Regulatory Net Worth and Agency Capital Requirements

9 Months Ended

Sep. 30, 2013

Regulatory Net Worth and Agency Capital Requirements

Regulatory Net Worth and Agency Capital Requirements

Note 22—Regulatory Net Worth and Agency Capital Requirements

The Company, through PLS, is required to maintain specified levels of equity to remain a seller/servicer in good standing with 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:

	September 30, 2013				December 31, 2012
Requirement - company subject to requirement	Net worth (1)		Required		Net worth (1)		Required
	(in thousands)
Fannie Mae - PLS	$	273,445	$	54,546	$	172,843	$	35,947
Freddie Mac - PLS	$	273,798	$	53,751	$	173,273	$	27,119
Ginnie Mae:
Issuer — PLS	$	260,032	$	45,625	$	152,782	$	23,886
Issuer’s parent — PennyMac	$	554,841	$	50,188	$	227,560	$	26,275
HUD - PLS	$	260,032	$	195,891	$	152,782	$	1,000

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

Noncompliance with the respective agencies’ capital requirements can result in the respective Agency taking various remedial actions up to and including removing PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency. Management believes that PennyMac and PLS had Agency capital in excess of the respective Agencies’ requirements at September 30, 2013.

- Definition

The entire disclosure for a mortgage banking entity related to capital requirements imposed by secondary market investors or state imposed regulatory mandates. The disclosure may include: (1) a description of the minimum net worth requirements related to (a) secondary market investors and (b) state-imposed regulatory mandates; (2) actual or possible material effects of noncompliance; (3) whether the entity is in compliance with the regulatory capital requirements, including (a) the entity's required and actual net worth amounts, (b) factors that may significantly affect adequacy of net worth such as potentially volatile components of capital, qualitative factors, or regulatory mandates; and (4) possible affects of noncompliance on amounts and disclosures in the notes to the financial statements. Servicers with net worth requirements from multiple sources may disclose (1) significant servicing covenants with secondary market investors with commonly defined servicing requirements (2) any other secondary market investor where violation of the requirement would have a significant adverse effect and (3) the most restrictive third party agreement, if not included above. The disclosure may also include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

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