PennyMac Financial Services, Inc.
(Exact name of Registrant as specified in its charter)

6101 Condor Drive
Moorpark, CA 93021
Phone: (818) 224-7442
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Jeffrey P. Grogin
Chief Administrative and Legal Officer and Secretary
Private National Mortgage Acceptance Company, LLC
6101 Condor Drive
Moorpark, CA 93021
Phone: (818) 224-7442
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of the proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

This is the initial public offering of our Class A common stock. We are selling shares of our Class A common stock. We currently expect the initial public offering price to be between $ and $ per share of Class A common stock.

We have granted the underwriters an option to purchase up to additional shares of Class A common stock.

We intend to apply to have the Class A common stock listed on the New York Stock Exchange under the symbol " ."

Immediately following this offering, the holders of our Class A common stock will collectively own 100% of the economic interests in PennyMac Financial Services, Inc. and have % of the voting power of PennyMac Financial Services, Inc., and indirectly own % of the economic interests of Private National Mortgage Acceptance Company, LLC, our principal operating subsidiary. The holders of our Class B common stock will have the remaining % of the voting power of PennyMac Financial Services, Inc. and will directly own the remaining % of the economic interests of Private National Mortgage Acceptance Company, LLC.

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, and therefore have elected to comply with certain reduced public company reporting requirements.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 17.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about , 2013 through the book-entry facilities of The Depository Trust Company.

Unless the context requires otherwise, references in this prospectus to "PennyMac," the "Company," "we," "us" and "our" refer (1) prior to the consummation of the Offering Transactions described under "Organizational Structure—Recapitalization," to Private National Mortgage Acceptance Company, LLC and its consolidated subsidiaries and (2) after the consummation of the Offering Transactions described under "Organizational Structure—Recapitalization," to PennyMac Financial Services, Inc. and its consolidated subsidiaries.

In this prospectus, we refer to our subsidiary PNMAC Capital Management, LLC as "PCM" and our subsidiary PennyMac Loan Services, LLC as "PLS." We refer to BlackRock Mortgage Ventures, LLC, together with its affiliates, as "BlackRock," and HC Partners LLC, formerly known as Highfields Capital Investments LLC, together with its affiliates, as "Highfields." We refer to BlackRock, Highfields and the other owners of Private National Mortgage Acceptance Company, LLC prior to the Offering Transactions, collectively, as our "existing owners."

Unless the context requires otherwise, references in this prospectus to "PMT" collectively refer to PennyMac Mortgage Investment Trust, a mortgage "real estate investment trust" managed by PCM, and its operating subsidiaries.

You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that

contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. We are offering to sell, and seeking offers to buy, our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus, or of any sale of our Class A common stock.

Through and including , 2013 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.

SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Class A common stock, you should read the entire prospectus carefully, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes.

Business Overview

Our Company

We are a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. residential mortgage loans and the management of investments related to the U.S. residential mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and our management's deep 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 were founded in 2008 by members of our executive leadership team and two strategic partners, BlackRock and Highfields. Since our founding we have pursued opportunities to acquire and manage residential mortgage loans and established what we believe to be a best-in-class mortgage platform. We have relied on the know-how of our management team and built a de novo operating platform to our specifications using industry-leading technology, processes and procedures to address the stringent requirements of residential mortgage lending and servicing in the post-financial crisis market. We believe that this approach has resulted in a specialized mortgage platform that is "legacy-free" and highly scalable to support the continued growth of our business.

We conduct our business in two segments: mortgage banking and investment management. Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC, or PLS, is a leading non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac, each of which is a government-sponsored entity, or GSE. It is also an approved issuer of securities guaranteed by the Government National Mortgage Association, or Ginnie Mae, a lender of the Federal Housing Administration, or FHA, a lender/servicer of the Veterans Administration, or VA, and a servicer for the Home Affordable Modification Program, or HAMP. We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA and VA as an "Agency." PLS is licensed (or exempt or otherwise not required to be licensed) to originate residential mortgage loans in 45 states and the District of Columbia and to service loans in 49 states, the District of Columbia and the U.S. Virgin Islands.

Our principal investment management subsidiary, PNMAC Capital Management, LLC, or PCM, is an SEC registered investment adviser. It manages PennyMac Mortgage Investment Trust, or PMT, a mortgage "real estate investment trust," or REIT, listed on the New York Stock Exchange. PCM also manages PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, LP, both registered under the Investment Company Act of 1940, an affiliate of these funds and PNMAC Mortgage Opportunity Fund Investors, LLC. We refer to these funds collectively as our "Investment Funds" and, together with PMT, as our "Advised Entities." Our Advised Entities have been some of the leading non-bank investors in distressed mortgage loans since 2008, investing in loans with over $5.9 billion of unpaid principal balances, or UPB. As of September 30, 2012, our Advised Entities had combined net assets of approximately $1.8 billion.

portfolios and fulfillment fees for mortgage banking services provided to PMT in connection with our correspondent lending program. Our relationships with our Advised Entities also allow us to pursue some market opportunities with reduced capital intensity, with PLS and PCM providing operational expertise and our Advised Entities providing investment capital for mortgage-related assets.

Our systems and processes have been designed to be highly scalable to accommodate the continued rapid growth of our businesses. To date our growth has been organic, drawing upon experienced personnel known to us in the mortgage industry, which has allowed us to be methodical and consistent in our operations and to establish and maintain a disciplined corporate culture that is focused on excellence.

Our Company Structure

Mortgage Banking Segment

As summarized below, our mortgage banking segment is comprised of three primary businesses: correspondent lending, retail lending, and loan servicing.

Correspondent Lending

Our correspondent lending business manages, on behalf of PMT and for our own account, the acquisition of newly originated, prime credit quality, first-lien residential mortgage loans that have been underwritten to investor guidelines. PMT acquires, from approved correspondent sellers, newly originated loans, primarily "conventional" residential mortgage loans guaranteed by the GSEs and "government-insured" residential mortgage loans insured or guaranteed primarily by the FHA or the VA.

For conventional loans, we perform fulfillment activities for PMT and earn a fee for each loan acquired by PMT. Fulfillment activities include reviews of loan data, documentation and appraisals to assess loan quality and risk, correspondent seller performance and credit monitoring procedures, and the subsequent sale and securitization of loans through secondary mortgage markets on behalf of PMT. PMT earns interest income and gains or losses during the holding period and upon the sale or

securitization of these conventional loans and retains the associated mortgage servicing rights, or MSRs. PLS provides loan subservicing for PMT's retained MSRs and earns a subservicing fee.

In the case of government-insured loans, we purchase them from PMT at PMT's cost plus a sourcing fee. We fulfill the government loans for our own account. We typically pool the federally insured or guaranteed loans together into a mortgage-backed security, or MBS, which Ginnie Mae guarantees. We earn interest income and gains or losses during the holding period and upon the sale of these securities, and we retain the associated MSRs.

We have grown our correspondent lending business through purchases from approved mortgage originators that meet specific criteria related to management experience, financial strength, risk management controls and loan quality. Our management team has prior experience with the majority of these mortgage originators. As of December 31, 2012, we had approved 140 sellers on PMT's behalf, primarily independent mortgage originators and small banks located across the United States. PMT purchased approximately $21.5 billion of loans in 2012, including $13.0 billion of conventional loans and $8.4 billion of government-insured loans. In the third quarter of 2012, with $6.3 billion in production, PMT was the fifth largest correspondent lender in the United States as ranked by Inside Mortgage Finance.

Retail Lending

Our retail lending business originates new prime credit quality, first-lien residential conventional and government-insured mortgage loans on a national basis to allow customers to purchase or refinance their homes. We conduct this business through a consumer direct model, which relies on the Internet and call center-based staff, rather than a traditional branch network, to acquire and interact with customers across the country. Effective marketing, call center staff, procedures, training and technology are all important to growing our retail lending business. We use sophisticated telephony and lead-management software to improve conversion rates, deliver outstanding customer service, and lower costs. In 2012, we originated $534 million of residential mortgage loans in our retail lending business, a 259% growth rate compared to 2011.

Our existing servicing portfolio is our main source of leads for new originations. These portfolio-based originations include: refinancing loans to proactively protect our servicing portfolio from run-off, which we refer to as "recapture;" refinancing loans from the restructure of distressed loans acquired by our Advised Entities; and purchasing loans to facilitate the sale of real estate owned, or REO, properties held by our Advised Entities. In addition, we are growing our non-portfolio originations by sourcing prospective customers through consumer marketing and community and professional relationships.

For loans originated via our retail lending business, we conduct our own fulfillment, earn interest income and gains or losses during the holding period and upon the sale or securitization of these loans, and retain the associated MSRs (subject to sharing 30% of such MSRs with PMT in the case of retail originated loans that refinance a loan for which the related MSR was held by PMT).

Loan Servicing

Our loan servicing business performs loan administration, collection, and default activities, including the collection and remittance of loan payments, responding to customer inquiries, accounting for principal and interest, holding custodial (impound) funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors, modifying loans and supervising foreclosures and our property dispositions.

We service loans for which we own the MSRs and we service loans on behalf of other MSR or mortgage owners which we refer to as "subservicing." The owner of MSRs acts on behalf of mortgage

loan owners and has the contractual right to receive a stream of cash flows (expressed as a percentage of UPB) in exchange for performing specified mortgage servicing functions and temporarily advancing funds to cover payments on delinquent and defaulted mortgages. As a subservicer, we earn a contractual fee on a per-loan basis and the right to any ancillary fees, and we are reimbursed for any servicing advances we make on delinquent or defaulted mortgages. We presently subservice only for our Advised Entities.

We characterize our servicing business as either "Prime Servicing" or "Special Servicing."

Prime Servicing. Our prime servicing includes servicing or subservicing activities for loans that are prime credit quality and generally exhibit low delinquency and default rates. This portfolio includes conventional and government-insured loans. Prime servicing generally tends to be lower cost and benefits from significant economies of scale. As of December 31, 2012, our prime servicing portfolio comprised over 100,000 loans, most of which are recent originations, with an aggregate UPB of approximately $23.3 billion. We own the MSRs to over 50,000 of these loans (or approximately 45% of our total prime portfolio as measured by UPB), most of which are serviced for Ginnie Mae securitizations and were produced by us through our correspondent and retail lending businesses. In addition, we subservice approximately 50,000 conventional loans (or approximately 55% of our total prime portfolio as measured by UPB), the MSRs to which are owned by PMT.

Special Servicing. Our special servicing includes servicing activities for distressed whole loans that have been acquired as investments by our Advised Entities, as well as for loans in "private-label" MBS securities, which are securities that are not guaranteed by or otherwise affiliated with any government agency. Special servicing utilizes a "high-touch" model to establish and maintain borrower contact and facilitate loss mitigation strategies. Our general strategy is to try to keep defaulted borrowers in their homes. Under certain circumstances, we offer loss mitigation options that include loan modification through the use of federally sponsored loan modification programs (such as HAMP) or otherwise to reflect both the borrowers' current financial condition and the value of their homes. When loan modifications and other efforts are unable to cure a default, we seek to avoid foreclosure and timely acquire and/or liquidate the property securing the mortgage loan where possible and pursue alternative property resolutions including "short sales," in which the borrower agrees to sell the property for less than the loan balance and the difference is forgiven, and deeds-in-lieu of foreclosure, in which the borrower agrees to convey the property deed outside of foreclosure proceedings. As of December 31, 2012, we provided special servicing to approximately 16,000 distressed whole loans with an aggregate UPB of approximately $3.6 billion and approximately 7,000 loans in "private-label" securities with an aggregate UPB of approximately $1.3 billion. Our special servicing fees typically include a base servicing fee and activity-based fees for the successful completion of default-related services.

We have grown our mortgage servicing portfolio primarily through organic mortgage loan production in our correspondent lending and retail lending businesses, supplemented by the opportunistic acquisition by our Advised Entities of distressed pools of residential whole loans which we subservice, and our own MSR acquisitions. As of December 31, 2012, we serviced or subserviced approximately 123,000 loans with an aggregate UPB of approximately $28.2 billion. The majority of these loans are serviced for Fannie Mae, Freddie Mac or Ginnie Mae securitizations.

Investment Management Segment

private funds established in August 2008, whose commitment periods ended in 2011. As of September 30, 2012, these funds had aggregate equity value of $576 million and had generated total returns of 39%, net of all fees, expenses and carried interest, since their inception. The term of each of these funds ends in December 2016 with the possibility of three one-year extensions. Subject to contractual restrictions with PMT, we may establish additional private investment vehicles to invest in distressed loans or pursue related mortgage strategies, for which we would provide investment management services as well.

PMT was formed as a Maryland real estate investment trust in May 2009 and consummated an initial public offering in August 2009. PMT's shareholders' equity has grown through a combination of retained earnings and new equity raised through follow-on public offerings and other sales of its common stock. Since its initial public offering, PMT has raised new equity of approximately $200 million in 2011 and approximately $600 million in 2012. As of September 30, 2012, PMT had shareholders' equity of $1,184 million. For the years ended December 31, 2010 and December 31, 2011, and the nine months ended September 30, 2012, PMT reported returns on average shareholders' equity of 8%, 13% and 16%, respectively. Our relationship with PMT provides a partner with long-term investment capital and enhances our ability to both support our existing business and to pursue potential growth initiatives.

Market Opportunity

The U.S. residential mortgage industry is one of the largest financial markets in the world, with approximately $10 trillion of outstanding debt and average annual origination volume of $1.7 trillion for the five years ending December 31, 2012. Dislocations from the financial crisis have led many of the largest financial institutions to reduce their participation in the mortgage market through asset sales and by exiting businesses, and the industry remains in a period of significant transformation. In addition, increasing capital requirements for banks have resulted in competitive advantages for non-bank participants relative to the banks that have traditionally held the majority of the market share in mortgage originations and servicing.

The residential mortgage industry is characterized by high barriers to entry, including: the necessity for approvals required to sell loans to and service loans for the GSEs and Ginnie Mae; state licensing requirements; sophisticated infrastructure, technology, and processes required for successful operations; and financial capital requirements. We believe that we are one of the few new enterprises well positioned to lead in the rapidly evolving mortgage industry.

Our Competitive Strengths

Leading Non-bank Residential Mortgage Specialist with Integrated, Complementary Capabilities

We are a leading non-bank residential mortgage specialist that has developed highly complementary capabilities in residential mortgage production, servicing and investment management. In 2012, we produced $22.0 billion of mortgage loans, including $6.3 billion acquired by PMT through correspondent lending in the third quarter during which it ranked among the top five correspondent lenders nationwide. In loan servicing, we provide prime and special servicing, with strong expertise in distressed assets that require high levels of borrower contact and specialized operations and technology focused on loss mitigation and default related processes. As of December 31, 2012, we serviced approximately 123,000 loans with an aggregate UPB of approximately $28.2 billion. In addition, our Advised Entities are leading non-bank investors in distressed mortgage loans.

investment management performance through execution of loss mitigation programs and our origination platform mitigates run-off of our servicing portfolios through refinance recapture.

Profitable Businesses with Significant Growth Potential

We have been profitable every year except for our first year of operations and have a track record of generating meaningful returns on equity for our equityholders. Since our inception, we have made substantial investments in infrastructure, technology, and operations that have subsequently facilitated significant growth in our business volumes and profits. For the nine months ended September 30, 2012, our net income grew 427% to $60.5 million as compared to the nine months ended September 30, 2011, resulting in a return on average equity of 49.5%, which was largely driven by growth in our correspondent lending production. During 2012, our correspondent lending production totaled $21.5 billion, a 1,587% increase versus 2011, and our servicing portfolio totaled approximately $28.2 billion in UPB as of December 31, 2012, a 264% increase versus a year earlier. We believe that there is significant growth potential yet to be tapped within our existing businesses and also through our expansion into adjacent related businesses as described in "Our Growth Strategies." Our historical profitability has generated internal cash flows that can be used to fund additional growth in our operations.

Legacy-free, Specialized and Scalable Operating Platform

We believe we have a superior mortgage banking platform. Since our formation in 2008, we have utilized state-of-the-art technology combined with best-in-class processes to address the complexity of conducting mortgage banking activities in the post-crisis environment. Unlike many other competing platforms in the market, our platform is not overburdened by "legacy" portfolios which are either distressed or have potentially significant repurchase obligations to the GSEs or liability to other non-Agency investors in connection with loans originated prior to the recent financial crisis that fail to meet required underwriting standards; nor is it constrained by the inherent limitation of old existing systems and operations that are not able to accommodate large numbers of delinquent loans. Instead, our operating platform is legacy-free, highly scalable and specifically designed to address the needs of our businesses. It provides centralized and streamlined processes and infrastructure across all of the critical areas for mortgage management, including correspondent and retail lending, underwriting, quality control, secondary marketing and capital markets, portfolio strategy, servicing, finance and other supporting functions. Many of these functions are proprietary, including our loan-level analytics platform for distressed loan management, which we call "LENE^SM" (Loan Enhancement Normalization Engine).

Our primary operations center is located in southern California, home to thousands of experienced and qualified mortgage professionals. We have been able to grow our platform in part due to our ability to hire many high-quality employees affected by dislocations in the mortgage market. In 2012, we opened new operations centers in Pasadena, California and Tampa, Florida, an area that also has a deep base of experienced mortgage professionals, to support the growth of our retail lending and correspondent lending businesses, respectively. We believe that our platform enables us to scale our business quickly with cost efficiency and systems integrity, adapt to the latest regulatory changes, and maintain a competitive advantage in meeting the needs of the mortgage market.

Seasoned Management with Deep Industry Experience and Aligned Interests

relevant industry experience. Many of them have experience in managing other public companies and have also worked together for over a decade. In addition, our management owns approximately one-third of our equity prior to this offering and will own % of the new class of units of Private National Mortgage Acceptance Company, LLC, which we refer to as "New Holdings Units," outstanding immediately following this offering, creating a significant alignment of interests between our management and stockholders. Such a deep, extensive and interest-aligned management team has delivered a successful execution of our strategy, demonstrated by our profitable growth in a relatively short period of time. We also believe that our seasoned, experienced management team is a significant competitive advantage for us as the mortgage industry continues its transformation and enters new market cycles.

Long-standing Relationships with Critical Institutional Partners

The mortgage industry is characterized by high barriers to entry, including extensive institutional relationships needed to conduct and grow business. Our senior management and business development teams have long-standing relationships with our critical institutional partners. These partners include: the GSEs to whom we sell and for whom we service loans; leading banks and broker-dealers who provide us with financing and mortgage-related assets for acquisition by our Advised Entities; and leading independent mortgage originators who sell loans to PMT through our correspondent lending business. We have successfully turned such relationships into our competitive advantage over other new entrants in our businesses.

Synergistic Partnership with PennyMac Mortgage Investment Trust

We have established a synergistic partnership with PMT, the public REIT that is externally managed by our investment management subsidiary, PCM, and whose mortgage assets are serviced by our mortgage banking subsidiary, PLS. PMT is intended to be a tax-efficient vehicle for investing in mortgages and mortgage-related assets and has a track record of raising new capital in a cost-effective manner. As we provide mortgage banking related operational, infrastructure and risk management services and investment management expertise to PMT, PMT as a long-term investment vehicle provides us with efficient access to the capital markets and helps reduce balance sheet constraints as we grow our business. For example, in our correspondent lending business for conventional loans, PMT funds the loans until their sale or securitization, for which we perform fulfillment activities before and after the acquisition of the loans, and retains the resulting MSR assets, for which we provide subservicing. This mutually beneficial partnership facilitates our activities across the residential mortgage market, particularly given the capital-intensive nature of mortgage origination, servicing and investment.

Our Growth Strategies

Since our establishment during the financial crisis, we have demonstrated our ability to apply our residential mortgage expertise and operating capabilities to multiple business opportunities. In the initial years of our operation, for example, we identified distressed investing as an attractive opportunity and we raised and deployed capital through a series of successful transactions. As the mortgage market presented opportunities in new loan production and servicing, we expanded our management and capabilities to profitably capitalize on these businesses as well.

As a non-bank mortgage company, we believe that we are well positioned to continue to take advantage of future industry changes as the market shifts away from the large banks to specialized firms. For example, we are not subject to stringent regulatory capital constraints on retaining certain mortgage-related assets that could prove beneficial as the residential mortgage market develops following the recent financial crisis. Examples of industry changes that may create future business

opportunities for us include, among others, GSE reform and the re-emergence of a robust jumbo mortgage loan market for loans in amounts above conventional conforming loan limits.

We expect to drive near-term growth in the following ways:

Grow our Servicing Portfolio Organically and through Opportunistic Acquisitions

We expect to grow our servicing portfolio primarily on an organic basis, as our correspondent government-insured lending and retail lending production adds new prime servicing for owned MSRs, and correspondent conventional lending adds new subservicing. Our correspondent and retail loan production in the fourth quarter of 2012 was $41.0 billion in UPB on an annualized basis, significantly larger than our outstanding servicing portfolio which totaled $28.2 billion in UPB as of December 31, 2012. We will supplement our organic growth by adding new special servicing through continued distressed loan acquisitions by our Advised Entities. We may also opportunistically pursue the acquisition of third-party residential mortgage servicing portfolios. These acquisitions may be pursued in partnership with PMT, which may co-invest in the MSRs through the purchase of a portion of the servicing fee cash flows.

Grow Correspondent Lending through Expanding Seller Relationships

We expect to grow our correspondent lending business by selectively increasing the number of sellers from which we purchase loans and cautiously increasing the volume of loans that we purchase from our existing sellers as we continue to increase the breadth of approved loan products that we offer and expand into additional geographic markets in the United States. Over the past few years, a number of large banks have exited or reduced the size of their correspondent lending businesses, creating an opportunity for non-bank entities to gain market share. We believe that we are well positioned to take advantage of this opportunity based on our management expertise in the correspondent lending business, our relationships with correspondent sellers, and our supporting systems and processes.

Grow Retail Lending through Portfolio Refinance and Non-Portfolio Originations

We expect to grow our retail lending business by leveraging our growing servicing portfolio through refinance activities as well as increasing our non-portfolio originations. As our servicing portfolio grows, we will have a greater number of leads to pursue, which we believe will lead to greater recapture activity. At the same time, we are making significant investments in technology, personnel and marketing to increase our non-portfolio originations. We believe that our national call center model and our technology will enable us to drive origination process efficiencies and best-in-class customer service.

Risks Affecting Us

Our mortgage banking and investment management businesses are subject to numerous risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following the prospectus summary. Some of these risks are:

•: 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 creation of the Consumer Financial Protection Bureau, or CFPB, its recently issued and future rules and the enforcement thereof by the CFPB;

•: Changes in existing U.S. government-sponsored entities, their current roles or their guarantees or guidelines;
•: Changes to government mortgage modification programs;
•: The licensing and operational requirements of states and other jurisdictions applicable to our businesses, to which our bank competitors are not subject;
•: Foreclosure delays and changes in foreclosure practices;
•: Changes in macroeconomic and U.S. residential real estate market conditions;
•: Difficulties inherent in growing loan production volume;
•: Changes in prevailing interest rates;
•: Increases in loan delinquencies and defaults;
•: Our reliance on PMT as a significant source of financing for, and revenue related to, our correspondent lending business;
•: Any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all;
•: Our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances;
•: Our obligation to indemnify PMT and the Investment Funds if our services fail to meet certain criteria or characteristics or under other circumstances;
•: Decreases in the historical returns on the assets that we select and manage for our clients, and our resulting management and incentive fees;
•: The extensive amount of regulation applicable to our investment management segment;
•: Conflicts of interest in allocating our services and investment opportunities among ourselves and our Advised Entities; and
•: Our recent rapid growth.

Our Structure

Following this offering PennyMac Financial Services, Inc. will be a holding company and its sole asset will be an equity interest in Private National Mortgage Acceptance Company, LLC. PennyMac Financial Services, Inc. will operate and control all of the business and affairs and consolidate the financial results of Private National Mortgage Acceptance Company, LLC and its subsidiaries. Prior to the completion of this offering, the limited liability company agreement of Private National Mortgage Acceptance Company, LLC will be amended and restated to, among other things, modify its capital structure by converting the different classes of interests currently held by our existing owners into New Holdings Units. We and our existing owners will also enter into an exchange agreement under which (subject to the terms of the exchange agreement) they will have the right to exchange their New Holdings Units for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. See "Organizational Structure."

Corporate and Other Information

Private National Mortgage Acceptance Company, LLC was formed in Delaware in January 2008. PennyMac Financial Services, Inc. was formed in Delaware in December 2012. Our principal executive offices are located at 6101 Condor Drive in Moorpark, California and our telephone number is (818) 224-7442. Our website address is www.pennymacfinancial.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it part of this prospectus.

The trademark PennyMac®, and its corresponding logos appearing in this prospectus, are owned by us or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 in this prospectus as the "JOBS Act," and references in this prospectus to "emerging growth company" shall have the meaning ascribed to it in the JOBS Act.

THE OFFERING


Class A common stock we are offering		shares.
Underwriters' option to purchase additional shares		shares.
Class A common stock outstanding after giving effect to this offering		shares (or shares if all outstanding New Holdings Units held by our existing owners were exchanged for newly-issued shares of Class A common stock on a one-for-one basis).
Class B common stock outstanding after giving effect to this offering		shares, or one share for each holder of New Holdings Units.
Voting power held by holders of Class A common stock after giving effect to this offering		% (or 100% if all outstanding New Holdings Units held by our existing owners were exchanged for newly-issued shares of Class A common stock on a one-for-one basis).
Voting power held by holders of Class B common stock after giving effect to this offering		% (or 0% if all outstanding New Holdings Units held by our existing owners were exchanged for newly-issued shares of Class A common stock on a one-for-one basis). A holder of Class B common stock will be entitled, without regard to the number of shares of Class B common stock held, to a number of votes on matters presented to the stockholders of PennyMac Financial Services, Inc. that is equal to the aggregate number of New Holdings Units of Private National Mortgage Acceptance Company, LLC held by such holder.
Use of proceeds		We estimate that the net proceeds to us from the sale of the shares of our Class A common stock offered by us will be approximately $ million, based on an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions. If the underwriters' option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $ million, after deducting underwriting discounts and commissions.


		We intend to use the net proceeds to us from this offering to purchase newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC, as described under "Organizational Structure—Recapitalization." Accordingly, we will not retain any of these proceeds. We intend to cause Private National Mortgage Acceptance Company, LLC to use these proceeds primarily to provide capital to grow our mortgage banking business and for general corporate purposes. Private National Mortgage Acceptance Company, LLC will also use these proceeds to pay the expenses of this offering, which we estimate will be approximately $ million.
		Private National Mortgage Acceptance Company, LLC will have broad discretion over the uses of such proceeds.
Voting rights		Each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally.
		Following the Offering Transactions described under "Organizational Structure—Recapitalization," each existing owner of Private National Mortgage Acceptance Company, LLC will hold one share of Class B common stock. The shares of Class B common stock have no economic rights but entitle the holder, without regard to the number of shares of Class B common stock held, to a number of votes on matters presented to stockholders of PennyMac Financial Services, Inc. that is equal to the aggregate number of New Holdings Units of Private National Mortgage Acceptance Company, LLC held by such holder. See "Description of Capital Stock—Common Stock—Class B Common Stock."
		Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law.
Dividend policy		Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial position, results of operations, liquidity and legal requirements. See "Dividend Policy."


Exchange rights of holders of New Holdings Units		Prior to this offering we will enter into an exchange agreement with our existing owners so that they may (subject to the terms of the exchange agreement) exchange their New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc. on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. As our existing owners exchange New Holdings Units for shares of Class A common stock, the voting power afforded to them by their shares of Class B common stock will be automatically and correspondingly reduced.
		We will also enter into a tax receivable agreement with our existing owners that will provide for the payment by PennyMac Financial Services, Inc. to the existing owners of Private National Mortgage Acceptance Company, LLC of 85% of the tax benefits, if any, that PennyMac Financial Services, Inc. is deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.
Risk factors		See "Risk Factors" beginning on page 17 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Class A common stock.
Proposed listing and symbol		We intend to apply to list our Class A common stock on the New York Stock Exchange, or NYSE, under the symbol " ."

In this prospectus, unless otherwise indicated, the number of shares of Class A common stock outstanding and the other information based thereon does not reflect:

•: shares of Class A common stock issuable upon the exercise of the underwriters' option to purchase additional shares of Class A common stock from us;
•: shares of Class A common stock that may be granted under the PennyMac Financial Services, Inc. 2013 Equity Incentive Plan, or our "2013 Equity Incentive Plan," which number represents the total number of shares initially issuable under this plan less the number of shares issuable under this plan in exchange for New Holdings Units held by our existing owners immediately following this offering pursuant to the exchange agreement; or
•: shares of Class A common stock issuable (under our 2013 Equity Incentive Plan or otherwise) upon the exchange of New Holdings Units that will be held by our existing owners immediately following this offering pursuant to the exchange agreement.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth our summary historical consolidated financial and other data as of the dates and for the periods indicated. PennyMac Financial Services, Inc. is a recently-formed holding company which has not engaged in any business or other activities except in connection with its formation and the Offering Transactions described elsewhere in this prospectus. Accordingly, for the purposes of this prospectus, all financial and other information herein relating to periods prior to the completion of the Offering Transactions is that of Private National Mortgage Acceptance Company, LLC. The summary historical consolidated balance sheet data as of December 31, 2011 and 2010 and the summary historical consolidated statement of operations data for each of the years ended December 31, 2011 and 2010 have been derived from Private National Mortgage Acceptance Company, LLC's audited financial statements included elsewhere in this prospectus. The summary historical consolidated balance sheet data as of September 30, 2012 and the summary historical consolidated statement of operations data for the nine months ended September 30, 2012 and 2011 have been derived from Private National Mortgage Acceptance Company, LLC's unaudited financial statements included elsewhere in this prospectus.

The summary historical consolidated financial and other data presented below is not indicative of our results for any future periods. You should read the information in the table below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Financial Information," our historical audited financial statements and the accompanying notes and our interim financial statements and the accompanying notes included elsewhere in this prospectus.

		Year ended December 31,						Nine months ended September 30,

	Pro Forma Year ended December 31, 2011(1)	Year ended December 31,						Nine months ended September 30,
	Pro Forma Year ended December 31, 2011(1)	2011			2010			2012			2011
	(in thousands, except per unit data)
Statement of Operations Data—Consolidated
Revenue
Net servicing income:
Loan servicing fees
From PennyMac Mortgage Investment Trust		$	13,204		$	2,989		$	13,163		$	9,152
From Investment Funds			14,523			9,474			9,130			10,990
Mortgage servicing rebate (to) from Investment Funds			(2,772	)		1,162			(407	)		(569	)
From non-affiliates			11,493			11,431			10,824			8,513
Ancillary fees			1,657			1,345			1,613			1,224

Total			38,105			26,401			34,323			29,310
Amortization, impairment and change in estimated fair value of mortgage servicing rights			(9,438	)		(400	)		(8,977	)		(6,400	)

Net servicing income			28,667			26,001			25,346			22,910
Net gain on mortgage loans held for sale at fair value			13,029			2,008			68,487			3,895
Management fees:
From PennyMac Mortgage Investment Trust			8,456			5,484			9,847			7,043
From Investment Funds			9,943			9,943			7,199			7,457
Carried Interest from Investment Funds			12,596			24,654			7,254			10,348
Fulfillment fees from PennyMac Mortgage Investment Trust			1,744			—			31,097			358
Other income			2,224			1,139			8,110			978

Total revenue			76,659			69,229			157,340			52,989

Expenses
Compensation			47,479			25,412			77,756			31,316
Other expenses			14,481			10,775			19,135			10,193

Total expenses			61,960			36,187			96,891			41,509

Net income		$	14,699		$	33,042		$	60,449		$	11,480
Net income attributable to preferred unit holders		$	14,507		$	29,014		$	52,482		$	11,364
Net income attributable to non-vested common unit awards outstanding		$	152		$	3,837		$	5,094		$	84
Net income attributable to common unit holders		$	40		$	191		$	2,873		$	32
Pro forma information (unaudited):
Historical net income before taxes		$	14,699		$	33,042		$	60,449		$	11,480
Pro forma adjustment for taxes(2)
Pro forma net income
Earnings per unit:
Preferred units		$	237.82		$	645.30		$	542.83		$	221.72
Common units:
Basic		$	11.63		$	555.59		$	466.97		$	11.05
Diluted		$	3.88		$	40.72		$	192.41		$	3.58
Weighted average units outstanding:
Preferred units			61,003			44,962			96,682			51,256
Common units:
Basic			3,470			345			6,153			2,913
Diluted			10,410			4,704			14,933			8,997

(1): As described in "Organizational Structure," PennyMac Financial Services, Inc. will become the sole managing member of Private National Mortgage Acceptance Company, LLC. PennyMac Financial Services, Inc. will initially own less than 100% of the economic interest in Private National Mortgage Acceptance Company, LLC but will have 100% of the voting power and control its management immediately following this offering.
(2): Following the Recapitalization and the Offering Transactions, PennyMac Financial Services, Inc. will be subject to U.S. federal income taxes, in addition to state, local and international taxes, with respect to its allocable share of any net taxable income of Private National Mortgage Acceptance Company, LLC, which will result in higher income taxes. As a result, the pro forma statements of income reflect an adjustment to our provision for corporate income taxes to reflect an effective rate of %, which includes provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction.

	December 31, 2011		December 31, 2010		September 30, 2012		September 30, 2012

	(in thousands)
					(unaudited)
					(actual)		(as adjusted)(1)
Balance Sheet Data—Consolidated
ASSETS
Cash and short-term investment, at fair value	$	32,506	$	15,241	$	31,150
Mortgage loans held for sale at fair value		89,857		14,720		410,071
Servicing advances		63,565		22,811		76,554
Receivable from Advised Entities		19,864		13,687		13,917
Carried interest due from Investment Funds		37,250		24,654		44,504
Mortgage servicing rights		32,124		31,957		74,154
Other		14,115		5,332		52,349

Total assets	$	289,281	$	128,402	$	702,699

LIABILITIES
Loans sold under agreements to repurchase	$	77,700	$	13,289	$	361,478
Note payable		18,602		3,499		34,035
Derivative liability		—		—		3,356
Payable to PennyMac Mortgage Investment Trust		25,595		2,842		35,920
Payable to Investment Funds		29,622		13,262		34,443
Accounts payable and accrued expenses		13,398		5,352		29,235
Liability for losses under representations and warranties		449		189		2,305

Total liabilities		165,366		38,433		500,772
MEMBERS' EQUITY		123,915		89,969		201,927

Total liabilities and members' equity	$	289,281	$	128,402	$	702,699

(1): The column gives effect to the transactions described under "Unaudited Pro Forma Consolidated Financial Information," including the application of the proceeds from this offering as described in "Use of Proceeds."

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our Class A common stock. If any of the following risks are realized, our business, operating results and prospects could be materially and adversely affected. In that event, the price of our Class A common stock could decline, and you could lose part or all of your investment.

We operate in a highly regulated industry and the continually changing federal, state and local laws and regulation could materially adversely affect our business, financial condition and results of operations.

Due to the highly regulated nature of the residential mortgage industry, we are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which we conduct our loan production and servicing businesses and the fees that we may charge. These regulations directly impact our business and require constant compliance, monitoring and internal and external audits. A material failure to comply with any of these laws or regulations could subject us to lawsuits or governmental actions and damage our reputation, which could materially adversely affect our business, financial condition and results of operations.

Federal, state and local governments have recently proposed or enacted numerous new laws, regulations and rules related to mortgage loans. Laws, regulations, rules and judicial and administrative decisions relating to mortgage loans include those pertaining to real estate settlement procedures, equal credit opportunity, fair lending, fair credit reporting, truth in lending, fair debt collection practices, service members protections, compliance with net worth and financial statement delivery requirements, compliance with federal and state disclosure and licensing requirements, the establishment of maximum interest rates, finance charges and other charges, qualified mortgages, licensing of loan officers, loan officer compensation, secured transactions, payment processing, escrow, loss mitigation, collection, foreclosure, repossession and claims-handling procedures, and other trade practices and privacy regulations providing for the use and safeguarding of non-public personal financial information of borrowers. Service providers we use must also comply with these legal requirements, including outside foreclosure counsel retained to process foreclosures.

In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, represents a comprehensive overhaul of the financial services industry in the United States and includes, among other things (i) the creation of a Financial Stability Oversight Council to identify emerging systemic risks posed by financial firms, activities and practices, and to improve cooperation among federal agencies, (ii) the creation of the CFPB authorized to promulgate and enforce consumer protection regulations relating to financial products and services, including mortgage lending and servicing, (iii) the establishment of strengthened capital and prudential standards for banks and bank holding companies, (iv) enhanced regulation of financial markets, including the derivatives and securitization markets, and (v) amendments to the Truth in Lending Act, or TILA, aimed at improving consumer protections with respect to mortgage originations, including disclosures, originator compensation, minimum repayment standards, prepayment considerations appraisals and servicing requirements.

Our failure to comply with these laws, regulations and rules may result in reduced payments by borrowers, modification of the original terms of mortgage loans, permanent forgiveness of debt, delays in the foreclosure process, increased servicing advances, litigation, enforcement actions, and repurchase

and indemnification obligations. Our failure to adequately supervise service providers, including outside foreclosure counsel, may also have these negative results.

In addition, although they have not yet been enacted, the Federal Housing Finance Agency, or FHFA, proposed changes to mortgage servicing compensation structures in 2011 for servicing with GSEs, including reducing servicing fees and channeling funds toward reserve accounts for delinquent loans. Also, there continue to be changes in legislation, rulemaking and licensing in an effort to simplify the consumer mortgage experience which requires technology changes and additional implementation costs for loan originators. We expect that legislative and regulatory changes will continue in the foreseeable future, which may increase our operating expenses.

Any of these, or other, changes in laws or regulations could adversely affect our business, financial condition and results of operations.

The creation of the CFPB and its recently issued rules will likely increase our regulatory compliance burden and associated costs, which could adversely affect our business, financial condition and results of operations.

On July 21, 2011, the CFPB obtained rulemaking and enforcement authority pursuant to the Dodd-Frank Act and began official operations. We are subject to examination by the CFPB. The CFPB has broad enforcement powers over mortgage participants, including originators and servicers, and can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, and civil money penalties. The CFPB has been active in investigations and enforcement actions, and issued large civil money penalties in 2012.

In addition to its regulatory authority, the CFPB has examination authority over all federal and state non-depository lending and servicing institutions, including mortgage brokers, lenders and servicers. Such examinations, as well as regulations that the CFPB might issue in the future, could ultimately increase our administrative burdens and adversely affect our business, financial condition and results of operations.

In October 2011, January 2012 and October 2012, the CFPB issued guidelines governing, among other things, examination procedures for bank and non-bank mortgage servicers and originators and its procedures for supervising mortgage transactions. In January 2013, the CFPB issued its final rules relating to, among other things, its "Ability to Repay" rule under TILA's implementing Regulation Z, mortgage escrow account requirements and mortgage servicing requirements. For further discussion on the details of the CFPB's final rules, see "Business—Compliance and Regulatory."

Similar to other mortgage servicers of our size, we received a general request for information from the CFPB on September 24, 2012. We responded in a timely fashion to the CFPB by providing the requested information.

The CFPB's recently enacted rules will likely increase our administrative and compliance costs. They could also greatly influence the availability and cost of residential mortgage credit, and increase servicing costs and risks. In addition, the effective dates for these new rules are aggressive in some cases and it may be difficult for us to implement the procedures necessary to comply with these new rules by the dates on which they are to become effective. These increased costs of compliance, the effect of these rules on the mortgage industry and mortgage servicing and any failure in our ability to comply with these new rules by their effective dates, could have an adverse effect on our business, financial position and results of operations.

We are highly dependent on U.S. government-sponsored entities, and any changes in these entities or their current roles could materially and adversely affect our business, liquidity, financial position and results of operations.

Our ability to generate revenues through mortgage loan sales depends to a significant degree on programs administered by government-sponsored entities, or GSEs, such as Fannie Mae and Freddie Mac, government agencies, including Ginnie Mae, and others that facilitate the issuance of mortgage-backed securities, or MBS, in the secondary market. These GSEs and Agencies play a critical role in the residential mortgage industry and we have significant business relationships with many of them. Presently, almost all of the newly originated conforming loans that we originate directly with borrowers or assist PMT in acquiring from mortgage lenders through our correspondent lending program qualify under existing standards for inclusion in mortgage securities backed by the GSEs or Ginnie Mae. We also derive other material financial benefits from these relationships, including the assumption of credit risk by these GSEs on loans included in such mortgage securities in exchange for our payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures.

There is significant uncertainty regarding the future of Fannie Mae and Freddie Mac, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have. Although the U.S. Treasury has committed capital to Fannie Mae and Freddie Mac since they were placed into conservatorship, there can be no assurance that additional funding will be provided within the required time periods or that the actions of the U.S. Treasury will be adequate for their needs. If such funding is not provided as required, the FHFA would be obligated to place Fannie Mae and Freddie Mac into receivership. Further, Fannie Mae or Freddie Mac could be placed into receivership at the discretion of the FHFA at any time under certain circumstances. If the actions of the U.S. Treasury are inadequate or pending repurchase requests by Fannie Mae and Freddie Mac to lenders prove unsuccessful, or if Fannie Mae and Freddie Mac are adversely affected by events such as ratings downgrades, foreclosure problems and delays and problems with mortgage insurers, Fannie Mae and Freddie Mac could continue to suffer losses and could fail to honor their guarantees and other obligations. In addition, the future roles of Fannie Mae and Freddie Mac remain uncertain. Their roles could be significantly reduced or eliminated and the nature of the guarantees could be considerably limited relative to historical measurements. Solvency concerns have also recently been raised regarding the FHA, which we rely on for the insurance of a significant portion of the government-insured loans that we produce. The elimination of the traditional roles of Fannie Mae, Freddie Mac or the FHA could adversely affect our business and results of operations.

Our ability to generate revenues from newly originated loans that we assist PMT in acquiring from mortgage lenders through our correspondent lending program is highly dependent on the fact that the GSEs have not historically acquired such loans directly from mortgage lenders, but have instead relied on banks and non-bank service providers such as us to acquire, aggregate and securitize or otherwise sell such loans to investors in the secondary market. If one or more of the GSEs were to start making these purchases and sales for their own accounts, our business and results of operations could be adversely affected.

Any discontinuation of, or significant reduction in, the operation of these GSEs or any significant adverse change in the level of activity of these GSEs in the primary or secondary mortgage markets or in the underwriting criteria of these GSEs could materially and adversely affect our business, liquidity, financial position and results of operations.

Changes in GSE guidelines or guarantees could adversely affect our business, financial condition and results of operations.

We are required to follow specific guidelines that impact the way that we service and originate GSE loans, including guidelines with respect to:

In particular, the FHFA has directed the GSEs to align their guidelines for servicing delinquent mortgages that they own or that back securities which they guarantee, which can result in monetary incentives for servicers that perform well and penalties for those that do not. In addition, the FHFA has directed Fannie Mae to assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations.

We cannot negotiate these terms with the GSEs and they are subject to change at any time. A significant change in these guidelines that has the effect of decreasing the fees we charge or requires us to expend additional resources in providing mortgage services could decrease our revenues or increase our costs, which would adversely affect our business, financial condition and results of operations.

In addition, changes in the nature or extent of the guarantees provided by Fannie Mae and Freddie Mac or the insurance provided by the FHA could also have broad adverse market implications. The guarantee fees that we are required to pay to the GSEs for these guarantees have increased significantly over time and any future increases in these fees would adversely affect our business, financial condition and results of operations.

Fannie Mae has indicated that it may impose annual delivery volume limits on all of its approved seller/servicers. Fannie Mae has not yet determined or announced the criteria for how these potential delivery limits may be calculated, or when they may be imposed. If a delivery limitation is imposed on PMT by Fannie Mae, it could result in a shift of business market share to Freddie Mac, and could adversely impact our gain on sale income to the extent that Freddie Mac price execution may be worse than that of Fannie Mae. Freddie Mac has indicated that it does not have any plans to establish delivery volume limits for its seller/servicers.

Changes to government mortgage modification and refinance programs could adversely affect our future revenues and costs.

Under HAMP and similar government programs, a participating servicer may be entitled to receive financial incentives in connection with any modification plans that it enters into with eligible borrowers and subsequent success fees to the extent that a borrower remains current in any agreed upon loan modification. While we participate in and dedicate numerous resources to HAMP, changes in legislation or regulation regarding HAMP or any other government mortgage modification program or changes in the requirements necessary to qualify for refinancing mortgage loans may impact the extent to which we participate in and receive financial benefits from such programs, or may increase our operating costs and the expense of our participation in such programs.

On October 24, 2011, the FHFA announced changes to the existing Home Affordable Refinance Program, or HARP, for certain loans sold to Fannie Mae and Freddie Mac prior to May 31, 2009. The changes to HARP are designed to increase the number of mortgage loans eligible for refinancing under

the program and have meaningfully increased industry-wide loan production volumes. These changes and any additional changes that may be enacted to increase refinancing eligibility under this program will likely increase mortgage loan prepayment speeds, which would have an unfavorable impact on the valuation of our MSRs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk."

HAMP and HARP are each currently scheduled to expire on December 31, 2013. If HAMP and HARP are not extended, this could decrease our revenues, which would adversely affect our business, financial condition and results of operations.

Under the Making Home Affordable plan, or MHA, a participating servicer may receive a financial incentive to modify qualifying loans, in accordance with the plan's guidelines and requirements. HARP also allows us to refinance loans with an LTV of up to 125%. This program, and the FHA's negative equity refinance program, allow us to refinance loans to existing borrowers who have little or negative equity in their homes. The FHA's negative equity refinance program is scheduled to expire on December 31, 2014, and the expiration of that program or changes in legislation or regulations regarding that program or the MHA could reduce our volume of refinancing originations to borrowers with little or negative equity in their homes.

Changes to HAMP, HARP, the MHA and other similar programs could adversely affect our future revenues and costs.

Unlike competitors that are banks, we are subject to the licensing and operational requirements of states and other jurisdictions that result in substantial compliance costs, and our business would be adversely affected if we lose our licenses.

Because we are not a depository institution, we do not benefit from exemptions to state mortgage banking, loan servicing or debt collection licensing and regulatory requirements. We must comply with state licensing requirements and varying compliance requirements in all fifty states, the District of Columbia and the Virgin Islands, and we are sensitive to regulatory changes that may increase our costs through stricter licensing laws, disclosure laws or increased fees or that may impose conditions to licensing that we or our personnel are unable to meet. Currently we are able to service loans in 49 states, the District of Columbia and the Virgin Islands and originate loans in 45 states and the District of Columbia, either because we are properly licensed in a particular jurisdiction or we are exempt or otherwise not required to be licensed in that jurisdiction.

In most states in which we operate, a regulatory agency or agencies regulate and enforce laws relating to mortgage servicers and mortgage originators. These rules and regulations generally provide for licensing as a mortgage servicer, mortgage originator, loan modification processor/underwriter, or third-party debt default specialist (or a combination thereof), requirements as to the form and content of contracts and other documentation, licensing of our employees and independent contractors with whom we contract, and employee hiring background checks. They also set forth restrictions on collection practices and disclosure and record-keeping requirements, and they establish a variety of borrowers' rights. Future state legislation and changes in existing regulation may significantly increase our compliance costs or reduce the amount of ancillary fees, including late fees, that we may charge to borrowers. This could make our business cost-prohibitive in the affected state or states and could materially affect our business.

In addition, we are subject to periodic examinations by state and other regulators, which can result in increases in our administrative costs and refunds to borrowers of certain fees earned by us, and we may be required to pay substantial penalties imposed by these regulators due to compliance errors, or we may lose our license. Fines and penalties incurred in one jurisdiction may cause investigations or other actions by regulators in other jurisdictions.

We may not be able to maintain all currently requisite licenses and permits. In addition, the states that currently do not provide extensive regulation of our business may later choose to do so, and if such states so act, we may not be able to obtain or maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could result in a default under our servicing agreements and credit facilities and have a material adverse effect on our business, financial condition and results of operations.

Agency inquiries into foreclosure practices and foreclosure delays in certain states could result in additional compliance costs on our servicing business, and may adversely impact our results of operations, financial condition and business.

In connection with allegations of irregularities in foreclosure processes, including so-called "robo-signing" by mortgage loan servicers, certain state Attorneys General, court administrators and government agencies, as well as representatives of the federal government, have issued letters of inquiry to mortgage servicers, requesting written responses to questions regarding policies and procedures, especially with respect to notarization and affidavit procedures. If initiated against us, these requests or any subsequent administrative, judicial or legislative actions taken by these regulators, court administrators or other government entities may subject us to fines and other sanctions, including a foreclosure moratorium or suspension. In addition to these inquiries, several state Attorneys General have requested that certain mortgage servicers suspend foreclosure proceedings pending internal review to ensure compliance with applicable law. Such inquiries, if initiated against us, as well as continued court backlog and emerging court processes, may cause an extended delay in the foreclosure process in certain states.

Also, on February 9, 2012, federal and state agencies announced a $25 billion settlement with the five largest banks that resulted from investigations of foreclosure practices, which is referred to as the "Joint Federal-State Mortgage Servicing Settlement." As part of the settlement, the banks agreed to comply with various servicing standards relating to foreclosure and bankruptcy proceedings, documentation of borrowers' account balances, chain of title, and evaluation of borrowers for loan modifications and short sales as well as servicing fees and the use of force-placed insurance.

Although we are not a party to the above enforcement consent orders and settlements, we could be required to comply with certain requirements and terms set forth in the consent orders and settlements if (i) we subservice loans in certain circumstances for the mortgage servicers that are parties to the enforcement consent orders and settlements, (ii) the agencies begin to enforce the consent orders and settlements by looking downstream to our arrangement with certain mortgage servicers, (iii) the MSR owners for whom we subservice loans request that we comply with certain aspects of the consent orders and settlements, or (iv) we otherwise find it prudent to comply with certain aspects of the consent orders and settlements. In addition, the practices set forth in such consent orders and settlements may be adopted by the industry as a whole, forcing us to comply with them in order to follow standard industry practices, or may become required by our servicing agreements. While we have made and continue to make changes to our operating policies and procedures in light of the consent orders and settlements, further changes could be required and changes to our servicing practices may increase compliance and operating costs for our servicing business, which could materially and adversely affect our financial condition or results of operations.

We may be subject to liability for potential violations of predatory lending laws, which could adversely impact our results of operations, financial condition and business.

Various U.S. federal, state and local laws have been enacted that are designed to discourage predatory lending practices. The U.S. federal Home Ownership and Equity Protection Act of 1994, or HOEPA, prohibits inclusion of certain provisions in residential mortgage loans that have mortgage rates or origination costs in excess of prescribed levels and requires that borrowers be given certain

disclosures prior to origination. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in HOEPA. In addition, under the anti-predatory lending laws of some states, the origination of certain residential mortgage loans, including loans that are not classified as "high-cost" loans under applicable law, must satisfy a net tangible benefits test with respect to the related borrower. This test may be highly subjective and open to interpretation. As a result, a court may determine that a residential mortgage loan, for example, does not meet the test even if the related originator reasonably believed that the test was satisfied. If any of our production loans are found to have been originated in violation of predatory or abusive lending laws, we could incur losses, which could adversely impact our results of operations, financial condition and business.

Our mortgage banking revenues are highly dependent on macroeconomic and United States residential real estate market conditions.

Continuing concerns over factors including inflation, deflation, unemployment, personal and business income taxes, energy costs, geopolitical issues and the availability and cost of credit have contributed to increased volatility and unclear expectations for the economy in general and the residential real estate and mortgage markets in particular going forward. According to the S&P/Case-Shiller Home Price Index, since 2006, United States residential housing values have declined by approximately 30% and the volume of newly originated mortgages has decreased by 50%. While national housing values have increased in the last 12 months, there is no assurance that these conditions have stabilized or that they will not worsen. A destabilization of the residential real estate and mortgage markets or deterioration in these markets may reduce our loan production volume, reduce the profitability of servicing mortgages or adversely affect our ability to sell mortgage loans that we originate or acquire, either at a profit or at all. Any of the foregoing could adversely affect our business, financial condition and results of operations.

We may not be able to continue to grow our loan production volume, which could negatively affect our business, financial condition and results of operations.

Our loan production operations consist of our retail originations program, in which we originate mortgage loans directly with borrowers through telephone call centers or the Internet, and our correspondent lending program, in which we facilitate, in exchange for a fulfillment fee, the acquisition by PMT from correspondent sellers of newly originated mortgage loans that have been underwritten to our standards. In certain cases, we subsequently acquire those loans from PMT.

Our correspondent lending program is relationship driven. We currently work with 140 approved mortgage lenders, but these lenders are not contractually obligated to do business with us or PMT, and our competitors also have relationships with these lenders and actively compete with us in our efforts to expand PMT's network of approved mortgage lenders. In order to increase our loan production volume, we will need to not only maintain PMT's existing relationships, but also develop PMT's relationships with additional mortgage lenders. To date, we have grown our loan production volumes with mortgage lenders by providing customer service and turn-around times in the execution of our fulfillment functions in accordance with the expectations of the mortgage lenders. If we are not able to consistently maintain this level of execution, our reputation and existing relationships with mortgage lenders could be damaged. We also plan to introduce new mortgage loan products such as Freddie Mac's Loan Prospector loans and enhanced jumbo loan products to mortgage lenders. There can be no assurance that we will maintain PMT's existing relationships or develop new relationships with mortgage lenders or that our new mortgage products will gain widespread acceptance.

Our current volume of retail originations, which is based in large part on the refinancing of existing mortgage loans that we service, is highly dependent on interest rates and government mortgage modification programs and may decline if interest rates increase or these programs are terminated. Our retail originations platform may not succeed because of the referral-driven nature of our industry. For example, the origination of purchase money mortgage loans is greatly influenced by traditional business clients in the home buying process such as real estate agents and builders. As a result, our ability to secure relationships with such traditional business clients will influence our ability to grow our purchase money mortgage loan volume and, thus, our retail originations business, and there can be no assurance that we will succeed in establishing such relationships. In addition, to grow our retail originations business, we will need to convert leads regarding prospective borrowers into funded loans and that depends on the pricing that we will be able to offer relative to the pricing of our competitors and our operational ability to process, underwrite and close loans. Institutions that compete with us in this regard may have significantly greater access to capital or resources than we do, which may give them the benefit of a lower cost of operations.

Our earnings may decrease because of changes in prevailing interest rates.

Our profitability is directly affected by changes in prevailing interest rates. The following are the material risks we face related to changes in prevailing interest rates:

Any adverse effect to our business, financial condition or results of operations as a result of changes in prevailing interest rates would be beyond our control.

We may be unable to obtain sufficient capital and liquidity to meet the financing requirements of our business.

We will require new and continued debt financing to facilitate our anticipated growth. Accordingly, our ability to finance our operations and repay maturing obligations rests in large part on our ability to borrow money. We are generally required to renew our financing arrangements each year, which exposes us to refinancing and interest rate risks. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Our ability to refinance existing debt and borrow additional funds is affected by a variety of factors including:

If we are unable to obtain sufficient capital to meet the financing requirements of our business, our business, financial condition and results of operations would be materially adversely affected.

We leverage our operations, which may materially and adversely affect our financial condition and results of operations.

We currently leverage and, to the extent available, we intend to continue to leverage our retail lending operations and our acquisitions of government-insured loans from PMT through borrowings under repurchase agreements. When we enter into repurchase agreements, we sell mortgage loans to lenders, which are the repurchase agreement counterparties, and receive cash from the lenders. The lenders are obligated to resell the same assets back to us at the end of the term of the transaction. The cash that we receive from a lender when we initially sell the assets to that lender is less than the value of those assets (this difference is referred to as the haircut), so if the lender defaults on its obligation to resell the same assets back to us we could incur a loss on the transaction equal to the amount of the haircut (assuming that there was no change in the value of the assets). In addition, repurchase agreements generally allow the counterparties, to varying degrees, to determine a new market value of the collateral to reflect current market conditions. If a counterparty lender determines that the value of the collateral has decreased, it may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing. Should this occur, in order to obtain cash to satisfy a margin call, we may be required to liquidate assets at a disadvantageous time, which could cause us to incur further losses. If we are unable to satisfy a margin call, our counterparty may sell the collateral, which may result in significant losses to us.

Unlike banks, we are not subject to regulatory restrictions on the amount of our leverage. Our total borrowings are only restricted by covenants in our repurchase agreements and market conditions, and our board of directors may change our target borrowing levels at any time without the approval of our stockholders. Incurring substantial debt subjects us to the risk that our cash flow from operations may be insufficient to repurchase the assets that we have sold to the lenders under our repurchase agreements.

Our existing repurchase agreements also impose financial and non-financial covenants and restrictions on us that limit the amount of indebtedness that we may incur, impact our liquidity through minimum cash reserve requirements, and impact our flexibility to determine our operating policies and investment strategies. If we default on one of our obligations under a repurchase agreement, the lender may be able to terminate the transaction, accelerate any amounts outstanding and cease entering into any other repurchase transactions with us. Because our repurchase agreements typically contain cross-default provisions, a default that occurs under any one agreement could allow the lenders under our other agreements to also declare a default. Additional repurchase agreements or other bank credit facilities that we may enter into in the future may contain additional covenants and restrictions. If we fail to meet or satisfy any of these covenants, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral. Any losses that we incur on our repurchase agreements could materially adversely affect our financial condition and results of operations.

Hedging against interest rate exposure may materially and adversely affect our results of operations and cash flows.

We pursue hedging strategies to reduce our exposure to adverse changes in interest rates. Our hedging activity will vary in scope based on the risks hedged, the level of interest rates, the type of investments held, and other changing market conditions. Hedging instruments involve risk because they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities, and our interest rate hedging may fail to protect or could adversely affect us because, among other things:

In addition, we may fail to recalculate, re-adjust and execute hedges in an efficient manner.

Any hedging activity, which is intended to limit losses, may materially and adversely affect our results of operations and cash flows. Therefore, while we may enter into such transactions seeking to reduce interest rate risk, unanticipated changes in interest rates may result in worse overall investment performance than if we had not engaged in any such hedging transactions. No assurance can be given that a liquid secondary market will exist for a hedging instrument purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in significant losses. In addition, the degree of correlation between price movements of the instruments used in hedging strategies and price movements in the portfolio positions or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio positions or liabilities being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. Numerous regulations currently apply to hedging and any new regulations or changes in existing regulations may significantly increase our administrative or compliance costs. Our hedging agreements generally provide for the daily mark to market of our hedge exposures. If a hedge counterparty determines that its exposure to us exceeds its exposure threshold, it may initiate a margin call and require us to post collateral. If we are unable to satisfy a margin call, we would be in default of our agreement, which could materially adversely affect our business, financial condition and results of operations.

Our MSRs are highly volatile assets with continually changing values, and these changes in value, or inaccuracies in our estimates of their value, could adversely affect our financial condition and results of operations.

The value of our MSRs is based on the cash flows projected to result from the servicing of the related mortgage loans and continually fluctuates due to a number of factors. These factors include changes in interest rates and other market conditions, which affect the number of loans that are refinanced and thus no longer result in cash flows, and the number of loans that become delinquent.

We use internal financial models that utilize market participant data to value our MSRs for purposes of financial reporting and for purposes of determining the price that we pay to acquire loans for which we will retain MSRs. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates. In addition, the modeling requirements of MSRs are complex because of the high number of variables that drive cash flows associated with MSRs. Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our assumptions and the results of the models.

If loan delinquencies or prepayment speeds are higher than anticipated or other factors perform worse than modeled, the recorded value of certain of our MSRs may decrease, which would adversely affect our financial condition and results of operations.

Increases in delinquencies and defaults may adversely affect our business, financial condition and results of operations.

Falling home prices across the United States have resulted in higher loan-to-value ratios, or LTVs, lower recoveries in foreclosure and an increase in loss severities above those that would have been realized had property values remained the same or continued to increase. Though housing values have stabilized in some markets, many borrowers do not have sufficient equity in their homes to permit them to refinance their existing loans, which may reduce the volume or growth of our loan production business. This may also provide borrowers with an incentive to default on their mortgage loans even if they have the ability to make principal and interest payments. Further, interest rates have remained at historical lows for an extended period of time. Borrowers with adjustable rate mortgage loans must make larger monthly payments when the interest rates on those mortgage loans adjust upward from their initial fixed rates or low introductory rates to the rates computed in accordance with the applicable index and margin. Increases in monthly payments may increase the delinquencies, defaults and foreclosures on a significant number of the loans that we service.

Increased mortgage delinquencies, defaults and foreclosures may result in lower revenue for loans that we service for the GSEs, such as Fannie Mae or Freddie Mac, because we only collect servicing fees from GSEs for performing loans. Additionally, while increased delinquencies generate higher ancillary fees, including late fees, these fees are not likely to be recoverable in the event that the related loan is liquidated. In addition, an increase in delinquencies lowers the interest income that we receive on cash held in collection and other accounts because there is less cash in those accounts. Also, increased mortgage defaults may ultimately reduce the number of mortgages that we service.

Increased mortgage delinquencies, defaults and foreclosures will also result in a higher cost to service those loans due to the increased time and effort required to collect payments from delinquent borrowers and to liquidate properties or otherwise resolve loan defaults if payment collection is unsuccessful, and only a portion of these increased costs are recoverable under our servicing agreements. Increased mortgage delinquencies, defaults and foreclosures may also result in an increase in our interest expense and affect our liquidity as a result of borrowing under our credit facilities to fund an increase in our advancing obligations.

A disruption in the MBS market could materially adversely affect our business, financial condition and results of operations.

During 2012, approximately 60% of the loans that we produced were delivered to Fannie Mae or Freddie Mac to be pooled into Agency MBS securities and 39% of our loans were originated to FHA guidelines and pooled into Ginnie Mae MBS securities. Disruptions in the general MBS market have occurred in the past. Any significant disruption or period of illiquidity in the general MBS market would directly affect our own liquidity and the liquidity of PMT because no existing alternative secondary market would likely be able to accommodate on a timely basis the volume of loans that we

typically sell in any given period. Accordingly, if the MBS market experiences a period of illiquidity, we might be prevented from selling the loans that we produce into the secondary market in a timely manner or at favorable prices, which could materially adversely affect our business, financial condition and results of operations.

The geographic concentration of our servicing portfolio may decrease the value of our MSRs and adversely affect our retail lending business, which would adversely affect our financial condition and results of operations.

As of December 31, 2012, approximately 38%, 5% and 5% of the aggregate outstanding loan balance in our servicing portfolio was secured by properties located in California, Florida and Colorado, respectively. These states have experienced severe declines in property values and are experiencing a disproportionately high rate of delinquencies and foreclosures relative to other states. To the extent that these states continue to experience weaker economic conditions or greater rates of decline in real estate values than the United States generally, the concentration of loans that we service in those regions may decrease the value of our MSRs and adversely affect our retail lending business. The impact of property value declines may increase in magnitude and it may continue for a long period of time. Additionally, if states in which we have greater concentrations of business were to change their licensing or other regulatory requirements to make our business cost-prohibitive, we may be required to stop doing business in those states or may be subject to higher cost of doing business in those states, which could materially adversely affect our business, financial condition and results of operations.

We rely on PMT as a significant source of financing for, and revenue related to, our correspondent lending business, and the termination of, or material adverse change in, the terms of this relationship, or a material adverse change to PMT or its operations, would adversely affect our business, financial condition and results of operations.

PMT is the counterparty that currently acquires all of the newly originated mortgage loans in connection with our correspondent lending businesses. A significant portion of our income is derived from a fulfillment fee earned in connection with PMT's acquisition of conventional loans. We are able to conduct our correspondent lending business without having to incur the significant additional debt financing that would be required for us to purchase those loans from the originating lender. In the case of government-insured loans, we purchase them from PMT at PMT's cost plus a sourcing fee and fulfill them for our own account, typically by pooling the federally insured or guaranteed loans together into an MBS which Ginnie Mae guarantees. We earn interest income and gains or losses during the holding period and upon the sale of these securities, and we retain the MSRs with respect to the loans. If this relationship with PMT was terminated by PMT or PMT reduced the volume of these loans that it acquires for any reason, we would have to acquire these loans from the correspondent sellers for our own account, something that we may be unable to do, or enter into another similar counterparty arrangement with a third party, which we may not be able to enter into on terms that are as favorable to us, or at all. Also, the management agreement, the mortgage banking and warehouse services agreement and certain of the other agreements that we have entered into with PMT contain cross-termination provisions that allow PMT to terminate all of those agreements in the event that we default on our obligations under one of our agreements with PMT. Accordingly, the termination of this relationship with PMT, or a material change in the terms thereof that is adverse to us, would likely adversely affect our business, financial condition and results of operations.

We expect that PMT will continue to qualify as a REIT for U.S. federal income tax purposes. However, it is possible that PMT may not meet the requirements for qualification as a REIT. If PMT were to lose its REIT status, corporate-level income tax, including any applicable alternative minimum tax, would apply to PMT's taxable income at regular corporate rates, thereby potentially impairing

PMT's financial position and its ability to raise capital. Consequently, PMT's failure to qualify as a REIT could impair PMT's ability to continue to acquire loans from correspondent sellers.

A significant portion of our loan servicing operations are conducted pursuant to subservicing contracts with PMT, and any termination by PMT of these contracts, or a material change in the terms thereof that is adverse to us, would adversely affect our business, financial condition and results of operations.

PMT, as the owner of a substantial number of all of the MSRs or whole loans that we subservice, may, under certain circumstances, terminate our subservicing contract with or without cause, in some instances with little notice and little to no compensation. Upon any such termination, it would be difficult to replace such a large volume of subservicing in a short period of time, or perhaps at all. Accordingly, we may not generate as much revenue from subservicing for other third parties. If we were to have our subservicing terminated by PMT, or if there was a change in the terms under which we perform subservicing for PMT that was materially adverse to us, this would adversely affect our business, financial condition and results of operations.

PMT has an exclusive right to acquire the loans that are produced through our correspondent lending program, which may limit the revenues that we could otherwise earn in respect of those loans.

Our mortgage banking and warehouse services agreement with PMT requires PLS to provide fulfillment services for correspondent lending activities exclusively to PMT as long as PMT has the legal and financial capacity to purchase correspondent loans. As a result, unless PMT sells some of these loans back to us, the revenue that we earn with respect to these loans will be limited to the fulfillment fees that we earn in connection with the production of these loans, which may be less than the revenues that we might otherwise be able to realize by acquiring these loans ourselves and selling them in the secondary loan market.

We may be required to indemnify the purchasers of loans that we originate, acquire or assist in the fulfillment of, or repurchase those loans, if those loans fail to meet certain criteria or characteristics or under other circumstances.

Our contracts with purchasers of newly originated loans that we fund through our retail lending program or acquire from PMT contain provisions that require us to indemnify the purchaser of the related loans or repurchase those loans under certain circumstances. In addition, our contracts with PMT and the Investment Funds require us to indemnify those entities with respect to loans for which we provide fulfillment services or repurchase those loans in certain instances. While our contracts vary, they generally contain provisions that require us to indemnify these parties, or repurchase these loans, if:

We believe that, as a result of the current market environment, many purchasers of residential mortgage loans are particularly aware of the conditions under which loan originators or sellers must indemnify them against losses related to purchased loans, or repurchase those loans, and would benefit from enforcing any repurchase remedies they may have. Repurchased loans typically can only be financed at a steep discount to their repurchase price, if at all. They are also typically sold at a significant discount to the unpaid principal balance. In certain cases, we would have contractual rights to recover from the mortgage lenders from whom loans were acquired through our correspondent

lending program some or all of the amount paid by us in connection with this indemnification, or contractual rights to cause these mortgage lenders to repurchase these loans from us, but there can be no assurance that such recovery would actually be obtained. To recognize these potential indemnification and repurchase losses, we have recorded a reserve of $2.3 million as of September 30, 2012. Because of the increase in our loan originations since 2010, we expect that indemnification and repurchase requests are likely to increase. Should home values decrease, our realized loan losses from loan indemnifications and repurchases may increase as well. As such, our indemnification and repurchase costs may increase beyond our current expectations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Gain on Mortgage Loans Held for Sale." If we are required to indemnify PMT, the Investment Funds or other purchasers against loans, or repurchase loans, that result in losses that exceed our reserve, this could materially adversely affect our business, financial condition and results of operations.

We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.

In deciding whether to approve loans or to enter into other transactions with borrowers and counterparties in our retail lending and correspondent lending businesses, we may rely on information furnished to us by or on behalf of borrowers and counterparties, including financial statements and other financial information. We also may rely on representations of borrowers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the loan applicant, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. Our controls and processes may not have detected or may not detect all misrepresented information in our loan originations or from our business clients. Any such misrepresented information could adversely affect our business, financial condition and results of operations.

The industry in which we operate is highly competitive, and is likely to become more competitive, and our inability to compete successfully or decreased margins resulting from increased competition could adversely affect our business, financial condition and results of operations.

We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory and technological changes. With respect to mortgage loan production, we face competition in such areas as mortgage loan offerings, rates, fees and customer service. With respect to servicing, we face competition in areas such as fees, performance in reducing delinquencies and entering into successful modifications.

Competition in servicing mortgage loans and in originating or acquiring newly originated mortgage loans comes from large commercial banks and savings institutions and other independent mortgage servicers and originators. Many of these institutions generally have significantly greater resources and access to capital than we do, which gives them the benefit of a lower cost of funds. Additionally, our existing and potential competitors may decide to modify their business models to compete more directly with our loan production and servicing models. For example, other non-bank loan servicers may try to leverage their servicing relationships and expertise to develop or expand a loan origination business. Since the withdrawal of a number of large participants from these markets following the financial crisis in 2008, there have been relatively few large non-bank participants. As more non-bank entities enter these markets, our mortgage banking businesses may generate lower margins in order to effectively compete.

In addition, technological advances and heightened e-commerce activities have increased consumers' accessibility to products and services. This has intensified competition among banks and non-banks in offering mortgage loans. We may be unable to compete successfully in our industries and this could adversely affect our business, financial condition and results of operations.

We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances, which could adversely affect our liquidity, business, financial condition and results of operations.

During any period in which a borrower is not making payments, we are required under most of our servicing agreements in respect of our MSRs to advance our own funds to meet contractual principal and interest remittance requirements for investors, pay property taxes and insurance premiums, legal expenses and other protective advances. We also advance funds under these agreements to maintain, repair and market real estate properties on behalf of investors. As home values change, we may have to reconsider certain of the assumptions underlying our decisions to make advances and, in certain situations, our contractual obligations may require us to make advances for which we may not be reimbursed. In addition, if a mortgage loan serviced by us is in default or becomes delinquent, the repayment to us of the advance may be delayed until the mortgage loan is repaid or refinanced or a liquidation occurs. If we receive requests for advances in excess of amounts that we are able to secure from our advance credit facility or, in the case of loans that we subservice, from the owner of the MSRs and loans, we may not be able to fund these advance requests, which could materially and adversely affect our loan servicing business. A delay in our ability to collect an advance may adversely affect our liquidity, and our inability to be reimbursed for an advance could adversely affect our business, financial condition and results of operations.

Our counterparties may terminate our servicing rights, which could adversely affect our business, financial condition and results of operations.

The owners of the loans that we service may terminate our MSRs if we fail to comply with applicable servicing guidelines. As is standard in the industry, under the terms of our master servicing agreements with the Agencies in respect of MSRs that we retain in connection with our retail loan originations, the Agencies have the right to terminate us as servicer of the loans we service on their behalf at any time (and, in certain instances, without the payment of any termination fee) and also have the right to cause us to sell the MSRs to a third party. In addition, the failure to comply with servicing standards could result in termination of our agreements with the Agencies with little or no notice and without any compensation. If the servicing rights were terminated on a material portion of our servicing portfolio, our business, financial condition and results of operations could be adversely affected.

Negative public opinion could damage our reputation and adversely affect our earnings.

Reputation risk, or the risk to our business, earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending and debt collection practices, corporate governance, and actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from media coverage, whether accurate or not. Negative public opinion can adversely affect our ability to attract and retain customers, trading counterparties and employees and can expose us to litigation and regulatory action.

Certain of our officers, including Stanford L. Kurland, our chairman and chief executive officer, are former employees of Countrywide Financial Corporation, which has been the subject of various investigations and lawsuits and ongoing negative publicity. We cannot assure you that any existing or

future investigations, litigation or negative publicity involving Countrywide Financial Corporation will not generate negative publicity or media attention for us or adversely impact us.

Challenges to the MERS® System could materially and adversely affect our business, results of operations and financial condition.

MERSCORP, Inc. is a privately held company that maintains an electronic registry, referred to as the MERS System that tracks servicing rights and ownership of loans in the United States. Mortgage Electronic Registration Systems, Inc., or MERS, a wholly-owned subsidiary of MERSCORP, Inc., can serve as a nominee for the owner of a mortgage loan and in that role initiate foreclosures or become the mortgagee of record for the loan in local land records. We may choose to use MERS as a nominee. The MERS System is widely used by participants in the mortgage finance industry.

Several legal challenges in the courts and by governmental authorities have been made disputing MERS's legal standing to initiate foreclosures or act as nominee for lenders in mortgages and deeds of trust recorded in local land records. These challenges have focused public attention on MERS and on how loans are recorded in local land records. Although most legal decisions have accepted MERS as mortgagee, these challenges could result in delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, conducting foreclosure sales of mortgaged properties, and submitting proofs of claim in borrower bankruptcy cases.

We may not realize all of the anticipated benefits of potential future acquisitions of MSRs, which could adversely affect our business, financial condition and results of operations.

Our ability to realize the anticipated benefits of potential future acquisitions of servicing portfolios will depend, in part, on our ability to scale up to appropriately service any such assets. The process of acquiring these assets may disrupt our business and may not result in the full benefits expected. The risks associated with these acquisitions include, among others, unanticipated issues in integrating information regarding the new loans to be serviced into our information technology systems, and the diversion of management's attention from other ongoing business concerns. Moreover, if we inappropriately value the assets that we acquire or the value of the assets that we acquire declines after we acquire them, the resulting charges may negatively affect the carrying value of the assets on our balance sheet and our earnings. See "—Our MSRs are highly volatile assets with continually changing values, and these changes in value, or inaccuracies in our estimates of their value, could adversely affect our financial condition and results of operations." If our estimates or assumptions prove to be incorrect, we may be required to record impairment charges, which could adversely affect our earnings. Furthermore, if we incur additional indebtedness to finance an acquisition, the acquired servicing portfolio may not be able to generate sufficient cash flow to service that additional indebtedness. Unsuitable or unsuccessful acquisitions could adversely affect our business, financial condition and results of operations.

Market conditions could reduce the value of the assets that we manage, which would reduce our management and incentive fees.

Volatile market conditions could adversely affect our investment management segment in many ways, including by reducing the value of our assets under management, which could materially reduce our management fee and incentive fee revenues and adversely affect our financial condition. A significant portion of the fees that we earn under our investment management agreements with clients are based on the value of the assets that we manage. The prices of the securities and other assets held in the portfolios that we manage and, therefore, our assets under management may decline due to any number of factors beyond our control, including, among others, a declining housing, stock or bond market, a general economic downturn, political uncertainty or acts of terrorism. The economic outlook

remains uncertain and we continue to operate in a challenging business environment. If market conditions cause a decline in the value of the assets that we manage, that decline in value would result in lower management fees and potentially lower incentive fees resulting from reduced performance under our management contracts with our Advised Entities. If our revenues decline without a commensurate reduction in our expenses, our net income will be reduced and our business will be negatively affected.

The historical returns on the assets that we select and manage for our clients, and our resulting management and incentive fees, may not be indicative of future results.

The historical returns of the assets that we manage should not be considered indicative of the future returns on those assets or future returns on other assets that we may select for investment by our Advised Entities. The investment performance that is achieved for the assets that we manage varies over time and the variance can be wide. Accordingly, the management and incentive fees that we have earned in the past based on those returns should not be considered indicative of the management or incentive fees that we may earn in the future from managing those same assets or from managing other assets for our Advised Entities. A decline in the investment performance of our managed assets will also adversely affect our ability to attract and retain clients.

We currently, and in the future may, manage assets for a small number of clients, the loss of any one of which could significantly reduce our management and incentive fees and have a material adverse effect on our results of operations.

We currently manage the assets of only the Advised Entities, and the majority of our management and incentive fees result from our management of PMT. Although the management contract that we have entered into with PMT cannot be terminated without cause, other than pursuant to cross-termination provisions contained in other agreements that we have entered into with PMT, prior to February 1, 2017 without the payment of a termination fee, the termination of such contract and the loss of PMT as a client would significantly affect our investment management segment and negatively impact our management fees, and could have a material adverse effect on our results of operations and financial condition. Also, because the management agreements we have entered into with the Investment Funds were negotiated between related parties without the benefit of the type of negotiations normally conducted with unaffiliated third parties, the terms of these agreements, including the fees payable to us, may prove to be more favorable to us than they would be if these agreements had been negotiated with unaffiliated third parties. Accordingly, we may not generate as much revenue from management agreements that we enter into with other third parties. In addition, the Investment Funds are limited-life funds that were established in 2008 with commitment periods that ended in 2011 and terms that end in December 2016 with the possibility of three one-year extensions. Accordingly, fees generated by the Investment Funds will continue to decline as the assets under management run-off.

In addition, because PCM is registered under the Investment Advisers Act of 1940, as amended, which we refer to as the "Advisers Act," the management agreements between us and the Advised Entities would be terminated upon an "assignment" of these agreements without consent, which assignment may be deemed to occur in the event that PCM was to experience a direct or indirect change of control. We cannot be certain that consents required to assignments of our investment management agreements will be obtained if a change of control occurs. "Assignment" of these agreements without consent could cause us to lose the management and incentive fees we earn from such Advised Entities.

Our failure to comply with the extensive amount of regulation applicable to our investment management segment could materially adversely affect our business, financial condition and results of operations.

Our investment management segment is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Advisers Act and regulation of PNMAC Mortgage Opportunity Fund LLC, and PNMAC Mortgage Opportunity Fund, LP under the Investment Company Act of 1940, which we refer to as the "Investment Company Act." The requirements imposed by our regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in our Advised Entities and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities.

These requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program, solicitation agreements, conflicts of interest, recordkeeping and reporting requirements, disclosure requirements, limitations on agency cross and principal transactions between an adviser and advisory clients and general anti-fraud prohibitions. Similar requirements apply to registered investment companies and to PCM's management of those companies under the Investment Company Act which, among other things, regulates the relationship between a registered investment company and its investment adviser and prohibits or severely restricts principal transactions and joint transactions. Registered investment advisers and registered investment companies are also subject to routine periodic examinations by the staff of the SEC.

We also regularly rely on exemptions from various requirements of the Securities Act of 1933, as amended, which we refer to as the "Securities Act," the Securities Exchange Act of 1934, as amended, which we refer to as the "Exchange Act," the Investment Company Act and ERISA. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties and service providers whom we do not control. If for any reason these exemptions were to be revoked or challenged or otherwise become unavailable to us, we could be subject to regulatory action or third-party claims, and our business could be materially and adversely affected.

Our business combines the production and servicing of loans and investment management, which presents particular compliance challenges. For example, regulations applicable to our investment management business that are easily applied to traditional investments, such as stocks and bonds, may be more difficult to apply to a portfolio of loans, and the regulations applicable to our investment management business can require procedures that are uncommon, impractical or difficult in our loan production and servicing business.

The failure by us to comply with applicable laws or regulations could result in fines, suspensions of individual employees or other sanctions, which could materially adversely affect our business, financial condition and results of operations. Even if an investigation or proceeding did not result in a fine or sanction or the fine or sanction imposed against us or our employees by a regulator were small in monetary amount, the adverse publicity relating to an investigation, proceeding or imposition of these fines or sanctions could harm our reputation and cause us to lose existing clients.

Changes in regulations applicable to our investment management segment could materially adversely affect our business, financial condition and results of operations.

The legislative and regulatory environment in which we operate has undergone significant changes in the recent past. We believe that significant regulatory changes in the investment management industry are likely to continue, which is likely to subject industry participants to additional, more costly and generally more detailed regulation. New laws or regulations, or changes in the enforcement of existing laws or regulations, applicable to us and our clients may adversely affect our business. Our ability to function in this environment will depend on our ability to monitor and promptly react to legislative and regulatory changes.

Certain provisions of the Dodd-Frank Act will, and other provisions may, increase regulatory burdens and reporting and related compliance costs on our investment management segment. The scope of many provisions of the Dodd-Frank Act is being determined by implementing regulations, some of which will require lengthy proposal and promulgation periods. Moreover, the Dodd-Frank Act mandates many regulatory studies, some of which pertain directly to the investment management industry, which could lead to additional legislation or regulation. The SEC requires investment advisers such as us that are registered with the SEC and advise one or more private funds to provide certain information on Form PF about their funds and assets under management, including the amount of borrowings, concentration of ownership and other performance information. The Dodd-Frank Act will affect a broad range of market participants with whom we interact or may interact, including banks, non-bank financial institutions, rating agencies, mortgage brokers, credit unions, insurance companies and broker-dealers, and may cause us to become subject to further regulation by the Commodity Futures Trading Commission. Regulatory changes that will affect other market participants are likely to change the way in which we conduct business with our counterparties. The uncertainty regarding the continued implementation of the Dodd-Frank Act and its impact on the investment management industry and us cannot be predicted at this time but will continue to be a risk for our business.

In addition, as a result of the recent economic downturn, acts of serious fraud in the investment management industry and perceived lapses in regulatory oversight, U.S. and non-U.S. governmental and regulatory authorities may increase regulatory oversight of our investment management segment. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations, as well as by U.S. and non-U.S. courts. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed on us or the markets in which we trade, or whether any of the proposals will become law. Compliance with any new laws or regulations could add to our compliance burden and costs and adversely affect the manner in which we conduct business, as well as our financial condition and results of operations.

We may encounter conflicts of interest in trying to appropriately allocate our time and services between our own activities and the accounts that we manage, or in trying to appropriately allocate investment opportunities among ourselves and the accounts that we manage.

Pursuant to our management agreements with PMT and the Investment Funds, we are obligated to provide PMT and the Investment Funds with the services of our senior management team, and the members of that team are required to devote such time to us as is necessary and appropriate, commensurate with the level of activity of PMT and the Investment Funds. The members of our senior management team may have conflicts in allocating their time and services between our operations and the activities of PMT, the Investment Funds and other entities or accounts managed by us now or in the future.

Certain of the funds that we currently advise have, and certain of the funds that we may in the future advise may have, overlapping investment objectives, including funds which have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. In addition, we and the other entities or accounts that we manage now or in the future may participate in some of PMT's investments, which may not be the result of arm's length negotiations and may involve or later result in potential conflicts between our interests in the investments and those of PMT or such other entities.

Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business.

As we have expanded the scope of our businesses, we increasingly confront potential conflicts of interest relating to the investment activities that we manage for our clients. In addition, investors in our clients may perceive conflicts of interest regarding investment decisions for funds in which our executive officers, who have made and may continue to make personal investments, are personally invested. Similarly, conflicts of interest may exist regarding decisions about the allocation of specific investment opportunities between funds in which we receive an allocation of profits as the general partner and funds in which we do not.

The SEC and other regulators have increased their scrutiny of potential conflicts of interest, and as we expand the scope of our business and our client base, we must continue to monitor and address any conflicts between our interests and those of our clients. We have implemented procedures and controls to be followed when real or potential conflicts of interest arise, but it is possible that potential or perceived conflicts could give rise to the dissatisfaction of, or litigation by, investors in our client entities or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny, litigation or reputational risk incurred in connection with conflicts of interest would adversely affect our business in a number of ways, including a reluctance of counterparties to do business with us, and may adversely affect our results of operations.

The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, management fee rates, continuity of the management team and client relationships, reputation and the continuity of buying and selling arrangements with intermediaries. A number of factors, including the following, serve to increase our competitive risks:

If we are unable to compete effectively, our results of operations may be materially adversely affected.

We are subject to third-party litigation risk, which could result in significant liabilities and reputational harm to us.

In general, we will be exposed to the risk of litigation by investors in our client funds if our management of or advice to any Advised Entity is alleged to constitute gross negligence or willful misconduct. Investors could sue us to recover amounts lost by those entities due to our alleged misconduct, up to the entire amount of loss. Further, we may be subject to litigation arising from investor dissatisfaction with the performance of entities that we manage or from allegations that we improperly exercised control or influence over those entities. In addition, we are exposed to risks of litigation or investigation relating to transactions which presented conflicts of interest that were not

properly addressed. In such actions we would be obligated to bear legal, settlement and other costs (which may be in excess of available insurance coverage). In addition, although we are generally indemnified by the entities that we manage, our rights to indemnification may be challenged. If we are required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from the entities that we manage, our results of operations, financial condition and liquidity would be materially adversely affected.

We have experienced rapid growth, which may be difficult to sustain and which may place significant demands on our administrative, operational and financial resources.

Our servicing portfolio, measured in UPB, and monthly loan production have grown from approximately $5.4 billion and $17.8 million, respectively, for the month ended December 31, 2010 to $28.2 billion and $3.4 billion, respectively, for the month ended December 31, 2012. Our rapid growth has caused, and if it continues will continue to cause, significant demands on our legal, accounting and operational infrastructure, and increased expenses. In addition, we are required to continuously develop our systems and infrastructure in response to the increasing sophistication of the investment management and mortgage lending markets and legal, accounting and regulatory developments relating to all of our business activities. Our future growth will depend, among other things, on our ability to maintain an operating platform and management system sufficient to address our growth and will require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we face significant challenges in:

There can be no assurance that we will be able to manage our expanding operations effectively or that we will be able to continue to grow, and any failure to do so could adversely affect our ability to generate revenue and control our expenses.

Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting interpretations or assumptions could impact our financial statements.

Accounting rules for mortgage loan sales and securitizations, valuations of financial instruments and MSRs, investment consolidations and other aspects of our operations are highly complex and involve significant judgment and assumptions. These complexities could lead to a delay in preparation of financial information and the delivery of this information to our stockholders and also increase the risk of errors and restatements, as well as the cost of compliance. Changes in accounting interpretations or assumptions could impact our financial statements and our ability to timely prepare our financial statements. Although we are an emerging growth company, we are electing to comply with new public company accounting standards. Our inability to timely prepare our financial statements in the future would likely adversely affect our share price significantly.

If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could harm our business and the market value of our common shares.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We may in the future discover areas of our internal controls that need improvement. Section 404 of the Sarbanes-Oxley Act of 2002 will require us to continue to evaluate and to report on our internal controls over financial reporting. We cannot be certain that we will be successful in continuing to maintain adequate control over our financial reporting and financial processes. Furthermore, as we rapidly grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. If we or our independent auditors discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market value of shares of our Class A common stock. Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.

The loss of the services of our senior managers could adversely affect our business.

The experience of our senior managers is a valuable asset to us. Our management team has significant experience in the residential mortgage loan production and servicing industry and the investment management industry. We do not maintain key life insurance policies relating to our senior managers. The loss of the services of our senior managers for any reason could adversely affect our business.

Our business could suffer if we fail to attract and retain a highly skilled workforce.

Our future success will depend on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization, in particular skilled managers, loan officers, underwriters, loan servicers and debt default specialists. Trained and experienced personnel are in high demand and may be in short supply in some areas. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. We may not be able to attract, develop and maintain an adequate skilled workforce necessary to operate our businesses and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are unable to attract and retain such personnel, we may not be able to take advantage of acquisitions and other growth opportunities that may be presented to us and this could materially affect our business, financial condition and results of operations.

We may be subject to certain banking regulations that may limit our business activities.

As of September 30, 2012, The PNC Financial Services Group, Inc. ("PNC") owned approximately 21% of the outstanding voting common shares of BlackRock Inc. Based on PNC's interests in and relationships with BlackRock, Inc., BlackRock, Inc. is deemed to be a non-bank subsidiary of PNC. BlackRock, Inc. is an affiliate of BlackRock Mortgage Ventures, LLC, or BlackRock, which is one of our largest equity holders and which owns approximately one-third of our equity interests prior to this offering. Due to these relationships, we are deemed to be a non-bank subsidiary of PNC, which is regulated as a financial holding company under the Bank Holding Company Act of 1956, as amended. As a non-bank subsidiary of PNC, we may be subject to certain banking regulations, including the supervision and regulation of the Federal Reserve. Such banking regulations could limit the activities and the types of businesses that we may conduct. The Federal Reserve has broad enforcement authority

over financial holding companies and their subsidiaries. The Federal Reserve could exercise its power to restrict PNC from having a non-bank subsidiary that is engaged in any activity that, in the Federal Reserve's opinion, is unauthorized or constitutes an unsafe or unsound business practice, and could exercise its power to restrict us from engaging in any such activity. The Federal Reserve may also impose substantial fines and other penalties for violations that we may commit. To the extent that we are subject to banking regulation, we could be at a competitive disadvantage because some of our competitors are not subject to these limitations.

The success and growth of our business will depend upon our ability to adapt to and implement technological changes.

Our mortgage loan production business is currently dependent upon our ability to effectively interface with our borrowers, mortgage lenders and other third parties and to efficiently process loan applications and closings. The retail and correspondent lending processes are becoming more dependent upon technological advancement, such as our continued ability to process applications over the Internet, accept electronic signatures, provide process status updates instantly and other borrower- or counterparty-expected conveniences. Maintaining and improving this new technology and becoming proficient with it may also require significant capital expenditures. As these requirements increase in the future, we will have to fully develop these technological capabilities to remain competitive and any failure to do so could adversely affect our business, financial condition and results of operations.

Technology failures could damage our business operations and increase our costs, which could adversely affect our business, financial condition and results of operations.

The financial services industry as a whole is characterized by rapidly changing technologies, and system disruptions and failures caused by fire, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our customers. Security breaches, acts of vandalism and developments in computer capabilities could result in a compromise or breach of the technology that we use to protect our customers' personal information and transaction data. Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the methods of attack change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients. These risks may increase in the future as we continue to increase our reliance on the Internet and use of web-based product offerings.

A successful penetration or circumvention of the security of our systems or a defect in the integrity of our systems or cyber security could cause serious negative consequences for our business, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or operating systems and to those of our customers and counterparties. Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.

Terrorist attacks and other acts of violence or war may affect the real estate industry generally and our business, financial condition and results of operations.

The terrorist attacks on September 11, 2001 disrupted the U.S. financial markets, including the real estate capital markets, and negatively impacted the U.S. economy in general. Any future terrorist

attacks, the anticipation of any such attacks, the consequences of any military or other response by the United States and its allies, and other armed conflicts could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. The economic impact of these events could also adversely affect the credit quality of some of our loans and investments and the properties underlying our interests.

We may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact our performance and may cause the market value of our common shares to decline or be more volatile. A prolonged economic slowdown, recession or declining real estate values could impair the performance of our investments and harm our financial condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. We cannot predict the severity of the effect that potential future armed conflicts and terrorist attacks would have on us. Losses resulting from these types of events may not be fully insurable.

PennyMac Financial Services, Inc.'s only material asset after completion of this offering will be its interest in Private National Mortgage Acceptance Company, LLC and its subsidiaries, and it is accordingly dependent upon distributions from Private National Mortgage Acceptance Company, LLC and its subsidiaries to pay taxes, make payments under the tax receivable agreement or pay dividends.

PennyMac Financial Services, Inc. will be a holding company and will have no material assets other than its ownership of New Holdings Units. PennyMac Financial Services, Inc. has no independent means of generating revenue. PennyMac Financial Services, Inc. will be required to pay tax on its allocable share of the taxable income of Private National Mortgage Acceptance Company, LLC without regard to whether Private National Mortgage Acceptance Company, LLC distributes any cash or other property to PennyMac Financial Services, Inc. PennyMac Financial Services, Inc. intends to cause Private National Mortgage Acceptance Company, LLC to make distributions to its unit holders in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the tax receivable agreement and dividends, if any, declared by it. To the extent that PennyMac Financial Services, Inc. needs funds, and Private National Mortgage Acceptance Company, LLC is restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements, or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.

We will be required to pay our existing owners for certain tax benefits that we may claim arising in connection with this offering and related transactions, and the amounts we may pay could be significant.

As described in "Organizational Structure—Recapitalization," we intend to use all of the proceeds from this offering to purchase New Holdings Units. We will enter into a tax receivable agreement with our existing owners that will provide for the payment by PennyMac Financial Services, Inc. to the existing owners of Private National Mortgage Acceptance Company, LLC of 85% of the tax benefits, if any, that PennyMac Financial Services, Inc. is deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement."

We expect that the payments that we may make under the tax receivable agreement will be substantial. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding tax receivable agreement payments. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and/or distributions to PennyMac Financial Services, Inc. by Private National Mortgage Acceptance Company, LLC are not sufficient to permit PennyMac Financial Services, Inc. to make payments under the tax receivable agreement after it has paid taxes. The payments under the tax receivable agreement are not conditioned upon our existing owners' continued ownership of us.

In certain cases, payments under the tax receivable agreement to our existing owners may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement.

The tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, or if, at any time, we elect an early termination of the tax receivable agreement, the corporate taxpayer's (or its successor's) obligations with respect to exchanged or acquired New Holdings Units (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayer would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As a result, (i) we could be required to make payments under the tax receivable agreement that are greater than or less than the percentage specified in the tax receivable agreement of the actual benefits that we realize in respect of the tax attributes that are subject to the tax receivable agreement and (ii) if we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits (if any). In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity. There can be no assurance that we will be able to finance our obligations under the tax receivable agreement.

Payments under the tax receivable agreement will be based on the tax reporting positions that we determine. Although we are not aware of any issue that would cause the Internal Revenue Service, or IRS, to challenge a tax basis increase, PennyMac Financial Services, Inc. will not be reimbursed for any payments previously made under the tax receivable agreement. As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of the benefits that the corporate taxpayer actually realizes in respect of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.

Our existing owners will initially be able to significantly influence the outcome of votes of the outstanding shares of PennyMac Financial Services, Inc., and their interests may differ from those of our public stockholders.

Pursuant to separate stockholder agreements with BlackRock and Highfields, each of BlackRock and Highfields will have the right to nominate one or two individuals for election to our board of directors, depending on the percentage of the voting power of our outstanding shares of stock that it holds, and we are obligated to use our best efforts to cause the election of those nominees. As a result,

each of BlackRock and Highfields may be able to significantly influence our management and affairs. In addition, as a result of the size of their individual equity holding they will initially be able to significantly influence the outcome of all matters requiring stockholder approval, including mergers and other material transactions, and may be able to cause or prevent a change in the composition of our board of directors or a change in control of our company that could deprive our stockholders of an opportunity to receive a premium for their Class A common stock as part of a sale of our company and might ultimately affect the market price of our Class A common stock.

In addition, because they hold their ownership interest in our business through Private National Mortgage Acceptance Company, LLC, rather than through the public company, these existing owners may have conflicting interests with holders of shares of our Class A common stock. For example, our existing owners may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement that we will enter in connection with this offering, and whether and when PennyMac Financial Services, Inc. should terminate the tax receivable agreement and accelerate its obligations thereunder. In addition, the structuring of future transactions may take into consideration these existing owners' tax or other considerations even where no similar benefit would accrue to us. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement."

PennyMac Financial Services, Inc. will receive a pro rata portion of the tax distributions made by Private National Mortgage Acceptance Company, LLC following this offering. The cash received from such distributions will first be used to satisfy any tax liability of PennyMac Financial Services, Inc. and then to make any payments under the tax receivable agreement with our existing owners. The declaration, amount and payment of any dividends on shares of Class A common stock with respect to any remaining excess cash will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. We may also enter into credit agreements or other borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our common stock. Accordingly, there can be no assurance that we will pay any dividends on our common stock in the foreseeable future. See "Dividend Policy."

Our certificate of incorporation contains provisions renouncing our interest and expectancy in certain corporate opportunities identified by or presented to BlackRock and Highfields.

BlackRock, Highfields and their respective affiliates are in the business of providing capital to growing companies, and may acquire interests in businesses that directly or indirectly compete with certain portions of our business. Our certificate of incorporation, in the amended and restated form that will be in effect upon the completion of the offering, provides that neither BlackRock nor Highfields nor their respective affiliates has any duty to refrain from (i) engaging, directly or indirectly, in a corporate opportunity in the same or similar lines of business in which we now engage or propose to engage, or (ii) doing business with any of our clients, customers or vendors. In the event that either of BlackRock or Highfields acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself or its affiliates and for us or our affiliates, then neither BlackRock nor Highfields has any duty to communicate or offer such transaction or business opportunity to us and may take any such opportunity for themselves or offer it to another person or entity. Neither BlackRock nor Highfields nor any officer, director or employee thereof, shall be liable

to us or to any of our stockholders (or any affiliates thereof) for breach of any fiduciary or other duty by engaging in any such activity and we waive and renounce any claim based on such activity. This provision applies even if the business opportunity is one that we might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so. Our amended and restated certificate of incorporation provides that any amendment or repeal of the provisions related to corporate opportunities described above requires the consent of each of BlackRock and Highfields as long as it holds any equity interest in us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by BlackRock or Highfields to themselves or their other affiliates instead of to us. The terms of our amended and restated certificate of incorporation are more fully described in "Description of Capital Stock—Corporate Opportunity."

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

Our amended and restated certificate of incorporation and bylaws, in the amended and restated form that will be in effect upon the completion of the offering, contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. Among other things, these provisions:

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

An active trading market for our Class A common stock may never develop or be sustained.

Although we intend to apply to list our Class A common stock on the NYSE, even if such application is approved an active trading market for our Class A common stock may not develop on

that exchange or elsewhere or, if developed, that market may not be sustained. Accordingly, if an active trading market for our Class A common stock does not develop or is not maintained, the liquidity of our Class A common stock, your ability to sell your shares of Class A common stock when desired and the prices that you may obtain for your shares of Class A common stock will be adversely affected.

We are an "emerging growth company" and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an "emerging growth company" as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

Even if an active trading market develops, the market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class A common stock may fluctuate and cause significant price variations to occur. The initial public offering price of our Class A common stock will be determined by negotiation between us and the representatives of the underwriters based on a number of factors and may not be indicative of prices that will prevail in the open market following completion of this offering. If the market price of our Class A common stock declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our Class A common stock may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A common stock include:

These broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including in recent months. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

Future offerings of debt or equity securities by us may adversely affect the market price of our Class A common stock.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of our Class A common stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or shares of preferred stock. In particular, we intend to seek opportunities to acquire loan servicing portfolios. Future acquisitions could require substantial additional capital in excess of cash from operations. We would expect to obtain the capital required for acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-backed acquisition financing and/or cash from operations.

Issuing additional shares of our Class A common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our Class A common stock or both. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our Class A common stock. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Class A common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. In addition, the limited liability company agreement of Private National Mortgage Acceptance Company, LLC provides that new classes of units or other equity interests of Private

National Mortgage Acceptance Company, LLC may be issued to third parties other than PennyMac Financial Services, Inc. following the completion of this offering only with the approval of all members that hold more than 5% of the then outstanding New Holdings Units and, as long as they hold any New Holding Units, BlackRock and Highfields. Any such issuance will dilute the ownership of holders of our Class A common stock in substantially all of our operating assets. Thus, holders of our Class A common stock bear the risk that our future offerings, including any future offerings by Private National Mortgage Acceptance Company, LLC, may reduce the market price of our Class A common stock and dilute their stockholdings in us. See "Description of Capital Stock."

The market price of our Class A common stock could be negatively affected by sales of substantial amounts of our Class A common stock in the public markets.

After this offering, there will initially be shares of Class A common stock outstanding or shares outstanding if the underwriters exercise their option to purchase additional shares in full. Of our issued and outstanding shares, all the Class A common stock sold in this offering will be freely transferable, except for any shares held by our "affiliates," as that term is defined in Rule 144 under the Securities Act. We will enter into an exchange agreement with the existing owners of Private National Mortgage Acceptance Company, LLC, under which each existing owner (and certain permitted transferees thereof) may, from and after the closing of this offering (subject to the terms of the exchange agreement), exchange their New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc. on a one-for-one basis. If all New Holdings Units were exchanged pursuant to this agreement immediately following the closing of this offering, an additional shares of Class A common stock would be outstanding.

All of the existing holders of New Holdings Units have agreed with the underwriters that, subject to customary exceptions, for a period of 180 days after the date of this prospectus, they will not directly or indirectly sell any Class A common stock, options or warrants to acquire shares of our Class A common stock, or any related security or instrument (including without limitation any New Holdings Units and any shares of Class B common stock) or cause a registration statement covering any Class A common stock to be filed, without the prior written consent of each of Citigroup Global Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. and certain of our existing holders will be further restricted from selling shares of Class A common stock that they may acquire pursuant to the exchange agreement due to their status as our "affiliates." The market price of our Class A common stock may decline significantly when these restrictions on the sale of Class A common stock by our existing stockholders lapse due to the actual or publicly anticipated sale of this stock into the public market. A decline in the price of our Class A common stock might impede our ability to raise capital through the issuance of additional Class A common stock or other equity securities.

The future issuance of additional Class A common stock in connection with our incentive plans, acquisitions or otherwise will dilute all other stockholdings.

After this offering, assuming the underwriters exercise their option to purchase additional shares in full, we will have an aggregate of shares of Class A common stock authorized but unissued and not reserved for issuance under our incentive plans. We may issue all of these shares of Class A common stock without any action or approval by our stockholders, subject to certain exceptions. We also intend to continue to evaluate acquisition opportunities and may issue Class A common stock in connection with these acquisitions. Any Class A common stock issued in connection with our incentive plans, acquisitions, the exercise of outstanding stock options or otherwise would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price of our Class A common stock will be substantially higher than the net tangible book value per share issued and outstanding immediately after this offering. Our net tangible book value per share as of September 30, 2012 was approximately $ and represents the amount of book value of our total tangible assets minus the book value of our total liabilities, divided by the number of our shares of Class A common stock then issued and outstanding (assuming that all of our existing owners exchanged their New Holdings Units for newly-issued shares of Class A common stock on a one-for-one basis). Investors who purchase Class A common stock in this offering will pay a price per share that substantially exceeds the net tangible book value per share of Class A common stock. If you purchase shares of our Class A common stock in this offering, you will experience immediate and substantial dilution of $ in the net tangible book value per share, based upon the initial public offering price of $ per share (the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus). Investors that purchase Class A common stock in this offering will have purchased % of the shares issued and outstanding immediately after the offering (assuming that all of our existing owners exchanged their New Holdings Units for newly-issued shares of Class A common stock on a one-for-one basis), but will have paid % of the total consideration for those shares.

Private National Mortgage Acceptance Company, LLC will have broad discretion in the use of a significant part of the net proceeds from this offering and may not use them effectively.

We intend to use the net proceeds to us from this offering to purchase newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC. We intend to cause Private National Mortgage Acceptance Company, LLC to use the net proceeds from this offering in the manner described in "Use of Proceeds" and Private National Mortgage Acceptance Company, LLC will have broad discretion in the application of a significant part of the net proceeds from this offering. The failure by Private National Mortgage Acceptance Company, LLC to apply these funds effectively could affect our ability to operate and grow our business.

As a public company, we will incur additional costs and face increased demands on our management.

As a public company with shares listed on a U.S. exchange, we will need to comply with an extensive body of regulations that did not apply to us previously, including provisions of the Sarbanes Oxley Act of 2002, or SOX, regulations of the SEC and requirements of the NYSE. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, particularly after we are no longer an emerging growth company. For example, as a result of becoming a public company, we intend to add independent directors, create additional board committees and adopt certain policies regarding internal controls and disclosure controls and procedures. In addition, we will incur additional costs associated with our public company reporting requirements and maintaining directors' and officers' liability insurance. We are currently evaluating and monitoring developments with respect to these rules, which may impose additional costs on us and materially affect our business, financial condition and results of operations.

This prospectus contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under "Risk Factors" and include, among other things:

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This prospectus includes market and industry data and forecasts that we have derived from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data and estimates. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

Our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management's understanding of industry conditions. Although we believe that such information is reliable, we have not had this information verified by any independent sources.

The diagram below depicts our organizational structure immediately following this offering.

Currently, the capital structure of Private National Mortgage Acceptance Company, LLC consists of four different classes of limited liability company units (common units, Class B common units, Class C common units and preferred units). Each of these classes (other than the preferred units) has different amounts of aggregate distributions above which its holders share in future distributions. Prior to the completion of this offering, the limited liability company agreement of Private National Mortgage Acceptance Company, LLC will be amended and restated to, among other things, modify its capital structure by converting all existing classes of limited liability company units into New Holdings

Units. The amendment and restatement of the limited liability company agreement of Private National Mortgage Acceptance Company, LLC, including the recapitalization of the outstanding units to be effected thereby, requires the approval of Private National Mortgage Acceptance Company, LLC, BlackRock, Highfields and each other holder of preferred units of Private National Mortgage Acceptance Company, LLC.

The allocation of New Holdings Units among our existing owners will be determined pursuant to the distribution provisions of the existing limited liability company agreement of Private National Mortgage Acceptance Company, LLC based upon the liquidation value of Private National Mortgage Acceptance Company, LLC, assuming it was liquidated at the time of this offering with a value implied by the initial public offering price of the shares of Class A common stock sold in this offering. Immediately following this recapitalization but prior to the "Offering Transactions" described below, there will be New Holdings Units issued and outstanding. The New Holdings Units received by our officers and employees in respect of units that are subject to service-based vesting requirements will remain subject to such service-based vesting requirements. New Holdings Units received by our officers and employees in respect of units that are currently vested will be vested. See "Executive and Director Compensation."

We refer to the foregoing transactions, collectively, as the "Recapitalization."

PennyMac Financial Services, Inc. was incorporated as a Delaware corporation on December 31, 2012. PennyMac Financial Services, Inc. has not engaged in any business or other activities except in connection with its formation. The amended and restated certificate of incorporation of PennyMac Financial Services, Inc. authorizes two classes of common stock, Class A common stock and Class B common stock, each having the terms described in "Description of Capital Stock."

Prior to the completion of this offering, shares of Class B common stock of PennyMac Financial Services, Inc. will be issued to Private National Mortgage Acceptance Company, LLC, which will, in turn, distribute one share of that Class B common stock to each of our existing owners, each of which provides its owner with no economic rights but entitles the holder, without regard to the number of shares of Class B common stock held by such holder, to one vote on matters presented to stockholders of PennyMac Financial Services, Inc. for each New Holdings Unit held by such holder, as described in "Description of Capital Stock—Common Stock—Class B Common Stock." Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law.

We and our existing owners will enter into an exchange agreement under which, subject to the terms of the exchange agreement, they (or certain permitted transferees thereof) will have the right or, under certain circumstances, the obligation to exchange their New Holdings Units for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. See "Certain Relationships and Related Party Transactions—Exchange Agreement."

At the time of this offering, PennyMac Financial Services, Inc. intends to purchase New Holdings Units from Private National Mortgage Acceptance Company, LLC at a purchase price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount per share. Regardless of the initial public offering price per share of Class A common stock in this offering, PennyMac Financial Services, Inc. will purchase a number of newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC equal to the number of shares of Class A common stock sold in this offering using the entire amount of proceeds that it receives from

this offering. Private National Mortgage Acceptance Company, LLC will bear all of the expenses of this offering, including underwriting discounts.

Accordingly, at the time of this offering PennyMac Financial Services, Inc. will purchase from Private National Mortgage Acceptance Company, LLC newly-issued New Holdings Units for an aggregate of $ million (or New Holdings Units for an aggregate of $ million if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

The unit holders of Private National Mortgage Acceptance Company, LLC (other than PennyMac Financial Services, Inc.) may (subject to the terms of the exchange agreement) exchange their New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc. on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the assets of Private National Mortgage Acceptance Company, LLC that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that PennyMac Financial Services, Inc. would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. We will enter into a tax receivable agreement with our existing owners that will provide for the payment by PennyMac Financial Services, Inc. to our existing owners of 85% of the amount of the benefits, if any, that PennyMac Financial Services, Inc. is deemed to realize as a result of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of PennyMac Financial Services, Inc. and not of Private National Mortgage Acceptance Company, LLC. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement."

In connection with its acquisition of New Holdings Units, PennyMac Financial Services, Inc. will become the sole managing member of Private National Mortgage Acceptance Company, LLC and, through Private National Mortgage Acceptance Company, LLC and its subsidiaries, operate our business. Accordingly, although PennyMac Financial Services, Inc. will initially have a minority economic interest in Private National Mortgage Acceptance Company, LLC, PennyMac Financial Services, Inc. will have 100% of the voting power and control the management of Private National Mortgage Acceptance Company, LLC, subject to certain exceptions. See "Certain Relationships and Related Party Transactions—Private National Mortgage Acceptance Company, LLC Limited Liability Company Agreement."

Our post-offering organizational structure will allow our existing owners to retain their equity ownership in Private National Mortgage Acceptance Company, LLC, an entity that is intended to be classified as a partnership for United States federal income tax purposes (and not as an association, taxable mortgage pool or publicly traded partnership, each of which could be taxable as a corporation), in the form of New Holdings Units. Investors in this offering will, by contrast, hold their equity ownership in PennyMac Financial Services, Inc., a Delaware corporation that is a domestic corporation for United States federal income tax purposes, in the form of shares of Class A common stock. We believe that our existing owners generally find it advantageous to hold their equity interests in an entity that is not taxable as a corporation for United States federal income tax purposes. Our existing owners and, following the offering, PennyMac Financial Services, Inc., will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of Private National Mortgage Acceptance Company, LLC. We do not believe that our organizational structure gives rise to any significant benefit or detriment to our business or operations. Under the tax receivable agreement, PennyMac Financial Services, Inc. and its stockholders will retain approximately 15% of the marginal tax benefits that PennyMac Financial Services, Inc. is deemed to realize as a result of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.

As noted above, we will enter into an exchange agreement with our existing owners that will entitle them to exchange their New Holdings Units for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments. Our existing owners will be able to exercise their exchange rights at any time following our initial public offering. In addition, we can require our existing owners to exercise their exchange rights (i) in connection with a change of control of PennyMac Financial Services, Inc. or (ii) if no holder of New Holdings Units (other than PennyMac Financial Services, Inc.) holds 3% or more of all New Holdings Units, in each case unless the cash that they would receive in connection with such exchange (including the after-tax value of amounts received pursuant to the tax receivable agreement) would not be sufficient to cover the taxes that our existing owners would become liable for as a result of such exchange. We can also require an existing owner who is an officer or employee to exercise his or her exchange rights, upon the termination of his or her employment. The exchange agreement provides, however, that voluntary exchanges must be for the lesser of a stated minimum number of New Holdings Units or all of the vested New Holdings Units held by such existing owner. The exchange agreement also provides that an existing owner will not have the right to exchange New Holdings Units if PennyMac Financial Services, Inc. determines that such exchange would be prohibited by law or regulation or would violate other agreements with Private National Mortgage Acceptance Company, LLC to which the existing owner may be subject. PennyMac Financial Services, Inc. may impose additional restrictions on exchanges that it determines to be necessary or advisable so that Private National Mortgage Acceptance Company, LLC is not treated as a "publicly traded partnership" for United States federal income tax purposes. All shares of Class A common stock issued upon exchange of New Holdings Units will also be subject to contractual lock-up agreements with the underwriters of this offering. See "Shares Eligible for Future Sale—Lock-Up Agreements."

Our existing owners will also hold shares of Class B common stock of PennyMac Financial Services, Inc. Although these shares have no economic rights, they will allow our existing owners to

exercise voting power at PennyMac Financial Services, Inc., the managing member of Private National Mortgage Acceptance Company, LLC, at a level that is consistent with their overall equity ownership of our business. Under the amended and restated certificate of incorporation of PennyMac Financial Services, Inc., each holder of Class B common stock shall be entitled, without regard to the number of shares of Class B common stock held by such holder, to one vote for each New Holdings Unit held by such holder. Accordingly, as our existing owners exchange New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc. pursuant to the exchange agreement, the voting power afforded to them by their shares of Class B common stock is automatically and correspondingly reduced.

PennyMac Financial Services, Inc. will be a holding company, and its sole material asset will be an equity interest in Private National Mortgage Acceptance Company, LLC. As the sole managing member of Private National Mortgage Acceptance Company, LLC, PennyMac Financial Services, Inc. will operate and control all of the business and affairs of Private National Mortgage Acceptance Company, LLC and, through Private National Mortgage Acceptance Company, LLC and its subsidiaries, conduct our business.

PennyMac Financial Services, Inc. will consolidate the financial results of Private National Mortgage Acceptance Company, LLC and its subsidiaries, and the ownership interest of the other members of Private National Mortgage Acceptance Company, LLC will be reflected as a non-controlling interest in PennyMac Financial Services, Inc.'s consolidated financial statements.

Pursuant to the amended and restated limited liability company agreement of Private National Mortgage Acceptance Company, LLC, PennyMac Financial Services, Inc. will have the right to determine when distributions will be made to the members of Private National Mortgage Acceptance Company, LLC and the amount of any such distributions, other than with respect to tax distributions as described below. If PennyMac Financial Services, Inc. authorizes a distribution, such distribution will be made to the members of Private National Mortgage Acceptance Company, LLC pro rata in accordance with the percentages of their respective limited liability company interests.

The holders of limited liability company interests in Private National Mortgage Acceptance Company, LLC, including PennyMac Financial Services, Inc., will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of Private National Mortgage Acceptance Company, LLC. Except as otherwise required by Section 704(c) of the Code to account for the difference between the fair market value and the adjusted tax basis of the assets of Private National Mortgage Acceptance Company, LLC on the date of this offering, net profits and net losses of Private National Mortgage Acceptance Company, LLC will generally be allocated to its members (including PennyMac Financial Services, Inc.) pro rata in accordance with their respective limited liability company interests. The limited liability company agreement provides for quarterly cash distributions to the holders of limited liability company interests of Private National Mortgage Acceptance Company, LLC if PennyMac Financial Services, Inc. determines that the taxable income of Private National Mortgage Acceptance Company, LLC will give rise to taxable income for its members. In accordance with the limited liability company agreement, we are required to cause Private National Mortgage Acceptance Company, LLC to make quarterly cash distributions to the holders of limited liability company interests of Private National Mortgage Acceptance Company, LLC for purposes of funding their tax obligations in respect of the income of Private National Mortgage Acceptance Company, LLC that is allocated to them. Generally, these tax distributions will be computed based on the taxable income of Private National Mortgage Acceptance Company, LLC multiplied by an assumed tax rate determined by us.

See "Certain Relationships and Related Party Transactions—Private National Mortgage Acceptance Company, LLC Limited Liability Company Agreement."

We estimate that the net proceeds to us from the sale of the shares of our Class A common stock offered by us will be approximately $ million, based on an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions. If the underwriters' option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $ million, after deducting underwriting discounts and commissions.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. Similarly, each increase (decrease) of one million shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions.

We intend to use the net proceeds to us from this offering to purchase newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC, as described under "Organizational Structure—Recapitalization." Accordingly, we will not retain any of these proceeds. We intend to cause Private National Mortgage Acceptance Company, LLC to use these proceeds primarily to provide capital to grow our mortgage banking business and for general corporate purposes. Private National Mortgage Acceptance Company, LLC will also use these proceeds to pay the expenses of this offering, which we estimate will be approximately $ million. Private National Mortgage Acceptance Company, LLC will have broad discretion over the uses of such proceeds.

Other than tax-related distributions, Private National Mortgage Acceptance Company, LLC has not made any distributions to our existing owners during 2011, 2012 or to date during 2013. Tax-related distributions aggregated $15.0 million in 2011, and $11.3 million for the nine months ended September 30, 2012. PennyMac Financial Services, Inc. will receive a pro rata portion of the tax distributions made by Private National Mortgage Acceptance Company, LLC following this offering. The cash received from such distributions will first be used to satisfy any tax liability of PennyMac Financial Services, Inc. and then to make any payments under the tax receivable agreement with our existing owners.

The declaration, amount and payment of any dividends on shares of Class A common stock with respect to any remaining excess cash will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. We may also enter into credit agreements or other borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our Class A common stock.

PennyMac Financial Services, Inc. is a holding company and has no material assets other than its ownership of New Holdings Units in Private National Mortgage Acceptance Company, LLC. We intend to cause Private National Mortgage Acceptance Company, LLC to make distributions to us in an amount sufficient to cover cash dividends, if any, declared by us. If Private National Mortgage Acceptance Company, LLC makes such distributions to PennyMac Financial Services, Inc., the other holders of New Holdings Units will be entitled to receive equivalent distributions.

The following table sets forth our cash and capitalization as of September 30, 2012 on:

You should read this table together with the information contained in this prospectus, including "Organizational Structure," "Use of Proceeds," "Unaudited Pro Forma Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

	As of September 30, 2012

	Actual			Pro Forma
	(Dollar amounts in thousands except share and per share data)
Cash and short term investments, at fair value	$	31,150		$
Loans sold under agreements to repurchase		361,478
Note payable		34,035
Members' capital(1)		96,884
Members' equity attributable to common units from equity incentive plan		16,107
Stock subscription receivable		(4,842	)
Class A common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis		—
Class B common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis		—
Additional paid-in capital
Retained earnings		93,778

Total members'/stockholders' equity		201,927

Total capitalization	$	628,590		$

See "Pricing Sensitivity Analysis" to see how the information presented above would be affected by an initial public offering price per share of Class A common stock at the low-, mid- and high-points of the price range indicated on the front cover of this prospectus or if the underwriters' option to purchase additional shares of Class A common stock is exercised in full.

If you invest in shares of our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of Class A common stock and the pro forma net tangible book value per share of Class A common stock after this offering. Dilution results from the fact that the per share offering price of the shares of Class A common stock is substantially in excess of the pro forma net tangible book value per share attributable to our existing owners.

Our pro forma net tangible book value as of September 30, 2012 was approximately $ million, or $ per share of Class A common stock. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, and pro forma net tangible book value per share of Class A common stock represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding, in each case after giving effect to the Recapitalization and assuming that all of the holders of New Holdings Units in Private National Mortgage Acceptance Company, LLC (other than PennyMac Financial Services, Inc.) exchanged their New Holdings Units for newly-issued shares of Class A common stock on a one-for-one basis.

After giving effect to the transactions described under "Unaudited Pro Forma Consolidated Financial Information," including the application of the proceeds from this offering as described in "Use of Proceeds," our pro forma net tangible book value as of September 30, 2012 would have been $ million, or $ per share of Class A common stock. This represents an immediate increase in net tangible book value of $ per share of Class A common stock to our existing owners and an immediate dilution in net tangible book value of $ per share of Class A common stock to investors in this offering.

The following table illustrates this dilution on a per share of Class A common stock basis assuming the underwriters do not exercise their option to purchase additional shares of Class A common stock:

Because our existing owners do not own any Class A common stock or other economic interests in PennyMac Financial Services, Inc., we have presented dilution in pro forma net tangible book value per share of Class A common stock to investors in this offering assuming that all of the holders of New Holdings Units in Private National Mortgage Acceptance Company, LLC (other than PennyMac Financial Services, Inc.) exchanged their New Holdings Units for newly-issued shares of Class A common stock on a one-for-one basis in order to more meaningfully present the dilutive impact on the investors in this offering.

See "Pricing Sensitivity Analysis" to see how some of the information presented above would be affected by an initial public offering price per share of Class A common stock at the low-, mid- and high-points of the price range indicated on the front cover of this prospectus or if the underwriters exercise in full their option to purchase additional shares of Class A common stock.

The following table summarizes, on the same pro forma basis as of September 30, 2012, the total number of shares of Class A common stock purchased from us, the total cash consideration paid to us and the average price per share of Class A common stock paid by our existing owners and by new

investors purchasing shares of Class A common stock in this offering, assuming that all of the holders of New Holdings Units in Private National Mortgage Acceptance Company, LLC (other than PennyMac Financial Services, Inc.) exchanged their New Holdings Units for shares of our Class A common stock on a one-for-one basis.

The unaudited pro forma consolidated statements of income for the fiscal year ended December 31, 2011 and for the nine months ended September 30, 2012 present our consolidated results of operations giving pro forma effect to the Recapitalization and Offering Transactions described under "Organizational Structure" and the use of the estimated net proceeds from this offering as described under "Use of Proceeds," as if such transactions occurred on January 1, 2011. The unaudited pro forma consolidated balance sheet as of September 30, 2012 presents our consolidated financial position giving pro forma effect to the Recapitalization and Offering Transactions described under "Organizational Structure" and the use of the estimated net proceeds from this offering as described under "Use of Proceeds," as if such transactions occurred on September 30, 2012. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions on the historical financial information of Private National Mortgage Acceptance Company, LLC.

The unaudited pro forma consolidated financial information should be read together with "Organizational Structure," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

The unaudited pro forma consolidated financial information is included for informational purposes only and does not purport to reflect the results of operations or financial position of PennyMac Financial Services, Inc. that would have occurred had we operated as a public company during the periods presented. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our results of operations or financial position had the Recapitalization and Offering Transactions described under "Organizational Structure" and the use of the estimated net proceeds from this offering as described under "Use of Proceeds" occurred on the dates assumed. The unaudited pro forma consolidated financial information also does not project our results of operations or financial position for any future period or date.

The unaudited pro forma consolidated financial information presented assumes no exercise by the underwriters of the option to purchase up to an additional shares of Class A common stock from us and that the shares of Class A common stock to be sold in this offering are sold at $ per share of Class A common stock, which is the midpoint of the price range indicated on the front cover of this prospectus. See "Pricing Sensitivity Analysis" to see how certain aspects of the Offering Transactions would be affected by an initial public offering price per share of Class A common stock at the low-, mid- and high-points of the price range indicated on the front cover of this prospectus or if the underwriters' option to purchase additional shares of Class A common stock is exercised in full.

PENNYMAC FINANCIAL SERVICES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2011

	Private National Mortgage Acceptance Company, LLC Actual

	(in thousands, except per unit data)
Revenue
Net servicing income:
Loan servicing fees:
From PennyMac Mortgage Investment Trust	$	13,204
From Investment Funds		14,523
Mortgage servicing rebate (to) from Investment Funds		(2,772	)
From non-affiliates		11,493
Ancillary fees		1,657

Total		38,105
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(9,438	)

Net servicing income		28,667
Net gain on mortgage loans held for sale at fair value		13,029
Management fees:
From PennyMac Mortgage Investment Trust		8,456
From Investment Funds		9,943
Carried Interest from Investment Funds		12,596
Fulfillment fees from PennyMac Mortgage Investment Trust		1,744
Other		2,224

Total revenue		76,659

Expenses
Compensation		47,479
Other		14,481

Total expenses		61,960

Net income	$	14,699

Net income attributable to preferred unit holders	$	14,507
Net income attributable to common unit awards outstanding	$	152
Net income attributable to common unit holders	$	40
Pro forma information (unaudited):
Historical net income before taxes	$	14,699
Pro forma adjustment for taxes(2)
Pro forma net income
Earnings per unit:
Preferred units	$	237.82
Common units:
Basic	$	11.63
Diluted	$	3.88
Weighted average units outstanding:
Preferred units		61,003
Common units:
Basic		3,470
Diluted		10,410

PENNYMAC FINANCIAL SERVICES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

	Private National Mortgage Acceptance Company, LLC Actual

	(in thousands, except per unit data)
Revenue
Net servicing income:
Loan servicing fees:
From PennyMac Mortgage Investment Trust	$	13,163
From Investment Funds, net		9,130
Mortgage servicing rebate (to) from Investment Funds		(407	)
From non-affiliates		10,824
Ancillary fees		1,613

Total		34,323
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(8,977	)

Net servicing income		25,346
Net gain on mortgage loans held for sale at fair value		68,487
Management fees:
From PennyMac Mortgage Investment Trust		9,847
From Investment Funds		7,199
Carried Interest from Investment Funds		7,254
Fulfillment fees from PennyMac Mortgage Investment Trust		31,097
Other		8,110

Total revenue		157,340

Expenses
Compensation		77,756
Other		19,135

Total expenses		96,891

Net income	$	60,449

Net income attributable to preferred unit holders	$	52,482
Net income attributable to common unit awards outstanding	$	5,094
Net income attributable to common unit holders	$	2,873
Pro forma information (unaudited):
Historical net income before taxes	$	60,449
Pro forma adjustment for taxes(2)
Pro forma net income
Earnings per unit:
Preferred units	$	542.83
Common units:
Basic units	$	466.97
Diluted	$	192.41
Weighted average units outstanding:
Preferred units		96,682
Common units:
Basic		6,153
Diluted		14,933

PENNYMAC FINANCIAL SERVICES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2012

	Private National Mortgage Acceptance Company, LLC Actual			Pro Forma Adjustments(1)

				(in thousands, except unit data)
ASSETS
Cash	$	27,734
Short-term investment, at fair value		3,416
Mortgage loans held for sale at fair value		410,071
Servicing advances		76,554
Receivable from Investment Funds		4,183
Receivable from PennyMac Mortgage Investment Trust		9,734
Derivative assets		39,793
Carried Interest due from Investment Funds		44,504
Investment in PennyMac Mortgage Investment Trust, at fair value		1,753
Mortgage servicing rights, at fair value		21,240
Mortgage servicing rights, at lower of amortized cost or fair value		52,914
Furniture, fixtures, equipment and building improvements, net		4,466
Capitalized software, net		751
Other		5,586

Total assets	$	702,699

LIABILITIES
Loans sold under agreements to repurchase	$	361,478
Note payable		34,035
Derivative liability		3,356
Payable to PennyMac Mortgage Investment Trust		35,920
Payable to Investment Funds		34,443
Accounts payable and accrued expenses		29,235
Liability for losses under representations and warranties		2,305

Total liabilities		500,772

MEMBERS' EQUITY
Preferred units, 96,682 units authorized, subscribed, issued and outstanding as of September 30, 2012		96,884
Members' equity attributable to common units from equity compensation plan		16,107
Stock subscription receivable		(4,842	)
Retained earnings		93,778

Total members' equity		201,927

Total liabilities and members' equity	$	702,699

The following selected historical consolidated financial data of Private National Mortgage Acceptance Company, LLC should be read together with "Organizational Structure," "Unaudited Pro Forma Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus. Private National Mortgage Acceptance Company, LLC will be considered our predecessor for accounting purposes, and its consolidated financial statements will be our historical consolidated financial statements following this offering.

We derived the selected historical consolidated statement of income data of Private National Mortgage Acceptance Company, LLC for the fiscal years ended December 31, 2011 and 2010 and the selected historical consolidated balance sheet data as of December 31, 2011 and 2010 from the audited consolidated financial statements of Private National Mortgage Acceptance Company, LLC which are included elsewhere in this prospectus. The consolidated statement of income data for the nine months ended September 30, 2012 and 2011, and the consolidated balance sheet data as of September 30, 2012 have been derived from unaudited consolidated financial statements of Private National Mortgage Acceptance Company, LLC included elsewhere in this prospectus. The unaudited consolidated financial statements of Private National Mortgage Acceptance Company, LLC have been prepared on substantially the same basis as the audited financial statements and include all adjustments that we consider necessary for a fair presentation of our consolidated financial position and results of operations for all periods presented.

	Year ended December 31,						Nine months ended September 30,

	2011			2010			2012			2011
	(in thousands, except per unit data)
Statement of Operations Data—Consolidated
Revenue
Net servicing income:
Loan servicing fees
From PennyMac Mortgage Investment Trust	$	13,204		$	2,989		$	13,163		$	9,152
From Investment Funds, net		14,523			9,474			9,130			10,990
Mortgage servicing rebate (to) from Investment Funds		(2,772	)		1,162			(407	)		(569	)
From non-affiliates		11,493			11,431			10,824			8,513
Ancillary fees		1,657			1,345			1,613			1,224

Total		38,105			26,401			34,323			29,310
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(9,438	)		(400	)		(8,977	)		(6,400	)

Net servicing income		28,667			26,001			25,346			22,910
Net gain on mortgage loans held for sale at fair value		13,029			2,008			68,487			3,895
Management fees:
From PennyMac Mortgage Investment Trust		8,456			5,484			9,847			7,043
From Investment Funds		9,943			9,943			7,199			7,457
Carried Interest from Investment Funds		12,596			24,654			7,254			10,348
Fulfillment fees from PennyMac Mortgage Investment Trust		1,744			—			31,097			358
Other		2,224			1,139			8,110			978

Total revenue		76,659			69,229			157,340			52,989

Expenses
Compensation		47,479			25,412			77,756			31,316
Other		14,481			10,775			19,135			10,193

Total expenses		61,960			36,187			96,891			41,509

Net income	$	14,699		$	33,042		$	60,449		$	11,480

Net income attributable to preferred unit holders	$	14,507		$	29,014		$	52,482		$	11,364
Net income attributable to non-vested common unit awards outstanding	$	152		$	3,837		$	5,094		$	84
Net income attributable to common unit holders	$	40		$	191		$	2,873		$	32
Pro forma information (unaudited):
Historical net income before taxes	$	14,699		$	33,042		$	60,449		$	11,480
Pro forma adjustment for taxes
Pro forma net income
Earnings per unit:
Preferred units	$	237.82		$	645.30		$	542.83		$	221.72
Common units:
Basic	$	11.63		$	555.59		$	466.97		$	11.05
Diluted	$	3.88		$	40.72		$	192.41		$	3.58
Weighted average units outstanding:
Preferred units		61,003			44,962			96,682			51,256
Common units:
Basic		3,470			345			6,153			2,913
Diluted		10,410			4,704			14,933			8,997

	December 31, 2011		December 31, 2010		September 30, 2012

	(in thousands)
Balance Sheet Data—Consolidated
ASSETS
Cash and short-term investment, at fair value	$	32,506	$	15,241	$	31,150
Mortgage loans held for sale at fair value		89,857		14,720		410,071
Servicing advances		63,565		22,811		76,554
Receivable from Advised Entities		19,864		13,687		13,917
Carried interest due from Investment Funds		37,250		24,654		44,504
Mortgage servicing rights		32,124		31,957		74,154
Other		14,115		5,332		52,349

Total assets	$	289,281	$	128,402	$	702,699

LIABILITIES
Loans sold under agreements to repurchase	$	77,700	$	13,289	$	361,478
Note payable		18,602		3,499		34,035
Derivative liability		—		—		3,356
Payable to PennyMac Mortgage Investment Trust		25,595		2,842		35,920
Payable to Investment Funds		29,622		13,262		34,443
Accounts payable and accrued expenses		13,398		5,352		29,235
Liability for losses under representations and warranties		449		189		2,305

Total liabilities		165,366		38,433		500,772
MEMBERS' EQUITY		123,915		89,969		201,927

Total liabilities and members' equity	$	289,281	$	128,402	$	702,699

OPERATING METRICS
Net assets under management of the Advised Entities	$	1,166,095	$	883,338	$	1,760,053
Mortgage loans serviced (unpaid balance)	$	7,736,608	$	5,358,819	$	18,599,954
Number of mortgage loans serviced		36,395		26,022		83,449

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion together with the consolidated financial statements, related notes and other financial information included in this prospectus. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under "Risk Factors" and elsewhere in this prospectus. These risks could cause our actual results to differ materially from any future performance suggested below. Accordingly, you should read "Special Note Regarding Forward-Looking Statements" and "Risk Factors."

We are a specialty financial services firm that operates in two segments: mortgage banking and investment management.

Our mortgage banking segment is comprised of three primary businesses: correspondent lending, retail lending, and loan servicing.

During the nine months ended September 30, 2012, we managed PMT's acquisition of approximately $11.5 billion of newly originated, prime credit quality, first-lien residential mortgage loans, of which we purchased approximately $4.8 billion of government-insured loans from PMT for our

own account. We also originated $302.8 million of residential mortgage loans through our retail channel during the nine months ended September 30, 2012. During the nine months ended September 30, 2012, we increased our portfolio of loans that we serviced or subserviced from approximately $7.7 billion to approximately $18.6 billion.

During the year ended December 31, 2011, we managed PMT's acquisition of approximately $1.3 billion of newly originated, prime credit quality, first-lien residential mortgage loans, of which we purchased $548.6 million of government-insured loans from PMT for our own account. We also originated $148.8 million of residential mortgage loans through our retail channel during the year ended December 31, 2011. During the year ended December 31, 2011, we increased our portfolio of loans that we serviced or subserviced from approximately $5.4 billion to $7.7 billion.

We are an investment manager through our wholly-owned subsidiary, PCM. PCM currently manages PMT and the Investment Funds, which had combined net assets of approximately $1.8 billion as of September 30, 2012. For these activities, we earn management fees as a percentage of net assets and incentive compensation based on investment performance. To date, we have achieved strong investment performance in all Advised Entities largely through the successful execution of PCM's strategy of investing in distressed mortgage loans.

Our businesses are affected by macroeconomic conditions in the United States, including economic growth, unemployment rates, the residential housing market and interest rate levels and expectations. The U.S. economy continues its pattern of modest growth as reflected in recent economic data. According to the Department of Commerce, real U.S. gross domestic product expanded at a revised annual rate of 3.1% during the third quarter of 2012, compared to a revised 1.3% annual rate for the second quarter of 2012 and a revised 2.0% annual rate for the third quarter of 2011. Modest economic growth and pressure on state and federal government spending continued to affect unemployment rates during 2012. According to the Bureau of Labor Statistics, the national unemployment rate was 7.8% at September 30, 2012, the first time the rate was below 8% since January 2009 and compares to a revised seasonally adjusted rate of 9.0% at September 30, 2011 and 8.5% at December 31, 2011. Declining unemployment is partially reflective of a declining workforce labor participation rate. Delinquency rates on single-family residential mortgage loans linger at historically high rates. According to the Federal Reserve's Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks, delinquency rates during the second quarter of 2012 were 10.6%, a slight reduction from the cyclical high of 11.2% during the first quarter of 2010.

Residential real estate activity appears to be modestly improving. According to the National Association of Realtors®, the seasonally adjusted annual rate of existing home sales for December 2012 was 12.8% higher than for December 2011 and the national median existing home price for all housing types was $180,800, an 11.5% increase from December 2011. On a national level, foreclosure filings during the third quarter of 2012 decreased 5% as compared to the second quarter of 2012 and 13% as compared to the third quarter of 2011, representing the ninth consecutive quarter with an annual decrease in foreclosure activity.

According to the Federal Home Loan Mortgage Corporation's Weekly Primary Mortgage Market Survey, thirty-year fixed rate mortgage interest rates ranged from a high of 3.66% to a low of 3.40% during the third quarter of 2012 with the low of 3.40% representing an all-time record low for the thirty-year fixed rate mortgage. During the first nine months of 2012, mortgage interest rates have ranged from a high of 4.08% to the all-time record low of 3.40%. Mortgage interest rates during the third quarter were relatively unchanged until the Federal Reserve began its purchases of mortgage

securities pursuant to a third round of quantitative easing. During the first nine months of 2011, thirty-year fixed rate mortgage interest rates ranged from a high of 5.05% to a low of 4.01%.

We believe that the shifting investment and operational priorities of banks and other traditional mortgage lenders have created additional opportunities for our business and the business of PMT. Under current market conditions, these opportunities include the purchase from mortgage lenders of newly originated mortgage loans that are eligible for sale and/or securitization through an Agency.

In our capacity as an investment manager, we continue to see substantial volumes of distressed residential mortgage loan sales by a limited number of sellers, which remain primarily sales of nonperforming loan pools, with a small but increasing number of sales of troubled but performing loans. During the third quarter of 2012, we reviewed 23 mortgage loan pools on behalf of PMT with unpaid principal balances totaling approximately $3.8 billion for potential purchase. This compares to our review for potential purchase on behalf of PMT and the Investment Funds of 20 mortgage loan pools with unpaid principal balances totaling approximately $3.6 billion during the third quarter of 2011. We managed the acquisition on behalf of PMT of distressed mortgage loans with fair values totaling $150.5 million during the third quarter of 2012, all of which were acquired from or through one or more subsidiaries of Citigroup, Inc.

During 2011, we reviewed on behalf of PMT and the Investment Funds 88 mortgage loan pools with unpaid principal balances totaling approximately $13.6 billion for potential purchase. During 2011, we managed the acquisitions on behalf of PMT and the Investment Funds of distressed mortgage loans with unpaid principal balances totaling $2.0 billion, of which $1.7 billion was acquired from or through one or more subsidiaries of Citigroup Inc.

We expect our results of operations to be affected by various factors, many of which are beyond our control. Our primary sources of income are from:

We service loans either through subservicing arrangements with PMT and the Investment Funds or for our own account as a result of our purchase of MSRs and our retention of MSRs associated with the loans that we originate or purchase for sale. Net servicing income includes the fees that we earn as well as the amortization, impairment and changes in fair value that we recognize from holding MSRs. A significant component of our net servicing income is driven by the changes in the fair value of the MSRs that we hold. Changes in the fair value of MSRs are significantly influenced by prepayment expectations and actual prepayments relating to the underlying loans that are, in turn, primarily influenced by mortgage interest rate levels and expectations.

Under the terms of our prior loan servicing agreement with PennyMac Operating Partnership, L.P., the operating partnership subsidiary of PMT, servicing fee rates for the historical periods presented in the consolidated financial statements included in this prospectus were based on the risk characteristics

of the mortgage loans serviced and total servicing compensation was established at levels that management believed was competitive with those charged by other servicers or special servicers, as applicable.

Effective February 1, 2013, we amended our loan servicing agreement with PMT and established servicing fees at fixed per-loan monthly amounts based on the delinquency, bankruptcy and foreclosure status of the serviced loan or the real estate acquired in settlement of a loan. Amounts for the historical periods presented in the consolidated financial statements included in this prospectus do not reflect the amended agreement, as it was not in effect during the historical periods presented. However, we do not expect the amendment to have a significant effect on the level of fees that we record for loans serviced for PMT. See the description of the new terms of the loan servicing agreement under "Certain Relationships and Related Party Transactions—Servicing Agreements."

Our servicing agreements with the Investment Funds generally provide for fee revenue of between 45 and 100 basis points of unpaid principal balance per year, which varies depending on the type and quality of the loans being serviced. We are also entitled to certain customary market-based fees and charges.

Under the servicing agreements between us and the Investment Funds, on December 31, 2011 and at the end of every calendar year thereafter, we will also rebate to the Investment Funds an amount equal to the cumulative profit, if any, of the servicing operations attributable to the Investment Funds' assets, and, conversely, charge the Investment Funds if a loss has been incurred in order to effect overall "at cost" pricing with respect to loan servicing activities for such assets.

Under the agreements, we will also rebate to the Investment Funds 50% of any profit generated from loan originations resulting from the refinancing of, or modification activities with respect to, loans that we subservice on behalf of the Investment Funds. This arrangement was changed effective January 1, 2012 with respect to one of the Investment Funds, whereby we settled our accrued servicing fee rebate with the fund and amended the related servicing agreement to charge scheduled servicing fees in place of the previous "at cost" servicing arrangement. We record the net rebate amounts as earned or incurred.

On our account, as well as on behalf of PMT and the Investment Funds, we participate in HAMP (and other similar mortgage loan modification programs). HAMP establishes standard loan modification guidelines for "at risk" homeowners and provides incentive payments to certain participants, including loan servicers, for achieving modifications and successfully remaining in the program. Our loan servicing agreements entitle us to retain any incentive payments that we receive and

to which we are entitled under HAMP; provided, however, that with respect to any such incentive payments paid to us under HAMP in connection with a mortgage loan modification for which we previously were paid an incentive fee by PMT or the Investment Funds, we will reimburse PMT or the Investment Fund an amount equal to the lesser of such modification fee or such incentive payments.

Our servicing agreements with non-affiliates were initially primarily special servicing arrangements with non-affiliated entities in support of mortgage securitizations and provided for servicing fees of approximately 50 basis points per year of the UPB of the loans. Beginning late in 2011, as our correspondent lending activities began to grow, the primary composition of our servicing for non-affiliates began to shift from special servicing to prime servicing—primarily of government-insured or guaranteed loans included in pools of loans securing Ginnie Mae-guaranteed securities that we originated through our correspondent lending activities and sold to third parties on a servicing-retained basis. Such loans have contractual servicing fee rates ranging from 19 to 44 basis points net of guarantee fees. As with other servicing arrangements, we are also entitled to ancillary fees such as late charges and other fees allowable for government-insured or guaranteed loans.

MSRs represent the value of a contract that obligates us to service the mortgage loans on behalf of the owner of the loan in exchange for servicing fees and the right to collect certain ancillary income from the borrower. We recognize MSRs at our estimate of the fair value of the contract to service the loans.

How much of the MSR we realize in cash depends upon how our initial estimates of the future cash flows accruing to the MSRs are realized. As economic fundamentals influencing the loans change, our estimate of the fair value of the related MSR we retain will also change. As a result, we will record changes in fair value as a component of net servicing income for the MSRs we carry at fair value, and we may recognize changes in fair value relating to our MSRs carried at the lower of amortized cost or fair value depending on the relationship of the asset's fair value to its amortized cost at the measurement date. See "Note 8—Fair Value" in the Notes to Consolidated Financial Statements for the years ended December 31, 2010 and 2011 for key assumptions used in determining the fair value of MSRs at the time of the initial recognition and at period end for the periods covered by our financial statements.

After the initial recognition of MSRs, we account for such assets based on the initial interest rates of the mortgage loans underlying the respective MSRs. We account for MSRs differently based on whether the interest rates of the mortgage loans underlying such assets are above 4.5% because we have concluded that mortgage loans with initial interest rates of 4.5% or less present different risks to us than MSRs relating to mortgage loans with initial interest rates of more than 4.5% and, therefore, require a different risk management approach. Our risk management efforts relating to MSRs relating to mortgage loans with initial interest rates of 4.5% or less are aimed at moderating the effects of non-interest rate risks on fair value, such as the effect of changes in home prices on the assets' values. Our risk management efforts in connection with MSRs relating to mortgage loans with initial interest rates of more than 4.5% are aimed at moderating the effects of changes in interest rates on the assets' values.

We account for MSRs relating to mortgage loans with initial interest rates of more than 4.5% at fair value. Changes in the fair value of MSRs carried at fair value are included in current period results of operations as a component of net servicing income.

We account for MSRs relating to mortgage loans with initial interest rates of less than or equal to 4.5% using the amortization method. Under the amortization method, we amortize the cost of MSRs in

proportion to, and over the period of, net servicing income for the mortgage loans underlying the respective assets.

We also evaluate MSRs accounted for using the amortization method for impairment with reference to the assets' fair value at the measurement date. Impairment occurs when the current fair value of the MSR falls below the asset's carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current period earnings and the carrying value of the MSRs is adjusted through a valuation allowance. If the value of impaired MSRs subsequently increases, we recognize the increase in value in current period earnings and, through a reduction in the valuation allowance, adjust the carrying value of the MSRs to a level not in excess of amortized cost.

When evaluating MSRs for impairment, we stratify the assets by predominant risk characteristic including loan type (fixed-rate or adjustable-rate) and note rate. We stratify fixed-rate loans into note rate pools of 50 basis points for note rates between 3.0% and 4.5% and a single pool for note rates below 3%. We evaluate adjustable-rate mortgage loans with initial interest rates of 4.5% or less in a single pool.

We periodically review the various impairment strata to determine whether the value of the impaired MSRs in a given stratum is likely to recover. When we deem recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.

Amortization and impairment of MSRs accounted for using the amortization method are included in current period results of operations as a component of net servicing income.

For more information on the key assumptions used in determining the fair value of MSRs at the time of initial recognition for the historical periods presented in the consolidated financial statements included in this prospectus, see "Note 8—Fair Value—Mortgage Servicing Rights" in the Notes to Consolidated Financial Statements for the years ended December 31, 2010 and 2011 and "Note 7—Fair Value—Mortgage Servicing Rights" in the Notes to Consolidated Financial Statements for the nine months ended September 30, 2011 and 2012.

When we sell our mortgage loans, we record a gain or loss which is determined by the nature and terms of the transaction. The gain or loss that we realize on the sale of loans acquired through our mortgage lending activities is primarily determined by the price paid for purchased loans or the terms of originated loans, the effect of any hedging and other risk management activities that we undertake, the sales price of the loan and the value of any MSRs received in the transaction. Gain on mortgage loans held for sale is significantly influenced by mortgage loan prepayment activity which is, in turn, significantly influenced by the level and direction of mortgage interest rates. Certain of these factors are beyond our control.

Our gain on mortgage loans held for sale includes both cash and non-cash elements. We receive proceeds on sale that include both cash and our estimate of the value of MSRs. We also provide an estimate of our losses relating to representations and warranties that we make to the investors.

We recognize the fair value of loan commitments we make to borrowers and commitments to PMT to purchase government-insured loans. We refer to these commitments as interest rate lock commitments, or IRLCs. We recognize the value of these commitments upon their issuance, which is generally before we purchase the mortgage loans subject to the commitment. We presently issue interest rate lock commitments with commitment periods ranging to sixty days. The value that we assign to an IRLC is estimated based on our estimated gain on sale of a mortgage loan funded under the commitment, adjusted for the probability that the loan will fund or be purchased within the terms

of the IRLC. The IRLC is subject to changes in fair value as the loan approaches funding, as market interest rates for similar loans change and as our assessment of the probability of the funding of mortgage loans at similar points in the origination process changes. The value of an IRLC can be either positive or negative, depending on the relationship of the mortgage loan's interest rates to current market rates for similar mortgage loans.

The primary factor influencing the probability that the loan will fund within the terms of the IRLC is the change, if any, in mortgage interest rates subsequent to the commitment date. In general, the probability of funding increases if current rates rise and decreases if current rates fall. This is due primarily to the relative attractiveness of current mortgage interest rates compared to the applicant's committed rate. The probability that a loan will fund within the terms of the IRLC is also influenced by the source of the application, age of the application, purpose of the loan (purchase or refinance) and the application approval rate. We have developed closing ratio estimates using empirical data that take into account all of these variables, as well as renegotiations of rate and point commitments that tend to occur when mortgage interest rates fall. These closing ratio estimates are used to calculate the aggregate balance of loans that we expect to fund within the terms of the IRLCs.

We manage the risk created by IRLCs relating to mortgage loans and by our inventory of mortgage loans held for sale by entering into forward sale agreements to sell the mortgage loans and by the purchase and sale of MBS options and futures. Such agreements are accounted for as derivative instruments.

We account for our derivative financial instruments as free-standing derivatives. We do not designate our forward sale agreements or options and futures for hedge accounting. We recognize all of our derivative financial instruments on the balance sheet at fair value with changes in the fair value being reported in current period income as a component of net gain on mortgage loans held for sale.

We also provide for our estimate of the fair value of future losses that we may be required to incur as a result of our breach of representations and warranties provided to the purchasers of the loans we have sold. The representations and warranties require adherence to investor or 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 mortgage loans with the identified defects or indemnify the investor or insurer from its related losses. In such cases, we bear any subsequent credit loss on the mortgage loans. Our losses from representations and warranties may be reduced by any recourse that we have to correspondent lenders that, in turn, had sold such mortgage loans to us through PMT and breached similar or other representations and warranties. In such event, we generally have the right to seek a repurchase or indemnity from that originator through PMT.

We record a provision for losses relating to such representations and warranties as part of our loan sale transactions. The method we use to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, estimated future defaults and loan repurchase rates, the potential severity of loss in the event of defaults and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and continually update our liability estimate.

The level of the liability for losses from representations and warranties is difficult to estimate and requires considerable management judgment. The level of mortgage loan repurchase losses is dependent on economic factors, investor repurchase demand strategies, and other external conditions that may change over the lives of the underlying loans. Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current unpaid principal

balance of loans that we have sold to date represents the maximum exposure to repurchases related to representations and warranties.

We evaluate the adequacy of our liability for losses from representations and warranties based on our loss experience and our assessment of future losses to be incurred relating to loans that we have previously sold and which remain outstanding at the balance sheet date. As our portfolio of loans sold subject to representations and warranties grows and as economic fundamentals change, such adjustments can be material. However, we believe that our current estimates adequately approximate the future losses to be incurred on our servicing portfolio of mortgage loans sold subject to such representations and warranties.

For more information on our estimates of our liability for representations and warranties for the historical periods presented in the consolidated financial statements included in this prospectus, see "Note 16—Liability for Representations and Warranties" in the Notes to Consolidated Financial Statements for the years ended December 31, 2010 and 2011 and "Note 15—Liability for Representations and Warranties" in the Notes to Consolidated Financial Statements for the nine months ended September 30, 2011 and 2012.

In our investment management activities, we earn management fees from PMT and we earn management fees and carried interest from the Investment Funds.

The management fees that we are entitled to receive from PMT have two components: a base component and a performance incentive component. Under our prior management agreement with PMT, which was effective during the historical periods presented in the consolidated financial statements included in this prospectus, the terms of the two components were as follows:

Effective February 1, 2013 we amended the terms of our management agreement with PMT. The amendment reduced the annual rate of the base component of the management fee applicable to shareholders' equity in excess of $2.0 billion and it changed the basis on which the performance incentive portion of our management fee is calculated from "core earnings," as defined under the prior agreement, to earnings as determined in accordance with U.S. GAAP. As a result of this change, we expect to recognize the performance incentive portion of our management fee on a go-forward basis

which we had previously not recognized. See the new terms of this agreement at "Certain Relationships and Related Party Transactions—Management Agreements."

For periods through December 31, 2011, the management fees that we received from the Investment Funds were based on the respective funds' capital commitments. For subsequent periods, the management fees have been based on the lesser of the funds' net asset values or aggregate capital contributions. The base management fees accrue at annual rates ranging from 1.5% to 2.0% of the applicable amounts on which they are based.

The carried interest that we recognize from the Investment Funds is determined by the Investment Funds' performance and our contractual rights to share in the Investments Funds' returns in excess of the preferred returns accruing to the investors, if any. We recognize carried interest as a participation in the profits in the Investment Funds after the investors in the Investment Funds have achieved a preferred return as defined in the fund agreements. After the investors have achieved the preferred returns specified in the respective fund agreements, a "catch up" return accrues to us until we receive a specified percentage of the preferred return. Thereafter, we participate in future returns in excess of the preferred return at the rates specified in the fund agreements.

The investment period for the Investment Funds ended on December 31, 2011. The amount of the carried interest that we will receive depends on the Investment Funds' future performance. As a result, the amount of carried interest recorded by us at period end is subject to adjustment based on future results of the Investment Funds. We expect to collect the carried interest when the Investment Funds liquidate. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the agreements that govern the Investment Funds.

In connection with our correspondent lending business, we provide certain mortgage banking services to PMT, including fulfillment and disposition-related services, for a fulfillment fee based on a percentage of the UPB of the mortgage loans sold to non-affiliates. In general, the fulfillment fee for such services is based on the type of mortgage loan acquired by PMT and equal to a percentage of the unpaid balance of such mortgage loan.

Effective February 1, 2013, we terminated our prior amended and restated mortgage banking services agreement with PMT and entered into a new mortgage banking and warehouse services agreement. The new agreement provides for the reimbursement of a portion of the fulfillment fee applicable to PMT's acquisition of mortgage loans in excess of specified monthly thresholds. In the event that PMT acquires mortgage loans with an aggregate UPB in any month greater than $2.5 billion but less than or equal to $5 billion, we have agreed to discount the amount of such fulfillment fees by reimbursing PMT in an amount equal to the product of (i) .025%, (ii) the amount of unpaid principal balance in excess of $2.5 billion, and (iii) the percentage of the aggregate unpaid principal balance relating to mortgage loans for which we collected fulfillment fees in such month. In the event that PMT acquires mortgage loans in any month with an aggregate UPB greater than $5 billion, we have agreed to discount the amount of such fulfillment fees by reimbursing PMT in an amount equal to the product of (i) .05%, (ii) the amount of unpaid principal balance in excess of $5.0 billion, and (iii) the percentage of the aggregate unpaid principal balance relating to mortgage loans for which we collected fulfillment fees in such month. See a further description of the terms of this agreement under "Certain Relationships and Related Party Transactions—Mortgage Banking and Warehouse Services Agreements and MSR Recapture Agreement."

We incur compensation and overhead expenses necessary to run our business. The level of these expenses depends, in part, on the nature and amount of assets that we manage for our investment management clients, the volume of mortgage loans and mix of such loans between performing and distressed mortgage loans that we service, and the level of loan origination and purchase activity that we manage and conduct for our own account. Many of these expenses (such as certain technology costs and the cost of experienced specialized managers and staff necessary to manage and execute the specialized activities in which we engage) are fixed and require us to operate at an adequate level of activity to operate profitably.

The following is a summary of the composition of expenses included in the various expense line items:

Our management agreement with PMT provides us with the right to allocate a portion of certain overhead charges to PMT based on PMT's assets as a percentage of the total assets we manage. For the actual expenses allocated to PMT in the historical periods presented in the consolidated financial statements included in this prospectus, refer to the discussion and tables under "—Results of Operations—Expenses Allocated to PMT."

Prepayment Speeds. Prepayment speeds, as reflected by the constant prepayment rate, vary according to interest rates, the type of investment, conditions in the housing and financial markets, competition and other factors, none of which can be predicted with any certainty. In general, when interest rates rise, it is relatively less attractive for borrowers to refinance their mortgage loans and, as a result, prepayment speeds tend to decrease. This can extend the period over which we earn servicing income but reduce the demand for new mortgage loans. When interest rates fall, prepayment speeds tend to increase, thereby decreasing the value of MSRs and shortening the period over which we earn servicing income but increasing the demand for new mortgage loans.

Changing Interest Rate Environment. Generally, when interest rates rise, the value of mortgage loans and interest rate lock commitments decrease while the value of hedging instruments related to

such loans and commitments increases. When interest rates fall, the value of mortgage loans and interest rate lock commitments increases and the value of hedging instruments related to such loans and commitments decrease. Decreasing interest rates also precipitate increased loan refinancing activity by borrowers seeking to benefit from lower mortgage interest rates.

Changing Home Prices Affect REO Property Disposition Proceeds. The state of the real estate market and home prices at the time of sale will determine proceeds from the sale of REO properties. Generally, rising home prices are expected to positively affect our results from REO properties for loans serviced under agreements whereby we retain some risk on REO sales. Conversely, declining real estate prices are expected to negatively affect our results from REO properties. We cannot predict future home prices with any certainty.

Risk Management Effectiveness—Credit Risk. We are subject to the risk of potential credit losses on all of the residential mortgage loans that we hold for sale or investment as well as for losses incurred by investors in mortgage loans that we sell to them as a result of breaches of representations and warranties we make as part of the loan sales. The representations and warranties require adherence to investor or guarantor 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. The level of mortgage loan repurchase losses is dependent on economic factors, investor repurchase demand strategies, and other external conditions that may change over the lives of the underlying loans.

Risk Management Effectiveness—Interest Rate Risk. Because changes in interest rates may significantly affect our activities, our operating results will depend, in large part, upon our ability to effectively manage interest rate risks and prepayment risks, including risk arising from the change in value of our inventory of mortgage loans held for sale and commitments to fund mortgage loans and related hedging derivative instruments, as well the effects of changes in interest rates on the value of our investment in MSRs. See "—Quantitative and Qualitative Disclosures about Market Risk" for a discussion on the effects of changes in interest rates on the recorded value of our MSRs.

Liquidity. Our ability to operate profitably is dependent on both our access to capital to finance our assets and our ability to profitably sell and service mortgage loans. An important source of capital for the residential mortgage industry is warehouse financing facilities. These facilities provide funding to mortgage loan producers until the loans are sold to investors or securitized in the secondary mortgage loan market. Our ability to hold loans pending sale and/or securitization depends, in part, on the availability to us of adequate financing lines of credit at suitable interest rates. During any period in which a borrower is not making payments, if we own the MSR then we may be required to advance our own funds to meet contractual principal and interest remittance requirements for investors and advance costs of protecting the property securing the investors' loan and the investors' interest in the property. We finance a portion of these advances under bank lines of credit. The ability to obtain capital to finance our servicing advances at appropriate interest rates influences our ability to profitably service delinquent loans. See "—Liquidity and Capital Resources" and "—Off-Balance Sheet Arrangements and Aggregate Contractual Obligations—Debt Obligations."

Servicing Effectiveness. In cases where we own the MSR, our servicing fee rates for loans serviced for non-affiliates are generally at specified servicing rates that do not change with a loan's performance status. As a mortgage loan becomes delinquent and moves through the delinquency process to settlement through acquisition of the property or partial payoff, the loan requires greater effort on our part to service. Increased mortgage delinquencies, defaults and foreclosures will therefore result in a higher cost to service those loans due to the increased time and effort required to collect payments from delinquent borrowers. Therefore, how efficiently we are able to maintain the credit quality of our portfolio of serviced mortgage loans and address the mortgage loans where the borrower has defaulted influences the level of expenses that we incur in the mortgage loan servicing process.

We have elected to record our non-cash financial assets at fair value and group them in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

The valuation method used to estimate fair value may produce a fair value measurement that may not be indicative of ultimate realizable value. Furthermore, while we believe our valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value of certain financial statement items could result in a different estimate of fair value at the reporting date. Those estimated values may differ significantly from the values that would have been used had a readily available market for such items existed, or had such items been liquidated, and those differences could be material to the financial statements.

Mortgage loans held for sale are carried at their estimated fair values. Changes in the estimated fair value of mortgage loans are recognized in current period income. All changes in fair value are recognized as a component of gain on mortgage loans held for sale at fair value. Fair value of mortgage loans is estimated based on whether the mortgage loans are saleable into active markets with established counterparties and transparent pricing.

Our interest rate lock commitments are categorized as a "Level 3" fair value financial statement item. Inputs to the estimation of the fair value of interest rate lock commitments include the pull-through rate and MSR value, which we classify as "Level 3" inputs. Changes in the value of interest rate lock commitments are included in gain on mortgage loans held for sale at fair value.

The derivative financial instruments that we acquire to manage the price risk arising from making interest rate lock commitments and holding mortgage loans held for sale at fair value are categorized as "Level 2" financial statement items and their fair values are estimated using quoted market prices or market price equivalents. Changes in the fair value of derivatives used to manage price risk are included in gain on mortgage loans held for sale at fair value.

We recognize MSRs initially at their estimated fair values, either from sales of mortgage loans where we retain the right to service the loan in the sale transaction, or from the purchase of MSRs. MSRs arise from contractual agreements between us and the investors (or their agents) in mortgage securities and mortgage loans. Under these contracts, we are responsible for loan servicing functions in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities, collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound) funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real estate collateralizing the mortgage loans in settlement thereof and property dispositions.

The value of MSRs is derived from the net positive cash flows associated with the servicing contracts. We receive a servicing fee generally of 0.25% annually on the remaining outstanding principal balances of the loans subject to the servicing contracts. The servicing fees are collected from the monthly payments made by the mortgagors. We generally receive other remuneration including rights to various mortgagor-contracted fees such as late charges, collateral reconveyance charges and loan prepayment penalties, and we are generally entitled to retain the interest earned on funds held pending remittance for mortgagor payments.

The precise fair value of MSRs cannot be readily determined because MSRs are not actively traded in stand-alone markets. Considerable judgment is required to estimate the fair values of these assets and the exercise of such judgment can significantly affect our earnings. MSR values are estimated by our financial analysis and valuation group and are reviewed and approved by our senior management valuation committee. Therefore, we classify our MSRs as "Level 3" fair value financial statement items.

We use a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting servicing cash flows discounted at a rate that we assume market participants would use in their determinations of value. The cash flow and prepayment assumptions used in our discounted cash flow model are based on market factors which we believe are consistent with assumptions and data used by market participants valuing similar MSRs.

The key assumptions used in the valuation of MSRs include mortgage prepayment speeds, cost to service the loans and discount rates. These variables can, and generally do, change from period to period as market conditions change.

Our subsequent accounting for MSRs is based on the class of MSRs. We have identified two classes of MSRs: MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5% and MSRs backed by mortgage loans with initial interest rates of more than 4.5%. MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5% are accounted for using the amortization method. MSRs backed by loans with initial interest rates of more than 4.5% are accounted for at fair value with changes in fair value recorded in current period income. We distinguish between these classes of MSRs due to their differing sensitivities to changes in value as a result of changes in interest rates.

We amortize MSRs accounted for using the amortization method. MSR amortization is determined by applying the ratio of the net MSR cash flows projected for the current period to the estimated total remaining net MSR cash flows. The estimated total net MSR cash flows are determined at the beginning of each month using prepayment assumptions applicable at that time.

We assess MSRs accounted for using the amortization method for impairment monthly. Impairment occurs when the current fair value of the MSR falls below the asset's carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, we recognize the impairment in current-period earnings and adjust the carrying value of the MSRs through a valuation allowance. If the value of impaired MSRs subsequently increases, we recognize the increase in value in current-period earnings and we adjust the carrying value of the MSRs through a reduction in the valuation allowance. Carrying value is not increased above amortized cost.

We stratify our MSRs by predominant risk characteristic when evaluating for impairment. For purposes of performing our MSR impairment evaluation, we stratify our servicing portfolio on the basis of certain risk characteristics, including loan type (fixed-rate or adjustable-rate) and note rate. We stratify fixed-rate loans into note rate pools of 50 basis points for note rates between 3.0% and 4.5% and a single pool for note rates below 3%. If the fair value of MSRs in any of the note rate pools is below the carrying value of the MSRs for that pool, we recognize impairment to the extent of the difference between the estimated fair value and the existing valuation allowance for that pool.

Amortization and impairment of MSRs are included in current period results of operations as a component of net servicing income.

Changes in fair value of MSRs accounted for at fair value are recognized in current period results of operations as a component of net servicing income.

We may earn carried interest from each of the Investment Funds in which we have a general partnership interest or other carried interest arrangement. See "—Reporting Metrics and Prospective Trends—Net Servicing Income" and "—Reporting Metrics and Prospective Trends—Management Fees and Carried Interest." We determine the amount of carried interest to be recorded each period based on the cash flows that would be produced assuming termination of the Investment Funds' agreements at each period end.

The amount of the carried interest received by us depends on the Investment Funds' future performance. As a result, the amount of carried interest recorded by us at period end is subject to adjustment based on future results of the Investment Funds and may be reduced as a result of subsequent performance. However, we are not required to pay guaranteed returns to the Investment Funds and the amount of carried interest will only be reversed to the extent of amounts previously recognized.

In addition, we have allowed certain of our employees to purchase preferred units of equity, which are subject to repurchase rights upon a termination of employment, but were not issued under one of the plans listed above.

No further awards will be made under these plans following the consummation of this offering. We recognize compensation expense relating to our common equity compensation plans with reference to the fair value of the common units we award. The fair value of the common units is estimated by discounting forecasted cash flows (dividends and value from a hypothetical sale of the Company) to the holders of the units. We use assumptions that we believe would be used by market participants when valuing our Company. The assumptions we use to forecast the cash flows include: our short and long-term growth rates, discount rate, and the percentage of our income that we distribute.

We estimate the fair value of awards under the Class C common equity plan and the 2011 Equity Incentive Plan using an option pricing approach. Under this approach, our various classes of units are valued as call options based on their respective claims on our assets. The characteristics of the unit classes, as determined by the unit agreements and our limited liability company agreement, determine the respective units' claims on our assets relative to each other and the other components of our capital structure. We perform periodic valuations to establish the fair value of awards under the Class C common equity plan and the 2011 Equity Incentive Plan.

We amortize the fair value of share-based awards to compensation expense using a graded vesting method. Under the graded vesting calculation, compensation expense is recognized over the requisite service period for each separate vesting of a previously granted award.

We have elected to opt out of the extended transition period for an emerging growth company under the JOBS Act to comply with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. This election is irrevocable.

Set forth below is a summary of our results of operations for the periods indicated.

	Year ended December 31,						Nine months ended September 30,

	2011			2010			2012			2011
	(in thousands)
Revenue
Net servicing income:
Loan servicing fees:
From PennyMac Mortgage Investment Trust	$	13,204		$	2,989		$	13,163		$	9,152
From Investment Funds		14,523			9,474			9,130			10,990
Mortgage servicing rebate (to) from Investment Funds		(2,772	)		1,162			(407	)		(569	)
From non-affiliates		11,493			11,431			10,824			8,513
From borrowers—ancillary fees		1,657			1,345			1,613			1,224

Total		38,105			26,401			34,323			29,310
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(9,438	)		(400	)		(8,977	)		(6,400	)

Net servicing income		28,667			26,001			25,346			22,910
Net gains on mortgage loans held for sale at fair value		13,029			2,008			68,487			3,895
Loan origination fees		669			734			5,439			461
Management fees:
From PennyMac Mortgage Investment Trust		8,456			5,484			9,847			7,043
From Investment Funds		9,943			9,943			7,199			7,457
Carried interest from Investment Funds		12,596			24,654			7,254			10,348
Fulfillment fees from PennyMac Mortgage Investment Trust		1,744			—			31,097			358
Interest		1,532			195			2,039			584
Other		23			210			632			(67	)

Total revenue		76,659			69,229			157,340			52,989

Expenses
Compensation		47,479			25,412			77,756			31,316
Professional services		3,867			2,244			3,538			2,604
Occupancy		1,985			938			1,078			1,788
Technology		1,979			1,959			3,161			1,529
Interest		1,875			790			4,227			806
Servicing		2,344			2,167			2,438			1,619
Loan origination		185			150			1,803			404
Other		2,246			2,527			2,890			1,443

Total expenses		61,960			36,187			96,891			41,509

Net income	$	14,699		$	33,042		$	60,449		$	11,480

Total loan servicing fees increased $5,013 from $29,310 for the nine months ended September 30, 2011 to $34,323 for the nine months ended September 30, 2012. The increase was due to an increase of $4,011 in loan servicing fees from PMT due to growth in the volume of loans we subservice for PMT, an increase of $2,311 in loan servicing fees from non-affiliates due to growth in our portfolio of loans serviced as a result of our increasing sales of mortgage loans with servicing rights retained and an

increase of $389 in ancillary fees due to growth in the portfolio of mortgage loans serviced, partially offset by a decrease in loan servicing fees from Investment Funds of $1,860. This decrease was due to the decrease in the principal balance in the Investment Funds' mortgage loan portfolios as these portfolios liquidate following the end of the related commitment periods on December 31, 2011.

Set forth below is information about our loan servicing portfolio as of September 30, 2011 and 2012.

	As of September 30,

	2012		2011
	(in thousands)
Loans serviced at period end (unpaid balance):
Prime servicing:
Subserviced for our Advised Entities—Originated	$	6,875,026	$	79,587
Owned MSRs—Originated		5,876,517		428,420
Owned MSRS—Acquisitions		1,087,385		1,501,846

Total Prime servicing		13,838,928		2,009,853
Special servicing:
Subserviced for our Advised Entities—Acquisitions		3,438,853		3,322,581
Owned MSRS—Acquisitions		1,322,173		1,535,259

Total Special servicing		4,761,026		4,857,840

Total loans serviced	$	18,599,954	$	6,867,693

Mortgage servicing rebate to Investment Funds decreased $162 from $(569) for the nine months ended September 30, 2011 to $(407) for the nine months ended September 30, 2012. The decrease was due to decreases in our per-loan servicing costs as a result of scaling efficiencies that we are realizing through the growth in our mortgage servicing operations.

Amortization, impairment and change in estimated fair value of mortgage servicing rights increased $2,577 from $6,400 for the nine months ended September 30, 2011 to $8,977 for the nine months ended September 30, 2012. The increase was due to growth in our investment in MSRs which increases the level of assets subject to amortization, compounded by decreases in prevailing mortgage interest rates during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011. This decrease in mortgage interest rates caused decreases in the fair value of our investment in MSRs and we recognized impairment resulting from this decrease in fair value.

Net gains on mortgage loans held for sale at fair value increased $64,592 from $3,895 for the nine months ended September 30, 2011 to $68,487 for the nine months ended September 30, 2012. The increase was due to growth in the volume of mortgage loans that we sold during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011. The net gain for the nine months ended September 30, 2011 included $3,193 in fair value of MSRs received as part of proceeds on sales. The net gain for the nine months ended September 30, 2012 included $51,006 in fair value of MSRs received as part of proceeds on sales.

	Nine months ended September 30,

	2012			2011
	(in thousands)
Cash gain (loss) on sale:
Loan proceeds	$	49,695		$	4,536
Hedging activities		(40,276	)		(2,998	)

		9,419			1,538

Non-cash gains (losses):
Mortgage servicing rights received as proceeds on sale		51,006			3,193
Provision for representations and warranties on loans sold		(1,856	)		(124	)
Change in fair value of commitments to fund mortgage loans		25,527			1,099
Change in fair value relating to loans and hedging instruments held for sale at year-end:
Loans		8,637			577
Hedging activities		(24,246	)		(2,388	)

Total non-cash changes in fair value relating to loans and hedging instruments held at year-end		(15,609	)		(1,811	)

Total non-cash changes in fair value		59,068			2,357

Net gains on mortgage loans held for sale at fair value	$	68,487		$	3,895

Fair value of loans sold during the period	$	5,144,533		$	238,694

At period end:
Fair value of mortgage loans held for sale	$	410,071

Commitments to fund and purchase mortgage loans	$	1,470,590

Loan origination fees increased $4,978 from $461 for the nine months ended September 30, 2011 to $5,439 for the nine months ended September 30, 2012. The increase was due to growth in the volume of loans originated in our retail lending business.

Management fees from PennyMac Mortgage Investment Trust increased $2,804 from $7,043 for the nine months ended September 30, 2011 to $9,847 for the nine months ended September 30, 2012. The increase was due to increases in PMT's shareholders' equity upon which the management fee is based. Management fees from Investment Funds decreased $258 from $7,457 for the nine months ended September 30, 2011 to $7,199 for the nine months ended September 30, 2012. The decrease was due to decreases in the Investment Funds' net asset values as a result of the end of the Investment Funds' commitment periods at December 31, 2011 as well as subsequent distributions to the funds' investors, which together reduced the investment base on which the management fees are based.

Carried interest from Investment Funds decreased $3,093 from $10,348 for the nine months ended September 30, 2011 to $7,254 for the nine months ended September 30, 2012. The decrease was due to the close of the Investment Funds' commitment periods.

Fulfillment fees from PennyMac Mortgage Investment Trust increased $30,739 from $358 for the nine months ended September 30, 2011 to $31,097 for the nine months ended September 30, 2012. The increase was due to growth in the volume of loans for which we provided fulfillment services to PMT.

Interest income increased $1,455 from $584 for the nine months ended September 30, 2011 to $2,039 for the nine months ended September 30, 2012. The increase was due to the increase in our average inventory of mortgage loans held for sale as a result of the growth in our loan production activities, and primarily relates to the interest that we earned on mortgage loans during the period for which we held the loans pending sale.

Other income increased $699 from $(67) for the nine months ended September 30, 2011 to $632 for the nine months ended September 30, 2012. The increase was primarily due to appreciation in the value of our investment in common shares of PMT. As of both September 30, 2011 and September 30, 2012, we held 75,000 common shares of PMT.

Compensation expense increased $46,440 from $31,316 for the nine months ended September 30, 2011 to $77,756 for the nine months ended September 30, 2012. The increase was due to the development of and growth in our mortgage banking segment as well as growth in the level of assets serviced for PMT and the Investment Funds. Below is a summary of our headcount as of the respective period ends:

Professional services expense increased $934 from $2,604 for the nine months ended September 30, 2011 to $3,538 for the nine months ended September 30, 2012. The increase was due to growth in the size of our operations.

Occupancy expense decreased $710 from $1,788 for the nine months ended September 30, 2011 to $1,078 for the nine months ended September 30, 2012. The decrease was due to the non-recurrence of a lease abandonment charge of $1,155 we recorded during the nine months ended September 30, 2011. We incurred this charge due to our relocation from our previous corporate facility, which we had outgrown.

Technology expense increased $1,632 from $1,529 for the nine months ended September 30, 2011 to $3,161 for the nine months ended September 30, 2012. The increase was due to growth in the size of our operations.

Interest expense increased $3,421 from $806 for the nine months ended September 30, 2011 to $4,227 for the nine months ended September 30, 2012. The increase in interest expense reflects increases in borrowings incurred to finance the growth of our loan production activities and, to a lesser extent, to finance our servicing advances and a portion of our own MSRs.

Servicing expense increased $819 from $1,619 for the nine months ended September 30, 2011 to $2,438 for the nine months ended September 30, 2012. The increase was due to growth in our mortgage servicing portfolio.

Loan origination expense increased $1,399 from $404 for the nine months ended September 30, 2011 to $1,803 for the nine months ended September 30, 2012. The increase was due to growth in our loan origination volume.

Other expense increased $1,447 from $1,443 for the nine months ended September 30, 2011 to $2,890 for the nine months ended September 30, 2012. The increase was due to growth in the size of our operations.

Expense amounts allocated to PMT during the nine months ended September 30, 2011 and the nine months ended September 30, 2012 are summarized below:

The amount of total expenses that we allocated to PMT increased $63 from $2,412 in the nine months ended September 30, 2011 to $2,475 in the nine months ended September 30, 2012. The increase was due to growth in our overhead expenses, partly offset by a reduction of PMT's assets in relation to the total assets that we manage, resulting in a smaller portion of our overhead expenses being allocated to PMT.

Total loan servicing fees increased $11,704 from $26,401 for the year ended December 31, 2010 to $38,105 for the year ended December 31, 2011. The increase was due to an increase of $10,215 in loan servicing fees from PennyMac Mortgage Investment Trust due to growth in the volume of loans we subservice for PMT, an increase of $5,049 in loan servicing fees from Investment Funds due to growth, both in the volume of mortgage loans we serviced on behalf of the Investment Funds and to growth in activity-based fees we receive from the funds for successful completion of workouts and liquidations of distressed mortgage loans, an increase of $62 in loan servicing fees from non-affiliates due to growth in our portfolio of mortgage loans serviced for non-affiliates, and an increase of $312 in ancillary fees due to growth in the size of our mortgage servicing portfolio.

Set forth below is information about our loan servicing portfolio as of December 31, 2010 and December 31, 2011.

	As of December 31,

	2011		2010
	(in thousands)
Loans serviced at period end (unpaid balance):
Prime servicing:
Subserviced for our Advised Entities—Originated	$	496,404	$	3,865
Owned MSRs—Originated		968,406		158,353
Owned MSRS—Acquisitions		1,402,676		1,428,970

Total Prime servicing		2,867,486		1,591,188
Special servicing:
Subserviced for our Advised Entities—Acquisitions		3,382,205		2,097,141
Owned MSRS—Acquisitions		1,486,917		1,670,490

Total Special servicing		4,869,122		3,767,631

Total loans serviced	$	7,736,608	$	5,358,819

Mortgage servicing rebate from Investment Funds decreased $3,934 from $1,162 for the year ended December 31, 2010 to $(2,772) for the year ended December 31, 2011. The decrease was due to decreases in our per-loan servicing costs as a result of scaling efficiencies we are realizing through the growth in our mortgage servicing operations.

Amortization, impairment and change in estimated fair value of mortgage servicing rights increased $9,038 from $(400) for the year ended December 31, 2010 to $(9,438) for the year ended December 31, 2011. The increase was due to growth in our investment in MSRs which increases the level of assets subject to amortization, compounded by decreases in prevailing mortgage interest rates during 2011 as compared to 2010. This decrease in mortgage interest rates caused decreases in the fair value of our investment in MSRs, and we recognized the resulting decrease in fair value.

Net gains on mortgage loans held for sale at fair value increased $11,021 from $2,008 for the year ended December 31, 2010 to $13,029 for the year ended December 31, 2011. The increase was due to growth in the volume of mortgage loans we sold during 2011 as compared to 2010. The net gain for the year ended December 31, 2010 included approximately $1,174 in fair value of MSRs received as part of the proceeds on sales. The net gain for the year ended December 31, 2011 included approximately $8,253 in fair value of MSRs received as part of the proceeds on sales. We recognized gains on mortgage loans held for sale as summarized below:

	Year ended December 31,

	2011			2010
	(in thousands)
Cash gain (loss) on sale:
Loan proceeds	$	182		$	(221	)
Hedging activities		(8,578	)		(315	)

		(8,396	)		(536	)

Non-cash changes in fair value:
Mortgage servicing rights received as proceeds on sale		8,253			1,174
Provision for representations and warranties on loans sold		(259	)		(51	)
Change in fair value of commitments to fund mortgage loans		7,919			(24	)
Change in fair value relating to loans and hedging instruments held for sale at year-end:
Loans		393			1,099
Hedging activities		5,119			346

Total non-cash changes in fair value relating to loans and hedging instruments held at year-end		5,512			1,445

Total non-cash changes in fair value		21,425			2,544

Net gains on mortgage loans held for sale at fair value	$	13,029		$	2,008

Fair value of loans sold during the period	$	655,853		$	56,494

At period end:
Fair value of mortgage loans held for sale	$	89,857		$	14,720

Commitments to fund and purchase mortgage loans	$	325,752		$	16,922

Loan origination fees decreased $65 from $734 for the year ended December 31, 2010 to $669 for the year ended December 31, 2011. The decrease was due to decreases in the level of activity in one of our initial loan origination programs that had significant origination fees, partially offset by increased levels of originations in other loan programs.

Management fees from PennyMac Mortgage Investment Trust increased $2,972 from $5,484 for the year ended December 31, 2010 to $8,456 for the year ended December 31, 2011. The increase was due to increases in PMT's shareholders' equity upon which the management fee is based. Management fees from Investment Funds remained even at $9,943 for both the year ended December 31, 2010 and the year ended December 31, 2011.

Carried interest from Investment Funds decreased $12,058 from $24,654 for the year ended December 31, 2010 to $12,596 for the year ended December 31, 2011. We began recording carried interest during the year ended December 31, 2010. During the year ended December 31, 2010, the Investment Funds realized strong performance and we recognized the "catch up" component of our carried interest. Our carried interest in the year ended December 31, 2010 includes both the "catch up" component, totaling approximately $7.8 million and our ratable sharing of the return to the funds in excess of the preferred returns to the funds. Our carried interest income decreased during the year ended December 31, 2011 due in part to the absence of the "catch up" component.

Fulfillment fees from PennyMac Mortgage Investment Trust increased $1,744 from $0 for the year ended December 31, 2010 to $1,744 for the year ended December 31, 2011. The increase was due to growth in the volume of loans for which we provide fulfillment services to PMT.

Interest income increased $1,337 from $195 for the year ended December 31, 2010 to $1,532 for the year ended December 31, 2011. The increase was due to the increase in our average inventory of mortgage loans held for sale as a result of the growth in our loan production activities, and primarily relates to the interest that we earned on mortgage loans during the period for which we held the loans pending sale.

Other income decreased $187 from $210 for the year ended December 31, 2010 to $23 for the year ended December 31, 2011. The decrease was due to a decrease in the value of our holdings of common shares of PMT at December 31, 2011 as compared to December 31, 2010. As of both December 31, 2011 and September 31, 2010, we held 75,000 common shares of PMT.

Compensation expense increased $22,067 from $25,412 for the year ended December 31, 2010 to $47,479 for the year ended December 31, 2011. The increase was due to the development of and growth in our mortgage banking segment as well as growth in the level of assets serviced for PMT and the Investment Funds. Below is a summary of our headcount as of the respective period ends:

Professional services expense increased $1,623 from $2,244 for the year ended December 31, 2010 to $3,867 for the year ended December 31, 2011. The increase was due to growth in the size of our operations and the portfolio we service and manage.

Occupancy expense increased $1,047 from $938 for the year ended December 31, 2010 to $1,985 for the year ended December 31, 2011. The increase was due to growth in the size of our operations.

Technology expense increased $20 from $1,959 for the year ended December 31, 2010 to $1,979 for the year ended December 31, 2011. The increase was due to growth in the size of our operations.

Interest expense increased $1,085 from $790 for the year ended December 31, 2010 to $1,875 for the year ended December 31, 2011. The increase in interest expense was due to an increase in borrowing incurred to finance the growth in our loan production activities and, to a lesser extent, to finance our servicing advances and a portion of our MSRs.

Servicing expense increased $177 from $2,167 for the year ended December 31, 2010 to $2,344 for the year ended December 31, 2011. The increase was due to growth in the size of our mortgage servicing portfolio.

Loan origination expense increased $35 from $150 for the year ended December 31, 2010 to $185 for the year ended December 31, 2011. The increase was due to growth in the volume of mortgage loans we originated or purchased during 2011 as compared to 2010.

Other expense decreased $281 from $2,527 for the year ended December 31, 2010 to $2,246 for the year ended December 31, 2011. The decrease was due to increases in the amount of other expense we allocate to PMT in excess of growth in other expense during the year ended December 31, 2011.

Expense amounts allocated to PMT during the year ended December 31, 2010 and the year ended December 31, 2011 are summarized below:

The amount of total expenses that we allocated to PMT increased $2,563 from $1,418 in the year ended December 31, 2010 to $3,981 in the year ended December 31, 2011. The increase was due to growth in our overhead expenses, growth of PMT's assets in relation to the total assets that we manage, resulting in a larger portion of our overhead expenses being allocated to PMT, and the non-recurrence of a waiver by us of our right to recover allocated expenses from PMT for a portion of 2010. During PMT's startup period and through March 31, 2010, we did not charge PMT for its allocated expenses. Such waived expenses totaled approximately $500 for the year ended December 31, 2010. We did not waive any other charges during PMT's startup period and through March 31, 2010 or thereafter. We do not intend to waive the recovery of allocated expenses in the future.

Other Operating Metrics (dollar amounts under this caption are in thousands)

Set forth below is a summary of other operating metrics as of and for the dates indicated.

	Year ended December 31,				Nine months ended September 30,

	2011		2010		2012		2011
	(in thousands)
Operating Metrics
Net assets under management:
PennyMac Mortgage Investment Trust	$	546,017	$	319,913	$	1,184,203	$	530,663
Investment Funds		620,078		597,248		575,850		608,742

Total net assets under management	$	1,166,095	$	917,161	$	1,760,053	$	1,139,405

Mortgage loans serviced (unpaid balance):
Servicing rights owned by PLS	$	3,649,502	$	3,242,579	$	8,058,823	$	3,446,845
Subservicing		4,002,722		2,101,450		10,164,416		3,363,624
Mortgage loans held for sale		84,384		14,790		376,215		57,224

Total mortgage loans serviced	$	7,736,608	$	5,358,819	$	18,599,954	$	6,867,693

Mortgage loan production (unpaid balance):
Government-insured or guaranteed loans acquired from PMT	$	548,589	$	3,268	$	4,824,972	$	175,156
Retail production		148,812		65,919		302,806		96,811

Total mortgage loan production	$	697,401	$	69,187	$	5,127,778	$	271,967

Mortgage loan fulfillment volume (unpaid balance)	$	505,317	$	24,067	$	12,422,435	$	6,064,165

Net assets under management for PennyMac Mortgage Investment Trust increased $653,540 from $530,663 as of September 30, 2011 to $1,184,203 as of September 30, 2012. The increase was due to increases in PMT's shareholders' equity as a result of share offerings by PMT, supplemented by PMT's retained earnings.

Net assets under management for Investment Funds decreased $32,892 from $608,742 as of September 30, 2011 to $575,850 as of September 30, 2012. The decrease was due to distributions made by the funds to their investors during the period, following the end of the Investment Funds' commitment periods at December 31, 2011.

Mortgage loans serviced (unpaid balance) under servicing rights owned by PLS increased $4,611,978 from $3,446,845 as of September 30, 2011 to $8,058,823 as of September 30, 2012. The increase was due to growth in our portfolio of loans serviced as a result of our sales of mortgage loans with servicing rights retained during the period between September 30, 2011 and September 30, 2012.

Mortgage loans serviced (unpaid balance) under subservicing arrangements increased $6,800,792 from $3,363,624 as of September 30, 2011 to $10,164,416 as of September 30, 2012. The increase was due to growth in the volume of loans we subservice for PMT as the result of growth of PMT's servicing portfolio arising from the correspondent lending operations we manage on its behalf.

Mortgage loans held for sale (unpaid balance) increased $319,491 from $57,224 as of September 30, 2011 to $376,715 as of September 30, 2012. The increase was due to growth in the volume of mortgage loans we originated or purchased, resulting in an increased inventory of mortgage loans at period end.

Mortgage loan production (government-insured or guaranteed loans acquired from PMT) increased $4,649,816 from $175,156 as of September 30, 2011 to $4,824,972 as of September 30, 2012. The increase was due to growth in the volume of mortgage loans we purchased from PMT through our correspondent activities.

Mortgage loan retail production increased $205,995 from $96,811 as of September 30, 2011 to $302,806 as of September 30, 2012. The increase was primarily due to growth in our portfolio of loans serviced and the resulting growth in our recapture refinance activity.

Net assets under management for PennyMac Mortgage Investment Trust increased $226,104 from $319,913 as of December 31, 2010 to $546,017 as of December 31, 2011. The increase was due to increases in PMT's shareholders' equity as a result of share offerings by PMT supplemented by PMT's retained earnings.

Net assets under management for Investment Funds increased $22,830 from $597,248 as of December 31, 2010 to $620,078 as of December 31, 2011. The increase was due to growth in the investment net asset values primarily as a result of their profitable operations.

Mortgage loans serviced (unpaid balance) under servicing rights owned by PLS increased $406,923 from $3,242,579 as of December 31, 2010 to $3,649,502 as of December 31, 2011. The increase was due to growth in our portfolio of loans serviced as a result of our sales of mortgage loans with servicing rights retained.

Mortgage loans serviced (unpaid balance) under subservicing arrangements increased $1,901,272 from $2,101,450 as of December 31, 2010 to $4,002,722 as of December 31, 2011. The increase was primarily due to growth in the volume of loans we subservice for PMT as the result of growth of PMT's servicing portfolio arising from the correspondent lending operations we manage on its behalf.

Mortgage loans held for sale increased $69,594 from $14,790 as of December 31, 2010 to $84,384 as of December 31, 2011. The increase was due to growth in the volume of mortgage loans we originated or purchased, resulting in an increased inventory of mortgage loans at period end.

Mortgage loan production (government-insured or guaranteed loans acquired from PMT) increased $545,321 from $3,268 as of December 31, 2010 to $548,589 as of December 31, 2011. The increase was due to growth in the volume of mortgage loans we purchased from PMT through our correspondent activities.

Mortgage loan retail production increased $82,893 from $65,919 as of December 31, 2010 to $148,812 as of December 31, 2011. The increase was primarily due to growth in our portfolio of loans serviced and the resulting growth in our recapture refinance activity.

Balance Sheet Analysis (dollar amounts under this caption are in thousands)

	December 31, 2011		December 31, 2010		September 30, 2012

	(in thousands)
ASSETS
Cash and short-term investments	$	32,506	$	15,241	$	31,150
Mortgage loans held for sale at fair value		89,857		14,720		410,071
Servicing advances		63,565		22,811		76,554
Receivables from affiliates		19,864		13,687		13,917
Carried Interest due from Investment Funds		37,250		24,654		44,504
Mortgage servicing rights		32,124		31,957		74,154
Other assets		14,115		5,332		52,349

Total assets	$	289,281	$	128,402	$	702,699

LIABILITIES
Borrowings	$	96,302	$	16,788	$	395,513
Other liabilities		69,064		21,645		105,259

Total liabilities		165,366		38,433		500,772

MEMBERS' EQUITY		123,915		89,969		201,927

Total liabilities and members' equity	$	289,281	$	128,402	$	702,699

Total assets increased $413,418 from $289,281 at December 31, 2011 to $702,699 at September 30, 2012. The increase was primarily due to an increase of $320,214 in mortgage loans held for sale at fair value due to growth in the volume of mortgage loans that we originated or purchased, resulting in an increased inventory of mortgage loans at period end, an increase of $42,030 in mortgage servicing rights due to growth in the volume of mortgage loans that we sold with servicing rights retained, resulting in an increase in our investment in MSRs, and an increase of $38,234 in other assets due to growth in the size of our operations, partially offset by a $5,947 decrease in receivables from affiliates due to settlements of amounts outstanding at period end.

Total liabilities increased by $335,406 from $165,366 as of December 31, 2011 to $500,772 as of September 30, 2012. The increase was due to additional borrowings of $299,211 to finance our asset growth.

Total assets increased $160,879 from $128,402 as of December 31, 2010 to $289,281 as of December 31, 2011. The increase was primarily due to an increase of $17,265 in cash and short-term investments due to growth in the size of our operations, an increase of $75,137 in mortgage loans held for sale at fair value due to growth in the volume of mortgage loans that we originated or purchased during 2011 as compared to 2010, and an increase of $40,754 in servicing advances due to growth in the size of our mortgage servicing portfolio.

Total liabilities increased by $126,933 from $38,433 as of December 31, 2010 to $165,366 as of December 31, 2011. The increase was due, in part, to additional borrowings of $79,514 and capital contributions from the issuance of additional preferred units of $15,100 to finance our asset growth.

Our cash flows resulted in a net increase in cash of $11,269 during the nine months ended September 30, 2012. The positive cash flows arose primarily due to growth in our operations. Cash used in operating activities totaled $273,853 during the nine months ended September 30, 2012. The decrease in cash flows was primarily due to the growth in our mortgage loan inventory as originations and purchases of loans exceeded proceeds from loan sales by $303,057.

Net cash used by investing activities was $17,773 for the nine months ended September 30, 2012. This use of cash reflects the growth of our investment portfolio and a $27,524 increase in margin deposits resulting from a decline in the value of our hedging instruments due to a decline in interest rates. Offsetting this use of cash was $12,625 in proceeds from short-term investments.

Net cash provided by financing activities was $302,895 for the nine months ended September 30, 2012. Cash provided by financing activities was primarily due to the sale of loans under agreements to repurchase exceeding repurchases of loans sold under agreements to repurchase by $283,778 in order to finance our growth of our mortgage loan inventory.

Cash used in operating activities totaled $209,512 during the nine months ended September 30, 2011. This decrease in cash flows was primarily due to the growth in our mortgage loan inventory as originations and purchases of loans exceeded loan sales by $206,487.

Net cash used by investing activities was $5,662 for the nine months ended September 30, 2011. This use of cash reflects $3,289 in cash outflows for short-term investments and $1,353 in purchases of mortgage servicing rights.

Net cash provided by financing activities was $217,176 for the nine months ended September 30, 2011. Cash provided by financing activities was primarily due to proceeds from sale of loans under agreements to repurchase totaling $165,044 and issuance of the note payable which resulted in cash inflows of $52,729.

Our cash flows resulted in a net increase in cash of $10,538 during 2011. The positive cash flows arose primarily due to growth in our operations. Cash used in operating activities totaled $74,718 during 2011. This use was primarily due to originations and purchases of mortgage loans held for sale exceeding proceeds from loan sales by $75,417. Cash used by operating activities during 2010 totaled $12,647, and also reflects the effects of growth in our mortgage loan inventory.

Net cash used by investing activities was $12,389 for 2011. This use of cash reflects the growth of our investment portfolio. We used cash to purchase short-term investments, resulting in a $6,727 increase in balance during 2011. This contrasts with cash used by investing activities totaling $7,176 during 2010, primarily resulting from the purchase of $11,974 in mortgage servicing rights.

Net cash provided by financing activities was $97,645 for 2011. Cash provided by financing activities was primarily due to proceeds from sale of loans under agreements to repurchases exceeding repurchase of loans sold under agreements to repurchase by $77,700 in order to finance our growth of our mortgage loan inventory, increases in the note payable of $15,103 and $18,908 in capital contributions from the payment of preferred unit subscriptions during the year ended December 31, 2011.

Our cash flows resulted in a net increase in cash of $2,987 for 2010. The positive cash flows arose primarily due to cash provided by financing activities exceeding cash used by investing and operating activities. Cash used by operating activities totaled $12,647 during 2010. This use of cash was primarily

due to the cash requirements related to the growth in our balance sheet accounts relating to our operations.

Net cash used by investing activities was $7,176 for the year ended December 31, 2010. This use of cash primarily reflects the purchase of mortgage servicing rights, offset by reductions in the level of our short-term investments of $5,630 as we converted this asset to operating assets.

Net cash provided by financing activities was $22,810 for 2010. These funds were primarily the result of $16,074 in borrowing under agreements to repurchase and $8,967 in capital contributions resulting from the issuance of preferred units.

Liquidity and Capital Resources (dollar amounts under this caption are in thousands)

Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, earnings on our investments and proceeds from borrowings and/or additional equity offerings. Assuming that we are able to renew or increase our warehouse facilities and credit financing in the ordinary course of business, we believe that our current liquidity is sufficient to meet our liquidity needs for at least the next twelve months. However, no assurance can be given that we will be able to do so.

Our current leverage strategy is to finance our assets where we believe such borrowing is prudent and appropriate. Our borrowing activities are in the form of sales of mortgage loans under agreements to repurchase, and a note payable secured by mortgage servicing rights and servicing advances.

Our repurchase agreements represent the sales of mortgage loans together with agreements for us to buy back the mortgage loans at a later date. During the nine months ended September 30, 2012, the average balance outstanding under agreements to repurchase mortgage loans totaled $146,425, and the maximum daily amount outstanding under such agreements totaled $361,588. During the year ended December 31, 2011, the average balance outstanding under agreements to repurchase mortgage loans totaled $24,905, and the maximum daily amount outstanding under such agreements totaled $127,593.

The difference between the maximum and average daily amounts outstanding was due to increases in the sizes and utilization of our existing facilities and our entry into a new credit facility during the quarter ended June 30, 2012, all in support of the growth in our mortgage loan production, investments and correspondent lending activities.

All of our borrowings discussed above have short-term maturities. The transactions relating to mortgage loans under agreements to repurchase mature between June 25, 2013 and January 2, 2014 and provide for the repurchase from major financial institution counterparties based on the estimated fair value of the mortgage loans sold. Our note payable secured by mortgage servicing rights and loan servicing advances at fair value matures on March 26, 2013.

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

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

With respect to our role as subservicer for the Advised Entities, we are also subject to certain covenants under their respective debt agreements. These covenants are similar to those above, with the additional covenant that we must maintain a minimum servicing portfolio of $5 billion in UPB.

Our debt financing agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.

We continue to explore a variety of additional means of financing our continued growth, including debt financing through bank warehouse lines of credit and additional repurchase agreements. 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.

As of September 30, 2012, we have not entered into any off-balance sheet arrangements or guarantees.

As of September 30, 2012, we had on-balance sheet contractual obligations of $361.5 million to finance assets under agreements to repurchase with maturities between November 5, 2012 and September 23, 2013, and a contractual obligation of $34.4 million relating to a note payable secured by mortgage servicing rights and loan servicing advances at fair value and with a maturity of March 26, 2013. All agreements to repurchase that matured between September 30, 2012 and the date of this prospectus have been renewed or extended. We also lease our primary office facilities under an agreement that expires on February 28, 2017 and we license certain software to support our loan servicing operations.

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 mortgage loans under agreements to repurchase, and a note payable secured by mortgage servicing rights and loan servicing advances at fair value. The borrower under each of these facilities is PLS, and all obligations thereunder are guaranteed by Private National Mortgage Acceptance Company, LLC.

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 December 31, 2012, we were in compliance in all material respects with these covenants.

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

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

All of PLS's borrowings discussed above have short-term maturities that expire as follows:

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 to which we are exposed are credit risk, interest rate risk, prepayment risk, inflation risk and market value risk.

We are subject to credit risk in connection with our loan sales activities. Our loan sales are generally made with contractual representations and warranties, which, if breached, can require us to repurchase the mortgage loan or reimburse the investor for any losses incurred because of that breach. These breaches are generally evidenced when the borrower defaults on a loan. The amount of our liability for losses due to representations and warranties to the loans' investors is not limited. We include a provision for potential losses due to recourse as part of our recognition of loan sales, based initially on our estimate of the fair value of such obligation. We review our loss experience relating to representations and warranties and adjust our liability estimate when necessary. We believe that residual loan credit quality is primarily determined by the borrowers' credit profiles and loan characteristics.

In the event of a significant rising interest rate environment or economic downturn, defaults could increase and result in credit losses arising from claims under our representations and warranties, which could materially and adversely affect our business, financial condition and results of operations.

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in interest rates affect both the fair value of, and interest income we earn from, our mortgage-related investments. This effect is most pronounced with fixed-rate mortgage assets. In general, rising interest rates negatively affect the fair value of our interest rate lock agreements and inventory of mortgage loans held for sale.

Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Presently our debt financing is based on a floating rate of interest

calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.

We engage in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in interest rates. To manage this price risk resulting from interest rate risk, we use derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the value of our interest rate lock commitments and inventory of mortgage loans held for sale. We do not use derivative financial instruments for purposes other than in support of our risk management activities.

To the extent that the actual prepayment rate on the mortgage loans underlying our MSRs differs from what we projected when we initially recognized the MSRs and when we measured fair value as of the end of each reporting period, the carrying value of our investment in MSRs will be affected. In general, an increase in prepayment expectations will accelerate the amortization of our MSRs accounted for using the amortization method and decrease our estimates of the fair value of both the MSRs accounted for using the amortization method and those accounted for using the fair value method, thereby reducing net servicing income.

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors will influence our performance more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Furthermore, our consolidated financial statements are prepared in accordance with GAAP and any distributions that Private National Mortgage Acceptance Company, LLC may make to its members will be determined by us as the managing member of Private National Mortgage Acceptance Company, LLC based primarily on our taxable income and, in each case, our activities and balance sheet are measured with reference to historical cost and/or fair value without considering inflation.

Our mortgage loans held for sale are reported at their estimated fair values. The fair value of these assets fluctuates primarily due to changes in interest rates.

The following sensitivity analyses are limited in that they were (i) performed at a particular point in time, (ii) only contemplate certain movements in interest rates, (iii) do not incorporate changes in interest rate volatility or changes in the relationship of one interest rate index to another, (iv) are subject to the accuracy of various models and assumptions used, including prepayment forecasts and discount rates, and (v) 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 an earnings forecast.

The following tables summarize the estimated change in fair value of MSRs accounted for using the amortization method as of September 30, 2012, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

The following tables summarize the estimated change in fair value of MSRs accounted for using the fair value method as of September 30, 2012, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

The following tables summarize the estimated change in fair value of purchased MSRs backed by distressed mortgage loans accounted for using the fair value method as of September 30, 2012, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

The following tables summarize the estimated change in fair value of MSRs accounted for using the amortization method as of December 31, 2011, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

The following tables summarize the estimated change in fair value of MSRs accounted for using the fair value method as of December 31, 2011, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

The following tables summarize the estimated change in fair value of purchased MSRs backed by distressed mortgage loans accounted for using the fair value method as of December 31, 2011, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

We conduct our business in the residential mortgage industry in the United States. We participate directly in two distinct, but related, sectors of the mortgage industry: residential mortgage loan production and residential mortgage loan servicing, which includes being the owner of the MSR and subservicing on behalf of other MSR or mortgage owners. We also provide investment management services to entities that have been organized to invest in residential mortgages and related assets.

Residential mortgage originations in 2012 have been increasing due to, among other things, government quantitative easing programs that have helped drive primary mortgage interest rates to historic lows, government refinance programs such as HARP, and a recovering housing market. However, despite this recent growth, origination volumes remain well below pre-recession levels (high of $3.8 trillion in 2003). According to the Mortgage Bankers Association, total residential mortgage originations in the United States were expected to reach $1.8 trillion in 2012, 71% of which were expected to be refinancings. This represents an increase of 22% over the originations in 2011. The refinance-driven origination growth is expected to change in the next two years as refinance volume drops and purchase volume gradually recovers.

In recent years, mortgages guaranteed by Fannie Mae or Freddie Mac, or insured by Agencies such as the FHA and the VA, have comprised a substantial majority of mortgage originations. As a percentage of the overall market, these Agency originations have increased from 36% in 2006 to 89% in the first six months of 2012. We anticipate the eventual reduction of the Agencies' market share and the recovery of non-Agency production, specifically in the prime jumbo product.

The U.S. residential mortgage market consists of a primary mortgage market that links borrowers and lenders and a secondary mortgage market that links lenders and investors. In the primary mortgage market, residential mortgage lenders such as mortgage banking companies, commercial banks, savings institutions, credit unions and other financial institutions originate or provide mortgages to borrowers. Lenders obtain liquidity for originations in a variety of ways, including by selling mortgages or mortgage-related securities into the secondary mortgage market. Banks that originate mortgage loans also have access to customer deposits to fund loan originations. The secondary mortgage market consists of institutions engaged in buying and selling mortgages in the form of whole loans, which

represent mortgages that have not been securitized, and mortgage-related securities. The GSEs and a government agency, Ginnie Mae, participate in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment (in the case of the GSEs) and by issuing (directly or through approved issuers) guaranteed mortgage-related securities.

The mortgage industry experienced significant consolidation in the years leading up to and during the financial crisis with large banks holding the majority of origination and servicing market share. Recently, however, the top five originators (all commercial banks) have come under significant pressure to reduce their exposure to the residential mortgage business as a result of regulatory scrutiny, punitive capital treatment of MSRs and headline risks associated with the industry. Consequently, their market share has diminished, which has created significant opportunities for non-bank participants such as us.

Residential mortgage loans are generally originated through a retail lending network or wholesale mortgage brokers, and may be subsequently sold to a correspondent mortgage aggregator. A retail lending network consists of a centralized retail platform and/or distributed retail branches. A centralized retail platform is a telephone and/or electronic platform with multiple loan officers in one location. Typical loan origination sources for a retail lending network include real estate agents, homebuilders, credit unions, banks, the Internet and refinancings from existing servicing portfolios. In a retail lending network, the lender controls all loan origination processes, including sourcing the borrower, taking the application and setting the interest rate, ordering the appraisal and underwriting, processing, closing and funding the loan. In an integrated mortgage banking business, retail originations can help maximize the return from a lender's servicing portfolio. When the lender refinances a loan in its servicing portfolio, it replaces the old MSR with a new one and extends the life of the servicing cash flows associated with that loan.

Loans sourced by mortgage brokers are funded by a lender partner and generally closed in the lender's name. The mortgage broker's role is to identify the applicant, assist in completing the loan application, gather necessary information and documents and serve as the liaison to the borrower through the lending process. The lender reviews and underwrites the application submitted by the mortgage broker, approves or denies the application, sets the interest rate and other terms of the loan and, upon acceptance by the borrower and satisfaction of all conditions required by the lender, funds the loan. Mortgage brokers conduct their own marketing, employ their own personnel to complete the loan applications and maintain contact with the borrowers.

Correspondent mortgage aggregators acquire loans from retail or wholesale mortgage originators and in turn sell them on the secondary market. For example, in our business PMT and (in the case of government loans) PLS act as correspondent aggregators. Correspondent loans can be sold individually or in pools to the correspondent aggregators. The loans are underwritten and funded by the mortgage originator, but the loan programs are usually based on terms approved by the correspondent aggregator. Mortgage originators may offer an array of products for multiple correspondent aggregators, and act as an extension for those aggregators.

The length of time from the origination or purchase of a mortgage loan to its sale or securitization generally ranges from 7 to 60 days, depending on a variety of factors including loan volume, product type, interest rates and capital markets conditions. An important source of capital for the residential mortgage industry is warehouse lending typically in the form of a credit facility provided by a bank or broker-dealer. These facilities provide funding to mortgage loan originators and aggregators until the loans are sold to investors in the secondary mortgage loan market.

Mortgage loans generally fall into one of the following three categories: prime conforming mortgage loans, government-insured residential mortgage loans and non-conforming mortgage loans.

Prime Conforming Mortgage Loans: These are prime credit quality first-lien mortgage loans (such as mortgage loans that, in the event of default, have priority over all other liens or claims) secured by single-family residences that meet or "conform" to the underwriting standards established by Fannie Mae or Freddie Mac for inclusion in their guaranteed mortgage securities programs.

Government-Insured Residential Mortgage Loans: These are first-lien mortgage loans secured by single-family residences that are insured by the FHA or guaranteed by the VA and securitized into Ginnie Mae securities.

Non-Conforming Mortgage Loans: Non-conforming mortgage loans include both prime non-conforming mortgage loans and non-prime mortgage loans. Prime non-conforming mortgage loans are prime credit quality first-lien mortgage loans secured by single-family residences that either (i) do not conform to the underwriting standards established by Fannie Mae or Freddie Mac, because they have original principal amounts exceeding Fannie Mae and Freddie Mac limits, which are commonly referred to as jumbo mortgage loans, or (ii) have alternative documentation requirements and property or credit-related features (such as higher loan-to-value or debt-to-income ratios) but are otherwise considered prime credit quality due to other compensating factors. Non-prime mortgage loans are first-lien and certain junior lien mortgage loans secured by single-family residences, made to individuals with credit profiles that do not qualify for a prime loan, have credit-related features that fall outside the parameters of traditional prime mortgage loans or have performance characteristics that otherwise expose lenders to comparatively higher risk of loss.

Over the last few decades, the complexity of the market for residential mortgage loans in the United States has dramatically increased. In the past, a borrower seeking credit for a home purchase would typically have obtained financing from a financial institution, such as a bank, savings association or credit union. These institutions would generally have held a majority of their originated mortgage loans as interest-earning assets on their balance sheets and would have performed all activities associated with servicing the loans.

Now, institutions that originate mortgage loans generally hold a smaller portion of such loans as assets on their balance sheets and instead sell a significant portion of the loans that they originate to third parties. Fannie Mae and Freddie Mac are currently the largest purchasers of home mortgage loans. Under a process known as securitization, the GSEs and financial institutions typically package residential mortgage loans into pools that are sold to securitization trusts. These securitization trusts fund the acquisition of mortgage loans by issuing securities, known as mortgage-backed securities, which entitle the owner of such securities to receive a portion of the interest and principal collected on the mortgage loans in the pool. The purchasers of the mortgage-backed securities are typically large institutions, such as pension funds, mutual funds and insurance companies. The packaging of mortgage loans into a pool, the servicing of such mortgage loans and the terms of the mortgage-backed securities issued by the securitization trust are governed by the applicable GSE's Seller/Servicer Guide.

According to the Federal Reserve, there were approximately $10.0 trillion in residential mortgage loans outstanding in the United States as of September 30, 2012. Each mortgage loan must be serviced by a loan servicer. Owners of MSRs generally earn a contractual per-loan fee of 25 to 50 basis points per annum on the UPB of loans serviced, as well as incentive fees and associated ancillary fees, such as

late fees. Subservicers service loans on behalf of other MSR or mortgage owners, and generally receive a contractual monthly fee on a per-loan basis. A loan servicer can create value for both itself and the mortgage owner and, in the case of a subservicing arrangement, for the owner of the MSRs, by increasing the number of borrowers that remain current in their repayment obligations. Loan owners may include a lender, third-party investor or, in the case of a securitized pool of mortgages, a residential MBS trust.

Loan servicing predominantly involves loan administration, collection and default activities, including the collection and remittance of loan payments, response to customer inquiries, accounting for principal and interest, holding custodial (impound) funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors and supervising foreclosures and property dispositions.

Generally speaking, in a weak economic and credit environment with elevated delinquencies and defaults, servicing is operationally more challenging and more capital-intensive as servicers need to add and train staff to manage the increase in delinquent borrowers. In addition, servicers are generally required to make advances on delinquent mortgage loans for principal and interest payments, taxes, insurance, legal fees and property maintenance fees, all of which are typically recovered upon foreclosure or liquidation. Based on information from the Mortgage Bankers Association, as of September 30, 2012, approximately 7.0% of mortgages in the United States were in the process of foreclosure or were 90 or more days delinquent. As an example of more normalized levels, this rate was 1.8% in the third quarter of 2005.

The majority of loan servicing in the United States is performed by the nation's money center banks such as Bank of America, Wells Fargo, JPMorgan Chase and Citigroup, which together serviced almost 49% of all outstanding mortgage loans on one-to-four-family residences as of September 30, 2012. These traditional bank servicers primarily service conventional, performing (non-delinquent) mortgages and are most effective at routine account management of portfolios with low delinquencies that require limited interaction with the borrowers. In the current environment of elevated delinquencies, foreclosures, liquidation proceedings and REO activity, however, traditional servicers are experiencing higher operating costs, and their performance metrics are declining.

In contrast to the traditional bank servicing model, the special servicing model emphasizes increased borrower contact in an effort to improve loan performance and reduce loan defaults and foreclosures, thereby minimizing credit losses and maximizing cash flows. The special servicing model functions well in environments characterized by elevated delinquencies, foreclosures, liquidation proceedings and REO activity. We believe there are a limited number of servicers such as us that are able to operate both traditional and special servicing activities effectively in a variety of market environments. We believe that having a comprehensive set of servicing capabilities enables us to address a broader range of market opportunities and deliver superior servicing results for assets that we manage on behalf of our investment management clients, as well as for our own account.

In the course of servicing delinquent loans, servicers are required to make advances that are reimbursable from collections on the related mortgage loan, or in the event of a non-recoverable advance, from collections on other mortgage loans in the related mortgage pool. In the case of subservicing, the advances are typically required on an intra-month basis and the subservicer is entitled to reimbursement from the owner of the MSRs.

There are generally three types of advances, as defined below: P&I Advances, T&I Advances and Corporate Advances.

P&I Advances: Advances to cover scheduled payments of principal and interest that have not been timely paid by borrowers. P&I Advances serve to smooth the cash flows paid to holders of securities issued by the residential MBS trust.

T&I Advances: Advances to pay specified expenses associated with the preservation of a mortgaged property or the liquidation of defaulted mortgage loans, including, but not limited to, property taxes, insurance premiums or other property related expenses that have not been timely paid by borrowers.

Corporate Advances: Advances to pay costs and expenses incurred in loan foreclosure and REO preservation and sale, including attorneys' and other professional fees and expenses incurred in connection with foreclosure and liquidation or other legal proceedings arising in the course of servicing mortgage loans.

A servicer may decide to stop making P&I Advances prior to a liquidation of the mortgage loan if the servicer deems future P&I Advances to be non-recoverable. In this circumstance, T&I Advances and Corporate Advances will likely continue in order to preserve the existing value of the mortgage loan and complete the foreclosure and REO sale process.

Servicers of GSE securities are reimbursed by the GSE for their advances upon completion of the foreclosure sale at which point the mortgage loan is repurchased out of the MBS trust by the GSE. Servicers of GSE securities are not responsible for managing REO properties. Conversely, servicers of non-Agency MBS are obligated under the servicing agreement to make advances through liquidation of the related REO properties.

Advances are non-interest bearing assets. Non-bank servicers typically utilize securitizations or match funded liabilities to finance their advances. The securitizations are generally non-recourse to the servicer, and the advances are financed at a discount to par value accounting for the non-interest bearing nature of the asset.

If a borrower defaults on a mortgage loan, the owner of the mortgage loan, or the servicer on its behalf, is entitled to foreclose on the property in order to sell it to repay the loan. The foreclosure process is generally initiated when the loan becomes 90 days or more delinquent.

State foreclosure laws establish certain procedures that servicers must follow in conducting foreclosures and establish minimum time periods for various aspects of the foreclosure process. These laws and their associated timelines vary widely by state. States generally follow one of two methods for their foreclosure process: judicial, with a judge presiding over the process in a court proceeding; or statutory, with the process being conducted outside the courtroom in accordance with state law. Foreclosure proceedings generally take longer and are more costly to complete in states that follow the judicial foreclosure process, primarily because of the additional legal work involved.

Foreclosure timelines increase as the number of delinquent mortgage loans increase. In addition, various state banking regulators and attorneys general have publicly announced that they have initiated inquiries into banks and servicers regarding compliance with legal procedures in connection with mortgage foreclosures and, in the case of the Joint Federal-State Mortgage Servicing Settlement, have entered into a settlement in connection with mortgage foreclosure issues. These activities raise the possibility that governmental authorities, including regulators and judicial bodies, could implement further measures, including foreclosure moratoria that could further increase foreclosure timelines. All else being equal, an increase in foreclosure timelines would adversely affect servicers by lengthening the amount of time that servicing advances are outstanding and, consequentially, increasing the financing costs related to those servicing advances.

Servicing standards for the foreclosure process continue to develop. The servicing rules issued by the CFPB on January 17, 2013 prohibit a servicer from initiating a foreclosure action or proceeding to a foreclosure judgment or sale in a pending action where the borrower has submitted a completed loss mitigation application to the servicer. Moreover, a number of states, including California, Massachusetts and Washington, have revised their foreclosure laws to require the suspension of a foreclosure action until all of the loss mitigation options are exhausted. New state laws are also addressing "robo-signing" concerns by creating new requirements to validate the evidence of the right to foreclose and the accuracy of the foreclosure documents. We believe that additional states will adopt similar requirements.

The owner of a mortgage loan, or the servicer acting on its behalf, may elect to remediate borrower delinquencies through loss mitigation and home retention strategies that rely on alternatives to foreclosure. Under the terms of many pooling and servicing agreements mortgage servicers are permitted, on behalf of the owner of the mortgage loan, to negotiate with a borrower to modify the terms of the loan. These modifications can include principal forgiveness, maturity extensions, delinquent interest capitalization and changes to contractual interest rates. In addition, a servicer can agree to the liquidation of a loan, commonly known as a short sale, where a portion of the outstanding principal of the loan is forgiven as part of a sale of the underlying property to a third party, or the owner of the mortgage loan can take title to and possession of the underlying property and cancel the foreclosure with the consent of the borrower, a process commonly known as a deed-in-lieu of foreclosure. Certain governmental and Agency-sponsored programs also provide economic incentives for servicers to implement strategies to avoid or delay foreclosures.

In response to the rising level of foreclosures, in February 2009 the U.S. Department of the Treasury established the Making Home Affordable plan, or MHA. Several programs designed to keep borrowers in their homes have been implemented under MHA, including the Home Affordable Modification Program, or HAMP, and the Home Affordable Refinance Program, or HARP. HAMP provides financial incentives to loan servicers and borrowers to successfully modify qualifying residential mortgages. Under HAMP, servicers receive an up-front fee of $1,000 for each completed modification and an additional $500 if the loan is current but is at risk of imminent default while the borrower is in the HAMP trial period, typically a three-month period in which no foreclosure sales can occur and the borrower's ability to meet the modified loan's terms and conditions is gauged. Servicers also receive success fees of as much as $1,000 each year for up to three years, which accrue monthly and are paid annually on the anniversary of the month in which the trial period plan was executed. The annual incentives are predicated on the borrower remaining in good standing, meaning that the borrower must not be more than two months delinquent at any time during the year.

Effective June 1, 2012, HAMP was extended through December 2013 and expanded to include "Tier 2" loan modifications which cover: homeowners who are applying for a modification on a home that is not their primary residence, but the property is rented or intended for rental; homeowners who previously did not qualify for HAMP because their debt-to-income ratio was 31% or lower; homeowners who previously received a HAMP trial period plan, but defaulted in their payments; and homeowners who previously received a HAMP permanent modification, but defaulted in their payments. This extension and expansion of HAMP, known as HAMP 2, expands the pool of loans eligible for loan modification.

On October 24, 2011, the FHFA announced changes to HARP for certain loans sold to Fannie Mae and Freddie Mac. The changes to HARP are designed to increase the number of mortgage loans eligible for refinancing under the program. Specifically, these changes eliminate the maximum loan-to-value ratio and appraisal requirements and reduce risk-based pricing and other fees to borrowers. The FHFA further announced that it is waiving certain lender representations and

warranties for loans refinanced under the program. To be eligible for refinance under these changes to HARP, the loan must have been sold to Fannie Mae or Freddie Mac prior to May 31, 2009, and the loan must be current at the time of refinance with no late payments in the past six months and no more than one late payment in the past twelve months. In addition to these changes, the FHFA announced that HARP will continue through December 31, 2013. These changes are expected to increase mortgage loan prepayment speeds, which would likely have an unfavorable impact on the valuation of our mortgage servicing rights; however, increased prepayment speeds will allow for an increase in loan origination volumes.

Servicing standards for the loss mitigation process continue to develop. As part of the CFPB's servicing rules issued on January 17, 2013, servicers are required to make good faith efforts to establish contact with borrowers by the 36th day of delinquency to discuss the availability of the foreclosure prevention options. The rules also require continuity of contact between servicers and delinquent borrowers to advise and assist with the loss mitigation and foreclosure processes. Upon receipt of a timely and completed application, servicers are required to consider the borrower for all foreclosure prevention options and advise the borrower of its decisions relating to these options before proceeding to a foreclosure sale. Similar laws are developing in states such as California, Massachusetts and Washington to establish foreclosure prevention requirements, including the requirements discussed above.

We believe that many banks are currently under tremendous pressure to exit, or reduce their exposure to, the mortgage banking business as a result of increased regulatory scrutiny and capital requirements, headline risk associated with sizeable legal settlements and potentially significant earnings volatility. As a result of the severe dislocation in the U.S. housing market and the related fallout, regulatory and legislative attention on the mortgage industry has increased. Numerous legislative and regulatory actions have been proposed, including the following:


Increased Capital Requirements		• Pending Basel III standards impose material capital charges for banks holding mortgage servicing assets, including substantially higher risk weightings for lower quality mortgage assets and increased MSR risk weightings of 250%, with limitations on capital qualification
Dodd-Frank		• Requires any "securitizer" to retain a minimum 5% unhedged piece of the credit risk unless loans meet the "Qualified Residential Mortgage" definition, adds certain blackout periods to customer access when outsourcing fulfillment functions and creates the CFPB
		• The Qualified Mortgage rule safe harbor limits mortgage loans to 43% DTI, loans' annual percentage rates, or APRs, below the "higher-priced" threshold of 150 basis points over the Average Prime Offer Rate, or APOR, 3% fees and costs cap, and eligibility for purchase by the GSEs or Agencies
SAFE Act		• Mandates a nationwide licensing and registration system for residential mortgage loan originators


Joint Federal-State Mortgage Servicing Settlement		• $25 billion settlement between Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally and 49 state Attorneys General and the HUD regarding servicing and foreclosure practices including monetary penalties and requires changes in servicing practices
New CFPB Servicer Rules		• Requires servicers to provide monthly mortgage statements with a detailed breakdown of payments, interest rate adjustment notices, prompt crediting of payments and payoff statements, force placed insurance requirements, error resolution and information requests from borrowers, policy and procedure requirements, early notices about foreclosure prevention options, continuity of contact for troubled borrowers, and loss mitigation procedures
Consent Orders		• Requires servicers to implement a single point of contact, or SPOC, for delinquent borrowers, stronger vendor management controls, procedures governing the parallel use of loss mitigation and foreclosure practices, as well as staffing levels and training
Regulatory Scrutiny & Headline Risk		• Mortgage settlements with residential MBS holders • "Robo-signing" headlines • Robust loan put-back from GSEs • Servicing requirements regarding delinquent mortgages • Modification of servicing compensation related to Fannie Mae and Freddie Mac loans • New regulations from the recently formed CFPB • Additional litigation brought by Attorneys General of nonparticipating states • Forced place insurance risk

We believe the aforementioned factors will disproportionately adversely affect the largest bank originators and servicers. Additionally, we believe there is a limited number of non-bank mortgage companies such as us who are positioned to capitalize upon these opportunities by providing a high level of service with sufficient scale to comply with the new regulatory and legislative standards.

On September 7, 2008, the FHFA placed Fannie Mae and Freddie Mac into conservatorship and, together with the U.S. Treasury, established a program designed to boost investor confidence in their respective debt and MBS. The U.S. government has expressed interest in reforming and significantly reducing the participation of the GSEs in the residential mortgage market. We believe that a reduction in the GSEs' participation will create opportunities for private capital in the non-Agency loan market and that we are well positioned to take advantage of such opportunities.

At the direction of the Federal Housing Finance Agency, or FHFA, Freddie Mac and Fannie Mae have jointly modified their representation and warranty frameworks with respect to all loans with settlement dates of January 1, 2013 or later. Under the new selling representation and warranty frameworks, once a mortgage has established an acceptable payment history (generally 36 months) and if it meets certain eligibility criteria, these GSEs will not exercise their remedies, including the issuance of a repurchase request, in connection with a seller/servicer's breaches of certain selling representations and warranties.

In addition to the market opportunities that we have identified and that we believe will continue to present themselves, numerous government programs and initiatives, such as HARP and HAMP, continue to provide advantages for integrated mortgage originators and servicers with specialized expertise.

Investment management is the professional management of securities and other assets on behalf of individual and institutional investors. Traditional investment managers, such as separate account and mutual fund managers, generally engage in managing and advising investment portfolios of equity and fixed income securities. The investment objectives of these portfolios include maximizing total return, capital appreciation and current income or tracking the performance of a particular index. Performance is typically evaluated over various time periods based on investment returns relative to the appropriate market index or peer group. Managers are generally compensated based on a percentage of assets under management. Investors generally have unrestricted access to their capital through market transactions in the case of closed-end funds and exchange-traded funds, or through withdrawals in the case of separate accounts and mutual funds, or open-end funds.

Alternative investment managers such as managers of hedge funds, private equity funds, venture capital funds, real estate funds, mezzanine funds and distressed funds, utilize a variety of investment strategies to achieve returns within certain stipulated risk parameters and investment criteria. These returns are typically evaluated on an absolute basis, rather than benchmarked in relation to an index. The compensation structure for alternative investment managers may include investment management fees on committed or contributed capital, transaction and advisory fees as capital is invested (typically for private equity funds) and carried interest or performance fees tied to achieving certain absolute return hurdles. Unlike traditional investment managers, alternative investment managers may limit investors' access to funds once committed or invested for fixed periods or until the investments have been realized. Many of these funds are limited-life vehicles similar to our Investment Funds.

Externally-managed mortgage REITs such as PMT are alternative investment vehicles with permanent capital that are specifically designed to invest in mortgage-related assets on a tax-efficient basis. REITs generally are not subject to U.S. federal income taxes to the extent that they distribute annually at least 90% of their REIT taxable income to their stockholders. The manager of a mortgage REIT receives a base management fee that is typically a percentage of the stockholders' equity of the REIT and is a stable income stream since the invested capital is not subject to outflows. The manager may also receive an incentive fee which entitles it to share the excess profit above a certain hurdle rate with the stockholders of the REIT. The revenue streams of the manager are often protected by a management contract with a high barrier to exit in the form of a termination fee, typically defined as a multiple of the average annual management fee earned by the manager over a period prior to the termination.

The mortgage REIT sector has benefited in recent years from significant inflows of new capital driven by investor demand for yield product in an environment of historically low interest rates. According to Dealogic, over the three-year period starting January 1, 2010 and ending December 31, 2012, residential mortgage REITs have raised approximately $30 billion in initial public offerings and follow-on offerings of common stock. Companies in the sector have grown through frequent incremental equity raises. PMT has been a beneficiary of these favorable capital-raising trends, which has allowed us to grow net assets under management and fee revenues in our Investment Management segment.

We conduct our business in two segments: mortgage banking and investment management. Our principal mortgage banking subsidiary, PLS, is a leading non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for Fannie Mae and Freddie Mac, each of which is a GSE. It is also an approved issuer of securities guaranteed by Ginnie Mae, a lender of the FHA, a lender/servicer of the VA, and a servicer for HAMP. PLS is licensed (or exempt or otherwise not required to be licensed) to originate residential mortgage loans in 45 states and the District of Columbia and to service loans in 49 states, the District of Columbia and the U.S. Virgin Islands.

Our principal investment management subsidiary, PCM, is an SEC registered investment adviser. It manages PMT, a mortgage REIT listed on the NYSE. PCM also manages our Investment Funds. Our Advised Entities have been some of the leading non-bank investors in distressed mortgage loans since 2008, investing in loans with over $5.5 billion of unpaid principal balances, or UPB. As of September 30, 2012, our Advised Entities had combined net assets of approximately $1.8 billion.

We conduct some of our activities for our own account and some for our Advised Entities. We earn significant fee income and carried interest from the activities we conduct for our Advised Entities; such fees include investment management fees, incentive fees, subservicing fees for servicing loan portfolios and fulfillment fees for mortgage banking services provided to PMT in connection with our correspondent lending program. Our relationships with our Advised Entities also allow us to pursue some market opportunities with reduced capital intensity, with PLS and PCM providing operational expertise and our Advised Entities providing investment capital for mortgage-related assets.

As summarized below, our mortgage banking segment is comprised of three primary businesses: correspondent lending, retail lending, and loan servicing.

Our existing servicing portfolio is our main source of leads for new originations. These portfolio-based originations include: refinancing loans to proactively protect our servicing portfolio from run-off, which we refer to as "recapture;" refinancing loans from the restructure of distressed loans acquired by our Advised Entities; and purchasing loans to facilitate the sale of REO properties held by our Advised Entities. In addition, we are growing our non-portfolio originations by sourcing prospective customers through consumer marketing and community and professional relationships.

We service loans for which we own the MSRs and we service loans on behalf of other MSR or mortgage owners which we refer to as "subservicing." The owner of MSRs acts on behalf of mortgage loan owners and has the contractual right to receive a stream of cash flows (expressed as a percentage of UPB) in exchange for performing specified mortgage servicing functions and temporarily advancing funds to cover payments on delinquent and defaulted mortgages. As a subservicer, we earn a contractual fee on a per-loan basis and the right to any ancillary fees, and we are reimbursed for any servicing advances we make on delinquent or defaulted mortgages. We presently subservice only for our Advised Entities.

We characterize our servicing business as either "Prime Servicing" or "Special Servicing."

The following table shows the UPB and other information for certain categories of loans within our servicing portfolio:

	December 31,

	2012			2011			2010
Prime Servicing Portfolio
Subserviced for our Advised Entities—Originated
Unpaid Principal Balance (in millions)	$	12,920		$	496		$	4
Loan count		50,327			1,905			22
Avg. loan balance (in thousands)	$	257		$	261		$	176
Avg. coupon		3.70	%		4.23	%		4.76	%
Avg. FICO credit score		763			770			714
30+ days delinquent (% of loans)		0.37	%		0.26	%		0.00	%
Owned MSRs—Originated
Unpaid Principal Balance (in millions)	$	9,410		$	968		$	158
Loan count		44,393			4,480			599
Avg. loan balance (in thousands)	$	212		$	216		$	264
Avg. coupon		3.68	%		4.38	%		4.86	%
Avg. FICO credit score		711			728			755
30+ days delinquent (% of loans)		1.55	%		1.00	%		1.00	%
Owned MSRs—MSR Acquisitions
Unpaid Principal Balance (in millions)	$	990		$	1,403		$	1,429
Loan count		5,984			7,966			7,474
Avg. loan balance (in thousands)	$	166		$	176		$	191
Avg. coupon		5.32	%		5.34	%		5.41	%
Avg. FICO credit score		729			732			744
30+ days delinquent (% of loans)		5.53	%		4.77	%		3.73	%
Total Prime Servicing Portfolio
Unpaid Principal Balance (in millions)	$	23,320		$	2,867		$	1,591
Loan count		100,704			14,351			8,095
Special Servicing Portfolio
Subserviced for our Advised Entities
Unpaid Principal Balance (in millions)	$	3,560		$	3,382		$	2,097
Loan count		15,590			13,894			8,956
Avg. loan balance (in thousands)	$	228		$	243		$	234
Avg. coupon		6.24	%		6.58	%		7.10	%
Avg. FICO credit score		637			640			638
30+ days delinquent (% of loans)		73.33	%		77.17	%		76.30	%
Owned MSRs—MSR Acquisitions
Unpaid Principal Balance (in millions)	$	1,272		$	1,487		$	1,671
Loan count		7,159			8,150			8,971
Avg. loan balance (in thousands)	$	178		$	182		$	186
Avg. coupon		6.21	%		6.29	%		6.38	%
Avg. FICO credit score		696			697			698
30+ days delinquent (% of loans)		19.60	%		19.50	%		17.25	%
Total Special Servicing Portfolio
Unpaid Principal Balance (in millions)	$	4,832		$	4,869		$	3,768
Loan count		22,749			22,044			17,927
Total Servicing Portfolio
Unpaid Principal Balance (in millions)	$	28,152		$	7,737		$	5,359

Loan count		123,453			36,395			26,022

We have grown our mortgage servicing portfolio primarily through organic mortgage loan production in our correspondent lending and retail lending businesses, supplemented by the opportunistic acquisition by our Advised Entities of distressed pools of residential whole loans, which we subservice, and our own MSR acquisitions. As of December 31, 2012, we serviced or subserviced approximately 123,000 loans with an aggregate UPB of approximately $28.2 billion. The majority of these loans are serviced for Fannie Mae, Freddie Mac or Ginnie Mae securitizations.

The following charts detail the percentages of the aggregate UPB in our prime and special servicing and prime subservicing portfolios, and our total servicing portfolio by investor as of December 31, 2012:

The following charts detail the percentages of the aggregate UPB in our prime and special servicing portfolios by product type as of December 31, 2012:

The following charts detail the percentages of the aggregate UPB in our prime and special servicing portfolios by geography as of December 31, 2012:

We are an investment manager through our wholly-owned subsidiary PCM. PCM currently manages PMT and the Investment Funds, which had combined net assets of approximately $1.8 billion as of September 30, 2012. For these activities, we earn management fees as a percentage of net assets and incentive compensation based on investment performance. The Investment Funds are limited-life private funds established in August 2008, whose commitment periods ended in 2011. As of September 30, 2012, these funds had aggregate equity value of $576 million and had generated total returns of 39%, net of all fees, expenses and carried interest, since their inception. The term of each of these funds ends in December 2016 with the possibility of three one-year extensions. Subject to contractual restrictions with PMT, we may establish additional private investment vehicles to invest in distressed loans or pursue related mortgage strategies, for which we would provide investment management services as well.

We believe that we are one of the few non-bank market participants with such a broad range of capabilities. Our leading industry position and synergistic businesses position us favorably in the rapidly evolving mortgage industry. For example, our loan production businesses and investment management activities result in the growth of our servicing business, our special servicing capabilities enhance investment management performance through execution of loss mitigation programs and our origination platform mitigates run-off of our servicing portfolios through refinance recapture.

We have been profitable every year except for our first year of operations and have a track record of generating meaningful returns on equity for our equityholders. Since our inception, we have made substantial investments in infrastructure, technology, and operations that have subsequently facilitated significant growth in our business volumes and profits. For the nine months ended September 30, 2012, our net income grew 427% to $60.5 million as compared to the nine months ended September 30, 2011 resulting in a return on average equity of 49.5%, which was largely driven by growth in our correspondent lending production. During 2012, our correspondent lending production totaled $21.5 billion, a 1,587% increase versus 2011, and our servicing portfolio totaled approximately $28.2 billion in UPB as of December 31, 2012, a 264% increase versus a year earlier. We believe that there is significant growth potential yet to be tapped within our existing businesses and also through our expansion into adjacent related businesses as described in "—Our Growth Strategies." Our historical profitability has generated internal cash flows that can be used to fund additional growth in our operations.

We believe we have a superior mortgage banking platform. Since our formation in 2008, we have utilized state-of-the-art technology combined with best-in-class processes to address the complexity of conducting mortgage banking activities in the post-crisis environment. Unlike many other competing platforms in the market, our platform is not overburdened by "legacy" portfolios which are either distressed or have potentially significant repurchase obligations to the GSEs or liability to other non-Agency investors in connection with loans originated prior to the recent financial crisis that fail to meet required underwriting standards; nor is it constrained by the inherent limitation of old existing systems and operations that are not able to accommodate large numbers of delinquent loans. Instead, our operating platform is legacy-free, highly scalable and specifically designed to address the needs of our businesses. It provides centralized and streamlined processes and infrastructure across all of the critical areas for mortgage management, including correspondent and retail lending, underwriting, quality control, secondary marketing and capital markets, portfolio strategy, servicing, finance and other supporting functions. Many of these functions are proprietary, including our loan-level analytics platform for distressed loan management which we call "LENE^SM" (Loan Enhancement Normalization Engine).

Our management team has extensive experience managing all aspects of the residential mortgage business through a variety of credit cycles and market conditions. Stanford L. Kurland, our chairman and chief executive officer, is an accomplished financial services executive with more than 36 years of experience in mortgage banking and was a former president and chief operating officer of Countrywide Financial Corporation until September 2006. Our 47 senior-most executives have on average 23 years of relevant industry experience. Many of them have experience in managing other public companies and have also worked together for over a decade. In addition, our management owns approximately one-third of our equity prior to this offering and will own % of the New Holdings Units outstanding immediately following this offering, creating a significant alignment of interests between our management and stockholders. Such a deep, extensive and interest-aligned management team has delivered a successful execution of our strategy, demonstrated by our profitable growth in a relatively short period of time. We also believe that our seasoned, experienced management team is a significant competitive advantage for us as the mortgage industry continues its transformation and enters new market cycles.

business. We have successfully turned such relationships into our competitive advantage over other new entrants in our businesses.

We believe that we have a unique operating platform comprised of industry-leading functional capabilities that support the multiple businesses we presently operate in and position us favorably to take advantage of future opportunities in the U.S. residential mortgage markets. These functions include: correspondent and retail loan production; capital markets and secondary marketing; centralized credit activities, including product development and credit policy, underwriting and appraisals, and quality control activities; portfolio strategy; loan servicing; information technology; compliance and regulatory; and other supporting functions.

Although our loan production activities are specialized for the particular needs of our correspondent and retail lending businesses, these businesses share a common, company-wide approach to loan manufacturing, and rely on centralized functions including credit and secondary marketing to provide critical capabilities. For example, product development is coordinated by our central credit function and pricing is coordinated by our secondary marketing function, working in close collaboration with our correspondent and retail units. Underwriting and appraisal review activities are conducted by our central credit function. As a result, the key capabilities in the correspondent and retail production units are the processes and systems to successfully acquire and manage customers, acquire new loans, and fulfill the loans to our standards for eventual sale or securitization.

Our loan production capabilities for correspondent lending are focused in three major areas: client approval, monitoring, and management; products and pricing; and loan fulfillment.

Client selection is a key component of our correspondent lending business model. Clients consist of independent mortgage companies, financial institutions, and home builders. Clients share our core values of manufacturing quality, mutual profitability, responsible lending and regulatory compliance. The approval process includes a review of information such as the correspondent originator's legal structure, organizational structure, resumes of key managers, policies and procedures for key areas,

quality control results, and investor scorecards. Applicants must meet minimum eligibility requirements including financial requirements, state licensing, agency approvals, and acceptable background checks. We negotiate and execute a loan purchase agreement for each approved client. Ongoing client monitoring activities include regular reviews of government insuring, accounts receivables, outbound repurchase activity, client scorecards, and client-specific metrics such as run-off. Clients who exceed or fall below certain thresholds are subject to further review and a remediation plan. In addition, we require officer compliance certifications on a quarterly basis, and re-certifications on an annual basis, for each client, including financial statements, quality control reports, and production volume reports.

Counterparty management activities are governed by a policy established by our central credit function. Under the policy, a client approval committee approves the criteria related to client approvals, monitoring and re-certifications. The committee meets on a quarterly basis to review new approvals, terminations and decisions made as a result of the monitoring activities.

Pricing activities are coordinated by a products and pricing group that is responsible for all pricing-related activities including margin management, product development, transaction management, sales support, vendor management, web site enhancement and maintenance, and reporting and system development. The correspondent lending unit distributes pricing each day to its clients, utilizing a break-even loan price determined by our central secondary marketing function and building in appropriate margins. Pricing and margin management is a shared responsibility of the products and pricing group and correspondent sales team. Pricing policies and procedures are developed, maintained, and monitored by products and pricing, while many of the customer-level pricing decisions are set by the sales team. We use a variety of tools that allow our sales team to determine pricing for each seller independently. We monitor interest-rate lock volumes (with associated revenue at the loan level) in real time throughout each business day in order to optimize volume and revenue opportunities. We offer a full suite of conventional and government-insured products to our approved clients, with periodic rollouts of new products and enhancements to the base offerings from the GSEs, FHA and VA. Correspondent sellers deliver loans to PMT through "best efforts" transactions, in which PMT bears the risk that the seller is unable to close, fund and deliver the loan, and through "mandatory" transactions, in which the seller commits to deliver a funded loan to PMT. In 2013, we expect to introduce an assignment of trade process, or AOT, in which a seller fills a forward MBS trade it has previously entered into with a third-party broker-dealer by delivering loans to PMT.

We provide sales support through a pricing help desk and a customer care email function, which are staffed and trained to respond to all pricing, commitment, or product related questions. The GoPennyMac.com website operates as a communication tool with our clients, as well as a means to lock single loans and upload files. Our transaction management team is responsible for all commitment-related activities, from initial lock through acquisition and potential post-closing reconciliation.

The loan acquisition process is conducted by a loan fulfillment group that is responsible for ensuring all required loan data is available in our electronic systems, validating that the data is supported by underlying documents in the loan file, evaluating key areas of credit, risk and adherence to consumer and regulatory compliance, and escalating loans for additional review according to our credit policy. In addition, the loan fulfillment group validates that the loan collateral is received through a third-party document custodian as well as confirms wire details for final funding of loans.

The loan fulfillment group works closely with our central credit function to ensure that the loans acquired meet investor guidelines and state and federal regulations, and that we meet our clients' expectations for service. We have successfully scaled the fulfillment operations to support the growth of our correspondent lending business and are positioned for further growth through our bi-coastal operating centers located in Tampa, Florida and Moorpark, California.

Our loan production capabilities for retail lending focus on our call center operations and industry-leading technology designed to maximize the effectiveness of our operations. Our retail unit consists of multiple call centers staffed with loan officers and processors who interact with consumers across the United States. We utilize a technology-focused approach in sophisticated telephony systems, lead-management connectivity, automated pricing, paperless workflow, lending compliance and state-based routing, which is a system that automatically routes calls identified as originating from a specific state to one of our mortgage originators licensed in that state. We believe that these systems allow us to improve conversion rates, deliver quality customer service, manufacture high-quality loans, and lower costs.

In order to maximize our ability to capture servicing portfolio-based originations, our retail unit has instituted disciplined operational processes to capitalize on the referrals generated by our servicing unit. For refinance opportunities, these processes focus on achieving high contact rates and optimizing the customer experience to maximize the recapture rate. For purchase loans to facilitate the sale of REO properties and short sales, our retail unit includes a dedicated sales team to prequalify and provide financing to high-quality buyers.

The retail unit also works in partnership with our portfolio strategy function in several important ways. The retail business originates refinance loans from the restructure of distressed loans acquired by our Advised Entities, which is an effective strategy pursued by our portfolio strategy group in distressed loan management. In sourcing leads for non-portfolio originations, the retail unit relies on a data-driven analytical approach to consumer marketing overseen by our portfolio strategy group.

Capital markets and secondary marketing is a critical capability that spans our mortgage banking and investment management businesses. The capital markets unit is responsible for the overall investment activities conducted by us and for our Advised Entities. Potential investment assets include Agency mortgage loans and MBS, non-Agency loans and asset-backed securities, or ABS, mortgage servicing rights, and distressed whole loans. In our loan production activities, our secondary marketing group is responsible for maximizing proceeds through sale or securitization of the loans that we produce.

All of these activities are managed using industry-leading financial analytics and valuation models. In addition, we have a dedicated analysis and valuation group focused on valuing and forecasting the performance of financial instruments that we own, manage, or evaluate for purchase. We use specialized valuation and forecast models, both proprietary and third-party, for different mortgage-related assets such as performing residential mortgage loans, distressed and non-performing residential mortgage loans, mortgage servicing rights, and residential mortgage-backed securities. We continuously update, calibrate and validate our models using a combination of data from internal sources as well as market information and external data providers. In addition to valuation and forecasting, we utilize these analytical tools to identify trends and monitor the performance of our investments owned by us and our Advised Entities.

Our investment activities are governed by our investment committee, which meets on an as-needed basis to review contemplated purchases and sales of whole loan portfolios, securities, and MSR portfolios. The investment committee includes members of our executive management and senior capital markets and investment professionals with substantial expertise in pricing and trading mortgages and mortgage-related assets. Our investment process is focused on meeting the investment objectives of the Company and our Advised Entities while maintaining adequate balance between risk and return.

The key capabilities that comprise secondary marketing include pricing, pooling and delivery, counterparty risk management, interest rate risk management, best execution analysis, forward instrument eligibility, data validation and system interface.

We use a formulaic approach to determine loan pricing: revenues minus our expenses minus our required profit margin equals the loan price. Our revenue consists of the proceeds that we can obtain upon the sale of the loan, origination fees, and the value that we attribute to the mortgage servicing rights. Our primary expenses include hedging costs, origination expenses, overhead expenses, interest expense, and reserves established for potential repurchase claims. Our secondary marketing group calculates loan pricing each day and disseminates it to the correspondent and retail loan origination systems. The production units take the price provided by our secondary marketing group and adjust it to account for adjustments set by the GSEs, such as Fannie Mae's 0.25% adverse market delivery charge and loan-level price adjustments that are assessed based on loan-specific attributes such as loan-to-value ratio and the credit score of the borrower.

We utilize our models to group, or pool, loans according to the best price execution for a given loan, with similar loans pooled together to form an Agency security. We use the GSEs' systems to securely transmit loan-level data, and mortgage notes are shipped directly to a third-party document custodian for safekeeping. Our document custodian reviews all of the loan documents for accuracy and completeness and certifies the loans or pool of loans. We seek to pool, securitize and settle our loans in an operationally efficient manner in order to minimize the aging of loans.

When we enter into an interest rate lock, we assume interest rate risk for the duration of the lock period. In order to manage the interest rate risk, we have a policy that governs allowable lock periods, lock expirations, lock extensions, renegotiations and cancellations. We utilize hedging to reduce the interest rate risk embedded in our loan origination pipeline; we do not enter into speculative interest rate trades. We continuously monitor our interest rate positions and make hedging decisions subject to senior management review.

Our credit function is focused on managing credit exposures across the company, with an emphasis on loan production. It is managed centrally and is comprised of product development and credit policy; underwriting and appraisal; and quality control functions.

We carefully construct our product menu to manage our credit exposure. In our correspondent and retail lending businesses, we primarily produce standard conventional conforming loans, Desktop Underwriter Refi Plus loans, FHA Section 203b loans and FHA Streamline Refinances, in accordance with Fannie Mae, Freddie Mac and FHA guidelines, as applicable. During 2012, approximately 60% of the loans that we produced were delivered to Fannie Mae or Freddie Mac and 39% of our loans were originated to FHA guidelines and pooled into Ginnie Mae securities. We also intend to increase our production of jumbo mortgage loans, which are loans with an initial principal balance greater than the conventional conforming loan limits. These loans would likely be securitized.

We utilize our credit policies to manage our credit exposure, primarily by setting minimum guidelines for credit scores and debt-to-income ratios for both conventional and FHA loans.

The underwriting and appraisal activities for correspondent and retail lending are managed by our Chief Underwriter, who reports to the Chief Credit Officer. For those loan programs where an automated underwriting decision is applicable, such as through Desktop Underwriter, or DU, Fannie Mae's automated underwriting system, we require an "Accept/Eligible" response, the most favorable approval decision. For those loan programs where a decision from DU is not applicable, loans are underwritten according to the applicable GSE Seller Guide or the applicable FHA Mortgagee Letters.

In retail lending, all loans are underwritten by underwriters who are directly employed by us. All appraisals are obtained from appraisal management companies and all appraisals are reviewed by licensed appraisers who are directly employed by us.

In correspondent lending, all loans are audited by auditors who are directly employed by us and samples of loans are selected for more detailed pre-purchase underwriting reviews and pre-purchase appraisal reviews. Not all pre-purchase underwriting reviews or pre-purchase appraisal reviews are completed by individuals who are employees of ours. When a pre-purchase underwriting review is outsourced, the review is completed by a nationally recognized contract underwriting firm whose work is re-reviewed by one of our underwriters before a final decision on the loan is made. We also rely on additional controls in correspondent lending including the loan purchase agreement between us and the correspondent seller, the seller approval process and the seller monitoring process.

We maintain a staff of quality control underwriters and processors to manage our underwriting quality control activities. These activities comply with Fannie Mae, Freddie Mac and FHA standards and are generally reviewed by Fannie Mae and Freddie Mac on an annual basis. Loans produced through our correspondent and retail lending businesses are reviewed as part of random, discretionary and targeted quality control samples. The scope of the quality control review validates all of the activities performed by the underwriter and also requires a new credit report, re-verifications of income and assets and a re-validation of the appraised value on 10% of the quality control sample. The result of the quality control review is a rating which assesses the overall compliance with the applicable underwriting guidelines. The most negative ranking is "Unsatisfactory." Unsatisfactory loans generally have significant underwriting defects and have a high probability of resulting in an investor repurchase request. During 2012, the percentage of loans rated Unsatisfactory has remained less than 1%.

Portfolio strategy is a dedicated function that we have developed which is responsible for maximizing the value of mortgage assets once they have been acquired by us or our Advised Entities.

In this role, our portfolio strategy group has a particular focus on the distressed mortgage loans that we manage for our Advised Entities and designs and implements strategies including loan restructures, modifications, and alternatives to foreclosures that are executed in our special servicing business. Our portfolio strategy group is also responsible for the data-driven analytical approach to consumer marketing which is utilized by our retail lending business.

A core element of our distressed loan management strategy is to work with borrowers to avoid foreclosure where possible, cure loan defaults and prevent future defaults. Where prudent, we strive to restructure existing mortgage loans on terms that allow the borrower to retain ownership and remain in his or her home by performing on the modified mortgage loan terms. We use proprietary loan-level models and tools, with appropriate consideration of the borrowers' specific economic situation and the requirements of the loan owner, to modify loans and enable the borrowers to continue to make payments on the modified mortgage loan. Moreover, we solicit delinquent and non-delinquent borrowers for refinance programs, which include options for debt forgiveness.

Upon acquiring a distressed loan, our portfolio strategy team coordinates an attempt by the servicing unit to open a line of communication with the borrower and to conduct an initial interview. We use PLS's call center along with strategic marketing campaigns and partnerships with real estate agents to establish contact with borrowers. In 2012, we were successful 62% of the time in making contact and conducting an initial interview. The results of the initial interview generally provide us with additional information on the borrower's financial condition, an understanding of the borrower's reason or reasons for delinquency or hardship and additional information regarding the borrower's property condition. Based on the information acquired during the initial interview, information from property assessments and portfolio and loan modification guidelines established by us or the mortgage loan investor, we select from among a range of appropriate resolution options as directed by our proprietary loan-level tools. The standardization of our portfolio strategy through the use of proprietary technology is designed to ensure that modifications or other approaches improve economic value relative to foreclosure, mitigate the risk of disparate impacts and create an improved customer experience. The range of options includes structured repayment plans, special forbearance of defaults, payoffs, deeds in lieu of foreclosure, foreclosures, principal payment deferments or interest payment deferments, changes in the interest rate, forgiveness of principal and other loan modifications through a variety of structures, including refinancing. Specifically, we offer the FHA "negative equity" refinance program to both performing and non-performing borrowers, which provides principal reduction and fixed 30-year mortgages at prevailing market interest rates. In such a refinance, the borrower owed more on the old loan than the current property value and the excess unpaid principal amount is typically forgiven.

Portfolio strategy and marketing are also critical capabilities in the pursuit of new loan originations and refinancings through our retail lending business. We use proprietary models to identify refinance-eligible borrowers from our servicing portfolio, and we solicit these borrowers using a combination of approaches including direct-mail, email, and our website. We regularly analyze and review lead and application trends in order to optimize recapture rates from our servicing portfolio. Customer retention and acquisition activities are supported by industry-leading technology which provides lead management and lead distribution capabilities to our retail call center, as well as analytical tools to increase the efficiency of marketing expenditures.

We have developed sophisticated capabilities to service both performing and delinquent loans through our servicing subsidiary, PLS. These capabilities are critical for both the Prime Servicing and Special Servicing categories of our servicing business and allow us to deliver strong performance to support our loan production businesses and enhance investment performance for our Advised Entities.

Non-default servicing is comprised of all activities related to the servicing of performing loans. These activities include the entry of a loan into our servicing system, which we refer to as "loan boarding," escrow administration, special loans, document control, customer communications, payoffs, lien release, tax services and the customer call center. Loans are boarded through an electronic loan interface, or ELI, application. The process and controls built into ELI allow us to board servicing transfers of various sizes, from fewer than 100 loans to over 10,000. Our loan boarding team has quality control checks in place to ensure boarding accuracy and to identify data anomalies and illogical conditions. All loan file documentation, outbound communications, and inbound correspondence are stored in our imaging system and are available for viewing on demand. All correspondence is tracked from receipt to completion through a workflow tracking system. Escalated issues are also tracked and reported each month allowing us to identify drivers, trends and training opportunities. Tax servicing is primarily conducted by our staff, with limited geographies addressed by a third-party vendor. We believe that in-house tax servicing affords us greater control over the tax bill payment process while reducing costs through increased efficiency.

Our call center serves as a primary contact point for our non-defaulted customers. Our inbound call center technology allows for the automated routing of calls based on loan status or customer selection. We have established specialty queues which improve efficiency and the customer experience by allowing the customer to interact with a representative most skilled at a particular type of inquiry. The call center uses a portal screen to log each inquiry and the disposition of each call. This proprietary system which we call the Loan Administration Mortgage Portal, or LAMP, also provides nearly complete loan servicing information without the need to navigate a number of different systems screens. If an inquiry requires assistance from another area, another proprietary system, the Loan Administration Follow-Up Application, or LAFA, is used to track that item through to completion. We continue to expand our offerings on our interactive voice response, or IVR, system and website, to provide more options to those customers who prefer automated service. We strongly emphasize call quality in the call center, and all customer calls are recorded. Recorded calls are used to identify procedural and training opportunities. Calls are reviewed as part of a quality monitoring program which requires a minimum number of monitoring for every representative each month based on performance. Feedback from these reviews, both positive and constructive, is provided to the representatives.

Default servicing focuses on servicing delinquent loans. It is more personnel intensive than non-default servicing as it requires more frequent and lengthier borrower communications as well as additional work related to potential solutions for resolving the delinquent loan. Our default group works in close partnership with our portfolio strategy function and retail production unit in refinancing distressed loans. Our default group is comprised of several operational areas including collections, loan modifications, short sales and deeds-in-lieu of foreclosure, bankruptcy, foreclosure and REO.

Collections efforts are structured to notify borrowers of their delinquency and collect payments to bring loans current when possible. We utilize proprietary systems designed to determine the appropriate resolution strategy based on borrower-provided information for those who are unable to make their delinquent payments. We also employ calling campaigns designed by a dedicated group of our analysts to target borrowers in early-stage delinquency. These campaigns are monitored daily to ensure compliance with collections regulations and to assess their effectiveness.

When a borrower is unable to make payments on a loan, we seek to restructure the loan through modification, which includes the use of federally sponsored loan modification programs such as HAMP. Through modification, the borrower keeps the same loan, but under restructured terms that improve either the ability or willingness to pay. In 2012, we were successful at converting HAMP trial

modifications to permanent modifications 97.5% of the time, one of the highest conversion rates among all HAMP servicers as published in the most recent MHA Performance Report. We also had a recidivism rate of 6% at year-end, well below the industry average, for loans that re-defaulted within six months of their permanent conversion. In certain instances, we are able to offer borrowers an FHA "negative equity" refinance, where the borrower is offered a new loan at market rates. As of November 30, 2012, PLS was the third largest originator of these loans in the country.

When loan resolution through home retention is not an option and the current property value is less than the amount owed, we seek to offer loss mitigation resolutions such as short sales or deeds-in-lieu of foreclosure, which help the borrower avoid foreclosure. In a short sale, the borrower agrees to sell the home to a third-party buyer at current market value while the investor agrees to forgive the remaining UPB. In a deed-in-lieu of foreclosure, the borrower agrees to transfer the deed and clean title of the home to the investor outside of the foreclosure process. The ultimate resolution of the asset is then handled by our REO group. Both short sales and deeds-in-lieu of foreclosure are typically preferable to the foreclosure process, which can be costly and time-consuming.

We have developed short sale and modification processing systems, including proprietary systems, that provide workflow and management tools which allow us to make decisions regarding individual cases quickly and within the appropriate guidelines. In the case of short sales, a borrower portal allows both borrowers and real estate agents the ability to directly upload documents to our system for review. This allows our reviewer to instantly access documents as they are submitted, provides the customer with assurance that the documentation was received, and facilitates a self-service view of the short sale decision process.

In late-stage delinquencies (that is, for borrowers more than 90 days past due), we will initiate foreclosure proceedings in accordance with state foreclosure guidelines. We work with licensed state attorneys and trustees on a vendor-managed platform to manage the foreclosure process for individual loans. In the event that a borrower chooses to file bankruptcy, the borrower is assigned to a bankruptcy specialist who will administer the bankruptcy plan proceedings in accordance with applicable law and in conjunction with an outsourcing firm.

Our REO group manages properties in the servicing portfolio that have completed the foreclosure or the deed-in-lieu of foreclosure process. We use both internal and external resources to manage the disposition of the REO properties. The primary goal of the REO team is to liquidate the properties at fair value within an acceptable timeframe, securing the lowest possible loss. Our REO group currently realizes net proceeds upon liquidation that average approximately 96% of the property's fair market value.

Our servicing unit includes a group dedicated to compliance-related functions including federal, state, and investor compliance, policies and procedures, and audit management. This servicing administration group focuses on identifying all upcoming changes to regulations or policies, documenting these changes and then working with each function impacted across the servicing unit to make sure that all processes, communications, and controls are updated to account for the changes. We conduct post-implementation testing to ensure that all the changes are effective. In addition, we monitor all internal and external audits to ensure that timely and consistent documentation is provided to all parties. Any findings or observations are monitored by this group for prompt remediation. We believe that the dedicated focus and attention on compliance and audits results in a better controlled environment.

Our information technology, or IT, function is centralized, with dedicated resources assigned to each of our major organizational units. This structure ensures the consistent use of similar technologies and solutions across the Company. As a legacy-free platform that is not based on old existing IT systems, we have designed our IT systems to take advantage of some of the latest technologies at low cost. We utilize technology, from call center routing systems to comprehensive valuation tools, to enhance the efficiency and effectiveness of our business operations.

We maintain two high-availability (Tier 3) SAS-70 Type II certified data centers located in Los Angeles, California and Chandler, Arizona. We have a 100% virtualized server environment coupled with extensive use of virtual desktop and thin-client technologies that we believe provides us with efficiency, agility, and fault tolerance at a low cost. Our data networks provide fast and reliable service by using enterprise-grade components and top-tier communications carriers with redundancy. To reduce costs and shorten application development time, we generally begin by purchasing off-the-shelf software solutions and also utilizing open-source solutions whenever possible. When off-the-shelf solutions do not meet our needs, we utilize an agile development approach for proprietary applications which results in frequent value-added updates or system enhancements and reduces the risk associated with longer-term or large-scale projects. Across our infrastructure, we believe that we have implemented a comprehensive set of security controls and defensive capabilities to prevent, detect and manage security incidents. Our IT staff has extensive experience in the mortgage industry, which we believe enables rapid and cost-effective design, development and implementation of IT solutions that meet our business needs.

Our business is subject to extensive federal, state and local regulation. Our loan production and loan servicing operations are primarily regulated at the state level by state licensing authorities and administrative agencies, with additional oversight from the CFPB. We, along with certain of our employees who engage in regulated activities, must apply for licensing as a mortgage banker or lender, loan servicer and debt collector pursuant to applicable state law. These state licensing requirements typically require an application process, fulfillment fees, background checks and administrative review. Our servicing operations are licensed (or exempt or otherwise not required to be licensed) to service mortgage loans in 49 states, the District of Columbia and the U.S. Virgin Islands. Our retail lending business is licensed to originate loans in 45 states and the District of Columbia. From time to time, we receive requests from states and other agencies for records, documents and information regarding our policies, procedures and practices regarding our loan production and loan servicing business activities, and undergo periodic examinations by state regulatory agencies. We incur significant ongoing costs to comply with these licensing and examination requirements.

While the U.S. federal government does not primarily regulate loan production, the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 requires all states to enact laws that require all individuals acting in the United States as mortgage loan originators be individually licensed or registered if they intend to offer mortgage loan products. These licensing requirements include enrollment in the Nationwide Mortgage Licensing System, application to state regulators for individual licenses, a minimum of 20 hours of pre-licensing education, an annual minimum of eight hours of continuing education and the successful completion of both national and state exams.

In addition to licensing requirements, we must comply with a number of federal consumer protection laws, including, among others:

Many of these laws are further impacted by the SAFE Act and implementation of new rules by the CFPB under the Dodd-Frank Act. On January 10, 2013, the CFPB issued its final "Ability to Repay" rule under TILA's implementing Regulation Z, which will require lenders to verify a consumer's ability to repay a mortgage loan. The rule will become effective on January 10, 2014, and creates a "Qualified Mortgage," or QM, using as its criteria (i) a debt-to-income, or DTI, ratio not to exceed 43%, (ii) points and fees paid by the borrower generally may not exceed 3% of the amount borrowed, and (iii) no loan features such as negative amortization, interest-only payments, terms exceeding 30 years, or balloon payments. In addition, "no-doc" loans, where the lender does not verify income or assets, cannot be QMs. Under a temporary exception, loans eligible to be purchased, guaranteed or insured by the Agencies will be QMs even if they do not meet the QM criteria. This exception will phase out as the Agencies issue their own QM rules, if the GSEs exit conservatorship, and in any event after seven years. The rule provides a "safe harbor" for QM loans, meaning that borrowers whose loans meet the QM standards will not be able to bring lawsuits against lenders or holders of MBS involving "ability to repay" claims.

Also on January 10, 2013, the CFPB issued its final mortgage escrow account rule relating to the establishment of mandatory escrow accounts on higher-priced mortgage loans. The final rule is effective June 1, 2013. This rule implements changes to earlier regulations and lengthens the time that mandatory escrow accounts must be maintained on higher-priced mortgage loans from one year to five

years and exempts certain types of transactions from the escrow requirement. A creditor or servicer may not cancel escrow accounts required under the rule except upon either the termination of the loan or receipt of a consumer's request to cancel the escrow account no earlier than five years after consummation, whichever happens first. The creditor or servicer may not cancel the escrow account unless the unpaid principal balance is less than 80% of the security property's original value and the consumer is not delinquent or in default on the loan at the time of the request.

Also on January 10, 2013, the CFPB issued its final rule increasing protections for consumers who take out high-cost mortgages. The rule expands the official definition of high-cost mortgages, and becomes effective on January 10, 2014. Under this rule, a mortgage will be considered high-cost if it is (i) a first mortgage with an APR that is more than 6.5 percentage points higher than the average prime offer rate, (ii) a second mortgage with an APR more than 8.5 percentage points higher than the average prime offer rate for a similar second mortgage, (iii) a loan of less than $20,000 with borrower-paid points and fees that exceed the lesser of 8% of the loan amount or $1,000, or (iv) a loan of $20,000 or more with points and fees that exceed 5% of the loan amount. This rule also bans certain features from high-cost mortgages, such as prepayment penalties, loan modification fees, and most fees charged to a borrower who requests a payoff statement. Balloon payments would also be banned, except in special circumstances.

On January 17, 2013, the CFPB issued its final rules relating to mortgage servicing, which will become effective on January 10, 2014. These rules address the following nine major servicing topics: (i) periodic billing statements with timing, form and content requirements; (ii) interest rate adjustment notices for ARM loans that must be provided to consumers prior to payment changes from rate changes; (iii) prompt crediting of payments and timing requirements for payoff statements; (iv) force placed insurance notice, coverage and cancellation requirements; (v) procedural requirements for error resolution and information requests from consumers; (vi) policy and procedure requirements for servicing functions and document management; (vii) early intervention notice requirements with delinquent borrowers about loss mitigation options; (viii) continuity of contact between servicer personnel and delinquent borrowers throughout the loss mitigation process; and (ix) loss mitigation procedures and restrictions on "dual tracking" of foreclosure alternatives with the foreclosure process.

On January 18, 2013, the CFPB issued final rules related to appraisals for higher-priced mortgage loans and consumer access to appraisals. These rules are effective January 18, 2014. The rule on appraisals for higher-price mortgages prohibits creditors from making such mortgage loans unless certain conditions are met, including obtaining a written appraisal based on a full interior appraisal. The rule on appraisal access requires creditors to notify consumers within a certain time period of their right to receive a copy of the appraisal and requires creditors to provide copies of the appraisal and other written valuation.

On January 20, 2013, the CFPB issued is final loan originator compensation rules which, among other things, create compensation restrictions and qualifications for loan originators. Under the rule, loan originators are prohibited from basing their compensation on "any transaction's terms or conditions" and dual compensation is generally prohibited. The rule mandates certain qualifications for loan originators, such as licensing, and requires loan originator organizations to ensure compliance with the Secure and Fair Enforcement for Mortgage Licensing Act, where applicable. The rule also prohibits the use of mandatory arbitration clauses in both mortgage and home equity loan agreements. The financing of single premiums or fees for credit insurance in connection with a consumer credit transaction secured by a dwelling is prohibited by the rule. The provisions of the rule prohibiting mandatory arbitration clauses and financing of single-premium credit insurance are effective June 1, 2013, and all other provisions of the rule are effective January 10, 2014.

The CFPB also plans to finalize or introduce other mortgage-related rules in 2013, including its proposal to combine certain disclosures that consumers receive in connection with applying for, and closing on, a mortgage loan under TILA and the Real Estate Settlement Procedures Act.

We are committed to complying with all applicable laws, regulations and contractual agreements. We believe that compliance is best managed by integrating responsibility within each department's activities to promote management and employee ownership. Accordingly, we have implemented a matrixed approach to the integration of our Compliance Program that utilizes expertise within the organization and defines clear responsibilities for the Program; specifically, business units are responsible for defining and managing compliance performance through process-based controls/risk remediation and reporting. Centralized monitoring and independent review, control testing/validation and regulation interpretation is performed by our Corporate Quality Control, Enterprise Risk Management & Regulatory Compliance, Internal Audit and Legal groups.

We have established a Compliance Committee to oversee the Compliance Program, engender a culture conducive to ethical conduct and compliance throughout the Company, proactively identify and respond to changes in our risk profile and regulatory environment, and establish compliance program standards, articulated in compliance policies. The Committee has identified Compliance Officers throughout the organization to oversee specific areas of compliance. Committee membership includes senior management from all divisions and meets monthly to remain updated on recurring and rotational topics.

We administer a role-centric Compliance Training Program to promote a shared and contemporary understanding of compliance issues and regulations affecting the mortgage industry among our workforce. Compliance awareness is introduced with on-boarding training and reinforced through mandatory coursework.

During 2012, our loan origination and servicing operations were reviewed by Fannie Mae, Freddie Mac, the U.S. Department of the Treasury, the FDIC and by many of the states where we are licensed. There were no significant findings of violations of law from any of these reviews.

We hold registered trademarks with respect to the name PennyMac®, the swirl design appearing in certain PennyMac drawings and logos and various additional designs and word marks relating to the PennyMac name. We do not otherwise rely on any copyright, patent or other form of registration to protect our rights in our intellectual property. Our other intellectual property includes proprietary know-how and technological innovations, such as our proprietary loan-level analytics "LENE^SM" (Loan Enhancement Normalization Engine) for distressed loan management, and other trade secrets that we have developed to maintain our competitive position.

Given the diverse and specialized nature of our businesses, we do not believe we have a direct competitor for the totality of our business. We compete with a number of nationally-focused companies in each of our businesses.

In our mortgage banking segment, we compete with large financial institutions and with other independent residential mortgage loan producers and servicers, such as Wells Fargo, JP Morgan Chase, Bank of America, Citigroup, U.S. Bank, Quicken Loans, Nationstar Mortgage, Ocwen Financial Corporation and Walter Investment Management Corp. In our correspondent and retail lending businesses, we compete on the basis of product offerings, technical knowledge, manufacturing quality, speed of execution, rate and fees. In our servicing business, we compete on the basis of experience in

the residential loan servicing business, quality of high-touch special servicing and historical servicing performance.

In our investment management segment, we compete for capital with both traditional and alternative investment managers. We compete on the basis of historical track record of risk-adjusted returns, experience of investment management team, the return profile of prospective investment opportunities and on the level of fees and expenses.

Our corporate offices are located at 6101 Condor Drive, Moorpark, California 93021, in a 142,000 square foot leased facility. This location, along with an adjacent property located at 5898 Condor Drive, Moorpark, California 93021, house our primary mortgage banking and investment management operations as well as our administrative offices.

We lease six additional locations throughout the country generally housing loan production activities. Our retail lending business occupies 20,000 square feet in Pasadena, CA for telemarketing and loan processing. We also have four branches located in Egan, MN, Sacramento, CA, Henderson, NV and Honolulu, HI devoted to loan production. These average 1,800 square feet and have lease terms between one and three years. We also lease 10,000 square feet in Tampa, FL devoted to our correspondent lending business.

None of our leases extend beyond five years and the financial commitments are immaterial to the scope of our operations.

As of December 31, 2012, we had 907 full-time and three part-time employees, all of whom are based in the United States. We also employ 101 full-time contractors. None of our employees is represented by a labor union and we consider our employee relations to be good.

From time to time, we may be exposed to litigation relating to our products and operations. We are not currently engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our financial conditions or results of operations.

The following table sets forth the names, ages and positions of the directors and executive officers of PennyMac Financial Services, Inc.:

Stanford Kurland. Mr. Kurland has been the Chairman and Chief Executive Officer of PennyMac Financial Services, Inc. since its formation and has been the Chairman and Chief Executive Officer of Private National Mortgage Acceptance Company, LLC since its formation in January 2008. In addition, Mr. Kurland has been the Chairman of the Board of Trustees of PennyMac Mortgage Investment Trust since July 2009, the Chairman of PNMAC Capital Management, LLC since March 2008, and the Chairman of PennyMac Loan Services, LLC since its formation in February 2008. Before founding the Company, from January 1979 to September 2006, Mr. Kurland served as a director and held several executive positions, including president, chief financial officer and chief operating officer, at Countrywide Financial Corporation, a diversified financial services company. Mr. Kurland holds a B.S. from California State University, Northridge. We believe Mr. Kurland is qualified to serve on our board of directors because he is our Chief Executive Officer and an accomplished financial services executive with more than 30 years of experience in the mortgage banking arena.

David Spector. Mr. Spector has been the President and Chief Operating Officer of PennyMac Financial Services, Inc. since its formation and has been President and Chief Investment Officer of Private National Mortgage Acceptance Company, LLC since January 2008. In addition, Mr. Spector has been a member of the board of trustees of PennyMac Mortgage Investment Trust since May 2009, a member of the board of directors of PNMAC Mortgage Opportunity Fund, LP since May 2008, and a member of the board of directors of PNMAC Mortgage Opportunity Fund, LLC since May 2008. Before joining the Company, Mr. Spector was co-head of global residential mortgages for Morgan Stanley, a global financial services firm, based in London. Before joining Morgan Stanley in September 2006, Mr. Spector was the senior managing director, secondary marketing, at Countrywide Financial Corporation, where he was employed from May 1990 to August 2006. Mr. Spector has also been a member of the board of directors of PennyMac Financial Services, Inc. since its formation. Mr. Spector holds a B.A. from the University of California, Los Angeles. We believe Mr. Spector is qualified to serve on our board of directors because he is our President and Chief Operating Officer and an experienced executive with broad mortgage banking expertise in portfolio investments, interest rate and credit risk management, and capital markets activity that includes pricing, trading and hedging.

Steve Bailey. Mr. Bailey has been the Chief Servicing Officer of PennyMac Financial Services, Inc. since its formation and has been the Chief Servicing Officer of Private National Mortgage Acceptance Company, LLC since April 2010. Mr. Bailey is responsible for directing our loan servicing and retail origination operation, including the implementation of the methods and programs directed at improving the value of acquired loans, as well as setting and managing performance goals for all aspects of the servicing and loan administration functions. Prior to joining the Company, Mr. Bailey served as a mortgage servicing executive at Countrywide Financial Corporation (and Bank of America Corporation, as its successor) from November 2004 until February 2010. Prior to this role, Mr. Bailey served as Chief Executive Officer of Loan Administration for Countrywide Home Loans following a progressive career in a variety of management and leadership positions in servicing operations from May 1985 until June 2008. Mr. Bailey holds a B.M. from the University of Southern California.

Andrew Chang. Mr. Chang has been the Chief Business Development Officer of PennyMac Financial Services, Inc. since its formation and has been the Chief Business Development Officer of Private National Mortgage Acceptance Company, LLC since May 2009. Mr. Chang was formerly the Chief Fund Administration Officer of Private National Mortgage Acceptance Company, LLC from January 2008 to May 2009. Mr. Chang is responsible for sourcing investment opportunities and overseeing our corporate development activities. From June 2005 to May 2008, Mr. Chang was a director at BlackRock, Inc., a global investment manager, and a senior member in its advisory services practice, specializing in financial strategy and risk management for banks and mortgage companies. Before joining BlackRock, Mr. Chang was a management consultant and engagement manager at McKinsey & Company, a global consulting firm, from September 1999 to May 2005, advising large global financial institutions in the areas of strategy, operational performance and organization. Mr. Chang holds an A.B. from Harvard University.

Vandad Fartaj. Mr. Fartaj has been the Chief Capital Markets Officer of PennyMac Financial Services, Inc. since its formation. In addition, Mr. Fartaj has been the Chief Capital Markets Officer of Private National Mortgage Acceptance Company, LLC since March 2010. He previously served as Managing Director, Capital Markets at Private National Mortgage Acceptance Company, LLC from April 2008 to March 2010. Mr. Fartaj is responsible for all capital markets and investment activities, including asset valuation, trading, hedging, secondary marketing, and risk management. Prior to joining the Company, he was employed in a variety of positions, including vice president, whole loan trading, at Countrywide Securities Corporation, a broker-dealer, where he was employed from November 1999 to April 2008. Mr. Fartaj holds a B.A. from the University of California, Los Angeles.

Jeffrey Grogin. Mr. Grogin has been the Chief Administrative and Legal Officer and Secretary of PennyMac Financial Services, Inc. since its formation and has been the Chief Administrative and Legal Officer and Secretary of Private National Mortgage Acceptance Company, LLC since its formation in January 2008. Mr. Grogin is responsible for overseeing our legal management and affairs, administration and human resources. Mr. Grogin began his legal career in 1987 as an associate with Gibson, Dunn & Crutcher where he worked on mergers and acquisitions, securities and mortgage banking related matters. Thereafter, from 1991 to 2002 he was a founding and managing partner of Samaha Grogin, LLP, a niche law firm representing local, national, and international clients in specialized litigation and complex transactional matters. In 2000, Mr. Grogin became chief executive officer and general counsel for Snood, LLC, a software game publisher. Mr. Grogin holds a B.S. from the University of Florida and a J.D. from Loyola Law School.

Douglas Jones. Mr. Jones has been the Chief Correspondent Lending Officer of PennyMac Financial Services, Inc. since its formation and has been the Chief Correspondent Lending Officer of Private National Mortgage Acceptance Company, LLC since June 2011. Mr. Jones is responsible for all business activities and production within our correspondent lending business. Prior to joining the Company, Mr. Jones was the senior managing director, correspondent lending at Countrywide Home

Loans, Inc. (and Bank of America Corporation, as its successor) from July 1997 until May 2011, where he was responsible for managing and overseeing the company's correspondent and warehouse lending operations. Mr. Jones holds a B.A. from California State University, Sacramento.

Anne McCallion. Ms. McCallion has been the Chief Financial Officer of PennyMac Financial Services, Inc. since its formation and has been the Chief Financial Officer of Private National Mortgage Acceptance Company, LLC since May 2009. Ms. McCallion is responsible for overseeing our financial management, reporting and controls, compliance, and tax management. Prior to joining the Company, Ms. McCallion was employed by Countrywide Financial Corporation (and Bank of America Corporation, as its successor), where she worked in a variety of executive positions, including deputy chief financial officer and senior managing director, finance, from July 1991 to December 2008. From January 2009 to March 2009, Ms. McCallion was an independent financial consultant. Ms. McCallion holds a B.S. from Gannon University and an M.B.A. from Ashland University.

David Walker. Mr. Walker has been the Chief Credit Officer of PennyMac Financial Services, Inc. since its formation and has been the Chief Credit Officer of Private National Mortgage Acceptance Company, LLC since its formation in January 2008 and its Chief Operating Officer since June 2011. Mr. Walker is responsible for credit, new loan underwriting and modification standards, portfolio management and technology. Prior to this role, Mr. Walker served as chief credit officer at New World Financial, a mortgage lender, from April 2007 to January 2008. From 1992 to 2007, Mr. Walker was employed in a variety of executive positions at Countrywide Bank, N.A. and its subsidiaries, including chief credit officer for Countrywide Home Loans, Inc. and chief lending officer for Countrywide Bank, N.A., where he was responsible for the bank's lending, credit and portfolio management activities. Mr. Walker holds a B.A. from California State University, Fullerton and an M.B.A. from the University of Southern California.

Biographical information for Mr. Kurland and Mr. Spector is provided above under "Executive Officers." Certain biographical information for our other directors is set forth below.

Matthew Botein. Mr. Botein has been a member of the board of directors of PennyMac Financial Services, Inc. since its formation and has been the Vice Chairman of the board of directors of Private National Mortgage Acceptance Company, LLC since 2009. In addition, Mr. Botein has been a member of the board of trustees of PennyMac Mortgage Investment Trust since July 2009. Since November 2009, Mr. Botein has been employed at BlackRock, Inc., a global investment manager, where he currently holds the position of managing director and head of BlackRock Alternative Investors. He previously served as chairman of Botein & Co., LLC, a private investment and advisory firm, from July 2009 through November 2009 and as a managing director of Highfields Capital Management LP, an investment management firm, where he worked from April 2003 through July 2009. He also currently serves on the board of Northeast Bancorp, a bank holding company. He previously served on the board of directors of Aspen Insurance Holdings Limited, First American Corporation and CoreLogic, Inc. Mr. Botein holds an A.B. from Harvard College and an M.B.A. from the Harvard Business School. We believe Mr. Botein is qualified to serve on our board of directors as a result of his considerable experience in the financial services industry, where he has managed portfolio investments in the banking, insurance, asset management, capital markets, and financial processing sectors.

Joseph Mazzella. Mr. Mazzella has been a member of the board of directors of PennyMac Financial Services, Inc. since its formation and has been a member of the board of directors of Private National Mortgage Acceptance Company, LLC since May 2008. Mr. Mazzella is a Managing Director and the General Counsel of Highfields Capital Management LP, an investment management firm, which he joined in 2002. Prior to joining Highfields, Mr. Mazzella was a partner at the law firm of Nutter, McClennen & Fish, L.L.P., in Boston, Massachusetts. Prior to private practice, he was an

attorney at the Securities & Exchange Commission from 1978 to 1980, and before that served as a clerk in the Superior Court of the District of Columbia. Mr. Mazzella has served on multiple public company boards of directors, including Alliant Techsystems, Inc. and Data Transmission Networks Corporation, and he served as Chairman of the Board of Insurance Auto Auctions, Inc. Mr. Mazzella received a B.A. from City College of New York and a J.D. from Rutgers University School of Law. We believe Mr. Mazzella is qualified to serve on our board of directors because he is an experienced executive and director with strong business and legal backgrounds in the financial services industry.

Farhad Nanji. Mr. Nanji has been a member of the board of directors of PennyMac Financial Services, Inc. since its formation and has been a member of the board of directors of Private National Mortgage Acceptance Company, LLC since January 2010. Mr. Nanji is a Managing Director of Highfields Capital Management LP, an investment management firm, which he joined in 2006 where he focuses on portfolio investments in distressed securities, restructurings, structured credit and global financial services. Prior to joining Highfields, Mr. Nanji was an associate with HighVista Strategies, an investment management firm. Before that, he served as an engagement manager in the financial institutions group at McKinsey & Company. Mr. Nanji received an M.B.A. from Harvard Business School and a B.Com. degree from McGill University. We believe Mr. Nanji is qualified to serve on our board of directors because of his valuable expertise in the mortgage and financial services businesses.

Mark Wiedman. Mr. Wiedman has been a member of the board of directors of PennyMac Financial Services, Inc. since its formation and has been a member of the board of directors of Private National Mortgage Acceptance Company, LLC since May 2008. Mr. Wiedman has been the global head of BlackRock, Inc.'s iShares business since September 2011 and is a member of BlackRock's Global Operating Committee. Previously, Mr. Wiedman was the head of Corporate Strategy for BlackRock and led the clients and advisory team within the Financial Markets Advisory Group in BlackRock Solutions, a group which advises financial institutions and governments on managing their capital markets exposures and businesses. Prior to joining BlackRock in 2004, Mr. Wiedman, as executive director, led the global product development and strategy group at Morgan Stanley Investment Management. He previously was a management consultant at McKinsey & Company, a global consulting firm, advising financial institutions in the United States, Europe and Japan. He also served as senior advisor and chief of staff for the Under Secretary for Domestic Finance at the US Treasury Department. Mr. Wiedman previously served on the board of trustees of PennyMac Mortgage Investment Trust. He has taught as an adjunct associate professor of law at Fordham University in New York and Renmin University in Beijing. Mr. Wiedman earned an A.B. degree from Harvard College and a J.D. degree from Yale Law School. We believe Mr. Wiedman is qualified to serve on our board of directors because of his numerous years of experience in the financial industry and deep understanding of our business.

Our amended and restated bylaws will provide that our board of directors will consist of the number of directors that our board of directors may determine from time to time. Our separate stockholders agreements with BlackRock and Highfields will provide that our board of directors will consist of no more than nine directors as long as those entities and their affiliates hold at least 10% of the voting power of our outstanding shares of capital stock. Those agreements will also provide that each of BlackRock and Highfields will have the right to nominate two individuals for election to our board of directors as long as it, together with its affiliates, holds at least 15% of the voting power of our outstanding shares of capital stock, and the right to nominate one individual for election to our board of directors as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding shares of capital stock. We, in turn, are obligated to use our best efforts to ensure that these nominees are elected. Our board of directors currently consists of six directors. Prior to the closing of this offering, we intend to increase the size of our board by one additional director.

Immediately upon the consummation of this offering, our board of directors will consist of (i) two directors originally designated by BlackRock who will be continuing as directors following the offering, (ii) two directors originally designated by Highfields who will be continuing as directors following the offering, (iii) one additional independent director, (iv) our president and chief operating officer and (v) our chief executive officer. Our board of directors has determined that Messrs. Botein, Wiedman, Mazzella and Nanji are independent for the purpose of serving on our board of directors under the independence standards promulgated by the NYSE.

Following the Recapitalization and prior to the consummation of this offering, our board of directors will establish the following committees: an audit committee, a compensation committee, a governance and nominating committee and a related-party matters committee. The initial composition and responsibilities of each committee are described below. Our separate stockholder agreements with Blackrock and Highfields will provide that each of Blackrock and Highfields, as long as it holds at least 10% of the voting power of our outstanding shares of capital stock, will have the right to nominate one member of each committee of our board of directors. Pursuant to those agreements, as long as those nominees meet the independence standards applicable to those committees, we will appoint them as members of those committees. Members will serve on these committees until their resignation or, subject to the terms of the stockholder agreements, until otherwise determined by our board of directors.

Our audit committee will provide oversight of our accounting and financial reporting process, the audit of our financial statements and our internal control function. Among other matters, the audit committee will be responsible for the following: assisting the board of directors in oversight of the independent auditors' qualifications, independence and performance; the engagement, retention and compensation of the independent auditors; reviewing the scope of the annual audit; reviewing and discussing with management and the independent auditors the results of the annual audit and the review of our quarterly consolidated financial statements including the disclosures in our annual and quarterly reports filed with the SEC; reviewing our risk assessment and risk management processes; establishing procedures for receiving, retaining and investigating complaints received by us regarding accounting, internal accounting controls or audit matters; and approving audit and permissible non-audit services provided by our independent auditor. In addition, our audit committee will oversee our internal audit function.

The initial members of our audit committee will be , who will be the chair of the committee, and . All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE. Our board of directors has determined that Mr. is an audit committee financial expert as defined under the applicable rules of the SEC and have the requisite financial sophistication as defined under the applicable rules and regulations of the NYSE. All of the members of our audit committee will be independent directors as defined under the applicable rules and regulations of the SEC and the NYSE.

Our compensation committee will adopt and administer the compensation policies, plans and benefit programs for our executive officers and all other members of our executive team. Our compensation committee will also be responsible for making recommendations regarding non-employee director compensation to the full board of directors. In addition, among other things, our compensation committee will evaluate annually, in consultation with the board of directors, the performance of our

chief executive officer, review and approve corporate goals and objectives relevant to compensation of our chief executive officer and other executives and evaluate the performance of these executives in light of those goals and objectives. Our compensation committee will also adopt and administer our equity compensation plans. The initial members of our compensation committee will be , who will be the chair of the committee, and . All of the members of our compensation committee will be independent under the applicable rules and regulations of the SEC and the NYSE, and Section 162(m) of the Internal Revenue Code, or the Code.

Our governance and nominating committee will be responsible for, among other things, making recommendations regarding corporate governance, the composition of our board of directors, identification, evaluation and nomination of director candidates and the structure and composition of committees of our board of directors. In addition, our governance and nominating committee will oversee our corporate governance guidelines, approve our committee charters, oversee compliance with our code of business conduct and ethics, contribute to succession planning, review actual and potential conflicts of interest of our directors and officers other than related party transactions reviewed by the related-party matters committee and oversee the board self-evaluation process. The initial members of our governance and nominating committee will be , who will be the chair of the committee, and . All of the members of our governance and nominating committee will be independent under the applicable rules and regulations of the NYSE.

Our related-party matters committee will review and approve certain transactions, and resolve other potential conflicts of interest, between us or any of our subsidiaries, on the one hand, and PMT, the Investment Funds and any other non-wholly-owned entity that we manage or over which we have control (whether through ownership, voting power, contract or otherwise), on the other hand. Among other matters, the related-party matters committee will review and approve any amendments of or extensions to our agreements with PMT. The initial members of our related-party matters committee will be , who will be the chair of the committee, and . All of the members of our related-party matters committee will be independent under the applicable rules and regulations of the SEC and the NYSE.

None of the members of our compensation committee is or has at any time during the past year been one of our officers or employees. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

We plan to adopt a code of business conduct and ethics that will apply to all of our employees, including our executive officers and directors, and those employees responsible for financial reporting. The code of business conduct and ethics will be available on our website. We expect that, to the extent required by law, any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

The following table presents compensation awarded in 2012 to our principal executive officer and our two other most highly compensated persons serving as executive officers as of December 31, 2012 or paid to or accrued for those executive officers for services rendered during 2012. We refer to these executive officers as our "named executive officers."

(1): Each amount shown represents a portion of the total amount of the bonus earned by the named executive officer during 2012, whether or not paid in 2012. The remaining portion of the bonus earned during 2012, if any, cannot be calculated at this time because the final bonus amount will not be determined until after a final review of both our financial performance and the individual performance of the named executive officer during 2012.
(2): The amount shown represents the full grant date fair value, as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation ("FASB ASC TOPIC 718"), of $140,353 with respect to 324.14 common units granted to Mr. Kurland by Private National Mortgage Acceptance Company, LLC on January 1, 2012 and $213,904 with respect to 35.55 preferred units purchased by Mr. Kurland for $35,550 on November 1, 2012. Following the Recapitalization, each of these common units will be converted into New Holdings Units.
(3): All Other Compensation for all three named executive officers consists of health insurance premiums and gross-up payments for the payment of self-employment taxes by each named executive officer. The Company paid gross-up payments to the named executive officers in the following amounts: $20,397 for Mr. Kurland, $13,872 for Mr. Spector, and $25,894 for Mr. Jones. Private National Mortgage Acceptance Company, LLC paid health insurance premiums to the named executive officers in the following amounts: $23,400 for Mr. Kurland, $23,400 for Mr. Spector, and $13,427 for Mr. Jones.
: With respect to Mr. Jones, All Other Compensation also includes a $10,000 contribution paid by Private National Mortgage Acceptance Company, LLC to his 401(k) plan and 15,000 restricted share units awarded to Mr. Jones by PennyMac Mortgage Investment Trust and recorded by Private National Mortgage Acceptance Company, LLC as a portion of its compensation expense and PCM's management fees. The restricted share units were granted on May 16, 2012 and have a full grant date fair value of $182,550 as determined in accordance with FASB ASC TOPIC 718. The restricted share units vest ratably over a four-year period beginning on the one-year anniversary of the grant date and entitle Mr. Jones to receive dividend equivalents during the vesting period.
: In addition to the amounts shown in All Other Compensation, restricted share units were awarded to Mr. Kurland and Mr. Spector by PennyMac Mortgage Investment Trust. The restricted share units were granted on May 16, 2012 and have full grant date fair values, as determined in accordance with FASB ASC TOPIC 718, of $1,867,000 and $1,250,890 for Mr. Kurland and Mr. Spector, respectively. The restricted share units vest ratably over a four-year period beginning on the one-year anniversary of the grant date and entitle each named executive officer to receive dividend equivalents during the vesting period.

The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2012.

(1)

With respect to Mr. Kurland, the amount shown represents 4,750.78 common units granted to Mr. Kurland that vest as follows: 511.35 units granted on September 22, 2009, all of which vest on September 22, 2013; 1,022.72 units granted on June 1, 2010, 340.91 of which vest on June 1, 2013 and 681.81 of which vest on June 1, 2014; 957.48 units granted on August 18, 2010, 319.16 of which vest on August 18, 2013 and 638.32 of which vest on August 18, 2014; 14.65 units granted on September 30, 2011, 6.89 of which vest on September 30, 2013 and 7.76 of which vest on September 30, 2014; 1,920.44 units granted on October 17, 2011, 902.91 of which vest on October 17, 2013 and 1,017.53 of which vest on October 17, 2014; and 324.14 units granted on January 1, 2012, 81.04 of which vest on January 1, 2014, 81.04 of which vest on January 1, 2015, and 162.07 of which vest on January 1, 2016. Following the Recapitalization, these common units will be converted in the aggregate into New Holdings Units with identical vesting schedules.

With respect to Mr. Spector, the amount shown represents 1,027.04 common units granted to Mr. Spector that vest as follows: 102.25 units granted on September 22, 2009, all of which vest on September 22, 2013; 204.53 units granted on June 1, 2010, 68.18 of which vest on June 1, 2013 and 136.35 of which vest on June 1, 2014; 331.22 units granted on August 18, 2010, 110.41 of which vest on August 18, 2013 and 220.81 of which vest on August 18, 2014; 3.91 units granted on September 30, 2011, 1.72 of which vest on September 30, 2013 and 2.19 of which vest on September 30, 2014; and 385.14 units granted on October 17, 2011, 169.53 of which vest on October 17, 2013 and 215.61 of which vest on October 17, 2014. Following the Recapitalization, these common units will be converted in the aggregate into New Holdings Units with identical vesting schedules.

With respect to Mr. Jones, the amount shown represents 1,319.19 Class C common units granted to Mr. Jones on June 1, 2011, 219.86 of which vest on June 1, 2013, 439.73 of which vest on June 1, 2014, and 879.46 of which vest on June 1, 2015. Following the Recapitalization, these common units will be converted in the aggregate into New Holdings Units with identical vesting schedules.

(2)

With respect to Messrs. Kurland and Spector, the amounts shown represent the market value of Private National Mortgage Acceptance Company, LLC common units on December 31, 2012, or $5,979 per unit, multiplied by the applicable number of unvested common units held by each such named executive officer on such date. With respect to Mr. Jones, the amount shown represents the market value of Private National Mortgage Acceptance Company, LLC Class C common units on December 31, 2012, or $5,516 per unit, multiplied by the number of unvested Class C common units held by Mr. Jones on such date.

We do not have a formal written bonus policy, and bonuses are not determined based upon the achievement of specified performance goals. Instead, our board of directors relies primarily on the judgment of its members in making bonus determinations after reviewing our performance and financial condition for the year and carefully evaluating an executive officer's performance during the year. In addition, our board of directors considers an executive officer's leadership qualities, business responsibilities and length of career with us in determining an appropriate bonus amount. In 2012, our board of directors also undertook a formal review of relevant market compensation data before determining bonus amounts. To date, bonuses for our executive officers have been approved by our board of directors on a discretionary basis in those instances where it desires to reward outstanding performance during the fiscal year by our executive officers.

We are not party to employment agreements or severance arrangements with our named executive officers, either directly or through our subsidiaries.

All of the common units of Private National Mortgage Acceptance Company, LLC outstanding as of the date of this prospectus were issued under our initial Equity Incentive Plan. Under the terms of this plan and related award agreements that have been entered into with recipients, these common units generally either vest over a three-year period beginning on the date of issuance or over a four-year period beginning on the date on which we hired the recipient, in either case as long as the recipient remains employed by us. These common units issued under this plan and related award agreements will remain outstanding following the offering and continue to vest pursuant to the applicable vesting schedule. We do not intend to issue any additional common units under this plan.

All of the outstanding Class C common units are subject to terms set forth in an exhibit to the limited liability company agreement of Private National Mortgage Acceptance Company, LLC, which terms effectively constitute a separate equity incentive plan with respect to our Class C common units. In general, 12.5% of a recipient's Class C common units vest on each of the first and second anniversaries of the date of issuance, and 25% and 50% of the units vest on the third anniversary and fourth anniversary, respectively, of the date of issuance.

Prior to the completion of this offering, additional common units will be issued under our 2011 Equity Incentive Plan to members of our management. Discretionary awards of common units are granted under this plan based on the Company's performance and the performance of the participating individuals, in each case in accordance with parameters set forth in the plan. This plan provides that all common units issued will be vested in full upon issuance.

Each of the three plans described above provides that all units held by a recipient under that plan shall be forfeited and canceled following the termination of the employment of that recipient for "Cause," as defined in the limited liability company agreement of Private National Mortgage Acceptance Company, LLC. Each of these plans also provides that Private National Mortgage Acceptance Company, LLC will have the right to repurchase vested units issued under that plan for a price representing the fair market value, as defined in the limited liability company agreement of Private National Mortgage Acceptance Company, LLC, of those units following the termination of the employment of the holder of those units for any reason other than "Cause." All unvested units issued under any plan are forfeited upon the termination of the recipient's employment for any reason.

No additional common units, Class C common units or other units of equity interest in Private National Mortgage Acceptance Company, LLC will be issuable under any of these plans following the amendment and restatement of the limited liability company agreement of Private National Mortgage Acceptance Company, LLC prior to the completion of this offering. In addition, that amendment and restatement will eliminate all of our existing repurchase rights with respect to vested units issued under these plans upon their conversion into New Holdings Units. The forfeiture and vesting provisions

described above with respect to unvested units issued under these plans will remain in effect following the completion of this offering with respect to the New Holdings Units into which those units have been converted. No vesting of any units will be accelerated in connection with the Recapitalization or this offering.

We have also allowed certain of our employees to purchase preferred units of Private National Mortgage Acceptance Company, LLC from time to time under terms set forth in its limited liability company agreement. To facilitate some of these purchases, we extended loans to certain of these employees on terms set forth in that limited liability company agreement. All of these preferred units were fully vested upon issuance, but remain subject to repurchase rights upon a termination of the holder's employment with us. If that termination is for "Cause," as defined in the limited liability company agreement of Private National Mortgage Acceptance Company, LLC, then we have the right to repurchase that holder's preferred units for a price equal to the lesser of (i) the unreturned face amount, which equals the consideration paid for the preferred unit less the amount of distributions previously made in respect of the preferred units, and (ii) the current fair value, as defined in that limited liability company agreement.

Following a termination by us of a holder's employment for any reason other than for "Cause" or a termination of employment by the holder for "Good Reason," we have a repurchase right for which the repurchase price is the unreturned face value of the preferred units if the holder was employed with us for less than two years, and is the current fair value of the preferred units if the holder was employed by us for four years or more. If such termination occurs after the holder has been employed by us for two years or more, but less than three years, then the repurchase price for 75% of the preferred units held by the terminated employee is the unreturned face amount and the repurchase price for the other 25% of the preferred units is the current fair value. If such termination occurs after the holder has been employed by us for three years or more, but less than four years, then the repurchase price for 50% of the preferred units held by the terminated employee is the unreturned face amount and the repurchase price for the other 50% of the preferred units is the current fair value.

The amendment and restatement of the limited liability company agreement of Private National Mortgage Acceptance Company, LLC prior to the completion of this offering will eliminate all of our existing repurchase rights with respect to preferred units, other than those in connection with a termination for "Cause," upon their conversion into New Holdings Units. In addition, all loans extended to an employee in connection with the purchase of preferred units will be effectively paid off and eliminated as part of the Recapitalization by reducing the number of New Holdings Units into which that employee's preferred units are converted by the number of New Holdings Units that together have a value equal to the current outstanding principal balance of, and unpaid interest accrued on, those loans. Any such loans made to executive officers have been repaid prior to the initial filing of the registration statement of which this prospectus is a part.

The following is a summary of the material terms of the 2013 Equity Incentive Plan, which will be in effect upon the completion of this offering. It does not purport to be complete and is qualified by reference to the full text of the 2013 Equity Incentive Plan, which we will file as an exhibit to our registration statement of which this prospectus is a part.

The 2013 Equity Incentive Plan provides for the grant of incentive stock option and nonstatutory stock options, stock appreciation rights, restricted stock and stock unit awards, performance units, stock grants and qualified performance-based awards, which we collectively refer to as "awards" in connection with the 2013 Equity Incentive Plan. Directors, officers and other employees of the Company and our subsidiaries, as well as others performing consulting or advisory services for us, are eligible for grants under the 2013 Equity Incentive Plan. The purpose of the 2013 Equity Incentive Plan

is to provide incentives that will attract, retain and motivate highly competent officers, directors, employees and consultants to promote the success of our business.

Under its terms, the 2013 Equity Incentive Plan is administered by the compensation committee of the board of directors. The board of directors itself may also exercise any of the powers and responsibilities under the 2013 Equity Incentive Plan. Subject to the terms of the 2013 Equity Incentive Plan, the plan administrator (the board or its compensation committee) will select the recipients of awards and determine, among other things, the:

All decisions, determinations and interpretations by the compensation committee with respect to the 2013 Equity Incentive Plan and the terms and conditions of or operation of any award are final and binding on all participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the 2013 Equity Incentive Plan or any award.

The aggregate number of shares of our common stock which may be issued or used for reference purposes under the 2013 Equity Incentive Plan or with respect to which awards may be granted, subject to the automatic increase provisions described below, may not exceed shares, which may be either authorized and unissued shares of our common stock or shares of common stock held in or acquired for our treasury. In general, if awards under the 2013 Equity Incentive Plan are for any reason cancelled, or expire or terminate unexercised, the number of shares covered by such awards will again be available for the grant of awards under the 2013 Equity Incentive Plan. In addition, (i) shares used to pay the exercise price of a stock option and (ii) shares delivered to or withheld by us to pay the withholding taxes related to an award do not count as shares issued under the 2013 Equity Incentive Plan.

The number of shares of common stock authorized under the 2013 Equity Incentive Plan also will be increased each January 1 starting in 2014 by an amount equal to the lesser of (i) % of our outstanding common stock on a fully diluted basis as of the end of our immediately preceding fiscal year, (ii) shares, and (iii) any lower amount determined by our board.

Members of our board of directors, as well as employees of, and consultants to, us or any of our subsidiaries and affiliates are eligible to receive awards under the 2013 Equity Incentive Plan. The selection of participants is within the sole discretion of the compensation committee.

Incentive stock options are intended to qualify as incentive stock options under Section 422 of the Code and will be granted pursuant to incentive stock option agreements. The plan administrator will determine the exercise price for an incentive stock option, which may not be less than 100% of the fair market value of the stock underlying the option determined on the date of grant. In addition, incentive

options granted to employees who own, or are deemed to own, more than 10% of our voting stock, must have an exercise price not less than 110% of the fair market value of the stock underlying the option determined on the date of grant.

Nonstatutory stock options are not intended to qualify as incentive stock options under Section 422 of the Code and will be granted pursuant to nonstatutory stock option agreements. The plan administrator will determine the exercise price for a nonstatutory stock option, which may not be less than the fair market value of the stock underlying the option determined on the date of grant.

A stock appreciation right, or a SAR, entitles a participant to receive a payment equal in value to the difference between the fair market value of a share of stock on the date of exercise of the SAR over the grant price of the SAR. SARs may be granted in tandem with a stock option, such that the recipient has the opportunity to exercise either the stock option or the SAR, but not both. The base exercise price (above which any appreciation is measured) will not be less than 50% of the fair market value of the common stock on the date of grant of the SAR or, in the case of an SAR granted in tandem with a stock option, the exercise price of the related stock option. The administrator may pay that amount in cash, in shares of our common stock, or a combination. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any SAR will be determined by the administrator at the time of the grant of award and will be reflected in the award agreement.

A restricted stock award or restricted stock unit award is the grant of shares of our common stock either currently (in the case of restricted stock) or at a future date (in the case of restricted stock units) at a price determined by the administrator (including zero), that is nontransferable and is subject to substantial risk of forfeiture until specific conditions or goals are met. Conditions are typically based on continuing employment. During the period of restriction, participants holding shares of restricted stock shall, except as otherwise provided in an individual award agreement, have full voting and dividend rights with respect to such shares. Participants holding restricted stock units may be entitled to receive payments equivalent to any dividends declared with respect to the common stock referenced in the grant of the restricted stock units, but only following the close of the applicable restriction period and then only if the underlying common stock has been earned. The restrictions will lapse in accordance with a schedule or other conditions determined by the administrator.

A performance unit award is a contingent right to receive predetermined shares of our common stock if certain performance goals are met. The value of performance units will depend on the degree to which the specified performance goals are achieved but are generally based on the value of our common stock. The administrator may, in its discretion, pay earned performance shares in cash, or stock, or a combination of both. Furthermore, based on the level of performance, the number of shares issued upon achievement of specified levels of performance could be up to % of the number of performance units.

The Compensation Committee has discretion to select the length of any applicable restriction or performance period, the kind and/or level of the applicable performance goal, and whether the performance goal is to apply to us, one of our subsidiaries or any division or business unit, or to the recipient, provided that any performance goals be objective and otherwise meet the requirements of

Section 162(m) of the Code. Generally, a recipient will be eligible to receive payment under a qualified performance-based award only if the applicable performance goal or goals are achieved within the applicable performance period, as determined by the Committee.

A stock grant is an award of shares of common stock without restriction. Stock grants may only be made in limited circumstances, such as in lieu of other earned compensation. Stock grants are made without any forfeiture conditions.

Qualified performance-based awards include performance criteria intended to satisfy Section 162(m) of the Code. Section 162(m) of the Code limits our federal income tax deduction for compensation to certain specified senior executives to $1 million dollars, but excludes from that limit "performance-based compensation." Any form of award permitted under the 2013 Plan, other than restricted stock, restricted stock units and stock grants, may be granted as a qualified performance-based award, but in each case will be subject to satisfaction of performance goals or (in the case of stock options) based on continued service. The performance criteria used to establish performance goals are limited to the following: (i) cash flow (before or after dividends), (ii) earnings per share (including, without limitation, earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) stockholder return or total stockholder return, (vi) return on capital (including, without limitation, return on total capital or return on invested capital), (vii) return on investment, (viii) return on assets or net assets, (ix) market capitalization, (x) economic value added, (xi) debt leverage (debt to capital), (xii) revenue, (xiii) sales or net sales, (xiv) backlog, (xv) income, pre-tax income or net income, (xvi) operating income or pre-tax profit, (xvii) operating profit, net operating profit or economic profit, (xviii) gross margin, operating margin or profit margin, (xix) return on operating revenue or return on operating assets, (xx) cash from operations, (xxi) operating ratio, (xxii) operating revenue, (xxiii) market share improvement, (xxiv) general and administrative expenses and (xxv) customer service.

Awards granted under the 2013 Equity Incentive Plan are generally nontransferable (other than by will or the laws of descent and distribution), except that the compensation committee may provide for the transferability of nonstatutory stock options at the time of grant or thereafter to certain family members.

In the event of any change in the outstanding shares of common stock as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar distribution with respect to the shares of common stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares subject to the 2013 Plan, (ii) the numbers and kinds of shares or other securities subject to then outstanding awards, (iii) the exercise price for each share or other unit of any other securities subject to then outstanding stock options or SARs (without change in the aggregate purchase price as to which such stock options or SARs remain exercisable), and (iv) the repurchase price of each share of restricted stock then subject to a risk of forfeiture in the form of a Company repurchase right. Any such adjustment in awards will be determined and made by the Compensation Committee in its sole discretion.

In the event of a transaction, including (i) any merger or consolidation of the Company, (ii) any sale or exchange of all of the common stock of the Company, (iii) any sale, transfer or other disposition of all or substantially all of the Company's assets, or (iv) any liquidation or dissolution of the Company, the compensation committee may, with respect to all or any outstanding stock options and SARS, (1) provide that such awards will be assumed, or substantially equivalent rights shall be provided in substitution therefore, (2) provide that the recipient's unexercised awards will terminate immediately prior to the consummation of such transaction unless exercised within a specified period following written notice to the recipient, (3) provide that outstanding awards shall become exercisable in whole or in part prior to or upon the transaction, (4) provide for cash payments, net of applicable tax withholdings, to be made to the recipients, (5) provide that, in connection with a liquidation or dissolution of the Company, awards shall convert into the right to receive liquidation proceeds net of the exercise price of the awards and any applicable tax withholdings, or (6) any combination of the foregoing. With respect to outstanding awards other than stock options or SARs, upon the occurrence of a transaction other than a liquidation or dissolution of the Company which is not part of another form of transaction, the repurchase and other rights of the Company under each such award will transfer to the Company's successor. Upon the occurrence of such a liquidation or dissolution of the Company, all risks of forfeiture and performance goals applicable to such other awards will automatically be deemed terminated or satisfied, unless specifically provided to the contrary in the award. Any determinations required to carry out any of the foregoing will be made by the Compensation Committee in its sole discretion.

Upon the occurrence of a change of control, all outstanding stock options and SARs will accelerate with respect to such percentage of the shares not then exercisable as is determined by the Committee, the risk of forfeiture applicable to all outstanding restricted stock and restricted stock units not based on achievement of performance goals will lapse with respect to such percentage of the restricted stock and restricted stock units still subject to such risk of forfeiture as is determined by the Committee, and such percentage of any outstanding awards of performance units will be deemed to have been satisfied as is determined by the Committee. In each case, a pro rata portion of each unvested award will be vested.

A change of control is defined as the occurrence of any of the following: (1) a transaction, as described above, unless securities possessing more than 50% of the total combined voting power of the resulting entity or ultimate parent entity are held by a person who held securities possessing more than 50% of the total combined voting power of the Company immediately prior to the transaction; (2) any person or group of persons, excluding the Company and certain other related entities, directly or indirectly acquires beneficial ownership of securities possessing more than 50% of the total combined voting power of the Company, unless pursuant to a tender or exchange offer that the Company's board of directors recommends stockholders accept; (3) over a period of no more than 24 consecutive months there is a change in the composition of the Company's board such that a majority of the board members ceases to be composed of individuals who either (i) have been board members continuously since the beginning of that period, or (ii) have been elected or nominated for election as board members during such period by at least a majority of the remaining board members who have been board members continuously since the beginning of that period.

Our board of directors may at any time amend any or all of the provisions of the 2013 Equity Incentive Plan, or suspend or terminate it entirely, retroactively or otherwise. Unless otherwise required by law or specifically provided in the 2013 Equity Incentive Plan, the rights of a participant under

awards granted prior to any amendment, suspension or termination may not be adversely affected without the consent of the participant. The 2013 Equity Incentive Plan expires after ten years.

It is not presently possible to determine the dollar value of award payments that may be made or the number of options, shares of restricted stock, restricted stock units, or other awards that may be granted under the 2013 Equity Incentive Plan in the future, or the individuals who may be selected for such awards because awards under the 2013 Equity Incentive Plan are granted at the discretion of the Compensation Committee.

Following the offering, Private National Mortgage Acceptance Company, LLC will continue to maintain a tax-qualified 401(k) retirement plan for all employees who satisfy certain eligibility requirements. Under our 401(k) plan, employees may elect to defer a portion of their eligible compensation subject to applicable annual Code limits. Under the 401(k) plan, Private National Mortgage Acceptance Company, LLC makes matching contributions to participants equal to 100% of the participant's elective deferrals, up to a maximum of 4% of the participant's annual compensation. We intend for the 401(k) plan to qualify under Section 401(a) and 501(a) of the Code so that contributions by employees to the 401(k) plan, and income earned on those contributions, are not taxable to employees until withdrawn from the 401(k) plan.

Section 145 of the Delaware General Corporation Law authorizes a corporation's board of directors to grant, and authorizes a court to award, indemnity to officers, directors, and other corporate agents.

As permitted by Delaware law, our amended and restated certificate of incorporation provides that, to the fullest extent permitted by Delaware law, no director will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Pursuant to Delaware law such protection would be not available for liability:

Our amended and restated certificate of incorporation also provides that if Delaware law is amended after the approval by our stockholders of the amended and restated certificate of incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law.

Our amended and restated bylaws further provide that we must indemnify our directors and officers to the fullest extent permitted by Delaware law. Our amended and restated bylaws also authorize us to indemnify any of our employees or agents and permit us to secure insurance on behalf of any officer, director, employee or agent for any liability arising out of his or her action in that capacity, whether or not Delaware law would otherwise permit indemnification.

In addition, our amended and restated bylaws also provide that we are required to advance expenses to our directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in the amended and restated bylaws are not exclusive.

The amended and restated limited liability company agreement of Private National Mortgage Acceptance Company, LLC also provides that Private National Mortgage Acceptance Company, LLC indemnify its officers, members, managers and other affiliates to the fullest extent permitted by Delaware law, and advance expenses to its officers, members, managers and other affiliates as incurred in connection with legal proceedings against them for which they may be indemnified. The rights conferred in the amended and restated limited liability company agreement of Private National Mortgage Acceptance Company, LLC are not exclusive.

We intend to enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, would require us to indemnify each director and officer to the fullest extent permitted by Delaware law, the amended and restated certificate of incorporation and amended and restated bylaws, for expenses such as, among other things, attorneys' fees, judgments, fines, and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action by or in our right, arising out of the person's services as our director or executive officer or as the director or executive officer of any subsidiary of ours or any other company or enterprise to which the person provides services at our request. We also maintain directors' and officers' liability insurance.

The SEC has taken the position that personal liability of directors for violation of the federal securities laws cannot be limited and that indemnification by us for any such violation is unenforceable. The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

No compensation was paid to or earned by our non-employee directors during our 2012 fiscal year. Following the closing of this offering, we intend to consider and adopt a compensation policy for non-employee directors.

Other than compensation arrangements, we describe below transactions and series of similar transactions, during our last three fiscal years, to which we were a party or will be a party, in which:

Compensation arrangements for our directors and named executive officers are described elsewhere in this prospectus.

Prior to the consummation of this offering, we will consummate the Recapitalization transactions described under "Organizational Structure" pursuant to the agreements filed as exhibits to the registration statement of which this prospectus forms a part.

We will enter into an exchange agreement with the existing owners of Private National Mortgage Acceptance Company, LLC. Under the exchange agreement, each existing owner (and certain permitted transferees thereof) may (subject to the terms of the exchange agreement), exchange their New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc. on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. As a holder exchanges its New Holdings Units, PennyMac Financial Services, Inc.'s interest in Private National Mortgage Acceptance Company, LLC will be correspondingly increased. See "Organizational Structure—Recapitalization."

We will enter into separate stockholders agreements with BlackRock and Highfields which will provide that our board of directors will consist of no more than nine directors as long as those entities and their affiliates hold at least 10% of the voting power of our outstanding shares of capital stock. Those agreements will also provide that each of BlackRock and Highfields will have the right to nominate two individuals for election to our board of directors as long it, together with its affiliates, holds at least 15% of the voting power of our outstanding shares of capital stock, and the right to nominate one individual for election to our board of directors as long as it, together with its affiliates, holds at least 10% of the voting power of our outstanding shares of capital stock. We, in turn, are obligated to use our best efforts to ensure that these nominees are elected. In addition, those agreements will provide that each of BlackRock and Highfields, as long as it holds at least 10% of the voting power of our outstanding shares of capital stock, will have the right to nominate one member of each committee of our board of directors. As long as those nominees meet the independence standards applicable to those committees, we will appoint them as members of those committees.

We will enter into a registration rights agreement with BlackRock, Highfields and our other existing owners pursuant to which BlackRock, Highfields and certain permitted transferees will have the right, under certain circumstances and subject to certain restrictions, to require us to register for resale the shares of our Class A common stock delivered in exchange for New Holdings Units held by them. Any such securities registered under any registration statement will be available for sale in the open market unless restrictions apply.

Demand Registration Rights. BlackRock and Highfields and certain permitted transferees will each have the right to demand that we register their Class A common stock for resale, subject to the conditions set forth in the registration rights agreement, no more than three times in any twelve month period. Six months after the closing of this offering, BlackRock and Highfields and certain permitted transferees will have the right under the registration rights agreement to require that we register their Class A common stock for resale. Such registration demand must reasonably be expected to result in aggregate gross cash proceeds to such demanding stockholder in excess of $25 million. Each of BlackRock and Highfields and certain permitted transferees will have the right to participate in any such demand registrations. We will not be obligated to effect a demand registration within 120 days of the effective date of a registration statement filed by us. We may postpone the filing of a registration statement for up to 60 days once in any 12-month period if our board of directors determines in good faith that the filing would reasonably be expected to materially adversely affect any material financing or acquisition of ours or require premature disclosure of information that would reasonably be expected to be materially adverse to us. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these demand registration rights.

Piggyback Registration Rights. BlackRock, Highfields, certain of their permitted transferees and the minority stockholders which are parties to the agreement will each have the right to "piggyback" on any registration statements that we file on an unlimited basis, subject to the conditions set forth in the registration rights agreement. If we register any securities for public sale, stockholders with piggyback registration rights under the registration rights agreement have the right to include their shares in the registration for resale by them, subject to specified limitations and exceptions.

S-3 Registration Rights. If we are eligible to file a registration statement on Form S-3, the stockholders with S-3 registration rights under the registration rights agreement and certain permitted transferees can request that we register their shares for resale. Any registration must be reasonably expected by the demanding stockholder to result in aggregate gross cash proceeds to such demanding stockholder in excess of $10 million, and no more than three demands for an S-3 registration may be made in any 12-month period. We may postpone the filing of a Form S-3 registration statement for up to 60 days once in any 12-month period if our board of directors determines in good faith that the filing would reasonably be expected to materially adversely affect any material financing or acquisition of ours or require premature disclosure of information that would reasonably be expected to be materially adverse to us. If we are eligible as a Well Known Seasoned Issuer, or WKSI, the requesting stockholders may request that the shelf registration statement utilize the automatic shelf registration process under Rule 415 and Rule 462 promulgated under the Securities Act. If we are not eligible as a WKSI or are otherwise ineligible to utilize the automatic shelf registration process, then we are required to use our reasonable efforts to have the shelf registration statement declared effective.

As described above, the unit holders of Private National Mortgage Acceptance Company, LLC (other than PennyMac Financial Services, Inc.) may (subject to the terms of the exchange agreement) exchange their New Holdings Units for shares of Class A common stock of PennyMac Financial Services, Inc., initially on a one-for-one basis. Private National Mortgage Acceptance Company, LLC intends to have in effect an election under Section 754 of the Code effective for each taxable year in which an exchange of New Holdings Units for shares of Class A common stock occurs, which may result in a special adjustment for PennyMac Financial Services, Inc. with respect to the tax basis of the assets of Private National Mortgage Acceptance Company, LLC at the time of an exchange of New Holdings Units, which adjustment affects only PennyMac Financial Services, Inc., which we refer to as the "corporate taxpayer." The subsequent exchanges are expected to result in special increases for the

corporate taxpayer in the tax basis of the assets of Private National Mortgage Acceptance Company, LLC that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that the corporate taxpayer would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. The IRS may challenge all or part of the existing tax basis, tax basis increase and increased deductions, and a court could sustain such a challenge.

We will enter into a tax receivable agreement with our existing owners that will provide for the payment from time to time by the corporate taxpayer to our existing owners of 85% of the amount of the net tax benefits, if any, that the corporate taxpayer is deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges of New Holdings Units, (ii) certain allocations as a result of the application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of certain assets of Private National Mortgage Acceptance Company, LLC on the date of the offering, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of the corporate taxpayer and not of Private National Mortgage Acceptance Company, LLC. For purposes of the tax receivable agreement, the tax benefit deemed realized by the corporate taxpayer will be computed by comparing the actual income tax liability of the corporate taxpayer (calculated with certain assumptions) to the taxes that the corporate taxpayer would have been required to pay had there been no increase to the tax basis of the assets of Private National Mortgage Acceptance Company, LLC as a result of the exchanges, had there been no tax benefit to the corporate taxpayer by application of the principles of Section 704(c) of the Code to take into account the difference between the fair market value and the adjusted tax basis of the assets of Private National Mortgage Acceptance Company, LLC on the date of this offering and had the corporate taxpayer not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless (i) the corporate taxpayer exercises its right to terminate the tax receivable agreement in exchange for an early termination payment in an amount based on the present value of the anticipated future tax benefits (calculated with certain assumptions) or (ii) the corporate taxpayer breaches any of its material obligations under the tax receivable agreement in which case all obligations will generally be accelerated and due as if the corporate taxpayer had exercised its right to terminate the agreement. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including:

We expect that the payments that we may make under the tax receivable agreement will be substantial. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and/or distributions to PennyMac Financial Services, Inc. by Private National Mortgage Acceptance Company, LLC are not sufficient to permit PennyMac Financial Services, Inc. to make payments under the tax receivable agreement after it has paid taxes. The payments under the tax receivable agreement are not conditioned upon our existing owners' continued ownership of us.

In addition, the tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, the corporate taxpayer's (or its successor's) obligations with respect to exchanged or acquired New Holdings Units (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayer would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As a result, (i) we could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual net tax benefits we realize in respect of the tax attributes subject to the tax receivable agreement and (ii) if we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future net tax benefits, which upfront payment may be made years in advance of the actual realization of such future benefits. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity.

Decisions made by our existing owners in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling existing owner under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments.

Payments are generally due under the tax receivable agreement within a specified period of time following the filing of our tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 100 basis points from the due date (without extensions) of such tax return. Payments not made when due under the tax receivable agreement would accrue interest at a rate of LIBOR plus 500 basis points.

Payments under the tax receivable agreement will be based on the tax reporting positions that we will determine. Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the corporate taxpayer will not be reimbursed for any payments previously made under the tax receivable agreement (except to the extent such amounts can be applied against future amounts that would otherwise be due under the tax receivable agreement). As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of the benefits that the corporate taxpayer actually realizes in respect of the tax attributes subject to the tax receivable agreement.

Private National Mortgage Acceptance Company, LLC Limited Liability Company Agreement

As a result of the Recapitalization and Offering Transactions, PennyMac Financial Services, Inc. will hold New Holdings Units in Private National Mortgage Acceptance Company, LLC and will be the sole managing member of Private National Mortgage Acceptance Company, LLC. Accordingly, PennyMac Financial Services, Inc. will operate and control all of the business and affairs of Private National Mortgage Acceptance Company, LLC and, through Private National Mortgage Acceptance Company, LLC and its operating entity subsidiaries, conduct our business.

Pursuant to the limited liability company agreement of Private National Mortgage Acceptance Company, LLC as it will be in effect at the time of this offering, PennyMac Financial Services, Inc. has the right to determine when distributions will be made to unit holders of Private National Mortgage Acceptance Company, LLC and the amount of any such distributions, other than with respect to tax distributions as described below. If a distribution is authorized, such distribution will be made to the unit holders of Private National Mortgage Acceptance Company, LLC pro rata in accordance with the percentages of their respective limited liability company interests.

The unit holders of Private National Mortgage Acceptance Company, LLC, including PennyMac Financial Services, Inc., will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of Private National Mortgage Acceptance Company, LLC. Except as otherwise required under Section 704(c) of the Code, net profits and net losses of Private National Mortgage Acceptance Company, LLC will generally be allocated to its unit holders (including PennyMac Financial Services, Inc.) pro rata in accordance with their respective limited liability company interests. The limited liability company agreement of Private National Mortgage Acceptance Company, LLC will provide for quarterly cash distributions, which we refer to as "tax distributions," to the holders of the New Holdings Units if PennyMac Financial Services, Inc., as the sole managing member of Private National Mortgage Acceptance Company, LLC, determines that the taxable income of Private National Mortgage Acceptance Company, LLC gives rise to taxable income for such holders. Generally, these quarterly tax distributions will be computed based on the taxable income of Private National Mortgage Acceptance Company, LLC multiplied by an assumed tax rate determined by us. Tax distributions will be made only to the extent that all distributions from Private National Mortgage Acceptance Company, LLC for the relevant year were insufficient to cover such tax liabilities.

The limited liability company agreement of Private National Mortgage Acceptance Company, LLC will also provide that substantially all expenses incurred by or attributable to PennyMac Financial Services, Inc. (such as expenses incurred in connection with this offering), but not including obligations incurred under the tax receivable agreement by PennyMac Financial Services, Inc. and income tax expenses of PennyMac Financial Services, Inc., will be borne by Private National Mortgage Acceptance Company, LLC.

The limited liability company agreement of Private National Mortgage Acceptance Company, LLC will generally provide that at any time we issue a share of our Class A common stock or any other equity security, the net proceeds received by us with respect to such share, if any, shall be concurrently transferred to Private National Mortgage Acceptance Company, LLC and Private National Mortgage Acceptance Company, LLC will issue to us one New Holdings Unit with respect to such issuance of Class A common stock (or another equity interest in Private National Mortgage Acceptance Company, LLC with respect to other equity issuances by us), subject to any change in the initial exchange rate provided for in the exchange agreement. Conversely, if at any time, any shares of our Class A common stock are redeemed by us for cash, Private National Mortgage Acceptance Company, LLC shall, immediately prior to such redemption of our Class A common stock, redeem an equal number of New Holdings Units held by us, upon the same terms and for the same price, as the shares of our Class A common stock are redeemed, subject to any change in the initial exchange rate provided for in the exchange agreement.

Other than PennyMac Financial Services, Inc., in its capacity as managing member, holders of the New Holdings Units will have no voting rights with respect to Private National Mortgage Acceptance Company, LLC, except that (i) the managing member shall not create additional classes of units or securities for issuance to any party other than PennyMac Financial Services, Inc. and (ii) the managing member and Private National Mortgage Acceptance Company, LLC shall take no action or enter into any agreement that would limit the ability of Private National Mortgage Acceptance Company, LLC to make tax distributions or the ability of the managing member to make payments under the tax receivable agreement, provided that the managing member and Private National Mortgage Acceptance Company, LLC may enter into credit, financing or warehousing or similar agreements that limit or prohibit the making of tax distributions or payments under the tax receivable agreement if there is a default or event of default or if such distributions could result in a default or event of default thereunder, in each case without the consent of all members having voting rights which hold more than 5% of the then outstanding New Holdings Units, and the consent of each of BlackRock and Highfields, as long as it, together with its affiliates, holds any New Holdings Units.

Holders of New Holdings Units will also have consent rights for amendments to the limited liability company agreement of Private National Mortgage Acceptance Company, LLC that materially and adversely affect the rights or duties of a holder on a discriminatory and non-pro rata basis. In addition, so long as either BlackRock or Highfields continues to own, together with its affiliates, a number of New Holdings Units representing more than 10% of the New Holdings Units outstanding immediately after this offering, its consent will be required for any amendment to the limited liability company agreement of Private National Mortgage Acceptance Company, LLC. The consent of BlackRock and Highfields will also be required to any amendment that reduces such holder's tax distributions on a non-pro rata basis, limits such holder's ability to exercise its rights under the exchange agreement, requires such holder to make a capital contribution, materially increases such holder's obligations or permits the appointment of a new managing member other than a successor to PennyMac Financial Services, Inc. permitted under the limited liability company agreement of Private National Mortgage Acceptance Company, LLC. In addition, the consent of BlackRock and Highfields will be required to convert the legal form of Private National Mortgage Association Company, LLC into a corporation, or treat it as other than a partnership for United States federal income tax purposes.

Our subsidiary, PCM, enters into investment management agreements with investment companies or funds that invest in residential mortgage assets. Presently, PCM is party to management agreements with the Investment Funds and with PMT.

These management agreements require us to oversee the business affairs of the Investment Funds and PMT in conformity with the investment policies that are approved and monitored by such client's board or management. We are responsible for the client's day-to-day management and perform such services and activities related to the client's assets and operations as may be appropriate.

PMT Management Agreement. Effective February 1, 2013, we renewed our management agreement with PMT and PennyMac Operating Partnership, L.P. through February 1, 2017 and amended and restated its terms in order to better align the base and performance incentive components of our management fee with PMT's investment strategy. Pursuant to the terms of the amended and restated management agreement between PCM and PMT, PCM collects a base management fee and may collect a performance incentive fee, both payable quarterly and in arrears. The initial term of this management agreement expires, on February 1, 2017, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

The base management fee is calculated at a defined annualized percentage of "shareholder's equity." "Shareholders' equity" is defined as the sum of the net proceeds from any issuances of PMT's equity securities since its inception (weighted for the time outstanding during the measurement period); plus PMT's retained earnings at the end of the quarter; less any amount that PMT pays for repurchases of its common shares (weighted for the time held during the measurement period); and excluding one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between PCM and PMT's independent trustees and approval by a majority of PMT's independent trustees.

The base management fee is equal to the sum of (i) 1.5% per annum of shareholders' equity up to $2 billion, (ii) 1.375% per annum of shareholders' equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per annum of shareholders' equity in excess of $5 billion. The base management fee is paid in cash.

The performance incentive fee is calculated at a defined annualized percentage of the amount by which "net income," on a rolling four-quarter basis and before the incentive fee, exceeds certain levels of return on "equity." "Net income," for purposes of determining the amount of the performance incentive fee, is defined as net income or loss computed in accordance with GAAP and certain other non-cash charges determined after discussions between PCM and PMT's independent trustees and approval by a majority of PMT's independent trustees. "Equity" is the weighted average of the issue price per common share of all of PMT's public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the four-quarter period.

The performance incentive fee is calculated quarterly and escalates as net income (stated as a percentage return on equity) increases over certain thresholds. On each calculation date, the threshold amounts represent a stated return on equity, plus or minus a "high watermark" adjustment. The performance fee payable for any quarter is equal to: (a) 10% of the amount by which net income for the quarter exceeds (i) an 8% return on equity plus the high watermark, up to (ii) a 12% return on equity; plus (b) 15% of the amount by which net income for the quarter exceeds (i) a 12% return on equity plus the high watermark, up to (ii) a 16% return on equity; plus (c) 20% of the amount by which net income for the quarter exceeds a 16% return on equity plus the high watermark.

The high watermark starts at zero and is adjusted quarterly. The quarterly adjustment reflects the amount by which the net income in that quarter exceeds or falls short of the lesser of 8% and the 30-year Fannie Mae current coupon MBS Yield (the target yield) for such quarter. 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 PCM 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 performance incentive fee may be paid in cash or in common shares of PMT (subject to a limit of no more than 50% paid in common shares), at PMT's option.

Under this management agreement, PCM is entitled to reimbursement of its organizational and operating expenses, including third-party expenses, incurred on PMT's behalf.

In general, the parties to this management agreement have agreed to negotiate in good faith to amend the provisions thereof relating to the compensation of PCM in order to cause such compensation to be materially consistent with market rates of compensation for services comparable to those provided under this management agreement if (a) PMT or PCM requests such negotiation after a determination by PMT or PCM that the rates of compensation payable to PCM differ materially from such market rates of compensation and (b) various conditions relating to the timing and frequency of such requests are satisfied, including the condition that no request be made before the second anniversary of the execution of this management agreement. If the parties are unable to reach agreement on the terms of a fee amendment within thirty days of the delivery of the relevant fee negotiation request, the terms of such fee amendment will be determined by final and binding arbitration procedures set forth in this management agreement.

Under this management agreement, PCM may be entitled to a termination fee under certain circumstances. Specifically, the termination fee is payable for (1) PMT's termination of the management agreement without cause, (2) PCM's termination of the management agreement upon a default by PMT in the performance of any material term of the management agreement that has continued uncured for a period of 30 days after receipt of written notice thereof or (3) PCM's termination of the management agreement after PMT's termination without cause (excluding a non-renewal) of the mortgage banking and warehouse services agreement, the MSR recapture agreement, or the amended and restated flow servicing agreement, each of which is described below. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual (or, if the period is less than 24 months, annualized) performance incentive fee earned by PCM, in each case during the 24-month period before termination.

PMT may terminate this management agreement without the payment of any termination fee under certain circumstances, including, among other circumstances, in the event of uncured material breaches by PCM of this management agreement, upon a change in control of PCM (defined to include a 50% change in the shareholding of PCM in a single transaction or related series of transactions or Stanford L. Kurland's failure to continue as chief executive officer of PCM to the extent his suitable replacement (in PMT's discretion) has not been retained by PCM within six months thereof) or upon the termination of the mortgage banking and warehouse services agreement or the MSR recapture agreement by PLS without cause.

This management agreement also provides that, prior to the undertaking by PCM or its affiliates of any new investment opportunity or any other business opportunity requiring a source of capital with respect to which PCM or its affiliates will earn a management, advisory, consulting or similar fee, PCM will present to PMT that new opportunity and the material terms on which PCM proposes to provide services before pursuing that opportunity with third parties.

We earned approximately $ million, $8.5 million and $5.5 million in base management fees, and no performance incentive fees, in fiscal years 2012, 2011 and 2010, respectively, under our management agreements with PMT.

Investment Funds Management Agreements. We have investment management agreements with the Investment Funds pursuant to which we receive management fees consisting of base management fees and carried interest. The Investment Funds' management fees were based on the capital commitments of the respective funds from their inception through December 31, 2011, at which time the commitment period for each of the Investment Funds ended. Since the end of the commitment periods, the base management fees are based on the lesser of the funds' net asset values or aggregate capital contributions. The base management fees accrue at annual rates ranging from one and one-half percent (1.5%) to two percent (2.0%) of the applicable amounts on which they are based.

We also recognize carried interest as a participation in the profits of the Investment Funds after their investors have achieved a preferred return of eight percent (8.0%), compounded annually and as defined in the management agreements. After the investors have achieved such preferred return, a

"catch up" return accrues to us until we receive a specified percentage of such preferred return, taken together with our portion thereof. Thereafter, we participate in future returns in excess of the preferred return rate at the rate of twenty percent (20.0%).

The amount of the carried interest that we will receive depends on the Investment Funds' future performance. As a result, the amount of carried interest recorded by us at period end is subject to adjustment based on future results of the Investment Funds. We expect to collect the carried interest when the Investment Funds liquidate. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the limited liability company and limited partnership agreements that govern the Investment Funds.

We earned from the Investment Funds approximately $ million, $9.9 million and $9.9 million in base management fees, and approximately $ million, $12.6 million and $24.7 in carried interest, in fiscal years 2012, 2011 and 2010, respectively, under our management agreements with the Investment Funds. We did not earn any performance incentive fees during these periods under these management agreements.

Our subsidiary, PLS, enters into servicing agreements with investment companies or funds that invest in residential mortgage loans pursuant to which we provide servicing for our clients' portfolio of residential mortgage loans. Presently, PLS is party to servicing agreements with the Investment Funds and PMT.

The loan servicing to be provided by us under the servicing agreements includes collecting principal, interest and escrow account payments, if any, with respect to mortgage loans, as well as managing loss mitigation, which may include, among other things, collection activities, loan workouts, modifications, foreclosures and short sales. We may also engage in certain loan origination activities that include refinancing mortgage loans and arranging financings that facilitate sales of REO properties.

PMT Loan Servicing Agreement. Effective February 1, 2013, we amended our loan servicing agreement with PMT and established servicing fees that change the nature of the fees that we earn to fixed per-loan monthly amounts based on the delinquency, bankruptcy and foreclosure status of the serviced loan or the real estate acquired in settlement of a loan. The initial term of this servicing agreement expires on February 1, 2017, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

The base servicing fees for distressed whole loans are calculated based on a monthly per-loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or the related underlying real estate. Presently, the base servicing fees for distressed whole loans range from $30 per month for current loans up to $125 per month for loans that are severely delinquent and in foreclosure.

The base servicing fees for loans subserviced on behalf of PMT are also calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the mortgage loan is a fixed-rate or adjustable-rate loan. Presently, the base servicing fees for loans subserviced on behalf of PMT are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate mortgage loans. To the extent that these loans become delinquent, PLS is entitled to an additional servicing fee per loan falling within a range of $10 to $75 per month and based on the delinquency, bankruptcy and foreclosure status of the loan or the related underlying real estate.

PLS is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, and assumption, modification and origination fees.

Except as otherwise provided in the MSR Recapture Agreement, when PLS effects a refinancing of a loan on PMT's behalf and not through a third-party lender and the resulting loan is readily saleable, or PLS originates a loan to facilitate the disposition of the real estate acquired by PMT in settlement of a loan, PLS is entitled to receive from PMT market-based fees and compensation consistent with pricing and terms PLS offers unaffiliated third parties on a retail basis.

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

In addition, because PMT does not have any employees or infrastructure, PLS 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, PLS receives from PMT a supplemental fee of $25 per month for each distressed whole loan and $3.25 per month for each other subserviced loan.

In general, the parties to this servicing agreement have agreed to negotiate in good faith to amend the provisions thereof relating to the compensation of PLS in order to cause such compensation to be materially consistent with market rates of compensation for services comparable to those provided under this servicing agreement if (a) either party requests such negotiation after a determination by either party that the rates of compensation payable to PLS differ materially from such market rates of compensation and (b) various conditions relating to the timing and frequency of such requests are satisfied, including the condition that no request be made before the second anniversary of the execution of this servicing agreement. If the parties are unable to reach agreement on the terms of a fee amendment within thirty days of the delivery of the relevant fee negotiation request, the terms of that fee amendment will be determined by final and binding arbitration procedures set forth in this servicing agreement.

No automatic renewal of this servicing agreement will occur upon the conclusion of the initial term or any renewal period if PMT or PLS delivers to the other party a notice of nonrenewal at least 180 days in advance. In addition, (i) PLS has the right to terminate this servicing agreement without cause if either of the mortgage banking and warehouse services agreement or the MSR recapture agreement is terminated by PMT without cause as provided in each such agreement or the management agreement is terminated by PMT without cause as provided in such agreement and (ii) PMT has the right to terminate the servicing agreement without cause if either of the mortgage banking and warehouse services agreement or the MSR recapture agreement is terminated by PLS without cause or the management agreement is terminated by PCM as provided in such agreement. This servicing agreement is further subject to termination under other circumstances, generally including (a) in whole, at the election of either party following a specified default or other for-cause event on the part of the other, (b) in part with respect to one or more individual loans, at the election of PMT in connection with a sale of such loan(s) or if such loan(s) become seriously delinquent or the real estate is acquired on behalf of the lender, and (c) in whole at the election of PLS or PMT if PMT or PLS, respectively, defaults in its obligations under the MSR recapture agreement. PMT is required to pay release fees to PLS in connection with certain terminations.

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

Investment Funds Loan Servicing Agreements. Our servicing agreements with the Investment Funds generally provide for fee revenue of between 50 and 100 basis points of unpaid principal balance per year, the amount of which varies depending on the type and quality of the loans being serviced. We are also entitled to certain customary market-based fees and charges. Under the servicing agreements

between us and the Investment Funds, on December 31, 2011 and the end of every calendar year thereafter, we are required to rebate to the Investment Funds an amount equal to the cumulative profit, if any, of the servicing operations attributable to the Investment Funds' assets, and, conversely, charge the Investment Funds if a loss has been incurred in order to effect overall "at cost" pricing with respect to loan servicing activities for those assets. Under these agreements, we also will rebate to the Investment Funds 50% of any profit generated from loan origination and modification activities. We record the net rebate amounts as earned or incurred.

This arrangement was modified, effective January 1, 2012, with respect to one of the Investment Funds. At that time, we settled our accrued servicing fee rebate and amended our servicing agreement with such fund to charge scheduled servicing fees in place of the previous "at cost" servicing arrangement.

We earned approximately $ million, $25.0 million and $13.6 million in loan servicing fees in fiscal years 2012, 2011 and 2010, respectively, in connection with work performed for PMT and the Investment Funds.

PMT Mortgage Banking and Warehouse Services Agreement. Pursuant to the terms of the current mortgage banking and warehouse services agreement, PLS provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, with respect to loans acquired by PMT from correspondent lenders, and certain warehouse lending services, including fulfillment and administrative services, with respect to loans financed by PMT for its warehouse lending clients. Pursuant to the mortgage banking and warehouse services agreement, PLS has agreed to provide such services exclusively for PMT's benefit, and PLS and its affiliates are prohibited from providing such services for any other third party. However, such exclusivity and prohibition shall not apply, and certain other duties instead will be imposed upon PLS, if PMT is unable to purchase or finance mortgage loans as contemplated under the mortgage banking and warehouse services agreement for any reason. The initial term of the mortgage banking and warehouse services agreement expires on February 1, 2017, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

In consideration for the mortgage banking services provided by PLS with respect to PMT's acquisition of mortgage loans, PLS is entitled to a fulfillment fee based on the type of mortgage loan acquired by PMT and equal to a percentage of the unpaid principal balance of such mortgage loan. Presently, the applicable percentages are (i) .50% for conventional mortgage loans, (ii) .88% for loans underwritten in accordance with the Ginnie Mae Mortgage-Backed Securities Guide, (iii) .80% for HARP mortgage loans with a loan-to-value ratio of 105% or less, and (iv) 1.20% for HARP mortgage loans with a loan-to-value ratio of greater than 105%. Presently, PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the mortgage banking and warehouse services agreement we currently purchase loans underwritten in accordance with the Ginnie Mae Mortgage-Backed Securities Guide "as is" and without recourse of any kind from PMT at its cost less an administrative fee plus accrued interest and a sourcing fee of three basis points.

In the event PMT acquires mortgage loans with an aggregate UPB in any month greater than $2.5 billion and less than or equal to $5 billion, PLS has agreed to discount the amount of such fulfillment fees by reimbursing PMT in an amount equal to the product of (i) .025%, (ii) the amount of unpaid principal balance in excess of $2.5 billion, and (iii) the percentage of the aggregate unpaid principal balance relating to mortgage loans for which we collected fulfillment fees in such month. In the event that PMT acquires mortgage loans in any month with an aggregate UPB greater than $5 billion, we have agreed to discount the amount of such fulfillment fees by reimbursing PMT in an amount equal to the product of (i) .05%, (ii) the amount of unpaid principal balance in excess of

$5.0 billion, and (iii) the percentage of the aggregate unpaid principal balance relating to mortgage loans for which we collected fulfillment fees in such month.

In consideration for the mortgage banking services provided by PLS with respect to PMT's acquisition of mortgage loans under its early purchase program, PLS is entitled to fees accruing at a rate per annum equal to (i) $25,000, plus (ii) $50 for each mortgage loan that PMT acquires.

In consideration for the warehouse services provided by PLS with respect to mortgage loans financed by PMT for its warehouse lending clients, with respect to each facility, PLS is entitled to fees that accrue at a rate per annum equal to (i) $25,000, plus (ii) $50 for each mortgage loan.

Notwithstanding any provision of the mortgage banking and warehouse services agreement to the contrary, if it becomes reasonably necessary or advisable for PLS to engage in additional services in connection with post-breach or post-default resolution activities for the purposes of a correspondent lending agreement, a warehouse agreement or a re-warehouse agreement, then PMT has generally agreed with PLS to negotiate in good faith for additional compensation and reimbursement of expenses to be paid to PLS for the performance of such additional services.

In general, the parties to the mortgage banking and warehouse services agreement have agreed to negotiate in good faith to amend the provisions of the mortgage banking and warehouse services agreement relating to the compensation of PLS in order to cause such compensation to be materially consistent with market rates of compensation for services comparable to those provided under the mortgage banking and warehouse services agreement if (a) either party requests such negotiation after a determination by either party that the rates of compensation payable to PLS differ materially from such market rates of compensation and (b) various conditions relating to the timing and frequency of such requests are satisfied, including the condition that no request be made before the second anniversary of the execution of the mortgage banking and warehouse services agreement. If the parties are unable to reach agreement on the terms of a fee amendment within thirty days of the delivery of the relevant fee negotiation request, the terms of that fee amendment will be determined by final and binding arbitration procedures set forth in the mortgage banking and warehouse services agreement.

No automatic renewal of the mortgage banking and warehouse services agreement will occur upon the conclusion of the initial term or any renewal period if PMT or PLS delivers to the other party a notice of nonrenewal at least 180 days in advance. In addition, (i) PLS has the right to terminate the mortgage banking and warehouse services agreement without cause if the MSR recapture agreement is terminated by PMT without cause as provided in such agreement, the servicing agreement is terminated by PMT without cause as provided in such agreement or the management agreement is terminated by us without cause as provided in such agreement, and (ii) PMT has the right to terminate the mortgage banking and warehouse services agreement without cause if the MSR recapture agreement or the servicing agreement is terminated by PLS without cause as provided in each such agreement or the management agreement is terminated by PCM without cause as provided in such agreement. The mortgage banking and warehouse services agreement is further subject to termination under other circumstances, generally including at the election of either party following a specified default or other for-cause event on the part of the other. In the case of a non-renewal or termination of the mortgage banking and warehouse services agreement, PMT will be entitled under certain circumstances to require that PLS continue to provide correspondent lending services for a specified number of months following the scheduled expiration or termination, in which case the then current fee structure and exclusivity obligations applicable to such services would remain in effect.

In connection with the execution of the mortgage banking and warehouse services agreement, PMT and PLS entered into an agreement terminating, effective on February 1, 2013, the amended and restated mortgage banking services agreement, dated as of November 1, 2010 (as amended, supplemented or otherwise modified), between PMT and PLS and mutually waived any and all notice and timing requirements applicable to such termination.

We earned approximately $ million, $1.7 million and $0 in fulfillment fees in fiscal years 2012, 2011 and 2010, respectively, under our mortgage banking and warehouse services agreements with PMT, and we paid to PMT approximately $ million, $0.2 million and $0 in sourcing fees in fiscal years 2012, 2011 and 2010, respectively.

MSR Recapture Agreement. PLS has also entered into an MSR recapture agreement with PMT. Pursuant to the terms of the MSR recapture agreement, if PLS refinances via its retail lending business loans for which PMT previously held the MSRs, PLS is generally required to transfer and convey to PMT, without cost to PMT, the MSRs with respect to new mortgage loans originated in those refinancings (or, under certain circumstances, other mortgage loans) that have an aggregate unpaid principal balance that is not less than 30% of the aggregate unpaid principal balance of all the loans so originated. The initial term of the MSR recapture agreement expires, on February 1, 2017, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

In general, the parties to the MSR recapture agreement have agreed to negotiate in good faith to amend the provisions thereof relating to the compensation of PLS in order to cause such compensation to be materially consistent with market rates of compensation for services comparable to those provided under the MSR recapture agreement if (a) either party requests such negotiation after a determination by either party that the rates of compensation payable to PLS differ materially from such market rates of compensation and (b) various conditions relating to the timing and frequency of such requests are satisfied, including the condition that no request be made before the second anniversary of the execution of the MSR recapture agreement. If the parties are unable to reach agreement on the terms of a fee amendment within thirty days of the delivery of the relevant fee negotiation request, the terms of such fee amendment will be determined by final and binding arbitration procedures set forth in the MSR recapture agreement.

No automatic renewal of the MSR recapture agreement will occur upon the conclusion of the initial term or any renewal period if PMT or PLS delivers to the other party a notice of nonrenewal at least 180 days in advance. In addition, (i) PLS has the right to terminate the MSR recapture agreement without cause if the mortgage banking and warehouse services agreement is terminated by PMT without cause as provided in such agreement, the servicing agreement is terminated by PMT without cause as provided in such agreement or the management agreement is terminated by us without cause as provided in such agreement, and (ii) PMT has the right to terminate the MSR recapture agreement without cause if the mortgage banking and warehouse services agreement or the servicing agreement is terminated by PLS without cause as provided in each such agreement or the management agreement is terminated by PCM without cause as provided in such agreement. In addition, if PMT exercises its right to terminate the servicing agreement without cause in connection with sales of one or more mortgage loans serviced thereunder, PLS will be entitled to terminate the MSR recapture agreement solely with respect to such mortgage loans. Following any termination of the MSR recapture agreement, PLS is prohibited from taking action with respect to the refinancing of the mortgage loans involved in the termination, subject to various exceptions, including an exception with respect to generalized advertising not targeted exclusively to the borrowers under such mortgage loans.

Spread Acquisition and MSR Servicing Agreement. Pursuant to a spread acquisition and MSR servicing agreement entered into by PLS and PMT on February 1, 2013, PMT may acquire from PLS the rights to receive certain excess servicing spread arising from mortgage servicing rights acquired by PLS, in which case PLS generally would be required to service or subservice the related mortgage loans. The terms of each transaction under this spread acquisition and MSR servicing agreement will be subject to the terms of such agreement as modified and supplemented by the terms of a confirmation executed in connection with such transaction. As of the date hereof, no acquisition has occurred, and no confirmation has been executed, under this spread acquisition and MSR servicing agreement.

Reimbursement Agreement. In connection with the initial public offering of common shares of PMT, on August 4, 2009 our subsidiary, PCM, entered into an agreement with PMT pursuant to which PMT agreed to reimburse PCM for the $2.9 million payment that PCM made to the underwriters for PMT's initial public offering if PMT satisfied certain performance measures over a specified period of time. We refer to this as the "Conditional Reimbursement." The reimbursement agreement provides for the reimbursement of PCM of the Conditional Reimbursement if PMT is required to pay PCM performance incentive fees under the amended and restated management agreement described above, at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The reimbursement of the Conditional Reimbursement is subject to a maximum reimbursement in any particular 12 month period of $980,422 and the maximum amount that may be reimbursed under the agreement is $2.9 million. In the event that the termination fee is payable to PCM under the amended and restated management agreement and PCM has not received the full amount of the reimbursements and payments under the reimbursement agreement, this amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.

Confidentiality Agreement. Pursuant to the Confidentiality Agreement, we agreed to standard confidentiality obligations with PMT and agreed that we and certain of our affiliates shall be prohibited from pursuing an acquisition of PMT, and PMT shall be prohibited from pursuing an acquisition of us, except through negotiations with our respective boards, for a period of three years.

We received dividends of $ , $138,000 and $58,000 in fiscal years 2012, 2011 and 2010, respectively, as a result of our investment in common shares of PMT.

Management Investments in Private National Mortgage Acceptance Company, LLC

Certain executive officers have been provided with the opportunity to purchase units in Private National Mortgage Acceptance Company, LLC. The numbers of units offered for purchase to such executive officers were determined based upon the recommendation of our Chief Executive Officer and approval by the board of directors of Private National Mortgage Acceptance Company, LLC based upon the individual's position and other relevant factors.

We previously extended loans to certain of our executive officers to facilitate the acquisitions of such units. In addition, in 2010 advances against future distributions were made to certain members of our management in lieu of cash bonuses relating to 2009. All such loans and advances made to our executive officers have been repaid prior to the initial filing of the registration statement of which this prospectus forms a part.

The following table sets forth the aggregate number and dollar amount of preferred units in Private National Mortgage Acceptance Company, LLC purchased by our executive officers, and the aggregate dollar amount of loans or advances made by us to our executive officers, in the last three years, in each case where the aggregate amount of all such purchases, loans or advances exceeded $120,000 in any year:

	2012		2011		2010

Stanford Kurland
Number of preferred units purchased		1,599.53		2,813.98		750.00
Aggregate purchase price	$	1,599,530	$	2,813,980	$	750,000
Purchase loans		—		—		—
Other loans and advances		—		—		—
David Spector
Number of preferred units purchased		248.05		446.29		118.95
Aggregate purchase price	$	248,045	$	446,295	$	118,950
Purchase loans	$	248,045	$	350,045		—
Other loans and advances		—		—	$	400,000
Steve Bailey
Number of preferred units purchased		106.35		191.35		255.00
Aggregate purchase price	$	106,350	$	191,350	$	255,000
Purchase loans	$	106,350	$	106,350	$	255,000
Other loans and advances	$	75,000	$	75,000	$	37,500
Andrew Chang
Number of preferred units purchased		171.41		308.41		82.20
Aggregate purchase price	$	171,410	$	308,410	$	82,200
Purchase loans	$	171,410	$	234,910		—
Other loans and advances		—		—	$	200,000
Vandad Fartaj
Number of preferred units purchased		159.84		287.59		273.45
Aggregate purchase price	$	159,840	$	287,590	$	273,450
Purchase loans	$	159,840	$	212,040	$	196,800
Other loans and advances		—		—	$	200,000
Jeffrey Grogin
Number of preferred units purchased		91.10		233.81		29.70
Aggregate purchase price	$	91,095	$	233,805	$	29,700
Purchase loans	$	91,095	$	214,905		—
Other loans and advances		—		—	$	200,000
Anne McCallion
Number of preferred units purchased		138.01		318.22		52.20
Aggregate purchase price	$	138,010	$	318,220	$	52,200
Purchase loans		—		—		—
Other loans and advances		—		—	$	200,000
David Walker
Number of preferred units purchased		205.51		369.76		163.95
Aggregate purchase price	$	205,505	$	369,755	$	163,950
Purchase loans	$	205,505	$	205,505	$	65,400
Other loans and advances		—		—	$	200,000

Presently, we employ Mr. Kurland's brother-in-law, Robert Schreibman. We established Mr. Schreibman's compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Schreibman. Mr. Schreibman does not report directly to any of our executive officers.

We have employed Mr. Schreibman since 2008, as a Director, Asset Management, for the following approximate amounts: in 2012, $242,280 in base salary and bonus; in 2011, $206,684 in base salary and bonus; and in 2010, $212,520 in base salary and bonus. In addition, on October 17, 2011, Mr. Schreibman purchased from us pursuant to a company loan 116.36 of our preferred units, with a market value of $1,068 per unit, at a purchase price of $1,000 per unit, and we granted Mr. Schreibman 63.98 common units with a market value of $68 per unit. Mr. Schreibman has also been entitled to receive employee benefits generally available to all employees.

Presently, we also employ Mr. Vandad Fartaj's brother, Vala Fartaj. We established Mr. Vala Fartaj's compensation in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities holding similar positions. None of the executive officers has a material interest in this employment relationship nor do any of them share a home with Mr. Vala Fartaj. Mr. Vala Fartaj does not report directly to any of our executive officers.

We have employed Mr. Vala Fartaj since 2008, as a Director, Mortgage Trading, for the following approximate amounts: in 2012, $229,698 in base salary and bonus and a gross-up payment for the payment of self-employment taxes in the amount of $1,608; in 2011, $220,802 in base salary and bonus and a gross-up payment for the payment of self-employment taxes in the amount of $2,631.78; and in 2010, $175,000 in base salary and bonus. In addition, on October 25, 2010, we granted Mr. Vala Fartaj 85.32 common units with a market value of $279 per unit and, on October 17, 2011, we granted Mr. Vala Fartaj 63.89 common units with a market value of $68 per unit. Mr. Vala Fartaj has also been entitled to receive employee benefits generally available to all employees.

In August 2011, we entered into a foodservice agreement with Me N U Kitchen, LLC, or MNU. MNU is a limited liability company, the membership and percentage interests of which are held equally in fifty percent increments by Ashley Rubinstein, a daughter of Mr. Kurland, and Marci Grogin, the wife of Mr. Grogin.

Pursuant to the terms of the foodservice agreement, MNU provides onsite foodservice (including cafeteria and catering services) to us and our employees on a contract basis. For these services, we pay MNU a monthly management fee equal to the greater of (a) $15,000 (or, during months in which our headcount is less than 600, $10,000), or (b) one-half of an adjusted profit that is calculated based on the fair value of food served by MNU without charge or at a standard discount, in either case to our officers, employees or business partners.

For its services in 2012 and 2011 we paid MNU management fees of $60,000 and $152,500, respectively. Ms. Rubinstein also received payments of $19,870 in 2012 and $3,500 in 2011 (for the period between August 2011 and year end), and Mrs. Grogin received payments of $3,500 in 2012 and $5,500 in 2011 (for the period between August 2011 and year end).

In addition, we do not charge MNU rent, its portion of utilities (including telephone and internet availability) or maintenance charges for the equipment it uses in connection with its use of the cafeteria and kitchen facilities, and we are required to bear certain other defined costs and expenses associated

with MNU's operation of its foodservice business. The aggregate amount of such costs and expenses was $148,522 in 2012 and $83,190 in 2011 (for the period between August 2011 and year end). We also purchased an off-the-shelf "Point of Sale" system for $32,163 and pay on MNU's behalf a monthly hosting and maintenance charge of $370.

PCM paid approximately $ , $124,000 and $123,000 in 2012, 2011 and 2010, respectively, to BlackRock Financial Management, Inc., an affiliate of BlackRock, as a fee for use of the BlackRock Solutions AnSer and Market Data analytics software.

In connection with this offering, we are adopting a policy that will specifically govern related party transactions. The policy will generally prohibit any related party transaction unless it is approved by our related-party matters committee in accordance with the policy. With certain exceptions, a related party transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which PennyMac Financial Services, Inc. (including any of its subsidiaries) were, are or will be a participant and the amount involved exceeds $120,000 in the aggregate in any calendar year, and in which any related party has, had or will have a direct or indirect interest. A related party is any person who is, or at any time since the beginning of our last fiscal year was one of our directors or executive officers or a nominee to become one of our directors; any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; and any immediate family member of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of any of the foregoing persons); and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.

The related party transactions policy will govern the process for identifying potential related party transactions and seeking review, approval or ratification of such transactions. In addition, each of our directors and executive officers will be required to complete an annual disclosure questionnaire and report all transactions with us in which they and their immediate family members had or will have a direct or indirect material interest with respect to us. We will review these questionnaires and, if we determine that it is necessary, discuss any reported transactions with our entire board of directors in accordance with the related party transactions policy.

Our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, or DGCL. In addition, our amended and restated certificate of incorporation will provide that our directors will not be liable for monetary damages for breach of fiduciary duty.

In addition, prior to the completion of this offering, we intend to enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL.

conferred in the amended and restated limited liability company agreement of Private National Mortgage Acceptance Company, LLC are not exclusive.

There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

The following table sets forth information regarding the beneficial ownership of New Holdings Units by (1) each person known to us to beneficially own more than 5% of the outstanding membership interests of Private National Mortgage Acceptance Company, LLC, (2) each of our directors and named executive officers and (3) all of our directors and executive officers as a group.

Approximately one-third of the total equity interest in Private National Mortgage Acceptance Company, LLC is currently held by BlackRock and the remaining equity interest is held by our employees, our directors and Highfields. The number of New Holdings Units outstanding and the percentage of beneficial ownership before the Offering Transactions set forth below is based on the number of New Holdings Units to be issued and outstanding immediately prior to the consummation of this offering after giving effect to the Recapitalization. No shares of our Class A common stock will be issued and outstanding at that time. The number of New Holdings Units and the percentage of beneficial ownership after the Offering Transactions set forth below is based on shares of our Class A common stock and of New Holdings Units to be issued and outstanding immediately after the Offering Transactions. Beneficial ownership reflected in the table below includes the total New Holdings Units held by the individual and his or her personal planning vehicles. Beneficial ownership is determined in accordance with the rules of the SEC.

	New Holdings Units Beneficially Owned(1)

	Prior to the Offering			After the Offering			% of Total Voting Power After the Offering(2)(3)
Beneficial Owner	Number	Percent		Number	Percent		% of Total Voting Power After the Offering(2)(3)
5% Stockholders:
BlackRock Mortgage Ventures, LLC			%			%		%
HC Partners LLC			%			%		%
Kurland Family Investments, LLC			%			%		%
Directors and Named Executive Officers:
Stanford Kurland			%			%		%
David Spector			%			%		%
Douglas Jones			%			%		%
Matthew Botein			%			%		%
Joseph Mazzella			%			%		%
Farhad Nanji			%			%		%
Mark Wiedman			%			%		%
Executive officers and directors as a group (13 persons)			%			%		%

Throughout this prospectus we provide information assuming that the initial public offering price per share of Class A common stock in this offering is $ , which is the midpoint of the price range indicated on the front cover of this prospectus. However, some of this information will be affected if the initial public offering price per share of Class A common stock in this offering is different from the midpoint of the price range. The following table presents how some of the information set forth in this prospectus would be affected by an initial public offering price per share of Class A common stock at the low-, mid- and high-points of the price range indicated on the front cover of this prospectus, assuming that the underwriters' option to purchase additional shares of Class A common stock is not exercised.

	Initial Public Offering Price per Share of Class A Common Stock

	$.00			$.00			$.00
	(Dollar amounts in thousands, except per unit data)
Use of Proceeds
Proceeds from offering used by PennyMac Financial Services, Inc. to purchase newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC	$			$			$

Pro Forma Cash and Capitalization
Cash and short term investments, at fair value	$			$			$

Class A common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis
Class B common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis		—			—			—
Additional paid-in capital
Retained earnings		(	)		(	)		(	)

Total members'/stockholders' equity

Total capitalization	$			$			$

Dilution
Pro forma net tangible book value per share of Class A common stock after the offering	$	(0.	)	$	(0.	)	$	(0.	)
Dilution in pro forma net tangible book value per share of Class A common stock to investors in this offering
Tax Receivable Agreement
Increase in deferred tax assets	$			$			$
Increase in liability to existing owners	$			$			$

In addition, throughout this prospectus we provide information assuming that the underwriters' option to purchase an additional shares of Class A common stock from us is not exercised. However, some of this information will be affected if the underwriters' option to purchase additional shares of Class A common stock is exercised. The following table presents how some of the information set forth in this prospectus would be affected if the underwriters exercise in full their option to purchase additional shares of Class A common stock where the initial public offering price

per share of Class A common stock is at the low-, mid- and high-points of the price range indicated on the front cover of this prospectus.

	Initial Public Offering Price per Share of Class A Common Stock

	$.00			$.00			$.00
	(Dollar amounts in thousands, except per unit data)
Use of Proceeds
Proceeds from offering used by PennyMac Financial Services, Inc. to purchase newly-issued New Holdings Units from Private National Mortgage Acceptance Company, LLC	$			$			$

Pro Forma Cash and Capitalization
Cash and short term investments, at fair value	$			$			$

Class A common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis
Class B common stock, par value $0.0001 per share, shares authorized on a pro forma basis; shares issued and outstanding on a pro forma basis		—			—			—
Additional paid-in capital
Retained earnings		(	)		(	)		(	)

Total members'/stockholders' equity

Total capitalization	$			$			$

Dilution
Pro forma net tangible book value per share of Class A common stock after the offering	$	(0.	)	$	(0.	)	$	(0.	)
Dilution in pro forma net tangible book value per share of Class A common stock to investors in this offering
Tax Receivable Agreement
Increase in deferred tax assets	$			$			$
Increase in liability to existing owners	$			$			$

The following description of our capital stock as it will be in effect upon the consummation of this offering is a summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated bylaws, the forms of which are filed as exhibits to the registration statement of which this prospectus forms a part, and by applicable law.

Upon consummation of this offering, our authorized capital stock will consist of shares of Class A common stock, par value $0.0001 per share, shares of Class B common stock, par value $0.0001 per share, and shares of preferred stock, par value $0.0001 per share. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.

Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.

Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law.

Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by our board of directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of our Class A common stock will be entitled to receive pro rata our remaining assets available for distribution.

Holders of shares of our Class A common stock do not have preemptive, subscription, redemption or conversion rights.

Each holder of Class B common stock shall be entitled, without regard to the number of shares of Class B common stock held by such holder, to one vote for each New Holdings Unit in Private National Mortgage Acceptance Company, LLC held by such holder. Accordingly, the unit holders of Private National Mortgage Acceptance Company, LLC collectively have a number of votes in PennyMac Financial Services, Inc. that is equal to the aggregate number of New Holdings Units that they hold.

Holders of our Class B common stock do not have any right to receive dividends or to receive a distribution upon a liquidation or winding up of PennyMac Financial Services, Inc.

As our existing owners exchange New Holdings Units for shares of Class A common stock, the voting power afforded to them by their shares of Class B common stock is automatically and correspondingly reduced.

Our amended and restated certificate of incorporation authorizes our board of directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or by any stock exchange, the authorized shares of preferred stock will be available for issuance without further action by our stockholders. Our board of directors is able to determine, with respect to any series of preferred stock, the terms and rights of that series, including:

We could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which our stockholders might receive a premium for their shares of Class A common stock over the market price of the shares of Class A common stock.

The General Corporation Law of Delaware does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NYSE, which would apply so long as the Class A common stock remains listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of Class A common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.

One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.

Anti-Takeover Effects of Provisions of Delaware Law and Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with super voting, special approval, dividend or other rights or preferences on a discriminatory basis that could impede the success of any attempt to acquire us or otherwise effect a change in control of us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

Our amended and restated certificate of incorporation provides that special meetings of the stockholders may be called only by or at the direction of our board of directors, two or more of our directors, the chairman of our board, our chief executive officer or one or more holders of at least a minimum percentage of the voting power of the outstanding shares of our capital stock. This minimum will initially be 25% and will automatically increase to 51% on the first date on which the holders of outstanding shares of our Class A common stock hold more than 51% of the voting power of all outstanding shares of our capital stock. Our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made pursuant to our stockholders agreements with BlackRock and Highfields or by or at the direction of the board of directors or a committee of the board of directors. In order for any matter to be "properly brought" before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our amended and restated bylaws will allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.

Our amended and restated certificate of incorporation provides that the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws provided that, if that action, amends the specific rights of BlackRock or Highfields in an adverse manner when that entity holds at least 5% of the voting power of our outstanding shares of capital stock, such action is approved by that entity.

The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not expressly provide for cumulative voting.

The DGCL provides that, unless a corporation's certificate of incorporation provides otherwise, the affirmative vote of holders of shares constituting a majority of the votes of all shares entitled to vote may approve amendments to the certificate of incorporation. In addition to the stockholder approval required by the DGCL, our amended and restated certificate of incorporation will provide that it may not be amended in any manner that is adverse to BlackRock or Highfields without the consent of

BlackRock or Highfields, as applicable, as long as such stockholder, together with its affiliates, holds more than 5% of the voting power of all of our outstanding shares of capital stock.

Our amended and restated certificate of incorporation will authorize our board of directors, as well as our stockholders, to amend or repeal our amended and restated bylaws, provided that, if that action by either our board of directors or our stockholders amends the bylaws in a manner adverse to Blackrock or Highfields when that entity holds at least 5% of the voting power of our outstanding shares of capital stock, such action is approved by that entity.

Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the company's amended and restated certificate of incorporation provides otherwise. Our amended and restated bylaws will prohibit the taking of any action of our stockholders by written consent without a meeting unless that action is taken with regard to a matter that has been approved by our board of directors or requires the approval only of certain classes or series of our stock.

We have not opted out of, and therefore are subject to, Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified in the law, a publicly-held Delaware corporation shall not engage in certain "business combinations" with any "interested stockholder" for a three-year period after the date of the transaction in which the person became an interested stockholder. These provisions generally prohibit or delay the accomplishment of mergers, assets or stock sales or other takeover or change-in-control attempts that are not approved by a company's board of directors.

In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding voting stock. If Section 203 were to apply to us, we expect that it would have an anti-takeover effect with respect to

transactions our board of directors does not approve in advance. In such event, we would also anticipate that Section 203 could discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Under certain circumstances, Section 203 makes it more difficult for a person who would be an "interested stockholder" to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Our amended and restated certificate of incorporation provides that neither BlackRock nor Highfields or their respective affiliates has any duty to refrain from engaging directly or indirectly in a corporate opportunity in the same or similar lines of business in which we now engage or propose to engage. In addition, in the event that either of BlackRock or Highfields acquires knowledge of a potential transaction or other business or employee thereof, they shall not be liable to us nor to any of our stockholders (or any affiliates thereof) for breach of any fiduciary or other duty by engaging in any such activity and we waive and renounce any claim based on such activity. This provision applies even if the business opportunity is one that we might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so. Our amended and restated certificate of incorporation provides that any amendment or repeal of the provisions related to corporate opportunities described above requires the consent of each of BlackRock and Highfields as long as they hold any equity interest in us.

See "Executive and Director Compensation—Employee Benefit and Stock Plans" for a discussion of the terms of our 2013 Equity Incentive Plan.

The following are entitled to rights with respect to the registration under the Securities Act of the shares of Class A common stock for which their New Holdings Units may be exchanged:

These registration rights are contained in our registration rights agreement, which is described under "Certain Relationships and Related Transactions—Registration Rights Agreement" above and a copy of which will be filed as an exhibit to the registration statement of which this prospectus is a part.

See "Executive and Director Compensation—Limitation on Liability and Indemnification Matters."

Upon the completion of this offering, the transfer agent and registrar for our common stock will be .

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK

The following is a summary of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of our Class A common stock to a non-U.S. holder that purchases shares of our Class A common stock for cash in this offering. For purposes of this summary, a "non-U.S. holder" means a beneficial owner of our Class A common stock that is, for U.S. federal income tax purposes:

In the case of a holder that is classified as a partnership for U.S. federal income tax purposes, the tax treatment of a partner in that partnership generally will depend upon the status of the partner and the activities of the partner and the partnership.

This summary is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, the U.S. Treasury regulations promulgated thereunder, judicial decisions, and published rulings and administrative procedures of the Internal Revenue Service, or the IRS, all as in effect as of the date hereof. These authorities are subject to change and to differing interpretations, possibly with retroactive effect, which could result in U.S. federal income tax consequences different from those summarized below. No ruling has been or will be sought from the IRS with respect to the matters summarized below, and there can be no assurance that the IRS will not take a contrary position regarding the U.S. federal income tax consequences of the acquisition, ownership, or disposition of our Class A common stock, or that any such contrary position would not be sustained by a court.

This summary is not a complete analysis of all of the potential U.S. federal income tax consequences relating to the acquisition, ownership, and disposition of our Class A common stock by non-U.S. holders, nor does it address any U.S. federal estate or gift tax consequences, any tax consequences arising under any state, local, or foreign tax laws, any consequences under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, or any consequences under other U.S. federal tax laws. In addition, this discussion does not address tax consequences resulting from a non-U.S. holder's particular circumstances or to non-U.S. holders that may be subject to special tax rules, including, without limitation:

Prospective investors should consult their tax advisors regarding the particular U.S. federal income tax consequences to them of acquiring, owning, and disposing of our Class A common stock, as well as any tax consequences arising under any state, local, or foreign tax laws and any other U.S. federal tax laws. Prospective investors should also consult their tax advisors regarding the potential impact of any applicable income tax treaty.

If we make a distribution of cash or property (other than certain stock distributions) with respect to our Class A common stock, or effect one of certain redemptions that are treated as distributions with respect to our Class A common stock, any such distributions or redemptions will constitute dividends for U.S. federal tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, such excess will be allocated ratably among the shares of Class A common stock with respect to which the distribution is made, will constitute a return of capital, and will first be applied against and reduce the non-U.S. holder's adjusted tax basis in those shares of Class A common stock, but not below zero. Distributions in excess of our current and accumulated earnings and profits and in excess of a non-U.S. holder's tax basis in that non-U.S. holder's shares of Class A common stock then will be treated as gain from the sale of that Class A common stock, subject to the tax treatment described below under "Gain on Disposition of Class A Common Stock." A non-U.S. holder's adjusted tax basis in a share of Class A common stock is generally the purchase price of the share, reduced by the amount of any distributions constituting a return of capital with respect to that share.

Any dividend paid to a non-U.S. holder of our Class A common stock generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividend, or such lower rate as may be specified by an applicable income tax treaty. If a non-U.S. holder is eligible for benefits under an income tax treaty and wishes to claim a reduced rate of withholding, the non-U.S. holder generally will be required to provide us or our paying agent with a properly completed IRS Form W-8BEN (or other applicable form) certifying under penalties of perjury the non-U.S. holder's qualification for the reduced rate. This certification must be provided to us or our paying agent prior to the payment of the dividend and may be required to be updated periodically. Special certification requirements apply to non-U.S. holders that hold Class A common stock through certain foreign intermediaries. Non-U.S. holders that do not timely provide the required certifications, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If we are not able to determine whether or not a distribution will exceed current and accumulated earnings and profits at the time the distribution is made, we may withhold tax on the entire amount of any distribution at the same rate as we would

withhold on a dividend. However, a non-U.S. holder may obtain a refund of amounts that we withhold to the extent the distribution in fact exceeded our current and accumulated earnings and profits.

If a non-U.S. holder holds our Class A common stock in connection with the conduct of a trade or business in the U.S., and dividends paid on the Class A common stock are effectively connected with the non-U.S. holder's U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the U.S., as defined under the applicable treaty), the non-U.S. holder will be exempt from U.S. federal withholding tax on the dividends. To claim the exemption, the non-U.S. holder must furnish a properly executed IRS Form W-8ECI (or other applicable form) prior to the payment of the dividends. Any dividends paid on our Class A common stock that are effectively connected with a non-U.S. holder's U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the U.S., as defined under the applicable treaty) generally will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates generally applicable to U.S. persons or at such lower rate as may be specified by an applicable income tax treaty. A non-U.S. holder that is treated as a corporation for U.S. federal income tax purposes also may be subject to an additional branch profits tax equal to 30% (or such lower rate as is specified by an applicable income tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with a U.S. trade or business, as adjusted for certain items.

Subject to the discussion below regarding backup withholding and foreign accounts, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale, exchange, or other taxable disposition of our Class A common stock unless:

Generally, we must report annually to the IRS and to each non-U.S. holder the amount of dividends and other distributions paid to the non-U.S. holder and the amount of tax, if any withheld with respect to those distributions. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in the non-U.S. holder's country of residence.

In addition, a non-U.S. holder may be subject to information reporting requirements and backup withholding with respect to dividends paid on, and the proceeds of disposition of, shares of our Class A common stock, unless, generally, the non-U.S. holder certifies under penalties of perjury (usually on IRS Form W-8BEN) that the non-U.S. holder is not a U.S. person or otherwise establishes an exemption. The backup withholding rate is 28%. Additional rules relating to information reporting requirements and backup withholding with respect to payments of the proceeds from the disposition of shares of our common stock are as follows:

Backup withholding is not a tax. Any amounts withheld from a non-U.S. holder under the backup withholding rules may be allowed as a refund or a credit against the non-U.S. holder's U.S. federal income tax liability, provided that the non-U.S. holder timely furnishes the required information to the IRS.

Legislation enacted in 2010 will impose withholding taxes on certain types of payments made to "foreign financial institutions" and other non-U.S. entities after December 31, 2013 (or, in certain cases, after later dates) unless those institutions and entities meet additional certification, information reporting and other requirements. The legislation will generally impose a 30% withholding tax on dividends on, or gross proceeds from the sale or other disposition of, our Class A common stock paid to a foreign financial institution unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, (i) undertake to identify accounts held by certain U.S. persons (including certain equity and debt holders of such institution) or by U.S.-owned foreign entities, (ii) annually report certain information about such accounts, and (iii) withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. In addition, subject to certain exceptions, the legislation will impose a 30% withholding tax on the same types of payments to a foreign entity that is not a foreign financial institution unless the entity certifies that it does not have any substantial U.S. owners (which generally include any U.S. persons who directly or indirectly own more than 10% of the entity) or furnishes identifying information regarding each such substantial U.S. owner. These withholding taxes would be imposed on dividends paid on our Class A common stock after December 31, 2013 (or, in certain cases, after later dates), and on gross proceeds from sales or other dispositions of our Class A common stock after December 31, 2016. A non-U.S. holder may be exempt from the withholding described in this paragraph under an applicable intergovernmental agreement between the U.S. and a foreign government, provided that the non-U.S. holder and the applicable foreign government comply with the terms of the agreement. We will not pay any additional amounts to non-U.S. holders in respect of any amounts withheld. Prospective investors should consult their tax advisors regarding this legislation.

Prior to this offering, there has been no public market for shares of our Class A common stock. We cannot predict the effect, if any, that future sales of shares of Class A common stock, or the availability for future sale of shares of Class A common stock, will have on the market price of shares of our Class A common stock prevailing from time to time. The sale of substantial amounts of shares of our Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Class A common stock.

Currently, no shares our Class A common stock are outstanding and shares of our Class B common stock are outstanding, all of which are owned by Private National Mortgage Acceptance Company, LLC. We intend to cause Private National Mortgage Acceptance Company, LLC to distribute one share of Class B common stock to each holder of New Holdings Units prior to the purchase by PennyMac Financial Services, Inc. of New Holdings Units with the proceeds of this offering. There are currently 37 unit holders of Private National Mortgage Acceptance Company, LLC.

Upon completion of this offering, we will have a total of shares of our Class A common stock outstanding (or shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock). All of these shares of Class A common stock will have been sold in this offering and will be freely tradable without restriction or further registration under the Securities Act by persons other than our "affiliates." Under the Securities Act, an "affiliate" of an issuer is a person who directly or indirectly controls, is controlled by or is under common control with that issuer.

In addition, subject to certain limitations and exceptions, pursuant to the terms of an exchange agreement we will enter into with our existing owners, unit holders of Private National Mortgage Acceptance Company, LLC may (subject to the terms of the exchange agreement) exchange New Holdings Units for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. Upon consummation of this offering, our existing owners will hold New Holdings Units (or New Holdings Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock), all of which will be exchangeable for shares of our Class A common stock. The shares of Class A common stock that we issue upon such exchanges would be "restricted securities" as defined in Rule 144 unless we register such issuances. However, we will enter into one or more registration rights agreements with BlackRock, Highfields and our other existing owners that will require us, under certain circumstances, to register under the Securities Act the resale of these shares of Class A common stock. See "—Registration Rights" and "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

In addition, shares of Class A common stock may be granted under our 2013 Equity Incentive Plan. See "Executive and Director Compensation—Employee Benefit and Stock Plans—2013 Equity Incentive Plan." We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of Class A common stock or securities convertible into or exchangeable for shares of Class A common stock issued under or covered by our 2013 Equity Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares of Class A common stock registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares of Class A common stock.

Our amended and restated certificate of incorporation authorizes us to issue additional shares of Class A common stock and options, rights, warrants and appreciation rights relating to Class A common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion. In accordance with the DGCL and the provisions of our amended and restated certificate of incorporation, we may also issue preferred stock that has designations,

preferences, rights, powers and duties that are different from, and may be senior to, those applicable to shares of Class A common stock. See "Description of Capital Stock."

We will enter into a registration rights agreement with BlackRock, Highfields and our other existing owners pursuant to which we will be required to register under the Securities Act, under certain circumstances and subject to certain restrictions, shares of our Class A common stock delivered in exchange for New Holdings Units held by our existing owners. In addition, BlackRock and Highfields will have the right, under certain circumstances and subject to certain restrictions, to require us to register for resale the shares of our Class A common stock delivered in exchange for New Holdings Units held by them. Any such securities registered under any registration statement will be available for sale in the open market unless restrictions apply.

We and each of our directors, officers and all of our existing owners have agreed to certain restrictions on our ability to sell additional shares of our Class A common stock for a period of 180 days after the date of this prospectus. We have agreed not to directly or indirectly offer for sale, sell, contract to sell, grant any option for the sale of, or otherwise issue or dispose of, any shares of our Class A common stock, options or warrants to acquire shares of our Class A common stock, or any related security or instrument (including without limitation any New Holdings Units and any shares of our Class B common stock), without the prior written consent of each of Citigroup Global Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. The agreements provide exceptions for (a) sales to the underwriters in connection with this offering, (b) our sales in connection with existing incentive plans and (c) customary other exceptions.

In general, under Rule 144 a person (or persons whose shares are aggregated) who may be deemed our affiliate is entitled to sell within any three-month period a number of restricted securities that does not exceed the greater of 1% of the then outstanding shares of Class A common stock and the average weekly trading volume during the four calendar weeks preceding each such sale, provided that at least six months has elapsed since such shares of Class A common stock were acquired from us or any affiliate of ours and certain manner of sale, notice requirements and requirements as to availability of current public information about us are satisfied. Any person who is deemed to be our affiliate must also comply with such provisions of Rule 144 (other than the six-month holding period requirement) in order to sell shares of Class A common stock which are not restricted securities (such as shares of Class A common stock acquired by affiliates through purchases in the open market following this offering). A person who is not our affiliate, and who has not been our affiliate at any time during the 90 days preceding any sale, is entitled to sell shares of Class A common stock (i) subject only to the requirements as to availability of current public information about us, provided that a period of at least six months has elapsed since the shares of Class A common stock were acquired from us or any affiliate of ours, and (ii) without regard to the requirements as to availability of current public information about us or any other requirement of Rule 144, provided that at least one year has elapsed since the shares of Class A common stock were acquired from us or any affiliate of ours.

As soon as practicable after the completion of this offering, we intend to file a Form S-8 registration statement under the Securities Act to register shares of our common stock subject to

options outstanding or reserved for issuance under our 2013 Equity Incentive Plan. This registration statement will become effective immediately upon filing, and shares covered by this registration statement will thereupon be eligible for sale in the public markets, subject to vesting restrictions, the lock-up agreements described above and Rule 144 limitations applicable to affiliates. For a more complete discussion of our stock plans, see "Executive and Director Compensation—Employee Benefit and Stock Plans."

Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. are acting as joint book-running managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that underwriter, the number of shares of Class A common stock set forth opposite the underwriter's name.

The underwriting agreement provides that the obligations of the underwriters to purchase the shares of Class A common stock included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares of Class A common stock (other than those covered by the underwriters' option to purchase additional shares described below) if they purchase any of the shares of Class A common stock.

Shares of Class A common stock sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares of Class A common stock sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $ per share. If all the shares of Class A common stock are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part. The representatives have advised us that the underwriters do not intend to make sales to discretionary accounts.

If the underwriters sell more shares of Class A common stock than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class A common stock at the public offering price less underwriting discounts and commissions. To the extent the option is exercised, each underwriter must purchase a number of additional shares of Class A common stock approximately proportionate to that underwriter's initial purchase commitment. Any shares of Class A common stock issued or sold under the option will be issued and sold on the same terms and conditions as the other shares of Class A common stock that are the subject of this offering.

We, our officers and directors, and all of our existing owners have agreed that, subject to customary exceptions, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of each of the representatives, dispose of or hedge any shares of Class A common stock or any securities convertible into or exchangeable for our Class A common stock or any related security or instrument (including without limitation any New Holdings Units and any shares of our Class B common stock). The representatives, in their sole discretion, may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. Notwithstanding the foregoing, during any period in which we are not an "emerging growth company" under Section 2(a) of the Securities Act, if (i) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (ii) prior to the expiration of the 180-day restricted period, we announce

that we will release earnings results during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Prior to this offering, there has been no public market for our shares of Class A common stock. Consequently, the initial public offering price for the shares of Class A common stock was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares of Class A common stock will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares of Class A common stock will develop and continue after this offering.

We have applied to have our shares of Class A common stock listed on the NYSE under the symbol " ."

The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

In connection with the offering, the underwriters may purchase and sell shares of Class A common stock in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the underwriters' option to purchase additional shares, and stabilizing purchases.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares of Class A common stock. They may also cause the price of the shares of Class A common stock to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the NYSE, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriters and their respective affiliates have in the past performed commercial banking, investment banking and advisory services for us from time to time for which they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates.

The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Citibank, N.A., an affiliate of Citigroup Global Markets Inc., one of the underwriters of this offering, is a lender under a $150 million master repurchase agreement with PLS and Private National Mortgage Acceptance Company, LLC, as guarantor dated as of June 26, 2012. In addition, from time to time, we have facilitated the purchase of distressed whole loans from one or more affiliates of Citibank, N.A. for the investment portfolio of PMT and the Investment Funds. For example, in 2011 we managed the acquisition by PMT and the Investment Funds of $1.7 billion in distressed mortgage loans from or through one or more affiliates of Citibank, N.A. and in the third quarter of 2012 we managed the acquisition by PMT of $357 million in distressed mortgage loans from or through one or more affiliates of Citibank, N.A.

Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters of this offering, is a lender under a $150 million master repurchase agreement with PLS and Private National Mortgage Acceptance Company, LLC, as guarantor, dated as of March 17, 2011.

Credit Suisse First Boston Mortgage Capital LLC, an affiliate of Credit Suisse Securities (USA) LLC, one of the underwriters of this offering, is a lender under a $150 million master repurchase agreement with PLS and Private National Mortgage Acceptance Company, LLC, as

guarantor, dated as of August 14, 2009. In addition, Credit Suisse AG, New York Branch, also an affiliate of Credit Suisse Securities (USA) LLC, is a lender under a $117 million amended and restated loan and security agreement with PLS and Private National Mortgage Acceptance Company, LLC, as guarantor, dated as of March 27, 2012.

Citibank, N.A., Bank of America, N.A., Credit Suisse First Boston Mortgage Capital LLC and Credit Suisse AG each receives customary fees and commissions for these financing transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements and Aggregate Contractual Obligations—Debt Obligations."

From time to time, we may make purchases of mortgage loans or servicing rights from, and sell loans that we have originated to, third parties in the future, which could include our underwriters or their affiliates.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of shares described in this prospectus may not be made to the public in that relevant member state other than:

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an "offer of securities to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

The sellers of the shares of Class A Common Stock have not authorized and do not authorize the making of any offer of shares of Class A Common Stock through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares of Class A Common Stock as contemplated in this prospectus. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of the sellers or the underwriters.

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a "relevant person"). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Neither this prospectus nor any other offering material relating to the shares of Class A common stock described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares of Class A common stock have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares of Class A common stock has been or will be:

The shares of Class A common stock may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

The shares of Class A common stock may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares of Class A common stock may be issued or may be in the possession of any person for the purpose of issue (in each case whether in

Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares of Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

The shares of Class A common stock offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The shares of Class A common stock have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of Class A common stock may not be circulated or distributed, nor may the shares of Class A common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the shares of Class A common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

The shares of Class A common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares of Class A common stock or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, or the shares of Class A common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares of Class A common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of Class A common stock.

Notice to Prospective Investors in the Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with the Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares of Class A common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares of Class A common stock offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

The validity of the shares of Class A common stock offered hereby will be passed upon for us by Bingham McCutchen LLP. Certain legal matters in connection with this offering will be passed upon for the underwriters by Goodwin Procter LLP.

The balance sheet of PennyMac Financial Services, Inc. as of December 31, 2012, included in this prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statement has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Private National Mortgage Acceptance Company, LLC and subsidiaries, as of December 31, 2011 and 2010, and for each of the two years ended December 31, 2011, included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, which report expresses an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph referring to a restatement. Such consolidated financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

We have filed with the SEC a registration statement on Form S-1 (including exhibits, schedules, and amendments) under the Securities Act with respect to the shares of Class A common stock offered by this prospectus. This prospectus does not contain all the information set forth in the registration statement. For further information about us and the shares of Class A common stock to be sold in this offering, you should refer to the registration statement. Statements contained in this prospectus relating to the contents of any contract, agreement or other document are not necessarily complete and are qualified in all respects by the complete text of the applicable contract, agreement or other document, a copy of which has been filed as an exhibit to the registration statement. Whenever this prospectus refers to any contract, agreement, or other document, you should refer to the exhibits that are a part of the registration statement for a copy of the contract, agreement, or document.

You may read and copy all or any portion of the registration statement or any other information we file at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available to you on the SEC's Website (http://www.sec.gov).

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act. Under the Exchange Act, we will file annual, quarterly and current reports, as well as proxy statements and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the SEC's Public Reference Room and the website of the SEC referred to above.

To the Board of Directors
PennyMac Financial Services, Inc.
6101 Condor Drive
Moorpark, CA 93021

We have audited the accompanying balance sheet of PennyMac Financial Services, Inc. (the "Company") as of December 31, 2012. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.

In our opinion, such balance sheet presents fairly, in all material respects, the financial position of the Company as of December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

PennyMac Financial Services, Inc. (the "Company") was formed as a Delaware corporation on December 31, 2012. Pursuant to a reorganization into a holding corporation structure, the Company will become a holding corporation and its sole assets are expected to be an equity interest in Private National Mortgage Acceptance Company, LLC. The Company will be the managing member of Private National Mortgage Acceptance Company, LLC and will operate and control all of the businesses and affairs of Private National Mortgage Acceptance Company, LLC subject to the consent rights of other members under certain circumstances and, through Private National Mortgage Acceptance Company, LLC and its subsidiaries, continue to conduct the business now conducted by these subsidiaries.

Basis of Accounting—The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America. Separate statements of income, changes in stockholders' equity and cash flows have not been presented in the financial statements because there have been no activities of this entity.

Underwriting Commissions and Offering Costs—Underwriting commissions and offering costs to be incurred in connection with the Company's common share offerings will be reflected as a reduction of additional paid-in capital. Underwriting commissions and offering costs are not recorded in the Company's consolidated balance sheet because such costs are not the Company's liability until the Company completes a successful initial public offering.

Organizational Costs—Organizational costs are not recorded in the Company's consolidated balance sheet because such costs are not the Company's liability until the Company completes a successful initial public offering. Thereafter, costs incurred to organize the Company will be expensed as incurred.

The Company is authorized to issue 9,000 shares of Class A common stock, par value $0.0001 per share ("Class A Common Stock"), and 1,000 shares of Class B common stock, par value $0.0001 per share ("Class B Common Stock"). Under the Company's certificate of incorporation as in effect as of December 31, 2012, all shares of Class A common stock and Class B common stock are identical.

Management has evaluated all events as of February 7, 2013, which represents the date of issuance of these financial statements.

As of February 7, 2013, offering costs of approximately $2.7 million have been incurred by Private National Mortgage Acceptance Company, LLC.

As of February 7, 2013, organizational costs of $2,000 have been incurred. These organizational costs will be paid by Private National Mortgage Acceptance Company, LLC.

To the Board of Directors and Members of
Private National Mortgage Acceptance Company, LLC
6101 Condor Drive
Moorpark, CA 93021

We have audited the accompanying consolidated balance sheets of Private National Mortgage Acceptance Company, LLC (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in members' equity, and cash flows for each of the two years in the period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, the accompanying 2011 and 2010 consolidated financial statements have been restated.

	December 31,

	2011			2010
	(as restated, note 3)
	(in thousands except unit data)
ASSETS
Cash	$	16,465		$	5,927
Short-term investment, at fair value		16,041			9,314
Mortgage loans held for sale at fair value		89,857			14,720
Servicing advances		63,565			22,811
Receivable from Investment Funds		8,264			9,392
Receivable from PennyMac Mortgage Investment Trust		11,600			4,295
Derivative financial instruments		5,460			342
Carried interest due from Investment Funds		37,250			24,654
Investment in PennyMac Mortgage Investment Trust, at fair value		1,247			1,361
Mortgage servicing rights, at fair value		25,698			31,957
Mortgage servicing rights, at lower of amortized cost or fair value		6,426			—
Margin deposits		2,148			—
Furniture, fixtures, equipment and building improvements, net		2,541			991
Capitalized software, net		556			682
Other		2,163			1,956

Total assets	$	289,281		$	128,402

LIABILITIES
Loans sold under agreements to repurchase	$	77,700		$	—
Loans sold under agreements to repurchase, at fair value		—			13,289
Note payable		18,602			3,499
Payable to Investment Funds		29,622			13,262
Payable to PennyMac Mortgage Investment Trust		25,595			2,842
Accounts payable and accrued expenses		13,398			5,352
Liability for losses under representations and warranties		449			189

Total liabilities		165,366			38,433

Commitments and contingencies
MEMBERS' EQUITY
Preferred units, 96,682 and 60,468 units authorized and subscribed, 96,682 and 45,371 units issued and outstanding as of 2011 and 2010, respectively		96,374			44,482
Common units, 20,556 and 10,665 units authorized; 4,564 and 715 units issued and outstanding as of 2011 and 2010, respectively		—			—
Members' equity attributable to common units from equity compensation plan		2,737			1,736
Stock subscription receivable		(19,918	)		(1,414	)
Retained earnings		44,722			45,165

Total members' equity		123,915			89,969

Total liabilities and members' equity	$	289,281		$	128,402

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF INCOME

	Year ended December 31,

	2011			2010
	(in thousands, except per unit data)
Revenue
Net servicing income:
Loan servicing fees:
From PennyMac Mortgage Investment Trust	$	13,204		$	2,989
From Investment Funds		14,523			9,474
Mortgage servicing rebate (to) from Investment Funds		(2,772	)		1,162
From non-affiliates		11,493			11,431
From borrowers—ancillary fees		1,657			1,345

		38,105			26,401
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(9,438	)		(400	)

Net servicing income		28,667			26,001
Net gains on mortgage loans held for sale at fair value		13,029			2,008
Loan origination fees		669			734
Management fees:
From PennyMac Mortgage Investment Trust		8,456			5,484
From Investment Funds		9,943			9,943
Carried interest from Investment Funds		12,596			24,654
Fulfillment fees from PennyMac Mortgage Investment Trust		1,744			—
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		23			130
Interest		1,532			195
Other		—			80

Total net revenue		76,659			69,229

Expenses
Compensation		47,479			25,412
Professional services		3,867			2,244
Occupancy		1,985			938
Technology		1,979			1,959
Interest		1,875			790
Servicing		2,344			2,167
Loan origination		185			150
Other		2,246			2,527

Total expenses		61,960			36,187

Net income	$	14,699		$	33,042

Net income attributable to preferred units	$	14,507		$	29,014
Net income attributable to non-vested common unit awards outstanding	$	152		$	3,837
Net income attributable to common units	$	40		$	191
Earnings per unit
Preferred units	$	237.82		$	645.30
Common units
Basic	$	11.63		$	555.59
Diluted	$	3.88		$	40.72
Weighted average units outstanding
Preferred units		61,003			44,962
Common units
Basic		3,470			345
Diluted		10,410			4,704

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY

	Preferred Units						Common Units

	Preferred Units						Common Units				Subscriptions receivable			Retained earnings
	Units			Amounts			Units		Amounts		Subscriptions receivable			Retained earnings			Total
	(as restated, note 3)			(as restated, note 3)							(as restated, note 3)
	(dollars in thousands)
Balance at December 31, 2009		35,920		$	35,960			—	$	445	$	(1,661	)	$	14,156		$	48,900
Capital:
Contributions		9,953			8,949			—		—		18			—			8,967
Advances to unit holders		—			—			—		—		—			(2,027	)		(2,027	)
Redemptions		(542	)		(427	)		—		—		209			(6	)		(224	)
Unit-based compensation expense		40			—			715		1,291		20			—			1,311
Net income		—			—			—		—		—			33,042			33,042

Balance at December 31, 2010		45,371			44,482			715		1,736		(1,414	)		45,165			89,969
Capital:
Contributions		35,265			35,196			—		—		(16,288	)		—			18,908
Contributions and concurrent distributions		14,999			14,968			—		—		—			(14,968	)		—
Subscriptions		1,709			1,709			—		—		(1,709	)		—			—
Advances to unit holders		—			543			—		—		(543	)		—			—
Redemptions		(662	)		(273	)		—		—		61			81			(131	)
Draws		—			(331	)		—		—		(25	)		(290	)		(646	)
Unit-based compensation expense		—			80			3,849		1,001		—			35			1,116
Net income		—			—			—		—		—			14,699			14,699

Balance at December 31, 2011		96,682		$	96,374			4,564	$	2,737	$	(19,918	)	$	44,722		$	123,915

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,

	2011			2010
	(as restated, note 3)
	(in thousands)
Cash flow from operating activities:
Net income	$	14,699		$	33,042
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accrual of servicing rebate to (from) Investment Funds		2,772			(1,162	)
Amortization, impairment and change in fair value of mortgage servicing rights		9,438			227
Net gain on mortgage loans held for sale at fair value		(13,029	)		(2,318	)
Carried interest income		(12,596	)		(24,654	)
Change in fair value of investment in PennyMac Mortgage Investment Trust		114			(73	)
Accrual of stock-based compensation		1,116			1,292
Amortization of commitment fees relating to financing facilities		1,028			675
Depreciation and amortization		251			365
Originations of mortgage loans held for sale		(149,393	)		(69,331	)
Purchase from affiliate of mortgage loans held for sale		(575,649	)		—
Sale and principal payments of mortgage loans held for sale		649,625			56,257
Increase in servicing advances		(40,754	)		(19,968	)
Increase in receivable from Investment Funds		(1,644	)		(587	)
(Increase) decrease in due from affiliates		(5,675	)		2,785
Increase in other assets		(451	)		(1,603	)
Increase in accounts payable and accrued expenses		8,596			1,661
Increase in payable to affiliates		21,447			—
Increase in payable to Investment Funds		16,359			10,745
Decrease in other liabilities		(350	)		—
Decrease in other receivables		350			—
Increase in prepaid expenses		(972	)		—

Net cash used in operating activities		(74,718	)		(12,647	)

Cash flow from investing activities:
Net (increase) decrease in short-term investment		(6,727	)		5,630
Purchase of furniture, fixtures, equipment and building improvements		(1,888	)		(686	)
Acquisition of capitalized software		(112	)		(146	)
Increase in margin deposit and restricted cash		(2,310	)		—
Purchase of mortgage servicing rights		(1,352	)		(11,974	)

Net cash used in investing activities		(12,389	)		(7,176	)

Cash flow from financing activities:
Sale of loans under agreements to repurchase at fair value		120,897			16,074
Repurchase of loans sold under agreements to repurchase at fair value		(134,186	)		—
Sale of loans under agreements to repurchase		535,845			—
Repurchase of loans sold under agreements to repurchase		(458,145	)		—
Increase in note payable		15,103			—
Capital contributions		18,908			8,967
Capital redemptions		(131	)		(204	)
Advances to unit holders		(646	)		(2,027	)

Net cash provided by financing activities		97,645			22,810

Net increase in cash		10,538			2,987
Cash at beginning of year		5,927			2,940

Cash at end of year	$	16,465		$	5,927

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Private National Mortgage Acceptance Company, LLC ("PennyMac") is a Delaware limited liability company which, through its subsidiaries (collectively, the "Company"), engages in mortgage banking and investment management activities. Its mortgage banking activities consist of residential mortgage lending (including correspondent lending and retail lending) and loan servicing. The investment management activities and a portion of the loan servicing activities are conducted on behalf of investment vehicles that invest in residential mortgage loans and related assets. PennyMac's primary wholly-owned subsidiaries are:

A substantial portion of the Company's activities relate to the Investment Funds that it manages and PMT. Fees charged to these entities (comprised of management fees, loan servicing fees and loan servicing rebates, carried interest income and fulfillment fees from PMT) totaled 75% and 78% of total revenues for the years ended December 31, 2011 and 2010, respectively. A portion of these fees are received pursuant to the management agreements between the Company and PMT and the Investment Funds. These agreements provide for a substantial payment to the Company if they are terminated without cause before December 31, 2016, in the case of the agreements with the Investment Funds, and before February 1, 2017, in the case of the agreement with PMT.

A description of the Company's significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

The accompanying consolidated financial statements are prepared on the accrual basis, which is in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") as codified in the Financial Accounting Standards Board's Accounting Standards Codification (the "Codification").

After the issuance of the 2011 consolidated financial statements, management determined that the 2011 and 2010 consolidated financial statements contained certain errors. As a result, the balance sheets as of December 31, 2011 and 2010, and the statement of cash flows for the year ended December 31, 2011 and statements of changes in members' equity for the years ended December 31, 2011 and 2010 have been restated from the amounts previously reported to correct these errors, as follows:

Debt incurred by the Company in connection with the purchase of mortgage loans from an affiliate was incorrectly presented on a net basis in the statement of cash flows for the year ended December 31, 2011. This error has been corrected as follows:

The following components of the balance sheets and statements of members' equity as of and for the years ended December 31, 2011 and 2010 have been corrected as follows:

The following amounts were previously presented in error within Note 22—Supplemental Cash Flow Information for the year ended December 31, 2011. This error has been corrected in the notes to the consolidated financial statements presented.

Within Note 8, the presentation of Derivative Financial Instruments has been restated to correct the misclassification of $7,905,000 of Interest Rate Lock Commitments to present these Derivative Financial Instruments as Level 3 measurements due to the significance of the use of unobservable inputs used in estimating fair value, as compared to their previously reported presentation as Level 2 measurements.

The consolidated financial statements include the accounts of PennyMac and all wholly-owned subsidiaries. The Company has whole ownership of all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

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

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 reliability of the assumptions used to determine fair value. These levels are:

Management incorporates lack of liquidity into its fair value estimates based on the type of asset or liability measured and the valuation method used. The Company uses discounted cash flow techniques to estimate fair value. These techniques incorporate forecasting of expected cash flows discounted at appropriate market discount rates that are intended to reflect the lack of liquidity in the market.

Short-term investment, which represents an investment in an institutional liquidity management (money market) fund, is carried at fair value. Changes in fair value are recognized in current period income. The Company classifies its short term investment as a "Level 1" fair value financial statement item.

Mortgage loans held for sale are carried at their estimated fair values. Changes in the estimated fair value of mortgage loans are recognized in current period income. All changes in fair value, including changes arising from the passage of time, are recognized as a component of Change in fair value of mortgage loans held for sale at fair value. The Company classifies mortgage loans held for sale at fair value as "Level 2" fair value financial statement items.

The Company recognizes transfers of mortgage loans as sales when it surrenders control over the mortgage loans. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates the Company to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets.

Interest income on mortgage loans is recognized over the life of the loans using their contractual interest rates. Income recognition is suspended for loans when they become 90 days delinquent, or when, in management's opinion, a full recovery of income and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current.

In its loan origination activities, the Company makes contractual commitments to loan applicants to originate mortgages at specified interest rates ("interest rate lock commitments"). These commitments are accounted for as derivative financial instruments. The Company manages the risk created by interest rate lock commitments relating to the origination or purchase of mortgage loans held for sale at fair value by entering into forward sale agreements to sell the mortgage loans and by the purchase and sale of mortgage-backed securities ("MBS") options and futures. Such agreements are also accounted for as derivative financial instruments. The Company classifies its derivative financial instruments as "Level 3" fair value financial statement items.

The Company accounts for its derivative financial instruments as free-standing derivatives. The Company does not designate its forward sale agreements or options and futures for hedge accounting. All derivative financial instruments are recognized on the balance sheet at fair value with changes in the fair values being reported in current period income. Changes in fair value are included in Change in fair value of mortgage loans held for sale in the Company's Consolidated Statements of Income.

When the Company has multiple derivative instruments with the same counterparty under a master netting arrangement, it offsets the amounts recorded as assets and liabilities and amounts recognized for the right to reclaim cash collateral it has deposited with the counterparty or the obligation to return cash collateral it has collected from the counterparty arising from the same master netting arrangement. Such offset amounts are presented as either a net asset or liability by counterparty on the Company's Consolidated Balance Sheets.

Servicing advances represent escrow and corporate advances made on behalf of borrowers and the loans' investors to fund delinquent balances for property tax and insurance premiums and out of pocket expenses (e.g., preservation and restoration of mortgaged or real estate owned property, legal fees, appraisals and insurance premiums). Servicing advances are made in accordance with the Company's servicing agreements and are deemed recoverable at the time of liquidation. These advances are periodically reviewed for collectability. Uncollectible amounts are written off when they are deemed uncollectible.

The Company has a general partnership interest or other carried interest arrangement with the Investment Funds, and earns carried interest thereunder. Carried interest, in general terms, is the share of any profits that the general partners receive as compensation. The Company determines the amount of carried interest to be recorded each period based on the cash flows that would be produced assuming termination of the Investment Funds agreements at each period end. The allocation of profits

between the Investment Funds and the Company is described under the Significant Accounting Policies caption Management Fees and Carried Interest, following.

Common shares of beneficial interest in PMT are carried at their fair value with changes in fair value recognized in current period results of operations. Fair value for purposes of the Company's holdings in PMT is based on the published closing price of the shares as of period end. The Company classifies its investment in common shares of PMT as a "Level 1" fair value financial statement item.

MSRs arise from contractual agreements between the Company and investors (or their agents) in mortgage securities and mortgage loans. Under these contracts, the Company performs loan servicing functions in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities, collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound) funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; supervising the acquisition of real estate collateralizing the mortgage loans in settlement thereof and property dispositions.

The value of MSRs is derived from the net positive cash flows associated with the servicing contracts. The Company receives a servicing fee ranging generally from 0.25% to 0.38% annually on the remaining outstanding principal balances of the loans. The servicing fees are collected from the monthly payments made by the mortgagors. The Company is contractually entitled to receive other remuneration including rights to various mortgagor-contracted fees such as late charges, collateral reconveyance charges and loan prepayment penalties, and the Company is generally entitled to retain the interest earned on funds held pending remittance related to its collection of mortgagor payments. The Company also generally has the right to solicit the mortgagors for other products and services as well as for new mortgages for those considering refinancing or purchasing a new home.

The Company recognizes MSRs initially at their estimated fair value, either as proceeds from sales of mortgage loans where the Company assumes the obligation to service the loan in the sale transaction, or from the purchase of MSRs. The Company's subsequent accounting for MSRs is based on the class of MSRs. The Company has identified two classes of MSRs: MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5% and MSRs backed by mortgage loans with initial interest rates of more than 4.5%. The Company distinguishes between these classes of MSRs due to their differing sensitivities to change in value as the result of the effect that changes in market interest rates have on mortgage prepayment speeds within the servicing portfolio. MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5% are accounted for using the amortization method. MSRs backed by loans with initial interest rates of more than 4.5% are accounted for at fair value with changes in fair value recorded in current period earnings.

The precise fair value of MSRs cannot be readily determined because MSRs are not actively traded in standalone markets. Considerable judgment is required to estimate the fair values of MSRs and the exercise of such judgment can significantly affect the Company's earnings. PCM's Valuation Committee reviews and approves the fair value estimates of MSRs. Therefore, the Company classifies its MSRs as "Level 3" fair value financial statement items.

The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting servicing cash flows discounted at a rate that management assumes market participants would use in their determinations of fair value. The cash flow and prepayment assumptions used in the Company's discounted cash flow model are based on market factors which management believes are consistent with assumptions and data used by market participants valuing similar MSRs.

MSRs are generally subject to a loss in value when mortgage interest rates decline. The fair value of MSRs is based on the present value of cash flows that are closely related to the expected life of the underlying loans. Declining mortgage interest rates generally encourage increased mortgage refinancing activity, which decreases the expected life of the underlying loans, thereby decreasing the fair value of the MSRs.

The Company amortizes MSRs that are accounted for using the amortization method. MSR amortization is determined by applying the ratio of the net MSR cash flows projected for the current period to the estimated total remaining net MSR cash flows. The estimated total net MSR cash flows are determined at the beginning of each month using prepayment assumptions applicable at that time.

MSRs accounted for using the amortization method are periodically evaluated for impairment. Impairment occurs when the current fair value of the MSRs decreases below the asset's carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a valuation allowance. If the value of impaired MSRs subsequently increases, the increase in value is recognized in current-period earnings and the valuation allowance is adjusted to bring the carrying value of the MSRs to a level not in excess of the asset's amortized cost.

The Company stratifies its MSRs by predominant risk characteristic when evaluating for impairment. For purposes of performing its MSR impairment evaluation, the Company stratifies its servicing portfolio on the basis of certain risk characteristics including loan type (fixed-rate or adjustable-rate) and note rate. Fixed-rate loans are stratified into note rate pools of 50 basis points for note rates between 3.0% and 4.5% and a single pool for note rates below 3%. If the fair value of MSRs in any of the note rate pools is below the carrying value of the MSRs for that pool, impairment is recognized to the extent of the difference between the estimated fair value and the carrying value, including the existing valuation allowance for that pool.

Management periodically reviews the various impairment strata to determine whether the value of the impaired MSRs in a given stratum is likely to recover. When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.

Both amortization and changes in the amount of impairment of MSRs are recorded in current period results of operations in Amortization, impairment and change in estimated fair value of mortgage servicing rights in the Consolidated Statements of Income.

Changes in fair value of MSRs accounted for at fair value are recognized in current period results of operations in Amortization, impairment and change in estimated fair value of mortgage servicing rights in the Consolidated Statements of Income.

Furniture, fixtures and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets, which range from five to seven years.

The Company capitalizes certain consulting, payroll, and payroll-related costs related to computer software for internal use, and subsequently amortizes such costs over a period of five years using the straight-line method.

The Company also periodically assesses long-lived assets including capitalized software for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. If management identifies an indicator of impairment, it assesses recoverability by comparing the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and is measured as the excess of carrying value over fair value. No such impairment was recorded during the years ended December 31, 2011 and 2010.

Restricted cash represents deposits that serve as collateral for various agreements the Company has entered into, such as derivative margin account agreements. Restricted cash is included in Other assets in the Company's Consolidated Balance Sheets.

Loans sold under agreements to repurchase are measured based on whether management has designated the agreements to be accounted for under the fair value option or at historical cost. Under both options, the carrying value of loans and securities sold under agreements to repurchase is based on the accrued cost of the agreements, which approximates fair value, due to the agreements' variable interests rates and short maturities.

Management classifies loans sold under agreements to repurchase as "Level 3" fair value financial statement items. When loans and securities sold under agreements to repurchase are carried at their estimated fair values, the costs of creating the facilities underlying the agreements are expensed as incurred. When loans and securities sold under agreements to repurchase are carried at historical cost, the costs of creating the facilities underlying the agreements are recognized as deferred charges in Other assets and amortized to Interest expense over the term of the borrowing facility.

The Company originates and sells mortgage loans into the secondary mortgage market. The Company's mortgage loan sales are presently structured without recourse to the Company. However, the Company's loan sales are generally made with contractual representations and warranties, which, if breached, can require the Company to repurchase the mortgage loan or to reimburse the investor for any losses incurred because of that breach. The Company has also sold loans on behalf of PMT in prior periods. As part of those loan sales, the Company assumed the recourse obligation related to PMT's loan sales in exchange for payment by PMT of the estimated recourse obligation.

The amount of the Company's liability for losses due to representations and warranties to the loans' investors is not limited. Management includes a provision for potential losses due to recourse as part of its recognition of loan sales, based initially on management's estimate of the fair value of such obligation. Management reviews its loss experience relating to representations and warranties and adjusts its liability estimate when necessary.

Management fee income includes investment advisory and stockholder services fees earned from the Investment Funds and management fees from PMT.

Pursuant to the investment management agreements between the Investment Funds and the Company, the Investment Funds paid total management fees (including stockholder services fees) equal to an annual rate of 2% on capital commitments until December 31, 2011. Thereafter, the Company earned a fee equal to an annual rate of 2% of the net asset values of the Funds so long as the fee did not exceed 2% of the aggregate capital contributions to the Funds. The management fee is accrued monthly and paid quarterly.

The Company may earn carried interest from each of the Investment Funds in which the Company has a general partnership interest or other carried interest arrangement. At the end of each reporting period, the Investment Fund administrator calculates the carried interest that would be due to the Company for each fund as specified in the fund agreements, as if the fair value of the underlying investments were realized as of such date, regardless of whether such amounts have been realized. The Company records carried interest income for the increase or decrease in the amount of carried interest that would be due to the Company at the end of the reporting period. The Investment Funds' agreements do not obligate the Company to pay guaranteed returns or hurdles to the owners of the Investment Fund, and therefore, the Company will not record negative carried interest over the life of an Investment Fund.

Profit distributions from the Investment Funds are made in accordance with the following distribution priorities, but such distributions may be recalled by the Investment Funds for purposes of making new investments until December 31, 2011:

During 2011, the Company amended its agreements with the Investment Funds, relating to the "catch-up" provision included in the profit distribution. The approved amendments resulted in an additional accrual of carried interest from the funds of $3,321,000 recorded during the year ended December 31, 2011.

The Company's management fees relating to PMT for the periods presented were calculated on a quarterly basis and included a base management fee and a performance incentive. The base management fee was calculated at the annual rate of 1.5% of PMT's shareholders' equity, adjusted to exclude the effect of unrealized gains and losses and other non-cash items and one-time adjustments as agreed to between the Company and PMT's independent trustees. The performance incentive fee was calculated at 20% per year of the amount by which "core earnings," on a rolling four-quarter basis and before the incentive fee, exceeded an 8% "hurdle rate."

Loan servicing fees are received by the Company for servicing residential mortgage for others, including the Investment Funds and PMT. Loan servicing fees are recognized as earned.

Under the servicing agreements between the Company and the Investment Funds, on December 31, 2011 and the end of every calendar year thereafter, the Company will rebate to the Investment Funds an amount equal to the cumulative profit, if any, of the servicing operations attributable to the Investment Funds' assets, and, conversely, charge the Investment Funds if a loss has been incurred in order to effect overall "at cost" pricing with respect to loan servicing activities for such assets. Under the agreements, the Company will rebate to the Investment Funds 50% of any profit generated from loan origination and modification activities. The Company records the net rebate amounts as earned or incurred. Effective December 31, 2011, the Company amended its servicing agreement with one of the Investment Funds to exit the loan servicing rebate arrangement and be charged set servicing fee rates beginning January 1, 2012.

The Company recognizes compensation expense relating to its stock-based compensation with reference to the fair value of the common units it awards. The fair value the common units is estimated by discounting forecasted cash flows, dividends and terminal value from a hypothetical sale of the Company to the holders of the common units. Management uses assumptions that it believes would be used by market participants when valuing the Company. Assumptions used to forecast the cash flows include: short and long-term growth rates of the company, discount rate, and percent of income distributed.

The Company amortizes the fair value of previously granted share based awards to Compensation expense using the graded vesting method. Under the graded vesting method, compensation expense is recognized over the requisite service period for each separate vesting of the award.

The Company intends to be treated as a partnership for Federal income tax purposes. Each partner is responsible for the tax liability or benefit relating to such partner's distributive share of taxable income or loss. Accordingly, no provision for Federal income taxes is reflected in the accompanying financial statements.

Management's assessment of the requirement to provide for income taxes also includes an assessment of the liability arising from uncertain tax positions taken or expected to be taken by the Company. Management has concluded that the Company does not have any unrecognized tax benefits that would affect the Company's financial position. If applicable, the Company will recognize interest accrued related to unrecognized tax benefits in "interest expense" and penalties in "other expenses" on the consolidated statements of income.

The periods that are open for examination by a relevant income taxing authority are the tax periods ending December 31, 2008, 2009, 2010, and 2011. As of December 31, 2011, the Company has no federal or state examination in progress.

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

Basic earnings or loss per common unit is calculated using the two class method, which requires the Company to reduce basic earnings available to common units by the amount of income allocable to participating units. The Company has preferred units, and Class C units that participate directly with the common units in net income and loss allocations after the preferred units have received their 8% per annum preferred returns and the preferred and common units have received allocations of a priority operating return. Non-vested common units also participate in distributions made to satisfy the unit holders' income tax liabilities arising from taxable income allocated to the non-vested units. These classes of equity are considered participating securities for accounting purposes. Allocations of net income or loss to each class of participating unit holders are made under the assumption of a hypothetical liquidation of the Company as specified in the Company's limited liability company agreement.

PMOFA is a general partner in the Master Fund. The Master Fund wholly owns PennyMac Mortgage Co. Funding, LLC ("Funding, LLC"), PennyMac Mortgage Co. Funding II, LLC ("Funding II, LLC), and PennyMac Mortgage Co, LLC ("Mortgage Co"). Funding LLC and Funding II, LLC, are each the majority interest holder in PennyMac Loan Trust 2010-NPL1, PennyMac Loan Trust 2011_NPL1 and PennyMac REO 2011 NPL1 (the "Trusts") which in the case of the first entity hold the mortgage loans for Funding LLC, and in the case of the latter two entities hold the mortgage loans for Funding II, LLC. PLS provides loan servicing to the Trusts as well as to Mortgage Co. The related party group constituting the Company and its affiliates (including PMOFA) has equity interest in the Master Fund, the ultimate Parent of the Trusts, Mortgage Co, Funding, LLC and Funding II, LLC. The direct equity holder in the Trusts and Mortgage Co, Funding, LLC and Funding II, LLC however, do not have power to direct operations of the respective entities and as such, both the Trust and Mortgage Co are considered to be a variable interest entities ("VIEs") as defined in the Consolidations topic of the Codification.

The Company is not the primary beneficiary in these VIEs, given it does not represent the enterprise within the related party group that is most closely associated with these VIEs and, as such, the Company does not consolidate these VIEs. Exposure of loss to the related party group from the unconsolidated VIEs is limited to the contributed capital of the related party group in the Master Fund totaling $1,436,000 which represents the general partnership interest held by PMOFA in the Master Fund.

In May 2011, the Financial Accounting Standards Board issued an Accounting Standards Update ("ASU"), ASU 2011-04 to the Fair Value Measurements topic of the Accounting Standards Codification

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

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

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

In December 2011, the Financial Accounting Standards Board issued ASU 2011-11 that requires disclosure of information about offsetting and related arrangements to enable users of financial statements to understand the effect of these arrangements on its financial condition.

ASU 2011-11 is applicable to the Company for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU 2011-11 is not expected to have a material effect on the Company's consolidated financial statements.

Amounts due from the Investment Funds are summarized below for the dates presented:

In accordance with the servicing agreements between the Company and the Investment Funds, certain monies are advanced to the Company by the Investment Funds for servicing advances relating to loans serviced by PLS on the Investment Funds' behalf. The Company reimburses such advances upon collection of funds from borrowers for mortgage loans serviced or upon liquidation of real estate acquired in settlement of loans. Amounts due to the Investment Funds totaling $29,622,000 and $13,262,000 represent amounts advanced by the Investment Funds to fund servicing advances made by the Company as of December 31, 2011 and 2010, respectively.

satisfied by the end of such 24 calendar quarter period, PMT's obligation to reimburse the Company and make the conditional payment of the underwriting discount will terminate. Management has concluded that this contingency is probable of being met during the 24-quarter period and has recognized a receivable for reimbursement of the payment made on behalf of PMT.

In accordance with the servicing agreements between the Company and PMT, certain monies are advanced to the Company by an affiliate for servicing advances relating to loans serviced by PLS on PMT's behalf. The Company reimburses such advances upon collection of funds from borrowers for mortgage loans serviced or upon liquidation of real estate acquired in settlement of loans.

Expenses allocated to PMT during the years ended December 31, 2011 and 2010 are detailed below:

During PMT's startup period and through March 31, 2010, the Company waived its right to reimbursement from PMT for PMT's proportionate share of common overhead expenses. Such expenses totaling approximately $500,000 have been permanently waived for the year ended December 31, 2010. The Company did not waive any other charges during PMT's startup period and through March 31, 2010. Management does not intend to waive recovery of common overhead costs in the future.

The Company also holds an investment in PMT in the form of 75,000 common shares of beneficial interest as of December 31, 2011 and 2010. The shares had fair values of $1,247,000 and $1,361,000 as of December 31, 2011 and 2010, respectively.

paper, securities issued or guaranteed by the U.S. Government or its agencies, obligations of U.S. banks and foreign banks with U.S. operations, fully collateralized repurchase agreements and variable and floating rate demand notes.

In connection with PMT's correspondent lending business, PLS also provides certain mortgage banking services, including fulfillment and disposition-related services, to PMT for a fulfillment fee based on a percentage of the unpaid principal balance of the mortgage loans. The fulfillment fee for such services during the periods presented was 50 basis points. Beginning November 1, 2010, the Company began transferring the interest income and paying a sourcing fee of three basis points for each mortgage loan it bought from PMT for ultimate disposition to a third-party where the Company was approved or licensed to sell to such third-party and PMT was not. During the years ended December 31, 2011 and 2010, the Company received fulfillment fees from PMT totaling approximately $1,744,000 and $103,000, respectively, and paid sourcing fees totaling approximately $165,000 and $103,000, respectively, to PMT.

Earnings per unit is calculated using the two-class method. The Company allocates net income or loss to each class of participating unit holders as specified in the Company's limited liability company agreement, which requires the allocation of distributions among the units under the assumption of a hypothetical liquidation of the Company as follows:

The following is a reconciliation of net income to net income attributable to common unit holders and a table summarizing the basic and diluted earnings per unit calculations for the periods presented:

	Year ended December 31,

	2011		2010
	(in thousands, except unit amounts)
Earnings per preferred unit:
Net income	$	14,699	$	33,042

Net income attributable to preferred units
Distributed priority return	$	12,062	$	—
Undistributed priority return		—		6,981
Undistributed earnings		2,445		22,033

Net income attributable to preferred units	$	14,507	$	29,014

Weighted-average preferred units outstanding		61,003		44,962

Earnings per preferred unit	$	237.82	$	645.30

Earnings per common unit:
Net income attributable to common members	$	191	$	4,028
Less: Distributions to non-vested common unit awards outstanding		55		95
Undistributed earnings attributable to non-vested common unit awards outstanding		96		3,742

Net income attributable to common units	$	40	$	191

Basic earnings per common unit:
Weighted-average common units outstanding		3,470		345

Basic earnings per common unit	$	11.63	$	555.59

Diluted earnings per common unit:
Net income available to common units	$	40	$	191

Weighted-average common units outstanding		3,470		345
Dilutive potential common units—units issuable under equity-based compensation plan		6,940		4,359

Diluted weighted-average number of common units outstanding		10,410		4,704

Diluted earnings per common units	$	3.88	$	40.72

The Company purchases and sells mortgage loans to 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 upon sale of mortgage loan in transactions where the Company maintains continuing involvement with the mortgage loan (primarily the obligation to service the loan on behalf of the loan's owner or owner's agent):

The Company's mortgage servicing portfolio is summarized as follows at year end:

	December 31,

	2011		2010
	(in thousands)
Agencies	$	2,547,679	$	1,512,727
Affiliated entities		3,533,529		2,101,450
Private investors		1,571,016		1,730,178
Mortgage loans held for sale		84,384		14,464

	$	7,736,608	$	5,358,819

Amount subserviced for the Company	$	445,874	$	477,263

Delinquent mortgage loans:
30 days	$	267,723	$	225,189
60 days		165,497		124,772
90 days or more		796,160		747,790

		1,229,380		1,097,751
Loans pending foreclosure		1,504,992		715,550

	$	2,734,372	$	1,813,301

Custodial funds managed by the Company(1)	$	77,315	$	80,946

Following is a summary of the geographical distribution of loans included in the Company's servicing portfolio for the top five states as measured by the total unpaid principal balance as of the dates presented:

basis for loans where the Company has obtained the rights to service the loans but servicing of the loans has not yet transferred to the Company's servicing system.

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

Management identified all of its non-cash financial assets, its MSRs relating to loans with initial interest rates of more than 4.5%, and its loans sold under agreements to repurchase on the Consolidated Balance Sheets, to be accounted for at estimated fair value so such changes in fair value will be reflected in results of operations as they occur and more timely reflect the results of the Company's performance. The Company's financial assets subject to this election include the short-term investment and mortgage loans held for sale. Management has a identified MSRs relating to loans with initial interest rates of more than 4.5%, to be accounted for at estimated fair value so such changes in fair value will also be reflected in results of operations.

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

For loans sold under agreements to repurchase subject to agreements made beginning in December 2010, management has determined that historical cost accounting is more appropriate because under this method debt issuance costs are amortized over the term of the debt and not expensed as incurred, thereby reflecting the debt issuance expense over the periods benefiting from the usage of the debt.

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

As shown above, mortgage servicing rights at fair value, interest rate lock commitments, and loans sold under agreements to repurchase at fair value are measured using Level 3 inputs. Following is a

roll forward of these items for the years ended December 31, 2011 and 2010 where Level 3 inputs were used on a recurring basis:

	Year ended December 31, 2011

	Mortgage servicing rights			Interest rate lock commitments			Total
	(in thousands)
Assets:
Balance, December 31, 2010	$	31,957		$	(13	)	$	31,944
Purchases		1,352			—			1,352
Interest rate lock commitments issued, net		—			18,436			18,436
Servicing received as proceeds from sales of mortgage loans		1,696			—			1,696
Changes in fair value included in income		(9,307	)		—			(9,307	)
		—			—			—
Transfers to mortgage loans held for sale		—			(10,518	)		(10,518	)

Balance, December 31, 2011	$	25,698		$	7,905		$	33,603

Changes in fair value recognized during the period relating to assets still held at December 31, 2011	$	(9,307	)	$	7,905

Accumulated changes in fair value relating to assets still held at December 31, 2011				$	7,905

	Year ended December 31, 2010

	Mortgage servicing rights			Interest rate lock commitments			Total
	(in thousands)
Assets:
Balance, December 31, 2009	$	19,024		$	11		$	19,035
Purchases		11,974			—			11,974
Interest rate lock commitments issued, net		—			816			816
Servicing received as proceeds from sales of mortgage loans		1,185			—			1,185
Changes in fair value included in income		(226	)		—			(226	)
Transfers to mortgage loans held for sale		—			(840	)		(840	)

Balance, December 31, 2010	$	31,957		$	(13	)	$	31,944

Changes in fair value recognized during the period relating to assets still held at December 31, 2010	$	(226	)	$	(13	)

Accumulated changes in fair value relating to assets still held at December 31, 2010				$	(13	)

The information used in the preceding roll forwards represents activity for any financial statement items identified as using Level 3 inputs at either the beginning or the end of the current fiscal period. Transfer in or out of Level 3 represents either the beginning value (for transfer in), or the ending value (for transfer out) of any investments where a change in the pricing level occurred from the beginning to the end of the period.

Gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value pursuant to the fair value option are summarized below:

	Changes in fair value included in current year income year ended December 31,

	2011								2010
	Change in fair value of mortgage loans held for sale at fair value		Net servicing income			Total			Change in fair value of mortgage loans held for sale at fair value		Net servicing income		Total
	(in thousands)
Assets:
Short-term investments	$	—	$	—		$	—		$	—	$	—	$	—
Mortgage loans held for sale at fair value		13,029		—			13,029			2,008		—		2,008
Mortgage servicing rights at fair value		—		(9,438	)		(9,438	)		—		400		400

	$	13,029	$	(9,438	)	$	3,591		$	2,008	$	400	$	2,408

Liabilities:
Loans sold under agreements to repurchase at fair value									$	—	$	—	$	—

									$	—	$	—	$	—

Following are the fair value and related principal amounts due upon maturity of assets and liabilities accounted for under the fair value option as of December 31, 2011 and 2010:

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

The following table summarizes the net gains (losses) on assets measured at estimated fair values on a nonrecurring basis for the periods indicated:

basis points for fixed-rate mortgage loans with note rates between 3% and 4.5% and a single pool for mortgage loans with note rates below 3%. MSRs relating to adjustable rate mortgage loans with initial interest rates of 4.5% or less are evaluated in a single pool. If the fair value of MSRs in any of the note rate pools is below the carrying value of the MSRs for that pool reduced by any existing valuation allowance, those MSRs are impaired.

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

The Company's cash balances as well as its carried interest due from Investment Funds, amounts receivable from and payable to Investment Funds and PennyMac Mortgage Investment Trust Loans sold under agreements to repurchase, and note payable are carried at amortized costs.

Management has concluded that the carrying value of the carried interest due from Investment Funds approximates its fair value as the balance represents the amount distributable to the Company at the balance sheet date assuming liquidation of the Investment Funds. Management has concluded that the estimated fair value of the note payable approximates the agreements' carrying value due to the agreements' short terms and variable interest rates.

The Company also carries the receivable from and payable to Investment Funds and PennyMac Mortgage Investment Trust at cost. Management has concluded that the estimated fair value of such balances cannot be approximated due to the related party nature of such transactions.

Cash is measured using Level 1 Inputs. The Company's borrowings carried at amortized cost do not have active markets or observable inputs and the fair value is measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as Level 3 as of December 31, 2011 due to the lack of current market activity and the Company's reliance on unobservable inputs to estimate the fair value.

Most of the Company's financial assets are carried at fair value with changes in fair value recognized in current period results of operations. A substantial portion of those assets are "Level 3" financial statement items which require the use of significant unobservable inputs in the estimation of the assets' values. Unobservable inputs reflect the Company's own assumptions about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances.

The Company has assigned the responsibility for estimating the fair values of "Level 3" financial statement items to a specialized valuation group and has developed procedures and controls governing the valuation process relating to these assets. The estimation of fair values of the Company's financial assets are assigned to its Financial Analysis and Valuation group (the "FAV group"), which is responsible for valuing and monitoring the Company's investment portfolios and maintenance of its valuation policies and procedures.

The FAV group reports to the Company's senior management valuation committee, which oversees and approves the valuations. The valuation committee includes the Company's chief executive, financial, investment and credit officers. The FAV group monitors the models used for valuation of the Company's "Level 3" financial statement items, including the models' performance versus actual results and reports those results to the valuation committee. The results developed in the FAV group's monitoring activities are used to calibrate subsequent projections used for valuation.

The FAV group is responsible for reporting to the valuation committee on a monthly basis on the changes in the valuation of the portfolio, including major drivers affecting the valuation and any changes in model methods and assumptions. To assess the reasonableness of its valuations, the FAV group presents an analysis of the effect on the valuation of each of the changes to the significant inputs to the models.

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

The Company's mortgage loans held for sale at fair value, are saleable into active markets and are therefore categorized as "Level 2" fair value financial statement items and their fair values are estimated using their quoted market or contracted price or market price equivalent. Changes in fair value attributable to changes in instrument-specific credit risk are measured by the change in the respective loan's delinquency status at period-end from the later of the beginning of the period or acquisition date.

The Company estimates the fair value of an interest rate lock commitment 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 mortgage loan will fund within the terms of the interest rate lock commitment.

The significant unobservable inputs used in the fair value measurement of the Company's interest rate lock commitments are the pull-through rate—the percentage of loans that the Company ultimately funds as a percentage of the commitments it has made—and the MSR component of the Company's estimate of the value of the mortgage loans it has committed to purchase. Significant changes in any of those inputs, in isolation, could result in a significant change in fair value measurement. Changes in these assumptions are generally inversely correlated as increasing interest rates have a negative effect on the fair value of mortgage loans and a positive effect on the fair value of MSRs that are created in the sale of such mortgage loans.

Following is a quantitative summary of key unobservable inputs used in the valuation of interest rate lock commitments:

The Company estimates the fair value of commitments to sell loans based on quoted MBS prices. The Company estimates the fair value of the MBS options and futures it purchases and sells based on observed interest rate volatilities in the MBS market. The Company estimates the fair value of its MBS interest rate swaptions based on quoted market prices.

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

Key assumptions used in determining the fair value of MSRs at the time of initial recognition are as follows:

Following is a quantitative summary of key inputs used in the valuation of the Company's MSRs at year end and the effect on the estimated fair value from adverse changes in those assumptions (weighted averages are based upon unpaid principal balance):

	December 31,

	2011			2010
	Range (Weighted average)
Key Inputs	Fair value	Amortized cost		Fair value	Amortized cost
	(dollar amounts in thousands)
Discount rate	19.0%-19.0% (19.0%)		—	19.0%-19.0% (19.0%)		—
Effect on value of 5% adverse change	($375)		—	($580)		—
Effect on value of 10% adverse change	($733)		—	($1,130)		—
Effect on value of 20% adverse change	($1,400)		—	($2,145)		—
Average life (in years)	4.9			6.3
Prepayment speed(1)	10.2%-10.2% (10.2%)		—	6.9%-6.9% (6.9)		—
Effect on value of 5% adverse change	($244)		—	($203)		—
Effect on value of 10% adverse change	($469)		—	($435)		—
Effect on value of 20% adverse change	($927)		—	($848)		—
Cost of servicing	$136-$136 ($136)			$132-$132 ($132)
Effect on value of 5% adverse change	($132)		—	($157)		—
Effect on value of 10% adverse change	($264)		—	($314)		—
Effect on value of 20% adverse change	($527)		—	($628)		—

	December 31,

	2011		2010
	Range (Weighted average)
Key Inputs	Fair value	Amortized cost	Fair value	Amortized cost
	(dollar amounts in thousands)
Pricing spread(1)	7.5%-19.5% (10.4%)	7.5%-17.0% (9.8%)	9.5%-14.0% (11.1%)	—
Effect on value of 5% adverse change	($168)	($146)	($271)	—
Effect on value of 10% adverse change	($332)	($287)	($532)	—
Effect on value of 20% adverse change	($643)	($553)	($1,023)	—
Average life (in years)	4.7	6.2	6.5	—
Prepayment speed(2)	8.1%-75.7% (17.7%)	6.7%-21.2% (9.1%)	5.79%-64.4% (11.0%)	—
Effect on value of 5% adverse change	($307)	($116)	($292)	—
Effect on value of 10% adverse change	($598)	($228)	($573)	—
Effect on value of 20% adverse change	($1,137)	($442)	($1,106)	—
Cost of servicing	$68-$140 ($76)	$68-$140 ($94)	$53-$125 ($57)	—
Effect on value of 5% adverse change	($100)	($70)	($81)	—
Effect on value of 10% adverse change	($200)	($139)	($162)	—
Effect on value of 20% adverse change	($323)	($266)	($325)	—

The preceding 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 in the variables in relation to other variables; are subject to the accuracy of various models and assumptions used; and do not incorporate other factors that would affect the Company's overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as an earnings forecast.

At December 31, 2011 and 2010, the Company had pledged $86,787,000 and $14,720,000, respectively, in fair value of mortgage loans held for sale to secure loans sold under agreements to repurchase.

The activity in MSRs carried at amortized cost is summarized below for the years presented:

	Year ended December 31,

	2011			2010
	(in thousands)
Mortgage Servicing Rights:
Balance at beginning of year	$	—		$	—
Additions		6,557			—
Amortization		(61	)		—
Application of valuation allowance to write down MSRs with other-than temporary impairment		—			—

Balance before valuation allowance at end of year		6,496			—

Valuation Allowance for Impairment of Mortgage Servicing Rights:
Balance at beginning of year	$	—		$	—
Additions (reductions)		(70	)		—
Application of valuation allowance to write down MSRs with other-than temporary impairment		—			—

Balance at end of year		(70	)		—

Mortgage Servicing Rights, net	$	6,426		$	—

Estimated Fair Value of MSRs at Year End	$	6,465		$	—

The following table summarizes the Company's estimate of amortization of its existing MSRs. This projection was developed using the assumptions made by management in its December 31, 2011 valuation of MSRs. The assumptions underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time. Therefore, the following estimates will change in a manner and amount not presently determinable by management.

The amount of the carried interest received by the Company depends on the Investment Funds' future performance. As a result, the amount of carried interest recorded by the Company at period end is subject to adjustment based on future results of the Investment Funds and may be reduced as a result of subsequent performance. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of carried interest will only be reversed to the extent of amounts previously recognized. Management expects the carried interest to be collected by the Company when the Investment Funds liquidate.

The investment period for the Investment Funds ended on December 31, 2011. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the limited liability company and limited partnership agreements that govern the Investment Funds.

The Company recorded dividends from its investment in common shares of PennyMac Mortgage Investment Trust totaling $138,000 and $58,000 during 2011 and 2010, respectively. The dividends were included in Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust in the Company's Consolidated Statements of Income.

Note 13—Furniture, Fixtures, Equipment and Building Improvements (Continued)

Depreciation and amortization expense totaled $337,000 and $154,000 for the years ended December 31, 2011 and 2010, respectively.

Software amortization expense totaled $238,000 and $211,000 for the years ended December 31, 2011 and 2010, respectively.

The Company maintains three borrowing facilities: two facilities that provide for sales of mortgage loans under agreements to repurchase; and one note payable secured by mortgage servicing rights and servicing advances made on loans in the Company's loan servicing portfolio.

The borrowing facilities secured by mortgage loans held for sale are in the form of loan sale and repurchase agreements. Eligible loans are sold under advance rates based on the loan type. Interest is charged at a rate based on the buyer's overnight cost-of funds rate for one agreement and based on the London Interbank Offered Rate for the other agreement. Loans sold under these agreements may be re-pledged by the lenders.

Financial data pertaining to loans sold under agreements to repurchase were as follows:

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's mortgage loans held for sale sold under agreements to repurchase is summarized by counterparty below as of December 31, 2011:

The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value (as determined by the applicable lender) of the mortgage loans securing those agreements decreases. As of December 31, 2011, the Company had $162,000 on deposit with its loan repurchase agreement counterparties.

The note payable matures on March 26, 2013. Interest is charged at a rate based on the lender's overnight cost of funds. The note payable secured by servicing advances and MSRs relating to certain loans in the Company's servicing portfolio provide for advance rates ranging from 50% to 85% of the amount of the servicing advances or the carrying value of the MSR pledged, up to a maximum of $17 million in the case of the note payable secured by servicing advances and $15 million in the case of the note payable secured by mortgage servicing rights.

The borrowing facilities contain various covenants, including financial covenants governing the Company's net worth, debt-to equity ratio, profitability and liquidity. Management believes the Company was in compliance with these requirements as of December 31, 2011.

The Company's agreements with the Agencies include representations and warranties related to the loans the Company sells to the Agencies. The representations and warranties require adherence to Agency 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 its representations and warranties, the Company may be required to either repurchase the mortgage loans with the identified defects or indemnify the investor or insurer. In such cases, the Company bears any subsequent credit loss on the mortgage loans. The Company's representations and warranties are generally not subject to stated limits of exposure. The Company's credit loss may be reduced by any recourse it has to correspondent lenders that, in turn, had sold such mortgage loans to the Company and breached similar or other representations and warranties. In such event, the Company has the right to seek a recovery of related repurchase losses from that correspondent lender.

The Company records a provision for losses relating to the representations and warranties it makes as part of its loan sale transactions. The method used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, estimated future defaults and loan repurchase rates and the potential severity of loss in the event of defaults and the probability of reimbursement by the correspondent loan seller. The Company continually updates its liability estimate.

Following is a summary of the Company's liability for representations and warranties for the periods presented:

Following is a summary of the repurchase activity at and for the periods presented:

The level of the liability for representations and warranties is difficult to estimate and requires considerable management judgment. The level of mortgage loan repurchase losses is dependent on economic factors, investor demand strategies, and other external conditions that may change over the lives of the underlying loans, However, management believes the amount and range of reasonably possible losses in relation to the recorded liability is not material to the Company's financial condition or results of operations. The current unpaid principal balance of loans sold by the Company to date represents the maximum exposure to repurchases related to representations and warranties.

The Company had the following derivative financial instruments recorded on its Consolidated Balance Sheets as of the dates presented:

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

The Company recorded net gains on derivative financial instruments totaling $4,400,000 and $310,000 and for the years ending December 31, 2011 and 2010. Derivative gains and losses are included in Change in fair value of mortgage loans held for sale at fair value in the Company's Consolidated Statements of Income.

During the year ended December 31, 2011, the Company's limited liability company agreement was amended to issue additional preferred units and raise approximately $36 million from the preferred members, to issue additional common units to common members, to adopt the 2011 Equity Incentive Plan, and to provide for Class C common units.

Subscriptions receivable are amounts due from certain members who are holders of preferred units, and earn interest at rates of between 4% and 8% annually. Interest is collectible from the distribution of the preferred return and receivables will be satisfied no later than at the time of income distribution to the members, in accordance with the limited liability company agreement.

Only the preferred units have voting rights. Each preferred unit entitles the holder to one (1) vote per preferred unit on any matters to be decided by a vote of the members. No other member and no

other class of units have voting rights. Preferred unit holders are entitled to a preferred return of 8% per year on their capital contributions. In the event of liquidation, preferred unit holders are entitled to their accumulated unpaid return plus return of the face amount of their contributions before any distributions are made to common or Class C common unit holders. Preferred and common unit holders are also entitled to a priority operating return before any income is allocated to Class C common unit holders. In the event of a liquidation, preferred and common unit holders are entitled to their accumulated priority operating return before any distributions are made to Class C common unit holders.

The Company provided a waiver to the Investment Funds relating to the "at cost" servicing fee amounting to approximately $2,462,000, which reduced the servicing rebate receivable to approximately $3,139,000 as of December 31, 2011.

Net gain on mortgage loans held for sale is summarized below for the years presented:

	Year ended December 31,

	2011			2010
	(in thousands)
Cash gain (loss) on sale:
Loan proceeds	$	182		$	(221	)
Hedging activities		(8,578	)		(315	)

		(8,396	)		(536	)

Non-cash changes in fair value:
Mortgage servicing rights received as proceeds on sale		8,253			1,174
Provision for representations and warranties on loans sold		(259	)		(51	)
Change in fair value of commitments to fund mortgage loans		7,919			(24	)
Change in fair value relating to loans and hedging instruments held for sale at year-end:
Loans		393			1,099
Hedging activities		5,119			346

Total non-cash changes in fair value relating to loans and hedging instruments held at year-end		5,512			1,445

Total non-cash changes in fair value		21,425			2,544

	$	13,029		$	2,008

The table below summarizes common unit activity under the common equity compensation plans and compensation expense for the years presented:

	As of and for the year ended December 31,

	2011			2010
	(dollar amounts in thousands, except for per unit data)
Number of units
Outstanding at beginning of year		9,588			6,348
Granted		6,933			4,667
Vested		(3,849	)		(715	)
Canceled		(498	)		(712	)

Outstanding at end of year		12,174			9,588

Weighted Average Grant Date Fair Value:
Outstanding at beginning of year	$	393		$	313
Granted	$	411		$	500
Vested	$	408		$	338
Expired or canceled	$	447		$	318
Outstanding at end of year	$	398		$	393
Units available for future awards	$	311		$	311
Compensation expense recorded during the year	$	1,160		$	1,292
Unamortized costs at year end	$	1,189		$	2,067

As of December 31, 2011, the weighted-average remaining vesting term of unvested units was approximately 8 months.

The Company issued Class C common units during November 2011 as awards to employees of the Company's correspondent lending group. The Class C units are subject to the participation preferences and other rights of the preferred units and common units as described in Note 18. No Class C units have vested, or been cancelled or forfeited as of December 31, 2011. The Company is recording expense relating to the grant date fair values of the Class C units awarded over the vesting periods.

The following is the activity for the Class C Units during the year ended December 31, 2011:

The Company did not award any common units under the 2011 Equity Incentive Plan during the year ended December 31, 2011.

The Class C and Common Unit awards contain certain repurchase provisions which could result in an award being settled in cash at the option of the Company, in the event of certain types of termination scenarios. The Company established a policy that settlement will not occur until the point in time where the unit holder has borne sufficient risks and rewards of equity ownership, assumed as six months and one day post vesting.

The valuation of unit-based awards during 2011 was estimated using a combination of the income and market approaches to estimate the fair value of the Company, and the options pricing model to estimate the fair value of the Unit awards. Under this approach, the Company's various classes of units' are valued as call options based on their respective claims on the assets of the Company. The characteristics of the unit classes, as determined by the Company's limited liability company agreement, determine respective units' claims on the Company's assets relative to each other and the other components of the Company's capital structure. Periodic valuations are performed in order to properly recognize equity-based compensation expense.

The valuation of unit-based awards was developed using the income approach, specifically a discounted cash flow analysis, and the market approach to determine the value of the Company. The discounted cash flow analysis was developed based on the Company's forecasts. The market approach was developed by applying market multiples of comparable peer companies in the Company's industry or similar lines of business. The values determined by the income and the market approach were combined by weighting the income and market approaches equally. The primary assumptions used in the determination of the fair value of the Company using the discounted cash flows method were the discount rate, terminal capitalization rate, and growth rate assumptions.

The aggregate value was then allocated to each class of units utilizing the option pricing model using the following assumptions:

The value derived from the option pricing model was reduced by the following in the determination of fair values of the awards at each of the following dates:

The following weighted-average assumptions were used in the Company's valuation of the fair value of the common unit awards in 2010:

The Company, through PLS, is required to maintain specified levels of equity to remain a seller/servicer in good standing by the Agencies. Such equity requirements generally are tied to the size of the Company's loan servicing portfolio or loan origination volume.

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

Management believes that the Company had Agency capital in excess of these requirements at both December 31, 2011 and 2010.

Noncompliance with the respective agencies' capital requirements can result in the respective Agency taking various remedial actions up to and including removing the Company's ability to sell loans to and service loans on behalf of the respective Agency.

The Company leases its primary office facilities under an agreement that expires on Feb 28, 2017. The Company also licenses certain software to support its loan servicing operations. Payments under these agreements are summarized below:

During 2011, the Company entered into a leasing arrangement to relocate its corporate offices. As a result of that agreement, PNMAC subleased its existing facilities and included a loss relating to the sublease of $1,155,000 in occupancy expense for the year ended December 31, 2011. Office lease expense (including the provision for losses on the sublease rents net of sublease income) totaled $2,962,000 and $1,335,000 for the years ended December 31, 2011 and 2010, respectively.

The business of the Company involves the collection of numerous accounts as well as the validity of liens and compliance with various state and federal lending and servicing laws; as such the Company is subject to various legal proceedings in the normal course of business. As of December 31, 2011, there were no material current or pending claims against the Company.

The Company has two business segments: mortgage banking and investment management.

The investment management segment represents the activities of the Company's investment manager, which include sourcing, valuation, performing due diligence, bidding and completion of asset acquisitions and managing the acquired assets for the Investment Funds and PMT.

The investment management segment presently focuses on investments in distressed mortgage assets, which include mortgage loans that are either in default or are perceived to be at higher risk of default. The investment management segment then seeks to maximize the value of the mortgage loans through the direction of effective "high touch" servicing by the mortgage banking segment. "High touch" servicing is based on significant levels of borrower outreach and contact, and the ability to implement long-term, sustainable loan modification and restructuring programs that address borrowers' ability and willingness to pay their mortgage loans. Where this is not possible, the investment management segment seeks to effect property resolution in a timely, orderly and economically efficient manner for the investor. The investment management segment also manages MSRs, mortgage loans held for sale, and other assets for PMT.

The mortgage banking segment represents the Company's operations aimed at servicing mortgage loans managed by the investment management segment, including servicing or subservicing loans and MSRs owned by PMT and the Investment Funds, executing the loan resolution strategy identified by the investment management segment, and originating, purchasing, selling and servicing newly originated mortgage loans.

Financial highlights by operating segment for the years ended December 31, 2011 and 2010 are as follows:

Year ended December 31, 2011	Investment management		Mortgage banking			Total

	(in thousands)
Revenues:
External:
Net servicing income	$	—	$	28,667		$	28,667
Gain on mortgage loans held for sale		—		13,029			13,029
Fulfillment fees from PMT		—		1,744			1,744
Management fees		18,399		—			18,399
Carried Interest from Investment Funds		12,596		—			12,596
Interest		4		1,528			1,532
Other		23		669			692
Intersegment		—		—			—

		31,022		45,637			76,659

Expenses:
Interest		—		1,875			1,875
Other		12,181		47,904			60,085

		12,181		49,779			61,960

Net income (loss)	$	18,841	$	(4,142	)	$	14 ,699

Segment assets at period end	$	46,319	$	242,962		$	289,281

Year ended December 31, 2010	Investment management		Mortgage banking		Total

	(in thousands)
Revenues:
External:
Net servicing income	$	—	$	26,001	$	26,001
Gain on mortgage loans held for sale		—		2,008		2,008
Fulfillment fees from PMT		—		—		—
Management fees		15,427		—		15,427
Carried interest from Investment Funds		24,654		—		24,654
Advisory income		—		—		—
Interest		19		176		195
Other		130		814		944
Intersegment		—		—		—

		40,230		28,999		69,229

Expenses:
Interest		—		790		790
Other		9,576		25,821		35,397

		9,576		26,611		36,187

Net income	$	30,654	$	2,388	$	33,042

Segment assets at period end	$	35,558	$	92,844	$	128,402

The accounting policies of the reportable segments are the same as those described in Note 3—Significant Accounting Policies.

Following is a presentation of selected quarterly financial data for each full quarterly period of 2011 and 2010:

	Quarter ended

	2011								2010
	Dec. 31		Sept. 30		June 30		Mar. 31		Dec. 31		Sept. 30		June 30		Mar. 31
	(amounts in thousands)
For the quarter ended:
Net servicing income(1)	$	5,756	$	5,666	$	9,586	$	7,659	$	9,799	$	4,784	$	5,628	$	5,790
Net gains on mortgage loans held for sale at fair value		9,133		2,343		753		800		1,080		731		71		126
Fulfillment fees		1,386		263		61		34		—		—		—		—
Management fees and carried interest(2)		6,147		8,233		9,763		6,852		8,233		6,569		21,389		3,890
Other income		1,248		409		171		396		405		524		188		22

		23,670		16,914		20,334		15,741		19,517		12,608		27,276		9,828
Expenses		20,451		16,825		13,479		11,205		11,255		9,005		7,972		7,955

Net income	$	3,219	$	89	$	6,855	$	4,536	$	8,262	$	3,603	$	19,304	$	1,873

At period end:
Mortgage loans held for sale at fair value	$	89,857	$	61,284	$	11,067	$	11,411	$	14,720	$	7,474	$	2,020	$	1,244
MSRs		32,124		29,860		33,408		32,158		31,957		30,137		32,436		20,690
Carried interest		37,250		35,002		31,890		26,917		24,654		20,251		17,443		—
Mortgage servicing advances		63,565		36,515		29,718		28,025		22,811		12,023		7,015		4,962
Other assets		66,485		49,656		39,911		39,413		34,260		33,591		34,526		38,755

Total assets	$	289,281	$	212,317	$	145,994	$	137,924	$	128,402	$	103,476	$	93,440	$	65,651

Borrowings	$	96,302	$	69,517	$	13,640	$	14,087	$	16,788	$	9,063	$	3,176	$	936
Other liabilities		69,064		40,975		30,441		28,948		21,645		13,607		12,340		15,128

Total liabilities		165,366		110,492		44,081		43,035		38,433		22,670		15,516		16,064
Members' equity		123,915		101,825		101,913		94,889		89,969		80,806		77,924		49,587

Total liabilities and members' equity	$	289,281	$	212,317	$	145,994	$	137,924	$	128,402	$	103,476	$	93,440	$	65,651

Management has evaluated all events or transactions through February 7, 2013, the date the Company issued these financial statements. During this period:

On February 2, 2012, PLS amended its master repurchase agreement, dated as of August 14, 2009, by and among Credit Suisse First Boston Mortgage Capital LLC, PLS and Private National Mortgage Acceptance Company, LLC, to increase the aggregate principal amount of borrowings available thereunder from $50 million to $100 million. This repurchase agreement, which is used to fund newly originated mortgage loans, was subsequently amended on September 21, 2012, to increase the aggregate

principal amount of borrowings available thereunder from $100 million to $150 million and to extend the maturity date to September 23, 2013.

On March 23, 2012, PLS amended its master repurchase agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PLS and Private National Mortgage Acceptance Company, LLC, to increase the aggregate principal amount of borrowings available thereunder from $50 million to $150 million and extend the maturity date to November 5, 2012. This repurchase agreement, which is used to fund newly originated mortgage loans, was subsequently renewed and it now matures on January 2, 2014.

On March 27, 2012, PLS entered into a second amended and restated loan and security agreement with Credit Suisse First Boston Mortgage Capital LLC and Private National Mortgage Acceptance Company, LLC, pursuant to which PLS may finance mortgage servicing rights and servicing advances in an aggregate amount not to exceed $57 million. The loan and security agreement was amended, on December 12, 2012, to increase the maximum credit limit to $117 million. The loan and security agreement matures on March 26, 2013.

On June 26, 2012, PLS entered into a master repurchase agreement with Citibank, N.A., pursuant to which PLS may sell, and later repurchase, newly originated mortgage loans in an aggregate principal amount of up to $200 million, $150 million of which is committed. This repurchase agreement, which is used to fund newly originated mortgage loans, matures on June 25, 2013.

The Company made tax distributions of $15.8 million and $9.4 million to our unit holders in 2012 and January 2013, respectively.

On February 1, 2013, the Company entered into the following agreements with PMT and its subsidiaries: Amended and Restated Management Agreement (the "Management Agreement"), by and among PMT, PennyMac Operating Partnership, L.P., a wholly-owned subsidiary of PMT (the "Operating Partnership") and PCM; Amended and Restated Flow Servicing Agreement (the "Servicing Agreement"), between the Operating Partnership and PLS; Mortgage Banking and Warehouse Services Agreement ("MBWS Agreement"), between PLS and PennyMac Corp., a wholly-owned, indirect subsidiary of PMT; MSR Recapture Agreement ("MSR Recapture Agreement"), between PLS and PennyMac Corp.; Master Spread Acquisition and MSR Servicing Agreement ("Spread Acquisition and MSR Servicing Agreement"), between PLS and the Operating Partnership; and Amended and Restated Underwriting Fee Reimbursement Agreement ("Reimbursement Agreement"), by and among PMT, the Operating Partnership and PCM. The initial term of all of the agreements other than the Reimbursement Agreement expires on February 1, 2017, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the respective agreements. The Reimbursement Agreement expires on February 1, 2019.

The Management Agreement was amended to provide for the payment to PCM of a base management fee and a performance incentive fee, both payable quarterly and in arrears. The base management fee is equal to the sum of (i) 1.5% per annum of shareholders' equity up to $2 billion, (ii) 1.375% per annum of shareholders' equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per annum of shareholders' equity in excess of $5 billion. The performance incentive fee is calculated at a defined annualized percentage of the amount by which "net income," on a rolling four-quarter basis and before the incentive fee, exceeds certain levels of return on "equity." "Net

income," for purposes of determining the amount of the performance incentive fee, is defined as net income or loss computed in accordance with GAAP and adjusted for certain non cash charges.

The Servicing Agreement was amended to provide for servicing fees payable to PLS that changed from a percentage of the loan's UPB to fixed 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 a loan.

The MBWS Agreement provides for a fulfillment fee paid to PLS based on the type of mortgage loan that PMT acquires. The fulfillment fee is equal to a percentage of the unpaid principal balance of such mortgage loan. The terms of the MBWS agreement are similar to the prior MBWS agreement, with the addition of potential fee rate discounts applicable to PMT's monthly purchase volume in excess of designated thresholds. The Company has also agreed to provide such services exclusively for PMT's benefit, and PLS and its affiliates are prohibited from providing such services for any other third party.

Pursuant to the terms of the MSR Recapture Agreement, if PLS refinances via its retail lending business loans for which PMT previously held the MSRs, PLS is generally required to transfer and convey to PennyMac Corp., without cost to PennyMac Corp., the MSRs with respect to new mortgage loans originated in those refinancings (or, under certain circumstances, other mortgage loans) that have an aggregate unpaid principal balance that is not less than 30% of the aggregate unpaid principal balance of all the loans so originated.

Pursuant to the Spread Acquisition and MSR Servicing Agreement, PMT may acquire from PLS the rights to receive certain excess servicing spread arising from mortgage servicing rights acquired by PLS, in which case PLS generally would be required to service or subservice the related mortgage loans. The terms of each transaction under the Spread Acquisition and MSR Servicing Agreement will be subject to the terms of such agreement as modified and supplemented by the terms of a confirmation executed in connection with such transaction.

Pursuant to the Reimbursement Agreement, the Company may be entitled to reimbursement of certain payments. In connection with the initial public offering of PMT's common shares, on August 4, 2009, PCM entered into an agreement with PMT pursuant to which PMT agreed to reimburse PCM for a $2.9 million payment that it made to the underwriters of the IPO if PMT satisfied certain performance measures over a specified period of time. Such reimbursements are contingent on earning a performance incentive fee under the Management Agreement and are subject to specified maximum payments in any 12-month period.

The Company made distributions of $5.8 million to unit holders on February 6, 2013. These distributions were used to repay loans and advances that had been made to facilitate the acquisition of preferred units of Private National Mortgage Acceptance Company, LLC.

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED BALANCE SHEET

(Unaudited)

	September 30, 2012			December 31, 2011

				(as restated, note 1)
	(in thousands, except unit data)
ASSETS
Cash	$	27,734		$	16,465
Short-term investment, at fair value		3,416			16,041
Mortgage loans held for sale at fair value		410,071			89,857
Servicing advances		76,554			63,565
Receivable from Investment Funds		4,183			8,264
Receivable from PennyMac Mortgage Investment Trust		9,734			11,600
Derivative Assets		39,793			5,460
Carried Interest due from Investment Funds		44,504			37,250
Investment in PennyMac Mortgage Investment Trust, at fair value		1,753			1,247
Mortgage servicing rights, at fair value		21,240			25,698
Mortgage servicing rights, at lower of amortized cost or fair value		52,914			6,426
Margin deposits		—			2,148
Furniture, fixtures, equipment and building improvements, net		4,466			2,541
Capitalized software, net		751			556
Other		5,586			2,163

Total assets	$	702,699		$	289,281

LIABILITIES
Loans sold under agreements to repurchase	$	361,478		$	77,700
Note payable		34,035			18,602
Derivative liabilities		3,356			—
Payable to PennyMac Mortgage Investment Trust		35,920			25,595
Payable to Investment Funds		34,443			29,622
Accounts payable and accrued expenses		29,235			13,398
Liability for losses under representations and warranties		2,305			449

Total liabilities		500,772			165,366

Commitments and contingencies
MEMBERS' EQUITY
Preferred units, 96,682 units authorized and subscribed, 96,682 units issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		96,884			96,374
Common units, 20,556 and 10,665 units authorized; 9,914 and 4,564 units issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		—			—
Members' equity attributable to common units from equity compensation plan		16,107			2,737
Stock subscription receivable		(4,842	)		(19,918	)
Retained earnings		93,778			44,722

Total members' equity		201,927			123,915

Total liabilities and members' equity	$	702,699		$	289,281

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Nine months ended September 30,

	2012			2011
	(in thousands, except unit data)
Revenue
Net servicing income:
Loan servicing fees
From PennyMac Mortgage Investment Trust	$	13,163		$	9,152
From Investment Funds		9,130			10,990
Mortgage servicing rebate to Investment Funds		(407	)		(569	)
From non-affiliates		10,824			8,513
From borrowers—ancillary fees		1,613			1,224

		34,323			29,310
Amortization, impairment and change in estimated fair value of mortgage servicing rights		(8,977	)		(6,400	)

Net servicing income		25,346			22,910
Net gain on mortgage loans held for sale at fair value		68,487			3,895
Loan origination fees		5,439			461
Management fees:
From PennyMac Mortgage Investment Trust		9,847			7,043
From Investment Funds		7,199			7,457
Carried interest from Investment Funds		7,254			10,348
Net gain (loss) on investments		506			(169	)
Fulfillment fees from PennyMac Mortgage Investment Trust		31,097			358
Interest		2,039			584
Other		126			102

Total net revenue		157,340			52,989

Expenses
Compensation		77,756			31,316
Professional services		3,538			2,604
Occupancy		1,078			1,788
Technology		3,161			1,529
Interest		4,227			806
Servicing		2,438			1,619
Loan origination		1,803			404
Other		2,890			1,443

Total expenses		96,891			41,509

Net income	$	60,449		$	11,480

Net income attributable to preferred units	$	52,482		$	11,364
Net income attributable to non-vested common unit awards outstanding	$	5,094		$	84
Net income attributable to common units	$	2,873		$	32
Earnings per unit
Preferred units	$	542.83		$	221.72
Common units:
Basic	$	466.97		$	11.05
Diluted		192.41		$	3.58
Weighted average units outstanding
Preferred units		96,682			51,256
Common units:
Basic		6,153			2,913
Diluted		14,933			8,997

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY

(Unaudited)

	Preferred units						Common units

	Preferred units						Common units				Subscriptions receivable			Retained earnings
	Units			Amounts			Units		Amounts		Subscriptions receivable			Retained earnings			Total
	(dollars in thousands)
Balance at December 31, 2010 (as restated, note 1)		45,371		$	44,482			715	$	1,736	$	(1,414	)	$	45,165		$	89,969
Capital:
Contributions and concurrent distributions		14,999			14,968			—		—		—			(14,968	)		—
Subscriptions		543			517			—		—		(517	)		—			—
Redemptions		(526	)		(271	)		—		—		61			—			(210	)
Distributions		—			—			—		—		—			(386	)		(386	)
Unit-based compensation expense		—			—			3,849		972		—			—			972
Net income		—			—			—		—		—			11,480			11,480

Balance at September 30, 2011		60,387		$	59,696			4,564	$	2,708	$	(1,870	)	$	41,291		$	101,825

Balance at December 31, 2011 (as restated, note 1)		96,682		$	96,374			4,564	$	2,737	$	(19,918	)	$	44,722		$	123,915
Capital:
Contributions		—			—			—		—		15,058			—			15,058
Redemptions		(125	)		(125	)		—		—		143			(24	)		(6	)
Distributions		—			—			—		—		—			(11,369	)		(11,369	)
Unit-based compensation expense		125			635			5,350		13,370		(125	)		—			13,880
Net income		—			—			—		—		—			60,449			60,449

Balance at September 30, 2012		96,682		$	96,884			9,914	$	16,107	$	(4,842	)	$	93,778		$	201,927

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended September 30,

	2012			2011
	(in thousands)
Cash flow from operating activities:
Net income	$	60,449		$	11,480
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accrual of servicing rebate to Investment Funds		407			569
Amortization, impairment and change in fair value of mortgage servicing rights		8,977			6,400
Change in fair value of mortgage loans held for sale at fair value		(68,487	)		(3,895	)
Carried interest income		(7,255	)		(10,348	)
Change in fair value of investment in PennyMac Mortgage Investment Trust		(506	)		169
Accrual of stock-based compensation		13,880			972
Amortization of commitment fees relating to financing facilities		1,261			505
Depreciation and amortization		389			180
Originations of mortgage loans held for sale		(304,402	)		(281,215	)
Purchase from affiliate of mortgage loans held for sale		(5,111,185	)		(165,044	)
Proceeds from sales and principal repayments of mortgage loans held for sale		5,112,530			239,773
Increase in servicing advances		(12,989	)		(13,704	)
Decrease in receivable from Investment Funds		3,674			413
Decrease in due from affiliates		2,528			907
Increase in other assets		(508	)		(1,261	)
Increase in accounts payable and accrued expenses		15,695			5,182
Decrease in payable to affiliates		10,325			—
Increase in payable to Investment Funds		4,821			3,946
Increase in other liabilities		—			653
Increase in other receivables		—			(4,562	)
Increase in prepaid expenses		(3,457	)		(632	)

Net cash used in operating activities		(273,853	)		(209,512	)

Cash flow from investing activities:
Net decrease (increase) in short-term investment		12,625			(3,289	)
Purchase of furniture, fixtures, equipment and building improvements		(2,495	)		(944	)
Acquisition of capitalized software		(379	)		(76	)
Increase in margin deposit		(27,524	)		—
Purchase of mortgage servicing rights		—			(1,353	)

Net cash used in investing activities		(17,773	)		(5,662	)

Cash flow from financing activities:
Sale of loans under agreements to repurchase		4,924,895			165,044
Repurchase of loans sold under agreements to repurchase		(4,641,117	)		—
Increase in note payable		15,433			52,729
Capital contributions		15,058			—
Capital redemptions		(6	)		—
Advances to unit holders		(11,368	)		(597	)

Net cash provided by financing activities		302,895			217,176

Net increase in cash		11,269			2,002
Cash at beginning of period		16,465			5,927

Cash at end of period	$	27,734		$	7,929

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Private National Mortgage Acceptance Company, LLC ("PennyMac") is a Delaware limited liability company which, through its subsidiaries (collectively, the "Company"), engages in mortgage banking and investment management activities. Its mortgage banking activities consist of residential mortgage lending and servicing. The investment management and portion of the loan servicing activities are conducted on behalf of investment vehicles that invest in residential mortgage loans and related assets. PennyMac's primary wholly-owned subsidiaries are:

After the issuance of the 2011 consolidated financial statements, management determined that the 2011and 2010 consolidated financial statements contained certain errors. As a result, the balance sheets as of December 31, 2011 and statements of changes in members' equity for the years ended December 31, 2011 and 2010 have been restated from the amounts previously reported to correct these errors, as follows:

The following components of the balance sheets and statements of members' equity as of and for the years ended December 31, 2011 and 2010 have been corrected as follows:

A substantial portion of the Company's activities are performed for the Investment Funds and PMT. Fees charged to these entities (comprised of management fees, loan servicing fees and loan servicing rebates, carried interest income and fulfillment fees from PMT) totaled 49% and 85% of revenues for the nine months ended September 30, 2012 and 2011, respectively. A portion of these fees are received pursuant to the management agreements between the Company and PMT and the Investment Funds. These agreements provide for a substantial payment to the Company if they are terminated without cause before December 31, 2016, in the case of the agreements with the Investment Funds, and before February 1, 2017, in the case of the agreement with PMT.

Amounts receivable from and payable to the Investment Funds are summarized below for the dates presented:

	September 30, 2012		December 31, 2011

	(in thousands)
Receivable from Investment Funds:
Loan servicing rebate	$	404	$	3,139
Management fees		2,416		2,601
Loan servicing fees		1,002		2,486
Expense reimbursements		361		38

		4,183		8,264

Carried interest due from Investment Funds:
PNMAC Mortgage Opportunity Fund, LLC		27,733		24,473
PNMAC Mortgage Opportunity Fund Investors, LLC		16,771		12,777

		44,504		37,250

	$	48,687	$	45,514

Payable to Investment Funds:
Loan servicing advances	$	34,443	$	29,622

In accordance with the servicing agreements between the Company and the Investment Funds, certain monies are advanced to the Company by an affiliate for servicing advances relating to loans serviced by PLS on the affiliates" behalf. The Company reimburses such advances upon collection of funds from borrowers for mortgage loans serviced or upon liquidation of real estate acquired in settlement of loans.

Amounts receivable from and payable to PMT are summarized below for the dates presented:

Certain of the underwriting costs incurred in PMT's initial public offering were paid on PMT's behalf by the Company. Reimbursement to the Company is contingent on PMT's performance as follows: PMT will reimburse the Company if, during any full four calendar quarter period during the 24 full calendar quarters after the date of the completion of its initial public offering, August 4, 2009, PMT's "core earnings" for such four quarter period and before the incentive portion of the Company's management fee equals or exceeds an 8% incentive fee "hurdle rate." If this requirement is not satisfied by the end of such 24 calendar quarter period, PMT's obligation to reimburse the Company and make the conditional payment of the underwriting discount will terminate. Management has concluded that this contingency is probable of being met during the 24-quarter period and has recognized a receivable for reimbursement of the payment made on behalf of PMT.

In accordance with the servicing agreements between the Company and PMT, certain monies are advanced to the Company by PMT to fund servicing advances made by PLS relating to loans serviced by PLS on PMT's behalf. The Company reimburses such advances upon collection of funds from borrowers for mortgage loans serviced or upon liquidation of real estate acquired in settlement of loans.

Expenses allocated to PMT during the nine months ended September 30, 2012 and 2011 are detailed below:

The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest as of September 30, 2012 and 2011. The shares had fair values of $1,753,000 and $1,193,000 as of September 30, 2012 and 2011, respectively.

In connection with PMT's correspondent lending business, PLS also provides certain mortgage banking services, including fulfillment and disposition-related services, to PMT for a fulfillment fee based on a percentage of the unpaid principal balance of the mortgage loans. The fulfillment fee for such services is currently 50 basis points. The Company transfers the interest income and pays a sourcing fee of three basis points for each mortgage loan it buys from PMT for ultimate disposition to a third-party where the Company is approved or licensed to sell to such third-party and PMT is not. During the nine months ended September 30, 2012 and 2011, the Company received fulfillment fees from PMT totaling approximately $31,097,000 and $358,000, respectively, and paid sourcing fees totaling approximately $1,448,000 and $52,000, respectively, to PMT.

The Company's short-term investments include investments in an institutional liquidity management (money market) fund managed by an affiliate, BlackRock, Inc. Investments in the fund are not insured. The fund invests exclusively in first-tier securities as rated by a nationally recognized statistical rating organization. The fund's investments are comprised primarily of domestic commercial paper, securities issued or guaranteed by the U.S. Government or its agencies, obligations of U.S. banks and foreign banks with U.S. operations, fully collateralized repurchase agreements and variable and floating rate demand notes.

The following is a reconciliation of Net Income Attributable to Common Unit Holders and a table summarizing the basic and diluted earnings per unit calculations for the periods presented:

	Nine months ended September 30,

	2012		2011
	(in thousands, except for unit amounts)
Net income	$	60,449	$	11,480

Earnings per preferred unit:
Net income attributable to preferred units:
Distributed priority return	$	2,905	$	10,443
Undistributed priority return		2,842		—
Undistributed earnings		46,735		921

	$	52,482	$	11,364

Weighted-average preferred units outstanding		96,682		51,256

Earnings per preferred unit	$	542.83	$	221.72

Earnings per common unit:
Net income attributable to common members	$	7,967	$	116
Less: Distributions to common unit awards outstanding		—		0
Undistributed earnings attributable to common unit awards outstanding		5,094		84

Net Income attributable to common units	$	2,873	$	32

Basic earnings per common unit:
Weighted-average common units outstanding		6,153		2,913

Basic earnings per common unit	$	466.97	$	11.05

Net income attributable to common units	$	2,873	$	32

Weighted-average common units outstanding		6,153		2,913
Dilutive potential common units—units issuable under unit-based compensation plans		8,780		6,084

Diluted common units outstanding		14,933		8,997

Diluted earnings per common unit	$	192.41	$	3.58

The Company's mortgage servicing portfolio is summarized as follows at period end:

	September 30, 2012

	Servicing rights owned		Subserviced for affiliates		Total loans serviced
	(in thousands)
Affiliated entities	$	—	$	10,404,861	$	10,404,861
Agencies		6,444,618		—		6,444,618
Private investors		1,373,758		—		1,373,758
Mortgage loans held for sale		376,717		—		376,717

	$	8,195,093	$	10,404,861	$	18,599,954

Amount subserviced for the Company	$	48,874	$	441,474	$	490,348

Delinquent mortgage loans:
30 days 30 days	$	169,968	$	178,109	$	348,077
60 days 60 days		59,504		109,609		169,113
90 days or more 90 days or more		105,153		672,496		777,649

		334,625		960,214		1,294,839
Loans pending foreclosure		71,709		1,358,665		1,430,374

	$	406,334	$	2,318,879	$	2,725,213

Custodial funds managed by the Company	$	192,693	$	95,959	$	288,652

	December 31, 2011

	Servicing rights owned		Subserviced for affiliates		Total loans serviced
	(in thousands)
Affiliated entities	$	—	$	3,533,529	$	3,533,529
Agencies		2,547,679		—		2,547,679
Private investors		1,571,016		—		1,571,016
Mortgage loans held for sale		84,384		—		84,384

	$	4,203,079	$	3,533,529	$	7,736,608

Amount subserviced for the Company	$	95,243	$	350,631	$	445,874

Delinquent mortgage loans:
30 days	$	132,035	$	135,688	$	267,723
60 days		60,241		105,256		165,497
90 days		88,407		707,753		796,160

		280,683		948,697		1,229,380
Loans pending foreclosure		99,859		1,405,133		1,504,992

	$	380,542	$	2,353,830	$	2,734,372

Custodial funds managed by the Company	$	74,912	$	2,403	$	77,315

Following is a summary of the geographical distribution of loans included in the Company's servicing portfolio (including loans subserviced for affiliates) for the top five states as measured by the total unpaid principal balance as of the dates presented:

Certain of the loans serviced by the Company are subserviced on the Company's behalf by other mortgage loan servicers. Loans are subserviced for the Company when the loans are secured by properties in states where the Company does not have a license to service the loan, or on a transitional basis for loans where the Company has obtained the rights to service the loans but servicing of the loans has not yet transferred to the Company's servicing system.

Borrower and investor custodial cash accounts relate to loans serviced under servicing agreements and are not recorded on the Company's balance sheet. The Company earns interest on custodial funds

it manages on behalf of the loans' investors, which is recorded as part of Interest income in the Company's Consolidated Statements of Income.

Management identified all of its non-cash financial assets, its MSRs relating to loans with initial interest rates of more than 4.5%, and its loans sold under agreements to repurchase on the consolidated balance sheet, to be accounted for at estimated fair value so such changes in fair value will be reflected in results of operations as they occur and more timely reflect the results of the Company's performance. The Company's financial assets subject to this election include the short-term investment and mortgage loans held for sale. Management has a identified MSRs relating to loans with initial interest rates of more than 4.5%, to be accounted for at estimated fair value so such changes in fair value will also be reflected in results of operations.

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

	September 30, 2012

	Total			Netting			Level 1		Level 2		Level 3
	(in thousands)
Assets:
Short-term investment	$	3,416			—		$	3,416	$	—	$	—
Mortgage loans held for sale at fair value		410,071			—			—		410,071		—
Investment in PMT		1,753			—			1,753		—		—
Mortgage servicing rights, at fair value		21,240			—			—		—		21,240
Derivative assets					—			—		—		—
Interest rate lock commitments		33,433			—			—		—		33,433
MBS forward purchase contracts		12,527			—			—		12,527		—
MBS forward sales contracts		1,038			—			—		1,038		—
MBS option purchase contracts		355			—			—		355		—
Total derivative assets before netting adjustment		47,353			—			—		13,920		33,433

Netting(1)		(7,560	)		(7,560	)		—		—		—
Total derivative assets		39,793			(7,560	)		—		13,920		33,433

	$	476,273		$	(7,560	)	$	5,169	$	423,991	$	54,673

Liabilities:
Derivative Liabilities
MBS forward purchase contracts	$	281		$	—		$	—	$	281	$	—
MBS forward sales contracts		38,749			—			—		38,749		—
Total derivative liabilities before netting adjustment		39,030			—			—		39,030		—

Netting(1)		(35,674	)		(35,674	)		—		—		—

Total derivative liabilities	$	3,356		$	(35,674	)	$	—	$	39,030	$	—

As shown above, mortgage servicing rights at fair value and loans sold under agreements to repurchase at fair value and interest rate lock commitments are measured using Level 3 inputs. Following is a roll forward of these items for the nine month periods ended September 30, 2012 and 2011 where Level 3 inputs were used on a recurring basis:

	Nine months ended September 30, 2012

	Mortgage servicing rights			Interest rate lock commitments			Total
	(in thousands)
Assets:
Balance, December 31, 2011	$	25,698		$	7,905		$	33,603
Interest rate lock commitments issued, net		—			63,652			63,652
Servicing received as proceeds from sales of mortgage loans		773			—			773
Changes in fair value included in income		(5,231	)		—			(5,231	)
Transfers to mortgage loans acquired for sale		—			(38,124	)		(38,124	)

Balance, September 30, 2012	$	21,240		$	33,433		$	54,673

Changes in fair value recognized during the period relating to assets still held at September 30, 2012	$	(5,231	)	$	33,433

Accumulated changes in fair value relating to assets still held at September 30, 2012				$	33,433

	Nine months ended September 30, 2011

	Mortgage servicing rights			Interest rate lock commitments			Total
	(in thousands)
Assets:
Balance, December 31, 2011	$	31,957		$	(13	)	$	31,944
Purchases		1,352			—			1,352
Interest rate lock commitments issued, net		—			5,283			5,283
Servicing received as proceeds from sales of mortgage loans		2,951			—			2,951
Changes in fair value included in income		(6,400	)		—			(6,400	)
Transfers to mortgage loans acquired for sale		—			(3,941	)		(3,941	)

Balance, September 30, 2012	$	29,860		$	1,329		$	31,189

Changes in fair value recognized during the period relating to assets still held at September 30, 2012	$	(6,400	)	$	1,329

Accumulated changes in fair value relating to assets still held at September 30, 2012				$	1,329

Gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value pursuant to the fair value option are summarized below:

	Changes in fair value included in current period income

	Nine month period ended September 30,
	2012								2011
	Change in fair value of mortgage loans held for sale at fair value		Net servicing income			Total			Change in fair value of mortgage loans held for sale at fair value		Net servicing income			Total
	(in thousands)
Assets:
Short-term investments	$	—	$	—		$	—		$	—	$	—		$	—
Mortgage loans acquired for sale at fair value		68,487		—			68,487			3,895		—			3,895
Mortgage servicing rights at fair value		—		(5,231	)		(5,231	)		—		(6,400	)		(6,400	)

	$	68,487		(5,231	)		63,256		$	3,895	$	(6,400	)	$	(2,505	)

Liabilities:
Loans sold under agreements to repurchase at fair value									$	—	$	—		$	—

									$	—	$	—		$	—

Following are the fair value and related principal amounts due upon maturity of assets and liabilities accounted for under the fair value option as of September 30, 2012:

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

The following table summarizes the total gains (losses) on assets measured at estimated fair values on a nonrecurring basis for the periods indicated:

The Company evaluates its MSRs at lower of amortized cost or fair value for impairment with reference to the assets' fair value. For purposes of performing its MSR impairment evaluation, the Company stratifies its MSRs at lower of amortized cost or fair value based on the interest rates borne by the mortgage loans underlying the MSRs. Mortgage loans are grouped into note rate pools of 50 basis points for fixed-rate mortgage loans with note rates between 3% and 4.5% and a single pool for mortgage loans with note rates below 3%. MSRs relating to adjustable rate mortgage loans with initial interest rates of 4.5% or less are evaluated in a single pool. If the fair value of MSRs in any of the

note rate pools is below the carrying value of the MSRs for that pool reduced by any existing valuation allowance, those MSRs are impaired.

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

The Company's mortgage loans acquired for sale at fair value, are saleable into active markets and are therefore categorized as "Level 2" fair value financial statement items and their fair values are estimated using their quoted market or contracted price or market price equivalent. Changes in fair value attributable to changes in instrument-specific credit risk are measured by the change in the respective loan's delinquency status at period-end from the later of the beginning of the period or acquisition date.

Following is a quantitative summary of key unobservable inputs used in the valuation of interest rate lock commitments:

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

Key assumptions used in determining the fair value of MSRs at the time of initial recognition are as follows:

	September 30, 2012		December 31, 2011

	Range (Weighted average)
Key Inputs	Fair value	Amortized cost	Fair value	Amortized cost
	(dollar amounts in thousands)
Discount rate	15.0%-15.0% (15.0%)	—	19.0%-19.0% (19.0%)	—
Effect on value of 5% adverse change	($293)	—	($375)	—
Effect on value of 10% adverse change	($575)	—	($733)	—
Effect on value of 20% adverse change	($1,106)	—	($1,400)	—
Average life (in years)	4.5		4.9
Prepayment speed(1)	11.4%-11.4% (11.4%)	—	10.2%-10.2% (10.2%)	—
Effect on value of 5% adverse change	($398)	—	($244)	—
Effect on value of 10% adverse change	($685)	—	($469)	—
Effect on value of 20% adverse change	($1,235)	—	($927)	—
Cost of servicing	$133-$133 ($133)	—	$136-$136 ($136)	—
Effect on value of 5% adverse change	($123)	—	($132)	—
Effect on value of 10% adverse change	($247)	—	($264)	—
Effect on value of 20% adverse change	($495)	—	($527)	—

	September 30, 2012		December 31, 2011

	Range (Weighted average)
Key Inputs	Fair value	Amortized cost	Fair value	Amortized cost
	(dollar amounts in thousands)
Pricing spread(1)	7.5%-19.5% (10.7%)	7.5%-16.5% (9.8%)	7.5%-19.5% (10.4%)	7.5%-17.0% (9.8%)
Effect on value of 5% adverse change	($136)	($1,146)	($168)	($146)
Effect on value of 10% adverse change	($267)	($2,249)	($332)	($287)
Effect on value of 20% adverse change	($509)	($4,045)	($643)	($553)
Average life (in years)	4.8	6.6	4.7	6.2
Prepayment speed(2)	9.0%-84.1% (20.1%)	8.4%-23.5% (9.2%)	8.1%-75.7% (17.7%)	6.7%-21.2% (9.1%)
Effect on value of 5% adverse change	($257)	($1,016)	($307)	($116)
Effect on value of 10% adverse change	($499)	($1,999)	($598)	($228)
Effect on value of 20% adverse change	($945)	($3,871)	($1,137)	($442)
Cost of servicing	$68-$140 ($77)	$68-$140 ($99)	$68-$140 ($76)	$68-$140 ($94)
Effect on value of 5% adverse change	($83)	($584)	($100)	($70)
Effect on value of 10% adverse change	($165)	($1,167)	($200)	($139)
Effect on value of 20% adverse change	($329)	($2,334)	($323)	($266)

Cash is measured using Level 1 Inputs. The Company's borrowings carried at amortized cost do not have active markets or observable inputs and the fair value is measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as Level 3 as of September 30, 2012 due to the lack of current market activity and the Company's reliance on unobservable inputs to estimate the fair value.

At September 30, 2012, the Company had pledged $408,415,000 in fair value of mortgage loans held for sale to secure loans sold under agreements to repurchase.

The activity in MSRs carried at amortized cost is summarized below for the periods presented:

	Nine months ended September 30,

	2012			2011
	(in thousands)
Mortgage Servicing Rights:
Balance at beginning of year	$	6,496		$	—
Additions		50,234			—
Amortization		(1,962	)		—
Application of valuation allowance to write down MSRs with other-than temporary impairment		—			—

Balance before valuation allowance at end of period	$	54,768			—

Valuation Allowance for Impairment of Mortgage Servicing Rights:
Balance at beginning of year	$	(70	)	$	—
Additions (reductions)		(1,784	)		—
Application of valuation allowance to write down MSRs with other-than temporary impairment		—			—

Balance at end of period		(1,854	)		—

Mortgage Servicing Rights, net	$	52,914			—

Estimated Fair Value of MSRs at end of period	$	53,419		$	—

The following table summarizes the Company's estimate of amortization of its existing MSRs. This projection was developed using the assumptions made by management in its September 30, 2012 valuation of MSRs. The assumptions underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time. Therefore, the following estimates will change in a manner and amount not presently determinable by management.

The amount of the carried interest received by the Company depends on the Investment Funds' future performance. As a result, the amount of carried interest recorded by the Company at period end is subject to adjustment based on future results of the Investment Funds and may be reduced as a result of subsequent performance. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of carried interest will only be reversed to the extent of amounts previously recognized. We expect the carried interest to be collected by The Company when the Investment Funds liquidate.

The investment period for the Investment Funds ended on December 31, 2011. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the limited partnership agreements that govern the Investment Funds.

The Company recorded dividends from its investment in common shares of PennyMac Mortgage Investment Trust totaling $124,000 and $101,000 for the nine month periods ended September 30, 2012 and 2011, respectively. The dividends were included in Other income in the Company's Consolidated Statements of Income.

Depreciation and amortization expense totaled $570,000 and $215,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

Software amortization expense totaled $184,000 and $175,000 for the periods ended September 30, 2012 and 2011, respectively.

The Company maintains four borrowing facilities: three facilities that provide for sales of mortgage loans under agreements to repurchase; and one note payable secured by mortgage servicing rights and servicing advances made on loans in the Company's loan servicing portfolio.

The borrowing facilities secured by mortgage loans held for sale are in the form of loan sale and repurchase agreements. The agreements provide for sales under agreements to repurchase loans eligible for sale under the agreements up to an aggregate combined capacity of $450,000,000. Eligible loans are sold under advance rates based on the loan type. Interest is charged at a rate based on the buyer's overnight cost-of-funds rate for one agreement and based on the London Interbank Offered Rate for the other agreement. Loans sold under these agreements may be re-pledged by the lenders.

Financial data pertaining to loans sold under agreements to repurchase were as follows:

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to the Company's mortgage loans

acquired for sale sold under agreements to repurchase is summarized by counterparty below as of September 30, 2012:

The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the value (as determined by the applicable lender) of the mortgage loans securing those agreements decreases. As of September 30, 2012, the Company had $1.7 million on deposit with its loan repurchase agreement counterparties. Margin deposits are included in Other assets in the Consolidated Balance Sheets.

The note payable matures on March 26, 2013. Interest is charged at a rate based on the lender's overnight cost of funds. The note payable secured by servicing advances and MSRs relating to certain loans in the Company's servicing portfolio provide for advance rates ranging from 50% to 85% of the amount of the servicing advances or the carrying value of the MSR pledged, up to a maximum of $17,000 in the case of the note payable secured by servicing advances and $100,000 in the case of the note payable secured by mortgage servicing rights.

In the event of a breach of its representations and warranties, the Company may be required to either repurchase the mortgage loans with the identified defects or indemnify the investor or insurer. In such cases, the Company bears any subsequent credit loss on the mortgage loans. The Company's representations and warranties are generally not subject to stated limits of exposure. The Company's credit loss may be reduced by any recourse it has to correspondent lenders that, in turn, had sold such mortgage loans PMT, and breached similar or other representations and warranties. PMT subsequently sold such loans to the Company without providing its own representations and warranties to PNMAC. In such event, the Company has the right to seek a recovery of related repurchase losses from that originator.

The Company records a provision for losses relating to such representations and warranties as part of its loan sale transactions. The method used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, estimated future defaults and loan repurchase rates and the potential severity of loss in the event of defaults and the probability of reimbursement by the correspondent loan seller. The Company continually updates its liability estimate.

Following is a summary of the Company's liability for representations and warranties for the periods presented:

Following is a summary of the repurchase activity at and for the periods presented:

The Company had the following derivative financial instruments recorded as of the dates presented:

	September 30, 2012								December 31, 2011

			Fair value
Instrument	Notional amount		Derivative assets			Derivative liabilities			Notional amount		Fair value
	(in thousands)
Derivatives not designated as hedging instruments
Free-standing derivatives (economic) hedges:
Interest rate lock commitments	$	1,470,590	$	33,433		$	—		$	325,091	$	7,905
MBS forward purchase contracts	$	901,200		12,527			281		$	130,900		2
MBS forward sales contracts	$	2,511,188		1,038			38,749		$	510,569		(2,531	)
MBS option purchase contracts	$	335,000		355			—		$	32,000		84

Total derivatives before netting				47,353			39,030					5,460
Netting(1)				(7,560	)		(35,674	)				—

Total			$	39,793		$	3,356				$	5,460

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

The Company recorded net gains or (loss) on derivative financial instruments totaling $(324,000) and $1,038,000 for the nine month periods ending September 30, 2012 and 2011, respectively. Derivative gains and losses are included in Change in fair value of mortgage loans held for sale at fair value in the Company's consolidated statements of income.

Only the preferred units have voting rights. Each preferred unit entitles the holder to one vote per preferred unit on any matters to be decided by a vote of the members. No other member and no other class of units have voting rights. Preferred unit holders are entitled to a preferred return of 8% per year on their capital contributions. In the event of liquidation, preferred unit holders are entitled to their accumulated unpaid return plus return of the face amount of their contributions before any distributions are made to any other class of unit holders, including common unit holders.

Note 19—Change in Fair Value of Mortgage Loans Held for Sale at Fair Value

Change in fair value of mortgage loans held for sale is summarized below for the years presented:

	Nine months ended September 30,

	2012			2011
	(in thousands)
Cash gain (loss) on sale:
Loan proceeds	$	49,695		$	4,536
Hedging activities		(40,276	)		(2,998	)

		9,419			1,538

Non-cash changes in fair value:
Mortgage servicing rights received as proceeds on sale		51,006			3,193
Provision for representations and warranties on loans sold		(1,856	)		(124	)
Change in fair value of commitments to fund mortgage loans		25,527			1,099
Change in fair value relating to loans and hedging instruments acquired for sale at year-end:
Loans		8,637			577
Hedging activities		(24,246	)		(2,388	)

Total non-cash changes in fair value relating to loans and hedging instruments held at year-end		(15,609	)		(1,811	)

Total non-cash changes in fair value		59,068			2,357

	$	68,487		$	3,895

The awards contain certain repurchase provisions which could result in an award being settled in cash at the option of the Company, in the event of certain types of termination scenarios. The Company established a policy that settlement will not occur until the point in time where the unit holder has borne sufficient risks and rewards of equity ownership, assumed as six months and one day post vesting.

The table below summarizes common unit activity and compensation expense under the common unit incentive plan for the years presented:

	As of and for the nine months ended September 30,

	2012			2011
	(dollar amounts in thousands except for per unit data)
Number of units:
Outstanding at beginning of period		12,174			9,588
Granted		324			6,933
Vested		(5,350	)		(3,849	)
Canceled		—			(498	)

Outstanding at end of period		7,148			12,174

Weighted Average Grant Date Fair Value:
Outstanding at beginning of period	$	393		$	393
Granted		—			—
Vested		416			408
Expired or canceled		—			447

Outstanding at end of period	$	398		$	398

Units available for future awards		—			311
Units vested and expected to vest
Compensation expense recorded during the period	$	966		$	1,019
Unamortized costs at period end	$	357		$	1,080

As of September 30, 2012, the weighted-average remaining vesting term of unvested units was approximately 4 months.

The Company issued Class C units initially during November 2011 and periodically during 2012 as awards to employees of the Company's correspondent lending group. The Class C units are subject to

the participation preferences and other rights of the preferred units and common units as described above. No Class C units have vested, cancelled or forfeited as of September 30, 2012.

The Company is recording expense relating to the grant date fair values of the Class C units awarded over the vesting periods. The Class C units vest over four years from their award dates as follows: 12.5%, 12.5%, 25% and 50%, respectively. During the nine months ended September 30, 2012 $288,000 was recognized as compensation expense related to the Class C unit awards. The fair value of unvested Class C unit awards at September 30, 2012 was $994,000. The unamortized compensation cost related to the Class C unit awards at September 30, 2012 was $706,000.

The following is the activity for the Class C Units during the period from January 1 to September 30, 2012:

	Number of Awards

Units outstanding as of December 31, 2011		2,932
Units awarded, nine months ended September 30, 2012		495

Units outstanding as of September 30, 2012		3,427

Weighted Average Grant Date Fair Value:
Outstanding at beginning of year	$	196
Granted	$	805
Vested		—
Expired or canceled		—

Outstanding at end of year	$	288

Units available for future awards		901
Compensation expense recorded during the period	$	288,000
Unamortized costs at period end	$	706,000

The Company has 2011 Incentive Plan Common Unit awards (2011 unit awards) where the terms and conditions were communicated to employees and key members of management of the Company during 2012. The 2011 unit awards are subject to the participation preferences and other rights of the Preferred Units and Common Units as described in note 4 along with performance metrics established for the 2012 vesting period in accordance with the 2011 Incentive Plan agreement. The service period for these awards precedes the Grant date which is expected to be established on January 1, 2013. At each reporting period, the Partnership assesses the probability of the likelihood that the performance metrics will be achieved and the 2011 unit awards will become eligible to vest. These performance metrics became probable of being achieved during 2012 and the Company is recording expense relating to the estimated fair values of the unit awards over the service period. During the nine months ended September 30, 2012, $12,115,000 was recognized as compensation expense related to the 2011 unit awards. The fair value of unvested 2011 unit awards at September 30, 2012 was $16,154,000. The unamortized compensation expense related to the 2011 unit awards at September 30, 2012 was $4,038,000.

The following is the activity for the 2011 unit awards during the period from January 1 to September 30, 2012:

	Estimated number of awards

As of December 31, 2011		—
Estimated number of Unit Awards		3,545

As of September 30, 2012		3,545

Weighted Average Service Period Fair Value:
Outstanding at beginning of year	$	—
Estimated number of Unit Awards	$	4,557
Vested		—
Expired or canceled		—

Outstanding at end of year	$	4,557

Units available for future awards		2,525
Compensation expense recorded during the period	$	12,115,000
Unamortized costs at period end	$	4,038,000

The Class C Unit and Common Unit awards contain certain repurchase provisions which could result in an award being settled in cash at the option of the Company alone, in the event of certain types of termination scenarios. The Company established a policy that settlement will not occur until the point in time where the unit holder has borne sufficient risks and rewards of equity ownership, assumed as six months and one day post vesting.

The valuation of Stock Based Compensation Awards during 2011 and 2012 was estimated using a combination of the income and market approaches to estimate the fair value of the Company, and the options pricing model to estimate the fair value of the Unit awards. Under this approach, the Company's various classes of units' are valued as call options based on their respective claims on the assets of the Company. The characteristics of the unit classes, as determined by the Company's limited liability company agreement, determine respective units' claims on the Company's assets relative to each other and the other components of the Company's capital structure. Periodic valuations are performed in order to properly recognize equity-based compensation expense.

The valuations of our Stock based compensation awards was developed using the income approach, specifically a discounted cash flow analysis, and the market approach to determine the value of the Company. The discounted cash flow analysis was developed based on our forecasts. The market approach was developed by applying market multiples of comparable peer companies in our industry or similar lines of business. The values determined by the income and the market approach were combined by weighting the income and market approaches equally. The primary assumptions used in the determination of the fair value of the Company using the discounted cash flow method were the discount rate, terminal capitalization rate, and growth rate assumptions.

The aggregate value was then allocated to each class of units utilizing the options pricing model using the following assumptions:

The value derived from the options pricing model was reduced by the following in the determination of fair values of the awards at each of the following dates:

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

Management believes that the Company had Agency capital in excess of these requirements at September 30, 2012.

The Company leases its primary office facilities under an agreement that expires on February 28, 2017. The Company also licenses certain software to support its loan servicing operations. Commitments for payments under these agreements are summarized below:

During 2011, the Company entered into a leasing arrangement to relocate its corporate offices. As a result of that agreement, PNMAC subleased its existing facilities and included a loss relating to the sublease of $1,155,000 in occupancy expense for the nine months ended September 30, 2011. Office lease expense (including the provision for losses on the sublease rents and sublease income) totaled $1,201,000 and $2,366,000 for the nine months ended September 30, 2012 and 2011, respectively.

As of September 30, 2012, the Internal Revenue Service was conducting an examination of the Company's federal income tax filings for the year ended December 31, 2010. No other federal or state examination was in progress as of September 30, 2012.

The business of the Company involves the collection of numerous accounts as well as the validity of liens and compliance with various state and federal lending and servicing laws; as such the Company is subject to various legal proceedings in the normal course of business. As of September 30, 2012, there were no material current or pending claims against the Company.

The Company has two business segments: mortgage banking and investment management.

The investment management segment represents the activities of the Company's investment manager, which include sourcing, performing diligence, bidding and completion of asset acquisitions and managing the acquired assets for the Investment Funds and PMT.

The mortgage banking segment represents the Company's operations aimed at servicing mortgage loans managed by the investment management segment, including executing the loan resolution strategy identified by the investment management segment, and originating, purchasing, selling and servicing newly originated mortgage loans.

Financial highlights by operating segment for the nine months ended September 30, 2012 and 2011 are as follows:

Nine months ended September 30, 2012	Investment management		Mortgage banking		Total

	(in thousands)
Revenues:
External
Net servicing income	$	—	$	25,346	$	25,346
Gain on mortgage loans held for sale		—		68,487		68,487
Fulfillment fees from PMT		—		31,097		31,097
Management fees		17,046		—		17,046
Carried Interest from Investment Funds		7,255		—		7,255
Interest		3		2,036		2,039
Other income		506		5,564		6,070
Intersegment		—		—		—

		24,810		132,530		157,340

Expenses:
Interest		—		4,227		4,227
Other		7,069		73,243		80,312

		7,069		77,470		84,539

Net income	$	17,741	$	55,060	$	72,801

Segment assets at period end	$	60,883	$	641,816	$	702,699

Nine months ended September 30, 2011	Investment management			Mortgage banking			Total

	(in thousands)
Revenues:
External
Net servicing income	$	—		$	22,910		$	22,910
Gain on mortgage loans held for sale		—			3,895			3,895
Fulfillment fees from PMT		—			358			358
Management fees		14,500			—			14,500
Carried Interest from Investment Funds		10,348			—			10,348
Interest		3			581			584
Other		(169	)		563			394
Intersegment		—			—			—

		24,682			28,307			52,989

Expenses:
Interest		—			806			806
Other		6,078			34,625			40,703

		6,078			35,431			41,509

Net income (loss)	$	18,604		$	(7,124	)	$	11,480

Segment assets at period end	$	44,417		$	167,900		$	212,317

The accounting policies of the reportable segments are the same as those described in Note 3—Significant Accounting Policies.

Management has evaluated all events or transactions through February 7, 2013, the date the Company issued these financial statements. During this period:

The Company made tax distributions of $4.5 million and $9.4 million to our unit holders in December 2012 and January 2013, respectively.

18-month periods, unless terminated earlier in accordance with the terms of the respective agreements. The Reimbursement Agreement expires on February 1, 2019.

Until , 2013 (25 days after the date of this prospectus), all dealers that effect buy, sell or trade shares of our Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.

The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered (excluding the underwriting discount). Except for the Securities and Exchange Commission registration fee and the Financial Industry Regulatory Authority, or FINRA, filing fee, all amounts are estimates.

As permitted by Delaware law, our certificate of incorporation, which will be amended and restated and in effect upon the completion of the offering, provides that, to the fullest extent permitted by Delaware law, no director will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Pursuant to Delaware law such protection would be not available for liability:

Our bylaws, which will be amended and restated and in effect upon the completion of the offering, further provide that we must indemnify our directors and officers to the fullest extent permitted by Delaware law. The amended and restated bylaws also authorize us to indemnify any of our employees or agents and permit us to secure insurance on behalf of any officer, director, employee or agent for

any liability arising out of his or her action in that capacity, whether or not Delaware law would otherwise permit indemnification.

In addition, our amended and restated bylaws provide that we are required to advance expenses to our directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in the amended and restated bylaws are not exclusive.

At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

		Description

1.1	*	Form of Underwriting Agreement
3.1	*	Form of Amended and Restated Certificate of Incorporation of the Registrant
3.2	*	Form of Amended and Restated Bylaws of the Registrant
4.1	*	Specimen Class A Common Stock Certificate
5.1	*	Opinion of Bingham McCutchen LLP
10.1	*	Form of Fourth Amended and Restated Limited Liability Company Agreement of Private National Mortgage Acceptance Company, LLC
10.2	*	Form of Tax Receivable Agreement
10.3	*	Form of Exchange Agreement
10.4	*	Form of Registration Rights Agreement
10.5	*†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (the "2013 Plan")
10.6	*†	Form of Stock Option Agreement under the 2013 Plan
10.7	*†	Form of Restricted Stock Agreement under the 2013 Plan
10.8	*†	Form of Director Indemnification Agreement
10.9		Mortgage Banking and Warehouse Services Agreement, by and between PennyMac Loan Services, LLC and PennyMac Corp., effective as of February 1, 2013
10.10		Amended and Restated Flow Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013

		Description

10.11		MSR Recapture Agreement, by and between PennyMac Loan Services, LLC and PennyMac Corp., effective as of February 1, 2013
10.12		Amended and Restated Management Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of February 1, 2013
10.13		Amended and Restated Underwriting Fee Reimbursement Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of February 1, 2013
10.14	*	Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Co., LLC and PennyMac Loan Services, LLC, dated August 1, 2010
10.15		Second Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Opportunity Fund Investors, LLC and PennyMac Loan Services, LLC, dated August 1, 2008, as amended effective as of January 1, 2012
10.16		Investment Management Agreement, by and between PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Capital Management, LLC, as amended and restated May 26, 2011
10.17		Investment Management Agreement between PNMAC Mortgage Opportunity Fund Investors, LLC and PNMAC Capital Management, LLC dated August 1, 2008
10.18		Master Repurchase Agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.19		Amendment No. 1 to Master Repurchase Agreement, dated as of July 21, 2011, Amendment No. 2 to Master Repurchase Agreement, dated as of March 23, 2012, Amendment No. 3 to Master Repurchase Agreement, dated as of August 28, 2012 and Amendment No. 4 to Master Repurchase Agreement, dated as of January 3, 2013, in each case, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.20		Master Repurchase Agreement, dated as of June 26, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A.
10.21		Amendment Number One to the Master Repurchase Agreement, dated as of December 31, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A.
10.22		Second Amended and Restated Loan and Security Agreement, dated as of March 27, 2012, between Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.23		Amendment No. 1 to Second Amended and Restated Loan Security Agreement, dated as of December 12, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.24	‡	Master Repurchase Agreement, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC, dated as of August 14, 2009

		Description

10.25	‡	Amendment No. 1 to Master Repurchase Agreement, dated as of November 20, 2009, Amendment No. 2 to Master Repurchase Agreement, dated as of May 6, 2010, Amendment No. 3 to Master Repurchase Agreement, dated as of July 14, 2010, Amendment No. 4 to Master Repurchase Agreement, dated as of August 10, 2010, Amendment No. 5 to Master Repurchase Agreement, dated as of August 10, 2011, Amendment No. 6 to Master Repurchase Agreement, dated as of November 1, 2011, Amendment No. 7 to Master Repurchase Agreement, dated as of November 30, 2011, Amendment No. 8 to Master Repurchase Agreement, dated as of February 2, 2012, Amendment No. 9 to Master Repurchase Agreement, dated as of March 6, 2012, Amendment No. 10 to Master Repurchase Agreement, dated as of August 6, 2012, Amendment No. 11 to Master Repurchase Agreement, dated as of September 10, 2012, Amendment No. 12 to Master Repurchase Agreement, dated as of September 18, 2012, Amendment No. 13 to Master Repurchase Agreement, dated as of September 21, 2012 and Amendment No. 14 to Master Repurchase Agreement, dated as of December 12, 2012, in each case, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.26		Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013
10.27	*	Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Opportunity Fund, LP and PennyMac Loan Services, LLC, dated as of August 1, 2010
10.28		Confidentiality Agreement, by and between PennyMac Mortgage Investment Trust and PNMAC Capital Management, LLC, dated as of February 6, 2013
14.1	*	Code of Business Conduct and Ethics
21.1	*	Subsidiaries of the Registrant
23.1	*	Consent of Bingham McCutchen LLP (included in Exhibit 5.1)
23.2		Consent of Deloitte & Touche LLP
24.1		Power of Attorney (on signature page)

All schedules have been omitted because they are not required or because the required information is given in the financial statements or notes to those statements.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director,

officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Moorpark, State of California, on February 7, 2013.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stanford L. Kurland and Jeffrey P. Grogin his true and lawful attorney-in-fact and agent with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

		Description

1.1	*	Form of Underwriting Agreement
3.1	*	Form of Amended and Restated Certificate of Incorporation of the Registrant
3.2	*	Form of Amended and Restated Bylaws of the Registrant
4.1	*	Specimen Class A Common Stock Certificate
5.1	*	Opinion of Bingham McCutchen LLP
10.1	*	Form of Fourth Amended and Restated Limited Liability Company Agreement of Private National Mortgage Acceptance Company, LLC
10.2	*	Form of Tax Receivable Agreement
10.3	*	Form of Exchange Agreement
10.4	*	Form of Registration Rights Agreement
10.5	*†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (the "2013 Plan")
10.6	*†	Form of Stock Option Agreement under the 2013 Plan
10.7	*†	Form of Restricted Stock Agreement under the 2013 Plan
10.8	*†	Form of Director Indemnification Agreement
10.9		Mortgage Banking and Warehouse Services Agreement, by and between PennyMac Loan Services, LLC and PennyMac Corp., effective as of February 1, 2013
10.10		Amended and Restated Flow Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013
10.11		MSR Recapture Agreement, by and between PennyMac Loan Services, LLC and PennyMac Corp., effective as of February 1, 2013
10.12		Amended and Restated Management Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of February 1, 2013
10.13		Amended and Restated Underwriting Fee Reimbursement Agreement, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, dated as of February 1, 2013
10.14	*	Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Co., LLC and PennyMac Loan Services, LLC, dated August 1, 2010
10.15		Second Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Opportunity Fund Investors, LLC and PennyMac Loan Services, LLC, dated August 1, 2008, as amended effective as of January 1, 2012
10.16		Investment Management Agreement, by and between PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Capital Management, LLC, as amended and restated May 26, 2011
10.17		Investment Management Agreement between PNMAC Mortgage Opportunity Fund Investors, LLC and PNMAC Capital Management, LLC dated August 1, 2008
10.18		Master Repurchase Agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.19		Amendment No. 1 to Master Repurchase Agreement, dated as of July 21, 2011, Amendment No. 2 to Master Repurchase Agreement, dated as of March 23, 2012, Amendment No. 3 to Master Repurchase Agreement, dated as of August 28, 2012 and Amendment No. 4 to Master Repurchase Agreement, dated as of January 3, 2013, in each case, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.20		Master Repurchase Agreement, dated as of June 26, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A.
10.21		Amendment Number One to the Master Repurchase Agreement, dated as of December 31, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A.

		Description

10.22		Second Amended and Restated Loan and Security Agreement, dated as of March 27, 2012, between Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.23		Amendment No. 1 to Second Amended and Restated Loan Security Agreement, dated as of December 12, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.24	‡	Master Repurchase Agreement, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC, dated as of August 14, 2009
10.25	‡	Amendment No. 1 to Master Repurchase Agreement, dated as of November 20, 2009, Amendment No. 2 to Master Repurchase Agreement, dated as of May 6, 2010, Amendment No. 3 to Master Repurchase Agreement, dated as of July 14, 2010, Amendment No. 4 to Master Repurchase Agreement, dated as of August 10, 2010, Amendment No. 5 to Master Repurchase Agreement, dated as of August 10, 2011, Amendment No. 6 to Master Repurchase Agreement, dated as of November 1, 2011, Amendment No. 7 to Master Repurchase Agreement, dated as of November 30, 2011, Amendment No. 8 to Master Repurchase Agreement, dated as of February 2, 2012, Amendment No. 9 to Master Repurchase Agreement, dated as of March 6, 2012, Amendment No. 10 to Master Repurchase Agreement, dated as of August 6, 2012, Amendment No. 11 to Master Repurchase Agreement, dated as of September 10, 2012, Amendment No. 12 to Master Repurchase Agreement, dated as of September 18, 2012, Amendment No. 13 to Master Repurchase Agreement, dated as of September 21, 2012 and Amendment No. 14 to Master Repurchase Agreement, dated as of December 12, 2012, in each case, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC
10.26		Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013
10.27	*	Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Opportunity Fund, LP and PennyMac Loan Services, LLC, dated as of August 1, 2010
10.28		Confidentiality Agreement, by and between PennyMac Mortgage Investment Trust and PNMAC Capital Management, LLC, dated as of February 6, 2013
14.1	*	Code of Business Conduct and Ethics
21.1	*	Subsidiaries of the Registrant
23.1	*	Consent of Bingham McCutchen LLP (included in Exhibit 5.1)
23.2		Consent of Deloitte & Touche LLP
24.1		Power of Attorney (on signature page)


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

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee




Class A Common Stock, $0.0001 par value per share	$287,500,000.00	$39,215.00

	Per Share	Total

Public Offering Price	$	$
Underwriting Discount	$	$
Proceeds to PennyMac Financial Services, Inc. (before expenses)	$	$


Citigroup		BofA Merrill Lynch		Credit Suisse		Goldman, Sachs & Co.


Assumed initial public offering price per share		$
Pro forma net tangible book value per share as of September 30, 2012	$
Increase per share attributable to this offering

Pro forma net tangible book value per share, as adjusted to give effect to this offering

Dilution in pro forma net tangible book value per share to new investors in this offering		$


Delaware (State or Other Jurisdiction of Incorporation or Organization)		6162 (Primary Standard Industrial Classification Code Number)		80-0882793 (I.R.S. Employer Identification Number)


Please send copies of all communications to:
Richard J. Welch Timothy R. Rupp Bingham McCutchen LLP 355 South Grand Avenue, Suite 4400 Los Angeles, CA 90071 (213) 680-6400		Laura Hodges Taylor Bradley C. Weber Goodwin Procter LLP 135 Commonwealth Drive Menlo Park, CA 94025 (650) 752-3100

		Page

Summary		1
Risk Factors		17
Special Note Regarding Forward-Looking Statements		48
Market Data		49
Organizational Structure		50
Use of Proceeds		55
Dividend Policy		56
Capitalization		57
Dilution		58
Unaudited Pro Forma Consolidated Financial Information		60
Selected Historical Consolidated Financial Data		64
Management's Discussion and Analysis of Financial Condition and Results of Operations		67
Industry		102
Business		111
Management		135
Executive and Director Compensation		141
Certain Relationships and Related Party Transactions		151
Principal Stockholders		169
Pricing Sensitivity Analysis		171
Description of Capital Stock		173
Material United States Federal Income Tax Consequences to Non-U.S. Holders of our Class A Common Stock		178
Shares Eligible For Future Sale		183
Underwriting		186
Legal Matters		193
Experts		193
Where You Can Find More Information		193
Index to Consolidated Financial Statements		F-1

	Shares of Class A Common Stock Purchased								Average Price Per Share of Class A Common Stock

	Shares of Class A Common Stock Purchased				Total Consideration
	Number	Percent			Amount	Percent
Existing owners				%	$			%	$
Investors in this offering

Total			100.0	%	$		100.0	%

	Nine months ended September 30,

	2012		2011
Average headcount (including temporary and contract personnel)		620		285

Period-end headcount		834		364

	Payments due by period

Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(in thousands)
Software licenses(1)	$	5,478	$	1,992	$	3,486	$	—	$	—
Office lease		11,538		2,633		5,069		3,836		—
Loans sold under agreements to repurchase		361,478		361,478		—		—		—
Note payable		34,035		34,035		—		—		—

Total	$	412,529	$	400,138	$	8,555	$	3,836	$	—

Counterparty	Amount at risk

	(in thousands)
Citibank, N.A.	$	21,637
Credit Suisse First Boston Mortgage Capital LLC		11,774
Bank of America, N.A.		14,997

Total	$	48,408

Counterparty(1)	Outstanding Indebtedness(2)		Committed Amount

	(in thousands)
Bank of America, N.A.	$	111,143	$	150,000	January 2, 2014
Citibank, N.A.	$	160,161	$	150,000	June 25, 2013
Credit Suisse First Boston Mortgage Capital LLC	$	90,174	$	150,000	September 23, 2013
Credit Suisse AG, New York Branch	$	34,035	$	117,000	March 26, 2013

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	58,478		$	55,847		$	54,609		$	52,273		$	51,170		$	49,374
Change in fair value:
$	$	5,059		$	2,429		$	1,191		$	(1,146	)	$	(2,248	)	$	(4,044	)
%		9.47	%		4.55	%		2.23	%		-2.14	%		-4.21	%		-7.57	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	57,847		$	55,556		$	54,469		$	52,403		$	51,420		$	49,548
Change in fair value:
$	$	4,428		$	2,138		$	1,051		$	(1,016	)	$	(1,999	)	$	(3,870	)
%		8.29	%		4.00	%		1.97	%		-1.90	%		-3.74	%		-7.25	%


PRELIMINARY PROSPECTUS

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	55,752		$	54,585		$	54,002		$	52,835		$	52,252		$	51,085
Change in fair value:
$	$	2,334		$	1,167		$	583		$	(583	)	$	(1,167	)	$	(2,334	)
%		4.37	%		2.18	%		1.09	%		-1.09	%		-2.18	%		-4.37	%

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	8,704		$	8,400		$	8,255		$	7,979		$	7,848		$	7,606
Change in fair value:
$	$	589		$	285		$	140		$	(136	)	$	(267	)	$	(509	)
%		7.26	%		3.51	%		1.73	%		-1.67	%		-3.29	%		-6.27	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	9,307		$	8,675		$	8,386		$	7,858		$	7,616		$	7,170
Change in fair value:
$	$	1,192		$	560		$	272		$	(256	)	$	(498	)	$	(944	)
%		14.69	%		6.90	%		3.35	%		-3.16	%		-6.14	%		-11.64	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	8,444		$	8,279		$	8,197		$	8,032		$	7,950		$	7,786
Change in fair value:
$	$	329		$	165		$	82		$	(82	)	$	(165	)	$	(329	)
%		4.06	%		2.03	%		1.01	%		-1.01	%		-2.03	%		-4.06	%

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	14,437		$	13,752		$	13,432		$	12,832		$	12,550		$	12,019
Change in fair value:
$	$	1,239		$	610		$	301		$	(293	)	$	(576	)	$	(1,125	)
%		9.99	%		4.77	%		2.34	%		-2.24	%		-4.39	%		-8.43	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	14,364		$	13,736		$	13,427		$	12,832		$	12,550		$	12,001
Change in fair value:
$	$	1,239		$	610		$	301		$	(293	)	$	(576	)	$	(1,125	)
%		9.44	%		4.65	%		2.30	%		-2.23	%		-4.39	%		-8.57	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	13,621		$	13,373		$	13,249		$	13,002		$	12,878		$	12,630
Change in fair value:
$	$	495		$	248		$	124		$	(124	)	$	(248	)	$	(495	)
%		3.77	%		1.89	%		0.94	%		-0.94	%		-1.89	%		-3.77	%

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	6,902		$	7,168		$	7,309		$	7,607		$	7,764		$	8,098
Change in fair value:
$	$	553		$	287		$	146		$	(152	)	$	(309	)	$	(643	)
%		7.42	%		3.85	%		1.96	%		-2.03	%		-4.15	%		-8.63	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	7,013		$	7,227		$	7,339		$	7,575		$	7,699		$	7,958
Change in fair value:
$	$	442		$	228		$	116		$	(120	)	$	(243	)	$	(503	)
%		5.93	%		3.06	%		1.55	%		-1.60	%		-3.26	%		-6.75	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	7,189		$	7,316		$	7,386		$	7,525		$	7,595		$	7,721
Change in fair value:
$	$	266		$	139		$	70		$	(70	)	$	(139	)	$	(266	)
%		3.57	%		1.87	%		0.93	%		-0.93	%		-1.87	%		-3.57	%

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	10,139		$	10,451		$	10,614		$	10,956		$	11,136		$	11,515
Change in fair value:
$	$	643		$	332		$	168		$	(174	)	$	(354	)	$	(733	)
%		5.96	%		3.08	%		1.56	%		-1.61	%		-3.28	%		-6.80	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	9,645		$	10,185		$	10,476		$	11,106		$	11,448		$	12,193
Change in fair value:
$	$	1,137		$	598		$	307		$	(324	)	$	(666	)	$	(1,410	)
%		10.54	%		5.54	%		2.84	%		-3.00	%		-6.17	%		-13.08	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	10,459		$	10,582		$	10,682		$	10,882		$	10,982		$	11,106
Change in fair value:
$	$	323		$	200		$	100		$	(100	)	$	(200	)	$	(323	)
%		3.00	%		1.86	%		0.93	%		-0.93	%		-1.86	%		-3.00	%

Pricing spread rate shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	12,557		$	13,224		$	13,582		$	14,351		$	14,765		$	15,661
Change in fair value:
$	$	1,400		$	733		$	375		$	(394	)	$	(808	)	$	(1,704	)
%		10.03	%		5.25	%		2.69	%		-2.82	%		-5.79	%		-12.21	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	13,030		$	13,488		$	13,713		$	14,200		$	14,442		$	14,939
Change in fair value:
$	$	927		$	469		$	244		$	(243	)	$	(485	)	$	(982	)
%		6.64	%		3.36	%		1.75	%		-1.74	%		-3.48	%		-7.04	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%

	(dollar amounts in thousands)
Fair value	$	13,430		$	13,693		$	13,825		$	14,089		$	14,221		$	14,484
Change in fair value:
$	$	527		$	264		$	132		$	(132	)	$	(264	)	$	(527	)
%		3.78	%		1.89	%		0.94	%		-0.94	%		-1.89	%		-3.78	%


Total Servicing Portfolio Total = $28.2 billion in UPB		Total Servicing Portfolio by Investor Total = $28.2 billion in UPB


Prime Servicing Portfolio by Product Type Total = $23.3 billion in UPB		Special Servicing Portfolio by Product Type Total = $4.8 billion in UPB


Prime Servicing Portfolio by State Total = $23.3 billion in UPB		Special Servicing Portfolio by State Total = $4.8 billion in UPB

Name		Position(s)

Stanford Kurland	60	Chairman of the Board of Directors and Chief Executive Officer
David Spector	49	President and Chief Operating Officer and Director
Steve Bailey	51	Chief Servicing Officer
Andrew Chang	35	Chief Business Development Officer
Vandad Fartaj	38	Chief Capital Markets Officer
Jeffrey Grogin	52	Chief Administrative and Legal Officer and Secretary
Douglas Jones	56	Chief Correspondent Lending Officer
Anne McCallion	58	Chief Financial Officer
David Walker	57	Chief Credit Officer
Matthew Botein	39	Director
Joseph Mazzella	60	Director
Farhad Nanji	34	Director
Mark Wiedman	42	Director

Name & Principal Position

Stanford L. Kurland	2012	950,000	1,500,000	354,257	43,797	2,634,150
Chairman and Chief Executive Officer
David A. Spector	2012	500,000	1,000,000	0	37,272	1,537,272
President and Chief Operating Officer
Douglas Jones	2012	300,000	450,000	0	231,871	981,871
Chief Correspondent Lending Officer