forth in Section 4.02(e).

“VFN Guaranty” means the Amended and Restated Guaranty, dated as of April 1, 2020, as further amended, restated, supplemented or otherwise modified from time to time, pursuant to which VFN Guarantor fully and unconditionally guarantees the obligations of Seller hereunder.

(b) Section 1.01 of the Series 2016-VF1 Repurchase Agreement is hereby amended by adding the definition of “Series 2020-SPIADVF1 Repurchase Agreement” in proper alphabetical order as follows:

“Series 2020-SPIADVF1 Repurchase Agreement” means the Series 2020-SPIADVF1 Repurchase Agreement, dated as of April 1, 2020, among PLS, as repo seller, CSCIB, as repo buyer and CSFB, as administrative agent, as amended, restated, supplemented or otherwise modified from time to time.

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(c) Section 2.05(a) of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting it in its entirety and replacing it as follows:

(a) If at any time the aggregate outstanding amount of the Purchase Price of the Note is greater than the related Asset Value (such excess, a “Margin Deficit”), then Buyer may by notice to Seller require Seller to transfer to Buyer cash in an amount at least equal to the Margin Deficit (such requirement, a “Margin Call”).

(d) Section 4.02 of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting clause (b), (c) and (d) in their entirety and replacing them as follows, adding a new clause (e) as follows and changing the existing clause (e) to clause (f):

(b) [Reserved].

(c) Buyer and Seller hereby agree that in order to further secure Seller’s Obligations hereunder, Seller hereby assigns, pledges, conveys and grants to Buyer a security interest in (i) as of the Closing Date, Seller’s rights (but not its obligations) under the Program Agreements including without limitation any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “Repurchase Rights”) and (ii) all collateral however defined or described under the Program Agreements to the extent not otherwise included under the definitions of Primary Repurchase Assets or Repurchase Rights (such collateral, “Additional Repurchase Assets,” and collectively with the Primary Repurchase Assets and the Repurchase Rights, the “Repurchase Assets”) to secure the Obligations.

(d) Seller hereby delivers an irrevocable instruction to the buyer under any Repurchase Document that upon receipt of notice of an Event of Default under this Agreement, the buyer thereunder is authorized and instructed to (i) remit to Buyer hereunder directly any amounts otherwise payable to Seller and (ii) deliver to Buyer all collateral otherwise deliverable to Seller, to the extent all obligations then due and owing under such Other Repurchase Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding purchase price under any Other Repurchase Agreement and termination of all obligations of the Seller thereunder or other termination of the related Repurchase Documents following repayment of all obligations thereunder, the related buyer under any Repurchase Document is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the related Repurchase Documents) then in its possession or control.

(e) Seller makes a subordinate pledge to the buyers under the Other Repurchase Agreements as security for the performance by Seller of its obligations thereunder and hereby grants, assigns and pledges to the buyers thereunder a subordinate security interest in all of Seller’s right, title and interest in, to and under (i) the Note identified on the Asset Schedule; (ii) all rights to reimbursement or payment of the Note and/or amounts due in respect thereof under the Note identified on the Asset Schedule; (iii) all records, instruments or other documentation evidencing any of the foregoing and

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(iv) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing (collectively, the “Subordinated Pledge Assets”). Seller hereby delivers an irrevocable instruction to Buyer that upon its receipt of notice of an “Event of Default” from the buyer under any Other Repurchase Agreement, Buyer is authorized and instructed to (i) remit to such buyer directly any amounts otherwise payable to Seller under this Agreement and (ii) deliver to such buyer all Subordinated Pledge Assets otherwise deliverable to Seller, to the extent all obligations then due and owing under this Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding Purchase Price and termination of all Obligations or other termination of the Program Agreements following repayment of all obligations thereunder, Buyer shall deliver to the buyer under any Other Repurchase Agreement with respect to which the related purchase price remains outstanding any Subordinated Pledge Assets then in Buyer’s possession or under its control. The subordinate pledge set forth in this clause (e) shall automatically terminate with respect to an Other Repurchase Agreement if Buyer or the other buyer thereunder, is no longer CSFB, CSCIB, or any Affiliates thereof.

(e) Section 4.07 of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting the third sentence thereof and replacing it with the following:

Without limiting the generality of the foregoing, Buyer may terminate the Participation Interest in Originated MSR Excess Spread, Retained Servicing Spread and Purchased MSR Excess Spread in accordance with the Participation Agreement.

(f) Section 5.03(d) of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting “true sale” and replacing it with “safe harbor.”

(g) Section 9.02(a) and (b) of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(a) Buyer may in accordance with applicable law at any time sell to one or more banks or other entities (“Participants”) participating interests in all or a portion of Buyer’s rights and obligations under this Agreement and the other Program Agreements; provided, that (i) Seller has consented to such sale; provided, however, Seller’s consent shall not be required in the event that (A) such Participant is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) each such sale shall represent an interest in a Transaction in a Purchase Price of $1,000,000 or more and (iii) other than with respect to a participating interest consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer receives an opinion of a nationally recognized tax counsel experienced in such matters that such sale will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes. In the event of any such sale by Buyer of participating interests to a Participant, Buyer shall remain a party to the Transaction for all purposes under this Agreement and the Program Agreements and Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement and the Program Agreements.

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(b) Buyer may in accordance with applicable law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a “Transferee”) all or a portion of Buyer’s rights and obligations under this Agreement so long as a Noteholder of an MBS Advance VFN continues to own interests in the outstanding Series of VFNs that are funded in an aggregate amount that equals or exceeds the amount required to avoid an Early Amortization Event under any outstanding Series of Term Notes and the other Program Agreements; provided, that (i) Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, Seller’s consent shall not be required in the event that (A) such Transferee is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) absent an Event of Default, Buyer shall give at least ten days’ prior notice thereof to Seller; and (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more, (iv) such Transferee shall have also acquired the same percentage interest in each other Series of Variable Funding Notes, unless Ginnie Mae has consented in writing to waive this requirement, and (v) other than with respect to an assignment, pledge, hypothecation or transfer consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer received an opinion of a nationally recognized tax counsel experienced in such matters that such assignment, pledge, hypothecation or transfer will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes. In the event of any such assignment, pledge, hypothecation or transfer by Buyer of Buyer’s rights under this Agreement and the other Program Agreements, Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement. Buyer (acting as agent for Seller) shall maintain at its address referred to in Section 10.05 a register (the “Register”) for the recordation of the names and addresses of Transferees, and the Purchase Price outstanding and Price Differential in the Transactions held by each thereof. The entries in the Register shall be prima facie conclusive and binding, and Seller may treat each Person whose name is recorded in the Register as the owner of the Transactions recorded therein for all purposes of this Agreement. No assignment shall be effective until it is recorded in the Register.

(h) Section 10.05 of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting all reference to Seller address and replacing it with the following:

If to Seller:

PennyMac Loan Services, LLC

3043 Townsgate Road

Westlake Village, CA 91361

Attention: Pamela Marsh/Richard Hetzel

Phone Number: (805) 330-6059/ (818) 746-2877

E-mail: pamela.marsh@pnmac.com;

richard.hetzel@pnmac.com;

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contract.finance@pnmac.com

with a copy to:

PennyMac Loan Services, LLC

3043 Townsgate Road

Westlake Village, CA 91361

Attention: Derek Stark

Phone Number: (818) 746-2289

E-mail: derek.stark@pnmac.com

(i) Schedule 1 of the Series 2016-VF1 Repurchase Agreement is hereby amended by deleting and replacing it with Exhibit A to this Amendment.

SECTION 2. Consent. Each of Buyer, Seller and Administrative Agent hereby consents to this Amendment.

SECTION 3. Reaffirmation of Guaranty. The VFN Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of Seller to Buyer under the Series 2016-VF1 Repurchase Agreement and the related Program Agreements, as amended hereby.

SECTION 4. Conditions to Effectiveness of this Amendment. This Amendment shall become effective upon the execution and delivery of this Amendment by all parties hereto.

SECTION 5. No Default; Representations and Warranties. To induce Buyer to provide the amendments set forth herein, Seller hereby represents, warrants and covenants that:

(a) no Event of Default has occurred and is continuing on the date hereof; and

(b) Seller’s representations and warranties contained in the Series 2016-VF1 Repurchase Agreement are true and correct in all material respects and such representations and warranties are remade as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case, they were true, correct and complete in all material respects on and as of such earlier date.

SECTION 6. Single Agreement. Except as expressly amended and modified by this Amendment, all of the terms and conditions of the Series 2016-VF1 Repurchase Agreement in full force and effect and are hereby reaffirmed.

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.

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SECTION 8. GOVERNING LAW. THIS AMENDMENT 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. Counterparts. This Amendment may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

[Signatures appear on the following pages]

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

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer and as 100% of the VFN Noteholders of the Outstanding Notes


By:	/s/ Dominic Obaditch

	Name:	Dominic Obaditch

	Title:	Authorized Signatory


By:	/s/ Margaret D. Dellafera

	Name:	Margaret D. Dellafera

	Title:	Authorized Signer

[Signature page to Amendment No. 2 to Series 2016-VF1 Repurchase Agreement]

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


By:	/s/ Dominic Obaditch

	Name:	Dominic Obaditch

	Title:	Vice President

[Signature page to Amendment No. 2 to Series 2016-VF1 Repurchase Agreement]

PENNYMAC LOAN SERVICES, LLC, as Seller and sole Owner


By:	/s/ Pamela Marsh using an electronic signature

	Name:	Pamela Marsh

	Title:	Senior Managing Director and Treasurer

[Signature page to Amendment No. 2 to Series 2016-VF1 Repurchase Agreement]

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


By:	/s/ Pamela Marsh using an electronic signature

	Name:	Pamela Marsh

	Title:	Senior Managing Director and Treasurer

[Signature page to Amendment No. 2 to Series 2016-VF1 Repurchase Agreement]

EXHIBIT A

SCHEDULE 1

RESPONSIBLE OFFICERS – SELLER

SELLER AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller under this Agreement:

Responsible Officers for execution of Program Agreements and amendments:

Name		Title		Signature
Pamela Marsh		Senior Managing Director and Treasurer		signed by Pamela Marsh using an electronic signature

Responsible Officers for execution of Transaction Notices and day-to-day operational functions:

Name	Title	Signature
Pamela Marsh	Senior Managing Director and Treasurer	signed by Pamela Marsh using an electronic signature

Maurice Watkins	Managing Director, Capital Markets	signed by Maurice Watkins using an electronic signature

Thomas Rettinger	Managing Director, Portfolio Risk Management	signed by Thomas Rettinger using an electronic signature

Richard Hetzel	Senior Vice President, Treasury	signed by Richard Hetzel using an electronic signature

Paul Newman	Executive Vice President, Treasury	signed by Paul Newman using an electronic signature

Angela Everest	Authorized Representative	signed by Angela Everest using an electronic signature

Exhibit A-1

Exhibit 10.16

JOINT AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (FREDDIE MAC MSRS) AND AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AMENDED AND RESTATED PRICING SIDE LETTER

This Joint Amendment No. 2 to Loan and Security Agreement and Amendment No. 1 to Pricing Side Letter (this “Amendment”) is made as of this 1st day of April, 2020, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the “Lender”), PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC (the “Guarantor”) and PENNYMAC LOAN SERVICES, LLC (the “ Borrower” and the “Servicer”), and amends that certain Loan and Security Agreement, dated as of February 1, 2018, as amended by Amendment No. 1, dated as of January 29, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Lender, the Guarantor and the Borrower, and that certain Loan and Security Agreement Amended and Restated Pricing Side Letter, dated as of September 11, 2019 (the “Pricing Side Letter” and Pricing Side Letter, together with the Loan Agreement, the “Agreements”), by and among the Borrower, the Guarantor and the Lender.

WHEREAS, the Administrative Agent, the Lender, the Guarantor and the Borrower have agreed to amend the Loan Agreement and the Pricing Side Letter as more particularly set forth herein.

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

SECTION 1. Amendments to the Loan Agreement. Effective as of the date hereof:

(a) Section 1.1 of Schedule I of the Loan Agreement is hereby amended by deleting the defined term “Termination Date” in its entirety and replacing such term with the following:

“Termination Date” means the earliest of (i) the Maturity Date, (ii) the day on which the Facility is terminated pursuant to Section 8.02(a) or Section 8.02(b), (iii) the Loan Repayment Date on which the final amounts owing under the Facility are required to be paid as provided for in the first sentence of Section 2.08(a) hereof, or (iv) the termination of the Repo Agreement, the SPIA VF1 Repo or the GMSR VF1 Repo.

(b) Section 1.1 of Schedule I of the Loan Agreement is hereby amended by adding the defined term “SPIA VF1 Repo” in proper alphabetical order as follows:

“SPIA VF1 Repo” means that certain Master Repurchase Agreement, dated as of April 1, 2020, among CSFB, as administrative agent, CSCIB, as repo buyer, and Borrower, as repo seller.

SECTION 2. Amendment to the Pricing Side Letter. Effective as of the date hereof:

(a) Section 1 of the Pricing Side Letter is hereby amended by deleting the defined term “Available Facility Amount” in its entirety and replacing such term with the following:

“Available Facility Amount” means: (i) an amount agreed to by the Lender that, when added to the aggregate outstanding repurchase price under the Repo Agreement, the PC MRA Utilized Purchase Price, the SPIA VFN Utilized Purchase Price and the MSR VFN Utilized Purchase Price, would not exceed the Maximum Combined Purchase Price; or (ii) the lesser of: (A) the Borrowing Base; or (B) the amount that, when added to the aggregate outstanding repurchase price under the Repo Agreement, the PC MRA Utilized Purchase Price, the SPIA VFN Utilized Purchase Price and the

MSR VFN Utilized Purchase Price, would not exceed the Maximum Combined Committed Purchase Price; provided, however, that the Available Facility Amount shall not exceed the difference between $400,000,000 and the sum of (x) the VFN Utilized Purchase Price, (y) the PC MRA Utilized Purchase Price and (z) the SPIA VFN Utilized Purchase Price.

For purposes of this definition, the terms “Maximum Combined Purchase Price,” “Maximum Combined Committed Purchase Price,” “MSR VFN Utilized Purchase Price,” “PC MRA Utilized Purchase Price,” and “SPIA VFN Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter.

(b) Section 1 of the Pricing Side Letter is hereby amended by deleting the defined term “MSR PC Repo Agreement” in its entirety.

SECTION 3. Fees and Expenses. The Borrower agrees to pay to the Lender all fees and out of pocket expenses incurred by the Lender in connection with this Amendment, including all reasonable fees and out of pocket costs and expenses of the legal counsel to the Lender incurred in connection with this Amendment, in accordance with Section 3.03 of the Loan Agreement.

SECTION 4. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement or the Pricing Side Letter, as applicable.

SECTION 5. Limited Effect. Except as amended hereby, each Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Agreements or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreements, any reference in any of such items to the Agreements being sufficient to refer to the Agreements as amended hereby.

SECTION 6. Representations. In order to induce the Lender and the Administrative Agent to execute and deliver this Amendment, each of the Borrower and the Guarantor hereby represents to the Administrative Agent and the Lender that as of the date hereof, (i) each of the Borrower and the Guarantor is in full compliance with all of the terms and conditions of the Facility Documents and remains bound by the terms thereof, and (ii) no default or event of default has occurred and is continuing under the Facility Documents.

SECTION 7. Governing Law. This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws (other than Sections 5‑1401 and 5‑1402 of the New York General Obligations Law which shall be applicable).

SECTION 8. Counterparts. For the purpose of facilitating the execution of this Amendment, and for other purposes, this Amendment may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties. The original documents shall be promptly delivered, if requested.

SECTION 9. Miscellaneous.

(a) This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

(b) The various headings and sub-headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreements or any provision hereof or thereof.

[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the Lender, the Administrative Agent, the Guarantor and the Borrower have each caused their names to be duly signed to this Amendment by their respective officers thereunto duly authorized, all as of the date first above written.

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
		Name: Dominic Obaditch
		Title: Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender


	By:	/s/ Dominic Obaditch
		Name: Dominic Obaditch
		Title: Authorized Signatory


	By:	/s/ Margaret D. Dellafera
		Name: Margaret D. Dellafera
		Title: Authorized Signer

[Signature Page to Joint Amendment No. 2 to Loan and Security Agreement and Amendment No. 1 to Pricing Side Letter (CS - PLS)]

	PENNYMAC LOAN SERVICES, LLC, as Borrower


	By:	/s/ Pamela Marsh using an electronic signature
		Name: Pamela Marsh
		Title: Senior Managing Director and Treasurer

[Signature Page to Joint Amendment No. 2 to Loan and Security Agreement and Amendment No. 1 to Pricing Side Letter (CS - PLS)]

	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By	/s/ Pamela Marsh using an electronic signature
		Name: Pamela Marsh
		Title: Senior Managing Director and Treasurer

[Signature Page to Joint Amendment No. 2 to Loan and Security Agreement and Amendment No. 1 to Pricing Side Letter (CS - PLS)]

Exhibit 10.17

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 1 TO

THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 1 TO THE PRICING SIDE LETTER

This Joint Amendment No. 1 to the Series 2020-SPIADVF1 Repurchase Agreement (as defined below) and Amendment No. 1 to the Pricing Side Letter (as defined below), is entered into as of April 24, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”) and PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and acknowledged by PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Series 2020-SPIADVF1 Repurchase Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer and the Seller are parties to that certain Master Repurchase Agreement, dated as of April 1, 2020 (as amended by this Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”) and the related Pricing Side Letter, dated as of April 1, 2020 (as amended by this Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter;

WHEREAS, as a condition precedent to amending the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the Guaranty on the date hereof;

WHEREAS, PNMAC GMSR Issuer Trust, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), the PLS, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), the Administrative Agent and Pentalpha Surveillance LLC, as credit manager, are parties to that certain Third Amended and Restated Base Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), as supplemented by the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as February 28, 2018, as amended by Amendment No. 1, dated as of August 10, 2018 (as may be further amended,

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restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”), and by the Series 2020-SPIADVF1 Indenture Supplement, dated April 1, 2020, by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”);

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner, (ii) pursuant to the Series 2016-MSRVF1 Indenture Supplement, with respect to the Series 2016-MSRVF1 Note, any Action provided by the Base Indenture or the Series 2016-MSRVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2016-MSRVF1 Note under the Series 2016-MSRVF1 Repurchase Agreement, (iii) pursuant to the terms of the Note Purchase Agreement, CSCIB is the purchaser of the Series 2016-MSRADV1 Note and (iv) pursuant to the terms of the Series 2020-SPIADVF1 Repurchase Agreement, CSCIB is the purchaser of the Series 2020-SPIADVF1 Note, and therefore CSCIB is 100% of the VFN Noteholders of the Outstanding Notes;

WHEREAS, the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter are Transaction Documents.

NOW THEREFORE, the Administrative Agent, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1. Amendments to the Series 2020-SPIADVF1 Repurchase Agreement.

(a) Section 1.01 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting the definitions of “Other Repurchase Agreements,” “Repurchase Documents” and “SPIA Funding Conditions” in their entirety and replacing them with the following in proper alphabetical order:

“Financing Documents” means any or all of the “Program Agreements,” “Facility Documents” or any similar term as defined in each Other Financing Agreement.

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“Other Financing Agreements” means each of the agreements listed on Schedule 4 hereto, which may be updated from time to time in a written confirmation signed by the parties to this Agreement.

“SPIADVF1 Funding Conditions” with respect to the Series 2020-SPIADVF1 Notes and any Funding Date, the following conditions:

(i) the Advance Verification Agent Report immediately preceding such Funding Date has been delivered in accordance with Section 3.3(g)(2) of the Base Indenture; and

(ii) to the extent the Advance Verification Agent Report delivered immediately preceding such Funding Date contains any exceptions noted therein, such exceptions have been waived by the Administrative Agent in its sole discretion.

(iii) solely with respect to funding of MBS Advances, Seller shall not have submitted an Appendix XI-01A Request for Pass-Through Assistance Related to COVID-19 and Repayment Agreement.

(b) Section 1.01 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting the definitions of “Mortgage Loan Repurchase Agreement” and “Series 2016-MSRVF1 Repurchase Agreement” in their entirety.

(c) Section 1.01 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by adding the definitions “Exposure Margin Deficit,” “Structuring Fee” and “Up-front Fee” in proper alphabetical order:

“Exposure Margin Deficit” has the meaning assigned to the term in the Pricing Side Letter.

“Structuring Fee” means an amount equal to the product of (i) [*****] and $600,000,000.

“Up-front Fee” means an amount equal to the product of (i) [*****] and $600,000,000.

(d) Section 2.05(a) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety replacing it with the following:

(a) If (x) at any time the aggregate outstanding amount of the Purchase Price of the Note is greater than the related Asset Value or the Maximum Purchase Price or (y) as of the last Business Day of the preceding month, the Exposure Margin Deficit exceeds zero (any such excess, a “Margin Deficit”), then Buyer may by notice to Seller require Seller to transfer to Buyer cash in an amount at least equal to the Margin Deficit (such requirement, a “Margin Call”).

(b) Section 2.05(c) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety.

(c) Section 4.02 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting clauses (d) and (e) in their entirety and replacing them with the following:

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(d) Seller hereby delivers an irrevocable instruction to the buyer or lender under any Financing Document that upon receipt of notice of an Event of Default under this Agreement, the buyer or lender thereunder is authorized and instructed to (i) remit to Buyer hereunder directly any amounts otherwise payable to Seller and (ii) deliver to Buyer all collateral otherwise deliverable to Seller, to the extent all obligations then due and owing under such Other Financing Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding repurchase price or loan amount under any Other Financing Agreement and termination of all obligations of the Seller thereunder or other termination of the related Financing Documents following repayment of all obligations thereunder, the related buyer or lender under any Financing Document is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the related Financing Documents) then in its possession or control.

(e) Seller makes a subordinate pledge to the buyers or lenders under the Other Financing Agreements as security for the performance by Seller of its obligations thereunder and hereby grants, assigns and pledges to the buyers or lenders thereunder a subordinate security interest in all of Seller’s right, title and interest in, to and under (i) the Note identified on the Asset Schedule; (ii) all rights to reimbursement or payment of the Note and/or amounts due in respect thereof under the Note identified on the Asset Schedule; (iii) all records, instruments or other documentation evidencing any of the foregoing and (iv) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing (collectively, the “Subordinated Pledge Assets”). Seller hereby delivers an irrevocable instruction to Buyer that upon its receipt of notice of an “Event of Default” from the buyer or lender under any Other Financing Agreement, Buyer is authorized and instructed to (i) remit to such buyer or lender directly any amounts otherwise payable to Seller under this Agreement and (ii) deliver to such buyer or lender all Subordinated Pledge Assets otherwise deliverable to Seller, to the extent all obligations then due and owing under this Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding Repurchase Price and termination of all Obligations or other termination of the Program Agreements following repayment of all obligations hereunder, Buyer shall deliver to the buyer or lender under any Other Financing Agreement with respect to which the related repurchase price or loan amount remains outstanding any Subordinated Pledge Assets then in Buyer’s possession or under its control. The subordinate pledge set forth in this clause (e) shall automatically terminate with respect to an Other Financing Agreement if the Buyer or the other buyer or lender thereunder is no longer CSFB, CSCIB, or any Affiliates thereof.

(d) Section 6.24(a)(5) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(5) whether, as of the last Business Day of the month, the Exposure Margin Deficit exceeds zero;

(e) Section 7.01(b) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by replacing the words “Repurchase Document” therein with “Financing Document.”

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(f) The Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by adding Schedule 4 attached hereto as Exhibit A in proper numerical order.

SECTION 2. Amendments to the Pricing Side Letter.

(a) Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Margin,” “Maximum Purchase Price” and “Termination Date” in their entirety and replacing them with the following:

“Margin” means (i) with respect to the Note prior to the occurrence of an Event of Default, 6.00% per annum, and (ii) with respect to the Note following the occurrence of an Event of Default, 9.00% per annum.

“Maximum Purchase Price” means the lesser of:

(i) an amount agreed to by the Buyer that, when added to (w) the aggregate outstanding purchase price under the Mortgage Loan Repurchase Agreement, (x) the MSR PC Utilized Purchase Price, (y) the MSR VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement, would not exceed the Maximum Combined Purchase Price; and

(ii) the lesser of: (A) the Asset Value; or (B) the amount that, when added to (w) the aggregate outstanding purchase price under the Mortgage Loan Repurchase Agreement, (x) the MSR PC Utilized Purchase Price, (y) the MSR VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement, would not exceed the Maximum Combined Committed Purchase Price; provided, however, that the Maximum Purchase Price shall not exceed the positive difference between (A) $600,000,000, minus (B) the sum of (x) the MSR PC Utilized Purchase Price, (y) the MSR VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement.

The Maximum Purchase Price may be modified from time to time in a written confirmation signed by the parties hereto.

For purposes of this definition, the terms “Maximum Combined Purchase Price,” “Maximum Combined Committed Purchase Price,” “MSR VFN Utilized Purchase Price” and “MSR PC Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter. “Warehouse Purchase Price Percentage” shall mean the weighted average “Purchase Price Percentage” weighted based on the “Type of Mortgage Loan” as set forth in the definition of “Purchase Price Percentage” in the MLRA Pricing Side Letter.

“Termination Date” means the earliest of (a) October 21, 2020; (b) the Obligations having become immediately due and payable pursuant to Section 7.03 of the Repurchase Agreement; (c) upon termination of the Indenture; and (d) at Buyer’s or Seller’s option pursuant to Section 2.16 of the Repurchase Agreement.

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(b) Section 1 of the Pricing Side Letter is hereby amended by adding the definitions of “Actual Seller Equity,” “Exposure Margin Deficit” and “Required Seller Equity” in proper alphabetical order:

“Actual Seller Equity” means the amount, measured on the last Business Day of each month, equal to the product of (x) the aggregate outstanding purchase price under the Mortgage Loan Repurchase Agreement on such day, and (y) [**].

“Exposure Margin Deficit” means, the excess, if any, measured on the last Business Day of each month, of (x) the Required Seller Equity, over (y) the Actual Seller Equity.

“Required Seller Equity” means the amount, measured on the last Business Day of each month, equal to the product of (A) [*****] (B) the sum of (w) the MSR VFN Utilized Purchase Price, (x) the SPIA VFN Utilized Purchase Price on such day, (y) the MSR PC Utilized Purchase Price on such day and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement on such day, and (C) [**].

For purposes of this definition, the terms “MSR VFN Utilized Purchase Price,” “SPIA VFN Utilized Purchase Price” and “MSR PC Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter.

SECTION 3. Reaffirmation of Guaranty. The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of the Seller to the Buyer under the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter and the related Program Agreements, as amended hereby.

SECTION 4. Conditions Precedent. This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of the Buyer, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyer and the Seller and payment of the Structuring Fee and Up-front Fee by the Seller.

SECTION 5. Structuring Fee. On the date hereof, the Seller shall pay to the Buyer the Structuring Fee. The Structuring Fee shall be fully earned on the date hereof and non-refundable when paid.

SECTION 6. Up-front Fee. On the date hereof, the Seller shall pay to the Buyer the Up-front Fee. The Up-front Fee shall be fully earned on the date hereof and non-refundable when paid.

SECTION 7. Representations and Warranties. The Seller hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the Series 2020-SPIADVF1 Repurchase Agreement and Pricing Side Letter on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article III of the Series 2020-SPIADVF1 Repurchase Agreement.

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SECTION 8. Limited Effect. Except as expressly amended and modified by this Amendment, the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 9. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 10. 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 11. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

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


	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer and as 100% of the VFN Noteholder of the Outstanding Notes


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Authorized Signatory


	By:	/s/ Dominic Obaditch
	Name:	Margaret Dellafera
	Title:	Authorized Signatory

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 1 to Pricing Side Letter]

	PENNYMAC LOAN SERVICES, LLC, as Seller and sole Owner


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 1 to Pricing Side Letter]

	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 1 to Pricing Side Letter]

EXHIBIT A

SCHEDULE 4

OTHER FINANCING AGEEMENTS

Third Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017 (as may be amended, restated supplemented or otherwise modified from time to time, the “Mortgage Loan Repurchase Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse AG, Cayman Islands Branch, as a committed buyer, Alpine Securitization LTD, as a buyer, PennyMac Loan Services, LLC, as seller, and Private National Mortgage Acceptance Company, LLC, as guarantor.

Master Repurchase Agreement, dated as of December 16, 2016 (as amended by Amendment No. 1, dated as of February 28, 2018, Amendment No. 2, dated as of April 1, 2020, and Amendment No. 3, dated as of April 24, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer.

Master Repurchase Agreement, dated as of September 11, 2019 (as amended by Amendment No. 1 to the Master Repurchase Agreement, dated as of April 24, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “MSR PC Repo Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer, and Private National Mortgage Acceptance Company, LLC, as guarantor.

Loan and Security Agreement, dated as of February 1, 2018, as amended by Amendment No. 1, dated as of January 29, 2020, Amendment No. 2, dated as of April 1, 2020, and Amendment No. 3, dated as of April 24, 2020, (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse AG, Cayman Islands Branch, as lender, Private National Mortgage Acceptance Company, LLC, as guarantor, PennyMac Mortgage Services, LLC, as borrower and servicer.

EXHIBIT A

Exhibit 10.18

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 3 TO THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 2 TO THE FOURTH AMENDED AND RESTATED PRICING SIDE LETTER

This Joint Amendment No. 3 to the Series 2016-MSRVF1 Repurchase Agreement (as defined below) and Amendment No. 2 to the Pricing Side Letter (as defined below), is entered into as of April 24, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”) and PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and acknowledged by PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Series 2016-MSRVF1 Repurchase Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer and the Seller are parties to that certain Master Repurchase Agreement, dated as of December 19, 2016 (as amended by Amendment No. 1 thereto, dated as of February 28, 2019, Amendment No. 2, dated as of April 1, 2020, and amended by this Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”) and the related Fourth Amended and Restated Pricing Side Letter, dated as of April 27, 2018, as amended by Amendment No. 1, dated as of April 1, 2020 (as amended by this Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter;

WHEREAS, as a condition precedent to amending the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the Guaranty on the date hereof;

WHEREAS, PNMAC GMSR Issuer Trust, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), the PLS, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), the Administrative Agent and Pentalpha Surveillance LLC, as credit manager, are parties to that certain Third Amended and Restated Base Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), as supplemented by

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the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as February 28, 2018, as amended by Amendment No. 1, dated as of August 10, 2018 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”), and by the Series 2020-SPIADVF1 Indenture Supplement, dated April 1, 2020, by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”);

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner, (ii) pursuant to the Series 2016-MSRVF1 Indenture Supplement, with respect to the Series 2016-MSRVF1 Note, any Action provided by the Base Indenture or the Series 2016-MSRVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2016-MSRVF1 Note under the Series 2016-MSRVF1 Repurchase Agreement, (iii) pursuant to the terms of the Note Purchase Agreement, CSCIB is the purchaser of the Series 2016-MSRADV1 Note and (iv) pursuant to the terms of the Master Repurchase Agreement, dated as of April 1, 2020, as amended by Amendment No. 1, dated as of April 24, 2020, by and among the Administrative Agent, the Buyer and the Seller, CSCIB is the purchaser of the Series 2020-SPIADVF1 Note, and therefore CSCIB is 100% of the VFN Noteholders of the Outstanding Notes;

WHEREAS, the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter are Transaction Documents.

NOW THEREFORE, the Administrative Agent, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1. Amendments to the Series 2016-MSRVF1 Repurchase Agreement.

(a) Section 1.01 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting the definitions of “Obligations,” “Other Repurchase Agreements” and

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“Repurchase Documents” in their entirety and replacing them with the following in proper alphabetical order:

“Obligations” means (a) all of Seller’s indebtedness, obligations to pay the outstanding principal balance of the Purchase Price, together with interest thereon on the Termination Date, outstanding interest due on each Price Differential Payment Date, and other obligations and liabilities, to Buyer or its Affiliates arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums reasonably incurred and paid by Buyer or on behalf of Buyer in order to preserve any Repurchase Asset or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller’s indebtedness, obligations or liabilities referred to in this definition, the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Repurchase Asset, or of any exercise by Buyer of its rights under the Program Agreements, including, without limitation, reasonable attorneys’ fees and disbursements and court costs’ (d) all of Seller’s indemnity obligations to Buyer pursuant to the Program Agreements and (e) all of Seller’s and PNMAC’s, as guarantor, obligations under the Other Financing Agreements and other Financing Documents.

“Financing Documents” means any or all of the “Program Agreements,” “Facility Documents” or any similar term as defined in each Other Financing Agreement.

“Other Financing Agreements” means each of the agreements listed on Schedule 4 hereto, which may be updated from time to time in a written confirmation signed by the parties to this Agreement.

(b) Section 1.01 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting the definitions of “Mortgage Loan Repurchase Agreement” and “Series 2020-SPIADVF1 Repurchase Agreement” in their entirety.

(c) Section 1.01 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by adding the definition of “Exposure Margin Deficit” in proper alphabetical order.

“Exposure Margin Deficit” has the meaning assigned to the term in the Pricing Side Letter.

(d) Section 2.05(a) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(a) If (x) at any time the aggregate outstanding amount of the Purchase Price of the Note is greater than the related Asset Value or the Maximum Purchase Price, or (y) as of the last Business Day of the preceding month, the Exposure Margin Deficit exceeds zero (any such excess, a “Margin Deficit”), then Buyer may by notice to Seller require Seller to transfer to Buyer cash in an amount at least equal to the Margin Deficit (such requirement, a “Margin Call”).

(e) Section 2.05(c) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety.

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(f) Section 4.02 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting clauses (d) and (e) in their entirety and replacing them with the following:

(g) Seller hereby delivers an irrevocable instruction to the buyer or lender under any Financing Document that upon receipt of notice of an Event of Default under this Agreement, the buyer or lender thereunder is authorized and instructed to (i) remit to Buyer hereunder directly any amounts otherwise payable to Seller and (ii) deliver to Buyer all collateral otherwise deliverable to Seller, to the extent all obligations then due and owing under such Other Financing Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding repurchase price or loan amount under any Other Financing Agreement and termination of all obligations of the Seller thereunder or other termination of the related Financing Documents following repayment of all obligations thereunder, the related buyer or lender under any Financing Document is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the related Financing Documents) then in its possession or control.

(h) Seller makes a subordinate pledge to the buyers or lenders under the Other Financing Agreements as security for the performance by Seller of its obligations thereunder and hereby grants, assigns and pledges to the buyers or lenders thereunder a subordinate security interest in all of Seller’s right, title and interest in, to and under (i) the Note identified on the Asset Schedule; (ii) all rights to reimbursement or payment of the Note and/or amounts due in respect thereof under the Note identified on the Asset Schedule; (iii) all records, instruments or other documentation evidencing any of the foregoing and (iv) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing (collectively, the “Subordinated Pledge Assets”). Seller hereby delivers an irrevocable instruction to Buyer that upon its receipt of notice of an “Event of Default” from the buyer or lender under any Other Financing Agreement, Buyer is authorized and instructed to (i) remit to such buyer or lender directly any amounts otherwise payable to Seller under this Agreement and (ii) deliver to such buyer or lender all Subordinated Pledge Assets otherwise deliverable to Seller, to the extent all obligations then due and owing under this Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding Repurchase Price and termination of all Obligations or other termination of the Program Agreements following repayment of all obligations hereunder, Buyer shall deliver to the buyer or lender under any Other Financing Agreement with respect to which the related repurchase price or loan amount remains outstanding any Subordinated Pledge Assets then in Buyer’s possession or under its control. The subordinate pledge set forth in this clause (e) shall automatically terminate with respect to an Other Financing Agreement if the Buyer or the other buyer or lender thereunder is no longer CSFB, CSCIB, or any Affiliates thereof.

(i) Section 6.24(a)(5) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(5) whether, as of the last Business Day of the month, the Exposure Margin Deficit exceeds zero;

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(j) Section 7.01(b) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by replacing the words “Repurchase Document” therein with “Financing Document.”

(k) The Series 2016-MSRVF1 Repurchase Agreement is hereby amended by adding Schedule 4 attached hereto as Exhibit A in proper numerical order.

SECTION 2. Amendments to the Pricing Side Letter.

(a) The preamble to the Pricing Side Letter is hereby amended by deleting the notice information for PennyMac Loan Services, LLC in its entirety and replacing it with the following:

PennyMac Loan Services, LLC

3043 Townsgate Road

Westlake Village, CA 91361

Attention: Pamela Marsh/Richard Hetzel

Phone Number: (805) 330-6059 / (805) 254-6088

Email: pamela.marsh@pnmac.com; richard.hetzel@pnmac.com

(b) Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Base Rate,” “Margin,” “Maximum Purchase Price,” “Mortgage Loan Repurchase Agreement” and “Termination Date” in their entirety and replacing them with the following:

“Base Rate” means the greater of (a) the LIBOR Rate or (b) [*****].

“Margin” means (i) with respect to the Note prior to the occurrence of an Event of Default, [*****] per annum, and (ii) with respect to the Note following the occurrence of an Event of Default, [*****] per annum.

“Maximum Purchase Price” means the lesser of (i) an amount agreed to by the Buyer that, when added to (w) the aggregate outstanding purchase price under the Mortgage Loan Repurchase Agreement, (x) the MSR PC Utilized Purchase Price, (y) the SPIA VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement, would not exceed the Maximum Combined Purchase Price; and (ii) the lesser of: (A) the Asset Value; or (B) the amount that, when added to (w) the aggregate outstanding purchase price under the Mortgage Loan Repurchase Agreement, (x) the MSR PC Utilized Purchase Price, (y) the SPIA VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement, would not exceed the Maximum Combined Committed Purchase Price; provided, however, that the Maximum Purchase Price shall not exceed the positive difference between $400,000,000, minus the sum of (A) the MSR PC Utilized Purchase Price and (B) the Outstanding Aggregate Loan Amount under the Loan Agreement.

The Maximum Purchase Price may be modified from time to time in a written confirmation signed by the parties hereto.

For purposes of this definition, the terms “Maximum Combined Purchase Price,” “Maximum Combined Committed Purchase Price,” “SPIA VFN Utilized Purchase Price”

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and “MSR PC Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter.

“Mortgage Loan Repurchase Agreement” means that certain Third Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017, by and among CSFB, as administrative agent, CSCIB, as a committed buyer, Alpine Securitization LTD, as a buyer, PLS, as seller, and PNMAC, as guarantor, as amended, restated, supplemented or otherwise modified from time to time.

(c) Section 1 of the Pricing Side Letter is hereby amended by adding the definitions of “Actual Seller Equity,” “Exposure Margin Deficit” and “Required Seller Equity” in proper alphabetical order:

“Exposure Margin Deficit” means, the excess, if any, measured on the last Business Day of each month, of (x) the Required Seller Equity, over (y) the Actual Seller Equity.

“Required Seller Equity” means the amount, measured on the last Business Day of each month, equal to the product of (A) [*****] (B) the sum of (w) MSR VFN Utilization Purchase Price (x) the SPIA VFN Utilized Purchase Price on such day, (y) the MSR PC Utilized Purchase Price on such day and (z) the Outstanding Aggregate Loan Amount under the Loan Agreement on such day, and (C) [**].

SECTION 3. Reaffirmation of Guaranty. The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of the Seller to the Buyer under the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter and the related Program Agreements, as amended hereby.

SECTION 5. Representations and Warranties. The Seller hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the Series 2016-MSRVF1 Repurchase Agreement and Pricing Side Letter on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article III of the Series 2016-MSRVF1 Repurchase Agreement.

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SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 8. 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 9. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

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

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer and as 100% of the VFN Noteholder of the Outstanding Notes


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Authorized Signatory


	By:	/s/ Margaret Dellafera
	Name:	Margaret Dellafera
	Title:	Authorized Signatory

[PNMAC GMSR Issuer Trust – Joint Amendment No. 3 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 2 to Fourth A&R Pricing Side Letter]

	PENNYMAC LOAN SERVICES, LLC, as Seller and sole Owner


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 3 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 2 to Fourth A&R Pricing Side Letter]

	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 3 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 2 to Fourth A&R Pricing Side Letter]

EXHIBIT A

SCHEDULE 4

OTHER FINANCING AGREEMENTS

Master Repurchase Agreement, dated as of April 1, 2020 (as amended by Amendment No. 1, dated as of April 24, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer.

EXHIBIT A

Exhibit 10.19

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 1 TO THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 2 TO THE PRICING SIDE LETTER

This Joint Amendment No. 1 to the MSR PC Repo Agreement (as defined below) and Amendment No. 2 to the Pricing Side Letter (as defined below), is entered into as of April 24, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”), PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the MSR PC Repo Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer, the Guarantor and the Seller are parties to that certain Master Repurchase Agreement, dated as of September 11, 2019 (as amended by this Amendment and as may be further restated, supplemented or otherwise modified from time to time, the “MSR PC Repo Agreement”) and the related Pricing Side Letter, dated as of September 11, 2019 (as amended by this Amendment and as may be further restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer, the Seller and the Guarantor have agreed, subject to the terms and conditions of this Amendment, that the MSR PC Repo Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the MSR PC Repo Agreement and the Pricing Side Letter; and

WHEREAS, as a condition precedent to amending the MSR PC Repo Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the guaranty under Section 11.13 of the MSR PC Repo Agreement on the date hereof.

NOW THEREFORE, the Administrative Agent, the Buyer, the Seller and the Guarantor hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the MSR PC Repo Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1. Amendments to the MSR PC Repo Agreement.

(a) Section 1.1 of Schedule I the MSR PC Repo Agreement is hereby amended by deleting the definition of “Default Rate” in its entirety and replacing it with the following:

“Default Rate” means, with respect to any Price Differential for any Price Differential Period, and any late payment of fees or other amounts due hereunder, the Base Rate for the related Price Differential Period (or for all successive Price Differential Periods during which such fees or other amounts were delinquent), plus [*****] per annum.

(b) Section 1.1 of Schedule I the MSR PC Repo Agreement is hereby amended by adding the definitions of “Base Rate,” “Financing Documents” and “Other Financing Agreements” in proper alphabetical order:

“Base Rate” has the meaning assigned to the term in the Pricing Side Letter.

“Financing Documents” means any or all of the “Program Agreements,” “Facility Documents” or any similar term as defined in each Other Financing Agreement.

“Other Financing Agreements” means each of the agreements listed on Schedule III hereto, which may be updated from time to time in a written confirmation signed by the parties to this Agreement.

(c) Section 2.04 of the Loan Agreement is hereby amended by replacing only the first occurrence of the word “LIBOR Rate” therein with “Base Rate.”

(d) Section 4.01 of the MSR PC Repo Agreement is hereby amended adding the following new clauses (e) and (f) and changing the existing clause (e) to clause (g):

(e) Seller hereby delivers an irrevocable instruction to the buyer or lender under any Financing Document that upon receipt of notice of an Event of Default under this Agreement, the buyer or lender thereunder is authorized and instructed to (i) remit to Buyer hereunder directly any amounts otherwise payable to Seller and (ii) deliver to Buyer all collateral otherwise deliverable to Seller, to the extent all obligations then due and owing under such Other Financing Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding repurchase price or loan amount under any Other Financing Agreement and termination of all obligations of the Seller thereunder or other termination of the related Financing Documents following repayment of all obligations thereunder, the related buyer or lender under any Financing Document is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the related Financing Documents) then in its possession or control.

(f) Seller makes a subordinate pledge to the buyers or lenders under the Other Financing Agreements as security for the performance by Seller of its obligations thereunder and hereby grants, assigns and pledges to the buyers or lenders thereunder a subordinate security interest in all of Seller’s right, title and interest in, to and under the Primary Repurchase Assets (collectively, the “Subordinated Pledge Assets”). Seller hereby delivers an irrevocable instruction to Buyer that upon its receipt of notice of an “Event of Default” from the buyer or lender under any Other Financing Agreement, Buyer is authorized and instructed to (i) remit to such buyer or lender directly any amounts otherwise payable to Seller under this Agreement and (ii) deliver to such buyer or lender all Subordinated Pledge Assets otherwise deliverable to Seller, to the extent all obligations then due and owing under this Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding Repurchase Price and termination of all Obligations or other termination of the Facility Documents following repayment of all obligations hereunder, Buyer shall deliver to the buyer or lender under any Other Financing Agreement with respect to which the related repurchase price or loan amount remains outstanding any Subordinated Pledge Assets then in Buyer’s possession or under its control. The subordinate pledge set forth in this clause (f) shall automatically terminate with respect to an Other Financing Agreement if the Buyer or the other buyer or lender thereunder is no longer CSFB, CSCIB, or any Affiliates thereof.

(e) The MSR PC Repo Agreement is hereby amended by adding Schedule III attached hereto as Exhibit A in proper numerical order.

SECTION 2. Amendments to the Pricing Side Letter.

(a) Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Applicable Margin,” “Maturity Date” and “Maximum Purchase Price” in their entirety and replacing them with the following:

“Applicable Margin” means [*****].

“Maturity Date” means October 21, 2020.

“Maximum Purchase Price” means the lesser of (i) an amount agreed to by the Buyer that, when added to (w) the aggregate outstanding purchase price under the Repo Agreement, (x) the MSR VFN Utilized Purchase Price (y) the SPIA VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Conventional MSR Loan Agreement, would not exceed the Maximum Combined Purchase Price; and (ii) the lesser of: (A) the Asset Base; or (B) the amount that, when added to (w) the aggregate outstanding purchase price under the Repo Agreement, (x) the MSR VFN Utilized Purchase Price, (y) the SPIA VFN Utilized Purchase Price and (z) the Outstanding Aggregate Loan Amount under the Conventional MSR Loan Agreement, would not exceed the Maximum Combined Committed Purchase Price; provided, however, that the Maximum Purchase Price shall not exceed the positive difference between $400,000,000 and the sum of (A) the MSR VFN Utilized Purchase Price and (B) the Outstanding Aggregate Loan Amount under the Conventional MSR Loan Agreement; in each case, as may be modified from time to time in a written confirmation signed by the parties hereto.

For purposes of this definition, the terms “Maximum Combined Purchase Price,” “Maximum Combined Committed Purchase Price,” “SPIA VFN Utilized Purchase Price” and “MSR VFN Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter.

(b) Section 1 of the Pricing Side Letter is hereby amended by adding the following definition of “Base Rate” in proper alphabetical order:

“Base Rate” means the greater of (a) the LIBOR Rate or (b) [*****].

SECTION 3. Conditions Precedent. This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of the Buyer, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyer, the Seller and the Guarantor.

SECTION 4. Representations and Warranties. Each Seller and Guarantor hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the MSR PC Repo Agreement and the Pricing Side Letter on its part to be observed or performed, and that no Event of Default has occurred or is

continuing, and hereby confirms and reaffirms the representations and warranties contained in Article VI of the MSR PC Repo Agreement.

SECTION 5. Reaffirmation of Guaranty. The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations contained in Section 11.13 of the MSR PC Repo Agreement.

SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, each of the MSR PC Repo Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its respective terms.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

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

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Authorized Signatory


	By:	/s/ Margaret Dellafera
	Name:	Margaret Dellafera
	Title:	Authorized Signatory

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to FNMA PC Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

	PENNYMAC LOAN SERVICES, LLC, as Seller


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to FNMA PC Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 1 to FNMA PC Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

EXHIBIT A

SCHEDULE III

OTHER FINANCING AGREEMENTS

Master Repurchase Agreement, dated as of December 16, 2016 (as amended by Amendment No. 1, dated as of February 28, 2018, and Amendment No. 2, dated as of April 1, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer.

Master Repurchase Agreement, dated as of April 1, 2020 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer.

Loan and Security Agreement, dated as of February 1, 2018 (as amended by Amendment No. 1, dated as of January 29, 2020, Amendment No. 2, dated as of April 1, 2020 and Amendment No. 3, dated as of April 24, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse AG, Cayman Islands Branch, as lender, Private National Mortgage Acceptance Company, LLC, as guarantor, and PennyMac Loan Services, LLC, as borrower.

EXHIBIT A

Exhibit 10.20

EXECUTION VERSION

April 24, 2020

Credit Suisse First Boston Mortgage Capital LLC

Eleven Madison Avenue,

New York, NY 10010

Re: Series 2020-SPIADVF1 Indenture Supplement

Ladies and Gentlemen:

Reference is hereby made to (i) the Third Amended and Restated Indenture, dated as of April 1, 2020 (as may be amended, supplemented, restated, or otherwise modified from time to time, the “Base Indenture”), by and among PNMAC GMSR Issuer Trust, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), calculation agent (in such capacity, the “Calculation Agent”), paying agent (in such capacity, the “Paying Agent”) and securities intermediary (the “Securities Intermediary”), PennyMac Loan Services, LLC, a limited liability company organized in the State of Delaware, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and Credit Suisse First Boston Mortgage Capital LLC, as administrative agent (the “Administrative Agent”), and (ii) the Series 2020-SPIADVF1 Indenture Supplement, dated as of April 1, 2020 (as may be amended, supplemented, restated or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”), by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent.

Capitalized terms used but not defined herein are used as defined in the Base Indenture or the Series 2020-SPIADVF1 Indenture Supplement, as applicable.

1. “Advance Rate Percentage” The Series 2020-SPIADVF1 Indenture Supplement defines “Advance Rate Percentage” as “with respect to any type of Advance, the applicable “Advance Rate Percentage” set forth in Schedule 1 hereto, which may be updated from time to time with the consent of the Administrative Agent and the Administrator and a copy of such updated Schedule to Ginnie Mae.” As contemplated by such definition, each of the Administrator and the Administrative Agent, by their respective signatures, hereby agrees to delete Schedule 1 of the Series 2020-SPIADVF1 Indenture Supplement in its entirety and replace it with Schedule 1 attached hereto as Exhibit A.

2. SPIA VFN Advance Rate Reduction Event. The Series 2020-SPIADVF1 Indenture Supplement defines “SPIA VFN Advance Rate Reduction Event” as “the occurrence of any of the events set forth in Schedule 4 hereto, which may be updated from time to time with the consent of the Administrative Agent and the Administrator.” As contemplated by such definition, each of the Administrator and the Administrative Agent, by their respective signatures, hereby agrees to delete

Schedule 4 of the Series 2020-SPIADVF1 Indenture Supplement in its entirety and replace it with Schedule 4 attached hereto as Exhibit B.

3. Miscellaneous.

This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this letter by telecopier or by electronic mail will be effective as delivery of a manually executed counterpart of this letter.

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

On and after the date of this letter agreement, each reference in the Base Indenture or the Series 2020-SPIADVF1 Indenture Supplement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference in the other Transaction Document, shall mean and be a reference to such document as modified hereby.

Except as expressly modified hereby, all of the terms of the Transaction Documents remain unchanged and in full force and effect.

[signature pages follow]

	Very truly yours,

	PENNYMAC LOAN SERVICES, LLC, as
	Administrator


	By:	/s/ Pamela Marsh using an electronic signature
		Name: Pamela Marsh
		Title: Senior Managing Director and
		Treasurer

[PNMAC GMSR ISSUER TRUST – Consent Letter re: Series 2020-SPIADVF1 Indenture Supplement]

	Acknowledged and Agreed to:

	CREDIT SUISSE FIRST BOSTON
	MORTGAGE CAPITAL LLC, as
	Administrative Agent


	By:	/s/ Dominic Obaditch
		Name: Dominic Obaditch
		Title: Vice President

[PNMAC GMSR ISSUER TRUST – Consent Letter re: Series 2020-SPIADVF1 Indenture Supplement]

EXHIBIT A

EXHIBIT B

Exhibit 10.21

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

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

PNMAC GMSR ISSUER TRUST,

as Issuer

and

CITIBANK, N.A.,

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

and

PENNYMAC LOAN SERVICES, LLC,

as Administrator and as Servicer

and

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and consented to by

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Noteholder

AMENDMENT NO. 2

Dated as of April 24, 2020

to the

AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

Dated as of February 28, 2018

PNMAC GMSR ISSUER TRUST

MSR COLLATERALIZED NOTES,

SERIES 2016-MSRVF1

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

AMENDMENT NO. 2 TO AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

This Amendment No. 2 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement (this “Amendment”) is dated as of April 24, 2020, by and among PNMAC GMSR ISSUER TRUST, as issuer (the “Issuer”), CITIBANK, N.A. (“Citibank”), as indenture trustee (the “Indenture Trustee”), PENNYMAC LOAN SERVICES, LLC, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (the “Administrative Agent”), and is consented to by CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB”), as the sole noteholder of 100% of the Series 2016-MSRVF1 Note (the “Noteholder”).

RECITALS

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent are parties to that certain Second Amended and Restated Indenture, dated as of August 10, 2017 (as amended by Amendment No. 1 to the Base Indenture, dated as of February 28, 2018, and by Amendment No. 2 to the Base Indenture, dated as of August 10, 2018, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of February 28, 2018 (as amended by Amendment No. 1, dated as of August 10, 2018, and as may be further amended, restated, supplement or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”, and together with the Base Indenture, the “Indenture”), among the Issuer, Citibank, the Servicer, the Administrator and the Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture;

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

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

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the

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

WHEREAS, the Series 2016-MSRVF1 Note (the “Series 2016-MSRVF1 Note”), was issued to PennyMac Loan Services, LLC (“PLS”) pursuant to the terms of the Series 2016-MSRVF1 Indenture Supplement, and was purchased by CSCIB under the Master Repurchase Agreement, dated as of December 19, 2016, by and among the Administrative Agent, CSCIB, as buyer, and PLS, as seller (as amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”), pursuant to which PLS sold all of rights, title and interest in the Series 2016-MSRVF1 Note to CSCIB;

WHEREAS, pursuant to the Series 2016-MSRVF1 Indenture Supplement, with respect to the Series 2016-MSRVF1 Note, any Action provided by the Base Indenture or the Series 2016-MSRVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2016-MSRVF1 Note under the Series 2016-MSRVF1 Repurchase Agreement;

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

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

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

Section 1. Amendment to the Series 2016-MSRVF1 Indenture Supplement. The Series 2016-MSRVF1 Indenture Supplement is hereby amended by deleting the definition of “Note Interest Rate” from Section 2 thereof in its entirety and replacing it with the following:

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

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

Section 3. Waiver of Issuer Tax Opinion and Authorization Opinion. Pursuant to Section 12.2 of the Base Indenture and Section 10 of the Series 2016-MSRVF1 Indenture Supplement, the Noteholder hereby waives and instructs the Administrative Agent and the Indenture Trustee to waive the provisions of Section 12.2 of the Base Indenture and Section 10 of the Series 2016-MSRVF1 Indenture Supplement which require delivery of an Issuer Tax Opinion with respect to this Amendment. Pursuant to Section 12.3 of the Base Indenture, the Noteholder hereby waives and instructs the Administrative Agent and the Indenture Trustee to waive the provisions of Section 12.3 of the Base Indenture which requires delivery of an Authorization Opinion with respect to this Amendment.

Section 4. Conditions to Effectiveness of this Amendment. This Amendment shall become effective upon the execution and delivery of this Amendment by all parties hereto (the “Amendment Effective Date”).

Section 5. Consent and Acknowledgment. By execution of this Amendment, CSCIB, as Noteholder of 100% of the Series 2016-MSRVF1 Note, hereby consents to this Amendment. The Noteholder certifies that it is the sole Noteholder of the Series 2016-MSRVF1 Note with the right to instruct the Indenture Trustee. In addition, the Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of the Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by Noteholder of this Amendment should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Amendment shall become effective on the Amendment Effective Date.

Section 6. Representations and Warranties. The Issuer hereby represents and warrants to the Indenture Trustee, the Administrative Agent and the Noteholder that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.

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

Section 8. No Recourse. It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer, (c)

nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer in this Amendment and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment or any other related documents.

Section 9. Successors and Assigns. This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 10. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11. Counterparts. The Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

Section 12. Entire Agreement. The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 13. Recitals. The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness. The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder.) In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

[Signature Pages Follow]

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

	PNMAC GMSR ISSUER TRUST, as Issuer


	By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee


	By:	/s/ Shaheen Mohajer
	Name:	Shaheen Mohajer
	Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to A&R Series 2016-MSRVF1 Indenture Supplement]

	PENNYMAC LOAN SERVICES, LLC, as Servicer and as Administrator


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to A&R Series 2016-MSRVF1 Indenture Supplement]

	CITIBANK, N.A., as Indenture Trustee, and not in its individual capacity


	By:	/s/ Valerie Delgado
	Name:	Valerie Delgado
	Title:	Senior Trust Officer

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to A&R Series 2016-MSRVF1 Indenture Supplement]

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to A&R Series 2016-MSRVF1 Indenture Supplement]

	CONSENTED TO BY:


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Noteholder of 100% of the Series 2016-MSRVF1 Note


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Authorized Signatory


	By:	/s/ Margaret Dellafera
	Name:	Margaret Dellafera
	Title:	Authorized Signatory

[PNMAC GMSR ISSUER TRUST – Amendment No. 2 to A&R Series 2016-MSRVF1 Indenture Supplement]

Exhibit 10.22

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (FREDDIE MAC MSRS) AND AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT AMENDED AND RESTATED PRICING SIDE LETTER

This Joint Amendment No. 3 to Loan and Security Agreement and Amendment No. 2 to Pricing Side Letter (this “Amendment”) is made as of this 24th day of April, 2020, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the “Lender”), PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC (the “Guarantor”) and PENNYMAC LOAN SERVICES, LLC (the “ Borrower” and the “Servicer”), and amends that certain Loan and Security Agreement, dated as of February 1, 2018, as amended by Amendment No. 1, dated as of January 29, 2020, and Amendment No. 2, dated as of April 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Lender, the Guarantor and the Borrower, and that certain Loan and Security Agreement Amended and Restated Pricing Side Letter, dated as of September 11, 2019, as amended by Amendment No. 1, dated as of April 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter” and Pricing Side Letter, together with the Loan Agreement, the “Agreements”), by and among the Borrower, the Guarantor and the Lender.

WHEREAS, the Administrative Agent, the Lender, the Guarantor and the Borrower have agreed to amend the Loan Agreement and the Pricing Side Letter as more particularly set forth herein.

SECTION 1. Amendments to the Loan Agreement. Effective as of the date hereof:

(a) Section 1.1 of Schedule I of the Loan Agreement is hereby amended by deleting the defined terms “Default Rate,” “Maturity Date,” and “Obligations” in their entirety and replacing such terms with the following:

“Default Rate” means, with respect to any Loan for any Interest Period, and any late payment of fees or other amounts due hereunder, the Base Rate for the related Interest Period (or for all successive Interest Periods during which such fees or other amounts were delinquent), plus [*****] per annum.

“Maturity Date” means October 21, 2020.

“Obligations” means the Outstanding Aggregate Loan Amount, all accrued and unpaid interest thereon and all other amounts payable by the Borrower to the Lender pursuant to this Agreement, the Note or any other Facility Document or any amounts payable by a Borrower pursuant to Section 11.12 hereof.

(b) Section 1.1 of Schedule I of the Loan Agreement is hereby amended by adding the defined terms “Base Rate,” “Financing Documents,” “Other Financing Agreements” and “PC MRA” in proper alphabetical order:

“Base Rate” has the meaning assigned to the term in the Pricing Side Letter.

“Financing Documents” means any or all of the “Program Agreements,” “Facility Documents” or any similar term as defined in each Other Financing Agreement.

“Other Financing Agreements” means each of the agreements listed on Schedule II hereto, which may be updated from time to time in a written confirmation signed by the parties to this Agreement.

“PC MRA” means the Master Repurchase Agreement, dated as of September 11, 2019, as amended by Amendment No. 1 to the Master Repurchase Agreement, dated as of April 24, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer, and Private National Mortgage Acceptance Company, LLC, as guarantor, and as may be further amended, restated, supplemented or otherwise modified from time to time.

(c) Section 1.1 of Schedule I of the Loan Agreement is hereby amended by deleting the defined term “Interest Rate” in its entirety.

(d) The Loan Agreement is hereby amended by adding the following new section in proper numerical order:

Section 4.06 Other Financing Agreements. Borrower hereby delivers an irrevocable instruction to the buyer or lender under any Financing Document that upon receipt of notice of an Event of Default under this Agreement, the buyer or lender thereunder is authorized and instructed to (i) remit to Lender hereunder directly any amounts otherwise payable to Borrower and (ii) deliver to Lender all collateral otherwise deliverable to Borrower, to the extent all obligations then due and owing under such Other Financing Agreement have been paid in full. In furtherance of the foregoing, upon repayment of the outstanding repurchase price or loan amount under any Other Financing Agreement and termination of all obligations of the Borrower thereunder or other termination of the related Financing Documents following repayment of all obligations thereunder, the related buyer or lender under any Financing Document is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the related Financing Documents) then in its possession or control.

(e) Section 2.05 of the Loan Agreement is hereby amended by replacing only the first occurrence of the word “LIBOR Rate” therein with “Base Rate.”

(f) Section 2.08(b) of the Loan Agreement is hereby amended by deleting in its entirety and replacing it with the following:

If, on any Business Day (each, a “Borrowing Base Shortfall Day”), the Lender provides written notice to the Borrower that the Lender has determined in its sole reasonable discretion based on the Borrowing Base Report most recently delivered by the Lender pursuant to Section 2.04 that the Outstanding Aggregate Loan Amount on such day exceeds the lesser of (i) the Borrowing Base and (ii) the Available Facility Amount on such day (such circumstance, a “Borrowing Base Deficiency”), the Borrower (i) on the same day if the Lender notifies Borrower by 11:00 a.m. (New York time) of such Borrowing Base Deficiency, or (ii) if the notice is received later than 11:00 a.m. (New York time), then within one (1) Business Day after the Borrowing Base Shortfall Day, shall repay outstanding Loans (including accrued Interest thereon), in an amount equal to the amount of the Borrowing Base Deficiency specified in the notice provided to the Borrower by the Lender (such requirement a “Margin Call”).

(g) Section 7.01 of the Loan Agreement is hereby amended by deleting subclause (w)(iv) in its entirety and replacing it with the following:

“Reserved.”

(h) Section 8.01 of the Loan Agreement is hereby amended by deleting clause (k) in its entirety and replacing it with the following:

“Borrower shall fail to comply with the financial covenants set forth in Section 7.01(w);”

(i) Section 8.03 of the Loan Agreement is hereby amended by deleting “and” at the end of subclause (d)(ii), adding the following subclause (d)(iii) and renumbering subclause (d)(iii) in proper numerical order:

(iii) to the Lender or any Affiliate any amount then due to such Persons pursuant to Section 11.12 that have not been paid by the Borrowers; and

(j) Section 11.12 of the Loan Agreement is hereby amended by adding the language “or any Termination Fee” immediately after “Surplus Proceeds.”

(k) Schedule 5.02 of the Loan Agreement is hereby amended by adding the following new subclause (vi) to clause (e) thereto, in proper numerical order:

“Borrower has maintained profitability of at least $1.00 in Net Income for at least one of the two prior Test Periods.”

(l) Schedule 5.02 of the Loan Agreement is hereby amended by deleting clause (k) in its entirety and replacing it with the following:

“The GMSR VF1 Repo and the SPIA VFN Repo are fully drawn based upon the then-current VFN Principal Balance (as defined in the GMSR VF1 Repo and the SPIA VFN Repo, respectively) and with respect to the PC MRA, the outstanding Purchase Price (as defined in the PC MRA) is equal to the Asset Base (as defined in the PC MRA).”

(m) The Loan Agreement is hereby amended by adding Schedule II attached hereto as Exhibit A in proper numerical order.

SECTION 2. Amendments to the Pricing Side Letter. Effective as of the date hereof:

(a) Section 1 of the Pricing Side Letter is hereby amended by deleting the defined terms “Applicable Margin” and “Available Facility Amount” in their entirety and replacing such terms with the following:

“Applicable Margin” means [*****].

“Available Facility Amount” means: (i) an amount agreed to by the Lender that, when added to the aggregate outstanding repurchase price under the Repo Agreement, the MSR PC Utilized Purchase Price, the SPIA VFN Utilized Purchase Price and the MSR VFN Utilized Purchase Price, would not exceed the Maximum Combined Purchase Price; or (ii) the lesser of: (A) the Borrowing Base; or (B) the amount that, when added to the aggregate outstanding repurchase price under the Repo Agreement, the MSR PC Utilized Purchase Price, the SPIA VFN Utilized Purchase Price and the MSR VFN Utilized Purchase Price, would not exceed the Maximum Combined Committed Purchase Price; provided, however, that the Available Facility Amount shall not exceed the positive difference between $400,000,000 and the sum of (x) the MSR VFN Utilized Purchase Price and (y) the MSR PC Utilized Purchase Price; in each case, as may be modified from time to time in a written confirmation signed by the parties hereto.

For purposes of this definition, the terms “Maximum Combined Purchase Price,” “Maximum Combined Committed Purchase Price,” “MSR VFN Utilized Purchase Price,” “MSR PC Utilized Purchase Price,” and “SPIA VFN Utilized Purchase Price” shall have the meaning assigned to such terms in the MLRA Pricing Side Letter.

(b) Section 1 of the Pricing Side Letter is hereby amended by adding the following defined term “Base Rate”:

“Base Rate” means the greater of (a) the LIBOR Rate or (b) [*****].

SECTION 4. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement or the Pricing Side Letter, as applicable.

SECTION 9. Miscellaneous.

(a) This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

	CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Vice President


	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender


	By:	/s/ Dominic Obaditch
	Name:	Dominic Obaditch
	Title:	Authorized Signatory


	By:	/s/ Margaret Dellafera
	Name:	Margaret Dellafera
	Title:	Authorized Signatory

[Joint Amendment No. 3 to Loan and Security Agreement and Amendment No. 2 to Pricing Side Letter (CS - PLS)]

	PENNYMAC LOAN SERVICES, LLC, as Borrower


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[Joint Amendment No. 3 to Loan and Security Agreement and Amendment No. 2 to Pricing Side Letter (CS - PLS)]

	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor


	By:	/s/ Pamela Marsh using an electronic signature
	Name:	Pamela Marsh
	Title:	Senior Managing Director and Treasurer

[Joint Amendment No. 3 to Loan and Security Agreement and Amendment No. 2 to Pricing Side Letter (CS - PLS)]

EXHIBIT A

SCHEDULE II

OTHER FINANCING AGREEMENTS

Master Repurchase Agreement, dated as of September 11, 2019 (as amended by Amendment No. 1 to the Master Repurchase Agreement, dated as of April 24, 2020 and as may be further amended, restated, supplemented or otherwise modified from time to time, the “PC MRA”), by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, PennyMac Loan Services, LLC, as seller, and Credit Suisse AG, Cayman Islands Branch, as buyer, and Private National Mortgage Acceptance Company, LLC, as guarantor.

EXHIBIT A

Exhibit 10.23

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

STOCK OPTION AWARD AGREEMENT

THIS AGREEMENT is dated as of February 26, 2020, between PennyMac Financial Services, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and the individual identified in Section 1 below (the “Recipient”).

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

Recipient

Number of Optioned Shares

Exercise Price Per Share

Grant Date	February 26, 2020

Vesting Commencement Date

Expiration Date

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PENNYMAC FINANCIAL SERVICES, INC.

Exhibit 10.24

Net Share Withholding

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT SUBJECT TO CONTINUED SERVICE

AWARD AGREEMENT

Recipient

Grant Date	February 26, 2020

Vesting Commencement Date

Number of RSUs Subject to
Continued Service

2. Vesting and Settlement.

2.1 One-third (1/3) of the RSUs subject to vesting based on continued service shall vest in a lump sum on each of the first, second, and third anniversaries of the Vesting Commencement Date specified above, subject to the Recipient’s continued service through each such anniversary, except as provided below, with any fractions rounded down except on the final installment. The shares of Stock earned as such RSUs vest will be transferred or issued to the Recipient promptly after the applicable anniversary, but in any event not later than December 31 of the calendar year in which such anniversary occurs.

2.2 Until the RSUs vest and are issued pursuant to the terms of this Award Agreement, the Recipient shall have no voting or other ownership rights in the Company arising from the award of RSUs under this Agreement prior to the delivery of the shares of Stock upon the vesting of the RSUs underlying the award and delivery of the shares of Stock in settlement thereof.

conditions as the underlying RSUs. Such Dividend Equivalents will be in an amount of cash per RSU equal to the cash dividend paid with respect to a share of outstanding Stock and shall accrue to the Recipient on the record date of the applicable dividend. The Dividend Equivalents accrued prior to the settlement date of each vested RSU will be paid to the Recipient with respect to all vested RSUs as soon as administratively feasible after each settlement date (but in no event later than 45 days following each respective settlement date). The Dividend Equivalents accrued on shares of Stock underlying RSUs that do not vest and are forfeited shall be automatically forfeited without notice for no consideration on the date such RSU is forfeited.

2.4 The Recipient’s name shall be entered as the stockholder of record on the books and records of the transfer agent for the Company with respect to the Stock issuable pursuant to Section 2.1 only upon compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such issuance and with the requirements of this Agreement and of the Plan. The determination of the Committee as to such compliance shall be final and binding on the Recipient. Notwithstanding anything to the contrary in this Agreement, no Stock shall be issued in settlement of vested RSUs if the issuance of such shares would constitute a violation of any applicable federal or state securities law or other law or regulation. As a condition to the issuance of Stock to the Recipient pursuant to Section 2.1, the Company may require the Recipient to make any representation or warranty to the Company at the time vested Stock becomes issuable to the Recipient as in the opinion of legal counsel for the Company may be required by any applicable law or regulation, including the execution and delivery of an appropriate representation statement. Accordingly, the stock certificates for the Stock issued pursuant to this Award may bear appropriate legends restricting the transfer of the Stock.

3. Effect of Termination. Unless otherwise expressly provided herein, no RSUs shall vest following the date (the Recipient’s “Termination Date”), reasonably fixed and determined by the Committee, of the voluntary or involuntary termination of the Recipient’s employment or other association with all of the Company and its Affiliates, for any or no reason whatsoever; provided, however, that military or sick leave shall not be deemed a termination of employment or other association, if it does not exceed the longer of 90 days or the period during which the Recipient’s reemployment rights, if any, are guaranteed by statute or by contract. As of the Recipient’s Termination Date, unless otherwise expressly provided herein, all of the then unvested RSUs and the corresponding Dividend Equivalents shall be forfeited by the Recipient or any transferee.

3.1 Termination of Employment Due to Retirement. Prior to the full vesting of the RSUs, (i) if the Recipient’s employment or other association with the Company is terminated due to Retirement (as defined below) and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, and (ii) provided the Recipient has executed and continues to comply with the terms of an agreement not to provide services as an employee, director, consultant, agent, or otherwise, to any of the Company’s direct competitors for a period of two (2) years from the date of Retirement (the “Retirement Date”), then the Recipient’s RSUs shall continue to vest and be settled after the Retirement Date in accordance with the original terms of such RSUs. Notwithstanding the foregoing, (i) if the Retirement Date occurs during the nine-month period immediately following the Grant Date, then all of the RSUs and the corresponding Dividend Equivalents shall be forfeited; and (ii) if the Retirement Date occurs during the three-month period prior to the first anniversary of the Grant Date, then one-third of the RSUs shall vest on the first anniversary of

the Grant Date (pro-rated based on (A) the number of full months of the Recipient’s employment from the Grant Date through the Retirement Date divided by (B) twelve (12)) and the remaining RSUs and the corresponding Dividend Equivalents shall be forfeited. “Retirement” shall mean voluntary termination of employment after the age of sixty (60) with at least ten (10) years of combined service to the Company and/or any of its subsidiaries; provided, however, that if the Recipient elects to terminate employment in connection with a Retirement, the Recipient must provide the Company with a minimum of (x) six (6) months prior written notice of such Retirement if such Recipient’s title is at the senior vice president level and above, or (y) three (3) months prior written notice of such Retirement if such Recipient’s title is at the first vice president level and below.

3.2 Termination of Employment Due to Death. If, prior to full vesting of the RSUs, the Recipient’s employment or other association with the Company is terminated due to his/her death and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, then the Recipient’s unvested RSUs scheduled to vest on the next anniversary of the Grant Date shall instead vest immediately (prorated based on (A) the number of full months of the Recipient’s employment from the later of the Grant Date or the most recent anniversary of the Grant Date through the date of termination due to death divided by (B) twelve (12)) and the remaining RSUs shall be forfeited; provided, however, that if the Recipient’s termination due to death occurs during the one-month period following the Grant Date, all of the RSUs and the corresponding Dividend Equivalents shall be forfeited.

3.3 Termination of Employment Due to Disability. If, prior to full vesting of the RSUs, the Recipient’s employment or other association with the Company is terminated due to his/her Disability (as defined below) and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, then the Recipient’s unvested RSUs scheduled to vest on the next anniversary of the Grant Date shall vest in accordance with the original terms of the RSUs (prorated based on (A) the number of full months of the Recipient’s employment from the later of the Grant Date or the most recent anniversary of the Grant Date through the date of termination due to Disability divided by (B) twelve (12)) and the remaining RSUs and the corresponding Dividend Equivalents shall be forfeited; provided, however, that if the Recipient’s termination due to Disability occurs during the one-month period following the Grant Date, all of the RSUs and the corresponding Dividend Equivalents shall be forfeited. “Disability” shall mean the inability to engage in any substantial gainful occupation to which the relevant individual is suited by education, training or experience, by reason of any medically determinable physical or mental impairment, which condition can be expected to result in death or otherwise continue for a period of not less than twelve (12) consecutive months.

4. Restrictions on Transfer. The RSUs (including, without limitation, the corresponding Dividend Equivalents) may not be assigned or transferred (by operation of law or otherwise) except by will or the laws of descent and distribution.

5. Withholding Obligations.

Company as of the first business day immediately preceding the vesting date, equal to the statutory minimum withholding tax obligation in respect of the shares of Stock otherwise issuable to Recipient (the “Share Withholding Method”).

5.2 Should Recipient become entitled to receive a distribution of shares of Stock upon vesting of RSUs at a time when the Share Withholding Method is not being utilized by the Company, Recipient authorizes the delivery of the shares of Stock to the Company’s designated broker with instructions to (i) sell shares of Stock sufficient to satisfy the applicable withholding taxes which arise in connection with such distribution, and (ii) remit the proceeds of such sale to the Company (“Sale to Cover”). In the event the sale proceeds are insufficient to fully satisfy the applicable withholding taxes, Recipient authorizes withholding from payroll and any other amounts payable to Recipient, in the same calendar year, and otherwise agrees to make adequate provision through the submission of cash, a check or its equivalent for any sums required to satisfy the applicable withholding taxes.

Recipient is not aware of any material nonpublic information with respect to the Company or any securities of the Company, is not subject to any legal, regulatory or contractual restriction that would prevent the designated broker from conducting sales as provided herein, does not have, and will not attempt to exercise, authority, influence or control over any sales of shares of Stock effected pursuant to this Section 5.2, and is entering into this Section 5.2 of the Award Agreement in good faith and not as part of a plan or scheme to evade compliance with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (regarding trading of the Company’s securities on the basis of material nonpublic information). It is the intent of the parties that the Sale to Cover transactions pursuant to this Section 5.2 comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act, and the Award Agreement will be interpreted to comply with the requirements of Rule 10b5-1(c) under the Exchange Act.

5.3 Unless the withholding tax obligations of the Company and/or any Affiliate thereof are satisfied, the Company shall have no obligation to deliver any shares of Stock on the Recipient’s behalf upon vesting of RSUs or make any cash payments for settlement of Dividend Equivalents.

6. Miscellaneous.

6.1 No Special Service Rights. Nothing contained in this Award Agreement shall confer upon the Recipient any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the Recipient’s employment or other association with the Company and its Affiliates.

6.2 Entire Agreement; Counterparts. This Award Agreement, including the Plan, constitute the entire agreement of the parties with respect to the subject matter hereof. This Award Agreement may be executed in any number of counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same instrument. In

making proof of this Award Agreement it shall not be necessary to produce or account for more than one such counterpart.

6.3 Tax Consequences. The Company makes no representation or warranty as to the tax treatment to the Recipient of receipt of these RSUs or the corresponding Dividend Equivalents, and does not warrant to the Recipient that all compensation paid or delivered to him or her for his or her services will be exempt from, or paid in compliance with, Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The Recipient should rely on his or her own tax advisors for all such advice.

6.4 Community Property. To the extent the Recipient resides in a jurisdiction in which community property rules apply, without prejudice to the actual rights of the spouses as between each other, for all purposes of this Award Agreement, the Recipient shall be treated as agent and attorney-in-fact for that interest held or claimed by the Recipient’s spouse with respect to these RSUs and the parties hereto shall act in all matters as if the Recipient was the sole owner of these RSUs. This appointment is coupled with an interest and is irrevocable.

7. Receipt of Plan. The RSUs and the corresponding Dividend Equivalents were awarded under the Plan, to which this Award Agreement is subject in all respects, including without limitation the adjustment and tax withholding provisions therein. All capitalized terms used in this Award Agreement and not otherwise defined shall have the meanings ascribed thereto in the Plan. The Recipient has reviewed and understands the Plan and this Award Agreement in their entirety, and has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement. The Recipient hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Award Agreement.

IN WITNESS WHEREOF, the Recipient and the Company have entered into this Award Agreement as of the Grant Date.

PENNYMAC FINANCIAL SERVICES, INC.

Exhibit 10.25

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT SUBJECT TO CONTINUED SERVICE

AWARD AGREEMENT

Recipient

Grant Date	February 26, 2020

Vesting Commencement Date

Number of RSUs Subject to
Continued Service

2. Vesting and Settlement.

2.1 One hundred percent (100%) of the RSUs subject to vesting based on continued service shall vest in a lump sum on the first anniversary of the Vesting Commencement Date specified above, subject to the Recipient’s continued service through such vesting. The shares of Stock earned as such RSUs vest will be transferred or issued to the Recipient promptly after the date they vest, but in any event not later than the 15th day of the third month following the end of the calendar year in which such RSUs become vested.

2.2 Until the RSUs vest and are issued pursuant to the terms of this Award Agreement, the Recipient shall have no rights as a stockholder, such as the right to vote or to receive dividends in respect of the Stock covered by this Award.

2.3 The Recipient’s name shall be entered as the stockholder of record on the books and records of the transfer agent for the Company with respect to the Stock issuable pursuant to Section 2.1 only upon compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such issuance and with the requirements of this Agreement and of the Plan. The determination of the Committee as to such compliance shall be final and binding on the Recipient. Notwithstanding anything to the contrary in this Agreement, no Stock shall be issued in settlement of vested RSUs if the issuance

of such shares would constitute a violation of any applicable federal or state securities law or other law or regulation. As a condition to the issuance of Stock to the Recipient pursuant to Section 2.1, the Company may require the Recipient to make any representation or warranty to the Company at the time vested Stock becomes issuable to the Recipient as in the opinion of legal counsel for the Company may be required by any applicable law or regulation, including the execution and delivery of an appropriate representation statement. Accordingly, the stock certificates for the Stock issued pursuant to this Award may bear appropriate legends restricting the transfer of the Stock.

3. Effect of Termination. Unless otherwise expressly provided herein, no RSUs shall vest following the date (the Recipient’s “Termination Date”), reasonably fixed and determined by the Committee, of the voluntary or involuntary termination of the Recipient’s service as a Director of the Company and its Affiliates, for any or no reason whatsoever, including death or disability and an entity ceasing to be an Affiliate of the Company; provided, however, that military or sick leave shall not be deemed a termination of employment or other association, if it does not exceed the longer of 90 days or the period during which the Recipient’s reemployment rights, if any, are guaranteed by statute or by contract. As of the Recipient’s Termination Date, all of the then unvested RSUs shall be forfeited by the Recipient or any transferee.

4. Restrictions on Transfer. The RSUs may not be assigned or transferred (by operation of law or otherwise) except by will or the laws of descent and distribution.

5. Miscellaneous.

5.1 No Special Service Rights. Nothing contained in this Award Agreement shall confer upon the Recipient any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the Recipient’s employment or other association with the Company and its Affiliates.

5.2 Entire Agreement; Counterparts. This Award Agreement, including the Plan, constitute the entire agreement of the parties with respect to the subject matter hereof. This Award Agreement may be executed in any number of counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same instrument. In making proof of this Award Agreement it shall not be necessary to produce or account for more than one such counterpart.

5.3 Tax Consequences. The Company makes no representation or warranty as to the tax treatment to the Recipient of receipt of these RSUs, and does not warrant to the Recipient that all compensation paid or delivered to him or her for his or her services will be exempt from, or paid in compliance with, Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The Recipient should rely on his or her own tax advisors for all such advice.

5.4 Community Property. To the extent the Recipient resides in a jurisdiction in which community property rules apply, without prejudice to the actual rights of the spouses as between each other, for all purposes of this Award Agreement, the Recipient shall be treated as agent and attorney-in-fact for that interest held or claimed by the Recipient’s spouse with respect to these RSUs and the parties hereto shall act in all matters as if the Recipient was the sole owner of these RSUs. This appointment is coupled with an interest and is irrevocable.

6. Receipt of Plan. The RSUs were awarded under the Plan, to which this Award Agreement is subject in all respects, including without limitation the adjustment and tax withholding provisions therein. All capitalized terms used in this Award Agreement and not otherwise defined shall have the meanings ascribed thereto in the Plan. The Recipient has reviewed and understands the Plan and this Award Agreement in their entirety, and has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement. The Recipient hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Award Agreement.

IN WITNESS WHEREOF, the Recipient and the Company have entered into this Award Agreement as of the Grant Date.

PENNYMAC FINANCIAL SERVICES, INC.

Exhibit 10.26

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT SUBJECT TO PERFORMANCE COMPONENTS

AWARD AGREEMENT

Recipient

Grant Date	February 26, 2020

Number of RSUs Subject to
Performance Components

Performance Period	January 1, 2020 – December 31, 2022

1. Grant of Restricted Stock Units. Subject to the terms and conditions of this Award Agreement and the Company’s 2013 Equity Incentive Plan, as the same may be amended, modified, supplemented or interpreted from time to time (the “Plan”), including without limitation the vesting provisions set forth in Section 2, the Company hereby grants to the Recipient, with effect as of the Grant Date specified above, the above indicated number of restricted stock units (the “RSUs”) to obtain for each RSU that is subject to vesting based on the satisfaction of performance components, one fully paid and nonassessable share of Common Stock, par value $0.0001 per share, in the Company (the “Stock”) if (a) the Variance to Target is 0% for performance components 1 and 2, and (b) the Rating is 4 for performance component 3, all as set forth on Exhibit A attached hereto, or such greater number (up to a maximum of 1.875 shares of Stock) or lesser number as is obtained by applying the sliding scale percentage factors that are to be applied to the various performance components as set forth on such Exhibit A.

2. Vesting and Settlement.

2.1 The RSUs subject to vesting based on satisfaction of performance components are subject to cumulative achievement of goals based on the following performance components: (1) the Company’s Return on Equity, (2) the Company’s Leverage Ratio, and (3) the Recipient’s Individual Effectiveness, in the amounts and each as further described in Exhibit A attached hereto. The RSUs subject to vesting based on satisfaction of performance components shall vest in a lump sum on the date the Committee determines that the goals based on the performance components have been satisfied, subject to the Recipient’s continued service through such date. The Recipient’s satisfaction of goals based on performance components shall be determined by the Committee in its sole discretion. The shares of Stock earned as such RSUs vest will be transferred or issued to the Recipient (or his or her estate, in the event of his or her death) promptly after they vest, but in any event not later than the 15th day of the third month following the end of the calendar year in which such RSUs become vested. Notwithstanding anything to the contrary in this Agreement, if any settlement of RSUs would otherwise result in the issuance of a fractional share to the Recipient after aggregating all shares and fractional shares to be issued to the

Recipient in connection with such settlement, then any such final fractional share shall be eliminated and the Company shall pay to the Recipient, in lieu thereof, cash in an amount equal to (i) the average closing price of a share of Stock during the 10 most recent trading days prior to the date of issuance of the other shares issued in settlement of such RSU, multiplied by (ii) such fractional amount.

2.3 If cash dividends are declared by the Company’s Board of Directors on the Stock on or after the Grant Date and prior to the settlement of the RSU, cash dividend equivalents (the “Dividend Equivalents”) shall accrue on the shares of Stock underlying RSUs, which Dividend Equivalents shall be subject to vesting and forfeiture on the same terms and conditions as the underlying RSUs. Such Dividend Equivalents will be in an amount of cash per RSU equal to the cash dividend paid with respect to a share of outstanding Stock and shall accrue to the Recipient on the record date of the applicable dividend. The Dividend Equivalents accrued prior to the settlement date of each RSU will be paid to the Recipient with respect to all vested RSUs as soon as administratively feasible after each settlement date (but in any event not later than the 15th day of the third month following the end of the calendar year in which such RSUs become vested). The Dividend Equivalents accrued on shares of Stock underlying RSUs that do not vest and are forfeited shall be automatically forfeited without notice for no consideration on the date such RSU is forfeited.

3.1 Termination of Employment Due to Retirement. Prior to the vesting and settlement of the RSUs, (i) if the Recipient’s employment or other association with the Company is terminated due to Retirement (as defined below) and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, and (ii) provided the Recipient has executed and continues to comply with the terms of an agreement not to provide services as an employee, director, consultant, agent, or otherwise, to any of the Company’s direct competitors for a period of two (2) years from the date of Retirement (the “Retirement Date”), then the Recipient’s RSUs shall continue to vest after the date of Retirement Date in accordance with the original terms of such RSUs. Notwithstanding the foregoing, (i) if the Retirement Date occurs during the nine-month period immediately following the Grant Date, then all of the RSUs and the corresponding Dividend Equivalents shall be forfeited; and (ii) if the Retirement Date occurs during the three-month period prior to the first anniversary of the Grant Date, then the Recipient shall be eligible to earn a number of shares of Stock in the manner and as provided in Section 2 above (pro-rated based on (A) the number of full months of the Recipient’s employment from the beginning of the performance period through the Retirement Date divided by (B) the total number of months in the performance period) and the remaining RSUs and the corresponding Dividend Equivalents shall be forfeited. “Retirement” shall mean voluntary termination of employment after the age of sixty (60) with at least ten (10) years of combined service to the Company and/or any of its subsidiaries; provided, however, that if the Recipient elects to terminate employment in connection with a Retirement, the Recipient must provide the Company with a minimum of (x) six (6) months prior written notice of such Retirement if such Recipient’s title is at the senior vice president level and above, or (y) three (3) months prior written notice of such Retirement if such Recipient’s title is at the first vice president level and below.

3.2 Termination of Employment Due to Death. If, prior to vesting and settlement of the RSUs, the Recipient’s employment or other association with the Company is terminated due to his/her death and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, then the Recipient’s RSUs shall vest and be settled in a number of shares of Stock based on the Company’s cumulative performance achievement during the performance period and through the most recent fiscal quarter end and not to exceed 100% payout if such termination due to death occurs prior to the end of the performance period (pro-rated based on (A) the number of full months of the Recipient’s employment from the beginning of the performance period through the date of termination due to death divided by (B) the total number of months in the performance period); provided, however, that if the Recipient’s termination due to death occurs during the one-month period following the Grant Date, the RSUs and the corresponding Dividend Equivalents shall be forfeited.

3.3 Termination of Employment Due to Disability. If, prior to vesting and settlement of the RSUs, the Recipient’s employment or other association with the Company is terminated due to his/her Disability (as defined below) and the Company does not have grounds to terminate Recipient’s employment or other association with the Company for cause, then the Recipient’s RSUs shall vest and be settled in the manner and as provided in Section 2 with achievement not to exceed 100% payout if such termination due to Disability occurs prior to the end of the performance period (pro-rated based on (A) the number of full months of the Recipient’s employment from the beginning of the performance period through the date of termination due to Disability divided by (B) the total number of months in the performance period) and the remaining RSUs and the corresponding Dividend Equivalents shall be forfeited; provided, however, that if the Recipient’s termination due to Disability occurs during the one-month period following the Grant

Date, all of the RSUs and the corresponding Dividend Equivalents shall be forfeited. “Disability” shall mean the inability to engage in any substantial gainful occupation to which the relevant individual is suited by education, training or experience, by reason of any medically determinable physical or mental impairment, which condition can be expected to result in death or otherwise continue for a period of not less than twelve (12) consecutive months.

5. Withholding Obligations.

5.1 At the time Recipient becomes entitled to receive a distribution of shares of Stock upon vesting of RSUs, Recipient authorizes the delivery of the shares of Stock to the Company’s designated broker with instructions to (i) sell shares of Stock sufficient to satisfy the applicable withholding taxes which arise in connection with such distribution, and (ii) remit the proceeds of such sale to the Company. In the event the sale proceeds are insufficient to fully satisfy the applicable withholding taxes, Recipient authorizes withholding from payroll and any other amounts payable to Recipient, in the same calendar year, and otherwise agrees to make adequate provision through the submission of cash, a check or its equivalent for any sums required to satisfy the applicable withholding taxes.

Recipient is not aware of any material nonpublic information with respect to the Company or any securities of the Company, is not subject to any legal, regulatory or contractual restriction that would prevent the designated broker from conducting sales as provided herein, does not have, and will not attempt to exercise, authority, influence or control over any sales of shares of Stock effected pursuant to this Section 5.1, and is entering into this Section 5.1 of the Award Agreement in good faith and not as part of a plan or scheme to evade compliance with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (regarding trading of the Company’s securities on the basis of material nonpublic information). It is the intent of the parties that this Section 5.1 comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act, and the Award Agreement will be interpreted to comply with the requirements of Rule 10b5-1(c) under the Exchange Act.

5.2 Unless the withholding tax obligations of the Company and/or any Affiliate thereof are satisfied, the Company shall have no obligation to deliver any shares of Stock on the Recipient’s behalf upon vesting of RSUs or make any cash payments for settlement of Dividend Equivalents.

6. Miscellaneous.

IN WITNESS WHEREOF, the Recipient and the Company have entered into this Award Agreement as of the Grant Date.

PENNYMAC FINANCIAL SERVICES, INC.

EXHIBIT A

PFSI 2013 Equity Incentive Plan Performance Objectives 2020

Award Components	Component	Comments		Target	% of Total
	1. PFSI Return on Equity (ROE)	ROE is the amount of net income returned as an annualized percentage of average month-end equity. ROE measures a company's profitability by revealing how much profit a company generates with the money equity holders have invested, including profits retained by the company. ROE = Net Income ÷ Average Month-End Equity ÷ Years in Measurement Period. The performance measurement period will be 01.01.20 - 12.31.22.		15.0% cumulative, annualized ROE	100%
	2. PFSI Leverage Ratio	Leverage Ratio is the average of the ratio at the end of each month of the performance measurement period of the amount of (a) total recourse indebtedness outstanding to (b) total equity.		3.5x	Multiplier
	3. Individual Effectiveness	Award “modifier” based on individual overall achievement of goals for the three grant period years.		4 Exceeds Expectations	Multiplier

Pay-Out Scale for Component 1	Achievement		Factor
	20.0%		150%
	17.5%		125%
	15.0%		100%
	12.5%		75%
	10.0%		50%
	<10.0%		0%

Multiplier Scale for Component 2	Rating		Factor
	<=1x		125%
	3.5x		100%
	>=5x		66%

Multiplier Scale for Component 3	Rating		Factor	Description
	4		100%	Exceeds Expectations
	3		80%	Meets Expectations
	2		60%	Needs Improvement
	1		0%	Unsatisfactory

Exhibit 10.27

Sale To Cover

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT SUBJECT TO CONTINUED SERVICE

AWARD AGREEMENT

Recipient

Grant Date	February 26, 2020

Vesting Commencement Date

Number of RSUs Subject to
Continued Service

2. Vesting and Settlement.

5. Withholding Obligations.

proceeds of such sale to the Company. In the event the sale proceeds are insufficient to fully satisfy the applicable withholding taxes, Recipient authorizes withholding from payroll and any other amounts payable to Recipient, in the same calendar year, and otherwise agrees to make adequate provision through the submission of cash, a check or its equivalent for any sums required to satisfy the applicable withholding taxes.

Recipient is not aware of any material nonpublic information with respect to the Company or any securities of the Company, is not subject to any legal, regulatory or contractual restriction that would prevent the designated broker from conducting sales as provided herein, does not have, and will not attempt to exercise, authority, influence or control over any sales of shares of Stock effected pursuant to this Section 5.1, and is entering into this Section 5.1 of the Award Agreement in good faith and not as part of a plan or scheme to evade compliance with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (regarding trading of the Company’s securities on the basis of material nonpublic information). It is the intent of the parties that this Section 5.1 comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act, and the Award Agreement will be interpreted to comply with the requirements of Rule 10b5-1(c) under the Exchange Act.

6. Miscellaneous.

IN WITNESS WHEREOF, the Recipient and the Company have entered into this Award Agreement as of the Grant Date.

PENNYMAC FINANCIAL SERVICES, INC.

Exhibit 10.28

Net Share Withholding

PENNYMAC FINANCIAL SERVICES, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT SUBJECT TO PERFORMANCE COMPONENTS

AWARD AGREEMENT

Recipient

Grant Date	February 26, 2020

Number of RSUs Subject to
Performance Components

Performance Period	January 1, 2020 – December 31, 2022

2. Vesting and Settlement.

connection with such settlement, then any such final fractional share shall be eliminated and the Company shall pay to the Recipient, in lieu thereof, cash in an amount equal to (i) the average closing price of a share of Stock during the 10 most recent trading days prior to the date of issuance of the other shares issued in settlement of such RSU, multiplied by (ii) such fractional amount.

shall mean the inability to engage in any substantial gainful occupation to which the relevant individual is suited by education, training or experience, by reason of any medically determinable physical or mental impairment, which condition can be expected to result in death or otherwise continue for a period of not less than twelve (12) consecutive months.

5. Withholding Obligations.

5.1 At the time Recipient becomes entitled to receive a distribution of shares of Stock upon vesting of RSUs, Recipient authorizes the Company, at Company’s sole discretion, to withhold from fully vested shares of Stock otherwise issuable to Recipient pursuant to such RSUs a number of shares of Stock having a Market Value, as determined by the Company as of the first business day immediately preceding the vesting date, equal to the statutory minimum withholding tax obligation in respect of the shares of Stock otherwise issuable to Recipient (the “Share Withholding Method”).

6. Miscellaneous.

IN WITNESS WHEREOF, the Recipient and the Company have entered into this Award Agreement as of the Grant Date.

PENNYMAC FINANCIAL SERVICES, INC.

EXHIBIT A

PFSI 2013 Equity Incentive Plan Performance Objectives 2020


Award Components	Component	Comments		Target	% of Total
	1. PFSI Return on Equity (ROE)	ROE is the amount of net income returned as an annualized percentage of average month-end equity. ROE measures a company's profitability by revealing how much profit a company generates with the money equity holders have invested, including profits retained by the company. ROE = Net Income ÷ Average Month-End Equity ÷ Years in Measurement Period. The performance measurement period will be 01.01.20 - 12.31.22.		15.0% cumulative, annualized ROE	100%
	2. PFSI Leverage Ratio	Leverage Ratio is the average of the ratio at the end of each month of the performance measurement period of the amount of (a) total recourse indebtedness outstanding to (b) total equity.		3.5x	Multiplier
	3. Individual Effectiveness	Award “modifier” based on individual overall achievement of goals for the three grant period years.		4 Exceeds Expectations	Multiplier

Pay-Out Scale for Component 1	Achievement		Factor
	20.0%		150%
	17.5%		125%
	15.0%		100%
	12.5%		75%
	10.0%		50%
	<10.0%		0%

Multiplier Scale for Component 2	Rating		Factor
	<=1x		125%
	3.5x		100%
	>=5x		66%

Multiplier Scale for Component 3	Rating		Factor	Description
	4		100%	Exceeds Expectations
	3		80%	Meets Expectations
	2		60%	Needs Improvement
	1		0%	Unsatisfactory

Exhibit 31.1

CERTIFICATION

I, David A. Spector, certify that:

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

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 7, 2020


By:	/s/ David A. Spector
	David A. Spector
	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Andrew S. Chang, certify that:

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

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 7, 2020


By:	/s/ Andrew S. Chang
	Andrew S. Chang
	Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc. (the “Company”) for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Spector, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 7, 2020

By:	/s/ David A. Spector
	David A. Spector
	President and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Financial Services, Inc. and will be retained by PennyMac Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc. (the “Company”) for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew S. Chang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 7, 2020

By:	/s/ Andrew S. Chang
	Andrew S. Chang
	Chief Financial Officer