10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2016

Or

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

For the transition period from           to           

Commission file number: 001-35916

PennyMac Financial Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware	80-0882793
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

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

(818) 224-7442

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer  ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)

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

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

Class	Outstanding at November 7, 2016
Class A Common Stock, $0.0001 par value	22,309,354
Class B Common Stock, $0.0001 par value	49

PENNYMAC FINANCIAL SERVICES, INC.

FORM 10-Q

September 30, 2016

TABLE OF CONTENTS

		Page
	Special Note Regarding Forward-Looking Statements	3
PART I. FINANCIAL INFORMATION		5
Item 1.		5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Changes in Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 4.	Controls and Procedures	86
PART II. OTHER INFORMATION		87
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	88

2

SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”) contains certain forward‑looking statements that are subject to various risks and uncertainties. Forward‑looking statements are generally identifiable by use of forward‑looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions. 

Forward‑looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward‑looking information. Examples of forward‑looking statements include the following:

· projections of our revenues, income, earnings per share, capital structure or other financial items;

· descriptions of our plans or objectives for future operations, products or services;

· forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and

· descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues.

Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward‑looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward‑looking statements. There are a number of factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.

You should not place undue reliance on any forward‑looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Report and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on March 10, 2016.

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

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

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

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

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

· changes to government mortgage modification programs;

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

· foreclosure delays and changes in foreclosure practices;

· certain banking regulations that may limit our business activities;

· our dependence on the multi-family and commercial real estate sectors for future originations and investments in commercial mortgage loans and other commercial real estate related loans;

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

· difficulties inherent in growing loan production volume;

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

· purchase opportunities for mortgage servicing rights (“MSRs”) and our success in winning bids;

· changes in prevailing interest rates;

3

· increases in loan delinquencies and defaults;

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

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

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

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

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

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

· conflicts of interest in allocating our services and investment opportunities among ourselves and certain advised entities;

· the effect of public opinion on our reputation;

· our recent growth;

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

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

· our ability to detect misconduct and fraud; and

· our ability to mitigate cybersecurity risks and cyber incidents.

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

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30,		December 31,
	2016		2015
	(in thousands, except share amounts)
ASSETS
Cash (includes $84,851 and $93,757 pledged to creditors)	$	94,727	$	105,472
Short-term investments at fair value		58,749		46,319
Mortgage loans held for sale at fair value (includes $3,094,617 and $1,079,489 pledged to creditors)		3,127,377		1,101,204
Derivative assets		135,777		50,280
Servicing advances, net (includes valuation allowance of $38,031 and $33,458)		306,150		299,354
Carried Interest due from Investment Funds pledged to creditors		70,870		69,926
Investment in PennyMac Mortgage Investment Trust at fair value		1,169		1,145
Mortgage servicing rights (includes $492,028 and $660,247 at fair value; $1,333,078 and $803,560 pledged to creditors)		1,337,674		1,411,935
Real estate acquired in settlement of loans		1,996		—
Furniture, fixtures, equipment and building improvements, net (includes $22,281 and $14,034 pledged to creditors)		29,121		16,311
Capitalized software, net (includes $444 and $783 pledged to creditors)		8,361		3,025
Note receivable from PennyMac Mortgage Investment Trust		150,000		150,000
Receivable from PennyMac Mortgage Investment Trust		14,747		18,965
Receivable from Investment Funds		1,596		1,316
Deferred tax asset		—		18,378
Mortgage loans eligible for repurchase		197,819		166,070
Other		60,061		45,594
Total assets	$	5,596,194	$	3,505,294
LIABILITIES
Assets sold under agreements to repurchase	$	2,491,366	$	1,166,731
Mortgage loan participation and sale agreement		782,913		234,872
Notes payable		110,619		61,136
Obligations under capital lease		20,700		13,579
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		280,367		412,425
Derivative liabilities		4,426		9,083
Accounts payable and accrued expenses		106,684		89,915
Mortgage servicing liabilities at fair value		13,045		1,399
Payable to Investment Funds		27,265		30,429
Payable to PennyMac Mortgage Investment Trust		165,264		162,379
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		75,434		74,315
Income taxes payable		11,415		—
Liability for mortgage loans eligible for repurchase		197,819		166,070
Liability for losses under representations and warranties		18,473		20,611
Total liabilities		4,305,790		2,442,944
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Class A common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 22,274,145 and 21,990,831 shares, respectively		2		2
Class B common stock—authorized 1,000 shares of $0.0001 par value; issued and outstanding, 49 and 51 shares, respectively		—		—
Additional paid-in capital		179,134		172,354
Retained earnings		141,805		98,470
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders		320,941		270,826
Noncontrolling interest in Private National Mortgage Acceptance Company, LLC		969,463		791,524
Total stockholders' equity		1,290,404		1,062,350
Total liabilities and stockholders’ equity	$	5,596,194	$	3,505,294

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

5

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands, except earnings per share)
Revenue
Net gains on mortgage loans held for sale at fair value:
From non-affiliates	$	183,811	$	85,744	$	409,405	$	247,822
Recapture payable to PennyMac Mortgage Investment Trust		(1,690)		(3,098)		(5,557)		(5,843)
		182,121		82,646		403,848		241,979
Mortgage loan origination fees		34,621		29,448		85,962		70,551
Fulfillment fees from PennyMac Mortgage Investment Trust		27,255		17,553		59,301		45,752
Net mortgage loan servicing fees:
Mortgage loan servicing fees:
From non-affiliates		98,865		83,424		282,962		200,392
From PennyMac Mortgage Investment Trust		11,039		11,736		38,919		34,542
From Investment Funds		770		796		2,194		1,917
Ancillary and other fees		11,913		10,096		34,183		33,131
		122,587		106,052		358,258		269,982
Amortization, impairment and change in fair value of mortgage servicing rights		(80,830)		(59,065)		(309,304)		(128,073)
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust		4,107		10,271		40,984		10,674
		(76,723)		(48,794)		(268,320)		(117,399)
Net mortgage loan servicing fees		45,864		57,258		89,938		152,583
Management fees:
From PennyMac Mortgage Investment Trust		5,025		5,742		15,576		18,524
From Investment Funds		496		714		1,587		3,384
		5,521		6,456		17,163		21,908
Carried Interest from Investment Funds		107		1,483		944		2,898
Net interest expense:
Interest income:
From non-affiliates		20,735		13,764		50,994		35,348
From PennyMac Mortgage Investment Trust		1,974		1,289		5,798		1,822
		22,709		15,053		56,792		37,170
Interest expense:
To non-affiliates		22,689		12,918		56,414		31,526
To PennyMac Mortgage Investment Trust		4,827		8,026		17,555		17,596
		27,516		20,944		73,969		49,122
Net interest expense		(4,807)		(5,891)		(17,177)		(11,952)
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		(13)		(158)		130		(295)
Result of real estate acquired in settlement of loans		42		—		—		—
Other		684		410		2,493		2,446
Total net revenue		291,395		189,205		642,602		525,870
Expenses
Compensation		96,132		74,129		247,577		202,695
Servicing		22,177		16,770		56,494		55,108
Technology		9,733		6,676		24,313		18,104
Loan origination		6,471		4,314		15,567		12,813
Professional services		4,631		3,803		12,923		10,710
Other		12,973		9,590		32,053		24,480
Total expenses		152,117		115,282		388,927		323,910
Income before provision for income taxes		139,278		73,923		253,675		201,960
Provision for income taxes		16,976		8,575		30,535		23,308
Net income		122,302		65,348		223,140		178,652
Less: Net income attributable to noncontrolling interest		98,617		52,668		179,805		144,195
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Earnings per share
Basic	$	1.07	$	0.58	$	1.96	$	1.59
Diluted	$	1.06	$	0.58	$	1.95	$	1.58
Weighted average common shares outstanding
Basic		22,217		21,810		22,101		21,702
Diluted		76,355		76,138		76,331		76,098

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

6

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

	Class A Common Stock							Noncontrolling
								interest in Private
				Additional				National Mortgage		Total
	Number of	Par		paid-in		Retained		Acceptance		stockholders'
	shares	value		capital		earnings		Company, LLC		equity
	(in thousands)
Balance at December 31, 2014	21,578	$	2	$	162,720	$	51,242	$	593,302	$	807,266
Net income	—		—		—		34,457		144,195		178,652
Stock and unit-based compensation	75		—		3,746		—		9,358		13,104
Distributions	—		—		—		—		(9,627)		(9,627)
Issuance of common stock in settlement of directors' fees	13		—		223		—		—		223
Exchange of Class A units of Private  National Mortgage Acceptance Company,  LLC to Class A common stock of PennyMac Financial Services, Inc.	177		—		2,919		—		(2,919)		—
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	—		—		(311)		—		—		(311)
Balance at September 30, 2015	21,843	$	2	$	169,297	$	85,699	$	734,309	$	989,307
Balance at December 31, 2015	21,991	$	2	$	172,354	$	98,470	$	791,524	$	1,062,350
Net income	—		—		—		43,335		179,805		223,140
Stock and unit-based compensation	99		—		3,341		—		8,914		12,255
Distributions	—		—		—		—		(6,742)		(6,742)
Issuance of common stock in settlement of directors' fees	18		—		230		—		—		230
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	166		—		4,038		—		(4,038)		—
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	—		—		(829)		—		—		(829)
Balance at September 30, 2016	22,274	$	2	$	179,134	$	141,805	$	969,463	$	1,290,404

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

7

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine months ended September 30,
	2016		2015
	(in thousands)
Cash flow from operating activities
Net income	$	223,140	$	178,652
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on mortgage loans held for sale at fair value		(403,848)		(241,979)
Accrual of servicing rebate payable to Investment Funds		209		1,193
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread		268,320		117,399
Carried Interest from Investment Funds		(944)		(2,898)
Capitalization of interest on mortgage loans held for sale at fair value		(20,451)		(11,703)
Accrual of interest on excess servicing spread financing		17,555		17,596
Amortization of debt issuance costs and commitment fees relating to financing facilities		7,944		5,688
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust		(24)		422
Stock and unit-based compensation expense		12,255		13,104
Provision for servicing advance losses		19,799		23,538
Depreciation and amortization		3,965		1,585
Purchase of mortgage loans held for sale from PennyMac Mortgage Investment Trust		(29,144,685)		(24,864,698)
Originations of mortgage loans held for sale		(4,428,426)		(3,106,147)
Purchase of mortgage loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale		(1,588,711)		(989,009)
Sale and principal payments of mortgage loans held for sale		33,124,241		28,346,871
Sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust		13,146		13,708
Repurchase of mortgage loans subject to representations and warranties		(13,525)		(17,112)
Increase in servicing advances		(28,591)		(47,080)
Increase in receivable from Investment Funds		(489)		(444)
Decrease in receivable from PennyMac Mortgage Investment Trust		5,491		8,889
Decrease in deferred tax asset		18,668		21,399
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		—		(4,299)
Increase in other assets		(24,325)		(23,113)
Increase in accounts payable and accrued expenses		12,992		22,280
Decrease in payable to Investment Funds		(3,164)		(5,697)
Increase in payable to PennyMac Mortgage Investment Trust		1,971		22,698
Increase in income taxes payable		11,415		—
Net cash used in operating activities		(1,916,072)		(519,157)
Cash flow from investing activities
Increase in short-term investments		(12,430)		(3,079)
Advance on note receivable from PennyMac Mortgage Investment Trust		—		(168,546)
Repayment of note receivable from PennyMac Mortgage Investment Trust		—		18,546
Purchase of mortgage servicing rights		(23)		(379,264)
Net settlement of derivative financial instruments used for hedging		173,696		(3,678)
Purchase of furniture, fixtures, equipment and leasehold improvements		(17,539)		(5,716)
Acquisition of capitalized software		(5,572)		(1,745)
(Increase) decrease in margin deposits and restricted cash		(39,467)		5,331
Net cash  provided by (used in) investing activities		98,665		(538,151)
Cash flow from financing activities
Sale of assets under agreements to repurchase		31,708,423		25,947,385
Repurchase of assets sold under agreements to repurchase		(30,384,066)		(25,482,890)
Issuance of mortgage loan participation certificates		21,895,964		13,265,896
Repayment of mortgage loan participation certificates		(21,347,920)		(13,162,123)
Advances on notes payable		97,000		289,556
Repayment of notes payable		(48,661)		(29,411)
Issuance of excess servicing spread financing		—		271,452
Repayment of excess servicing spread financing		(54,623)		(55,800)
Repurchase of excess servicing spread financing		(59,045)		—
Advances of obligations under capital lease		12,651		—
Repayment of obligation under capital lease		(5,530)		(6)
Payment of debt issuance costs		(6,525)		(5,965)
Assumption of mortgage servicing liability		5,736		—
Distribution to Private National Mortgage Acceptance Company, LLC members		(6,742)		(9,627)
Net cash provided by financing activities		1,806,662		1,028,467
Net decrease in cash		(10,745)		(28,841)
Cash at beginning of period		105,472		76,256
Cash at end of period	$	94,727	$	47,415

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

8

PENNYMAC FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization and Basis of Presentation

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) was formed as a Delaware corporation on December 31, 2012. Pursuant to a reorganization, the Company became a holding corporation and its primary asset is an equity interest in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac and operates and controls all of the businesses and affairs of PennyMac subject to the consent rights of other members under certain circumstances, and consolidates the financial results of PennyMac and its subsidiaries.

PennyMac is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PennyMac’s mortgage banking activities consist of residential mortgage loan production (including correspondent production and consumer direct lending) and mortgage loan servicing. PennyMac’s investment management activities and a portion of its mortgage loan servicing activities are conducted on behalf of entities that invest in residential mortgage loans and related assets. PennyMac’s primary wholly owned subsidiaries are:

· PNMAC Capital Management, LLC (“PCM”)—a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM enters into investment management agreements with entities that invest in residential mortgage loans and related assets.

Presently, PCM has management agreements with, PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P., (the “Master Fund”), both registered under the Investment Company Act of 1940, as amended, an affiliate of these registered funds, PNMAC Mortgage Opportunity Fund Investors, LLC (collectively, the “Investment Funds”) and PennyMac Mortgage Investment Trust (“PMT”), a publicly held real estate investment trust (“REIT”). Together, the Investment Funds and PMT are referred to as the “Advised Entities.”

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

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

· PNMAC Opportunity Fund Associates, LLC (“PMOFA”)—a Delaware limited liability company and the general partner of the Master Fund. PMOFA is entitled to incentive fees representing allocations of profits (“Carried Interest”) from the Master Fund.

The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. The interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods, but are not necessarily

9

indicative of income to be anticipated for the full year ending December 31, 2016. Intercompany accounts and transactions have been eliminated.

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

Note 2—Concentration of Risk

A substantial portion of the Company’s activities relate to the Advised Entities. Fees (generally comprised of fulfillment fees, mortgage loan servicing fees, management fees, Carried Interest and servicing recapture fees) and interest charged to these entities totaled 15% and 20% of total net revenue for the quarters ended September 30, 2016 and 2015, respectively, and 22% and 18% for the nine months ended September 30, 2016 and 2015, respectively.

Note 3—Transactions with Affiliates

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities

Following is a summary of mortgage lending and sourcing activity between the Company and PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights and excess servicing spread recapture incurred	$	1,690	$	3,098	$	5,557	$	5,843
Fulfillment fee revenue	$	27,255	$	17,553	$	59,301	$	45,752
Unpaid principal balance of mortgage loans fulfilled for PMT	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411
Sourcing fees paid to PMT	$	3,509	$	3,236	$	8,282	$	7,084
Unpaid principal balance of mortgage loans purchased from PMT	$	11,694,065	$	10,783,882	$	27,599,186	$	23,602,020
Proceeds from sale of mortgage loans held for sale to PMT	$	5,007	$	1,047	$	13,146	$	11,875
Tax service fees received from PMT	$	2,006	$	1,291	$	4,537	$	3,293
Early purchase program fees earned from PMT	$	5	$	—	$	7	$	—

10

Mortgage Loan Servicing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage loans acquired for sale at fair value:
Base and supplemental	$	90	$	130	$	225	$	198
Activity-based		210		153		497		243
		300		283		722		441
Mortgage loans at fair value:
Base and supplemental		2,615		3,930		8,881		12,145
Activity-based		3,014		2,961		14,981		8,948
		5,629		6,891		23,862		21,093
Mortgage servicing rights:
Base and supplemental		4,978		4,473		13,999		12,783
Activity-based		132		89		336		225
		5,110		4,562		14,335		13,008
	$	11,039	$	11,736	$	38,919	$	34,542

Investment Management Activities

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

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Base management	$	5,025	$	5,742	$	15,576	$	17,181
Performance incentive		—		—		—		1,343
	$	5,025	$	5,742	$	15,576	$	18,524

The management agreement, as amended, expires on September 12, 2020, subject to automatic renewal for additional 18‑month periods, unless terminated earlier in accordance with the terms of the management agreement.

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

11

Expense Reimbursement

PMT reimburses the Company for other expenses, including common overhead expenses incurred on its behalf by the Company, in accordance with the terms of its management agreement. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,417	$	2,694	$	6,413	$	8,125
Expenses incurred on PMT's (the Company's) behalf, net		13		(85)		(102)		377
	$	1,430	$	2,609	$	6,311	$	8,502
Payments and settlements during the period (1)	$	45,988	$	17,709	$	102,600	$	64,575

(1) Payments and settlements include payments for operating, investment and financing activities itemized in this Note and netting settlements made pursuant to master netting agreements between the Company and PMT.

Amounts due from and payable to PMT are summarized below:

	September 30,		December 31,
	2016		2015
	(in thousands)
Receivable from PMT:
Management fees	$	5,025	$	5,670
Servicing fees		3,641		3,682
Allocated expenses and expenses incurred on PMT's behalf		3,227		4,490
Fulfillment fees		926		1,082
Conditional reimbursement		900		900
Interest on note receivable		536		412
Correspondent production fees		492		2,729
	$	14,747	$	18,965
Payable to PMT:
Deposits made by PMT to fund servicing advances	$	159,488	$	153,573
Mortgage servicing rights ("MSR") recapture payable		450		781
Other		5,326		8,025
	$	165,264	$	162,379

Conditional Reimbursement of Underwriting Fees

In connection with its initial public offering of common shares on August 4, 2009 (“IPO”), PMT conditionally agreed to reimburse the Company up to $2.9 million for underwriting fees paid to the IPO underwriters by the Company on PMT’s behalf. The Company received reimbursement payments from PMT totaling $7,000 and $237,000 for the quarter and nine months ended September 30, 2015, respectively, and received no reimbursement from PMT during the nine months ended September 30, 2016.

In the event a termination fee is payable to the Company under the management agreement, and the Company has not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.

12

Investing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:
Interest income	$	1,974	$	1,289	$	5,798	$	1,822
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received and change in fair value	$	(13)	$	(158)	$	130	$	(295)

	September 30,		December 31,
	2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:	$	150,000	$	150,000
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,169	$	1,145
Number of shares		75		75

Financing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Excess servicing spread financing:
Issuance:
Cash	$	—	$	84,165	$	—	$	271,452
Pursuant to recapture agreement	$	1,438	$	2,268	$	5,039	$	4,833
Repayment	$	(16,342)	$	(24,717)	$	(54,623)	$	(55,800)
Repurchase	$	—	$	—	$	(59,045)	$	—
Change in fair value	$	(4,107)	$	(10,271)	$	(40,984)	$	(10,674)
Interest expense	$	4,827	$	8,026	$	17,555	$	17,596
Excess servicing spread recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread	$	1,283	$	2,428	$	4,709	$	5,173

13

Investment Funds

Amounts due from and payable to the Investment Funds are summarized below:

	September 30,		December 31,
	2016		2015
	(in thousands)
Carried Interest due from Investment Funds:
PNMAC Mortgage Opportunity Fund, LLC	$	42,357	$	41,893
PNMAC Mortgage Opportunity Fund Investors, LLC		28,513		28,033
	$	70,870	$	69,926
Receivable from Investment Funds:
Management fees	$	503	$	655
Expense reimbursements		429		45
Mortgage loan servicing fees		425		392
Mortgage loan servicing rebate		239		224
	$	1,596	$	1,316
Payable to Investment Funds—Servicing advances	$	27,265	$	30,429

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

The Company entered into a tax receivable agreement with PennyMac’s existing unitholders on the date of the IPO that will provide for the payment by the Company to PennyMac’s exchanged unitholders an amount equal to 85% of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from such unitholders’ exchanges and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Based on the PennyMac unitholder exchanges to date, the Company has recorded a $75.4 million and $74.3 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of September 30, 2016 and December 31, 2015, respectively. The Company made payments under the tax receivable agreement totaling $4.3 million during the nine months ended September 30, 2015. There were no payments made during the nine months ended September 30, 2016.

Note 4—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined using net income attributable to the Company’s common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is determined by dividing diluted net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all dilutive shares of common stock were issued.

Potentially dilutive shares of common stock include non-vested unit and stock-based compensation awards and PennyMac Class A units. The Company applies the treasury stock method to determine the diluted weighted average shares of common stock outstanding represented by the non-vested unit and stock-based compensation awards. The diluted earnings per share calculation assumes the exchange of PennyMac Class A units for shares of common stock. Accordingly, earnings attributable to the Company’s common stockholders is also adjusted to include the earnings allocated to the PennyMac Class A units after taking into account the income taxes that would be applicable to such earnings.

14

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands, except per share amounts)
Basic earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Basic earnings per share of common stock	$	1.07	$	0.58	$	1.96	$	1.59
Diluted earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Effect of net income attributable to PennyMac Class A units exchangeable to common stock, net of income taxes		57,444		31,418		105,480		86,012
Diluted net income attributable to common stockholders	$	81,129	$	44,098	$	148,815	$	120,469
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Dilutive shares:
PennyMac Class A units exchangeable to common stock		53,923		54,042		53,996		53,744
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock		—		163		—		528
Common shares issuable under stock-based compensation plan		215		123		234		124
Diluted weighted average shares of common stock outstanding		76,355		76,138		76,331		76,098
Diluted earnings per share of common stock	$	1.06	$	0.58	$	1.95	$	1.58

Potentially dilutive securities are excluded from the calculation of diluted earnings per share when their inclusion would be anti-dilutive. The following table summarizes the anti-dilutive weighted-average number of outstanding stock options and performance-based restricted stock units (“RSUs”) excluded from the calculation of diluted earnings per share:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands except for weighted-average exercise price)
Stock options (1)		2,768		1,864		2,559		1,712
Performance-based RSUs (2)		2,505		2,377		2,510		2,210
Total anti-dilutive stock-based compensation units		5,273		4,241		5,069		3,922
Weighted-average exercise price of anti-dilutive stock options (1)	$	15.81	$	18.17	$	15.82	$	18.17

(1) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were anti-dilutive.

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

Note 5—Loan Sales and Servicing Activities

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

15

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Cash flows:
Sales proceeds	$	13,947,544	$	12,738,035	$	33,124,241	$	28,357,226
Servicing fees received (1)	$	67,371	$	33,745	$	186,474	$	103,057
Net servicing advance recoveries	$	4,608	$	9,778	$	14,153	$	18,733

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

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance of mortgage loans outstanding at end of period	$	78,942,489	$	60,687,246
Delinquencies:
30-89 days	$	2,157,646	$	1,539,568
90 days or more:
Not in foreclosure	$	457,909	$	340,313
In foreclosure or bankruptcy	$	328,396	$	227,025
Foreclosed	$	2,435	$	755

The unpaid principal balance (“UPB”) of the Company’s mortgage loan servicing portfolio is summarized as follows:

	September 30, 2016
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	123,030,847	$	—	$	123,030,847
Affiliated entities		—		56,100,331		56,100,331
Mortgage loans held for sale		2,945,465		—		2,945,465
	$	125,976,312	$	56,100,331	$	182,076,643
Commercial real estate loans subserviced for the Company	$	16,403	$	—	$	16,403
Delinquent mortgage loans:
30 days	$	2,954,504	$	366,538	$	3,321,042
60 days		989,384		126,411		1,115,795
90 days or more:
Not in foreclosure		1,740,732		591,872		2,332,604
In foreclosure or bankruptcy		801,461		798,585		1,600,046
Foreclosed		29,560		471,956		501,516
	$	6,515,641	$	2,355,362	$	8,871,003
Custodial funds managed by the Company (1)	$	3,754,860	$	1,058,632	$	4,813,492

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interestincome in the Company’s consolidated statements of income.

16

	December 31, 2015
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	111,409,601	$	—	$	111,409,601
Affiliated entities		—		47,810,632		47,810,632
Mortgage loans held for sale		1,052,485		—		1,052,485
	$	112,462,086	$	47,810,632	$	160,272,718
Commercial real estate loans subserviced for the Company	$	14,454	$	—	$	14,454
Delinquent mortgage loans:
30 days	$	2,666,435	$	349,859	$	3,016,294
60 days		834,617		136,924		971,541
90 days or more:
Not in foreclosure		1,270,236		788,410		2,058,646
In foreclosure or bankruptcy		656,617		1,180,014		1,836,631
Foreclosed		23,372		542,031		565,403
	$	5,451,277	$	2,997,238	$	8,448,515
Custodial funds managed by the Company (1)	$	2,242,146	$	502,751	$	2,744,897

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interest income in the Company’s consolidated statements of income.

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

	September 30,		December 31,
State	2016		2015
	(in thousands)
California	$	40,854,288	$	39,007,363
Texas		14,851,369		12,191,722
Virginia		12,164,535		9,816,114
Florida		11,830,839		9,709,940
Maryland		7,755,698		6,151,945
All other states		94,619,914		83,395,634
	$	182,076,643	$	160,272,718

Note 6—Netting of Financial Instruments

The Company uses derivative financial instruments to manage exposure to interest rate risk for the interest rate lock commitments (“IRLCs”) it makes to purchase or originate mortgage loans at specified interest rates, its inventory of mortgage loans held for sale and MSRs. The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.

17

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts.

	September 30, 2016						December 31, 2015
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - Interest rate lock   commitments	$	107,127	$	—	$	107,127	$	45,885	$	—	$	45,885
Derivatives subject to a master netting arrangement:
Forward purchase contracts		54,574		—		54,574		4,181		—		4,181
Forward sale contracts		3,588		—		3,588		4,965		—		4,965
Mortgage-backed security ("MBS") put options		6,019		—		6,019		404		—		404
Put options on interest rate futures purchase contracts		6,707		—		6,707		1,832		—		1,832
Call options on interest rate futures purchase contracts		4,430		—		4,430		1,555		—		1,555
Netting		—		(46,668)		(46,668)		—		(8,542)		(8,542)
		75,318		(46,668)		28,650		12,937		(8,542)		4,395
	$	182,445	$	(46,668)	$	135,777	$	58,822	$	(8,542)	$	50,280

18

Derivative Assets, Financial Assets, and Collateral Held by Counterparty

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

	September 30, 2016								December 31, 2015
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
			balance sheet								balance sheet
	Net amount								Net amount
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	107,127	$	—	$	—	$	107,127	$	45,885	$	—	$	—	$	45,885
RJ O'Brien		8,634		—		—		8,634		2,246		—		—		2,246
Barclays Capital		8,431		—		—		8,431		72		—		—		72
JP Morgan		4,067		—		—		4,067		—		—		—		—
Federal National Mortgage Association		3,471		—		—		3,471		453		—		—		453
Citibank, N.A.		1,738		—		—		1,738		—		—		—		—
Goldman Sachs		836		—		—		836		471		—		—		471
Morgan Stanley Bank, N.A.		731		—		—		731		—		—		—		—
Jefferies & Co.		343		—		—		343		888		—		—		888
Wells Fargo Bank, N.A.		—		—		—		—		53		—		—		53
Others		399		—		—		399		212		—		—		212
	$	135,777	$	—	$	—	$	135,777	$	50,280	$	—	$	—	$	50,280

19

Offsetting of Derivative Liabilities and Financial Liabilities

Following is a summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts. As discussed above, all derivatives with the exception of IRLCs are subject to master netting arrangements. The mortgage loans sold under agreements to repurchase do not qualify for set off accounting.

	September 30, 2016						December 31, 2015
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - IRLCs	$	1,609	$	—	$	1,609	$	2,112	$	—	$	2,112
Derivatives subject to a master netting arrangement:
Forward purchase contracts		2,584		—		2,584		9,004		—		9,004
Forward sale contracts		45,085		—		45,085		7,497		—		7,497
Put options on interest rate futures purchase contracts		1,500		—		1,500		203		—		203
Call options on interest rate futures purchase contracts		398		—		398		47		—		47
Netting		—		(46,750)		(46,750)		—		(9,780)		(9,780)
		49,567		(46,750)		2,817		16,751		(9,780)		6,971
Total derivatives		51,176		(46,750)		4,426		18,863		(9,780)		9,083
Mortgage loans sold under agreements to repurchase:
Amount outstanding		2,491,762		—		2,491,762		1,167,405		—		1,167,405
Unamortized debt issuance costs		(396)		—		(396)		(674)		—		(674)
		2,491,366		—		2,491,366		1,166,731		—		1,166,731
	$	2,542,542	$	(46,750)	$	2,495,792	$	1,185,594	$	(9,780)	$	1,175,814

20

Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty

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

	September 30, 2016								December 31, 2015
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	1,609	$	—	$	—	$	1,609	$	2,112	$	—	$	—	$	2,112
Credit Suisse First Boston Mortgage Capital LLC		1,174,487		(1,174,288)		—		199		795,179		(794,470)		—		709
Bank of America, N.A.		449,502		(449,371)		—		131		271,130		(269,510)		—		1,620
Citibank, N.A.		396,423		(396,423)		—		—		55,948		(53,904)		—		2,044
Morgan Stanley Bank, N.A.		185,688		(185,688)		—		—		49,763		(49,521)		—		242
Barclays Capital		154,665		(154,665)		—		—		—		—		—		—
JP Morgan Chase Bank, N.A.		131,327		(131,327)		—		—		672		—		—		672
Wells Fargo Bank, N.A.		1,323		—		—		1,323		—		—		—		—
Nomura Securities International, Inc.		396		—		—		396		—		—		—		—
Raymond James & Associates		232		—		—		232		—		—		—		—
Bank of Oklahoma		167		—		—		167		135		—		—		135
BNP Paribas		128		—		—		128		738		—		—		738
Bank of New York Mellon		77		—		—		77		154		—		—		154
Others		164		—		—		164		657		—		—		657
	$	2,496,188	$	(2,491,762)	$	—	$	4,426	$	1,175,814	$	(1,166,731)	$	—	$	9,083

Note 7—Fair Value

The Company’s consolidated financial statements include assets and liabilities that are measured based on their fair values. The application of fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its fair value as discussed in the following paragraphs.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:

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

· Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and other inputs.

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

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

21

illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

Fair Value Accounting Elections

Management identified all of its non-cash financial assets, its originated MSRs relating to loans with initial interest rates of more than 4.5%, purchased MSRs subject to excess servicing spread financing (“ESS”) and mortgage servicing liabilities (“MSLs”) to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance. Management has also elected to account for its ESS at fair value as a means of hedging the related MSRs’ fair value risk.

Financial Statement Items Measured at Fair Value on a Recurring Basis

Following is a summary of financial statement items that are measured at fair value on a recurring basis:

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	58,749	$	—	$	—	$	58,749
Mortgage loans held for sale at fair value		—		3,081,003		46,374		3,127,377
Derivative assets:
Interest rate lock commitments		—		—		107,127		107,127
Forward purchase contracts		—		54,574		—		54,574
Forward sales contracts		—		3,588		—		3,588
MBS put options		—		6,019		—		6,019
Put options on interest rate futures purchase contracts		6,707		—		—		6,707
Call options on interest rate futures purchase contracts		4,430		—		—		4,430
Total derivative assets before netting		11,137		64,181		107,127		182,445
Netting		—		—		—		(46,668)
Total derivative assets		11,137		64,181		107,127		135,777
Investment in PennyMac Mortgage Investment Trust		1,169		—		—		1,169
Mortgage servicing rights at fair value		—		—		492,028		492,028
	$	71,055	$	3,145,184	$	645,529	$	3,815,100
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	280,367	$	280,367
Derivative liabilities:
Interest rate lock commitments		—		—		1,609		1,609
Forward purchase contracts		—		2,584		—		2,584
Forward sales contracts		—		45,085		—		45,085
Put options on interest rate futures purchase contracts		1,500		—		—		1,500
Call options on interest rate futures purchase contracts		398		—		—		398
Total derivative liabilities before netting		1,898		47,669		1,609		51,176
Netting		—		—		—		(46,750)
Total derivative liabilities		1,898		47,669		1,609		4,426
Mortgage servicing liabilities		—		—		13,045		13,045
	$	1,898	$	47,669	$	295,021	$	297,838

22

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	46,319	$	—	$	—	$	46,319
Mortgage loans held for sale at fair value		—		1,052,673		48,531		1,101,204
Derivative assets:
Interest rate lock commitments		—		—		45,885		45,885
Forward purchase contracts		—		4,181		—		4,181
Forward sales contracts		—		4,965		—		4,965
MBS put options		—		404		—		404
Put options on interest rate futures purchase contracts		1,832		—		—		1,832
Call options on interest rate futures purchase contracts		1,555		—		—		1,555
Total derivative assets before netting		3,387		9,550		45,885		58,822
Netting		—		—		—		(8,542)
Total derivative assets		3,387		9,550		45,885		50,280
Investment in PennyMac Mortgage Investment Trust		1,145		—		—		1,145
Mortgage servicing rights at fair value		—		—		660,247		660,247
	$	50,851	$	1,062,223	$	754,663	$	1,859,195
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	412,425	$	412,425
Derivative liabilities:
Interest rate lock commitments		—		—		2,112		2,112
Forward purchase contracts		—		9,004		—		9,004
Forward sales contracts		—		7,497		—		7,497
Put options on interest rate futures purchase contracts		203		—		—		203
Call options on interest rate futures purchase contracts		47		—		—		47
Total derivative liabilities before netting		250		16,501		2,112		18,863
Netting		—		—		—		(9,780)
Total derivative liabilities		250		16,501		2,112		9,083
Mortgage servicing liabilities		—		—		1,399		1,399
	$	250	$	16,501	$	415,936	$	422,907

23

As shown above, all or a portion of the Company’s mortgage loans held for sale, IRLCs, MSRs, ESS and  MSLs are measured using Level 3 fair value inputs. Following are roll forwards of these items for the quarters and nine month periods ended September 30, 2016 and 2015:

	Quarter ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, June 30, 2016	$	38,079	$	90,262	$	526,294	$	654,635
Purchases		750,709		—		12		750,721
Sales		(621,446)		—		—		(621,446)
Repayments		(9,629)		—		—		(9,629)
Interest rate lock commitments issued, net		—		148,315		—		148,315
Mortgage servicing rights resulting from mortgage loan sales		—		—		3,913		3,913
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		2,487		—		—		2,487
Other factors		—		68,241		(38,191)		30,050
		2,487		68,241		(38,191)		32,537
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(113,826)		—		—		(113,826)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(201,300)		—		(201,300)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	(234)	$	105,518	$	(38,191)	$	67,093

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2016	$	294,551	$	4,681	$	299,232
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		—		1,438
Accrual of interest		4,827		—		4,827
Repayments		(16,342)		—		(16,342)
Mortgage servicing liabilities assumed		—		5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales		—		6,401		6,401
Changes in fair value included in income		(4,107)		(3,773)		(7,880)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(4,107)	$	(3,773)	$	(7,880)

24

	Quarter ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance, June 30, 2015	$	34,085	$	27,737	$	581,269	$	643,091
Purchases		391,578		—		109,131		500,709
Sales		(286,481)		—		—		(286,481)
Repayments		(14,465)		—		—		(14,465)
Interest rate lock commitments issued, net		—		73,133		—		73,133
Mortgage servicing rights resulting from mortgage loan sales		—		—		6,989		6,989
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		—		—		—		—
Other factors		826		58,659		(27,722)		31,763
		826		58,659		(27,722)		31,763
Transfers of mortgage loans held for sale from Level 3 to Level 2  (2)		(61,921)		—		—		(61,921)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(115,991)		—		(115,991)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(614)	$	43,538	$	(27,722)	$	15,202

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2015	$	359,102	$	11,791	$	370,893
Issuance of excess servicing spread financing:
For cash		84,165		—		84,165
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		2,268		—		2,268
Mortgage servicing liabilities resulting from mortgage loan sales		—		8,358		8,358
Accrual of interest		8,026		—		8,026
Repayments		(24,717)		—		(24,717)
Changes in fair value included in income		(10,271)		(9,425)		(19,696)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,271)	$	(9,425)	$	(19,696)

25

	Nine months ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, December 31, 2015	$	48,531	$	43,773	$	660,247	$	752,551
Purchases		1,239,507		—		23		1,239,530
Sales		(899,763)		—		—		(899,763)
Repayments		(29,488)		—		—		(29,488)
Interest rate lock commitments issued, net		—		329,533		—		329,533
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,201		13,201
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		3,178		—		—		3,178
Other factors		—		217,429		(181,443)		35,986
		3,178		217,429		(181,443)		39,164
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(315,591)		—		—		(315,591)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(485,217)		—		(485,217)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	506	$	105,518	$	(181,443)	$	(75,419)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, December 31, 2015	$	412,425	$	1,399	$	413,824
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		5,039		—		5,039
Accrual of interest		17,555		—		17,555
Repurchase		(59,045)		—		(59,045)
Repayments		(54,623)		—		(54,623)
Mortgage servicing liabilities resulting from mortgage loan sales		—		11,810		11,810
Mortgage servicing liabilities assumed		—		5,736		5,736
Changes in fair value included in income		(40,984)		(5,900)		(46,884)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(33,774)	$	(5,900)	$	(39,674)

26

	Nine months ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance December 31, 2014	$	209,908	$	32,401	$	325,383	$	567,692
Purchases		857,863		—		379,264		1,237,127
Sales		(798,335)		—		—		(798,335)
Repayments		(34,467)		—		—		(34,467)
Interest rate lock commitments issued, net		—		217,278		—		217,278
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,107		13,107
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		4,054		—		—		4,054
Other factors		35		48,367		(48,087)		315
		4,089		48,367		(48,087)		4,369
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(175,436)		—		—		(175,436)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(254,508)		—		(254,508)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(1,145)	$	43,538	$	(48,087)	$	(5,694)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance December 31, 2014	$	191,166	$	6,306	$	197,472
Issuance of excess servicing spread financing:
For cash		271,452		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		4,833		—		4,833
Mortgage servicing liabilities resulting from mortgage loan sales		—		20,442		20,442
Accrual of interest		17,596		—		17,596
Repayments		(55,800)		—		(55,800)
Changes in fair value included in income		(10,674)		(16,024)		(26,698)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,674)	$	(16,024)	$	(26,698)

The information used in the preceding roll forwards represents activity for any financial statement items measured at fair value on a recurring basis and identified as using “Level 3” significant fair value inputs at either the beginning or the end of the periods presented. The Company had transfers among the fair value levels arising from transfers of IRLCs to mortgage loans held for sale at fair value upon purchase or funding of the respective mortgage loans and from the return to salability in the active secondary market of certain mortgage loans held for sale.

27

Financial Statement Items Measured at Fair Value under the Fair Value Option

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

	Quarter ended September 30,
	2016						2015
	Net gains on						Net gains on
	mortgage		Net mortgage				mortgage		Net mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	198,449	$	—	$	198,449	$	136,119	$	—	$	136,119
Mortgage servicing rights at fair value		—		(38,191)		(38,191)		—		(27,722)		(27,722)
	$	198,449	$	(38,191)	$	160,258	$	136,119	$	(27,722)	$	108,397
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	4,107	$	4,107	$	—	$	10,271	$	10,271
Mortgage servicing liabilities at fair value		—		3,773		3,773		—		9,425		9,425
	$	—	$	7,880	$	7,880	$	—	$	19,696	$	19,696

	Nine months ended September 30,
	2016						2015
	Net gains on		Net				Net gains on		Net
	mortgage		mortgage				mortgage		mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	499,058	$	—	$	499,058	$	285,936	$	—	$	285,936
Mortgage servicing rights at fair value		—		(181,443)		(181,443)		—		(48,087)		(48,087)
	$	499,058	$	(181,443)	$	317,615	$	285,936	$	(48,087)	$	237,849
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	40,984	$	40,984	$	—	$	10,674	$	10,674
Mortgage servicing liabilities at fair value		—		5,900		5,900		—		16,024		16,024
	$	—	$	46,884	$	46,884	$	—	$	26,698	$	26,698

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

	September 30, 2016
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	3,107,437	$	2,924,778	$	182,659
90 days or more delinquent:
Not in foreclosure		15,223		15,343		(120)
In foreclosure		4,717		5,344		(627)
	$	3,127,377	$	2,945,465	$	181,912

	December 31, 2015
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	1,068,548	$	1,016,314	$	52,234
90 days or more delinquent:
Not in foreclosure		26,399		26,999		(600)
In foreclosure		6,257		6,598		(341)
	$	1,101,204	$	1,049,911	$	51,293

Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

Following is a summary of financial statement items that were measured at fair value on a nonrecurring basis during the periods presented:

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	845,646	$	845,646
Real estate acquired in settlement of loans		—		—		173		173
	$	—	$	—	$	845,819	$	845,819

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	202,991	$	202,991
	$	—	$	—	$	202,991	$	202,991

29

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	(25,206)	$	(33,301)	$	(174,926)	$	(51,427)
Real estate acquired in settlement of loans		42		—		—		—
	$	(25,164)	$	(33,301)	$	(174,926)	$	(51,427)

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Cash as well as its Carried Interest due from Investment Funds,  Note receivable from PMT,Assets sold under agreements to repurchase,  Mortgage loan participation and sale agreements,  Notes payable,  Obligations under capital lease and amounts receivable from and payable to the Advised Entities are carried at amortized cost.

Cash is measured using a “Level 1” fair value input.

The Company has concluded that the carrying value of the Carried Interest due from Investment Funds approximates its fair value as the balance represents the amount distributable to the Company at the balance sheet date assuming liquidation of the Investment Funds.

The Company’s borrowings carried at amortized cost do not have observable inputs and the fair value is measured using management’s estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as “Level 3” fair value financial statement items due to the lack of observable inputs to estimate their fair values.

The Company has concluded that the fair value of the Note receivable from PMT and the receivables from and payables to the Advised Entities approximate the carrying value due to their short terms and/or variable interest rates.

Valuation Techniques and Inputs

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

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

With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees and approves the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value financial statement items, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes the Company’s chief executive, financial, operating, risk, business development and asset/liability management officers.

The FAV group is responsible for reporting to the Company’s senior management valuation committee on a monthly basis on the changes in the valuation of the “Level 3” fair value financial statement items, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its

30

valuations, the FAV group presents an analysis of the effect on the valuation of changes to the significant inputs to the models.

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

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

Mortgage Loans Held for Sale

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

Certain of the Company’s mortgage loans held for sale may become non-saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a mortgage loan with an identified defect. The Company may also purchase certain delinquent government guaranteed or insured mortgage loans from Ginnie Mae guaranteed pools in its mortgage loan servicing portfolio.

The Company’s right to purchase delinquent government guaranteed or insured mortgage loans arises as the result of the borrower’s failure to make payments for at least three consecutive months preceding the month of repurchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such repurchased mortgage loans may be resold to third-party investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed pool.

To the extent such mortgage loans have not become saleable into another Ginnie Mae guaranteed security by becoming current either through the borrower’s reperformance or through completion of a modification of the mortgage loan’s terms, the Company measures such mortgage loans along with mortgage loans with identified defects using “Level 3” fair value inputs.

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

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

Key inputs	September 30, 2016	December 31, 2015
Discount rate
Range	2.5% – 8.1%	2.5% – 9.1%
Weighted average	3.1%	2.8%
Twelve-month projected housing price index change
Range	2.8% – 5.2%	1.8% – 5.0%
Weighted average	4.5%	3.7%
Voluntary prepayment / resale speed (1)
Range	0.1% – 25.8%	0.6% – 20.1%
Weighted average	20.8%	16.6%
Total prepayment speed (2)
Range	0.1% – 41.3%	0.7% – 37.6%
Weighted average	33.1%	30.9%

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

(2)Total prepayment speed is measured using Life Total CPR.

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

Derivative Financial Instruments

Interest Rate Lock Commitments

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

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

Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of IRLCs:

Key inputs	September 30, 2016	December 31, 2015
Pull-through rate
Range	35.0% – 100.0%	54.1% – 100.0%
Weighted average	83.7%	90.1%
Mortgage servicing rights value expressed as:
Servicing fee multiple
Range	1.2 – 5.5	1.0 – 5.8
Weighted average	4.2	4.4
Percentage of unpaid principal balance
Range	0.2% – 2.7%	0.2% – 3.8%
Weighted average	1.2%	1.5%

Hedging Derivatives

The Company estimates the fair value of commitments to sell mortgage loans based on quoted MBS prices.These derivative financial instruments are categorized by the Company as “Level 1” fair value financial statement items for those based on exchange traded market prices or as “Level 2” fair value financial statement items for those based on observable MBS prices or  interest rate volatilities in the MBS market. Changes in the fair value of hedging derivatives are included in Net gains on mortgage loans acquired for sale at fair value, or Net mortgage loan servicing fees, as applicable, in the consolidated statements of income.

Mortgage Servicing Rights

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

.

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Following are the key “Level 3” fair value inputs used in determining the fair value of MSRs at the time of initial recognition, excluding MSR purchases:

	Quarter ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$3,913	$146,448	$6,989	$154,707
Unpaid principal balance of underlying mortgage loans	$340,562	$12,313,082	$550,073	$11,369,493
Weighted average servicing fee rate (in basis points)	33	29	32	34
Key inputs:
Pricing spread (1)
Range	7.6% – 10.5%	7.6% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	9.3%	9.5%	8.9%	9.1%
Annual total prepayment speed (2)
Range	5.0% – 42.8%	3.4% – 42.9%	7.7% – 52.3%	7.5% – 35.0%
Weighted average	12.4%	9.7%	11.9%	9.2%
Life (in years)
Range	1.7 – 10.8	1.7 – 12.2	1.4 – 7.5	1.9 – 9.1
Weighted average	6.5	7.6	6.5	7.0
Per-loan annual cost of servicing
Range	$78 – $103	$78 – $102	$59 – $101	$59 – $95
Weighted average	$92	$91	$75	$78

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

(2) Prepayment speed is measured using Life Total CPR.

33

	Nine months ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$13,201	$370,414	$13,107	$347,549
Unpaid principal balance of underlying mortgage loans	$1,108,802	$29,667,803	$1,072,203	$25,268,602
Weighted average servicing fee rate (in basis points)	33	30	32	35
Key inputs:
Pricing spread (1)
Range	7.2% – 10.5%	7.2% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	8.9%	9.2%	9.4%	9.2%
Annual total prepayment speed (2)
Range	3.3% – 52.3%	3.4% – 50.9%	7.7% – 62.4%	7.5% – 39.4%
Weighted average	12.6%	10.0%	11.6%	8.8%
Life (in years)
Range	1.3 – 11.8	1.3 – 12.2	1.1 – 7.5	1.8 – 9.1
Weighted average	6.5	7.5	6.5	7.0
Per-loan annual cost of servicing
Range	$68 – $105	$68 – $106	$59 – $101	$59 – $95
Weighted average	$87	$88	$75	$76

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

(2) Prepayment speed is measured using Life Total CPR.

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Following is a quantitative summary of key inputs used in the valuation and assessment for impairment of the Company’s MSRs at period end and the effect on fair value from adverse changes in those inputs (weighted averages are based upon UPB):

	September 30, 2016				December 31, 2015
	Fair		Amortized		Fair		Amortized
	value		cost		value		cost
	(Carrying value, unpaid principal balance of underlying
	mortgage loans and effect on fair value amounts in thousands)
MSR and pool characteristics:
Carrying value	$	492,028	$	845,646	$	660,247	$	751,688
Unpaid principal balance of underlying mortgage loans	$	46,236,558	$	75,076,431	$	54,182,477	$	56,420,227
Weighted average note interest rate		4.1%		3.8%		4.1%		3.8%
Weighted average servicing fee rate (in basis points)		32		31		32		32
Key inputs:
Pricing spread (1)
Range		7.6% – 14.4%		7.6% – 14.4%		7.2% – 14.1%		7.2% – 12.8%
Weighted average		9.7%		10.2%		8.9%		8.9%
Effect on fair value of (2):
5% adverse change	$	(8,318)	$	(15,356)	$	(11,115)	$	(13,467)
10% adverse change	$	(16,346)	$	(30,149)	$	(21,857)	$	(26,472)
20% adverse change	$	(31,585)	$	(58,160)	$	(42,293)	$	(51,183)
Average life (in years)
Range		2.1 – 8.9		1.5 – 9.3		1.9 – 9.0		1.8 – 9.1
Weighted average		6.0		6.5		6.9		7.4
Prepayment speed (3)
Range		6.7% – 26.5%		6.7% – 46.7%		5.3% – 43.8%		5.7% – 46.7%
Weighted average		12.3%		12.1%		9.7%		9.5%
Effect on fair value of (2):
5% adverse change	$	(10,448)	$	(18,008)	$	(12,475)	$	(14,360)
10% adverse change	$	(20,482)	$	(35,280)	$	(24,499)	$	(28,197)
20% adverse change	$	(39,396)	$	(67,777)	$	(47,286)	$	(54,406)
Annual per-loan cost of servicing
Range		$78 – $102		$79 – $102		$68 – $97		$68 – $95
Weighted average		$93		$92		$86		$84
Effect on fair value of (2):
5% adverse change	$	(5,720)	$	(7,101)	$	(6,812)	$	(5,725)
10% adverse change	$	(11,441)	$	(14,202)	$	(13,624)	$	(11,451)
20% adverse change	$	(22,882)	$	(28,405)	$	(27,247)	$	(22,901)

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

(2) For MSRs carried at fair value, an adverse change in one of the above-mentioned key inputs is expected to result in a reduction in fair value which will be recognized in income. For MSRs carried at lower of amortized cost or fair value, an adverse change in one of the above-mentioned key inputs may result in recognition of MSR impairment. The extent of the recognized MSR impairment will depend on the relationship of fair value to the carrying value of such MSRs.

(3) Prepayment speed is measured using Life Total CPR.

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

35

Excess Servicing Spread Financing at Fair Value

The Company categorizes ESS as a “Level 3” fair value financial statement item. The Company uses a discounted cash flow approach to estimate the fair value of ESS. The key inputs used in the estimation of ESS fair value include pricing spread and prepayment speed. Significant changes to either of those inputs in isolation could result in a significant change in the fair value of ESS. Changes in these key inputs are not necessarily directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally slow mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing its fair value, which is owed to PMT. Increases in the fair value of ESS decrease income and are included in Net mortgage loan servicing fees.

Interest expense for ESS is accrued using the interest method based upon the expected cash flows from the ESS through the expected life of the underlying mortgage loans. Other changes in fair value are recorded in Amortization, impairment and change in fair value of mortgage servicing rights.

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

	September 30,	December 31,
	2016	2015
Carrying value (in thousands)	$280,367	$412,425
ESS and pool characteristics:
Unpaid principal balance of underlying mortgage loans (in thousands)	$34,189,425	$51,966,405
Average servicing fee rate (in basis points)	34	32
Average excess servicing spread (in basis points)	19	17
Key inputs:
Pricing spread (1)
Range	4.7% – 5.9%	4.8% – 6.5%
Weighted average	5.5%	5.7%
Average life (in years)
Range	2.2 – 8.9	1.4 – 9.0
Weighted average	6.2	6.9
Annualized prepayment speed (2)
Range	6.7% – 23.3%	5.2% – 52.4%
Weighted average	12.2%	9.6%

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

(2)Prepayment speed is measured using Life Total CPR.

Note 8—Mortgage Loans Held for Sale at Fair Value

Mortgage loans held for sale at fair value include the following:

	September 30,		December 31,
	2016		2015
	(in thousands)
Government-insured or guaranteed	$	2,971,838	$	992,805
Conventional conforming		109,165		59,868
Delinquent mortgage loans purchased from Ginnie Mae pools serviced by the Company		38,433		42,600
Mortgage loans repurchased pursuant to representations and warranties		7,941		5,931
	$	3,127,377	$	1,101,204
Fair value of mortgage loans pledged to secure:
Assets sold under agreements to repurchase	$	2,278,952	$	833,748
Mortgage loan participation and sale agreement		815,665		245,741
	$	3,094,617	$	1,079,489

36

Note 9—Derivative Financial Instruments

The Company is exposed to fair value risk relative to its mortgage loans held for sale as well as to its IRLCs and MSRs. The Company bears fair value risk from the time an IRLC is made to PMT or a loan applicant to the time the mortgage loan is sold. The Company is exposed to loss in fair value of its IRLCs and mortgage loans held for sale when market mortgage interest rates increase. The Company is exposed to loss in fair value of its MSRs when market mortgage interest rates decrease.

The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in market interest rates. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of mortgage loans held for sale and MSRs.

The Company does not use derivative financial instruments for purposes other than in support of its risk management activities other than IRLCs, which are generated in the process of purchasing or originating mortgage loans held for sale. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

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

	September 30, 2016					December 31, 2015
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Derivatives not designated as hedging instruments:
Interest rate lock commitments	4,674,721	$	107,127	$	1,609	3,487,366	$	45,885	$	2,112
Forward purchase contracts	17,116,174		54,574		2,584	5,254,293		4,181		9,004
Forward sales contracts	17,768,293		3,588		45,085	6,230,811		4,965		7,497
MBS put options	5,500,000		6,019		—	1,275,000		404		—
Put options on interest rate futures purchase contracts	3,525,000		6,707		1,500	1,650,000		1,832		203
Call options on interest rate futures purchase contracts	300,000		4,430		398	600,000		1,555		47
Treasury futures purchase contracts	325,000		—		—	—		—		—
Total derivatives before netting			182,445		51,176			58,822		18,863
Netting			(46,668)		(46,750)			(8,542)		(9,780)
		$	135,777	$	4,426		$	50,280	$	9,083
Deposits received from derivative counterparties, net		$	(82)				$	(1,238)

37

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

	Quarter ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,510,863	63,091,757	(59,486,446)	17,116,174
Forward sale contracts	13,614,196	77,956,736	(73,802,639)	17,768,293
MBS put options	3,550,000	6,150,000	(4,200,000)	5,500,000
Put options on interest rate futures purchase contracts	1,000,000	4,025,000	(1,500,000)	3,525,000
Call options on interest rate futures purchase contracts	452,100	900,000	(1,052,100)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Quarter ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,202,418	33,050,370	(33,189,047)	6,063,741
Forward sale contracts	9,789,564	42,709,764	(45,383,082)	7,116,246
MBS put options	327,500	1,260,000	(677,500)	910,000
MBS call options	160,000	—	(160,000)	—
Put options on interest rate futures purchase contracts	2,019,500	3,365,000	(2,009,500)	3,375,000
Call options on interest rate futures purchase contracts	1,025,000	2,140,000	(1,990,000)	1,175,000

	Nine months ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	5,254,293	140,774,477	(128,912,596)	17,116,174
Forward sale contracts	6,230,811	173,875,141	(162,337,659)	17,768,293
MBS put options	1,275,000	15,600,000	(11,375,000)	5,500,000
Put options on interest rate futures purchase contracts	1,650,000	8,700,000	(6,825,000)	3,525,000
Call options on interest rate futures purchase contracts	600,000	4,537,500	(4,837,500)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Nine months ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	2,634,218	78,426,073	(74,996,550)	6,063,741
Forward sale contracts	3,901,851	107,084,874	(103,870,479)	7,116,246
MBS put options	340,000	2,502,500	(1,932,500)	910,000
MBS call options	—	160,000	(160,000)	—
Put options on interest rate futures purchase contracts	755,000	7,190,000	(4,570,000)	3,375,000
Call options on interest rate futures purchase contracts	630,000	5,055,000	(4,510,000)	1,175,000
Put options on interest rate futures sale contracts	50,000	50,000	(100,000)	—
Call options on interest rate futures sales contracts	—	35,100	(35,100)	—

38

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

		Quarter ended September 30,				Nine months ended September 30,
Hedged item	Income statement line	2016		2015		2016		2015
		(in thousands)
Interest rate lock commitments and mortgage loans held for sale	Net gains on mortgage loans held for sale	$	(27,546)	$	(63,954)	$	(145,665)	$	(44,713)
Mortgage servicing rights	Net mortgage loan servicing fees	$	19,026	$	30,455	$	142,694	$	19,259

Note 10—Mortgage Servicing Rights

Carried at Fair Value

The activity in MSRs carried at fair value is as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	526,294	$	581,269	$	660,247	$	325,383
Additions:
Purchases		12		109,131		23		379,264
Mortgage servicing rights resulting from mortgage loan sales		3,913		6,989		13,201		13,107
		3,925		116,120		13,224		392,371
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(17,573)		(5,651)		(118,304)		2,942
Other changes in fair value (2)		(20,618)		(22,071)		(63,139)		(51,029)
Total change in fair value		(38,191)		(27,722)		(181,443)		(48,087)
Balance at end of period	$	492,028	$	669,667	$	492,028	$	669,667
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	391,563	$	37,705
Note payable		99,805		20,881
	$	491,368	$	58,586

(1) Principally reflects changes in discount rates and prepayment speed inputs, primarily due to changes in market interest rates.

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

39

Carried at Lower of Amortized Cost or Fair Value

The activity in MSRs carried at the lower of amortized cost or fair value is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Amortized cost:
Balance at beginning of period	$	961,591	$	581,558	$	798,925	$	415,245
Mortgage servicing rights resulting from mortgage loan sales		146,448		154,707		370,414		347,549
Amortization		(40,230)		(19,522)		(101,530)		(46,051)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		(12,777)		—		(12,777)		—
Balance at end of period		1,055,032		716,743		1,055,032		716,743
Valuation allowance:
Balance at beginning of period		(196,957)		(27,317)		(47,237)		(9,800)
Additions		(25,206)		(51,701)		(174,926)		(69,218)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		12,777		—		12,777		—
Balance at end of period		(209,386)		(79,018)		(209,386)		(79,018)
Mortgage servicing rights, net	$	845,646	$	637,725	$	845,646	$	637,725
Fair value of mortgage servicing rights at beginning of period	$	764,634	$	569,969	$	766,345	$	416,802
Fair value of mortgage servicing rights at end of period	$	845,646	$	647,942
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	818,321	$	744,974
Note payable		23,389		—
	$	841,710	$	744,974

The following table summarizes the Company’s estimate of future amortization of its existing MSRs. This estimate was developed with the inputs applicable to the September 30, 2016 valuation of MSRs. The inputs underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time.

	Estimated MSR
Twelve month period ending September 30,	amortization
	(in thousands)
2017	$	149,968
2018		126,485
2019		108,364
2020		93,669
2021		81,397
Thereafter		495,149
	$	1,055,032

40

Servicing fees relating to MSRs are recorded in Net mortgage loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; late charges and other ancillary fees relating to MSRs are recorded in Net servicing fees—Loan servicing fees—Ancillary and other fees on the Company’s consolidated statements of income. The fees are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Contractual servicing fees	$	98,865	$	83,424	$	282,962	$	200,392
Ancillary and other fees:
Late charges		4,798		1,420		14,164		4,538
Other		1,316		478		3,393		1,880
	$	104,979	$	85,322	$	300,519	$	206,810

Mortgage Servicing Liabilities Carried at Fair Value

The activity in mortgage servicing liabilities carried at fair value is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	4,681	$	11,791	$	1,399	$	6,306
Mortgage servicing liabilities assumed		5,736		—		5,736		—
Mortgage servicing liabilities resulting from mortgage loan sales		6,401		8,358		11,810		20,442
Change in fair value		(3,773)		(9,425)		(5,900)		(16,024)
Balance at end of period	$	13,045	$	10,724	$	13,045	$	10,724

Note 11—Carried Interest Due from Investment Funds

The activity in the Company’s Carried Interest due from Investment Funds is summarized as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	70,763	$	68,713	$	69,926	$	67,298
Carried Interest recognized during the period		107		1,483		944		2,898
Proceeds received during the period		—		—		—		—
Balance at end of period	$	70,870	$	70,196	$	70,870	$	70,196

The amount of the Carried Interest that will be received by the Company depends on the Investment Funds’ future performance. As a result, the amount of Carried Interest recorded by the Company is based on the cash flows that would be produced assuming termination of the Investment Funds at period end and may be reduced in future periods based on the performance of the Investment Funds in those periods. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of any reduction to Carried Interest will be limited to the amounts previously recognized.

Management expects the Carried Interest to be collected by the Company when the Investment Funds liquidate. The limited liability company and limited partnership agreements of the Investment Funds specify that the funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion. PCM has elected to extend the relevant agreements of the Investment Funds for the first of such three one-year extensions.

41

Note 12—Borrowings

The borrowing facilities described throughout this Note 12 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio, profitability and liquidity. Management believes that the Company was in compliance with these covenants as of September 30, 2016.

Assets Sold Under Agreement to Repurchase

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

Following is a summary of financial information relating to assets sold under agreements to repurchase:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	1,515,632		$	975,724		$	1,303,313		$	805,517
Weighted average interest rate (1)		2.87	%		1.84	%		2.87	%		1.82	%
Total interest expense	$	12,951		$	5,661		$	33,863		$	14,159
Maximum daily amount outstanding	$	2,550,035		$	1,496,306		$	2,550,035		$	1,496,306

		September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	2,491,762		$	1,167,405
Unamortized debt issuance costs		(396)			(674)
	$	2,491,366		$	1,166,731
Unused amount (2)	$	350,238		$	40,178
Fair value of assets securing repurchase agreements
Mortgage loans held for sale	$	2,278,952		$	833,748
Mortgage servicing rights		1,209,884			782,679
	$	3,488,836		$	1,616,427
Weighted average interest rate		2.63	%		2.50	%
Margin deposits placed with counterparties (3)	$	3,000		$	2,500

(1) Excludes the effect of amortization of commitment fees totaling $1.8 million and $1.1 million for the quarters ended September 30, 2016 and 2015, respectively, and $5.4 million and $3.1 million for the nine months ended September 30, 2016 and 2015, respectively.

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

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

42

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

Remaining maturity at September 30, 2016	Balance
	(dollars in thousands)
Within 30 days	$	161,828
Over 30 to 90 days		2,325,774
Over 90 days		4,160
		2,491,762
Unamortized debt issuance costs		(396)
Total loans sold under agreements to repurchase	$	2,491,366
Weighted average maturity (in months)		1.7

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s mortgage loans held for sale sold under agreements to repurchase is summarized by counterparty below as of September 30, 2016:

			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	820,256	December 26, 2016	December 26, 2016
Credit Suisse First Boston Mortgage Capital LLC	$	70,451	December 7, 2016	March 30, 2017
Banc of America, N.A.	$	47,433	December 18, 2016	March 29, 2017
JP Morgan Chase Bank, N.A.	$	11,800	December 24, 2016	August 18, 2017
Morgan Stanley Bank, N.A.	$	20,279	November 18, 2016	August 25, 2017
Citibank, N.A.	$	27,027	November 6, 2016	December 2, 2016
Barclays Bank PLC	$	76,502	December 2, 2016	December 2, 2016

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

Mortgage Loan Participation and Sale Agreements

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

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

The mortgage loan participation and sale agreements are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	365,112		$	200,510		$	241,131		$	163,365
Weighted average interest rate (1)		1.75	%		1.44	%		1.72	%		1.43	%
Total interest expense	$	1,887		$	814		$	3,585		$	2,053
Maximum daily amount outstanding	$	793,395		$	250,325		$	793,395		$	250,325

43

	September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	782,942		$	234,898
Unamortized debt issuance costs		(29)			(26)
	$	782,913		$	234,872
Weighted average interest rate		1.77	%		1.45	%
Fair value of mortgage loans pledged to secure mortgage loan participation and sale agreement	$	815,665		$	245,741

(1) Excludes the effect of amortization of facility fees totaling $250,000 and $74,000 for the quarters ended September 30, 2016 and 2015, respectively, and $435,000 and $276,000 for the nine months ended September 30, 2016 and 2015, respectively.

Notes Payable

The Company entered into a revolving credit agreement classified as a note payable, dated as of December 30, 2015, pursuant to which the lenders have agreed to make revolving loans in an amount not to exceed $100,000,000. Interest on the note payable accrues at an annual rate of interest equal to, at the election of the Company, either LIBOR plus the applicable contract margin or an alternate base rate.  The maturity date of the note payable is 364 days following the date of the revolving credit agreement. The proceeds of the note payable are to be used solely for working capital and general corporate purposes of the Company and its subsidiaries.

During December 2015, the Company entered into a second note payable which is secured by MSRs relating to certain mortgage loans in the Company’s servicing portfolio.  Interest is charged at a rate based on LIBOR plus the applicable contract margin.

Notes payable are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	100,390		$	361,488		$	102,492		$	239,935
Weighted average interest rate (1)		4.55	%		3.07	%		4.50	%		3.03	%
Total interest expense	$	2,129		$	3,760		$	6,018		$	7,858
Maximum daily amount outstanding	$	115,006		$	407,000		$	128,849		$	407,000

	September 30,		December 31,
	2016		2015
	(in thousands)
Carrying value:
Unpaid principal balance	$	111,014	$	62,677
Unamortized debt issuance costs		(395)		(1,541)
	$	110,619	$	61,136
Unused amount	$	88,986	$	57,328
Assets pledged to secure notes payable:
Mortgage servicing rights	$	123,194	$	20,881
Cash	$	84,851	$	93,757
Carried Interest	$	70,870	$	69,296

(1) Excluding the effect of amortization of debt issuance costs totaling $760,000 and $2.1 million during the quarter and nine months ended September 30, 2016.

44

Obligations under Capital Lease

In December 2015, the Company entered into a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on December 9, 2019 and bears interest at a spread over one month LIBOR.

Obligations under capital lease are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	21,975		$	—		$	17,451		$	—
Weighted average interest rate		2.46	%		—	%		2.45	%		—	%
Total interest expense	$	139		$	—		$	363		$	—
Maximum daily amount outstanding	$	23,263		$	—		$	24,720		$	—

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance	$	20,700	$	13,579
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	22,281	$	14,034
Capitalized software	$	444	$	783

Excess Servicing Spread Financing

In conjunction with the Company’s purchase from non-affiliates of certain MSRs relating to pools of Agency-backed residential mortgage loans, the Company has entered into sale and assignment agreements with PMT. Under these agreements, the Company sold to PMT the right to receive ESS cash flows relating to certain MSRs. The Company retained a fixed base servicing fee and all ancillary income associated with servicing the mortgage loans. The Company continues to be the servicer of the mortgage loans and provides all servicing functions, including the responsibility to make servicing advances.

Following is a summary of ESS:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	294,551	$	359,102	$	412,425	$	191,166
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
For cash		—		84,165		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		2,268		5,039		4,833
Accrual of interest		4,827		8,026		17,555		17,596
Repayment		(16,342)		(24,717)		(54,623)		(55,800)
Repurchase (1)		—		—		(59,045)		—
Change in fair value		(4,107)		(10,271)		(40,984)		(10,674)
Balance at end of period	$	280,367	$	418,573	$	280,367	$	418,573

(1) On February 29, 2016, the Company and PMT terminated that certain master spread acquisition and MSR servicing agreement that the parties entered into effective February 1, 2013 (the “2/1/13 Spread Acquisition Agreement”) and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, the Company reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by the Company to PMT under the 2/1/13 Spread Acquisition Agreement and then subject to such 2/1/13 Spread Acquisition Agreement. On February 29, 2016, the Company also reacquired from PMT all of its right, title and interest in and to all of the Freddie Mac ESS previously sold to PMT by the Company.

45

Note 13—Liability for Losses Under Representations and Warranties

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	24,277	$	16,257	$	20,611	$	13,259
Provision for losses on mortgage loans sold:
Resulting from sales of mortgage loans		852		2,292		5,220		5,535
Reduction in liability due to change in estimate		(6,648)		—		(6,648)		—
Incurred losses		(8)		(71)		(710)		(316)
Balance at end of period	$	18,473	$	18,478	$	18,473	$	18,478
Unpaid principal balance of mortgage loans subject to representations and warranties at period end	$	80,050,420	$	54,259,297

Note 14—Income Taxes

The Company’s effective tax rates were 12.2% and 11.6% for the quarters ended September 30, 2016 and 2015, respectively, and 12.0% and 11.5% for the nine months ended September 30, 2016 and 2015, respectively. The difference between the Company’s effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into the Company’s shares, the portion of the Company’s income that will be subject to corporate federal and state statutory tax rates will increase, which will in turn increase the Company’s effective income tax rate.

Note 15—Noncontrolling Interest

Net income attributable to the Company’s common stockholders and the effects of changes in noncontrolling ownership interest in PennyMac are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	$	1,398	$	487	$	4,038	$	2,919
Shares of Class A common stock of PennyMac Financial Services, Inc. issued pursuant to exchange of Class A units of Private National Mortgage Acceptance Company, LLC		73		44		166		177

	September 30,		December 31,
	2016		2015
Percentage of noncontrolling interest in Private National Mortgage Acceptance Company, LLC	70.7	%	71.1	%

46

Note 16—Net Gains on Mortgage Loans Held for Sale

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
From non-affiliates:
Cash gain(loss) :
Mortgage loans	$	40,381	$	(33,957)	$	82,612	$	(70,171)
Hedging activities		(13,526)		(51,469)		(163,659)		(51,803)
		26,855		(85,426)		(81,047)		(121,974)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from mortgage loan sales, net		143,960		153,338		371,805		340,214
Provision for losses relating to representations and warranties:
Pursuant to mortgage loan sales		(852)		(2,292)		(5,220)		(5,535)
Reduction in liability due to change in estimate		6,648		—		6,648		—
Change in fair value relating to mortgage loans and hedging derivatives held at period end:
Interest rate lock commitments		15,256		15,800		61,744		11,137
Mortgage loans		5,964		16,809		37,481		16,890
Hedging derivatives		(14,020)		(12,485)		17,994		7,090
		183,811		85,744		409,405		247,822
Recapture payable to PennyMac Mortgage Investment Trust		(1,690)		(3,098)		(5,557)		(5,843)
	$	182,121	$	82,646	$	403,848	$	241,979

47

Note 17—Net Interest Expense

Net interest expense is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Interest income:
From non-affiliates:
Short-term investments	$	1,756	$	94	$	2,212	$	428
Mortgage loans held for sale at fair value		14,835		12,518		38,578		32,657
Placement fees relating to custodial funds		4,144		1,152		10,204		2,263
		20,735		13,764		50,994		35,348
From PennyMac Mortgage Investment Trust—Note receivable		1,974		1,289		5,798		1,822
		22,709		15,053		56,792		37,170
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		12,951		5,661		33,863		14,159
Mortgage loan participation and sale agreement		1,887		814		3,585		2,053
Notes payable		2,129		3,760		6,018		7,858
Obligations under capital lease		139		—		363		—
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		4,587		1,803		10,114		5,003
Interest on mortgage loan impound deposits		996		880		2,471		2,453
		22,689		12,918		56,414		31,526
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		4,827		8,026		17,555		17,596
		27,516		20,944		73,969		49,122
	$	(4,807)	$	(5,891)	$	(17,177)	$	(11,952)

Note 18—Stock-based Compensation

Following is a summary of the stock-based compensation expense by type of instrument awarded:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Performance-based RSUs	$	2,514	$	2,474	$	6,947	$	6,819
Stock options		1,073		1,396		3,576		4,392
Time-based RSUs		632		581		1,980		1,718
Exchangeable PNMAC units		14		55		57		175
	$	4,233	$	4,506	$	12,560	$	13,104

48

Following is a summary of equity award activity:

	Quarter ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2016		2,673		2,786		398		76,109
Granted		—		—		10		37
Vested		—				(6)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(189)		(28)		(11)		—
September 30, 2016		2,484		2,756		391		76,146

	Quarter ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2015		2,381		1,869		276		76,015
Granted		—		—		—		9
Vested		—				—		—
Exercised		—		—		(4)		—
Forfeited or canceled		(19)		(11)		(4)		—
September 30, 2015		2,362		1,858		268		76,024

	Nine months ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2015		2,351		1,845		271		76,029
Granted		813		962		261		117
Vested		—				(121)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(680)		(49)		(20)		—
September 30, 2016		2,484		2,756		391		76,146

	Nine months ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2014		1,257		1,167		202		75,936
Granted		1,143		715		150		88
Vested		—				(75)		—
Exercised		—		—		—		—
Forfeited or canceled		(38)		(24)		(9)		—
September 30, 2015		2,362		1,858		268		76,024

49

Note 19—Supplemental Cash Flow Information

	Nine months ended September 30,
	2016		2015
	(in thousands)
Cash paid for interest	$	70,897	$	47,867
Cash paid for income taxes	$	452	$	1,909
Non-cash investing activity:
Mortgage servicing rights resulting from mortgage loan sales	$	383,615	$	360,656
Mortgage servicing liabilities resulting from mortgage loan sales	$	11,810	$	20,442
Non-cash financing activity:
Transfer of excess servicing spread to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	5,039	$	4,833
Issuance of common stock in settlement of director fees	$	230	$	223

Note 20—Regulatory Capital and Liquidity Requirements

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

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

	September 30, 2016				December 31, 2015
Agency–company subject to requirement	Balance (1)		Requirement		Balance (1)		Requirement
	(in thousands)
Capital
Fannie Mae & Freddie Mac - PLS	$	1,166,706	$	317,441	$	835,157	$	283,655
Ginnie Mae - PLS	$	957,613	$	390,520	$	633,222	$	386,732
Ginnie Mae - PennyMac	$	1,135,605	$	429,572	$	894,731	$	425,405
HUD - PLS	$	957,613	$	2,500	$	633,222	$	2,500
Liquidity
Fannie Mae & Freddie Mac - PLS	$	132,969	$	43,055	$	145,431	$	38,936
Ginnie Mae - PLS	$	132,969	$	107,079	$	145,431	$	95,868

(1) Calculated in accordance with the respective Agency’s capital and liquidity requirements.

Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency. PennyMac and PLS had Agency capital and liquidity in excess of the respective Agencies’ requirements at September 30, 2016.

Note 21—Commitments and Contingencies

Commitments to Fund and Sell Mortgage Loans

	September 30, 2016
	(in thousands)
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust	$	2,383,191
Commitments to fund mortgage loans		2,291,530
	$	4,674,721

50

Litigation

The business of the Company involves the collection of numerous accounts, as well as the validation of liens and compliance with various state and federal lending and servicing laws. Accordingly, the Company may be involved in proceedings, claims, and legal actions arising in the ordinary course of business. As of September 30, 2016, the Company was not involved in any legal proceedings, claims, or actions that in management’s view would be reasonably likely to have a material adverse effect on the Company.

Commitment to Make Distributions to PennyMac Owners

Under the terms of its Limited Liability Company Agreement, PennyMac is required to make cash distributions to the Company’s noncontrolling interest holders in amounts sufficient to allow such noncontrolling interest holders to pay federal and state taxes on their allocable share of PennyMac taxable income.  Such distributions are calculated and, if required, made quarterly. 

Note 22—Segments and Related Information

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

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

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

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Financial performance and results by segment are as follows:

	Quarter ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	166,506	$	15,615	$	182,121	$	—	$	182,121
Mortgage loan origination fees		34,621		—		34,621		—		34,621
Fulfillment fees from PennyMac Mortgage Investment Trust		27,255		—		27,255		—		27,255
Net mortgage loan servicing fees		—		45,864		45,864		—		45,864
Management fees		—		—		—		5,521		5,521
Carried Interest from Investment Funds		—		—		—		107		107
Net interest income (expense):
Interest income		13,013		9,696		22,709		—		22,709
Interest expense		9,323		18,182		27,505		11		27,516
		3,690		(8,486)		(4,796)		(11)		(4,807)
Other		508		205		713		—		713
Total net revenue		232,580		53,198		285,778		5,617		291,395
Expenses		82,767		63,937		146,704		5,413		152,117
Income (loss) before provision for income taxes and non-segment activities		149,813		(10,739)		139,074		204		139,278
Non-segment activities		—		—		—		—		—
Income (loss) before provision for income taxes	$	149,813	$	(10,739)	$	139,074	$	204	$	139,278
Segment assets at period end (2)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers.

(2) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

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	Quarter ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	81,005	$	1,641	$	82,646	$	—	$	82,646
Mortgage loan origination fees		29,448		—		29,448		—		29,448
Fulfillment fees from PennyMac Mortgage Investment Trust		17,553		—		17,553		—		17,553
Net mortgage loan servicing fees		—		57,258		57,258		—		57,258
Management fees		—		—		—		6,456		6,456
Carried Interest from Investment Funds		—		—		—		1,483		1,483
Net interest income (expense):
Interest income		13,228		1,825		15,053		—		15,053
Interest expense		6,290		14,714		21,004		—		21,004
		6,938		(12,889)		(5,951)		—		(5,951)
Other		272		121		393		(141)		252
Total net revenue		135,216		46,131		181,347		7,798		189,145
Expenses		57,477		52,187		109,664		5,618		115,282
Income (loss) before provision for income taxes		77,739		(6,056)		71,683		2,180		73,863
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	77,739	$	(6,056)	$	71,683	$	2,180	$	73,923
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3)Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

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	Nine months ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains (losses) on mortgage loans held for sale at fair value	$	360,614	$	43,234	$	403,848	$	—	$	403,848
Loan origination fees		85,962		—		85,962		—		85,962
Fulfillment fees from PennyMac Mortgage Investment Trust		59,301		—		59,301		—		59,301
Net servicing fees		—		89,938		89,938		—		89,938
Management fees		—		—		—		17,163		17,163
Carried Interest from Investment Funds		—		—		—		944		944
Net interest income (expense):
Interest income		32,918		23,873		56,791		1		56,792
Interest expense		21,031		52,951		73,982		37		74,019
		11,887		(29,078)		(17,191)		(36)		(17,227)
Other		1,596		824		2,420		204		2,624
Total net revenue		519,360		104,918		624,278		18,275		642,553
Expenses		196,634		176,088		372,722		16,205		388,927
Income (loss) before provision for income taxes and non-segment activities		322,726		(71,170)		251,556		2,070		253,626
Non-segment activities (2)		—		—		—		—		49
Income (loss) before provision for income taxes	$	322,726	$	(71,170)	$	251,556	$	2,070	$	253,675
Segment assets at period end (3)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

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	Nine months ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	244,361	$	(2,382)	$	241,979	$	—	$	241,979
Loan origination fees		70,551		—		70,551		—		70,551
Fulfillment fees from PennyMac Mortgage Investment Trust		45,752		—		45,752		—		45,752
Net servicing fees		—		152,583		152,583		—		152,583
Management fees		—		—		—		21,908		21,908
Carried Interest from Investment Funds		—		—		—		2,898		2,898
Net interest income (expense):
Interest income		30,041		7,129		37,170		—		37,170
Interest expense		15,131		34,051		49,182		—		49,182
		14,910		(26,922)		(12,012)		—		(12,012)
Other		1,420		840		2,260		(109)		2,151
Total net revenue		376,994		124,119		501,113		24,697		525,810
Expenses		155,542		150,737		306,279		17,631		323,910
Income (loss) before provision for income taxes and non-segment activities		221,452		(26,618)		194,834		7,066		201,900
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	221,452	$	(26,618)	$	194,834	$	7,066	$	201,960
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3) Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

Note 23—Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU 2014-09, Revenue from Contracts with Customers (Subtopic 606)(“ASU 2014-09”), which supersedes the guidance in ASC 605, Revenue Recognition. ASU 2014-09 clarifies the principles for recognizing revenue in order to improve comparability of revenue recognition practices across entities and industries with certain scope exceptions including financial instruments, leases, and guarantees. ASU 2014-09 provides guidance intended to assist in the identification of contracts with customers and separate performance obligations within those contracts, the determination and allocation of the transaction price to those identified performance obligations and the recognition of revenue when a performance obligation has been satisfied. ASU 2014-09 also requires disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers.

Upon adoption, ASU 2014-09 provides for transition through either a full retrospective approach requiring the restatement of all presented prior periods or a modified retrospective approach, which allows the new recognition standard to be applied to only those contracts that are not completed at the date of transition. If the modified retrospective approach is adopted, a cumulative-effect adjustment to retained earnings is performed with additional disclosures required including the amount by which each line item is affected by the transition as compared to the guidance in effect before adoption and an explanation of the reasons for significant changes in these amounts.

The FASB has issued several amendments to the new revenue standard ASU 2014-09, including:

· In May 2014, ASU 2015-14, Revenue From Contracts With Customers (“ASU 2015-14”). This update deferred the initial effective date of ASU 2014-09. As a result of the issuance of ASU 2015-14, ASU

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2014-09 is effective for annual reporting periods beginning on or after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

· In March 2015, ASU 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments to this update are intended to improve the implementation guidance on principal versus agent considerations in ASU 2014-09 by clarifying how an entity should identify the unit of account (i.e. the specified good or service) and how an entity should apply the control principle to certain types of arrangements.

· In May 2016, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients. The amendments to this update clarify certain core recognition principles and provide practical expedients available at transition. The improvements address collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition.

The Company is currently evaluating the pending adoption of ASU 2014-09 and its impact on its consolidated financial statements and has not yet identified which transition method will be applied upon adoption.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related note disclosures.

Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting establishes the fundamental basis for measuring and classifying assets and liabilities.

ASU 2014-15 extends the responsibility for performing the going-concern assessment to management and contains guidance on (1) how to perform a going-concern assessment and (2) when going-concern disclosures would be required under U.S. GAAP.

Under ASU 2014-15, an entity would be required to evaluate its status as a going concern as part of its periodic financial statement preparation process and would be required to disclose information about its potential inability to continue as a going concern when “substantial doubt” about its ability to continue as a going concern for the period of one year from the earlier of the date its financial statements are issued or are ready to be issued.

If management concludes that there is “substantial doubt about the entity’s ability to continue as a going concern, it must disclose the principal conditions or events causing substantial doubt to be raised, management’s evaluation of the conditions and management’s plans. If substantial doubt is not alleviated as a result of management’s plans, the company is required to include a statement that there is “substantial doubt about the entity’s ability to continue as a going concern.” ASU 2014-15 also requires an entity to disclose how the substantial doubt was resolved in the period that substantial doubt no longer exists.

ASU 2014-15 is effective for the annual period ending December 31, 2016. The adoption of ASU 2014-15 is not expected to have an effect on the financial statements of the Company.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU 2015-

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02 effective January 1, 2016. The adoption of ASU 2015-02 had no effect on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 affects the accounting for equity investments, financial liabilities under the fair value option, the presentation and disclosure requirements for financial instruments, and the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.

ASU 2016-01 requires that:

· All equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) with readily determinable fair values will generally be measured at fair value through earnings.

· When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The accumulated gains and losses due to these changes will be reclassified from accumulated other comprehensive income to earnings if the financial liability is settled before maturity.

· For financial instruments measured at amortized cost, public business entities will be required to use the exit price when measuring the fair value of financial instruments for disclosure purposes.

· Financial assets and financial liabilities shall be presented separately in the notes to the financial statements, grouped by measurement category (e.g., fair value, amortized cost, lower of cost or fair value) and form of financial asset (e.g., loans, securities).

· Public business entities will no longer be required to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost.

· Entities will have to assess the realizability of a deferred tax asset related to a debt security classified as available for sale in combination with the entity’s other deferred tax assets.

The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income is permitted and can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. The Company is currently assessing the potential effect that the adoption of ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors) and supersedes previous leasing standards. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. 

ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In March 2016, The FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, including:

· Modifies the accounting for income taxes relating to share-based payments. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) will be recognized as income tax expense or benefit in the consolidated income statement. The tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur.

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An entity will recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Under current GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the consolidated income statement in the period they reduce income taxes payable.

· Changes the classification of excess tax benefits on the consolidated statement of cash flows. In the consolidated statement of cash flows, excess tax benefits will be classified along with other income tax cash flows as an operating activity. Under current GAAP, excess tax benefits are separated from other income tax cash flows and classified as a financing activity.

· Changes the requirement to estimate the number of awards that are expected to vest. Under ASC 2016-09, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest as presently required or account for forfeitures when they occur. Under current GAAP, accruals of compensation cost are based on the number of awards that are expected to vest.

· Changes the tax withholding requirements for share-based payment awards to qualify for equity accounting. The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. Under current GAAP, for an award to qualify for equity classification is that an entity cannot partially settle the award in cash in excess of the employer’s minimum statutory withholding requirements.

· Establishes GAAP for the classification of employee taxes paid when an employer withholds shares for tax withholding purposes. Cash paid by an employer when directly withholding shares for tax- withholding purposes should be classified as a financing activity. This guidance establishes GAAP related to the classification of withholding taxes in the statement of cash flows as there is no such guidance under current GAAP.

ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is currently assessing the potential effect that the adoption of ASU 2016-09 will have on its consolidated financial statements.

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Note 24—Subsequent Events

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

· On October 4, 2016, the Company, through PLS, amended the terms of its master repurchase agreement, dated July 2, 2013, by and among Morgan Stanley Bank, N.A. (“Morgan Stanley”), on the one hand, and PLS, on the other hand (the “MS Repurchase Agreement”), pursuant to which PLS, may sell, and later repurchase, newly originated mortgage loans that are originated through the PLS consumer direct lending channel or purchased from correspondent lenders through a subsidiary of PMT and, in either case, held by PLS pending sale and/or securitization.

Prior to the amendment, the MS Repurchase Agreement provided for a maximum aggregate purchase price of $200 million. Of this amount, $125 million was committed and available for purchases under the MS Repurchase Agreement.  Pursuant to the terms of the amendment, Morgan Stanley agreed to increase the maximum aggregate purchase price from $200 million to $300 million. Of this amount, $175 million is committed and available for purchases under the Repurchase Agreement.

· On October 11, 2016, the Company, through PLS and PennyMac, executed a Second Amended and Restated Request for Temporary Increase (the “Temporary Increase”) in connection with that certain mortgage loan participation purchase and sale agreement, dated August 13, 2014, by and among Bank of America, N.A. (“BANA”), on the one hand, and PLS, as seller, and PNMAC, as guarantor, on the other hand (the “BANA Participation Agreement”). The Temporary Increase amends and supersedes that certain request for temporary increase entered into by PLS, PNMAC and BANA on August 25, 2016.

Pursuant to the terms of the BANA Participation Agreement, PLS may sell to BANA participation certificates, each representing an undivided beneficial ownership interest in a pool of mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae and are pending securitization. Pursuant to the Temporary Increase, BANA agreed to temporarily maintain the aggregate transaction limit of purchase prices for participation certificates owned by BANA at any given time at up to $800 million until December 12, 2016, at which time the aggregate transaction limit of purchase prices will be reset to $250 million.

· On October 14, 2016, the Company, through PLS, entered into an amendment to its master repurchase agreement, dated as of June 26, 2012, by and between Citibank, N.A. (“Citibank”) and PLS (the “Citi Repurchase Agreement”), pursuant to which PLS may sell, and later repurchase, newly originated mortgage loans that are originated through PLS’ consumer direct lending channel or purchased from correspondent lenders through a subsidiary of PMT and, in either case, held by PLS pending sale and/or securitization.

Under the terms of this amendment, the uncommitted amount of the maximum aggregate purchase price provided for in the Citi Repurchase Agreement was increased from $50 million to $250 million and the maximum aggregate purchase price from $200 million to $400 million until December 2, 2016.

· On October 20, 2016, the Company entered into another amendment to the Citi Repurchase Agreement pursuant to which the maturity date of the Citi Repurchase Agreement was extended from October 20, 2016 to December 2, 2016. 

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· On October 17, 2016, the Company, through PLS and PNMAC, entered into amendments (the “October Amendments”) to the terms of (i) its Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), PLS and PNMAC (the “CSFB Repurchase Agreement”), pursuant to which PLS may sell to, and later repurchase from, CSFB certain newly originated or recently acquired residential and small balance multifamily mortgage loans; and (ii) its Master Repurchase Agreement (Participation Certificates and Servicing) by and among CSFB, PLS and PNMAC and dated as of November 10, 2015 (the “MSR Repo”), pursuant to which PLS may finance certain of its mortgage servicing rights and related participation interests and loan servicing advance receivables.

The original terms of the CSFB Repurchase Agreement and the MSR Repo collectively provided for a maximum combined purchase price of $907 million. Of this amount, $700 million was committed and available for purchases under the CSFB Repurchase Agreement to the extent not reduced by purchased amounts outstanding under the MSR Repo, while $407 million was committed and available for purchases under the MSR Repo to the extent not reduced by purchased amounts outstanding under the CSFB Repurchase Agreement. On September 26, 2016, CSFB previously agreed to increase the maximum combined purchase price provided for under the CSFB Repurchase Agreement and the MSR Repo from $907 million to $1.207 billion until October 26, 2016, at which time the maximum combined purchase price would be reset to $907 million.  Pursuant to the terms of the October Amendments, CSFB agreed to extend such increase in the maximum combined purchase price to December 23, 2016.

· On November 1, 2016, the Company, through PLS and PNMAC, entered into a master repurchase (the “JPM Repurchase Agreement”) agreement by and among JPMorgan Chase Bank, National Association (“JPM”), pursuant to which PLS may sell to JPM participation certificates, each of which represents an undivided beneficial ownership interest in a pool of mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae and are pending securitization, in an aggregate principal amount of up to $500 million. In connection with its sale of any participation certificate, PLS will also assign to JPM a take-out commitment, which evidences PLS’ right to sell to a third-party investor the security backed by the mortgage loans underlying the related participation certificate.  The scheduled maturity date of the JPM Repurchase Agreement is October 31, 2017, and the obligations of PLS are fully guaranteed by PNMAC. 

· On November 3, 2016, the Company, through PNMAC, entered into Schedule Number 003 (the “Schedule”) to that certain Master Lease Agreement (the “Master Lease”), dated as of December 9, 2015, with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the Master Lease, the Company may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by the Company’s indirect controlled subsidiary, PennyMac Loan Services, LLC.  Pursuant to the Schedule, PNMAC is financing equipment with an aggregate cost of approximately $4.3 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At the expiration of the three-year term, the Company is obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. All other terms and conditions of the Master Lease remain the same in all material respects.

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

Overview

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

Our Company

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

We operate and control all of the business and affairs of Private National Mortgage Acceptance Company, LLC (“PennyMac”) and are its sole managing member. PennyMac was founded in 2008 by members of our executive leadership team and two strategic partners, BlackRock Mortgage Ventures, LLC and HC Partners, LLC, formerly known as Highfields Capital Investments, LLC, together with its affiliates.

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

Our investment management subsidiary, PNMAC Capital Management, LLC (“PCM”), is a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisors Act of 1940, as amended, PCM manages PennyMac Mortgage Investment Trust (“PMT”), a mortgage real estate investment trust, listed on the New York Stock Exchange under the ticker symbol PMT, PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, LP, both registered under the Investment

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Company Act of 1940 (“Investment Company Act”), as amended, an affiliate of these Funds and PNMAC Mortgage Opportunity Fund Investors, LLC. We refer to these funds collectively as our “Investment Funds” and, together with PMT, as our “Advised Entities.”

Mortgage Banking

Loan Production

Our loan production segment sources mortgage loans through two channels: correspondent production and consumer direct lending.

In correspondent production we manage, on behalf of PMT and for our own account, the acquisition of newly originated, prime credit quality, first-lien residential mortgage loans that have been underwritten to investor guidelines. PMT acquires, from approved correspondent sellers, newly originated mortgage loans, including both conventional and government-insured or guaranteed residential mortgage loans that qualify for inclusion in securitizations that are guaranteed by the Agencies. For conventional mortgage loans, we perform fulfillment activities for PMT and earn a fulfillment fee for each mortgage loan purchased by PMT. In the case of government guaranteed or insured mortgage loans, we purchase them from PMT at PMT’s cost plus a sourcing fee and fulfill them for our own account.

Through our consumer direct lending channel, we originate new prime credit quality, first-lien residential conventional and government-insured or guaranteed mortgage loans on a national basis to allow customers to purchase or refinance their homes. The consumer direct model relies on the Internet and call center-based staff to acquire and interact with customers across the country. We do not have a “brick and mortar” branch network and have been developing our consumer direct operations with call centers strategically positioned across the United States.

For loans originated through our consumer direct lending channel, we conduct our own fulfillment, earn interest income and gains or losses during the holding period and upon the sale or securitization of these loans, and retain the associated MSRs (subject to sharing with PMT a portion of such MSRs or cash with respect to certain consumer direct originated loans that refinance loans for which the related mortgage servicing rights (“MSRs”) or excess servicing spread (“ESS”) was held by PMT).

Our loan production activity is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Unpaid principal balance of mortgage loans purchased and originated for sale:
Government-insured or guaranteed mortgage loans acquired from PennyMac Mortgage Investment Trust	$	11,694,065	$	10,783,882	$	27,599,186	$	23,602,020
Mortgage loans sourced through our consumer direct channel		1,677,028		1,042,302		4,385,245		3,077,569
	$	13,371,093	$	11,826,184	$	31,984,431	$	26,679,589
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411

Loan Servicing

Our mortgage loan servicing segment performs mortgage loan administration, collection, and default management activities, including the collection and remittance of mortgage loan payments; response to customer inquiries; accounting for principal and interest; holding custodial (impounded) funds for the payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising foreclosures and property dispositions. We service a diverse portfolio of mortgage loans both as the owner of MSRs and on behalf of other MSR or mortgage owners. We provide servicing for conventional and government-insured or guaranteed mortgage loans (“prime servicing”), as well as servicing for distressed mortgage loans that have been acquired as investments by our Advised Entities (“special servicing”) and we have acquired through the assumption of mortgage servicing liabilities. As of September 30, 2016, the portfolio of mortgage loans that we serviced or subserviced totaled approximately $182.1

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billion in UPB.

Investment Management

We are an investment manager through our subsidiary, PCM. PCM currently manages the Advised Entities. The Advised Entities had combined net assets of approximately $1.6 billion as of September 30, 2016. For these activities, we earn management fees as a percentage of the respective Advised Entities’ net assets and incentive compensation based on the entities’ performance.

Observations on Current Market Conditions

Our business is affected by macroeconomic conditions in the United States, including economic growth, unemployment rates, the residential housing market and interest rate levels and expectations. The U.S. economy continues to grow, albeit at a modest pace, as reflected in recent economic data. During the third quarter of 2016, U.S. real gross domestic product expanded at an annual rate of 2.9% compared to 2.0% for the third quarter of 2015 and 1.4% for the second quarter of 2016. The national seasonally adjusted unemployment rate was 5.0% at September 30, 2016 compared to 4.9% at June 30, 2016 and 5.1% at September 30, 2015. Delinquency rates on residential real estate loans remain elevated compared to historical rates, but have been steadily declining. As reported by the Federal Reserve Bank, during the second quarter of 2016, the delinquency rate on residential real estate loans held by commercial banks was 4.6%, a reduction from 5.8% during the second quarter of 2015.

Residential real estate activity remains strong. The seasonally adjusted annual rate of existing home sales for September 2016 was 0.6% higher than for September 2015, and the national median existing home price for all housing types was $234,200, a 5.6% increase from September 2015 (Source: National Association of Realtors®). On a national level, foreclosure filings during the quarter ended September 30, 2016 decreased by 10% as compared to the quarter ended September 30, 2015. However, foreclosure activity is expected to remain above historical average levels through 2016 and beyond.

Changes in fixed-rate residential mortgage loan interest rates generally follow changes in long-term U.S. Treasury yields. Thirty-year fixed mortgage interest rates ranged from a low of 3.41% to a high of 3.50% during the third quarter of 2016 while during the third quarter of 2015, thirty-year fixed mortgage interest rates ranged from a low of 3.84% to a high of 4.09% (Source: Freddie Mac’s Weekly Primary Mortgage Market Survey). Interest rates generally remained flat in the third quarter of 2016.

Mortgage lenders originated an estimated $580 billion of home loans during the third quarter of 2016, up 27.5% from the third quarter of 2015. Total mortgage originations are forecast to be higher in 2016 versus 2015, with current industry estimates for 2016 averaging $1.9 trillion (Source: average of Fannie Mae, Freddie Mac and Mortgage Bankers Association forecasts).

We believe there is long-term market opportunity for the production of non-Agency jumbo mortgage loans. However, most new jumbo mortgage loans are either being originated or purchased by banks, and the current market for jumbo mortgage loan securitizations is limited, as evidenced by weak demand and inconsistent pricing observed throughout 2015 and the first nine months of 2016. Prime jumbo MBS securitizations totaled $1.0 billion in UPB during the third quarter of 2016, a decrease from $2.1 billion during the third quarter of 2015. During the nine months ended September 30, 2016, we produced approximately $14 million in UPB of jumbo loans compared to $111 million in UPB of jumbo loans produced during the nine months ended September 30, 2015.

In our capacity as an investment manager, we expect to see a continued supply of distressed whole loans; however, we believe the pricing for recent transactions has been less attractive for buyers. We are transitioning PMT’s portfolio away from distressed whole loans to correspondent-related investments such as CRT and MSRs, and we continue to monitor the market to assess best execution opportunities for distressed portfolio investments held by the Advised Entities.

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Results of Operations

Our results of operations are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Revenues:
Net gains on mortgage loans held for sale at fair value	$	182,121	$	82,646	$	403,848	$	241,979
Mortgage loan origination fees		34,621		29,448		85,962		70,551
Fulfillment fees from PennyMac Mortgage Investment Trust		27,255		17,553		59,301		45,752
Net mortgage loan servicing fees		45,864		57,258		89,938		152,583
Management fees & Carried Interest		5,628		7,939		18,107		24,806
Net interest expense		(4,807)		(5,891)		(17,177)		(11,952)
Other		713		252		2,623		2,151
Total net revenue		291,395		189,205		642,602		525,870
Expenses		152,117		115,282		388,927		323,910
Provision for income taxes		16,976		8,575		30,535		23,308
Net income	$	122,302	$	65,348	$	223,140	$	178,652
Income before provision for income taxes by segment:
Mortgage banking:
Production	$	149,813	$	77,739	$	322,726	$	221,452
Servicing		(10,739)		(6,056)		(71,170)		(26,618)
Total mortgage banking		139,074		71,683		251,556		194,834
Investment management		204		2,180		2,070		7,066
Non-segment activities (1)		—		60		49		60
	$	139,278	$	73,923	$	253,675	$	201,960
During the period:
Interest rate lock commitments issued	$	16,331,883	$	11,237,991	$	37,996,911	$	30,619,804
Fair value of mortgage loans purchased and originated for sale:
Government-insured or guaranteed loans acquired from PennyMac Mortgage Investment Trust	$	12,360,845	$	11,350,129	$	29,144,685	$	24,864,697
Mortgage loans originated through consumer direct channel		1,688,256		1,053,500		4,418,965		3,106,148
Commercial real estate		3,549		—		9,461		—
	$	14,052,650	$	12,403,629	$	33,573,111	$	27,970,845
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411
	September 30,		December 31,
	2016		2015
Unpaid principal balance of mortgage loan servicing portfolio:
Owned:
Mortgage servicing rights	$	121,312,988	$	110,602,704
Mortgage servicing liabilities		1,717,859		806,897
Mortgage loans held for sale		2,945,465		1,052,485
		125,976,312		112,462,086
Subserviced for Advised Entities		56,100,331		47,810,632
	$	182,076,643	$	160,272,718
Net assets of Advised Entities:
PennyMac Mortgage Investment Trust	$	1,354,918	$	1,496,113
Investment Funds		201,802		231,745
	$	1,556,720	$	1,727,858

(1) Relates to parent Company interest expense eliminated in consolidation.

Net income increased $57.0 million and $44.5 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015. These changes reflect the effects on our mortgage banking activities of decreasing interest rates during the first nine months of 2016 as compared to the same period of 2015.  The increase in net income during the quarter and nine months ended September 30, 2016, compared to the same periods in 2015, was primarily due to an increase in netgains on mortgage loans held for sale at fair value that was partially offset by a decrease in net mortgage loan servicing fees and an increase in expenses incurred to accommodate our growth.

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Net Gains on Mortgage Loans Held for Sale at Fair Value

Most of our mortgage loan production is centered in government-insured or guaranteed loans. Over recent periods, the margins on correspondent government-insured or guaranteed mortgage loans have tended to be higher than those on conventional correspondent production. Government-insured or guaranteed mortgage lending is not as competitive as conventional conforming mortgage lending due to the added complexity involved in the origination and servicing of government-insured or guaranteed mortgage loans. We source the majority of our government-insured or guaranteed mortgage loan production through PMT. PMT is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed mortgage loans. We purchase the government-insured or guaranteed mortgage loans that PMT acquires through its correspondent lending activities and pay PMT a sourcing fee ranging from two to three and one-half basis points on the UPB of such mortgage loans.

During the quarter and nine months ended September 30, 2016, we recognized net gains on mortgage loans held for sale at fair value totaling $182.1 million and $403.8 million, respectively, increases of $99.5 million and $161.9 million from the same periods in 2015. The increase was due to growth in the volume of mortgage loans that we committed to purchase or originate and an improvement in production margins resulting from an increase in volume of our consumer direct channel, which earns higher margins than our correspondent production channel.

Our net gains on mortgage loans held for sale at fair value include both cash and non-cash elements. We receive proceeds on sale that include both cash and our estimate of the fair value of the MSRs and mortgage servicing liabilities created or incurred in such transactions. During the quarter and nine months ended September 30, 2016, the net gains on mortgage loans held for sale at fair value included $144.0 million and $371.8 million, respectively, in fair value of MSRs received, net of mortgage servicing liabilities incurred. During the quarter and nine months ended September 30, 2016, the net gains on mortgage loans held for sale at fair value also included $0.9 million and $5.2 million, respectively, of provision for representations and warranties resulting from loan sales and a $6.6 million reduction in liability relating to mortgage loans sold in prior periods. During the quarter and nine months ended September 30, 2015, the net gains on mortgage loans held for sale at fair value included $153.3 million and $340.2 million, respectively, in fair value of MSRs received as proceeds on sale, net of mortgage servicing liabilities incurred and $2.3 million and $5.5 million, respectively, of provision for representations and warranties.

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Cash (loss) gain:
Mortgage loans	$	40,381	$	(33,957)	$	82,612	$	(70,171)
Hedging activities		(13,526)		(51,469)		(163,659)		(51,803)
		26,855		(85,426)		(81,047)		(121,974)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from mortgage loan sales, net		143,960		153,338		371,805		340,214
Provision for losses relating to representations and warranties:
Pursuant to mortgage loan sales		(852)		(2,292)		(5,220)		(5,535)
Reduction in liability due to change in estimate		6,648		—		6,648		—
Change in fair value of mortgage loans and derivative financial instruments outstanding at period end:
Interest rate lock commitments		15,256		15,800		61,744		11,137
Mortgage loans		5,964		16,809		37,481		16,890
Hedging derivatives		(14,020)		(12,485)		17,994		7,090
		183,811		85,744		409,405		247,822
Recapture payable to PennyMac Mortgage Investment Trust		(1,690)		(3,098)		(5,557)		(5,843)
	$	182,121	$	82,646	$	403,848	$	241,979
During the period:
Unpaid principal balance of mortgage loans sold	$	13,265,227	$	12,197,731	$	31,646,787	$	28,379,856
Interest rate lock commitments issued:
Conventional mortgage loans	$	1,052,984	$	1,754,847	$	2,447,352	$	5,190,855
Government-insured or guaranteed mortgage loans		15,278,899		9,483,144		35,549,559		25,428,949
	$	16,331,883	$	11,237,991	$	37,996,911	$	30,619,804
Period end:
Mortgage loans held for sale at fair value	$	3,127,377	$	1,696,980
Commitments to fund and purchase mortgage loans	$	4,674,721	$	2,781,551

Provision for Losses on Representations and Warranties

We record our estimate of the losses that we expect to incur in the future as a result of claims against us in connection with the representations and warranties we provide to the purchasers and insurers of the mortgage loans we sell in our Net gains on sale of mortgage loans held for sale at fair value. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the mortgage loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.

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

The method we use to estimate our losses on representations and warranties is a function of our estimate of future defaults, mortgage loan repurchase rates, the severity of loss in the event of defaults and the probability of

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reimbursement by the correspondent mortgage loan seller. We establish a liability at the time loans are sold and review our liability estimate on a periodic basis.

We recorded provisions for losses under representations and warranties as a component of Net gains on mortgage loans held for sale at fair value totaling $0.9 million and $5.2 million during the quarter and nine months ended September 30, 2016, respectively, compared to $2.3 million and $5.5 million during the quarter and nine months ended September 30, 2015. The decrease in provision for losses under representations and warranties during the quarter and nine months ended September 30, 2016 compared to the same periods in 2015 was due to use of lower expected loss rates relating to current sales based, in part, on our favorable loss experience relating to similar loans originated in earlier periods, partly offset by an increase in mortgage loan sales activity during 2016 as compared to 2015. We also recorded a reduction in liabilities relating to mortgage loans sold in prior periods totaling $6.6 million during the quarter and nine months ended September 30, 2016. We recorded this reduction due to our losses continuing to be realized at lower-than anticipated levels due in part to the high rate of refinancing activity resulting from the historically low interest rates in the mortgage market over recent periods.

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
During the period:
Indemnification activity
Mortgage loans indemnified by PFSI at beginning of period	$	4,872	$	3,070	$	3,470	$	1,521
New indemnifications		—		214		1,855		1,763
Less:
Indemnified mortgage loans repurchased		—		—		—		—
Indemnified mortgage loans repaid or refinanced		—		—		(453)		—
Mortgage loans indemnified by PFSI at end of period	$	4,872	$	3,284	$	4,872	$	3,284
Repurchase activity
Total mortgage loans repurchased by PFSI	$	2,126	$	5,301	$	13,525	$	17,082
Less:
Mortgage loans repurchased by correspondent lenders		2,865		4,768		9,205		13,044
Mortgage loans repaid by borrowers or resold with defects resolved		466		2,726		1,607		4,684
Net mortgage loans (sold back to correspondents) repurchased by PFSI with losses chargeable to liability for representations and warranties	$	(1,205)	$	(2,193)	$	2,713	$	(646)
Net losses charged to liability for representations and warranties	$	8	$	71	$	710	$	316
	September 30,		December 31,
	2016		2015
Unpaid principal balance of mortgage loans subject to representations and warranties	$	80,050,420	$	60,687,246
Liability for representations and warranties	$	18,473	$	20,611

During the quarter and nine months ended September 30, 2016, we repurchased mortgage loans totaling $2.1 million and $13.5 million in UPB, respectively. We recorded losses of $8,000 and $710,000 respectively net of

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recoveries from correspondent lenders, as a result of these repurchases. As the outstanding balance of mortgage loans we purchase and sell subject to representations and warranties increases and the loans sold continue to season, we expect the level of repurchase activity to continue to increase.

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

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

Other mortgage loan production-related revenues

Mortgage loan origination fees increased $5.2 million and $15.4 million during the quarter and nine months ended September 30, 2016, compared to the same periods in 2015 primarily due to growth in the volume of correspondent purchases in our loan production activities.

Fulfillment fees from PMT, which represent fees we collect for services we perform on behalf of PMT in connection with its acquisition, packaging and sale of mortgage loans, are calculated as a percentage of the UPB of the mortgage loans we fulfill for PMT. Fulfillment fees increased $9.7 million and $13.5 million during the quarter and nine months ended September 30, 2016 compared to the same periods in 2015.  The effect of the increase in volume of mortgage loans we fulfilled for PMT was partially offset by a reduction in the average fulfillment fee rate we charged during 2016 as compared to 2015.

Summarized below are our fulfillment fees:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Fulfillment fee revenue	$	27,255	$	17,553	$	59,301	$	45,752
Unpaid principal balance of mortgage loans fulfilled	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411
Average fulfillment fee rate (in basis points)		38		43		38		43

Net mortgage loan servicing fees

Our net mortgage loan servicing fees are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Net mortgage loan servicing fees:
Mortgage loan servicing fees:
From non-affiliates	$	98,865	$	83,424	$	282,962	$	200,392
From PennyMac Mortgage Investment Trust		11,039		11,736		38,919		34,542
From Investment Funds		770		796		2,194		1,917
Ancillary and other fees		11,913		10,096		34,183		33,131
		122,587		106,052		358,258		269,982
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread financing		(76,723)		(48,794)		(268,320)		(117,399)
Net mortgage loan servicing fees	$	45,864	$	57,258	$	89,938	$	152,583
Average mortgage loan servicing portfolio	$	176,375,932	$	147,877,985	$	169,168,044	$	128,119,464

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Following is a summary of our mortgage loan servicing portfolio in UPB:

	September 30,		December 31,
	2016		2015
	(in thousands)
Mortgage loans serviced
Prime servicing:
Owned
Mortgage servicing rights
Originated	$	78,732,061	$	59,880,349
Acquired		42,580,927		50,722,355
		121,312,988		110,602,704
Mortgage servicing liabilities–Originated		1,717,859		806,897
Mortgage loans held for sale		2,945,465		1,052,485
		125,976,312		112,462,086
Subserviced for Advised Entities		53,247,024		43,963,378
Total prime servicing		179,223,336		156,425,464
Special servicing–Subserviced for Advised Entities		2,853,307		3,847,254
Total mortgage loans serviced	$	182,076,643	$	160,272,718

Net mortgage loan servicing fees decreased approximately $11.4 million and $62.6 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015, primarily due to the effect on net mortgage loan servicing fees of fair value driven adjustments recognized during 2016 as compared to 2015, partially offset by an increase in mortgage loan servicing fees resulting from a larger portfolio. The lower interest rates that have prevailed through much of 2016 as well as higher costs of capital for the primary purchasers of government MSRs had a negative effect on the fair value of our MSRs. As a result, we recognized fair value adjustments net of hedging results totaling $15.9 million and $103.7 million during the quarter and nine months ended September 30, 2016, respectively, compared to $7.2 million and $20.3 million during the quarter and nine months ended September 30, 2015, respectively.

Amortization and realization of cash flows also increased by $19.3 million and $67.6 million for the quarter and nine months ended September 30, 2016, respectively, as compared to the periods ended September 30, 2015. These increases reflect both growth in our investment in MSRs and acceleration of amortization owing to a shortened expected life as interest rates have declined. These adjustments were partially offset by increased servicing fees from growth in our mortgage loan servicing portfolio.

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Amortization, impairment and change in fair value of mortgage servicing rights are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Amortization of mortgage servicing rights carried at lower of amortized cost or fair value and realization of cash flows of mortgage servicing rights carried at fair value	$	(60,847)	$	(41,594)	$	(164,669)	$	(97,082)
Other changes in fair value of mortgage servicing rights and mortgage servicing liabilities carried at  fair value and provision for impairment of mortgage servicing rights carried at lower of amortized cost or fair value		(39,009)		(47,926)		(287,329)		(50,250)
Change in fair value of excess servicing spread		4,107		10,271		40,984		10,674
Hedging results		19,026		30,455		142,694		19,259
Total fair value adjustments, net of hedging results		(15,876)		(7,200)		(103,651)		(20,317)
Total amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread	$	(76,723)	$	(48,794)	$	(268,320)	$	(117,399)
Average mortgage servicing rights balances:
Carried at lower of amortized cost or fair value	$	804,172	$	604,128	$	776,706	$	504,392
Carried at fair value		511,156		649,608		568,419		484,153
	$	1,315,328	$	1,253,736	$	1,345,125	$	988,545
	September 30,		December 31,
	2016		2015
Mortgage servicing rights:
Carried at lower of amortized cost or fair value	$	845,646	$	751,688
Carried at fair value		492,028		660,247
	$	1,337,674	$	1,411,935

Management fees and Carried Interest

Management fees and Carried Interest are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Management fees:
PennyMac Mortgage Investment Trust:
Base management	$	5,025	$	5,742	$	15,576	$	17,181
Performance incentive		—		—		—		1,343
		5,025		5,742		15,576		18,524
Investment Funds		496		714		1,587		3,384
Total management fees		5,521		6,456		17,163		21,908
Carried Interest		107		1,483		944		2,898
Total management fees and Carried Interest	$	5,628	$	7,939	$	18,107	$	24,806
	September 30,		December 31,
	2016		2015
	(in thousands)
Net assets of Advised Entities:
PennyMac Mortgage Investment Trust	$	1,354,918	$	1,496,113
Investment Funds		201,802		231,745
	$	1,556,720	$	1,727,858

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Management fees from PMT decreased $717,000 and $2.9 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015. The decrease was primarily due to:

· a decrease in base management fees of $717,000 and $1.6 million, respectively, due primarily to the effect of a share repurchase program on PMT’s shareholders’ equity upon which its base management fee is based; and

· a decrease in performance incentive fees resulting from a decline in PMT’s financial performance over the four-quarter period upon which the incentive fees were calculated.

Management fees from the Investment Funds decreased $218,000 and $1.8 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015. The decrease was due to a reduction in the Investment Funds’ net asset values as a result of continued distributions to the Investment Funds’ investors following the end of the Investment Funds’ commitment period. 

Carried Interest from Investment Funds decreased $1.4 million and $2.0 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015.

Other revenues

Net interest expense decreased $1.1 million and increased $5.2 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015. The $1.1 million decrease is primarily due to an increase in interest income on mortgage loans held for sale as a result of an increase in mortgage loan inventory and an increase in the placement fees we receive relating to the custodial funds that we manage, partially offset by an increase in interest expense resulting from asset growth and increased borrowing costs. The $5.2 million increase is primarily due to increased leverage and increased interest expense on mortgage loan prepayments.

Change in fair value of investment in and dividends received from PMT increased $145,000 and $425,000 during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015 due to improved price performance in our investment in PMT. We held 75,000 common shares of PMT during each of the periods ended September 30, 2016 and 2015, with fair value of $1.2 million at the end of each period.

Expenses

Our compensation expense is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Salaries and wages	$	55,464	$	44,299	$	153,687	$	119,948
Incentive compensation		26,623		17,484		52,374		45,968
Taxes and benefits		9,155		7,475		26,700		21,317
Stock and unit-based compensation		4,890		4,871		14,816		15,462
	$	96,132	$	74,129	$	247,577	$	202,695
Head count:
Average		2,829		2,416		2,673		2,164
Period end		2,928		2,483

Compensation expense increased $22.0 million and $44.9 million, during the quarter and nine months ended September 30, 2016 compared to the same periods in 2015. The increase in compensation expense was primarily due to the growth in our mortgage banking segments.

Incentive compensation increased primarily due to higher attainment of profitability targets during the third quarter and nine months ended September 30, 2016 compared to 2015. 

Servicing expense increased $5.4 million and $1.4 million during the quarter and nine months ended September 30, 2016 compared to the same periods in 2015.  The increase was primarily due to the growth in our MSR portfolio during 2016 as compared to 2015.

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Technology expense increased $3.1 million and $6.2 million during the quarter and nine months ended September 30, 2016, respectively, compared to the same periods in 2015 primarily due to increased software costs as part of our continued investment in loan production and servicing infrastructure.

Expenses Allocated to PMT

We are reimbursed by PMT for other expenses, including common overhead expenses we have incurred on PMT’s behalf, in accordance with the terms of our management agreement with PMT.  We present the expense amounts in the consolidated statements of income net of these allocations.

Common overhead expense amounts allocated to PMT during the periods ended September 30, 2016 and 2015 are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Technology	$	408	$	1,216	$	2,678	$	3,532
Occupancy		538		497		1,623		1,463
Depreciation and amortization		194		531		1,000		1,640
Other		277		450		1,112		1,490
Total expenses	$	1,417	$	2,694	$	6,413	$	8,125

Provision for Income Taxes

Our effective tax rates were 12.2% and 12.0% during the quarter and nine months ended September 30, 2016, respectively, compared to 11.6% and 11.5% during the same periods in 2015. The difference between our effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into our shares, we expect an increase in allocated earnings that will be subject to corporate federal and state statutory tax rates, which will in turn increase our effective income tax rate.

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Balance Sheet Analysis

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

	September 30,		December 31,
	2016		2015
	(in thousands)
ASSETS
Cash and short-term investments	$	153,476	$	151,791
Mortgage loans held for sale at fair value		3,127,377		1,101,204
Servicing advances, net		306,150		299,354
Receivable from affiliates		166,343		170,281
Carried Interest due from Investment Funds		70,870		69,926
Mortgage servicing rights		1,337,674		1,411,935
Other		434,304		300,803
Total assets	$	5,596,194	$	3,505,294
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings	$	3,405,598	$	1,462,739
Payable to affiliates		548,330		679,548
Other		351,862		300,657
Total liabilities		4,305,790		2,442,944
Stockholders' equity		1,290,404		1,062,350
Total liabilities and stockholders' equity	$	5,596,194	$	3,505,294

Total assets increased $2.1 billion from $3.5 billion at December 31, 2015 to $5.6 billion at September 30, 2016. The increase was primarily due to an increase of $2.0 billion in mortgage loans held for sale at fair value, resulting from growth in our mortgage loan production.

Total liabilities increased by $1.9 billion from $2.4 billion as of December 31, 2015 to $4.3 billion as of September 30, 2016. The increase was primarily attributable to an increase in borrowings to fund growth in our inventory of mortgage loans held for sale at fair value and MSRs.

Cash Flows

Our cash flows for the nine months ended September 30, 2016 and 2015 are summarized below:

	Nine months ended September 30,
	2016		2015		Change
	(in thousands)
Cash flow activities:
Operating	$	(1,916,072)	$	(519,157)	$	(1,396,915)
Investing		98,665		(538,151)		636,816
Financing		1,806,662		1,028,467		778,195
Net cash flows	$	(10,745)	$	(28,841)	$	18,096

Our cash flows resulted in a net decrease in cash of $10.7 million during the nine months ended September 30, 2016 as discussed below.

Operating activities

Net cash used in operating activities totaled $1.9 billion and $519.2 million during the nine months ended September 30, 2016 and 2015, respectively, primarily due to the growth of our inventory of mortgage loans held for sale at fair value.

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Investing activities

Net cash provided by investing activities during the nine months ended September 30, 2016 totaled $98.7 million primarily due to $173.7 million in net settlements of derivative financial instruments used in our hedging of MSRs, partially offset by acquisitions of fixed assets and capitalized software. Net cash used in investing activities during the nine months ended September 30, 2015 totaled $538.2 million primarily due to our purchase of MSRs and advances on a note receivable from PMT that we made during the period.

Financing activities

Net cash provided by financing activities totaled $1.8 billion and $1.0 billion during the nine months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016, cash was provided primarily to finance the growth in our inventory of mortgage loans held for sale at fair value. For the nine months ended September 30, 2015, cash was provided primarily to finance mortgage loan inventory and mortgage servicing rights.

Liquidity and Capital Resources

Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, margin calls relating to hedges, and tax distributions to noncontrolling interest holders), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from borrowings and/or additional equity offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.

Our current leverage strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of assets sold under agreements to repurchase, sales of mortgage loan participation certificates, a note payable, a revolving credit agreement, ESS and a capital lease. All of our borrowings other than ESS and the capital lease have short-term maturities and provide for terms of approximately one year. We will continue to finance most of our assets on a short-term basis until longer-term financing becomes more available.Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to renew these facilities in advance of their maturity dates in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Repurchase agreements outstanding:
Average balance	$	1,515,632	$	975,724	$	1,303,313	$	805,517
Maximum daily balance	$	2,550,035	$	1,496,306	$	2,550,035	$	1,496,306
Balance at period end	$	2,491,762	$	1,286,411

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

· positive net income during each calendar quarter;

· a minimum in unrestricted cash and cash equivalents of $20 million;

· a minimum tangible net worth of $200 million;

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

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

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

In addition to the covenants noted above, our revolving credit agreement (classified as a note payable) and capital lease contain additional financial covenants specific to PennyMac including, but not limited to,

· a minimum of cash and carried interest equal to the amount borrowed under the revolving credit agreement;

· a minimum of unrestricted cash and cash equivalents equal to $25 million;

· a minimum tangible net worth of $500 million;

· a minimum asset coverage ratio (the ratio of the total asset amount to the total commitment) of 2.5; and

· a maximum ratio of total indebtedness to tangible net worth ratio of 5:1.

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

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

We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) and Ginnie Mae for Agency seller/servicers. Effective December 31, 2015, FHFA and Ginnie Mae have established new minimum liquidity requirements and revised their net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae and Freddie Mac and Ginnie Mae for its approved single-family issuers, as summarized below:

· FHFA liquidity requirement is equal to 0.035% (3.5 basis points) of total Agency servicing UPB plus an incremental 200 basis points of the amount by which total nonperforming Agency servicing UPB exceeds 6% of the applicable Agency servicing UPB; allowable assets to satisfy liquidity requirement include cash and cash equivalents (unrestricted), certain investment-grade securities that are available for sale or held for trading including Agency mortgage-backed securities, obligations of Fannie Mae or Freddie Mac, and U.S. Treasury obligations, and unused and available portions of committed servicing advance lines;

· FHFA net worth requirement is a tangible net worth/total assets ratio greater than or equal to 6%;

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

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

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

We have purchased portfolios of MSRs and have financed them in part through the sale to PMT of the right to receive ESS. The outstanding amount of the ESS financing is based on the current valuation of such ESS and amounts received on the underlying mortgage loans.

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

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Guarantees

As of September 30, 2016, we have not entered into any off-balance sheet arrangements or guarantees.

Contractual Obligations

As of September 30, 2016, we had on-balance commitments to purchase and originate mortgage loans of $4.7 billion, contractual obligations of $2.5 billion to finance assets under agreements to repurchase, $782.9 million to finance assets under our mortgage loan participation and sale agreement, $111 million of notes payable, $280.4 million of ESS transactions and a capital lease transaction secured by certain fixed assets and capitalized software with an outstanding balance of $20.7 million.  We also lease our primary office facilities under an agreement that expires on April 30, 2026 and we license certain software to support our loan servicing operations.

All debt financing arrangements that matured between September 30, 2016 and the date of this Report have been renewed or extended.  Payment obligations under these agreements are summarized below:

	Payments due by period
			Less than		1-3		3-5		More than
Contractual obligations	Total		1 year		years		years		5 years
	(in thousands)
Commitments to purchase and originate mortgage loans	$	4,674,721	$	4,674,721	$	—	$	—	$	—
Assets sold under agreements to repurchase		2,491,762		2,491,762		—		—		—
Mortgage loan participation and sale agreements		782,942		782,942		—		—		—
Notes payable		111,014		111,014		—		—		—
Obligations under capital lease		20,700		8,743		11,957		—		—
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust (1)		280,367		—		—		—		280,367
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		75,434		—		—		—		75,434
Anticipated interest payments related to excess servicing spread financing at fair value		115,412		17,352		27,807		20,759		49,494
Software licenses (2)		43,118		13,126		29,992		—		—
Office leases		102,296		8,709		24,952		24,985		43,650
Total	$	8,697,766	$	8,108,369	$	94,708	$	45,744	$	448,945

(1) The ESS financing obligation payable to PMT does not have a stated contractual maturity date and will pay down as the underlying MSRs receive the excess servicing fee rate due to PMT.

(2) Software licenses include both volume and activity based fees that are dependent on the number of loans serviced during each period and include a base fee of approximately $1.1 million per month. Estimated payments for software licenses above are based on the number of loans currently serviced by us, which totaled approximately 953,000 at September 30, 2016. Future amounts due may significantly fluctuate based on changes in the number of loans serviced by us. For the nine months ended September 30, 2016, software license fees totaled $10.4 million. All figures contained in this footnote are in actual amounts and not in thousands (in contrast to the table above).

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The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of September 30, 2016:

			Weighted average
			maturity of
			advances under
Counterparty	Amount at risk		repurchase agreement	Facility Maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	820,256	December 26, 2016	December 26, 2016
Credit Suisse First Boston Mortgage Capital LLC	$	70,451	December 7, 2016	March 30, 2017
Banc of America, N.A.	$	47,433	December 18, 2016	March 29, 2017
JP Morgan Chase Bank, N.A.	$	11,800	December 24, 2016	August 18, 2017
Morgan Stanley Bank, N.A.	$	20,279	November 18, 2016	August 25, 2017
Citibank, N.A.	$	27,027	November 6, 2016	December 2, 2016
Barclays Bank PLC	$	76,502	December 2, 2016	December 2, 2016
Royal Bank of Canada	$	—		September 18, 2017

Management Agreements

PMT Management Agreement

We externally manage and advise PMT pursuant to a management agreement. Our management agreement with PMT requires us to oversee PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees. We are responsible for PMT’s day-to-day management and perform such services and activities related to PMT’s assets and operations as may be appropriate. Pursuant to our management agreement, we collect a base management fee and may collect a performance incentive fee.

Pursuant to our management agreement, we collect a base management fee and may collect a performance incentive fee, both payable quarterly in arrears.  The management agreement, as amended and restated, expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

The base management fee is calculated at a defined annualized percentage of “shareholders’ equity.” PMT’s “shareholders’ equity” is defined as the sum of the net proceeds from any issuances of its equity securities since inception (weighted for the time outstanding during the measurement period); plus its 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.

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

The performance incentive fee is calculated as a defined percentage of the amount by which PMT’s “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of annualized return on PMT’s “equity amount.” For purposes of determining the amount of the performance incentive fee, “net income” is defined as net income or loss computed in accordance with GAAP and adjusted to exclude one-time events pursuant to changes in 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. For this purpose, “equity amount” is the weighted average of the issue price per common share of all of PMT’s public offerings of common shares, multiplied by the weighted average number of common shares outstanding (including restricted share units issued under PMT’s equity incentive plans) in the four-quarter period.

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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 amount represents 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” is the quarterly adjustment that reflects the amount by which the net income (stated as a percentage of return on equity) in that quarter exceeds or falls short of the lesser of 8% and the Fannie Mae 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 amount required for PCM to earn a performance incentive fee is 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 PMT common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.

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

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

Under the 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 agreement that has continued uncured for a period of 30 days after receipt of written notice thereof, or (3) PCM’s termination of the agreement after the termination by PMT without cause (excluding a non-renewal) of the MBS agreement, the MSR recapture agreement, or the servicing agreement (each as described and/or defined 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 during the 24-month period immediately preceding the date of termination.

PMT may terminate the management agreement without the payment of any termination fee under certain circumstances, including, among other circumstances, uncured material breaches by PCM of the 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 Mr. 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 MBS agreement, the MSR recapture agreement or the servicing agreement by PLS without cause.

The 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 shall present to PMT such new opportunity and the material terms on which PCM proposes to provide services to PMT before pursuing such opportunity with third parties.

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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 limited liability company and limited partnership agreements of the Investment Funds specify that the funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion. PCM has elected to extend the relevant agreements of the Investment Funds for the first of such three one-year extensions.

Loan Servicing Agreements

PMT Loan Servicing Agreement

Pursuant to a loan servicing agreement with PMT, PLS provides servicing for PMT’s portfolio of  residential mortgage loans and subservicing for its portfolio of MSRs.  Such servicing and subservicing provided by PLS 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. PLS also engages in certain loan origination activities that include refinancing mortgage loans and financings that facilitate sales of REO. The servicing agreement expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

The base servicing fee rates for distressed whole mortgage loans are charged based on a monthly per-loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or whether the underlying mortgage property has become REO. The base servicing fee rates for distressed whole mortgage loans range from $30 per month for current loans up to $100 per month for loans where the borrower has declared bankruptcy. The base servicing fee rate for REO is $75 per month. To the extent that we facilitate rentals of PMT's REO under its REO rental program, we collect an REO rental fee of $30 per month per REO, an REO property lease renewal fee of $100 per lease renewal, and a property management fee in an amount equal to our cost if property management services and/or any related software costs are outsourced to a third-party property management firm or 9% of gross rental income if we provide property management services directly. We are also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.

We are also entitled to certain activity-based fees for distressed whole mortgage loans that are charged based on the achievement of certain events.  These fees range from 0.50% for a streamline modification to 1.50% for a liquidation and $500 for a deed-in-lieu of foreclosure.  We are not entitled to earn more than one liquidation fee, reperformance fee or modification fee in any 18-month period.

In addition, because PMT has limited employees and 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 a supplemental servicing fee of $25 per month for each distressed whole loan. PLS is entitled to reimbursement for all customary, good faith reasonable and necessary out-of-pocket expenses incurred by PLS in performance of its servicing obligations.

Except as otherwise provided in the MSR recapture agreement, when PLS effects a refinancing of a loan on behalf of PMT and not through a third-party lender and the resulting loan is readily saleable, or 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.

We, on behalf of PMT, currently participate in HAMP (or other similar mortgage loan modification programs). HAMP establishes standard loan modification guidelines for “at risk” homeowners and provides incentive payments to certain participants, including mortgage loan servicers, for achieving modifications and successfully remaining in the program. The mortgage loan servicing agreement entitles PLS to retain any incentive payments made to it and to which it is entitled under HAMP; provided, however, that with respect to any such 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.

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PLS continues to be 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

We have also entered into loan servicing agreements with the Investment Funds. Our servicing agreements with the Investment Funds generally provide for fee revenue, which varies depending on the type and quality of the loans being serviced. We are also entitled to certain customary market-based fees and charges. This arrangement was modified, effective January 1, 2012, with respect to one of the Investment Funds. At that time, we settled our accrued servicing fee rebate and amended our servicing agreement with such fund to charge scheduled servicing fees in place of the previous “at cost” servicing arrangement.

Mortgage Banking Services Agreement

Pursuant to a mortgage banking services agreement (the “MBS 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. Pursuant to the MBS agreement, PLS has agreed to provide such services exclusively for the benefit of PMT, 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 MBS agreement for any reason. The MBS agreement expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

In 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 that PMT acquires and equal to a percentage of the unpaid principal balance of such mortgage loan. The applicable percentages are (i) 0.35% for mortgage loans sold or delivered to Fannie Mae or Freddie Mac, and (ii) 0.85% for all other mortgage loans; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae mortgage loans. PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the MBS agreement, PLS currently purchases mortgage loans underwritten in accordance with the Ginnie Mae Mortgage-Backed Securities Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and a sourcing fee ranging from two to three and one-half basis points, generally based on the average number of calendar days mortgage loans are held by PMT prior to purchase by PLS.

In consideration for the mortgage banking services provided by PLS with respect to PMT’s acquisition of mortgage loans under PLS’ early purchase program, PLS is entitled to fees accruing (i) at a rate equal to $1,500 per year per early purchase facility administered by PLS, and (ii) in the amount of $35 for each mortgage loan that PMT acquires thereunder.

Notwithstanding any provision of the MBS 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 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.

MSR Recapture Agreement

Pursuant to the terms of a MSR recapture agreement, as amended, if PLS refinances through its consumer direct lending business mortgage loans for which PMT previously held the MSRs, PLS is generally required to transfer and convey to PMT, without cost to PMT, 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 such mortgage loans so originated. Where the fair market value of the aggregate MSRs to be transferred for the applicable month is less than $200,000, PLS may, at its option, wire to PMT cash in an amount equal to the fair market value of the MSRs in lieu of transferring such MSRs. The MSR recapture agreement expires on September 12, 2020, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with the terms of the agreement.

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Spread Acquisition and MSR Servicing Agreements

Effective February 1, 2013, we entered into a master spread acquisition and MSR servicing agreement (the “2/1/13 Spread Acquisition Agreement”), pursuant to which we previously sold to PMT or one of its wholly owned subsidiaries the rights to receive certain ESS from MSRs acquired by us from banks and other third party financial institutions. We were generally required to service or subservice the related mortgage loans for the applicable agency or investor. We only used the 2/1/13 Spread Acquisition Agreement for the purpose of selling ESS relating to Fannie Mae MSRs. The specific terms of each transaction under the 2/1/13 Spread Acquisition Agreement were subject to the terms thereof, as modified and supplemented by the terms of a confirmation executed in connection with such transaction.

To the extent we refinanced any of the mortgage loans relating to the ESS sold to PMT, the 2/1/13 Spread Acquisition Agreement contained recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair value of the aggregate ESS to be transferred for the applicable month was less than $200,000, we were, at our option, permitted to pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.

On February 29, 2016, the parties terminated the 2/1/13 Spread Acquisition Agreement and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, we reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by us to PMT and then subject to such 2/1/13 Spread Acquisition Agreement.

On December 19, 2014, we entered into a second master spread acquisition and MSR servicing agreement with PMT (the “12/19/14 Spread Acquisition Agreement”). The terms of the 12/19/14 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Freddie Mac MSRs under the 12/19/14 Spread Acquisition Agreement.

To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 12/19/14 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair market value in lieu of transferring such ESS.

On February 29, 2016, we reacquired from PMT all of its right, title and interest in and to all of the Freddie Mae ESS previously sold by us to PMT and then subject to such 12/19/14 Spread Acquisition Agreement. The 12/19/14 Spread Acquisition Agreement remains in full force and effect.

On April 30, 2015, we amended and restated a third master spread acquisition and MSR servicing agreement with PMT (the “4/30/15 Spread Acquisition Agreement”). The terms of the 4/30/15 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement and the 12/19/14 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Ginnie Mae MSRs under the 4/30/15 Spread Acquisition Agreement. The primary purpose of the amendment and restatement to the 4/30/15 Spread Agreement was to evidence the ownership of the ESS under participation certificates and to otherwise incorporate the terms of previously executed amendments.

To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 4/30/15 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. However, under the 4/30/15 Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the refinanced mortgage loans, we are also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the modified mortgage loans, the 4/30/15 Spread Acquisition Agreement contains provisions that require us to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.

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In connection with our entry into the 4/30/15 Spread Acquisition Agreement, we were also required to (i) amend and restate the terms of a loan and security agreement (the “LSA”) with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), pursuant to which we pledged to CSFB all of our rights and interests in the Ginnie Mae MSRs we own or acquire, enabling us to finance certain of such MSRs and servicing advance receivables, and (ii) enter into a separate acknowledgement agreement with respect thereto, by and among Ginnie Mae, CSFB and us. Under the terms of the amendment and restatement to the LSA, the maximum loan amount was increased from $257 million to $407 million. The $150 million increase was implemented for the purpose of facilitating the financing of ESS by PMT. On November 10, 2015, the LSA was further amended and restated to convert the form of the borrowing into a repurchase agreement (as amended and restated, the “MSR Repo”). The aggregate loan amount outstanding under the MSR Repo and relating to advances outstanding with PMT is guaranteed in full by PMT.

Separately, as a condition to permitting us to transfer to PMT the ESS relating to a portion of our pledged Ginnie Mae MSRs, CSFB required PMT to enter into a Security and Subordination Agreement (the “Security Agreement”), pursuant to which PMT pledged to CSFB its rights under the 4/30/15 Spread Acquisition Agreement and its interest in any ESS purchased thereunder. CSFB’s lien on the ESS remains subordinate to the rights and interests of Ginnie Mae pursuant to the provisions of the 4/30/15 Spread Acquisition Agreement and the terms of the acknowledgement agreement.

The Security Agreement permits CSFB to liquidate PMT’s ESS along with the related MSRs to the extent there exists an event of default under the MSR Repo, and it contains certain trigger events, including breaches of representations, warranties or covenants and defaults under other of PMT’s credit facilities, that would require us to either (i) repay in full the outstanding loan amount under the MSR Repo or (ii) repurchase the ESS from PMT at fair value. To the extent we are unable to repay the loan under the MSR Repo or repurchase the ESS, an event of default would exist under the MSR Repo, thereby entitling CSFB to liquidate the ESS and the related MSRs. In the event the ESS is liquidated as a result of certain actions or inactions by us, PMT generally would be entitled to seek indemnity from us under the 4/30/15 Spread Acquisition Agreement.

Note Receivable from PMT

In connection with certain of the amendments and restatements described above, we entered into an underlying loan and security agreement with PMT, dated as of April 30, 2015, and as further amended pursuant to which PMT may borrow up to $150 million from us for the purpose of financing ESS (the “Underlying LSA”).

The principal amount of the borrowings under the Underlying LSA is based upon a percentage of the market value of the ESS pledged by PMT, subject to the $150 million sublimit described above. Pursuant to the Underlying LSA, PMT granted us a security interest in all of its right, title and interest in, to and under the ESS pledged to secure the borrowings.

We have agreed with PMT in connection with the Underlying LSA that PMT is required to repay us the principal amount of borrowings plus accrued interest to the date of such repayment, and we are required, in turn, to repay CSFB the corresponding amount under the MSR Repo. Interest accrues on the note receivable from PMT relating to the Underlying LSA at a rate based on CSFB’s cost of funds under the MSR Repo. PMT was also required to pay us a fee for the structuring of the Underlying LSA in an amount equal to the portion of the corresponding fee paid by us to CSFB allocable to the increase in the maximum loan amount under the MSR Repo resulting from the ESS financing.

Loan Purchase Agreements

We have entered into a mortgage loan purchase agreement and a flow commercial mortgage loan purchase agreement with PMT. Currently, we use the mortgage loan purchase agreement for the purpose of selling to PMT prime jumbo residential mortgage loans and conventional mortgage loans eligible for delivery into Agency credit risk transfer securities, in each case originated by us through our consumer direct lending business. We use the flow commercial mortgage loan purchase agreement for the purpose of selling to PMT small balance commercial mortgage loans, including multifamily mortgage loans, originated by us as part of our commercial lending business. Each of the loan purchase agreements contains customary terms and provisions, including representations and warranties, covenants, repurchase remedies and indemnities. The purchase prices paid to us by PMT for such loans are market-based.

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Commercial Mortgage Servicing Oversight Agreement

We have also entered into a commercial mortgage servicing oversight agreement with PMT that governs our oversight of the master and/or special servicing performed by third party servicers in connection with certain commercial mortgage loans acquired by PMT. For the oversight services performed under this agreement, we are entitled to collect a fee equal to 5 basis points per annum based on the UPB of the related commercial mortgage loans for which we provide oversight servicing.

Reimbursement Agreement

In connection with the IPO of PMT’s common shares on August 4, 2009, we entered into an agreement with PMT pursuant to which PMT agreed to reimburse us for the $2.9 million payment that it made to the underwriters in such offering (the “Conditional Reimbursement”) if PMT satisfied certain performance measures over a specified period of time. Effective February 1, 2013, the parties amended the terms of the reimbursement agreement to provide for the reimbursement to us of the Conditional Reimbursement if PMT is required to pay us performance incentive fees under the management agreement at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The reimbursement of the Conditional Reimbursement is subject to a maximum reimbursement in any particular 12 month period of $1.0 million and the maximum amount that may be reimbursed under the agreement is $2.9 million.

In the event the termination fee is payable to us under the management agreement and we have not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.

Debt Obligations

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

Under the terms of these agreements, PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of September 30, 2016, we were in compliance in all material respects with these covenants.

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

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

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All of the borrowings discussed above have short-term maturities that expire as follows:

	Outstanding		Total		Committed
Lender	indebtedness (1)		facility size (2)		Facility (2)		Maturity date (2)
	(dollar amounts in thousands)
Assets sold under agreements to repurchase
Credit Suisse First Boston Mortgage Capital LLC (3)	$	1,174,288	$	1,207,000	$	707,000	March 30, 2017
Banc of America, N.A.	$	449,371	$	500,000	$	225,000	March 29, 2017
Morgan Stanley Bank, N.A.	$	185,688	$	300,000	$	175,000	August 25, 2017
Citibank, N.A.	$	396,423	$	400,000	$	150,000	December 2, 2016
Barclays Bank PLC (4)	$	154,665	$	200,000	$	—	December 2, 2016
JP Morgan Chase Bank, N.A.	$	131,327	$	200,000	$	50,000	August 18, 2017
Royal Bank of Canada	$	—	$	135,000	$	75,000	September 18, 2017
Mortgage loan participation and sale agreements
Bank of America, N.A.(5)	$	782,942	$	800,000	$	—	March 29, 2017
Notes payable (6)
Credit Suisse AG	$	50,000	$	100,000	$	100,000	December 28, 2016
Barclays Bank PLC (4)	$	61,014	$	100,000	$	100,000	December 2, 2016
Obligations under capital lease
Banc of America Leasing and Capital LLC	$	20,700	$	25,000	$	—	May 4, 2019

(1) Outstanding indebtedness as of September 30, 2016.

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

(3) The borrowings with Credit Suisse First Boston Mortgage Capital LLC are subject to an aggregate facility amount of $1,207 million of which $407 million represents the maximum amount for MSRs.  The agreement to repurchase mortgage loans has a maturity date of March 30, 2017 and includes a temporary upsize of $300 million that matures on December 23, 2016.  The agreement to repurchase participation certificates representing beneficial ownership in MSRs and ESS, classified as an asset sold under agreement to repurchase, matures on December 26, 2016.

(4) The borrowings with Barclays Bank PLC are subject to a total aggregate facility amount of $300 million, of which $100 million represents the maximum amount for MSRs.

(5) Pursuant to the amendment on October 11, 2016, Bank of America, N.A. agreed to temporarily increase the aggregate transaction limit of purchase prices for participation certificates owned by Bank of America, N.A. at any given time up to $800 million until December 12, 2016, at which time the aggregate transaction limit of purchase prices will be reset to $250 million.

(6) The borrowing with Credit Suisse AG (with a committed amount of $100 million) is in the form of a revolving credit agreement, which is secured by cash and carried interest and classified as a note payable. The borrowing with Barclays Bank PLC (with a total facility size of $100 million) is in the form of a note payable secured by MSRs.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market based risks. The primary market risks that we are exposed to are credit risk, interest rate risk, prepayment risk, inflation risk and market value risk.

The following sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated variables; do not incorporate changes to other variables; are subject to the accuracy of various models and assumptions used; and do not incorporate other factors that would affect our overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the following estimates should not be viewed as earnings forecasts.

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Mortgage Servicing Rights

The following tables summarize the estimated change in fair value of MSRs accounted for using the amortization method as of September 30, 2016, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:

Pricing spread shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	913,359		$	878,176		$	861,597		$	830,290		$	815,497		$	787,487
Change in fair value:
$	$	67,713		$	32,529		$	15,951		$	(15,356)		$	(30,149)		$	(58,160)
%		8.0	%		3.9	%		1.9	%		(1.8)	%		(3.6)	%		(6.9)	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	926,033		$	884,063		$	864,438		$	827,638		$	810,367		$	777,869
Change in fair value:
$	$	80,386		$	38,417		$	18,792		$	(18,008)		$	(35,280)		$	(67,777)
%		9.5	%		4.5	%		2.2	%		(2.1)	%		(4.2)	%		(8.0)	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	874,051		$	859,849		$	852,748		$	838,545		$	831,444		$	817,242
Change in fair value:
$	$	28,405		$	14,202		$	7,101		$	(7,101)		$	(14,202)		$	(28,405)
%		3.4	%		1.7	%		0.8	%		(0.8)	%		(1.7)	%		(3.4)	%

The following tables summarize the estimated change in fair value of MSRs accounted for using the fair value method as of September 30, 2016, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:

Pricing spread shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	528,526		$	509,597		$	500,651		$	483,709		$	475,682		$	460,442
Change in fair value:
$	$	36,499		$	17,570		$	8,624		$	(8,318)		$	(16,346)		$	(31,585)
%		7.4	%		3.6	%		1.8	%		(1.7)	%		(3.3)	%		(6.4)	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	538,495		$	514,269		$	502,915		$	481,579		$	471,545		$	452,631
Change in fair value:
$	$	46,467		$	22,242		$	10,888		$	(10,448)		$	(20,482)		$	(39,396)
%		9.4	%		4.5	%		2.2	%		(2.1)	%		(4.2)	%		(8.0)	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	514,909		$	503,468		$	497,748		$	486,307		$	480,586		$	469,145
Change in fair value:
$	$	22,882		$	11,441		$	5,720		$	(5,720)		$	(11,441)		$	(22,882)
%		4.7	%		2.3	%		1.2	%		(1.2)	%		(2.3)	%		(4.7)	%

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Excess Servicing Spread Financing

The following tables summarize the estimated change in fair value of our ESS accounted for using the fair value method as of September 30, 2016, given several shifts in pricing spreads and prepayment speed (decrease in the liabilities’ values increases net income):

Pricing spread shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	294,098		$	287,068		$	283,678		$	277,134		$	273,975		$	267,872
Change in fair value:
$	$	13,731		$	6,701		$	3,310		$	(3,233)		$	(6,392)		$	(12,495)
%		4.9	%		2.4	%		1.2	%		(1.2)	%		(2.3)	%		(4.5)	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	311,670		$	295,283		$	287,653		$	273,404		$	266,744		$	254,262
Change in fair value:
$	$	31,303		$	14,916		$	7,286		$	(6,963)		$	(13,623)		$	(26,106)
%		11.2	%		5.3	%		2.6	%		(2.5)	%		(4.9)	%		(9.3)	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In response to this Item 3, the information set forth on pages 84 to 86 of this Report is incorporated herein by reference.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

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

Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the nine months ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various legal proceedings, claims and actions arising in the ordinary course of business. As of September 30, 2016, we were not involved in any such legal proceedings, claims or actions that management believes would be reasonably likely to have a material adverse effect on us.

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 10, 2016 and our Quarterly Reports on Form 10-Q filed thereafter.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6.  Exhibits

Exhibit Number	Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
3.2	Amended and Restated Bylaws of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 19, 2013).
4.1	Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Amendment No. 4 to Form S-1 Registration Statement as filed with the SEC on April 29, 2013).
10.1	Fourth Amended and Restated Limited Liability Company Agreement of Private National Mortgage Acceptance Company, LLC, dated as of May 8, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.2	Exchange Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and Private National Mortgage Acceptance Company, LLC and the Company Unitholders (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.3	Tax Receivable Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. Private National Mortgage Acceptance Company, LLC and each of the Members (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.4	Registration Rights Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and the Holders (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.5	Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and BlackRock Mortgage Ventures, LLC (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.6	Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and HC Partners LLC (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.7†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013).
10.8†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 16, 2013).
10.9†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Executive Officers (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).
10.10†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Other Eligible Participants (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).

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10.11†	PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on June 17, 2013).
10.12†	Form of PennyMac Financial Services, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.8 of the Registrant’s Amendment No. 2 to Form S-1 Registration Statement as filed with the SEC on April 5, 2013).
10.13†	Employment Agreement, dated December 8, 2015, among Stanford L. Kurland, Private National Mortgage Acceptance Company, LLC and PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).
10.14†	Employment Agreement, dated December 8, 2015, among David A. Spector, Private National Mortgage Acceptance Company, LLC and PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).
10.15	Second Amended and Restated Management Agreement, dated as of September 12, 2016, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 12, 2016).
10.16	Third Amended and Restated Flow Servicing Agreement, dated as of September 12, 2016, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 12, 2016).
10.17	Amended and Restated Mortgage Banking Services Agreement, dated as of September 12, 2016, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 12, 2016)
10.18	Amended and Restated MSR Recapture Agreement, dated as of September 12, 2016, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 12, 2016)
10.19	Amended and Restated Underwriting Fee Reimbursement Agreement, dated as of February 1, 2013, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.13 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.20	Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of April 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015).
10.21	Amendment No. 1 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of August 26, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.37 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).
10.22	Amendment No. 2 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.40 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).

89

10.23	Master Spread Acquisition and MSR Servicing Agreement, dated as of December 19, 2014, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 1.01 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 24, 2014).
10.24	Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.38 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015).
10.25	Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Co., LLC and PennyMac Loan Services, LLC, dated August 1, 2010 (incorporated by reference to Exhibit 10.14 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013).
10.26	Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Co., LLC (incorporated by reference to Exhibit 10.41 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.27	Second Amended and Restated Flow Servicing Agreement, dated as of August 1, 2008, as amended effective as of January 1, 2012, by and between PNMAC Mortgage Opportunity Fund Investors, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.15 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.28	Amendment No. 1 to the Second Amended and Restated Flow Servicing Agreement, dated as of December 5, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund Investors, LLC (incorporated by reference to Exhibit 10.43 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.29	Amended and Restated Flow Servicing Agreement, dated as of August 1, 2010, by and between PNMAC Mortgage Opportunity Fund, LP and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.27 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013).
10.30	Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.45 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.31	Investment Management Agreement, as amended and restated May 26, 2011, by and between PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.16 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.32	Investment Management Agreement, dated as of August 1, 2008, between PNMAC Mortgage Opportunity Fund Investors, LLC and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.17 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.33	Master Repurchase Agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.18 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).

90

10.34	Amendment No. 1 to Master Repurchase Agreement, dated as of July 21, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013).
10.35	Amendment No. 2 to Master Repurchase Agreement, dated as of March 23, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013).
10.36	Amendment No. 3 to Master Repurchase Agreement, dated as of August 28, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013).
10.37	Amendment No. 4 to Master Repurchase Agreement, dated as of January 3, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013).
10.38	Amendment No. 5 to Master Repurchase Agreement, dated as of March 28, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013).
10.39	Amendment No. 6 to Master Repurchase Agreement, dated as of January 31, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on February 6, 2014).
10.40	Amendment No. 7 to Master Repurchase Agreement, dated as of March 27, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.44 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014).
10.41	Amendment No. 8 to Master Repurchase Agreement, dated as of August 13, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.48 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).
10.42	Amendment No. 9 to Master Repurchase Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.49 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
10.43	Amendment No. 10 to Master Repurchase Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.62 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).
10.44	Guaranty, dated as of March 17, 2011, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A (incorporated by reference to Exhibit 10.50 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).

91

10.45	Master Repurchase Agreement, dated as of June 26, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.20 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.46	Amendment Number One to the Master Repurchase Agreement, dated as of December 31, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.21 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013).
10.47	Amendment Number Two to the Master Repurchase Agreement, dated April 17, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.40 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013).
10.48	Amendment Number Three to the Master Repurchase Agreement, dated June 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.41 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013).
10.49	Amendment Number Four to the Master Repurchase Agreement, dated July 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.42 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013).
10.50	Amendment Number Five to the Master Repurchase Agreement, dated February 5, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.50 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014).
10.51	Amendment Number Six to the Master Repurchase Agreement, dated February 25, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.51 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014).
10.52	Amendment Number Seven to the Master Repurchase Agreement, dated July 24, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.54 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).
10.53	Amendment Number Eight to the Master Repurchase Agreement, dated August 7, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.55 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).
10.54	Amendment Number Nine to the Master Repurchase Agreement, dated September 8, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.58 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).
10.55	Amendment Number Ten to the Master Repurchase Agreement, dated July 6, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.69 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.56	Amendment Number Eleven to the Master Repurchase Agreement, dated August 3, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 5, 2015).
10.57	Amendment Number Twelve to the Master Repurchase Agreement, dated September 7, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).
10.58	Amendment Number Thirteen to the Master Repurchase Agreement, dated October 22, 2015, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on October 28, 2015).

92

10.59	Amendment Number Fourteen to the Master Repurchase Agreement, dated July 25, 2016, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.70 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016).
10.60	Amendment Number Fifteen to the Master Repurchase Agreement, dated September 26, 2016, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 30, 2016).
10.61	Amendment Number Sixteen to the Master Repurchase Agreement, dated October 14, 2016, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on October 20, 2016)
10.62	Amendment Number Seventeen to the Master Repurchase Agreement, dated October 20, 2016, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on October 20, 2016)
10.63	Guaranty Agreement, dated as of June 26, 2012, by Private National Mortgage Acceptance Company, LLC in favor of Citibank, N.A (incorporated by reference to Exhibit 10.61 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
10.64	Amended and Restated Master Spread Participation Agreement, dated as of November 10, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC as the Initial Participant (incorporated by reference to Exhibit 10.189 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.65	Loan and Security Agreement, dated as of April 30, 2015, among PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015).
10.66	Amendment No. 1 to Loan and Security Agreement, dated as of October 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.87 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).
10.67	Amendment No. 2 to Loan and Security Agreement, dated as of November 10, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.92 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.68	Amendment No. 3 to Loan and Security Agreement, dated as of December 15, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.93 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.69	Amendment No. 4 to Loan and Security Agreement, dated as of January 28, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.94 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.70	Amendment No. 5 to Loan and Security Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.96 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).

93

10.71	Amendment No. 6 to Loan and Security Agreement, dated as of September 26, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC.
10.72	Third Amended and Restated Guaranty (Participation Certificates and Servicing), dated as of November 10, 2015, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on November 16, 2015).
10.73	Master Repurchase Agreement (Participation Certificates and Servicing), dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
10.74	Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 6, 2016).
10.75	Guaranty, dated as of August 14, 2009, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.77 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
10.76	Master Repurchase Agreement, dated as of July 2, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013).
10.77	Amendment Number One to the Master Repurchase Agreement, dated as of August 26, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.49 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013).
10.78	Amendment Number Two to the Master Repurchase Agreement, dated as of January 28, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.63 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014).
10.79	Amendment Number Three to the Master Repurchase Agreement, dated as of June 30, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.70 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).
10.80	Amendment Number Four to the Master Repurchase Agreement, dated as of June 29, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.98 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.81	Amendment Number Five to the Master Repurchase Agreement, dated as of July 27, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 27, 2015).
10.82	Amendment Number Six to the Master Repurchase Agreement, dated as of November 9, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.118 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).

94

10.83	Amendment Number Seven to the Master Repurchase Agreement, dated July 26, 2016, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.91 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016).
10.84	Amendment Number Eight to the Master Repurchase Agreement, dated August 26, 2016, by and between PennyMac Loan Services, LLC,  Morgan Stanley Bank, N.A. and Morgan Stanley Mortgage Capital Holdings LLC.
10.85	Guaranty Agreement, dated as of July 2, 2013, by Private National Mortgage Acceptance Company, LLC in favor of Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013).
10.86	Mortgage Loan Participation Purchase and Sale Agreement, dated as of August 13, 2014, by and among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Bank of America, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).
10.87	Amendment No. 1 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.84 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
10.88	Amendment No. 2 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 22, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.122 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.89	Amendment No. 3 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.96 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016).
10.90	Amended and Restated Guaranty, dated as of August 13, 2014, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A. (incorporated by reference to Exhibit 10.73 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).
10.91	Mortgage Loan Purchase Agreement, dated as of September 25, 2012, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.124 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).
10.92	Flow Sale Agreement, dated as of June 16, 2015, by and between PennyMac Corp. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.104 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.93	Amended and Restated Flow Commercial Mortgage Loan Purchase Agreement, dated as of June 1, 2016, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.100 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016).
10.94	Servicing Agreement, dated as of July 13, 2015, between PennyMac Corp., PennyMac Holdings, LLC, any other parties signing this Agreement as owner of Mortgage Loans listed in Schedule I and any New Owners, PennyMac Loan Services, LLC, and Midland Loan Services, a division of PNC Bank, National Association (incorporated by reference to Exhibit 10.127 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015).

95

10.95	Amended and Restated Commercial Mortgage Servicing Oversight Agreement, dated as of June 1, 2016, among PennyMac Corp., PennyMac Holdings, LLC, and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.102 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016).
10.96	Master Repurchase Agreement, dated as of December 4, 2015, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015).
10.97	Amendment Number One to Master Repurchase Agreement, dated as of September 29, 2016, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC.
10.98	Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 4, 2015, between PennyMac Loan Services, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015).
10.99	Loan and Security Agreement, dated as of December 4, 2015, among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015).
10.100	Amendment Number One to the Loan and Security Agreement, dated as of February 26, 2016, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on March 3, 2016)
10.101	Master Lease Agreement No.  30350-90000, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).
10.102	Addendum to Master Lease Agreement No.  30350-90000, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).
10.103	Schedule Number 001 to Master Lease Agreement, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).
10.104	Schedule Number 002 to Master Lease Agreement, dated as of May 4, 2016, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.140 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).
10.105	Guaranty, dated as of December 9, 2015, by  PennyMac Loan Services, LLC in favor of Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015).

96

10.106	Credit Agreement, dated December 30, 2015, by and among Private National Mortgage Acceptance Company, LLC, the lenders that are parties thereto, Credit Suisse AG and Credit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 30, 2015).
10.107	Collateral and Guaranty Agreement, dated December 30, 2015, by and among Private National Mortgage Acceptance Company, LLC, Credit Suisse AG, Cayman Islands Branch, PennyMac Financial Services, Inc., PNMAC Capital Management, LLC, PennyMac Loan Services, LLC and PNMAC Opportunity Fund Associates, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 30, 2015).
10.108	Master Repurchase Agreement, dated as of August 19, 2016, between PennyMac Loan Services, LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 23, 2016).
10.109	Guaranty, dated as of August 19, 2016, by Private National Mortgage Acceptance Company, LLC in favor of JPMorgan Chase Bank. N.A. (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 23, 2016).
10.110	Master Repurchase Agreement, dated as of September 19, 2016, between Royal Bank of Canada and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on September 22, 2016)
31.1	Certification of Stanford L. Kurland pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Anne D. McCallion pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Stanford L. Kurland pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Anne D. McCallion pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 (ii) the Consolidated Statements of Income for the quarters ended September 30, 2016 and September 30, 2015, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended September 30, 2016 and September 30, 2015, (iv) the Consolidated Statements of Cash Flows for the quarters ended September 30, 2016 and September 30, 2015 and (v) the Notes to the Consolidated Financial Statements.
*	The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
†	Indicates management contract or compensatory plan or arrangement.

97

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PENNYMAC FINANCIAL SERVICES, INC.
	(Registrant)
Dated: November 8, 2016	By:	/s/ STANFORD L. KURLAND
		Stanford L. Kurland
		Chairman of the Board of Directors and Chief Executive Officer
Dated: November 8, 2016	By:	/s/ ANNE D. McCALLION
		Anne D. McCallion
		Chief Financial Officer

98

EX-10.71

Exhibit 10.71

UNDERLYING ESS LSA EXECUTION

AMENDMENT NO. 6 TO LOAN AND SECURITY AGREEMENT

(PARTICIPATION CERTIFICATES AND SERVICING)

This Amendment No. 6 to Loan and Security Agreement (this “Amendment”) is made as of September 26, 2016 by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (“CS”), PENNYMAC LOAN SERVICES, LLC (the “Lender”) and PENNYMAC HOLDINGS, LLC (the “Borrower”).

Lender and Borrower previously entered into a Loan and Security Agreement, dated as of April 30, 2015 (as amended by Amendment No. 1 to Loan and Security Agreement, dated as of October 30, 2015, Amendment No. 2 to Loan and Security Agreement, dated as of November 10, 2015, by Amendment No. 3 to Loan and Security Agreement, dated as of December 15, 2015, by Amendment No. 4 to Loan and Security Agreement, dated as of January 28, 2016, and by Amendment No. 6 to Loan and Security Agreement, dated as of March 31, 2016, the “Existing Agreement”, and as further amended by this Amendment, the “Agreement”). 

Lender, Borrower and CS have agreed, subject to the terms and conditions of this Amendment, that the Existing Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Agreement.

Accordingly, Lender, Borrower and CS hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Agreement is hereby amended as follows:

SECTION 1. Definitions.  Section 1.01 of the Existing Agreement is hereby amended by deleting the definition of “Termination Date” in its entirety and replacing it with the following in its proper alphabetical order:

“Termination Date” means the earliest of (a) December 26, 2016; and (b) the Obligations having become immediately due and payable pursuant to Section 7.03 of the Loan Agreement.

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

2.1 Delivered Documents.  On the Amendment Effective Date, Lender shall have received the following documents, each of which shall be satisfactory to Lender in form and substance:

(a) this Amendment, executed and delivered by the duly authorized officers of the Lender and Borrower; and

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

SECTION 3. Representations and Warranties.  Borrower hereby represents and warrants to Lender that Borrower is in compliance with all the terms and provisions set forth in the Agreement on its part to be observed or performed, and that no Event of Default under the Agreement has occurred or is continuing and hereby confirms and reaffirms the representations and warranties contained in Article III of the Agreement.

SECTION 4. Limited Effect.  Except as expressly amended and modified by this Amendment, the Existing Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 5. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

SECTION 6. Counterparts.  This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.

SECTION 7. GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

2

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers or trustees as of the date first above written.

PENNYMAC HOLDINGS, LLC
By:	/s/ Pamela Marsh
	Name:  Pamela Marsh
	Title:  Managing Director, Treasurer
PENNYMAC LOAN SERVICES, LLC
By:	/s/ Pamela Marsh
	Name:  Pamela Marsh
	Title:  Managing Director, Treasurer

Signature Page to Amendment No. 6 to Loan and Security Agreement

EX-10.84

Exhibit 10.84

EXECUTION COPY

AMENDMENT NUMBER EIGHT

to the

MASTER REPURCHASE AGREEMENT

Dated as of July 2, 2013,

among

PENNYMAC LOAN SERVICES, LLC,

MORGAN STANLEY BANK. N.A.

and

MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC

This AMENDMENT NUMBER EIGHT (this “Amendment Number Eight”) is made this 26th day of August, 2016, among PENNYMAC LOAN SERVICES, LLC a Delaware limited liability company, as seller (“Seller”), MORGAN STANLEY BANK, N.A., a national banking association, as buyer (“Buyer”) and MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company, as agent for Buyer (“Agent”), to the Master Repurchase Agreement, dated as of July 2, 2013, between Seller and Buyer, as such agreement may be amended from time to time (the “Agreement”).  Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.

RECITALS

WHEREAS, Seller, Buyer and Agent have agreed to amend the Agreement to extend the Termination Date thereunder, as more specifically set forth herein; and

WHEREAS, as of the date hereof, Seller represents to Buyer and Agent that Seller is in full compliance with all of the terms and conditions of the Agreement and each other Program Document and no Default or Event of Default has occurred and is continuing under the Agreement or any other Program Document.

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

Section 1. Amendment.  Effective as of August 26, 2016 (the “Amendment Effective Date”),the defined term "Termination Date" in Section 1.01 of the Agreement is hereby amended to read in its entirety as follows:

“Termination Date” shall mean August 25, 2017 or such earlier date on which this Repurchase Agreement shall terminate in accordance with the provisions hereof or by operation of law.

Section 2. Defined Terms.  Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Agreement.

Section 3. Effectiveness.  This Amendment Number Eight shall become effective as of the date that the Agent shall have received:

(a) counterparts hereof duly executed by each of the parties hereto, and

(b) counterparts of that certain Amendment Number Seven to the Pricing Side Letter, dated as of the date hereof, duly executed by each of the parties thereto.

Section 4. Fees and Expenses.  Seller agrees to pay to Buyer and Agent all reasonable out of pocket costs and expenses incurred by Buyer or Agent in connection with this Amendment Number Eight (including all reasonable fees and out of pocket costs and expenses of Buyer’s or Agent’s legal counsel) in accordance with Section 13.04 and 13.06 of the Agreement.

Section 5. Representations.  Seller hereby represents to Buyer and Agent that as of the date hereof and taking into account the terms of this Amendment Number Eight, Seller is in full compliance with all of the terms and conditions of the Agreement and each other Program Document and no Default or Event of Default has occurred and is continuing under the Agreement or any other Program Document.

Section 6. Binding Effect; Governing Law.  This Amendment Number Eight shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  THIS AMENDMENT NUMBER EIGHT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL GOVERN).

Section 7. Counterparts.  This Amendment Number Eight may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument.

Section 8. Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number Eight need not be made in the Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.

[Signature Page Follows]

2

IN WITNESS WHEREOF, Seller, Buyer and Agent have caused this Amendment Number Eight to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.

	PENNYMAC LOAN SERVICES, LLC
	(Seller)
By:	/s/ Pamela Marsh
	Name: Pamela Marsh
	Title:  Managing Director, Treasurer
	MORGAN STANLEY BANK, N.A.
	(Buyer)
By:	/s/ Christopher Schmidt
	Name: Christopher Schmidt
	Title:   Authorized Signatory
	MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC
	(Agent)
By:	/s/ Sajid Zaidi
	Name: Sajid Zaidi
	Title:   Vice President

Amendment Number Eight to Master Repurchase Agreement

EX-10.97

Exhibit 10.97

EXECUTION COPY

AMENDMENT NUMBER ONE

to the

MASTER REPURCHASE AGREEMENT

dated as of December 4, 2015

among

BARCLAYS BANK PLC

and

PENNYMAC LOAN SERVICES, LLC

and

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC

This AMENDMENT NUMBER ONE (this “Amendment”) is made as of this 29th day of September, 2016, by and among Barclays Bank PLC (the “Purchaser” and the “Agent”), Private National Mortgage Acceptance Company, LLC (the “Guarantor”) and PennyMac Loan Services, LLC (the “Seller”), and amends that certain Master Repurchase Agreement, dated as of December 4, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Repurchase Agreement”), by and among the Purchaser, the Agent, the Guarantor and the Seller.

WHEREAS, the Purchaser, the Agent, the Guarantor and the Seller have agreed to amend the Repurchase Agreement as more particularly set forth herein.

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

SECTION 1.     Amendments.  Effective as of the date hereof:

(a)     Section 2 of the Repurchase Agreement is hereby amended by adding the defined terms “Bail-In Action,” “USDA” and “USDA/VA Mortgage Loan” in their proper alphabetical sequence:

 “Bail-In Action” means the exercise by the Bank of England (or any successor  resolution authority) of any write-down or conversion power existing from time to time (including, without limitation, any power to amend or alter the maturity of eligible liabilities of an institution under resolution or amend the amount of interest payable under such eligible liabilities or the date on which interest becomes payable, including by suspending payment for a temporary period and together with any power to terminate and value transactions) under, and exercised in compliance with, any laws, regulations, rules or requirements in effect in the United Kingdom relating to the transposition of the European Banking Recovery and Resolution Directive as amended from time to time, including but not limited to, the Banking Act 2009 as amended from time to time, and the instruments, rules and standards created thereunder, pursuant to which our obligations (or those of our affiliates) can be reduced (including to zero), cancelled or converted into shares, other securities, or other obligations of ours or any other person.

“USDA” means the United States Department of Agriculture. 

“USDA/VA Mortgage Loan” means a Mortgage Loan guaranteed by the USDA or the VA.

(b)      Section (U) of Exhibit B is hereby amended by deleting Subsection (A) and replacing it with the following:

-  1  -

(U) No Mortgage Loan:

(A) that is a First Mortgage Loan insured by the FHA or guaranteed by the VA or the USDA (other than a HARP Mortgage Loan), has a Loan-to-Value Ratio on First Mortgage Loans over 97.5% in the case of the FHA, or has a Loan-to-Value Ratio on First Mortgage Loans over 105% in the case of the VA or the USDA (provided that USDA/VA Mortgage Loans with a Loan-to-Value Ratio over 97.5% are subject to the USDA/VA Mortgage Loan LTV Sublimit);

(c)     Section 34 of the Repurchase Agreement is hereby amended by deleting the notice information for the Seller and the Guarantor and replacing it with the following:

	pamela.marsh@pnmac.com; kevin.chamberlain@pnmac.com
if to Seller	PennyMac Loan Services, LLC 3043 Townsgate Road Westlake Village, CA  91361 Attention: Pamela Marsh/Kevin Chamberlain Telephone: (805) 330-6059/ (818) 746-2877 E-mail:pamela.marsh@pnmac.com; kevin.chamberlain@pnmac.com
if to Guarantor	Private National Mortgage Acceptance Company, LLC 3043 Townsgate Road Westlake Village, CA  91361 Attention: Pamela Marsh/Kevin Chamberlain Telephone: (805) 330-6059/ (818) 746-2877 E-mail: pamela.marsh@pnmac.com; kevin.chamberlain@pnmac.com

(d)      The Repurchase Agreement is hereby amended by adding the following as a new section of the Repurchase Agreement in its proper numerical sequence:

39. Contractual Recognition of Bail-In. Seller and Guarantor acknowledge and agree that notwithstanding any other term of this Agreement or any other agreement, arrangement or understanding with Purchaser, any of Purchaser’s liabilities, as the Bank of England (or any successor resolution authority) may determine, arising under or in connection with this Agreement may be subject to Bail-In Action and you accept to be bound by the effect of:

(a)   any Bail-In Action in relation to such liability, including (without limitation):

(i)    a reduction, in full or in part, of any amount due in respect of any such liability;

(ii)    a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, you; and

(iii)    a cancellation of any such liability; and

(b)   a variation of any term of this Agreement to the extent necessary to give effect to Bail-In Action in relation to any such liability.

SECTION 2.     Fees and Expenses.  Seller agrees to pay to Purchaser all fees and out of pocket expenses incurred by Purchaser in connection with this Amendment, including all reasonable fees and out of pocket costs and expenses of the legal counsel to Purchaser incurred in connection with this Amendment, in accordance with Section 23 of the Repurchase Agreement.

-  2  -

SECTION 3.     Defined Terms.  Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Repurchase Agreement.

SECTION 4.     Limited Effect.  Except as amended hereby, the Repurchase Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment need not be made in the Repurchase Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Repurchase Agreement, any reference in any of such items to the Repurchase Agreement being sufficient to refer to the Repurchase Agreement as amended hereby.

SECTION 5.     Representations. In order to induce Purchaser to execute and deliver this Amendment, each of the Guarantor and the Seller hereby represents to Purchaser that as of the date hereof, (i) each of the Guarantor and the Seller is in full compliance with all of the terms and conditions of the Program Documents and remains bound by the terms thereof, and (ii) no default or event of default has occurred and is continuing under the Program Documents.

SECTION 6.     Governing Law.  This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflict of laws (other than Sections 5-1401 and 5‑1402 of the New York General Obligations Law which shall be applicable).

SECTION 7.     Counterparts.  For the purpose of facilitating the execution of this Amendment, and for other purposes, this Amendment may be executed simultaneously in any number of counterparts.  Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.  The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties. The original documents shall be promptly delivered, if requested.

SECTION 8.     Miscellaneous.

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

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

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-  3  -

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

	BARCLAYS BANK PLC,
	as Purchaser and Agent
By:	/s/ George Van Schaick
	Name: George Van Schaick
	Title:   Managing Director
	PENNYMAC LOAN SERVICES, LLC,
	as Seller
By:	/s/ Anne D. McCallion
	Name:  Anne McCallion
	Title:    SMD, Chief Financial Officer
	PRIVATE NATIONAL MORTGAGE
	ACCEPTANCE COMPANY, LLC,
	as Guarantor
By:	/s/ Anne D. McCallion
	Name:  Anne McCallion
	Title:    SMD, Chief Financial Officer

Amendment Number One to Master Repurchase Agreement

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Stanford L. Kurland, certify that:

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

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.[Intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2016
By:	/s/ Stanford L. Kurland
	Stanford L. Kurland
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Anne D. McCallion, certify that:

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

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.[Intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2016
By:	/s/ Anne D. McCallion
	Anne D. McCallion
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc. (the “Company”) for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanford L. Kurland, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2016
By:	/s/ Stanford L. Kurland
	Stanford L. Kurland
	Chairman of the Board and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Financial Services, Inc. and will be retained by PennyMac Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Financial Services, Inc. (the “Company”) for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anne D. McCallion, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2016
By:	/s/ Anne D. McCallion
	Anne D. McCallion
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Financial Services, Inc. and will be retained by PennyMac Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 07, 2016
Entity Registrant Name	PENNYMAC FINANCIAL SERVICES, INC.
Entity Central Index Key	0001568669
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Class A Common Stock
Entity Common Stock, Shares Outstanding		22,309,354
Class B Common Stock
Entity Common Stock, Shares Outstanding		49

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Cash (includes $84,851 and $93,757 pledged to creditors)	$ 94,727	$ 105,472
Short-term investments at fair value	58,749	46,319
Mortgage loans held for sale at fair value (includes $3,094,617 and $1,079,489 pledged to creditors)	3,127,377	1,101,204
Derivative assets	135,777	50,280
Servicing advances, net (includes valuation allowance of $38,031 and $33,458)	306,150	299,354
Mortgage servicing rights (includes $492,028 and $660,247 at fair value; $1,333,078 and $803,560 pledged to creditors)	1,337,674	1,411,935
Real estate acquired in settlement of loans	1,996
Furniture, fixtures, equipment and building improvements, net (includes $22,281 and $14,034 pledged to creditors)	29,121	16,311
Capitalized software, net (includes $444 and $783 pledged to creditors)	8,361	3,025
Deferred tax asset		18,378
Mortgage loans eligible for repurchase	197,819	166,070
Other	60,061	45,594
Total assets	5,596,194	3,505,294
LIABILITIES
Assets sold under agreements to repurchase	2,491,366	1,166,731
Mortgage Loan Participation and Sale Agreement	782,913	234,872
Note payable	110,619	61,136
Obligations under capital lease	20,700	13,579
Derivative liabilities	4,426	9,083
Accounts payable and accrued expenses	106,684	89,915
Mortgage servicing liabilities at fair value	13,045	1,399
Income taxes payable	11,415
Liability for loans eligible for repurchase	197,819	166,070
Liability for losses under representations and warranties	18,473	20,611
Total liabilities	4,305,790	2,442,944
Commitments and contingencies
STOCKHOLDERS' EQUITY
Additional paid-in capital	179,134	172,354
Retained earnings	141,805	98,470
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders	320,941	270,826
Noncontrolling interest in Private National Mortgage Acceptance Company, LLC	969,463	791,524
Total stockholders' equity	1,290,404	1,062,350
Total liabilities and stockholders' equity	5,596,194	3,505,294
Class A Common Stock
STOCKHOLDERS' EQUITY
Common stock	2	2
Total stockholders' equity	2	2
Class B Common Stock
STOCKHOLDERS' EQUITY
Common stock
Investment Funds
ASSETS
Carried Interest due from Investment Funds pledged to creditors	70,870	69,926
Receivable, from affiliates	1,596	1,316
LIABILITIES
Payable to affiliates	27,265	30,429
PMT
ASSETS
Investment in PennyMac Mortgage Investment Trust at fair value	1,169	1,145
Note receivable from PennyMac Mortgage Investment Trust	150,000	150,000
Receivable, from affiliates	14,747	18,965
LIABILITIES
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	280,367	412,425
Payable to affiliates	165,264	162,379
Private National Mortgage Acceptance Company, LLC
LIABILITIES
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	$ 75,434	$ 74,315

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Cash pledged to creditors	$ 84,851	$ 93,757
Mortgage loans held for sale, pledged to creditors	3,094,617	1,079,489
Servicing advances, net, valuation allowance	38,031	33,458
Mortgage servicing rights, at fair value	492,028	660,247
Furniture, fixtures, equipment and building improvements pledged to creditors	22,281	14,034
Capitalized software pledged to creditors	444	783
Mortgage servicing rights, pledged to secure note payable	$ 1,333,078	$ 803,560
Class A Common Stock
Common stock, shares authorized	200,000,000	200,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares issued	22,274,145	21,990,831
Common stock, shares outstanding	22,274,145	21,990,831
Class B Common Stock
Common stock, shares authorized	1,000	1,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares issued	49	51
Common stock, shares outstanding	49	51

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net gains (losses) on mortgage loans held for sale at fair value:
From non-affiliates	$ 183,811	$ 85,744	$ 409,405	$ 247,822
Net gains (losses) on mortgage loans held for sale at fair value	182,121	82,646	403,848	241,979
Mortgage loan origination fees	34,621	29,448	85,962	70,551
Mortgage loan servicing fees
From non-affiliates and affiliates	98,865	83,424	282,962	200,392
Ancillary and other fees	11,913	10,096	34,183	33,131
Net servicing fees	122,587	106,052	358,258	269,982
Amortization, impairment and change in fair value of mortgage servicing rights	(80,830)	(59,065)	(309,304)	(128,073)
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust	(76,723)	(48,794)	(268,320)	(117,399)
Net mortgage loan servicing fees	45,864	57,258	89,938	152,583
Management fees:
Management fees	5,521	6,456	17,163	21,908
Interest income:
From non-affiliates	20,735	13,764	50,994	35,348
Interest income	22,709	15,053	56,792	37,170
Interest expense:
To non-affiliates	22,689	12,918	56,414	31,526
Interest expense	27,516	20,944	73,969	49,122
Net interest expense:	(4,807)	(5,891)	(17,177)	(11,952)
Result of real estate acquired in settlement of loans	42
Other	684	410	2,493	2,446
Total net revenue	291,395	189,205	642,602	525,870
Expenses
Compensation	96,132	74,129	247,577	202,695
Servicing	22,177	16,770	56,494	55,108
Technology	9,733	6,676	24,313	18,104
Professional services	4,631	3,803	12,923	10,710
Loan origination	6,471	4,314	15,567	12,813
Other	12,973	9,590	32,053	24,480
Total expenses	152,117	115,282	388,927	323,910
Income before provision for income taxes	139,278	73,923	253,675	201,960
Provision for income taxes	16,976	8,575	30,535	23,308
Net income	122,302	65,348	223,140	178,652
Less: Net income attributable to noncontrolling interest	98,617	52,668	179,805	144,195
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$ 23,685	$ 12,680	$ 43,335	$ 34,457
Earnings per common share
Basic (in dollars per share)	$ 1.07	$ 0.58	$ 1.96	$ 1.59
Diluted (in dollars per share)	$ 1.06	$ 0.58	$ 1.95	$ 1.58
Weighted-average common shares outstanding
Basic (in shares)	22,217	21,810	22,101	21,702
Diluted (in shares)	76,355	76,138	76,331	76,098
PMT
Net gains (losses) on mortgage loans held for sale at fair value:
Recapture payable to PennyMac Mortgage Investment Trust	$ (1,690)	$ (3,098)	$ (5,557)	$ (5,843)
Fulfillment fees from PennyMac Mortgage Investment Trust	27,255	17,553	59,301	45,752
Mortgage loan servicing fees
From non-affiliates and affiliates	11,039	11,736	38,919	34,542
Management fees:
Management fees	5,025	5,742	15,576	18,524
Interest income:
From PennyMac Mortgage Investment Trust	1,974	1,289	5,798	1,822
Interest expense:
To PennyMac Mortgage Investment Trust	4,827	8,026	17,555	17,596
Change in fair value of investment in and dividends received from affiliate	(13)	(158)	130	(295)
Investment Funds
Mortgage loan servicing fees
From non-affiliates and affiliates	770	796	2,194	1,917
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust	4,107	10,271	40,984	10,674
Management fees:
Management fees	496	714	1,587	3,384
Carried Interest from Investment Funds	$ 107	$ 1,483	$ 944	$ 2,898

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Additional paid-in capital	Retained earnings	Noncontrolling interest	Class A Common Stock	Total
Balance at Dec. 31, 2014	$ 162,720	$ 51,242	$ 593,302	$ 2	$ 807,266
Balance (in shares) at Dec. 31, 2014				21,578
Changes in stockholders' equity
Net income		34,457	144,195		178,652
Distributions			(9,627)		(9,627)
Stock and unit-based compensation	3,746		9,358		13,104
Stock and unit-based compensation (in shares)				75
Issuance of common stock in settlement of director fees	223				223
Issuance of common stock in settlement of directors' fees (in shares)				13
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc.	2,919		(2,919)		2,919
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (in shares)				177
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc.	(311)				(311)
Balance at Sep. 30, 2015	169,297	85,699	734,309	$ 2	989,307
Balance (in shares) at Sep. 30, 2015				21,843
Balance at Dec. 31, 2015	172,354	98,470	791,524	$ 2	1,062,350
Balance (in shares) at Dec. 31, 2015				21,991
Changes in stockholders' equity
Net income		43,335	179,805		223,140
Distributions			(6,742)		(6,742)
Stock and unit-based compensation	3,341		8,914		12,255
Stock and unit-based compensation (in shares)				99
Issuance of common stock in settlement of director fees	230				230
Issuance of common stock in settlement of directors' fees (in shares)				18
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc.	4,038		(4,038)		4,038
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (in shares)				166
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc.	(829)				(829)
Balance at Sep. 30, 2016	$ 179,134	$ 141,805	$ 969,463	$ 2	$ 1,290,404
Balance (in shares) at Sep. 30, 2016				22,274

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flow from operating activities
Net income	$ 223,140	$ 178,652
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net gains on mortgage loans held for sale at fair value	(403,848)	(241,979)
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread	268,320	117,399
Capitalization of interest on mortgage loans held for sale at fair value	(20,451)	(11,703)
Accrual of interest on excess servicing spread financing	17,555	17,596
Amortization of debt issuance costs and commitment fees relating to financing facilities	7,944	5,688
Stock and unit-based compensation expense	12,255	13,104
Provision for servicing advance losses	19,799	23,538
Depreciation and amortization	3,965	1,585
Originations of mortgage loans held for sale	(4,428,426)	(3,106,147)
Purchase of mortgage loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale	(1,588,711)	(989,009)
Sale and principal payments of mortgage loans held for sale	33,124,241	28,346,871
Repurchase of mortgage loans subject to representations and warranties	(13,525)	(17,112)
Increase in servicing advances	(28,591)	(47,080)
Decrease in deferred tax asset	18,668	21,399
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	0	(4,299)
Increase in other assets	(24,325)	(23,113)
Increase in accounts payable and accrued expenses	(12,992)	(22,280)
Net cash used in operating activities	(1,916,072)	(519,157)
Cash flow from investing activities
Increase in short-term investments	(12,430)	(3,079)
Advance on note receivable from PennyMac Mortgage Investment Trust		(168,546)
Repayment of note receivable from PennyMac Mortgage Investment Trust		18,546
Purchase of mortgage servicing rights	(23)	(379,264)
Net settlement of derivative financial instruments used for hedging	173,696	(3,678)
Purchase of furniture, fixtures, equipment and leasehold improvements	(17,539)	(5,716)
Acquisition of capitalized software	(5,572)	(1,745)
(Increase) decrease in margin deposits and restricted cash	(39,467)	5,331
Net cash provided by (used in) investing activities	98,665	(538,151)
Cash flow from financing activities
Sale of assetss under agreements to repurchase	31,708,423	25,947,385
Repurchase of assets sold under agreements to repurchase	(30,384,066)	(25,482,890)
Issuance of mortgage loan participation certificates	(21,895,964)	(13,265,896)
Repayment of mortgage loan participation certificates	(21,347,920)	(13,162,123)
Advances on notes payable	97,000	289,556
Repayments of notes payable	(48,661)	(29,411)
Issuance of excess servicing spread		271,452
Repayment of excess servicing spread financing	(54,623)	(55,800)
Repurchases of excess servicing spread financing	(59,045)
Advances of obligations under capital lease	12,651
Repayments of obligations under capital lease	(5,530)	(6)
Payment of debt issuance costs	(6,525)	(5,965)
Assumption of mortgage servicing liability	5,736
Distributions to Private National Mortgage Acceptance Company, LLC members	(6,742)	(9,627)
Net cash provided by financing activities	1,806,662	1,028,467
Net decrease in cash	(10,745)	(28,841)
Cash at beginning of year	105,472	76,256
Cash at end of year	94,727	47,415
Investment Funds
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accrual of servicing rebate to Investment Funds	209	1,193
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread	(40,984)	(10,674)
Carried Interest from Investment Funds	(944)	(2,898)
(Increase) decrease in receivable from affiliates	(489)	(444)
(Decrease) increase in payable to affiliate	(3,164)	(5,697)
PMT
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust	(24)	422
Purchase of mortgage loans held for sale from PennyMac Mortgage Investment Trust	(29,144,685)	(24,864,698)
Sale of mortgage loans held for sale to Penny Mac Mortgage Investment Trust	13,146	13,708
(Increase) decrease in receivable from affiliates	5,491	8,889
(Decrease) increase in payable to affiliate	1,971	$ 22,698
Increase in income tax payable	$ 11,415

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Organization

9 Months Ended

Sep. 30, 2016

Organization

Organization

Note 1—Organization and Basis of Presentation

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) was formed as a Delaware corporation on December 31, 2012. Pursuant to a reorganization, the Company became a holding corporation and its primary asset is an equity interest in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac and operates and controls all of the businesses and affairs of PennyMac subject to the consent rights of other members under certain circumstances, and consolidates the financial results of PennyMac and its subsidiaries.

PennyMac is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PennyMac’s mortgage banking activities consist of residential mortgage loan production (including correspondent production and consumer direct lending) and mortgage loan servicing. PennyMac’s investment management activities and a portion of its mortgage loan servicing activities are conducted on behalf of entities that invest in residential mortgage loans and related assets. PennyMac’s primary wholly owned subsidiaries are:

· PNMAC Capital Management, LLC (“PCM”)—a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM enters into investment management agreements with entities that invest in residential mortgage loans and related assets.

Presently, PCM has management agreements with, PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P., (the “Master Fund”), both registered under the Investment Company Act of 1940, as amended, an affiliate of these registered funds, PNMAC Mortgage Opportunity Fund Investors, LLC (collectively, the “Investment Funds”) and PennyMac Mortgage Investment Trust (“PMT”), a publicly held real estate investment trust (“REIT”). Together, the Investment Funds and PMT are referred to as the “Advised Entities.”

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

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

· PNMAC Opportunity Fund Associates, LLC (“PMOFA”)—a Delaware limited liability company and the general partner of the Master Fund. PMOFA is entitled to incentive fees representing allocations of profits (“Carried Interest”) from the Master Fund.

The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. The interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods, but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2016. Intercompany accounts and transactions have been eliminated.

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

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Concentration of Risk

9 Months Ended

Sep. 30, 2016

Concentration of Risk

Concentration of Risk

Note 2—Concentration of Risk

A substantial portion of the Company’s activities relate to the Advised Entities. Fees (generally comprised of fulfillment fees, mortgage loan servicing fees, management fees, Carried Interest and servicing recapture fees) and interest charged to these entities totaled 15% and 20% of total net revenue for the quarters ended September 30, 2016 and 2015, respectively, and 22% and 18% for the nine months ended September 30, 2016 and 2015, respectively.

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Transactions with Affiliates

9 Months Ended

Sep. 30, 2016

Transactions with Affiliates

Transactions with Affiliates

Note 3—Transactions with Affiliates

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities

Following is a summary of mortgage lending and sourcing activity between the Company and PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights and excess servicing spread recapture incurred	$	1,690	$	3,098	$	5,557	$	5,843
Fulfillment fee revenue	$	27,255	$	17,553	$	59,301	$	45,752
Unpaid principal balance of mortgage loans fulfilled for PMT	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411
Sourcing fees paid to PMT	$	3,509	$	3,236	$	8,282	$	7,084
Unpaid principal balance of mortgage loans purchased from PMT	$	11,694,065	$	10,783,882	$	27,599,186	$	23,602,020
Proceeds from sale of mortgage loans held for sale to PMT	$	5,007	$	1,047	$	13,146	$	11,875
Tax service fees received from PMT	$	2,006	$	1,291	$	4,537	$	3,293
Early purchase program fees earned from PMT	$	5	$	—	$	7	$	—

Mortgage Loan Servicing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage loans acquired for sale at fair value:
Base and supplemental	$	90	$	130	$	225	$	198
Activity-based		210		153		497		243
		300		283		722		441
Mortgage loans at fair value:
Base and supplemental		2,615		3,930		8,881		12,145
Activity-based		3,014		2,961		14,981		8,948
		5,629		6,891		23,862		21,093
Mortgage servicing rights:
Base and supplemental		4,978		4,473		13,999		12,783
Activity-based		132		89		336		225
		5,110		4,562		14,335		13,008
	$	11,039	$	11,736	$	38,919	$	34,542

Investment Management Activities

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

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Base management	$	5,025	$	5,742	$	15,576	$	17,181
Performance incentive		—		—		—		1,343
	$	5,025	$	5,742	$	15,576	$	18,524

The management agreement, as amended, expires on September 12, 2020, subject to automatic renewal for additional 18‑month periods, unless terminated earlier in accordance with the terms of the management agreement.

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

Expense Reimbursement

PMT reimburses the Company for other expenses, including common overhead expenses incurred on its behalf by the Company, in accordance with the terms of its management agreement. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,417	$	2,694	$	6,413	$	8,125
Expenses incurred on PMT's (the Company's) behalf, net		13		(85)		(102)		377
	$	1,430	$	2,609	$	6,311	$	8,502
Payments and settlements during the period (1)	$	45,988	$	17,709	$	102,600	$	64,575

(1) Payments and settlements include payments for operating, investment and financing activities itemized in this Note and netting settlements made pursuant to master netting agreements between the Company and PMT.

Amounts due from and payable to PMT are summarized below:

	September 30,		December 31,
	2016		2015
	(in thousands)
Receivable from PMT:
Management fees	$	5,025	$	5,670
Servicing fees		3,641		3,682
Allocated expenses and expenses incurred on PMT's behalf		3,227		4,490
Fulfillment fees		926		1,082
Conditional reimbursement		900		900
Interest on note receivable		536		412
Correspondent production fees		492		2,729
	$	14,747	$	18,965
Payable to PMT:
Deposits made by PMT to fund servicing advances	$	159,488	$	153,573
Mortgage servicing rights ("MSR") recapture payable		450		781
Other		5,326		8,025
	$	165,264	$	162,379

Conditional Reimbursement of Underwriting Fees

In connection with its initial public offering of common shares on August 4, 2009 (“IPO”), PMT conditionally agreed to reimburse the Company up to $2.9 million for underwriting fees paid to the IPO underwriters by the Company on PMT’s behalf. The Company received reimbursement payments from PMT totaling $7,000 and $237,000 for the quarter and nine months ended September 30, 2015, respectively, and received no reimbursement from PMT during the nine months ended September 30, 2016.

In the event a termination fee is payable to the Company under the management agreement, and the Company has not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.

Investing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:
Interest income	$	1,974	$	1,289	$	5,798	$	1,822
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received and change in fair value	$	(13)	$	(158)	$	130	$	(295)

	September 30,		December 31,
	2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:	$	150,000	$	150,000
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,169	$	1,145
Number of shares		75		75

Financing Activities

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Excess servicing spread financing:
Issuance:
Cash	$	—	$	84,165	$	—	$	271,452
Pursuant to recapture agreement	$	1,438	$	2,268	$	5,039	$	4,833
Repayment	$	(16,342)	$	(24,717)	$	(54,623)	$	(55,800)
Repurchase	$	—	$	—	$	(59,045)	$	—
Change in fair value	$	(4,107)	$	(10,271)	$	(40,984)	$	(10,674)
Interest expense	$	4,827	$	8,026	$	17,555	$	17,596
Excess servicing spread recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread	$	1,283	$	2,428	$	4,709	$	5,173

Investment Funds

Amounts due from and payable to the Investment Funds are summarized below:

	September 30,		December 31,
	2016		2015
	(in thousands)
Carried Interest due from Investment Funds:
PNMAC Mortgage Opportunity Fund, LLC	$	42,357	$	41,893
PNMAC Mortgage Opportunity Fund Investors, LLC		28,513		28,033
	$	70,870	$	69,926
Receivable from Investment Funds:
Management fees	$	503	$	655
Expense reimbursements		429		45
Mortgage loan servicing fees		425		392
Mortgage loan servicing rebate		239		224
	$	1,596	$	1,316
Payable to Investment Funds—Servicing advances	$	27,265	$	30,429

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

The Company entered into a tax receivable agreement with PennyMac’s existing unitholders on the date of the IPO that will provide for the payment by the Company to PennyMac’s exchanged unitholders an amount equal to 85% of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from such unitholders’ exchanges and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Based on the PennyMac unitholder exchanges to date, the Company has recorded a $75.4 million and $74.3 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of September 30, 2016 and December 31, 2015, respectively. The Company made payments under the tax receivable agreement totaling $4.3 million during the nine months ended September 30, 2015. There were no payments made during the nine months ended September 30, 2016.

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Earnings Per Share of Common Stock

9 Months Ended

Sep. 30, 2016

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Note 4—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined using net income attributable to the Company’s common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is determined by dividing diluted net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all dilutive shares of common stock were issued.

Potentially dilutive shares of common stock include non-vested unit and stock-based compensation awards and PennyMac Class A units. The Company applies the treasury stock method to determine the diluted weighted average shares of common stock outstanding represented by the non-vested unit and stock-based compensation awards. The diluted earnings per share calculation assumes the exchange of PennyMac Class A units for shares of common stock. Accordingly, earnings attributable to the Company’s common stockholders is also adjusted to include the earnings allocated to the PennyMac Class A units after taking into account the income taxes that would be applicable to such earnings.

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands, except per share amounts)
Basic earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Basic earnings per share of common stock	$	1.07	$	0.58	$	1.96	$	1.59
Diluted earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Effect of net income attributable to PennyMac Class A units exchangeable to common stock, net of income taxes		57,444		31,418		105,480		86,012
Diluted net income attributable to common stockholders	$	81,129	$	44,098	$	148,815	$	120,469
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Dilutive shares:
PennyMac Class A units exchangeable to common stock		53,923		54,042		53,996		53,744
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock		—		163		—		528
Common shares issuable under stock-based compensation plan		215		123		234		124
Diluted weighted average shares of common stock outstanding		76,355		76,138		76,331		76,098
Diluted earnings per share of common stock	$	1.06	$	0.58	$	1.95	$	1.58

Potentially dilutive securities are excluded from the calculation of diluted earnings per share when their inclusion would be anti-dilutive. The following table summarizes the anti-dilutive weighted-average number of outstanding stock options and performance-based restricted stock units (“RSUs”) excluded from the calculation of diluted earnings per share:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands except for weighted-average exercise price)
Stock options (1)		2,768		1,864		2,559		1,712
Performance-based RSUs (2)		2,505		2,377		2,510		2,210
Total anti-dilutive stock-based compensation units		5,273		4,241		5,069		3,922
Weighted-average exercise price of anti-dilutive stock options (1)	$	15.81	$	18.17	$	15.82	$	18.17

(1) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were anti-dilutive.

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

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Loan Sales and Servicing Activities

9 Months Ended

Sep. 30, 2016

Loan Sales and Servicing Activities

Loan Sales and Servicing Activities

Note 5—Loan Sales and Servicing Activities

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

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Cash flows:
Sales proceeds	$	13,947,544	$	12,738,035	$	33,124,241	$	28,357,226
Servicing fees received (1)	$	67,371	$	33,745	$	186,474	$	103,057
Net servicing advance recoveries	$	4,608	$	9,778	$	14,153	$	18,733

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

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance of mortgage loans outstanding at end of period	$	78,942,489	$	60,687,246
Delinquencies:
30-89 days	$	2,157,646	$	1,539,568
90 days or more:
Not in foreclosure	$	457,909	$	340,313
In foreclosure or bankruptcy	$	328,396	$	227,025
Foreclosed	$	2,435	$	755

The unpaid principal balance (“UPB”) of the Company’s mortgage loan servicing portfolio is summarized as follows:

	September 30, 2016
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	123,030,847	$	—	$	123,030,847
Affiliated entities		—		56,100,331		56,100,331
Mortgage loans held for sale		2,945,465		—		2,945,465
	$	125,976,312	$	56,100,331	$	182,076,643
Commercial real estate loans subserviced for the Company	$	16,403	$	—	$	16,403
Delinquent mortgage loans:
30 days	$	2,954,504	$	366,538	$	3,321,042
60 days		989,384		126,411		1,115,795
90 days or more:
Not in foreclosure		1,740,732		591,872		2,332,604
In foreclosure or bankruptcy		801,461		798,585		1,600,046
Foreclosed		29,560		471,956		501,516
	$	6,515,641	$	2,355,362	$	8,871,003
Custodial funds managed by the Company (1)	$	3,754,860	$	1,058,632	$	4,813,492

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interestincome in the Company’s consolidated statements of income.

	December 31, 2015
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	111,409,601	$	—	$	111,409,601
Affiliated entities		—		47,810,632		47,810,632
Mortgage loans held for sale		1,052,485		—		1,052,485
	$	112,462,086	$	47,810,632	$	160,272,718
Commercial real estate loans subserviced for the Company	$	14,454	$	—	$	14,454
Delinquent mortgage loans:
30 days	$	2,666,435	$	349,859	$	3,016,294
60 days		834,617		136,924		971,541
90 days or more:
Not in foreclosure		1,270,236		788,410		2,058,646
In foreclosure or bankruptcy		656,617		1,180,014		1,836,631
Foreclosed		23,372		542,031		565,403
	$	5,451,277	$	2,997,238	$	8,448,515
Custodial funds managed by the Company (1)	$	2,242,146	$	502,751	$	2,744,897

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interest income in the Company’s consolidated statements of income.

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

	September 30,		December 31,
State	2016		2015
	(in thousands)
California	$	40,854,288	$	39,007,363
Texas		14,851,369		12,191,722
Virginia		12,164,535		9,816,114
Florida		11,830,839		9,709,940
Maryland		7,755,698		6,151,945
All other states		94,619,914		83,395,634
	$	182,076,643	$	160,272,718

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Netting of Financial Instruments

9 Months Ended

Sep. 30, 2016

Netting of Financial Instruments

Netting of Financial Instruments

Note 6—Netting of Financial Instruments

The Company uses derivative financial instruments to manage exposure to interest rate risk for the interest rate lock commitments (“IRLCs”) it makes to purchase or originate mortgage loans at specified interest rates, its inventory of mortgage loans held for sale and MSRs. The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts.

	September 30, 2016						December 31, 2015
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - Interest rate lock   commitments	$	107,127	$	—	$	107,127	$	45,885	$	—	$	45,885
Derivatives subject to a master netting arrangement:
Forward purchase contracts		54,574		—		54,574		4,181		—		4,181
Forward sale contracts		3,588		—		3,588		4,965		—		4,965
Mortgage-backed security ("MBS") put options		6,019		—		6,019		404		—		404
Put options on interest rate futures purchase contracts		6,707		—		6,707		1,832		—		1,832
Call options on interest rate futures purchase contracts		4,430		—		4,430		1,555		—		1,555
Netting		—		(46,668)		(46,668)		—		(8,542)		(8,542)
		75,318		(46,668)		28,650		12,937		(8,542)		4,395
	$	182,445	$	(46,668)	$	135,777	$	58,822	$	(8,542)	$	50,280

Derivative Assets, Financial Assets, and Collateral Held by Counterparty

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

	September 30, 2016								December 31, 2015
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
			balance sheet								balance sheet
	Net amount								Net amount
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	107,127	$	—	$	—	$	107,127	$	45,885	$	—	$	—	$	45,885
RJ O'Brien		8,634		—		—		8,634		2,246		—		—		2,246
Barclays Capital		8,431		—		—		8,431		72		—		—		72
JP Morgan		4,067		—		—		4,067		—		—		—		—
Federal National Mortgage Association		3,471		—		—		3,471		453		—		—		453
Citibank, N.A.		1,738		—		—		1,738		—		—		—		—
Goldman Sachs		836		—		—		836		471		—		—		471
Morgan Stanley Bank, N.A.		731		—		—		731		—		—		—		—
Jefferies & Co.		343		—		—		343		888		—		—		888
Wells Fargo Bank, N.A.		—		—		—		—		53		—		—		53
Others		399		—		—		399		212		—		—		212
	$	135,777	$	—	$	—	$	135,777	$	50,280	$	—	$	—	$	50,280

Offsetting of Derivative Liabilities and Financial Liabilities

Following is a summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts. As discussed above, all derivatives with the exception of IRLCs are subject to master netting arrangements. The mortgage loans sold under agreements to repurchase do not qualify for set off accounting.

	September 30, 2016						December 31, 2015
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - IRLCs	$	1,609	$	—	$	1,609	$	2,112	$	—	$	2,112
Derivatives subject to a master netting arrangement:
Forward purchase contracts		2,584		—		2,584		9,004		—		9,004
Forward sale contracts		45,085		—		45,085		7,497		—		7,497
Put options on interest rate futures purchase contracts		1,500		—		1,500		203		—		203
Call options on interest rate futures purchase contracts		398		—		398		47		—		47
Netting		—		(46,750)		(46,750)		—		(9,780)		(9,780)
		49,567		(46,750)		2,817		16,751		(9,780)		6,971
Total derivatives		51,176		(46,750)		4,426		18,863		(9,780)		9,083
Mortgage loans sold under agreements to repurchase:
Amount outstanding		2,491,762		—		2,491,762		1,167,405		—		1,167,405
Unamortized debt issuance costs		(396)		—		(396)		(674)		—		(674)
		2,491,366		—		2,491,366		1,166,731		—		1,166,731
	$	2,542,542	$	(46,750)	$	2,495,792	$	1,185,594	$	(9,780)	$	1,175,814

Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty

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

	September 30, 2016								December 31, 2015
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	1,609	$	—	$	—	$	1,609	$	2,112	$	—	$	—	$	2,112
Credit Suisse First Boston Mortgage Capital LLC		1,174,487		(1,174,288)		—		199		795,179		(794,470)		—		709
Bank of America, N.A.		449,502		(449,371)		—		131		271,130		(269,510)		—		1,620
Citibank, N.A.		396,423		(396,423)		—		—		55,948		(53,904)		—		2,044
Morgan Stanley Bank, N.A.		185,688		(185,688)		—		—		49,763		(49,521)		—		242
Barclays Capital		154,665		(154,665)		—		—		—		—		—		—
JP Morgan Chase Bank, N.A.		131,327		(131,327)		—		—		672		—		—		672
Wells Fargo Bank, N.A.		1,323		—		—		1,323		—		—		—		—
Nomura Securities International, Inc.		396		—		—		396		—		—		—		—
Raymond James & Associates		232		—		—		232		—		—		—		—
Bank of Oklahoma		167		—		—		167		135		—		—		135
BNP Paribas		128		—		—		128		738		—		—		738
Bank of New York Mellon		77		—		—		77		154		—		—		154
Others		164		—		—		164		657		—		—		657
	$	2,496,188	$	(2,491,762)	$	—	$	4,426	$	1,175,814	$	(1,166,731)	$	—	$	9,083

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Fair Value

9 Months Ended

Sep. 30, 2016

Fair Value

Fair Value

Note 7—Fair Value

The Company’s consolidated financial statements include assets and liabilities that are measured based on their fair values. The application of fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its fair value as discussed in the following paragraphs.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:

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

· Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and other inputs.

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

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

Fair Value Accounting Elections

Management identified all of its non-cash financial assets, its originated MSRs relating to loans with initial interest rates of more than 4.5%, purchased MSRs subject to excess servicing spread financing (“ESS”) and mortgage servicing liabilities (“MSLs”) to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance. Management has also elected to account for its ESS at fair value as a means of hedging the related MSRs’ fair value risk.

Financial Statement Items Measured at Fair Value on a Recurring Basis

Following is a summary of financial statement items that are measured at fair value on a recurring basis:

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	58,749	$	—	$	—	$	58,749
Mortgage loans held for sale at fair value		—		3,081,003		46,374		3,127,377
Derivative assets:
Interest rate lock commitments		—		—		107,127		107,127
Forward purchase contracts		—		54,574		—		54,574
Forward sales contracts		—		3,588		—		3,588
MBS put options		—		6,019		—		6,019
Put options on interest rate futures purchase contracts		6,707		—		—		6,707
Call options on interest rate futures purchase contracts		4,430		—		—		4,430
Total derivative assets before netting		11,137		64,181		107,127		182,445
Netting		—		—		—		(46,668)
Total derivative assets		11,137		64,181		107,127		135,777
Investment in PennyMac Mortgage Investment Trust		1,169		—		—		1,169
Mortgage servicing rights at fair value		—		—		492,028		492,028
	$	71,055	$	3,145,184	$	645,529	$	3,815,100
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	280,367	$	280,367
Derivative liabilities:
Interest rate lock commitments		—		—		1,609		1,609
Forward purchase contracts		—		2,584		—		2,584
Forward sales contracts		—		45,085		—		45,085
Put options on interest rate futures purchase contracts		1,500		—		—		1,500
Call options on interest rate futures purchase contracts		398		—		—		398
Total derivative liabilities before netting		1,898		47,669		1,609		51,176
Netting		—		—		—		(46,750)
Total derivative liabilities		1,898		47,669		1,609		4,426
Mortgage servicing liabilities		—		—		13,045		13,045
	$	1,898	$	47,669	$	295,021	$	297,838

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	46,319	$	—	$	—	$	46,319
Mortgage loans held for sale at fair value		—		1,052,673		48,531		1,101,204
Derivative assets:
Interest rate lock commitments		—		—		45,885		45,885
Forward purchase contracts		—		4,181		—		4,181
Forward sales contracts		—		4,965		—		4,965
MBS put options		—		404		—		404
Put options on interest rate futures purchase contracts		1,832		—		—		1,832
Call options on interest rate futures purchase contracts		1,555		—		—		1,555
Total derivative assets before netting		3,387		9,550		45,885		58,822
Netting		—		—		—		(8,542)
Total derivative assets		3,387		9,550		45,885		50,280
Investment in PennyMac Mortgage Investment Trust		1,145		—		—		1,145
Mortgage servicing rights at fair value		—		—		660,247		660,247
	$	50,851	$	1,062,223	$	754,663	$	1,859,195
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	412,425	$	412,425
Derivative liabilities:
Interest rate lock commitments		—		—		2,112		2,112
Forward purchase contracts		—		9,004		—		9,004
Forward sales contracts		—		7,497		—		7,497
Put options on interest rate futures purchase contracts		203		—		—		203
Call options on interest rate futures purchase contracts		47		—		—		47
Total derivative liabilities before netting		250		16,501		2,112		18,863
Netting		—		—		—		(9,780)
Total derivative liabilities		250		16,501		2,112		9,083
Mortgage servicing liabilities		—		—		1,399		1,399
	$	250	$	16,501	$	415,936	$	422,907

As shown above, all or a portion of the Company’s mortgage loans held for sale, IRLCs, MSRs, ESS and  MSLs are measured using Level 3 fair value inputs. Following are roll forwards of these items for the quarters and nine month periods ended September 30, 2016 and 2015:

	Quarter ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, June 30, 2016	$	38,079	$	90,262	$	526,294	$	654,635
Purchases		750,709		—		12		750,721
Sales		(621,446)		—		—		(621,446)
Repayments		(9,629)		—		—		(9,629)
Interest rate lock commitments issued, net		—		148,315		—		148,315
Mortgage servicing rights resulting from mortgage loan sales		—		—		3,913		3,913
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		2,487		—		—		2,487
Other factors		—		68,241		(38,191)		30,050
		2,487		68,241		(38,191)		32,537
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(113,826)		—		—		(113,826)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(201,300)		—		(201,300)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	(234)	$	105,518	$	(38,191)	$	67,093

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2016	$	294,551	$	4,681	$	299,232
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		—		1,438
Accrual of interest		4,827		—		4,827
Repayments		(16,342)		—		(16,342)
Mortgage servicing liabilities assumed		—		5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales		—		6,401		6,401
Changes in fair value included in income		(4,107)		(3,773)		(7,880)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(4,107)	$	(3,773)	$	(7,880)

	Quarter ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance, June 30, 2015	$	34,085	$	27,737	$	581,269	$	643,091
Purchases		391,578		—		109,131		500,709
Sales		(286,481)		—		—		(286,481)
Repayments		(14,465)		—		—		(14,465)
Interest rate lock commitments issued, net		—		73,133		—		73,133
Mortgage servicing rights resulting from mortgage loan sales		—		—		6,989		6,989
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		—		—		—		—
Other factors		826		58,659		(27,722)		31,763
		826		58,659		(27,722)		31,763
Transfers of mortgage loans held for sale from Level 3 to Level 2  (2)		(61,921)		—		—		(61,921)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(115,991)		—		(115,991)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(614)	$	43,538	$	(27,722)	$	15,202

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2015	$	359,102	$	11,791	$	370,893
Issuance of excess servicing spread financing:
For cash		84,165		—		84,165
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		2,268		—		2,268
Mortgage servicing liabilities resulting from mortgage loan sales		—		8,358		8,358
Accrual of interest		8,026		—		8,026
Repayments		(24,717)		—		(24,717)
Changes in fair value included in income		(10,271)		(9,425)		(19,696)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,271)	$	(9,425)	$	(19,696)

	Nine months ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, December 31, 2015	$	48,531	$	43,773	$	660,247	$	752,551
Purchases		1,239,507		—		23		1,239,530
Sales		(899,763)		—		—		(899,763)
Repayments		(29,488)		—		—		(29,488)
Interest rate lock commitments issued, net		—		329,533		—		329,533
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,201		13,201
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		3,178		—		—		3,178
Other factors		—		217,429		(181,443)		35,986
		3,178		217,429		(181,443)		39,164
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(315,591)		—		—		(315,591)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(485,217)		—		(485,217)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	506	$	105,518	$	(181,443)	$	(75,419)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, December 31, 2015	$	412,425	$	1,399	$	413,824
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		5,039		—		5,039
Accrual of interest		17,555		—		17,555
Repurchase		(59,045)		—		(59,045)
Repayments		(54,623)		—		(54,623)
Mortgage servicing liabilities resulting from mortgage loan sales		—		11,810		11,810
Mortgage servicing liabilities assumed		—		5,736		5,736
Changes in fair value included in income		(40,984)		(5,900)		(46,884)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(33,774)	$	(5,900)	$	(39,674)

	Nine months ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance December 31, 2014	$	209,908	$	32,401	$	325,383	$	567,692
Purchases		857,863		—		379,264		1,237,127
Sales		(798,335)		—		—		(798,335)
Repayments		(34,467)		—		—		(34,467)
Interest rate lock commitments issued, net		—		217,278		—		217,278
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,107		13,107
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		4,054		—		—		4,054
Other factors		35		48,367		(48,087)		315
		4,089		48,367		(48,087)		4,369
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(175,436)		—		—		(175,436)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(254,508)		—		(254,508)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(1,145)	$	43,538	$	(48,087)	$	(5,694)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance December 31, 2014	$	191,166	$	6,306	$	197,472
Issuance of excess servicing spread financing:
For cash		271,452		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		4,833		—		4,833
Mortgage servicing liabilities resulting from mortgage loan sales		—		20,442		20,442
Accrual of interest		17,596		—		17,596
Repayments		(55,800)		—		(55,800)
Changes in fair value included in income		(10,674)		(16,024)		(26,698)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,674)	$	(16,024)	$	(26,698)

The information used in the preceding roll forwards represents activity for any financial statement items measured at fair value on a recurring basis and identified as using “Level 3” significant fair value inputs at either the beginning or the end of the periods presented. The Company had transfers among the fair value levels arising from transfers of IRLCs to mortgage loans held for sale at fair value upon purchase or funding of the respective mortgage loans and from the return to salability in the active secondary market of certain mortgage loans held for sale.

Financial Statement Items Measured at Fair Value under the Fair Value Option

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

	Quarter ended September 30,
	2016						2015
	Net gains on						Net gains on
	mortgage		Net mortgage				mortgage		Net mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	198,449	$	—	$	198,449	$	136,119	$	—	$	136,119
Mortgage servicing rights at fair value		—		(38,191)		(38,191)		—		(27,722)		(27,722)
	$	198,449	$	(38,191)	$	160,258	$	136,119	$	(27,722)	$	108,397
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	4,107	$	4,107	$	—	$	10,271	$	10,271
Mortgage servicing liabilities at fair value		—		3,773		3,773		—		9,425		9,425
	$	—	$	7,880	$	7,880	$	—	$	19,696	$	19,696

	Nine months ended September 30,
	2016						2015
	Net gains on		Net				Net gains on		Net
	mortgage		mortgage				mortgage		mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	499,058	$	—	$	499,058	$	285,936	$	—	$	285,936
Mortgage servicing rights at fair value		—		(181,443)		(181,443)		—		(48,087)		(48,087)
	$	499,058	$	(181,443)	$	317,615	$	285,936	$	(48,087)	$	237,849
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	40,984	$	40,984	$	—	$	10,674	$	10,674
Mortgage servicing liabilities at fair value		—		5,900		5,900		—		16,024		16,024
	$	—	$	46,884	$	46,884	$	—	$	26,698	$	26,698

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

	September 30, 2016
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	3,107,437	$	2,924,778	$	182,659
90 days or more delinquent:
Not in foreclosure		15,223		15,343		(120)
In foreclosure		4,717		5,344		(627)
	$	3,127,377	$	2,945,465	$	181,912

	December 31, 2015
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	1,068,548	$	1,016,314	$	52,234
90 days or more delinquent:
Not in foreclosure		26,399		26,999		(600)
In foreclosure		6,257		6,598		(341)
	$	1,101,204	$	1,049,911	$	51,293

Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

Following is a summary of financial statement items that were measured at fair value on a nonrecurring basis during the periods presented:

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	845,646	$	845,646
Real estate acquired in settlement of loans		—		—		173		173
	$	—	$	—	$	845,819	$	845,819

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	202,991	$	202,991
	$	—	$	—	$	202,991	$	202,991

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	(25,206)	$	(33,301)	$	(174,926)	$	(51,427)
Real estate acquired in settlement of loans		42		—		—		—
	$	(25,164)	$	(33,301)	$	(174,926)	$	(51,427)

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Cash as well as its Carried Interest due from Investment Funds,  Note receivable from PMT,Assets sold under agreements to repurchase,  Mortgage loan participation and sale agreements,  Notes payable,  Obligations under capital lease and amounts receivable from and payable to the Advised Entities are carried at amortized cost.

Cash is measured using a “Level 1” fair value input.

The Company has concluded that the carrying value of the Carried Interest due from Investment Funds approximates its fair value as the balance represents the amount distributable to the Company at the balance sheet date assuming liquidation of the Investment Funds.

The Company’s borrowings carried at amortized cost do not have observable inputs and the fair value is measured using management’s estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as “Level 3” fair value financial statement items due to the lack of observable inputs to estimate their fair values.

The Company has concluded that the fair value of the Note receivable from PMT and the receivables from and payables to the Advised Entities approximate the carrying value due to their short terms and/or variable interest rates.

Valuation Techniques and Inputs

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

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

With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees and approves the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value financial statement items, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes the Company’s chief executive, financial, operating, risk, business development and asset/liability management officers.

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

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

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

Mortgage Loans Held for Sale

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

Certain of the Company’s mortgage loans held for sale may become non-saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a mortgage loan with an identified defect. The Company may also purchase certain delinquent government guaranteed or insured mortgage loans from Ginnie Mae guaranteed pools in its mortgage loan servicing portfolio.

The Company’s right to purchase delinquent government guaranteed or insured mortgage loans arises as the result of the borrower’s failure to make payments for at least three consecutive months preceding the month of repurchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such repurchased mortgage loans may be resold to third-party investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed pool.

To the extent such mortgage loans have not become saleable into another Ginnie Mae guaranteed security by becoming current either through the borrower’s reperformance or through completion of a modification of the mortgage loan’s terms, the Company measures such mortgage loans along with mortgage loans with identified defects using “Level 3” fair value inputs.

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

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

Key inputs	September 30, 2016	December 31, 2015
Discount rate
Range	2.5% – 8.1%	2.5% – 9.1%
Weighted average	3.1%	2.8%
Twelve-month projected housing price index change
Range	2.8% – 5.2%	1.8% – 5.0%
Weighted average	4.5%	3.7%
Voluntary prepayment / resale speed (1)
Range	0.1% – 25.8%	0.6% – 20.1%
Weighted average	20.8%	16.6%
Total prepayment speed (2)
Range	0.1% – 41.3%	0.7% – 37.6%
Weighted average	33.1%	30.9%

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

(2)Total prepayment speed is measured using Life Total CPR.

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

Derivative Financial Instruments

Interest Rate Lock Commitments

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

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

Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of IRLCs:

Key inputs	September 30, 2016	December 31, 2015
Pull-through rate
Range	35.0% – 100.0%	54.1% – 100.0%
Weighted average	83.7%	90.1%
Mortgage servicing rights value expressed as:
Servicing fee multiple
Range	1.2 – 5.5	1.0 – 5.8
Weighted average	4.2	4.4
Percentage of unpaid principal balance
Range	0.2% – 2.7%	0.2% – 3.8%
Weighted average	1.2%	1.5%

Hedging Derivatives

The Company estimates the fair value of commitments to sell mortgage loans based on quoted MBS prices.These derivative financial instruments are categorized by the Company as “Level 1” fair value financial statement items for those based on exchange traded market prices or as “Level 2” fair value financial statement items for those based on observable MBS prices or interest rate volatilities in the MBS market. Changes in the fair value of hedging derivatives are included in Net gains on mortgage loans acquired for sale at fair value, or Net mortgage loan servicing fees, as applicable, in the consolidated statements of income. 

Mortgage Servicing Rights

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

.

Following are the key “Level 3” fair value inputs used in determining the fair value of MSRs at the time of initial recognition, excluding MSR purchases:

	Quarter ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$3,913	$146,448	$6,989	$154,707
Unpaid principal balance of underlying mortgage loans	$340,562	$12,313,082	$550,073	$11,369,493
Weighted average servicing fee rate (in basis points)	33	29	32	34
Key inputs:
Pricing spread (1)
Range	7.6% – 10.5%	7.6% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	9.3%	9.5%	8.9%	9.1%
Annual total prepayment speed (2)
Range	5.0% – 42.8%	3.4% – 42.9%	7.7% – 52.3%	7.5% – 35.0%
Weighted average	12.4%	9.7%	11.9%	9.2%
Life (in years)
Range	1.7 – 10.8	1.7 – 12.2	1.4 – 7.5	1.9 – 9.1
Weighted average	6.5	7.6	6.5	7.0
Per-loan annual cost of servicing
Range	$78 – $103	$78 – $102	$59 – $101	$59 – $95
Weighted average	$92	$91	$75	$78

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

(2) Prepayment speed is measured using Life Total CPR.

	Nine months ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$13,201	$370,414	$13,107	$347,549
Unpaid principal balance of underlying mortgage loans	$1,108,802	$29,667,803	$1,072,203	$25,268,602
Weighted average servicing fee rate (in basis points)	33	30	32	35
Key inputs:
Pricing spread (1)
Range	7.2% – 10.5%	7.2% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	8.9%	9.2%	9.4%	9.2%
Annual total prepayment speed (2)
Range	3.3% – 52.3%	3.4% – 50.9%	7.7% – 62.4%	7.5% – 39.4%
Weighted average	12.6%	10.0%	11.6%	8.8%
Life (in years)
Range	1.3 – 11.8	1.3 – 12.2	1.1 – 7.5	1.8 – 9.1
Weighted average	6.5	7.5	6.5	7.0
Per-loan annual cost of servicing
Range	$68 – $105	$68 – $106	$59 – $101	$59 – $95
Weighted average	$87	$88	$75	$76

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

(2) Prepayment speed is measured using Life Total CPR.

Following is a quantitative summary of key inputs used in the valuation and assessment for impairment of the Company’s MSRs at period end and the effect on fair value from adverse changes in those inputs (weighted averages are based upon UPB):

	September 30, 2016				December 31, 2015
	Fair		Amortized		Fair		Amortized
	value		cost		value		cost
	(Carrying value, unpaid principal balance of underlying
	mortgage loans and effect on fair value amounts in thousands)
MSR and pool characteristics:
Carrying value	$	492,028	$	845,646	$	660,247	$	751,688
Unpaid principal balance of underlying mortgage loans	$	46,236,558	$	75,076,431	$	54,182,477	$	56,420,227
Weighted average note interest rate		4.1%		3.8%		4.1%		3.8%
Weighted average servicing fee rate (in basis points)		32		31		32		32
Key inputs:
Pricing spread (1)
Range		7.6% – 14.4%		7.6% – 14.4%		7.2% – 14.1%		7.2% – 12.8%
Weighted average		9.7%		10.2%		8.9%		8.9%
Effect on fair value of (2):
5% adverse change	$	(8,318)	$	(15,356)	$	(11,115)	$	(13,467)
10% adverse change	$	(16,346)	$	(30,149)	$	(21,857)	$	(26,472)
20% adverse change	$	(31,585)	$	(58,160)	$	(42,293)	$	(51,183)
Average life (in years)
Range		2.1 – 8.9		1.5 – 9.3		1.9 – 9.0		1.8 – 9.1
Weighted average		6.0		6.5		6.9		7.4
Prepayment speed (3)
Range		6.7% – 26.5%		6.7% – 46.7%		5.3% – 43.8%		5.7% – 46.7%
Weighted average		12.3%		12.1%		9.7%		9.5%
Effect on fair value of (2):
5% adverse change	$	(10,448)	$	(18,008)	$	(12,475)	$	(14,360)
10% adverse change	$	(20,482)	$	(35,280)	$	(24,499)	$	(28,197)
20% adverse change	$	(39,396)	$	(67,777)	$	(47,286)	$	(54,406)
Annual per-loan cost of servicing
Range		$78 – $102		$79 – $102		$68 – $97		$68 – $95
Weighted average		$93		$92		$86		$84
Effect on fair value of (2):
5% adverse change	$	(5,720)	$	(7,101)	$	(6,812)	$	(5,725)
10% adverse change	$	(11,441)	$	(14,202)	$	(13,624)	$	(11,451)
20% adverse change	$	(22,882)	$	(28,405)	$	(27,247)	$	(22,901)

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

(2) For MSRs carried at fair value, an adverse change in one of the above-mentioned key inputs is expected to result in a reduction in fair value which will be recognized in income. For MSRs carried at lower of amortized cost or fair value, an adverse change in one of the above-mentioned key inputs may result in recognition of MSR impairment. The extent of the recognized MSR impairment will depend on the relationship of fair value to the carrying value of such MSRs.

(3) Prepayment speed is measured using Life Total CPR.

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

Excess Servicing Spread Financing at Fair Value

The Company categorizes ESS as a “Level 3” fair value financial statement item. The Company uses a discounted cash flow approach to estimate the fair value of ESS. The key inputs used in the estimation of ESS fair value include pricing spread and prepayment speed. Significant changes to either of those inputs in isolation could result in a significant change in the fair value of ESS. Changes in these key inputs are not necessarily directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally slow mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing its fair value, which is owed to PMT. Increases in the fair value of ESS decrease income and are included in Net mortgage loan servicing fees.

Interest expense for ESS is accrued using the interest method based upon the expected cash flows from the ESS through the expected life of the underlying mortgage loans. Other changes in fair value are recorded in Amortization, impairment and change in fair value of mortgage servicing rights.

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

	September 30,	December 31,
	2016	2015
Carrying value (in thousands)	$280,367	$412,425
ESS and pool characteristics:
Unpaid principal balance of underlying mortgage loans (in thousands)	$34,189,425	$51,966,405
Average servicing fee rate (in basis points)	34	32
Average excess servicing spread (in basis points)	19	17
Key inputs:
Pricing spread (1)
Range	4.7% – 5.9%	4.8% – 6.5%
Weighted average	5.5%	5.7%
Average life (in years)
Range	2.2 – 8.9	1.4 – 9.0
Weighted average	6.2	6.9
Annualized prepayment speed (2)
Range	6.7% – 23.3%	5.2% – 52.4%
Weighted average	12.2%	9.6%

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

(2)Prepayment speed is measured using Life Total CPR.

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Mortgage Loans Held for Sale at Fair Value

9 Months Ended

Sep. 30, 2016

Mortgage Loans Held for Sale at Fair Value

Mortgage Loans Held for Sale at Fair Value

Note 8—Mortgage Loans Held for Sale at Fair Value

Mortgage loans held for sale at fair value include the following:

	September 30,		December 31,
	2016		2015
	(in thousands)
Government-insured or guaranteed	$	2,971,838	$	992,805
Conventional conforming		109,165		59,868
Delinquent mortgage loans purchased from Ginnie Mae pools serviced by the Company		38,433		42,600
Mortgage loans repurchased pursuant to representations and warranties		7,941		5,931
	$	3,127,377	$	1,101,204
Fair value of mortgage loans pledged to secure:
Assets sold under agreements to repurchase	$	2,278,952	$	833,748
Mortgage loan participation and sale agreement		815,665		245,741
	$	3,094,617	$	1,079,489

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2016

Derivative Financial Instruments

Derivative Financial Instruments

Note 9—Derivative Financial Instruments

The Company is exposed to fair value risk relative to its mortgage loans held for sale as well as to its IRLCs and MSRs. The Company bears fair value risk from the time an IRLC is made to PMT or a loan applicant to the time the mortgage loan is sold. The Company is exposed to loss in fair value of its IRLCs and mortgage loans held for sale when market mortgage interest rates increase. The Company is exposed to loss in fair value of its MSRs when market mortgage interest rates decrease.

The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in market interest rates. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of mortgage loans held for sale and MSRs.

The Company does not use derivative financial instruments for purposes other than in support of its risk management activities other than IRLCs, which are generated in the process of purchasing or originating mortgage loans held for sale. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

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

	September 30, 2016					December 31, 2015
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Derivatives not designated as hedging instruments:
Interest rate lock commitments	4,674,721	$	107,127	$	1,609	3,487,366	$	45,885	$	2,112
Forward purchase contracts	17,116,174		54,574		2,584	5,254,293		4,181		9,004
Forward sales contracts	17,768,293		3,588		45,085	6,230,811		4,965		7,497
MBS put options	5,500,000		6,019		—	1,275,000		404		—
Put options on interest rate futures purchase contracts	3,525,000		6,707		1,500	1,650,000		1,832		203
Call options on interest rate futures purchase contracts	300,000		4,430		398	600,000		1,555		47
Treasury futures purchase contracts	325,000		—		—	—		—		—
Total derivatives before netting			182,445		51,176			58,822		18,863
Netting			(46,668)		(46,750)			(8,542)		(9,780)
		$	135,777	$	4,426		$	50,280	$	9,083
Deposits received from derivative counterparties, net		$	(82)				$	(1,238)

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

	Quarter ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,510,863	63,091,757	(59,486,446)	17,116,174
Forward sale contracts	13,614,196	77,956,736	(73,802,639)	17,768,293
MBS put options	3,550,000	6,150,000	(4,200,000)	5,500,000
Put options on interest rate futures purchase contracts	1,000,000	4,025,000	(1,500,000)	3,525,000
Call options on interest rate futures purchase contracts	452,100	900,000	(1,052,100)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Quarter ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,202,418	33,050,370	(33,189,047)	6,063,741
Forward sale contracts	9,789,564	42,709,764	(45,383,082)	7,116,246
MBS put options	327,500	1,260,000	(677,500)	910,000
MBS call options	160,000	—	(160,000)	—
Put options on interest rate futures purchase contracts	2,019,500	3,365,000	(2,009,500)	3,375,000
Call options on interest rate futures purchase contracts	1,025,000	2,140,000	(1,990,000)	1,175,000

	Nine months ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	5,254,293	140,774,477	(128,912,596)	17,116,174
Forward sale contracts	6,230,811	173,875,141	(162,337,659)	17,768,293
MBS put options	1,275,000	15,600,000	(11,375,000)	5,500,000
Put options on interest rate futures purchase contracts	1,650,000	8,700,000	(6,825,000)	3,525,000
Call options on interest rate futures purchase contracts	600,000	4,537,500	(4,837,500)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Nine months ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	2,634,218	78,426,073	(74,996,550)	6,063,741
Forward sale contracts	3,901,851	107,084,874	(103,870,479)	7,116,246
MBS put options	340,000	2,502,500	(1,932,500)	910,000
MBS call options	—	160,000	(160,000)	—
Put options on interest rate futures purchase contracts	755,000	7,190,000	(4,570,000)	3,375,000
Call options on interest rate futures purchase contracts	630,000	5,055,000	(4,510,000)	1,175,000
Put options on interest rate futures sale contracts	50,000	50,000	(100,000)	—
Call options on interest rate futures sales contracts	—	35,100	(35,100)	—

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

		Quarter ended September 30,				Nine months ended September 30,
Hedged item	Income statement line	2016		2015		2016		2015
		(in thousands)
Interest rate lock commitments and mortgage loans held for sale	Net gains on mortgage loans held for sale	$	(27,546)	$	(63,954)	$	(145,665)	$	(44,713)
Mortgage servicing rights	Net mortgage loan servicing fees	$	19,026	$	30,455	$	142,694	$	19,259

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Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2016

Mortgage Servicing Rights

Mortgage Servicing Assets and Liabilities

Note 10—Mortgage Servicing Rights

Carried at Fair Value

The activity in MSRs carried at fair value is as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	526,294	$	581,269	$	660,247	$	325,383
Additions:
Purchases		12		109,131		23		379,264
Mortgage servicing rights resulting from mortgage loan sales		3,913		6,989		13,201		13,107
		3,925		116,120		13,224		392,371
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(17,573)		(5,651)		(118,304)		2,942
Other changes in fair value (2)		(20,618)		(22,071)		(63,139)		(51,029)
Total change in fair value		(38,191)		(27,722)		(181,443)		(48,087)
Balance at end of period	$	492,028	$	669,667	$	492,028	$	669,667
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	391,563	$	37,705
Note payable		99,805		20,881
	$	491,368	$	58,586

(1) Principally reflects changes in discount rates and prepayment speed inputs, primarily due to changes in market interest rates.

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

Carried at Lower of Amortized Cost or Fair Value

The activity in MSRs carried at the lower of amortized cost or fair value is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Amortized cost:
Balance at beginning of period	$	961,591	$	581,558	$	798,925	$	415,245
Mortgage servicing rights resulting from mortgage loan sales		146,448		154,707		370,414		347,549
Amortization		(40,230)		(19,522)		(101,530)		(46,051)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		(12,777)		—		(12,777)		—
Balance at end of period		1,055,032		716,743		1,055,032		716,743
Valuation allowance:
Balance at beginning of period		(196,957)		(27,317)		(47,237)		(9,800)
Additions		(25,206)		(51,701)		(174,926)		(69,218)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		12,777		—		12,777		—
Balance at end of period		(209,386)		(79,018)		(209,386)		(79,018)
Mortgage servicing rights, net	$	845,646	$	637,725	$	845,646	$	637,725
Fair value of mortgage servicing rights at beginning of period	$	764,634	$	569,969	$	766,345	$	416,802
Fair value of mortgage servicing rights at end of period	$	845,646	$	647,942
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	818,321	$	744,974
Note payable		23,389		—
	$	841,710	$	744,974

The following table summarizes the Company’s estimate of future amortization of its existing MSRs. This estimate was developed with the inputs applicable to the September 30, 2016 valuation of MSRs. The inputs underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time.

	Estimated MSR
Twelve month period ending September 30,	amortization
	(in thousands)
2017	$	149,968
2018		126,485
2019		108,364
2020		93,669
2021		81,397
Thereafter		495,149
	$	1,055,032

Servicing fees relating to MSRs are recorded in Net mortgage loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; late charges and other ancillary fees relating to MSRs are recorded in Net servicing fees—Loan servicing fees—Ancillary and other fees on the Company’s consolidated statements of income. The fees are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Contractual servicing fees	$	98,865	$	83,424	$	282,962	$	200,392
Ancillary and other fees:
Late charges		4,798		1,420		14,164		4,538
Other		1,316		478		3,393		1,880
	$	104,979	$	85,322	$	300,519	$	206,810

Mortgage Servicing Liabilities Carried at Fair Value

The activity in mortgage servicing liabilities carried at fair value is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	4,681	$	11,791	$	1,399	$	6,306
Mortgage servicing liabilities assumed		5,736		—		5,736		—
Mortgage servicing liabilities resulting from mortgage loan sales		6,401		8,358		11,810		20,442
Change in fair value		(3,773)		(9,425)		(5,900)		(16,024)
Balance at end of period	$	13,045	$	10,724	$	13,045	$	10,724

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Carried Interest Due from Investment Funds

9 Months Ended

Sep. 30, 2016

Carried Interest Due from Investment Funds

Carried Interest Due from Investment Funds

Note 11—Carried Interest Due from Investment Funds

The activity in the Company’s Carried Interest due from Investment Funds is summarized as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	70,763	$	68,713	$	69,926	$	67,298
Carried Interest recognized during the period		107		1,483		944		2,898
Proceeds received during the period		—		—		—		—
Balance at end of period	$	70,870	$	70,196	$	70,870	$	70,196

The amount of the Carried Interest that will be received by the Company depends on the Investment Funds’ future performance. As a result, the amount of Carried Interest recorded by the Company is based on the cash flows that would be produced assuming termination of the Investment Funds at period end and may be reduced in future periods based on the performance of the Investment Funds in those periods. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of any reduction to Carried Interest will be limited to the amounts previously recognized.

Management expects the Carried Interest to be collected by the Company when the Investment Funds liquidate. The limited liability company and limited partnership agreements of the Investment Funds specify that the funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion. PCM has elected to extend the relevant agreements of the Investment Funds for the first of such three one-year extensions.

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Borrowings

9 Months Ended

Sep. 30, 2016

Borrowings

Borrowings

Note 12—Borrowings

The borrowing facilities described throughout this Note 12 contain various covenants, including financial covenants governing the Company’s net worth, debt-to-equity ratio, profitability and liquidity. Management believes that the Company was in compliance with these covenants as of September 30, 2016.

Assets Sold Under Agreement to Repurchase

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

Following is a summary of financial information relating to assets sold under agreements to repurchase:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	1,515,632		$	975,724		$	1,303,313		$	805,517
Weighted average interest rate (1)		2.87	%		1.84	%		2.87	%		1.82	%
Total interest expense	$	12,951		$	5,661		$	33,863		$	14,159
Maximum daily amount outstanding	$	2,550,035		$	1,496,306		$	2,550,035		$	1,496,306

		September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	2,491,762		$	1,167,405
Unamortized debt issuance costs		(396)			(674)
	$	2,491,366		$	1,166,731
Unused amount (2)	$	350,238		$	40,178
Fair value of assets securing repurchase agreements
Mortgage loans held for sale	$	2,278,952		$	833,748
Mortgage servicing rights		1,209,884			782,679
	$	3,488,836		$	1,616,427
Weighted average interest rate		2.63	%		2.50	%
Margin deposits placed with counterparties (3)	$	3,000		$	2,500

(1) Excludes the effect of amortization of commitment fees totaling $1.8 million and $1.1 million for the quarters ended September 30, 2016 and 2015, respectively, and $5.4 million and $3.1 million for the nine months ended September 30, 2016 and 2015, respectively.

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

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

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

Remaining maturity at September 30, 2016	Balance
	(dollars in thousands)
Within 30 days	$	161,828
Over 30 to 90 days		2,325,774
Over 90 days		4,160
		2,491,762
Unamortized debt issuance costs		(396)
Total loans sold under agreements to repurchase	$	2,491,366
Weighted average maturity (in months)		1.7

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) relating to the Company’s mortgage loans held for sale sold under agreements to repurchase is summarized by counterparty below as of September 30, 2016:

			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	820,256	December 26, 2016	December 26, 2016
Credit Suisse First Boston Mortgage Capital LLC	$	70,451	December 7, 2016	March 30, 2017
Banc of America, N.A.	$	47,433	December 18, 2016	March 29, 2017
JP Morgan Chase Bank, N.A.	$	11,800	December 24, 2016	August 18, 2017
Morgan Stanley Bank, N.A.	$	20,279	November 18, 2016	August 25, 2017
Citibank, N.A.	$	27,027	November 6, 2016	December 2, 2016
Barclays Bank PLC	$	76,502	December 2, 2016	December 2, 2016

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

Mortgage Loan Participation and Sale Agreements

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

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

The mortgage loan participation and sale agreements are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	365,112		$	200,510		$	241,131		$	163,365
Weighted average interest rate (1)		1.75	%		1.44	%		1.72	%		1.43	%
Total interest expense	$	1,887		$	814		$	3,585		$	2,053
Maximum daily amount outstanding	$	793,395		$	250,325		$	793,395		$	250,325

	September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	782,942		$	234,898
Unamortized debt issuance costs		(29)			(26)
	$	782,913		$	234,872
Weighted average interest rate		1.77	%		1.45	%
Fair value of mortgage loans pledged to secure mortgage loan participation and sale agreement	$	815,665		$	245,741

(1) Excludes the effect of amortization of facility fees totaling $250,000 and $74,000 for the quarters ended September 30, 2016 and 2015, respectively, and $435,000 and $276,000 for the nine months ended September 30, 2016 and 2015, respectively.

Notes Payable

The Company entered into a revolving credit agreement classified as a note payable, dated as of December 30, 2015, pursuant to which the lenders have agreed to make revolving loans in an amount not to exceed $100,000,000. Interest on the note payable accrues at an annual rate of interest equal to, at the election of the Company, either LIBOR plus the applicable contract margin or an alternate base rate.  The maturity date of the note payable is 364 days following the date of the revolving credit agreement. The proceeds of the note payable are to be used solely for working capital and general corporate purposes of the Company and its subsidiaries.

During December 2015, the Company entered into a second note payable which is secured by MSRs relating to certain mortgage loans in the Company’s servicing portfolio.  Interest is charged at a rate based on LIBOR plus the applicable contract margin.

Notes payable are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	100,390		$	361,488		$	102,492		$	239,935
Weighted average interest rate (1)		4.55	%		3.07	%		4.50	%		3.03	%
Total interest expense	$	2,129		$	3,760		$	6,018		$	7,858
Maximum daily amount outstanding	$	115,006		$	407,000		$	128,849		$	407,000

	September 30,		December 31,
	2016		2015
	(in thousands)
Carrying value:
Unpaid principal balance	$	111,014	$	62,677
Unamortized debt issuance costs		(395)		(1,541)
	$	110,619	$	61,136
Unused amount	$	88,986	$	57,328
Assets pledged to secure notes payable:
Mortgage servicing rights	$	123,194	$	20,881
Cash	$	84,851	$	93,757
Carried Interest	$	70,870	$	69,296

(1) Excluding the effect of amortization of debt issuance costs totaling $760,000 and $2.1 million during the quarter and nine months ended September 30, 2016.

Obligations under Capital Lease

In December 2015, the Company entered into a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on December 9, 2019 and bears interest at a spread over one month LIBOR.

Obligations under capital lease are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	21,975		$	—		$	17,451		$	—
Weighted average interest rate		2.46	%		—	%		2.45	%		—	%
Total interest expense	$	139		$	—		$	363		$	—
Maximum daily amount outstanding	$	23,263		$	—		$	24,720		$	—

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance	$	20,700	$	13,579
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	22,281	$	14,034
Capitalized software	$	444	$	783

Excess Servicing Spread Financing

In conjunction with the Company’s purchase from non-affiliates of certain MSRs relating to pools of Agency-backed residential mortgage loans, the Company has entered into sale and assignment agreements with PMT. Under these agreements, the Company sold to PMT the right to receive ESS cash flows relating to certain MSRs. The Company retained a fixed base servicing fee and all ancillary income associated with servicing the mortgage loans. The Company continues to be the servicer of the mortgage loans and provides all servicing functions, including the responsibility to make servicing advances.

Following is a summary of ESS:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	294,551	$	359,102	$	412,425	$	191,166
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
For cash		—		84,165		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		2,268		5,039		4,833
Accrual of interest		4,827		8,026		17,555		17,596
Repayment		(16,342)		(24,717)		(54,623)		(55,800)
Repurchase (1)		—		—		(59,045)		—
Change in fair value		(4,107)		(10,271)		(40,984)		(10,674)
Balance at end of period	$	280,367	$	418,573	$	280,367	$	418,573

(1) On February 29, 2016, the Company and PMT terminated that certain master spread acquisition and MSR servicing agreement that the parties entered into effective February 1, 2013 (the “2/1/13 Spread Acquisition Agreement”) and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, the Company reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by the Company to PMT under the 2/1/13 Spread Acquisition Agreement and then subject to such 2/1/13 Spread Acquisition Agreement. On February 29, 2016, the Company also reacquired from PMT all of its right, title and interest in and to all of the Freddie Mac ESS previously sold to PMT by the Company.

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Liability for Losses Under Representations and Warranties

9 Months Ended

Sep. 30, 2016

Liability for Losses Under Representations and Warranties

Liability for Losses Under Representations and Warranties

Note 13—Liability for Losses Under Representations and Warranties

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	24,277	$	16,257	$	20,611	$	13,259
Provision for losses on mortgage loans sold:
Resulting from sales of mortgage loans		852		2,292		5,220		5,535
Reduction in liability due to change in estimate		(6,648)		—		(6,648)		—
Incurred losses		(8)		(71)		(710)		(316)
Balance at end of period	$	18,473	$	18,478	$	18,473	$	18,478
Unpaid principal balance of mortgage loans subject to representations and warranties at period end	$	80,050,420	$	54,259,297

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Income Taxes

9 Months Ended

Sep. 30, 2016

Income Taxes

Income Taxes

Note 14—Income Taxes

The Company’s effective tax rates were 12.2% and 11.6% for the quarters ended September 30, 2016 and 2015, respectively, and 12.0% and 11.5% for the nine months ended September 30, 2016 and 2015, respectively. The difference between the Company’s effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into the Company’s shares, the portion of the Company’s income that will be subject to corporate federal and state statutory tax rates will increase, which will in turn increase the Company’s effective income tax rate.

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Noncontrolling Interest

9 Months Ended

Sep. 30, 2016

Noncontrolling Interest.

Noncontrolling Interest

Note 15—Noncontrolling Interest

Net income attributable to the Company’s common stockholders and the effects of changes in noncontrolling ownership interest in PennyMac are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	$	1,398	$	487	$	4,038	$	2,919
Shares of Class A common stock of PennyMac Financial Services, Inc. issued pursuant to exchange of Class A units of Private National Mortgage Acceptance Company, LLC		73		44		166		177

	September 30,		December 31,
	2016		2015
Percentage of noncontrolling interest in Private National Mortgage Acceptance Company, LLC	70.7	%	71.1	%

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Net Gains on Mortgage Loans Held for Sale

9 Months Ended

Sep. 30, 2016

Net Gains on Mortgage Loans Held for Sale

Net Gains on Mortgage Loans Held for Sale

Note 16—Net Gains on Mortgage Loans Held for Sale

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

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
From non-affiliates:
Cash gain(loss) :
Mortgage loans	$	40,381	$	(33,957)	$	82,612	$	(70,171)
Hedging activities		(13,526)		(51,469)		(163,659)		(51,803)
		26,855		(85,426)		(81,047)		(121,974)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from mortgage loan sales, net		143,960		153,338		371,805		340,214
Provision for losses relating to representations and warranties:
Pursuant to mortgage loan sales		(852)		(2,292)		(5,220)		(5,535)
Reduction in liability due to change in estimate		6,648		—		6,648		—
Change in fair value relating to mortgage loans and hedging derivatives held at period end:
Interest rate lock commitments		15,256		15,800		61,744		11,137
Mortgage loans		5,964		16,809		37,481		16,890
Hedging derivatives		(14,020)		(12,485)		17,994		7,090
		183,811		85,744		409,405		247,822
Recapture payable to PennyMac Mortgage Investment Trust		(1,690)		(3,098)		(5,557)		(5,843)
	$	182,121	$	82,646	$	403,848	$	241,979

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Net Interest Expense

9 Months Ended

Sep. 30, 2016

Net Interest Expense

Net Interest Expense

Note 17—Net Interest Expense

Net interest expense is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Interest income:
From non-affiliates:
Short-term investments	$	1,756	$	94	$	2,212	$	428
Mortgage loans held for sale at fair value		14,835		12,518		38,578		32,657
Placement fees relating to custodial funds		4,144		1,152		10,204		2,263
		20,735		13,764		50,994		35,348
From PennyMac Mortgage Investment Trust—Note receivable		1,974		1,289		5,798		1,822
		22,709		15,053		56,792		37,170
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		12,951		5,661		33,863		14,159
Mortgage loan participation and sale agreement		1,887		814		3,585		2,053
Notes payable		2,129		3,760		6,018		7,858
Obligations under capital lease		139		—		363		—
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		4,587		1,803		10,114		5,003
Interest on mortgage loan impound deposits		996		880		2,471		2,453
		22,689		12,918		56,414		31,526
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		4,827		8,026		17,555		17,596
		27,516		20,944		73,969		49,122
	$	(4,807)	$	(5,891)	$	(17,177)	$	(11,952)

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Stock-based Compensation

9 Months Ended

Sep. 30, 2016

Stock-based Compensation

Stock-based Compensation

Note 18—Stock-based Compensation

Following is a summary of the stock-based compensation expense by type of instrument awarded:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Performance-based RSUs	$	2,514	$	2,474	$	6,947	$	6,819
Stock options		1,073		1,396		3,576		4,392
Time-based RSUs		632		581		1,980		1,718
Exchangeable PNMAC units		14		55		57		175
	$	4,233	$	4,506	$	12,560	$	13,104

Following is a summary of equity award activity:

	Quarter ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2016		2,673		2,786		398		76,109
Granted		—		—		10		37
Vested		—				(6)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(189)		(28)		(11)		—
September 30, 2016		2,484		2,756		391		76,146

	Quarter ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2015		2,381		1,869		276		76,015
Granted		—		—		—		9
Vested		—				—		—
Exercised		—		—		(4)		—
Forfeited or canceled		(19)		(11)		(4)		—
September 30, 2015		2,362		1,858		268		76,024

	Nine months ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2015		2,351		1,845		271		76,029
Granted		813		962		261		117
Vested		—				(121)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(680)		(49)		(20)		—
September 30, 2016		2,484		2,756		391		76,146

	Nine months ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2014		1,257		1,167		202		75,936
Granted		1,143		715		150		88
Vested		—				(75)		—
Exercised		—		—		—		—
Forfeited or canceled		(38)		(24)		(9)		—
September 30, 2015		2,362		1,858		268		76,024

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2016

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 19—Supplemental Cash Flow Information

	Nine months ended September 30,
	2016		2015
	(in thousands)
Cash paid for interest	$	70,897	$	47,867
Cash paid for income taxes	$	452	$	1,909
Non-cash investing activity:
Mortgage servicing rights resulting from mortgage loan sales	$	383,615	$	360,656
Mortgage servicing liabilities resulting from mortgage loan sales	$	11,810	$	20,442
Non-cash financing activity:
Transfer of excess servicing spread to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	5,039	$	4,833
Issuance of common stock in settlement of director fees	$	230	$	223

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Regulatory Net Worth and Agency Capital Requirements

9 Months Ended

Sep. 30, 2016

Regulatory Net Worth and Agency Capital Requirements

Regulatory Capital and Liquidity Requirements

Note 20—Regulatory Capital and Liquidity Requirements

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

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

	September 30, 2016				December 31, 2015
Agency–company subject to requirement	Balance (1)		Requirement		Balance (1)		Requirement
	(in thousands)
Capital
Fannie Mae & Freddie Mac - PLS	$	1,166,706	$	317,441	$	835,157	$	283,655
Ginnie Mae - PLS	$	957,613	$	390,520	$	633,222	$	386,732
Ginnie Mae - PennyMac	$	1,135,605	$	429,572	$	894,731	$	425,405
HUD - PLS	$	957,613	$	2,500	$	633,222	$	2,500
Liquidity
Fannie Mae & Freddie Mac - PLS	$	132,969	$	43,055	$	145,431	$	38,936
Ginnie Mae - PLS	$	132,969	$	107,079	$	145,431	$	95,868

(1) Calculated in accordance with the respective Agency’s capital and liquidity requirements.

Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency. PennyMac and PLS had Agency capital and liquidity in excess of the respective Agencies’ requirements at September 30, 2016.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitment and Contingencies.

Commitments and Contingencies

Note 21—Commitments and Contingencies

Commitments to Fund and Sell Mortgage Loans

	September 30, 2016
	(in thousands)
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust	$	2,383,191
Commitments to fund mortgage loans		2,291,530
	$	4,674,721

Litigation

The business of the Company involves the collection of numerous accounts, as well as the validation of liens and compliance with various state and federal lending and servicing laws. Accordingly, the Company may be involved in proceedings, claims, and legal actions arising in the ordinary course of business. As of September 30, 2016, the Company was not involved in any legal proceedings, claims, or actions that in management’s view would be reasonably likely to have a material adverse effect on the Company.

Commitment to Make Distributions to PennyMac Owners

Under the terms of its Limited Liability Company Agreement, PennyMac is required to make cash distributions to the Company’s noncontrolling interest holders in amounts sufficient to allow such noncontrolling interest holders to pay federal and state taxes on their allocable share of PennyMac taxable income.  Such distributions are calculated and, if required, made quarterly. 

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Segments and Related Information

9 Months Ended

Sep. 30, 2016

Segments and Related Information

Segments and Related Information

Note 22—Segments and Related Information

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

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

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

Financial performance and results by segment are as follows:

	Quarter ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	166,506	$	15,615	$	182,121	$	—	$	182,121
Mortgage loan origination fees		34,621		—		34,621		—		34,621
Fulfillment fees from PennyMac Mortgage Investment Trust		27,255		—		27,255		—		27,255
Net mortgage loan servicing fees		—		45,864		45,864		—		45,864
Management fees		—		—		—		5,521		5,521
Carried Interest from Investment Funds		—		—		—		107		107
Net interest income (expense):
Interest income		13,013		9,696		22,709		—		22,709
Interest expense		9,323		18,182		27,505		11		27,516
		3,690		(8,486)		(4,796)		(11)		(4,807)
Other		508		205		713		—		713
Total net revenue		232,580		53,198		285,778		5,617		291,395
Expenses		82,767		63,937		146,704		5,413		152,117
Income (loss) before provision for income taxes and non-segment activities		149,813		(10,739)		139,074		204		139,278
Non-segment activities		—		—		—		—		—
Income (loss) before provision for income taxes	$	149,813	$	(10,739)	$	139,074	$	204	$	139,278
Segment assets at period end (2)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers.

(2) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

	Quarter ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	81,005	$	1,641	$	82,646	$	—	$	82,646
Mortgage loan origination fees		29,448		—		29,448		—		29,448
Fulfillment fees from PennyMac Mortgage Investment Trust		17,553		—		17,553		—		17,553
Net mortgage loan servicing fees		—		57,258		57,258		—		57,258
Management fees		—		—		—		6,456		6,456
Carried Interest from Investment Funds		—		—		—		1,483		1,483
Net interest income (expense):
Interest income		13,228		1,825		15,053		—		15,053
Interest expense		6,290		14,714		21,004		—		21,004
		6,938		(12,889)		(5,951)		—		(5,951)
Other		272		121		393		(141)		252
Total net revenue		135,216		46,131		181,347		7,798		189,145
Expenses		57,477		52,187		109,664		5,618		115,282
Income (loss) before provision for income taxes		77,739		(6,056)		71,683		2,180		73,863
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	77,739	$	(6,056)	$	71,683	$	2,180	$	73,923
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3)Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

	Nine months ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains (losses) on mortgage loans held for sale at fair value	$	360,614	$	43,234	$	403,848	$	—	$	403,848
Loan origination fees		85,962		—		85,962		—		85,962
Fulfillment fees from PennyMac Mortgage Investment Trust		59,301		—		59,301		—		59,301
Net servicing fees		—		89,938		89,938		—		89,938
Management fees		—		—		—		17,163		17,163
Carried Interest from Investment Funds		—		—		—		944		944
Net interest income (expense):
Interest income		32,918		23,873		56,791		1		56,792
Interest expense		21,031		52,951		73,982		37		74,019
		11,887		(29,078)		(17,191)		(36)		(17,227)
Other		1,596		824		2,420		204		2,624
Total net revenue		519,360		104,918		624,278		18,275		642,553
Expenses		196,634		176,088		372,722		16,205		388,927
Income (loss) before provision for income taxes and non-segment activities		322,726		(71,170)		251,556		2,070		253,626
Non-segment activities (2)		—		—		—		—		49
Income (loss) before provision for income taxes	$	322,726	$	(71,170)	$	251,556	$	2,070	$	253,675
Segment assets at period end (3)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

	Nine months ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	244,361	$	(2,382)	$	241,979	$	—	$	241,979
Loan origination fees		70,551		—		70,551		—		70,551
Fulfillment fees from PennyMac Mortgage Investment Trust		45,752		—		45,752		—		45,752
Net servicing fees		—		152,583		152,583		—		152,583
Management fees		—		—		—		21,908		21,908
Carried Interest from Investment Funds		—		—		—		2,898		2,898
Net interest income (expense):
Interest income		30,041		7,129		37,170		—		37,170
Interest expense		15,131		34,051		49,182		—		49,182
		14,910		(26,922)		(12,012)		—		(12,012)
Other		1,420		840		2,260		(109)		2,151
Total net revenue		376,994		124,119		501,113		24,697		525,810
Expenses		155,542		150,737		306,279		17,631		323,910
Income (loss) before provision for income taxes and non-segment activities		221,452		(26,618)		194,834		7,066		201,900
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	221,452	$	(26,618)	$	194,834	$	7,066	$	201,960
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3) Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

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Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2016

Recently Issued Accounting Pronouncements.

Recently Issued Accounting Pronouncements

Note 23—Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU 2014-09, Revenue from Contracts with Customers (Subtopic 606)(“ASU 2014-09”), which supersedes the guidance in ASC 605, Revenue Recognition. ASU 2014-09 clarifies the principles for recognizing revenue in order to improve comparability of revenue recognition practices across entities and industries with certain scope exceptions including financial instruments, leases, and guarantees. ASU 2014-09 provides guidance intended to assist in the identification of contracts with customers and separate performance obligations within those contracts, the determination and allocation of the transaction price to those identified performance obligations and the recognition of revenue when a performance obligation has been satisfied. ASU 2014-09 also requires disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers.

Upon adoption, ASU 2014-09 provides for transition through either a full retrospective approach requiring the restatement of all presented prior periods or a modified retrospective approach, which allows the new recognition standard to be applied to only those contracts that are not completed at the date of transition. If the modified retrospective approach is adopted, a cumulative-effect adjustment to retained earnings is performed with additional disclosures required including the amount by which each line item is affected by the transition as compared to the guidance in effect before adoption and an explanation of the reasons for significant changes in these amounts.

The FASB has issued several amendments to the new revenue standard ASU 2014-09, including:

· In May 2014, ASU 2015-14, Revenue From Contracts With Customers (“ASU 2015-14”). This update deferred the initial effective date of ASU 2014-09. As a result of the issuance of ASU 2015-14, ASU 2014-09 is effective for annual reporting periods beginning on or after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

· In March 2015, ASU 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments to this update are intended to improve the implementation guidance on principal versus agent considerations in ASU 2014-09 by clarifying how an entity should identify the unit of account (i.e. the specified good or service) and how an entity should apply the control principle to certain types of arrangements.

· In May 2016, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients. The amendments to this update clarify certain core recognition principles and provide practical expedients available at transition. The improvements address collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition.

The Company is currently evaluating the pending adoption of ASU 2014-09 and its impact on its consolidated financial statements and has not yet identified which transition method will be applied upon adoption.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related note disclosures.

Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting establishes the fundamental basis for measuring and classifying assets and liabilities.

ASU 2014-15 extends the responsibility for performing the going-concern assessment to management and contains guidance on (1) how to perform a going-concern assessment and (2) when going-concern disclosures would be required under U.S. GAAP.

Under ASU 2014-15, an entity would be required to evaluate its status as a going concern as part of its periodic financial statement preparation process and would be required to disclose information about its potential inability to continue as a going concern when “substantial doubt” about its ability to continue as a going concern for the period of one year from the earlier of the date its financial statements are issued or are ready to be issued.

If management concludes that there is “substantial doubt about the entity’s ability to continue as a going concern, it must disclose the principal conditions or events causing substantial doubt to be raised, management’s evaluation of the conditions and management’s plans. If substantial doubt is not alleviated as a result of management’s plans, the company is required to include a statement that there is “substantial doubt about the entity’s ability to continue as a going concern.” ASU 2014-15 also requires an entity to disclose how the substantial doubt was resolved in the period that substantial doubt no longer exists.

ASU 2014-15 is effective for the annual period ending December 31, 2016. The adoption of ASU 2014-15 is not expected to have an effect on the financial statements of the Company.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU 2015-02 effective January 1, 2016. The adoption of ASU 2015-02 had no effect on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 affects the accounting for equity investments, financial liabilities under the fair value option, the presentation and disclosure requirements for financial instruments, and the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.

ASU 2016-01 requires that:

· All equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) with readily determinable fair values will generally be measured at fair value through earnings.

· When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The accumulated gains and losses due to these changes will be reclassified from accumulated other comprehensive income to earnings if the financial liability is settled before maturity.

· For financial instruments measured at amortized cost, public business entities will be required to use the exit price when measuring the fair value of financial instruments for disclosure purposes.

· Financial assets and financial liabilities shall be presented separately in the notes to the financial statements, grouped by measurement category (e.g., fair value, amortized cost, lower of cost or fair value) and form of financial asset (e.g., loans, securities).

· Public business entities will no longer be required to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost.

· Entities will have to assess the realizability of a deferred tax asset related to a debt security classified as available for sale in combination with the entity’s other deferred tax assets.

The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income is permitted and can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. The Company is currently assessing the potential effect that the adoption of ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors) and supersedes previous leasing standards. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. 

ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In March 2016, The FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, including:

· Modifies the accounting for income taxes relating to share-based payments. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) will be recognized as income tax expense or benefit in the consolidated income statement. The tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur. An entity will recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Under current GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the consolidated income statement in the period they reduce income taxes payable.

· Changes the classification of excess tax benefits on the consolidated statement of cash flows. In the consolidated statement of cash flows, excess tax benefits will be classified along with other income tax cash flows as an operating activity. Under current GAAP, excess tax benefits are separated from other income tax cash flows and classified as a financing activity.

· Changes the requirement to estimate the number of awards that are expected to vest. Under ASC 2016-09, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest as presently required or account for forfeitures when they occur. Under current GAAP, accruals of compensation cost are based on the number of awards that are expected to vest.

· Changes the tax withholding requirements for share-based payment awards to qualify for equity accounting. The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. Under current GAAP, for an award to qualify for equity classification is that an entity cannot partially settle the award in cash in excess of the employer’s minimum statutory withholding requirements.

· Establishes GAAP for the classification of employee taxes paid when an employer withholds shares for tax withholding purposes. Cash paid by an employer when directly withholding shares for tax- withholding purposes should be classified as a financing activity. This guidance establishes GAAP related to the classification of withholding taxes in the statement of cash flows as there is no such guidance under current GAAP.

ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is currently assessing the potential effect that the adoption of ASU 2016-09 will have on its consolidated financial statements.

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Subsequent Events

9 Months Ended

Sep. 30, 2016

Subsequent Events

Subsequent Events

Note 24—Subsequent Events

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

· On October 4, 2016, the Company, through PLS, amended the terms of its master repurchase agreement, dated July 2, 2013, by and among Morgan Stanley Bank, N.A. (“Morgan Stanley”), on the one hand, and PLS, on the other hand (the “MS Repurchase Agreement”), pursuant to which PLS, may sell, and later repurchase, newly originated mortgage loans that are originated through the PLS consumer direct lending channel or purchased from correspondent lenders through a subsidiary of PMT and, in either case, held by PLS pending sale and/or securitization.

Prior to the amendment, the MS Repurchase Agreement provided for a maximum aggregate purchase price of $200 million. Of this amount, $125 million was committed and available for purchases under the MS Repurchase Agreement.  Pursuant to the terms of the amendment, Morgan Stanley agreed to increase the maximum aggregate purchase price from $200 million to $300 million. Of this amount, $175 million is committed and available for purchases under the Repurchase Agreement.

· On October 11, 2016, the Company, through PLS and PennyMac, executed a Second Amended and Restated Request for Temporary Increase (the “Temporary Increase”) in connection with that certain mortgage loan participation purchase and sale agreement, dated August 13, 2014, by and among Bank of America, N.A. (“BANA”), on the one hand, and PLS, as seller, and PNMAC, as guarantor, on the other hand (the “BANA Participation Agreement”). The Temporary Increase amends and supersedes that certain request for temporary increase entered into by PLS, PNMAC and BANA on August 25, 2016.

Pursuant to the terms of the BANA Participation Agreement, PLS may sell to BANA participation certificates, each representing an undivided beneficial ownership interest in a pool of mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae and are pending securitization. Pursuant to the Temporary Increase, BANA agreed to temporarily maintain the aggregate transaction limit of purchase prices for participation certificates owned by BANA at any given time at up to $800 million until December 12, 2016, at which time the aggregate transaction limit of purchase prices will be reset to $250 million.

· On October 14, 2016, the Company, through PLS, entered into an amendment to its master repurchase agreement, dated as of June 26, 2012, by and between Citibank, N.A. (“Citibank”) and PLS (the “Citi Repurchase Agreement”), pursuant to which PLS may sell, and later repurchase, newly originated mortgage loans that are originated through PLS’ consumer direct lending channel or purchased from correspondent lenders through a subsidiary of PMT and, in either case, held by PLS pending sale and/or securitization.

Under the terms of this amendment, the uncommitted amount of the maximum aggregate purchase price provided for in the Citi Repurchase Agreement was increased from $50 million to $250 million and the maximum aggregate purchase price from $200 million to $400 million until December 2, 2016.

· On October 20, 2016, the Company entered into another amendment to the Citi Repurchase Agreement pursuant to which the maturity date of the Citi Repurchase Agreement was extended from October 20, 2016 to December 2, 2016. 

· On October 17, 2016, the Company, through PLS and PNMAC, entered into amendments (the “October Amendments”) to the terms of (i) its Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), PLS and PNMAC (the “CSFB Repurchase Agreement”), pursuant to which PLS may sell to, and later repurchase from, CSFB certain newly originated or recently acquired residential and small balance multifamily mortgage loans; and (ii) its Master Repurchase Agreement (Participation Certificates and Servicing) by and among CSFB, PLS and PNMAC and dated as of November 10, 2015 (the “MSR Repo”), pursuant to which PLS may finance certain of its mortgage servicing rights and related participation interests and loan servicing advance receivables.

The original terms of the CSFB Repurchase Agreement and the MSR Repo collectively provided for a maximum combined purchase price of $907 million. Of this amount, $700 million was committed and available for purchases under the CSFB Repurchase Agreement to the extent not reduced by purchased amounts outstanding under the MSR Repo, while $407 million was committed and available for purchases under the MSR Repo to the extent not reduced by purchased amounts outstanding under the CSFB Repurchase Agreement. On September 26, 2016, CSFB previously agreed to increase the maximum combined purchase price provided for under the CSFB Repurchase Agreement and the MSR Repo from $907 million to $1.207 billion until October 26, 2016, at which time the maximum combined purchase price would be reset to $907 million.  Pursuant to the terms of the October Amendments, CSFB agreed to extend such increase in the maximum combined purchase price to December 23, 2016.

· On November 1, 2016, the Company, through PLS and PNMAC, entered into a master repurchase (the “JPM Repurchase Agreement”) agreement by and among JPMorgan Chase Bank, National Association (“JPM”), pursuant to which PLS may sell to JPM participation certificates, each of which represents an undivided beneficial ownership interest in a pool of mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae and are pending securitization, in an aggregate principal amount of up to $500 million. In connection with its sale of any participation certificate, PLS will also assign to JPM a take-out commitment, which evidences PLS’ right to sell to a third-party investor the security backed by the mortgage loans underlying the related participation certificate.  The scheduled maturity date of the JPM Repurchase Agreement is October 31, 2017, and the obligations of PLS are fully guaranteed by PNMAC. 

· On November 3, 2016, the Company, through PNMAC, entered into Schedule Number 003 (the “Schedule”) to that certain Master Lease Agreement (the “Master Lease”), dated as of December 9, 2015, with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the Master Lease, the Company may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by the Company’s indirect controlled subsidiary, PennyMac Loan Services, LLC.  Pursuant to the Schedule, PNMAC is financing equipment with an aggregate cost of approximately $4.3 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At the expiration of the three-year term, the Company is obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. All other terms and conditions of the Master Lease remain the same in all material respects.

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Transactions with Affiliates (Tables)

9 Months Ended

Sep. 30, 2016

Transactions with Affiliates

Summary of reimbursement of expenses

Expense Reimbursement

PMT reimburses the Company for other expenses, including common overhead expenses incurred on its behalf by the Company, in accordance with the terms of its management agreement. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,417	$	2,694	$	6,413	$	8,125
Expenses incurred on PMT's (the Company's) behalf, net		13		(85)		(102)		377
	$	1,430	$	2,609	$	6,311	$	8,502
Payments and settlements during the period (1)	$	45,988	$	17,709	$	102,600	$	64,575

(1) Payments and settlements include payments for operating, investment and financing activities itemized in this Note and netting settlements made pursuant to master netting agreements between the Company and PMT.

PMT

Transactions with Affiliates

Summary of lending activity between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights and excess servicing spread recapture incurred	$	1,690	$	3,098	$	5,557	$	5,843
Fulfillment fee revenue	$	27,255	$	17,553	$	59,301	$	45,752
Unpaid principal balance of mortgage loans fulfilled for PMT	$	7,263,557	$	4,073,201	$	15,696,940	$	10,542,411
Sourcing fees paid to PMT	$	3,509	$	3,236	$	8,282	$	7,084
Unpaid principal balance of mortgage loans purchased from PMT	$	11,694,065	$	10,783,882	$	27,599,186	$	23,602,020
Proceeds from sale of mortgage loans held for sale to PMT	$	5,007	$	1,047	$	13,146	$	11,875
Tax service fees received from PMT	$	2,006	$	1,291	$	4,537	$	3,293
Early purchase program fees earned from PMT	$	5	$	—	$	7	$	—

Summary of mortgage loan servicing fees earned from PMT

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage loans acquired for sale at fair value:
Base and supplemental	$	90	$	130	$	225	$	198
Activity-based		210		153		497		243
		300		283		722		441
Mortgage loans at fair value:
Base and supplemental		2,615		3,930		8,881		12,145
Activity-based		3,014		2,961		14,981		8,948
		5,629		6,891		23,862		21,093
Mortgage servicing rights:
Base and supplemental		4,978		4,473		13,999		12,783
Activity-based		132		89		336		225
		5,110		4,562		14,335		13,008
	$	11,039	$	11,736	$	38,919	$	34,542

Summary of management fees earned

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Base management	$	5,025	$	5,742	$	15,576	$	17,181
Performance incentive		—		—		—		1,343
	$	5,025	$	5,742	$	15,576	$	18,524

Summary of investing activity between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:
Interest income	$	1,974	$	1,289	$	5,798	$	1,822
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received and change in fair value	$	(13)	$	(158)	$	130	$	(295)

	September 30,		December 31,
	2016		2015
	(in thousands)
Note receivable from PennyMac Mortgage Investment Trust:	$	150,000	$	150,000
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	1,169	$	1,145
Number of shares		75		75

Summary of financing activty between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Excess servicing spread financing:
Issuance:
Cash	$	—	$	84,165	$	—	$	271,452
Pursuant to recapture agreement	$	1,438	$	2,268	$	5,039	$	4,833
Repayment	$	(16,342)	$	(24,717)	$	(54,623)	$	(55,800)
Repurchase	$	—	$	—	$	(59,045)	$	—
Change in fair value	$	(4,107)	$	(10,271)	$	(40,984)	$	(10,674)
Interest expense	$	4,827	$	8,026	$	17,555	$	17,596
Excess servicing spread recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread	$	1,283	$	2,428	$	4,709	$	5,173

Summary of amounts due from and payable to affiliate

	September 30,		December 31,
	2016		2015
	(in thousands)
Receivable from PMT:
Management fees	$	5,025	$	5,670
Servicing fees		3,641		3,682
Allocated expenses and expenses incurred on PMT's behalf		3,227		4,490
Fulfillment fees		926		1,082
Conditional reimbursement		900		900
Interest on note receivable		536		412
Correspondent production fees		492		2,729
	$	14,747	$	18,965
Payable to PMT:
Deposits made by PMT to fund servicing advances	$	159,488	$	153,573
Mortgage servicing rights ("MSR") recapture payable		450		781
Other		5,326		8,025
	$	165,264	$	162,379

Investment Funds

Transactions with Affiliates

Summary of amounts due from and payable to affiliate

	September 30,		December 31,
	2016		2015
	(in thousands)
Carried Interest due from Investment Funds:
PNMAC Mortgage Opportunity Fund, LLC	$	42,357	$	41,893
PNMAC Mortgage Opportunity Fund Investors, LLC		28,513		28,033
	$	70,870	$	69,926
Receivable from Investment Funds:
Management fees	$	503	$	655
Expense reimbursements		429		45
Mortgage loan servicing fees		425		392
Mortgage loan servicing rebate		239		224
	$	1,596	$	1,316
Payable to Investment Funds—Servicing advances	$	27,265	$	30,429

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Earnings Per Share of Common Stock (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share of Common Stock

Summary of basic and diluted earnings per share calculations

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands, except per share amounts)
Basic earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Basic earnings per share of common stock	$	1.07	$	0.58	$	1.96	$	1.59
Diluted earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Effect of net income attributable to PennyMac Class A units exchangeable to common stock, net of income taxes		57,444		31,418		105,480		86,012
Diluted net income attributable to common stockholders	$	81,129	$	44,098	$	148,815	$	120,469
Weighted average shares of common stock outstanding		22,217		21,810		22,101		21,702
Dilutive shares:
PennyMac Class A units exchangeable to common stock		53,923		54,042		53,996		53,744
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock		—		163		—		528
Common shares issuable under stock-based compensation plan		215		123		234		124
Diluted weighted average shares of common stock outstanding		76,355		76,138		76,331		76,098
Diluted earnings per share of common stock	$	1.06	$	0.58	$	1.95	$	1.58

Schedule of anti-dilutive shares outstanding

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands except for weighted-average exercise price)
Stock options (1)		2,768		1,864		2,559		1,712
Performance-based RSUs (2)		2,505		2,377		2,510		2,210
Total anti-dilutive stock-based compensation units		5,273		4,241		5,069		3,922
Weighted-average exercise price of anti-dilutive stock options (1)	$	15.81	$	18.17	$	15.82	$	18.17

(1) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were anti-dilutive.

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

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Loan Sales and Servicing Activities (Tables)

9 Months Ended

Sep. 30, 2016

Loan Sales and Servicing Activities

Summary of cash flows between the Company and transferees upon sale of mortgage loans in transactions

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Cash flows:
Sales proceeds	$	13,947,544	$	12,738,035	$	33,124,241	$	28,357,226
Servicing fees received (1)	$	67,371	$	33,745	$	186,474	$	103,057
Net servicing advance recoveries	$	4,608	$	9,778	$	14,153	$	18,733

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

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance of mortgage loans outstanding at end of period	$	78,942,489	$	60,687,246
Delinquencies:
30-89 days	$	2,157,646	$	1,539,568
90 days or more:
Not in foreclosure	$	457,909	$	340,313
In foreclosure or bankruptcy	$	328,396	$	227,025
Foreclosed	$	2,435	$	755

Summary of mortgage servicing portfolio

	September 30, 2016
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	123,030,847	$	—	$	123,030,847
Affiliated entities		—		56,100,331		56,100,331
Mortgage loans held for sale		2,945,465		—		2,945,465
	$	125,976,312	$	56,100,331	$	182,076,643
Commercial real estate loans subserviced for the Company	$	16,403	$	—	$	16,403
Delinquent mortgage loans:
30 days	$	2,954,504	$	366,538	$	3,321,042
60 days		989,384		126,411		1,115,795
90 days or more:
Not in foreclosure		1,740,732		591,872		2,332,604
In foreclosure or bankruptcy		801,461		798,585		1,600,046
Foreclosed		29,560		471,956		501,516
	$	6,515,641	$	2,355,362	$	8,871,003
Custodial funds managed by the Company (1)	$	3,754,860	$	1,058,632	$	4,813,492

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interestincome in the Company’s consolidated statements of income.

	December 31, 2015
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities	$	111,409,601	$	—	$	111,409,601
Affiliated entities		—		47,810,632		47,810,632
Mortgage loans held for sale		1,052,485		—		1,052,485
	$	112,462,086	$	47,810,632	$	160,272,718
Commercial real estate loans subserviced for the Company	$	14,454	$	—	$	14,454
Delinquent mortgage loans:
30 days	$	2,666,435	$	349,859	$	3,016,294
60 days		834,617		136,924		971,541
90 days or more:
Not in foreclosure		1,270,236		788,410		2,058,646
In foreclosure or bankruptcy		656,617		1,180,014		1,836,631
Foreclosed		23,372		542,031		565,403
	$	5,451,277	$	2,997,238	$	8,448,515
Custodial funds managed by the Company (1)	$	2,242,146	$	502,751	$	2,744,897

(1) Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on custodial funds it manages on behalf of the mortgage loans’ investors, which is included in Interest income in the Company’s consolidated statements of income.

Summary of the geographical distribution of loans for the top five and all other states as measured by the total unpaid principal balance (UPB)

	September 30,		December 31,
State	2016		2015
	(in thousands)
California	$	40,854,288	$	39,007,363
Texas		14,851,369		12,191,722
Virginia		12,164,535		9,816,114
Florida		11,830,839		9,709,940
Maryland		7,755,698		6,151,945
All other states		94,619,914		83,395,634
	$	182,076,643	$	160,272,718

XML

Netting of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2016

Netting of Financial Instruments

Summaries of derivative assets and related netting amounts

	September 30, 2016						December 31, 2015
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - Interest rate lock   commitments	$	107,127	$	—	$	107,127	$	45,885	$	—	$	45,885
Derivatives subject to a master netting arrangement:
Forward purchase contracts		54,574		—		54,574		4,181		—		4,181
Forward sale contracts		3,588		—		3,588		4,965		—		4,965
Mortgage-backed security ("MBS") put options		6,019		—		6,019		404		—		404
Put options on interest rate futures purchase contracts		6,707		—		6,707		1,832		—		1,832
Call options on interest rate futures purchase contracts		4,430		—		4,430		1,555		—		1,555
Netting		—		(46,668)		(46,668)		—		(8,542)		(8,542)
		75,318		(46,668)		28,650		12,937		(8,542)		4,395
	$	182,445	$	(46,668)	$	135,777	$	58,822	$	(8,542)	$	50,280

Summary of the amount of derivative asset positions by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	September 30, 2016								December 31, 2015
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
			balance sheet								balance sheet
	Net amount								Net amount
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	107,127	$	—	$	—	$	107,127	$	45,885	$	—	$	—	$	45,885
RJ O'Brien		8,634		—		—		8,634		2,246		—		—		2,246
Barclays Capital		8,431		—		—		8,431		72		—		—		72
JP Morgan		4,067		—		—		4,067		—		—		—		—
Federal National Mortgage Association		3,471		—		—		3,471		453		—		—		453
Citibank, N.A.		1,738		—		—		1,738		—		—		—		—
Goldman Sachs		836		—		—		836		471		—		—		471
Morgan Stanley Bank, N.A.		731		—		—		731		—		—		—		—
Jefferies & Co.		343		—		—		343		888		—		—		888
Wells Fargo Bank, N.A.		—		—		—		—		53		—		—		53
Others		399		—		—		399		212		—		—		212
	$	135,777	$	—	$	—	$	135,777	$	50,280	$	—	$	—	$	50,280

Summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts

	September 30, 2016						December 31, 2015
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to a master netting arrangement - IRLCs	$	1,609	$	—	$	1,609	$	2,112	$	—	$	2,112
Derivatives subject to a master netting arrangement:
Forward purchase contracts		2,584		—		2,584		9,004		—		9,004
Forward sale contracts		45,085		—		45,085		7,497		—		7,497
Put options on interest rate futures purchase contracts		1,500		—		1,500		203		—		203
Call options on interest rate futures purchase contracts		398		—		398		47		—		47
Netting		—		(46,750)		(46,750)		—		(9,780)		(9,780)
		49,567		(46,750)		2,817		16,751		(9,780)		6,971
Total derivatives		51,176		(46,750)		4,426		18,863		(9,780)		9,083
Mortgage loans sold under agreements to repurchase:
Amount outstanding		2,491,762		—		2,491,762		1,167,405		—		1,167,405
Unamortized debt issuance costs		(396)		—		(396)		(674)		—		(674)
		2,491,366		—		2,491,366		1,166,731		—		1,166,731
	$	2,542,542	$	(46,750)	$	2,495,792	$	1,185,594	$	(9,780)	$	1,175,814

Summary of amount of derivative liabilities and assets sold under agreements to repurchase by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	September 30, 2016								December 31, 2015
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	1,609	$	—	$	—	$	1,609	$	2,112	$	—	$	—	$	2,112
Credit Suisse First Boston Mortgage Capital LLC		1,174,487		(1,174,288)		—		199		795,179		(794,470)		—		709
Bank of America, N.A.		449,502		(449,371)		—		131		271,130		(269,510)		—		1,620
Citibank, N.A.		396,423		(396,423)		—		—		55,948		(53,904)		—		2,044
Morgan Stanley Bank, N.A.		185,688		(185,688)		—		—		49,763		(49,521)		—		242
Barclays Capital		154,665		(154,665)		—		—		—		—		—		—
JP Morgan Chase Bank, N.A.		131,327		(131,327)		—		—		672		—		—		672
Wells Fargo Bank, N.A.		1,323		—		—		1,323		—		—		—		—
Nomura Securities International, Inc.		396		—		—		396		—		—		—		—
Raymond James & Associates		232		—		—		232		—		—		—		—
Bank of Oklahoma		167		—		—		167		135		—		—		135
BNP Paribas		128		—		—		128		738		—		—		738
Bank of New York Mellon		77		—		—		77		154		—		—		154
Others		164		—		—		164		657		—		—		657
	$	2,496,188	$	(2,491,762)	$	—	$	4,426	$	1,175,814	$	(1,166,731)	$	—	$	9,083

XML

Fair Value (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value

Summary of financial statement items measured at estimated fair value on a recurring basis

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	58,749	$	—	$	—	$	58,749
Mortgage loans held for sale at fair value		—		3,081,003		46,374		3,127,377
Derivative assets:
Interest rate lock commitments		—		—		107,127		107,127
Forward purchase contracts		—		54,574		—		54,574
Forward sales contracts		—		3,588		—		3,588
MBS put options		—		6,019		—		6,019
Put options on interest rate futures purchase contracts		6,707		—		—		6,707
Call options on interest rate futures purchase contracts		4,430		—		—		4,430
Total derivative assets before netting		11,137		64,181		107,127		182,445
Netting		—		—		—		(46,668)
Total derivative assets		11,137		64,181		107,127		135,777
Investment in PennyMac Mortgage Investment Trust		1,169		—		—		1,169
Mortgage servicing rights at fair value		—		—		492,028		492,028
	$	71,055	$	3,145,184	$	645,529	$	3,815,100
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	280,367	$	280,367
Derivative liabilities:
Interest rate lock commitments		—		—		1,609		1,609
Forward purchase contracts		—		2,584		—		2,584
Forward sales contracts		—		45,085		—		45,085
Put options on interest rate futures purchase contracts		1,500		—		—		1,500
Call options on interest rate futures purchase contracts		398		—		—		398
Total derivative liabilities before netting		1,898		47,669		1,609		51,176
Netting		—		—		—		(46,750)
Total derivative liabilities		1,898		47,669		1,609		4,426
Mortgage servicing liabilities		—		—		13,045		13,045
	$	1,898	$	47,669	$	295,021	$	297,838

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	46,319	$	—	$	—	$	46,319
Mortgage loans held for sale at fair value		—		1,052,673		48,531		1,101,204
Derivative assets:
Interest rate lock commitments		—		—		45,885		45,885
Forward purchase contracts		—		4,181		—		4,181
Forward sales contracts		—		4,965		—		4,965
MBS put options		—		404		—		404
Put options on interest rate futures purchase contracts		1,832		—		—		1,832
Call options on interest rate futures purchase contracts		1,555		—		—		1,555
Total derivative assets before netting		3,387		9,550		45,885		58,822
Netting		—		—		—		(8,542)
Total derivative assets		3,387		9,550		45,885		50,280
Investment in PennyMac Mortgage Investment Trust		1,145		—		—		1,145
Mortgage servicing rights at fair value		—		—		660,247		660,247
	$	50,851	$	1,062,223	$	754,663	$	1,859,195
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	412,425	$	412,425
Derivative liabilities:
Interest rate lock commitments		—		—		2,112		2,112
Forward purchase contracts		—		9,004		—		9,004
Forward sales contracts		—		7,497		—		7,497
Put options on interest rate futures purchase contracts		203		—		—		203
Call options on interest rate futures purchase contracts		47		—		—		47
Total derivative liabilities before netting		250		16,501		2,112		18,863
Netting		—		—		—		(9,780)
Total derivative liabilities		250		16,501		2,112		9,083
Mortgage servicing liabilities		—		—		1,399		1,399
	$	250	$	16,501	$	415,936	$	422,907

Summary of roll forward of items measured using Level 3 inputs on a recurring basis

	Quarter ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, June 30, 2016	$	38,079	$	90,262	$	526,294	$	654,635
Purchases		750,709		—		12		750,721
Sales		(621,446)		—		—		(621,446)
Repayments		(9,629)		—		—		(9,629)
Interest rate lock commitments issued, net		—		148,315		—		148,315
Mortgage servicing rights resulting from mortgage loan sales		—		—		3,913		3,913
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		2,487		—		—		2,487
Other factors		—		68,241		(38,191)		30,050
		2,487		68,241		(38,191)		32,537
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(113,826)		—		—		(113,826)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(201,300)		—		(201,300)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	(234)	$	105,518	$	(38,191)	$	67,093

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2016	$	294,551	$	4,681	$	299,232
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		—		1,438
Accrual of interest		4,827		—		4,827
Repayments		(16,342)		—		(16,342)
Mortgage servicing liabilities assumed		—		5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales		—		6,401		6,401
Changes in fair value included in income		(4,107)		(3,773)		(7,880)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(4,107)	$	(3,773)	$	(7,880)

	Quarter ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance, June 30, 2015	$	34,085	$	27,737	$	581,269	$	643,091
Purchases		391,578		—		109,131		500,709
Sales		(286,481)		—		—		(286,481)
Repayments		(14,465)		—		—		(14,465)
Interest rate lock commitments issued, net		—		73,133		—		73,133
Mortgage servicing rights resulting from mortgage loan sales		—		—		6,989		6,989
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		—		—		—		—
Other factors		826		58,659		(27,722)		31,763
		826		58,659		(27,722)		31,763
Transfers of mortgage loans held for sale from Level 3 to Level 2  (2)		(61,921)		—		—		(61,921)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(115,991)		—		(115,991)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(614)	$	43,538	$	(27,722)	$	15,202

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Quarter ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, June 30, 2015	$	359,102	$	11,791	$	370,893
Issuance of excess servicing spread financing:
For cash		84,165		—		84,165
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		2,268		—		2,268
Mortgage servicing liabilities resulting from mortgage loan sales		—		8,358		8,358
Accrual of interest		8,026		—		8,026
Repayments		(24,717)		—		(24,717)
Changes in fair value included in income		(10,271)		(9,425)		(19,696)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,271)	$	(9,425)	$	(19,696)

	Nine months ended September 30, 2016
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights			Total
	(in thousands)
Assets:
Balance, December 31, 2015	$	48,531	$	43,773	$	660,247	$	752,551
Purchases		1,239,507		—		23		1,239,530
Sales		(899,763)		—		—		(899,763)
Repayments		(29,488)		—		—		(29,488)
Interest rate lock commitments issued, net		—		329,533		—		329,533
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,201		13,201
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		3,178		—		—		3,178
Other factors		—		217,429		(181,443)		35,986
		3,178		217,429		(181,443)		39,164
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(315,591)		—		—		(315,591)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(485,217)		—		(485,217)
Balance, September 30, 2016	$	46,374	$	105,518	$	492,028	$	643,920
Changes in fair value recognized during the period relating to assets still held at September 30, 2016	$	506	$	105,518	$	(181,443)	$	(75,419)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2016
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance, December 31, 2015	$	412,425	$	1,399	$	413,824
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		5,039		—		5,039
Accrual of interest		17,555		—		17,555
Repurchase		(59,045)		—		(59,045)
Repayments		(54,623)		—		(54,623)
Mortgage servicing liabilities resulting from mortgage loan sales		—		11,810		11,810
Mortgage servicing liabilities assumed		—		5,736		5,736
Changes in fair value included in income		(40,984)		(5,900)		(46,884)
Balance, September 30, 2016	$	280,367	$	13,045	$	293,412
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2016	$	(33,774)	$	(5,900)	$	(39,674)

	Nine months ended September 30, 2015
	Mortgage		Net interest		Mortgage
	loans held		rate lock		servicing
	for sale		commitments (1)		rights		Total
	(in thousands)
Assets:
Balance December 31, 2014	$	209,908	$	32,401	$	325,383	$	567,692
Purchases		857,863		—		379,264		1,237,127
Sales		(798,335)		—		—		(798,335)
Repayments		(34,467)		—		—		(34,467)
Interest rate lock commitments issued, net		—		217,278		—		217,278
Mortgage servicing rights resulting from mortgage loan sales		—		—		13,107		13,107
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		4,054		—		—		4,054
Other factors		35		48,367		(48,087)		315
		4,089		48,367		(48,087)		4,369
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2)		(175,436)		—		—		(175,436)
Transfers of interest rate lock commitments to mortgage loans held for sale		—		(254,508)		—		(254,508)
Balance, September 30, 2015	$	63,622	$	43,538	$	669,667	$	776,827
Changes in fair value recognized during the period relating to assets still held at September 30, 2015	$	(1,145)	$	43,538	$	(48,087)	$	(5,694)

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

(2) Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification, borrower reperformance or resolution of deficiencies found in the borrowers’ credit files.

	Nine months ended September 30, 2015
	Excess
	servicing		Mortgage
	spread		servicing
	financing		liabilities		Total
	(in thousands)
Liabilities:
Balance December 31, 2014	$	191,166	$	6,306	$	197,472
Issuance of excess servicing spread financing:
For cash		271,452		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		4,833		—		4,833
Mortgage servicing liabilities resulting from mortgage loan sales		—		20,442		20,442
Accrual of interest		17,596		—		17,596
Repayments		(55,800)		—		(55,800)
Changes in fair value included in income		(10,674)		(16,024)		(26,698)
Balance, September 30, 2015	$	418,573	$	10,724	$	429,297
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2015	$	(10,674)	$	(16,024)	$	(26,698)

Summary of net gains (losses) from changes in fair values included in earnings for financial statement items carried at fair value

	Quarter ended September 30,
	2016						2015
	Net gains on						Net gains on
	mortgage		Net mortgage				mortgage		Net mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	198,449	$	—	$	198,449	$	136,119	$	—	$	136,119
Mortgage servicing rights at fair value		—		(38,191)		(38,191)		—		(27,722)		(27,722)
	$	198,449	$	(38,191)	$	160,258	$	136,119	$	(27,722)	$	108,397
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	4,107	$	4,107	$	—	$	10,271	$	10,271
Mortgage servicing liabilities at fair value		—		3,773		3,773		—		9,425		9,425
	$	—	$	7,880	$	7,880	$	—	$	19,696	$	19,696

	Nine months ended September 30,
	2016						2015
	Net gains on		Net				Net gains on		Net
	mortgage		mortgage				mortgage		mortgage
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
	(in thousands)
Assets:
Mortgage loans held for sale at fair value	$	499,058	$	—	$	499,058	$	285,936	$	—	$	285,936
Mortgage servicing rights at fair value		—		(181,443)		(181,443)		—		(48,087)		(48,087)
	$	499,058	$	(181,443)	$	317,615	$	285,936	$	(48,087)	$	237,849
Liabilities:
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust	$	—	$	40,984	$	40,984	$	—	$	10,674	$	10,674
Mortgage servicing liabilities at fair value		—		5,900		5,900		—		16,024		16,024
	$	—	$	46,884	$	46,884	$	—	$	26,698	$	26,698

Schedule of fair value and related principal amounts due upon maturity of assets and liabilities accounted for under the fair value option

	September 30, 2016
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	3,107,437	$	2,924,778	$	182,659
90 days or more delinquent:
Not in foreclosure		15,223		15,343		(120)
In foreclosure		4,717		5,344		(627)
	$	3,127,377	$	2,945,465	$	181,912

	December 31, 2015
			Principal
			amount
	Fair		due upon
	value		maturity		Difference
	(in thousands)
Mortgage loans held for sale:
Current through 89 days delinquent	$	1,068,548	$	1,016,314	$	52,234
90 days or more delinquent:
Not in foreclosure		26,399		26,999		(600)
In foreclosure		6,257		6,598		(341)
	$	1,101,204	$	1,049,911	$	51,293

Summary of financial statement items measured at estimated fair value on a nonrecurring basis

	September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	845,646	$	845,646
Real estate acquired in settlement of loans		—		—		173		173
	$	—	$	—	$	845,819	$	845,819

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	—	$	—	$	202,991	$	202,991
	$	—	$	—	$	202,991	$	202,991

Summary of total gains (losses) on assets measured at estimated fair values on a nonrecurring basis

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Mortgage servicing rights at lower of amortized cost or fair value	$	(25,206)	$	(33,301)	$	(174,926)	$	(51,427)
Real estate acquired in settlement of loans		42		—		—		—
	$	(25,164)	$	(33,301)	$	(174,926)	$	(51,427)

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items, excluding MSR purchases

	Quarter ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$3,913	$146,448	$6,989	$154,707
Unpaid principal balance of underlying mortgage loans	$340,562	$12,313,082	$550,073	$11,369,493
Weighted average servicing fee rate (in basis points)	33	29	32	34
Key inputs:
Pricing spread (1)
Range	7.6% – 10.5%	7.6% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	9.3%	9.5%	8.9%	9.1%
Annual total prepayment speed (2)
Range	5.0% – 42.8%	3.4% – 42.9%	7.7% – 52.3%	7.5% – 35.0%
Weighted average	12.4%	9.7%	11.9%	9.2%
Life (in years)
Range	1.7 – 10.8	1.7 – 12.2	1.4 – 7.5	1.9 – 9.1
Weighted average	6.5	7.6	6.5	7.0
Per-loan annual cost of servicing
Range	$78 – $103	$78 – $102	$59 – $101	$59 – $95
Weighted average	$92	$91	$75	$78

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

(2) Prepayment speed is measured using Life Total CPR.

	Nine months ended September 30,
	2016		2015
	Fair	Amortized	Fair	Amortized
	value	cost	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans in thousands)
MSR and pool characteristics:
Amount recognized	$13,201	$370,414	$13,107	$347,549
Unpaid principal balance of underlying mortgage loans	$1,108,802	$29,667,803	$1,072,203	$25,268,602
Weighted average servicing fee rate (in basis points)	33	30	32	35
Key inputs:
Pricing spread (1)
Range	7.2% – 10.5%	7.2% – 14.4%	7.0% – 14.4%	6.8% – 16.2%
Weighted average	8.9%	9.2%	9.4%	9.2%
Annual total prepayment speed (2)
Range	3.3% – 52.3%	3.4% – 50.9%	7.7% – 62.4%	7.5% – 39.4%
Weighted average	12.6%	10.0%	11.6%	8.8%
Life (in years)
Range	1.3 – 11.8	1.3 – 12.2	1.1 – 7.5	1.8 – 9.1
Weighted average	6.5	7.5	6.5	7.0
Per-loan annual cost of servicing
Range	$68 – $105	$68 – $106	$59 – $101	$59 – $95
Weighted average	$87	$88	$75	$76

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

(2) Prepayment speed is measured using Life Total CPR.

Quantitative summary of key inputs used in the valuation of the MSRs at year end and the effect on estimated fair value from adverse changes in those inputs

	September 30, 2016				December 31, 2015
	Fair		Amortized		Fair		Amortized
	value		cost		value		cost
	(Carrying value, unpaid principal balance of underlying
	mortgage loans and effect on fair value amounts in thousands)
MSR and pool characteristics:
Carrying value	$	492,028	$	845,646	$	660,247	$	751,688
Unpaid principal balance of underlying mortgage loans	$	46,236,558	$	75,076,431	$	54,182,477	$	56,420,227
Weighted average note interest rate		4.1%		3.8%		4.1%		3.8%
Weighted average servicing fee rate (in basis points)		32		31		32		32
Key inputs:
Pricing spread (1)
Range		7.6% – 14.4%		7.6% – 14.4%		7.2% – 14.1%		7.2% – 12.8%
Weighted average		9.7%		10.2%		8.9%		8.9%
Effect on fair value of (2):
5% adverse change	$	(8,318)	$	(15,356)	$	(11,115)	$	(13,467)
10% adverse change	$	(16,346)	$	(30,149)	$	(21,857)	$	(26,472)
20% adverse change	$	(31,585)	$	(58,160)	$	(42,293)	$	(51,183)
Average life (in years)
Range		2.1 – 8.9		1.5 – 9.3		1.9 – 9.0		1.8 – 9.1
Weighted average		6.0		6.5		6.9		7.4
Prepayment speed (3)
Range		6.7% – 26.5%		6.7% – 46.7%		5.3% – 43.8%		5.7% – 46.7%
Weighted average		12.3%		12.1%		9.7%		9.5%
Effect on fair value of (2):
5% adverse change	$	(10,448)	$	(18,008)	$	(12,475)	$	(14,360)
10% adverse change	$	(20,482)	$	(35,280)	$	(24,499)	$	(28,197)
20% adverse change	$	(39,396)	$	(67,777)	$	(47,286)	$	(54,406)
Annual per-loan cost of servicing
Range		$78 – $102		$79 – $102		$68 – $97		$68 – $95
Weighted average		$93		$92		$86		$84
Effect on fair value of (2):
5% adverse change	$	(5,720)	$	(7,101)	$	(6,812)	$	(5,725)
10% adverse change	$	(11,441)	$	(14,202)	$	(13,624)	$	(11,451)
20% adverse change	$	(22,882)	$	(28,405)	$	(27,247)	$	(22,901)

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

(2) For MSRs carried at fair value, an adverse change in one of the above-mentioned key inputs is expected to result in a reduction in fair value which will be recognized in income. For MSRs carried at lower of amortized cost or fair value, an adverse change in one of the above-mentioned key inputs may result in recognition of MSR impairment. The extent of the recognized MSR impairment will depend on the relationship of fair value to the carrying value of such MSRs.

(3) Prepayment speed is measured using Life Total CPR.

Schedule of key inputs used in determining the fair value of ESS financing

	September 30,	December 31,
	2016	2015
Carrying value (in thousands)	$280,367	$412,425
ESS and pool characteristics:
Unpaid principal balance of underlying mortgage loans (in thousands)	$34,189,425	$51,966,405
Average servicing fee rate (in basis points)	34	32
Average excess servicing spread (in basis points)	19	17
Key inputs:
Pricing spread (1)
Range	4.7% – 5.9%	4.8% – 6.5%
Weighted average	5.5%	5.7%
Average life (in years)
Range	2.2 – 8.9	1.4 – 9.0
Weighted average	6.2	6.9
Annualized prepayment speed (2)
Range	6.7% – 23.3%	5.2% – 52.4%
Weighted average	12.2%	9.6%

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

(2)Prepayment speed is measured using Life Total CPR.

Interest rate lock commitments

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

Key inputs	September 30, 2016	December 31, 2015
Pull-through rate
Range	35.0% – 100.0%	54.1% – 100.0%
Weighted average	83.7%	90.1%
Mortgage servicing rights value expressed as:
Servicing fee multiple
Range	1.2 – 5.5	1.0 – 5.8
Weighted average	4.2	4.4
Percentage of unpaid principal balance
Range	0.2% – 2.7%	0.2% – 3.8%
Weighted average	1.2%	1.5%

Mortgage loans held for sale

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

Key inputs	September 30, 2016	December 31, 2015
Discount rate
Range	2.5% – 8.1%	2.5% – 9.1%
Weighted average	3.1%	2.8%
Twelve-month projected housing price index change
Range	2.8% – 5.2%	1.8% – 5.0%
Weighted average	4.5%	3.7%
Voluntary prepayment / resale speed (1)
Range	0.1% – 25.8%	0.6% – 20.1%
Weighted average	20.8%	16.6%
Total prepayment speed (2)
Range	0.1% – 41.3%	0.7% – 37.6%
Weighted average	33.1%	30.9%

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

(2)Total prepayment speed is measured using Life Total CPR.

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Mortgage Loans Held for Sale at Fair Value (Tables)

9 Months Ended

Sep. 30, 2016

Mortgage Loans Held for Sale at Fair Value

Summary of mortgage loans held for sale at fair value

	September 30,		December 31,
	2016		2015
	(in thousands)
Government-insured or guaranteed	$	2,971,838	$	992,805
Conventional conforming		109,165		59,868
Delinquent mortgage loans purchased from Ginnie Mae pools serviced by the Company		38,433		42,600
Mortgage loans repurchased pursuant to representations and warranties		7,941		5,931
	$	3,127,377	$	1,101,204
Fair value of mortgage loans pledged to secure:
Assets sold under agreements to repurchase	$	2,278,952	$	833,748
Mortgage loan participation and sale agreement		815,665		245,741
	$	3,094,617	$	1,079,489

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2016

Derivative Financial Instruments

Summary of derivative financial instruments

	September 30, 2016					December 31, 2015
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Derivatives not designated as hedging instruments:
Interest rate lock commitments	4,674,721	$	107,127	$	1,609	3,487,366	$	45,885	$	2,112
Forward purchase contracts	17,116,174		54,574		2,584	5,254,293		4,181		9,004
Forward sales contracts	17,768,293		3,588		45,085	6,230,811		4,965		7,497
MBS put options	5,500,000		6,019		—	1,275,000		404		—
Put options on interest rate futures purchase contracts	3,525,000		6,707		1,500	1,650,000		1,832		203
Call options on interest rate futures purchase contracts	300,000		4,430		398	600,000		1,555		47
Treasury futures purchase contracts	325,000		—		—	—		—		—
Total derivatives before netting			182,445		51,176			58,822		18,863
Netting			(46,668)		(46,750)			(8,542)		(9,780)
		$	135,777	$	4,426		$	50,280	$	9,083
Deposits received from derivative counterparties, net		$	(82)				$	(1,238)

Summary of the notional value activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans held for sale at fair value and MSRs

	Quarter ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,510,863	63,091,757	(59,486,446)	17,116,174
Forward sale contracts	13,614,196	77,956,736	(73,802,639)	17,768,293
MBS put options	3,550,000	6,150,000	(4,200,000)	5,500,000
Put options on interest rate futures purchase contracts	1,000,000	4,025,000	(1,500,000)	3,525,000
Call options on interest rate futures purchase contracts	452,100	900,000	(1,052,100)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Quarter ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,202,418	33,050,370	(33,189,047)	6,063,741
Forward sale contracts	9,789,564	42,709,764	(45,383,082)	7,116,246
MBS put options	327,500	1,260,000	(677,500)	910,000
MBS call options	160,000	—	(160,000)	—
Put options on interest rate futures purchase contracts	2,019,500	3,365,000	(2,009,500)	3,375,000
Call options on interest rate futures purchase contracts	1,025,000	2,140,000	(1,990,000)	1,175,000

	Nine months ended September 30, 2016
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	5,254,293	140,774,477	(128,912,596)	17,116,174
Forward sale contracts	6,230,811	173,875,141	(162,337,659)	17,768,293
MBS put options	1,275,000	15,600,000	(11,375,000)	5,500,000
Put options on interest rate futures purchase contracts	1,650,000	8,700,000	(6,825,000)	3,525,000
Call options on interest rate futures purchase contracts	600,000	4,537,500	(4,837,500)	300,000
Treasury futures purchase contracts	—	493,700	(168,700)	325,000
Treasury futures sale contracts	—	168,700	(168,700)	—

	Nine months ended September 30, 2015
	Balance			Balance
	beginning of		Dispositions/	end of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	2,634,218	78,426,073	(74,996,550)	6,063,741
Forward sale contracts	3,901,851	107,084,874	(103,870,479)	7,116,246
MBS put options	340,000	2,502,500	(1,932,500)	910,000
MBS call options	—	160,000	(160,000)	—
Put options on interest rate futures purchase contracts	755,000	7,190,000	(4,570,000)	3,375,000
Call options on interest rate futures purchase contracts	630,000	5,055,000	(4,510,000)	1,175,000
Put options on interest rate futures sale contracts	50,000	50,000	(100,000)	—
Call options on interest rate futures sales contracts	—	35,100	(35,100)	—

Summary of gains (losses) recognized on derivative financial instruments and the respective income statement line items

		Quarter ended September 30,				Nine months ended September 30,
Hedged item	Income statement line	2016		2015		2016		2015
		(in thousands)
Interest rate lock commitments and mortgage loans held for sale	Net gains on mortgage loans held for sale	$	(27,546)	$	(63,954)	$	(145,665)	$	(44,713)
Mortgage servicing rights	Net mortgage loan servicing fees	$	19,026	$	30,455	$	142,694	$	19,259

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Mortgage Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2016

Mortgage Servicing Rights

Schedule of activity in MSRs carried at fair value

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	526,294	$	581,269	$	660,247	$	325,383
Additions:
Purchases		12		109,131		23		379,264
Mortgage servicing rights resulting from mortgage loan sales		3,913		6,989		13,201		13,107
		3,925		116,120		13,224		392,371
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(17,573)		(5,651)		(118,304)		2,942
Other changes in fair value (2)		(20,618)		(22,071)		(63,139)		(51,029)
Total change in fair value		(38,191)		(27,722)		(181,443)		(48,087)
Balance at end of period	$	492,028	$	669,667	$	492,028	$	669,667
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	391,563	$	37,705
Note payable		99,805		20,881
	$	491,368	$	58,586

(1) Principally reflects changes in discount rates and prepayment speed inputs, primarily due to changes in market interest rates.

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

Schedule of activity in MSRs carried at lower of amortized cost or fair value

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Amortized cost:
Balance at beginning of period	$	961,591	$	581,558	$	798,925	$	415,245
Mortgage servicing rights resulting from mortgage loan sales		146,448		154,707		370,414		347,549
Amortization		(40,230)		(19,522)		(101,530)		(46,051)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		(12,777)		—		(12,777)		—
Balance at end of period		1,055,032		716,743		1,055,032		716,743
Valuation allowance:
Balance at beginning of period		(196,957)		(27,317)		(47,237)		(9,800)
Additions		(25,206)		(51,701)		(174,926)		(69,218)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary-impairment		12,777		—		12,777		—
Balance at end of period		(209,386)		(79,018)		(209,386)		(79,018)
Mortgage servicing rights, net	$	845,646	$	637,725	$	845,646	$	637,725
Fair value of mortgage servicing rights at beginning of period	$	764,634	$	569,969	$	766,345	$	416,802
Fair value of mortgage servicing rights at end of period	$	845,646	$	647,942
	September 30,		December 31,
	2016		2015
Fair value of mortgage servicing rights pledged to secure:
Assets sold under agreements to repurchase	$	818,321	$	744,974
Note payable		23,389		—
	$	841,710	$	744,974

Summary of estimate of future amortization of existing MSRs

	Estimated MSR
Twelve month period ending September 30,	amortization
	(in thousands)
2017	$	149,968
2018		126,485
2019		108,364
2020		93,669
2021		81,397
Thereafter		495,149
	$	1,055,032

Summary of servicing fees, late fees and ancillary and other fees relating to MSRs recorded on the consolidated statements of income

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Contractual servicing fees	$	98,865	$	83,424	$	282,962	$	200,392
Ancillary and other fees:
Late charges		4,798		1,420		14,164		4,538
Other		1,316		478		3,393		1,880
	$	104,979	$	85,322	$	300,519	$	206,810

Schedule of activity in mortgage servicing liability carried at fair value

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	4,681	$	11,791	$	1,399	$	6,306
Mortgage servicing liabilities assumed		5,736		—		5,736		—
Mortgage servicing liabilities resulting from mortgage loan sales		6,401		8,358		11,810		20,442
Change in fair value		(3,773)		(9,425)		(5,900)		(16,024)
Balance at end of period	$	13,045	$	10,724	$	13,045	$	10,724

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Carried Interest Due from Investment Funds (Tables)

9 Months Ended

Sep. 30, 2016

Carried Interest Due from Investment Funds

Summary of activity in the Company's Carried interest due from Investment Funds

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	70,763	$	68,713	$	69,926	$	67,298
Carried Interest recognized during the period		107		1,483		944		2,898
Proceeds received during the period		—		—		—		—
Balance at end of period	$	70,870	$	70,196	$	70,870	$	70,196

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2016

Borrowings

Summary of financial data pertaining to mortgage loans sold under agreements to repurchase

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	1,515,632		$	975,724		$	1,303,313		$	805,517
Weighted average interest rate (1)		2.87	%		1.84	%		2.87	%		1.82	%
Total interest expense	$	12,951		$	5,661		$	33,863		$	14,159
Maximum daily amount outstanding	$	2,550,035		$	1,496,306		$	2,550,035		$	1,496,306

		September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	2,491,762		$	1,167,405
Unamortized debt issuance costs		(396)			(674)
	$	2,491,366		$	1,166,731
Unused amount (2)	$	350,238		$	40,178
Fair value of assets securing repurchase agreements
Mortgage loans held for sale	$	2,278,952		$	833,748
Mortgage servicing rights		1,209,884			782,679
	$	3,488,836		$	1,616,427
Weighted average interest rate		2.63	%		2.50	%
Margin deposits placed with counterparties (3)	$	3,000		$	2,500

(1) Excludes the effect of amortization of commitment fees totaling $1.8 million and $1.1 million for the quarters ended September 30, 2016 and 2015, respectively, and $5.4 million and $3.1 million for the nine months ended September 30, 2016 and 2015, respectively.

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

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

Summary of maturities of outstanding advances under repurchase agreements by maturity date

Remaining maturity at September 30, 2016	Balance
	(dollars in thousands)
Within 30 days	$	161,828
Over 30 to 90 days		2,325,774
Over 90 days		4,160
		2,491,762
Unamortized debt issuance costs		(396)
Total loans sold under agreements to repurchase	$	2,491,366
Weighted average maturity (in months)		1.7

Summary of amount at risk relating to the mortgage loans held for sale sold under agreements to repurchase by counterparty

			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC	$	820,256	December 26, 2016	December 26, 2016
Credit Suisse First Boston Mortgage Capital LLC	$	70,451	December 7, 2016	March 30, 2017
Banc of America, N.A.	$	47,433	December 18, 2016	March 29, 2017
JP Morgan Chase Bank, N.A.	$	11,800	December 24, 2016	August 18, 2017
Morgan Stanley Bank, N.A.	$	20,279	November 18, 2016	August 25, 2017
Citibank, N.A.	$	27,027	November 6, 2016	December 2, 2016
Barclays Bank PLC	$	76,502	December 2, 2016	December 2, 2016

Summary of mortgage loan participations

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	365,112		$	200,510		$	241,131		$	163,365
Weighted average interest rate (1)		1.75	%		1.44	%		1.72	%		1.43	%
Total interest expense	$	1,887		$	814		$	3,585		$	2,053
Maximum daily amount outstanding	$	793,395		$	250,325		$	793,395		$	250,325

	September 30,			December 31,
	2016			2015
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	782,942		$	234,898
Unamortized debt issuance costs		(29)			(26)
	$	782,913		$	234,872
Weighted average interest rate		1.77	%		1.45	%
Fair value of mortgage loans pledged to secure mortgage loan participation and sale agreement	$	815,665		$	245,741

Excludes the effect of amortization of facility fees totaling $250,000 and $74,000 for the quarters ended September 30, 2016 and 2015, respectively, and $435,000 and $276,000 for the nine months ended September 30, 2016 and 2015, respectively.

Summary of note payable

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	100,390		$	361,488		$	102,492		$	239,935
Weighted average interest rate (1)		4.55	%		3.07	%		4.50	%		3.03	%
Total interest expense	$	2,129		$	3,760		$	6,018		$	7,858
Maximum daily amount outstanding	$	115,006		$	407,000		$	128,849		$	407,000

	September 30,		December 31,
	2016		2015
	(in thousands)
Carrying value:
Unpaid principal balance	$	111,014	$	62,677
Unamortized debt issuance costs		(395)		(1,541)
	$	110,619	$	61,136
Unused amount	$	88,986	$	57,328
Assets pledged to secure notes payable:
Mortgage servicing rights	$	123,194	$	20,881
Cash	$	84,851	$	93,757
Carried Interest	$	70,870	$	69,296

(1) Excluding the effect of amortization of debt issuance costs totaling $760,000 and $2.1 million during the quarter and nine months ended September 30, 2016.

Summary of obligations under capital lease

	Quarter ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(dollars in thousands)
Average balance	$	21,975		$	—		$	17,451		$	—
Weighted average interest rate		2.46	%		—	%		2.45	%		—	%
Total interest expense	$	139		$	—		$	363		$	—
Maximum daily amount outstanding	$	23,263		$	—		$	24,720		$	—

	September 30,		December 31,
	2016		2015
	(in thousands)
Unpaid principal balance	$	20,700	$	13,579
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	22,281	$	14,034
Capitalized software	$	444	$	783

Summary of roll forward of Excess Servicing Spread Financing

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	294,551	$	359,102	$	412,425	$	191,166
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
For cash		—		84,165		—		271,452
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,438		2,268		5,039		4,833
Accrual of interest		4,827		8,026		17,555		17,596
Repayment		(16,342)		(24,717)		(54,623)		(55,800)
Repurchase (1)		—		—		(59,045)		—
Change in fair value		(4,107)		(10,271)		(40,984)		(10,674)
Balance at end of period	$	280,367	$	418,573	$	280,367	$	418,573

On February 29, 2016, the Company and PMT terminated that certain master spread acquisition and MSR servicing agreement that the parties entered into effective February 1, 2013 (the “2/1/13 Spread Acquisition Agreement”) and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, the Company reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by the Company to PMT under the 2/1/13 Spread Acquisition Agreement and then subject to such 2/1/13 Spread Acquisition Agreement. On February 29, 2016, the Company also reacquired from PMT all of its right, title and interest in and to all of the Freddie Mac ESS previously sold to PMT by the Company.

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Liability for Losses Under Representations and Warranties (Tables)

9 Months Ended

Sep. 30, 2016

Liability for Losses Under Representations and Warranties

Summary of repurchase activity

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	24,277	$	16,257	$	20,611	$	13,259
Provision for losses on mortgage loans sold:
Resulting from sales of mortgage loans		852		2,292		5,220		5,535
Reduction in liability due to change in estimate		(6,648)		—		(6,648)		—
Incurred losses		(8)		(71)		(710)		(316)
Balance at end of period	$	18,473	$	18,478	$	18,473	$	18,478
Unpaid principal balance of mortgage loans subject to representations and warranties at period end	$	80,050,420	$	54,259,297

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Noncontrolling Interest (Tables)

9 Months Ended

Sep. 30, 2016

Noncontrolling Interest.

Noncontrolling Interest

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$	23,685	$	12,680	$	43,335	$	34,457
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc.	$	1,398	$	487	$	4,038	$	2,919
Shares of Class A common stock of PennyMac Financial Services, Inc. issued pursuant to exchange of Class A units of Private National Mortgage Acceptance Company, LLC		73		44		166		177

	September 30,		December 31,
	2016		2015
Percentage of noncontrolling interest in Private National Mortgage Acceptance Company, LLC	70.7	%	71.1	%

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Net Gains on Mortgage Loans Held for Sale (Tables)

9 Months Ended

Sep. 30, 2016

Net Gains on Mortgage Loans Held for Sale

Net Gains on Mortgage Loans Held for Sale

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
From non-affiliates:
Cash gain(loss) :
Mortgage loans	$	40,381	$	(33,957)	$	82,612	$	(70,171)
Hedging activities		(13,526)		(51,469)		(163,659)		(51,803)
		26,855		(85,426)		(81,047)		(121,974)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from mortgage loan sales, net		143,960		153,338		371,805		340,214
Provision for losses relating to representations and warranties:
Pursuant to mortgage loan sales		(852)		(2,292)		(5,220)		(5,535)
Reduction in liability due to change in estimate		6,648		—		6,648		—
Change in fair value relating to mortgage loans and hedging derivatives held at period end:
Interest rate lock commitments		15,256		15,800		61,744		11,137
Mortgage loans		5,964		16,809		37,481		16,890
Hedging derivatives		(14,020)		(12,485)		17,994		7,090
		183,811		85,744		409,405		247,822
Recapture payable to PennyMac Mortgage Investment Trust		(1,690)		(3,098)		(5,557)		(5,843)
	$	182,121	$	82,646	$	403,848	$	241,979

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Net Interest Expense (Tables)

9 Months Ended

Sep. 30, 2016

Net Interest Expense

Summary of net interest income (expense)

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Interest income:
From non-affiliates:
Short-term investments	$	1,756	$	94	$	2,212	$	428
Mortgage loans held for sale at fair value		14,835		12,518		38,578		32,657
Placement fees relating to custodial funds		4,144		1,152		10,204		2,263
		20,735		13,764		50,994		35,348
From PennyMac Mortgage Investment Trust—Note receivable		1,974		1,289		5,798		1,822
		22,709		15,053		56,792		37,170
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase		12,951		5,661		33,863		14,159
Mortgage loan participation and sale agreement		1,887		814		3,585		2,053
Notes payable		2,129		3,760		6,018		7,858
Obligations under capital lease		139		—		363		—
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		4,587		1,803		10,114		5,003
Interest on mortgage loan impound deposits		996		880		2,471		2,453
		22,689		12,918		56,414		31,526
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		4,827		8,026		17,555		17,596
		27,516		20,944		73,969		49,122
	$	(4,807)	$	(5,891)	$	(17,177)	$	(11,952)

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2016

Stock-based Compensation

Summary of the stock-based compensation expense by instrument awarded

	Quarter ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
	(in thousands)
Performance-based RSUs	$	2,514	$	2,474	$	6,947	$	6,819
Stock options		1,073		1,396		3,576		4,392
Time-based RSUs		632		581		1,980		1,718
Exchangeable PNMAC units		14		55		57		175
	$	4,233	$	4,506	$	12,560	$	13,104

Summary of equity awards

	Quarter ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2016		2,673		2,786		398		76,109
Granted		—		—		10		37
Vested		—				(6)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(189)		(28)		(11)		—
September 30, 2016		2,484		2,756		391		76,146

	Quarter ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
June 30, 2015		2,381		1,869		276		76,015
Granted		—		—		—		9
Vested		—				—		—
Exercised		—		—		(4)		—
Forfeited or canceled		(19)		(11)		(4)		—
September 30, 2015		2,362		1,858		268		76,024

	Nine months ended September 30, 2016
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2015		2,351		1,845		271		76,029
Granted		813		962		261		117
Vested		—				(121)		—
Exercised		—		(2)		—		—
Forfeited or canceled		(680)		(49)		(20)		—
September 30, 2016		2,484		2,756		391		76,146

	Nine months ended September 30, 2015
	Performance-		Stock		Time-based		Exchangeable
	based RSUs		options		RSUs		PNMAC units
	(in thousands)
December 31, 2014		1,257		1,167		202		75,936
Granted		1,143		715		150		88
Vested		—				(75)		—
Exercised		—		—		—		—
Forfeited or canceled		(38)		(24)		(9)		—
September 30, 2015		2,362		1,858		268		76,024

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2016

Supplemental Cash Flow Information

Schedule of supplemental cash flow information

	Nine months ended September 30,
	2016		2015
	(in thousands)
Cash paid for interest	$	70,897	$	47,867
Cash paid for income taxes	$	452	$	1,909
Non-cash investing activity:
Mortgage servicing rights resulting from mortgage loan sales	$	383,615	$	360,656
Mortgage servicing liabilities resulting from mortgage loan sales	$	11,810	$	20,442
Non-cash financing activity:
Transfer of excess servicing spread to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	5,039	$	4,833
Issuance of common stock in settlement of director fees	$	230	$	223

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Regulatory Net Worth and Agency Capital Requirements (Tables)

9 Months Ended

Sep. 30, 2016

Regulatory Net Worth and Agency Capital Requirements

Summary of agencies' capital and liquidity requirements by each agency

	September 30, 2016				December 31, 2015
Agency–company subject to requirement	Balance (1)		Requirement		Balance (1)		Requirement
	(in thousands)
Capital
Fannie Mae & Freddie Mac - PLS	$	1,166,706	$	317,441	$	835,157	$	283,655
Ginnie Mae - PLS	$	957,613	$	390,520	$	633,222	$	386,732
Ginnie Mae - PennyMac	$	1,135,605	$	429,572	$	894,731	$	425,405
HUD - PLS	$	957,613	$	2,500	$	633,222	$	2,500
Liquidity
Fannie Mae & Freddie Mac - PLS	$	132,969	$	43,055	$	145,431	$	38,936
Ginnie Mae - PLS	$	132,969	$	107,079	$	145,431	$	95,868

(1) Calculated in accordance with the respective Agency’s capital and liquidity requirements.

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2016

Commitment and Contingencies.

Schedule of commitments to fund and sell mortgage loans

	September 30, 2016
	(in thousands)
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust	$	2,383,191
Commitments to fund mortgage loans		2,291,530
	$	4,674,721

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Segments and Related Information (Tables)

9 Months Ended

Sep. 30, 2016

Segments and Related Information

Summary of financial highlights by segment

	Quarter ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	166,506	$	15,615	$	182,121	$	—	$	182,121
Mortgage loan origination fees		34,621		—		34,621		—		34,621
Fulfillment fees from PennyMac Mortgage Investment Trust		27,255		—		27,255		—		27,255
Net mortgage loan servicing fees		—		45,864		45,864		—		45,864
Management fees		—		—		—		5,521		5,521
Carried Interest from Investment Funds		—		—		—		107		107
Net interest income (expense):
Interest income		13,013		9,696		22,709		—		22,709
Interest expense		9,323		18,182		27,505		11		27,516
		3,690		(8,486)		(4,796)		(11)		(4,807)
Other		508		205		713		—		713
Total net revenue		232,580		53,198		285,778		5,617		291,395
Expenses		82,767		63,937		146,704		5,413		152,117
Income (loss) before provision for income taxes and non-segment activities		149,813		(10,739)		139,074		204		139,278
Non-segment activities		—		—		—		—		—
Income (loss) before provision for income taxes	$	149,813	$	(10,739)	$	139,074	$	204	$	139,278
Segment assets at period end (2)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers.

(2) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

	Quarter ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	81,005	$	1,641	$	82,646	$	—	$	82,646
Mortgage loan origination fees		29,448		—		29,448		—		29,448
Fulfillment fees from PennyMac Mortgage Investment Trust		17,553		—		17,553		—		17,553
Net mortgage loan servicing fees		—		57,258		57,258		—		57,258
Management fees		—		—		—		6,456		6,456
Carried Interest from Investment Funds		—		—		—		1,483		1,483
Net interest income (expense):
Interest income		13,228		1,825		15,053		—		15,053
Interest expense		6,290		14,714		21,004		—		21,004
		6,938		(12,889)		(5,951)		—		(5,951)
Other		272		121		393		(141)		252
Total net revenue		135,216		46,131		181,347		7,798		189,145
Expenses		57,477		52,187		109,664		5,618		115,282
Income (loss) before provision for income taxes		77,739		(6,056)		71,683		2,180		73,863
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	77,739	$	(6,056)	$	71,683	$	2,180	$	73,923
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3)Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

	Nine months ended September 30, 2016
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains (losses) on mortgage loans held for sale at fair value	$	360,614	$	43,234	$	403,848	$	—	$	403,848
Loan origination fees		85,962		—		85,962		—		85,962
Fulfillment fees from PennyMac Mortgage Investment Trust		59,301		—		59,301		—		59,301
Net servicing fees		—		89,938		89,938		—		89,938
Management fees		—		—		—		17,163		17,163
Carried Interest from Investment Funds		—		—		—		944		944
Net interest income (expense):
Interest income		32,918		23,873		56,791		1		56,792
Interest expense		21,031		52,951		73,982		37		74,019
		11,887		(29,078)		(17,191)		(36)		(17,227)
Other		1,596		824		2,420		204		2,624
Total net revenue		519,360		104,918		624,278		18,275		642,553
Expenses		196,634		176,088		372,722		16,205		388,927
Income (loss) before provision for income taxes and non-segment activities		322,726		(71,170)		251,556		2,070		253,626
Non-segment activities (2)		—		—		—		—		49
Income (loss) before provision for income taxes	$	322,726	$	(71,170)	$	251,556	$	2,070	$	253,675
Segment assets at period end (3)	$	3,221,446	$	2,277,146	$	5,498,592	$	90,746	$	5,589,338

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

(3) Excludes parent Company assets, which consist primarily of working capital of $6.9 million.

	Nine months ended September 30, 2015
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on mortgage loans held for sale at fair value	$	244,361	$	(2,382)	$	241,979	$	—	$	241,979
Loan origination fees		70,551		—		70,551		—		70,551
Fulfillment fees from PennyMac Mortgage Investment Trust		45,752		—		45,752		—		45,752
Net servicing fees		—		152,583		152,583		—		152,583
Management fees		—		—		—		21,908		21,908
Carried Interest from Investment Funds		—		—		—		2,898		2,898
Net interest income (expense):
Interest income		30,041		7,129		37,170		—		37,170
Interest expense		15,131		34,051		49,182		—		49,182
		14,910		(26,922)		(12,012)		—		(12,012)
Other		1,420		840		2,260		(109)		2,151
Total net revenue		376,994		124,119		501,113		24,697		525,810
Expenses		155,542		150,737		306,279		17,631		323,910
Income (loss) before provision for income taxes and non-segment activities		221,452		(26,618)		194,834		7,066		201,900
Non-segment activities (2)		—		—		—		—		60
Income (loss) before provision for income taxes	$	221,452	$	(26,618)	$	194,834	$	7,066	$	201,960
Segment assets at period end (3)	$	1,723,137	$	1,979,252	$	3,702,389	$	87,365	$	3,789,754

(1) All revenues are from external customers

(2) Relates to parent Company interest expense eliminated in consolidation.

Excludes parent Company assets, which consist primarily of Deferred tax asset of $25.9 million.

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Concentration of Risk (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Sales Revenue, Services, Net [Member] | Customer Concentration Risk [Member]
Concentration of Risk
Percentage of total net revenue	15.00%	20.00%	22.00%	18.00%

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Transactions with Affiliates - Correspondent Production (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Lending activity between the entity and affiliate
Unpaid principal balance of loans fulfilled for PennyMac Mortgage Investment Trust	$ 7,263,557	$ 4,073,201	$ 15,696,940	$ 10,542,411
Unpaid principal balance of loans purchased from PennyMac Mortgage Investment Trust	11,694,065	10,783,882	27,599,186	23,602,020
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust	182,121	82,646	403,848	241,979
PMT
Lending activity between the entity and affiliate
Fulfillment fee revenue	27,255	17,553	59,301	45,752
PMT | Mortgage Lending
Lending activity between the entity and affiliate
Mortgage servicing rights and excess servicing spread recapture incurred	1,690	3,098	5,557	5,843
Fulfillment fee revenue	27,255	17,553	59,301	45,752
Sourcing fees paid	3,509	3,236	8,282	7,084
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust	5,007	1,047	13,146	11,875
Tax service fee	2,006	$ 1,291	4,537	$ 3,293
Early purchase program fees earned from PMT	$ 5		$ 7

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Transactions with Affiliates - Mortgage Loan Servicing (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Summary of mortgage loan servicing fees earned
Loan servicing fees	$ 11,039	$ 11,736	$ 38,919	$ 34,542
PMT | Mortgage loans acquired for sale at fair value
Summary of mortgage loan servicing fees earned
Base and supplemental	90	130	225	198
Activity-based	210	153	497	243
Loan servicing fees	300	283	722	441
PMT | Mortgage loans at fair value
Summary of mortgage loan servicing fees earned
Base and supplemental	2,615	3,930	8,881	12,145
Activity-based	3,014	2,961	14,981	8,948
Loan servicing fees	5,629	6,891	23,862	21,093
PMT | Mortgage servicing rights
Summary of mortgage loan servicing fees earned
Base and supplemental	4,978	4,473	13,999	12,783
Activity-based	132	89	336	225
Loan servicing fees	$ 5,110	$ 4,562	$ 14,335	$ 13,008

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Transactions with Affiliates - Management Fees (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) item	Sep. 30, 2015 USD ($)
Management Fees Revenue [Abstract]
Management fees	$ 5,521	$ 6,456	$ 17,163	$ 21,908
Maximum
Transactions with Affiliates
Percentage of performance incentive fee payable by issuance of common shares			50.00%
PMT
Management Fees Revenue [Abstract]
Management fees	5,025	5,742	$ 15,576	18,524
PMT | Management Agreement
Management Fees Revenue [Abstract]
Base management fee	5,025	5,742	15,576	17,181
Performance incentive				1,343
Management fees	$ 5,025	$ 5,742	$ 15,576	$ 18,524
Automatic renewal additional period			18 months
Period for calculating average annual fees			24 months
Multiplier for calculating the termination fee | item			3

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Transactions with Affiliates - Investing and Financing Activities (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Investing activities:
Advance on note receivable from PennyMac Mortgage Investment Trust				$ 168,546
Repayment of note receivable from PennyMac Mortgage Investment Trust				18,546
Financing activities:
Issuance: Cash				271,452
Issuance: Pursuant to recapture agreement			$ 5,039	4,833
Interest expense from excess servicing spread financing			17,555	17,596
PMT
Investing activities:
Interest income on note receivable from PennyMac Mortgage Investment Trust	$ 1,974	$ 1,289	5,798	1,822
Activity during the period:
Dividends received and change in fair value	(13)	(158)	130	(295)
Note receivable from PennyMac Mortgage Investment Trust	150,000		150,000		$ 150,000
Fair value of PennyMac Mortgage Investment Trust shares	1,169		1,169		1,145
PMT | Investing and Financing Activity
Investing activities:
Interest income on note receivable from PennyMac Mortgage Investment Trust	1,974	1,289	5,798	1,822
Activity during the period:
Dividends received and change in fair value	(13)	(158)	130	(295)
Note receivable from PennyMac Mortgage Investment Trust	150,000		150,000		150,000
Fair value of PennyMac Mortgage Investment Trust shares	$ 1,169		$ 1,169		$ 1,145
Number of shares	75		75		75
Excess servicing spread financing | PMT | Investing and Financing Activity
Financing activities:
Issuance: Cash		84,165		271,452
Issuance: Pursuant to recapture agreement	$ 1,438	2,268	$ 5,039	4,833
Repayments of excess servicing spread	(16,342)	(24,717)	(54,623)	(55,800)
Repurchases			(59,045)
Changes in fair value included in income	(4,107)	(10,271)	(40,984)	(10,674)
Interest expense from excess servicing spread financing	4,827	8,026	17,555	17,596
Excess servicing spread recapture recognized	$ 1,283	$ 2,428	$ 4,709	$ 5,173

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Transactions with Affiliates - Investing and Financing Activities - additional information (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
PMT
Note Receivable
Note receivable, related party	$ 150,000	$ 150,000

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Transactions with Affiliates - Other transactions, Conditional Reimbursement (Details) - PMT - Conditional Reimbursement - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Aug. 04, 2009
Conditional reimbursement
Payments received	$ 7,000	$ 0	$ 237,000
Maximum
Conditional reimbursement
Conditional reimbursement				$ 2,900,000

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Transactions with Affiliates - Other Transactions, Reimbursement of Common Overhead Expenses (Details) - PMT - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company	$ 1,430	$ 2,609	$ 6,311	$ 8,502
Payments and settlements during the period	45,988	17,709	102,600	64,575
Common overhead incurred
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company	1,417	2,694	6,413	8,125
Expenses incurred
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company	$ 13	$ (85)	$ (102)	$ 377

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Transactions with Affiliates - Amounts due from Affilate (Details) - PMT - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Amounts due from affiliate
Management fees	$ 5,025	$ 5,670
Servicing fees	3,641	3,682
Allocated expenses	3,227	4,490
Fulfillment fees	926	1,082
Conditional Reimbursement	900	900
Interest on note receivable	536	412
Correspondent production fees	492	2,729
Total due from affiliate	14,747	18,965
Payable to affiliate
Deposits made by PMT	159,488	153,573
MSR recapture payable to PMT	450	781
Other expenses	5,326	8,025
Total payable	$ 165,264	$ 162,379

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Transactions with Affiliates - Amounts due from Investment Funds (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Investment Funds
Amounts due from affiliate
Carried Interest from Investment Funds	$ 70,870	$ 70,763	$ 69,926	$ 70,196	$ 68,713	$ 67,298
Management fees	503		655
Expense reimbursements	429		45
Loan servicing fees	425		392
Loan servicing rebate	239		224
Total due from affiliate	1,596		1,316
Due to Affiliate	27,265		30,429
PNMAC Mortgage Opportunity Fund, LLC
Amounts due from affiliate
Carried Interest from Investment Funds	42,357		41,893
PNMAC Mortgage Opportunity Fund Investors, LLC
Amounts due from affiliate
Carried Interest from Investment Funds	$ 28,513		$ 28,033

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Transactions with Affiliates - Exchanged Private National Mortgage Acceptance Company, LLC Unitholders (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Transactions with Affiliates
Amount of tax benefits under the tax sharing agreement (as a percent)	85.00%
Amount of tax liability under the tax sharing agreement	$ 75,400		$ 74,300
Payment of liability to exchange PNMAC unit holders under tax receivable agreement	$ 0	$ 4,299

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Earnings Per Share of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Basic earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc common stockholders	$ 23,685	$ 12,680	$ 43,335	$ 34,457
Weighted-average common stock outstanding	22,217	21,810	22,101	21,702
Basic earnings per share of common stock (in dollars per share)	$ 1.07	$ 0.58	$ 1.96	$ 1.59
Diluted earnings per share of common stock:
Net income attributable to PennyMac Financial Services, Inc common stockholders	$ 23,685	$ 12,680	$ 43,335	$ 34,457
Effect of net income attributable to noncontrolling interest, net of tax	57,444	31,418	105,480	86,012
Diluted net income attributable to common stockholders	$ 81,129	$ 44,098	$ 148,815	$ 120,469
Weighted-average common stock outstanding	22,217	21,810	22,101	21,702
Dilutive shares:
PennyMac Class A units exchangeable to common stock	215	123	234	124
PennyMac Class A units exchangeable to common stock	53,923	54,042	53,996	53,744
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock		163		528
Diluted weighted-average common stock outstanding	76,355	76,138	76,331	76,098
Diluted earnings per share of common stock (in dollars per share)	$ 1.06	$ 0.58	$ 1.95	$ 1.58
Total anti-dilutive stock-based compensation units	5,273	4,241	5,069	3,922
Stock Options
Dilutive shares:
Total anti-dilutive stock-based compensation units	2,768	1,864	2,559	1,712
Weighted-average exercise price of anti-dilutive stock options	$ 15.81	$ 18.17	$ 15.82	$ 18.17
Performance-based RSUs
Dilutive shares:
Total anti-dilutive stock-based compensation units	2,505	2,377	2,510	2,210

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Loan Sales and Servicing Activities - Summary of Cash Flows with Transferees (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Cash flows:
Sales proceeds	$ 13,947,544	$ 12,738,035	$ 33,124,241	$ 28,357,226
Servicing fees received	67,371	33,745	186,474	103,057
Net servicing advance recoveries	4,608	$ 9,778	14,153	$ 18,733
Period end information:
Unpaid principal balance of mortgage loans outstanding at end of period	78,942,489		78,942,489		$ 60,687,246
30-89 days	2,157,646		2,157,646		1,539,568
90 days or more - Not in foreclosure	457,909		457,909		340,313
90 days or more - In foreclosure	328,396		328,396		227,025
90 days or more - Foreclosed	$ 2,435		$ 2,435		$ 755

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Loan Sales and Servicing Activities - Summary of Mortgage Servicing Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Mortgage servicing portfolio
Mortgage loans held for sale	$ 2,945,465	$ 1,052,485
Total loans serviced	182,076,643	160,272,718
Commercial real estate loans subserviced for the Company	16,403	14,454
Delinquent mortgage loans:
30 days	3,321,042	3,016,294
60 days	1,115,795	971,541
90 days or more - Not in foreclosure	2,332,604	2,058,646
90 days or more - In foreclosure	1,600,046	1,836,631
90 days or more - Foreclosed	501,516	565,403
Total delinquent mortgage loans	8,871,003	8,448,515
Custodial funds managed by the Company	4,813,492	2,744,897
Servicing rights owned
Mortgage servicing portfolio
Mortgage loans held for sale	2,945,465	1,052,485
Total loans serviced	125,976,312	112,462,086
Commercial real estate loans subserviced for the Company	16,403	14,454
Delinquent mortgage loans:
30 days	2,954,504	2,666,435
60 days	989,384	834,617
90 days or more - Not in foreclosure	1,740,732	1,270,236
90 days or more - In foreclosure	801,461	656,617
90 days or more - Foreclosed	29,560	23,372
Total delinquent mortgage loans	6,515,641	5,451,277
Custodial funds managed by the Company	3,754,860	2,242,146
Contract servicing and subservicing
Mortgage servicing portfolio
Total loans serviced	56,100,331	47,810,632
Delinquent mortgage loans:
30 days	366,538	349,859
60 days	126,411	136,924
90 days or more - Not in foreclosure	591,872	788,410
90 days or more - In foreclosure	798,585	1,180,014
90 days or more - Foreclosed	471,956	542,031
Total delinquent mortgage loans	2,355,362	2,997,238
Custodial funds managed by the Company	1,058,632	502,751
Non affiliated entities
Mortgage servicing portfolio
Total loans serviced, excluding loans held for sale	123,030,847	111,409,601
Non affiliated entities | Servicing rights owned
Mortgage servicing portfolio
Total loans serviced, excluding loans held for sale	123,030,847	111,409,601
Affiliated entities
Mortgage servicing portfolio
Total loans serviced, excluding loans held for sale	56,100,331	47,810,632
Affiliated entities | Contract servicing and subservicing
Mortgage servicing portfolio
Total loans serviced, excluding loans held for sale	$ 56,100,331	$ 47,810,632

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Loan Sales and Servicing Activities - Geographical Distriubtion of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Loan Sales and Servicing Activities
Total loans serviced	$ 182,076,643	$ 160,272,718
California
Loan Sales and Servicing Activities
Total loans serviced	40,854,288	39,007,363
Texas
Loan Sales and Servicing Activities
Total loans serviced	14,851,369	12,191,722
Virginia
Loan Sales and Servicing Activities
Total loans serviced	12,164,535	9,816,114
Florida
Loan Sales and Servicing Activities
Total loans serviced	11,830,839	9,709,940
Maryland
Loan Sales and Servicing Activities
Total loans serviced	7,755,698	6,151,945
All other states
Loan Sales and Servicing Activities
Total loans serviced	$ 94,619,914	$ 83,395,634

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Netting of Financial Instruments - Offsetting of Derivative Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Derivatives not subject to master netting arrangements
Gross amounts of recognized assets	$ 107,127	$ 45,885
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	75,318	12,937
Gross amounts offset in the consolidated balance sheet	(46,668)	(8,542)
Net amounts of assets presented in the consolidated balance sheet	28,650	4,395
Total
Gross amounts of recognized assets	182,445	58,822
Net amounts of assets presented in the balance sheet	135,777	50,280
Margin Deposits
Total
Gross amounts of recognized assets	(82)	(1,238)
MBS put options
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	6,019	404
Net amounts of assets presented in the consolidated balance sheet	6,019	404
Forward contracts | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	54,574	4,181
Net amounts of assets presented in the consolidated balance sheet	54,574	4,181
Forward contracts | Sales
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	3,588	4,965
Net amounts of assets presented in the consolidated balance sheet	3,588	4,965
Interest rate lock commitments
Total
Net amounts of assets presented in the balance sheet	107,127	45,885
Put options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	6,707	1,832
Net amounts of assets presented in the consolidated balance sheet	6,707	1,832
Call options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	4,430	1,555
Net amounts of assets presented in the consolidated balance sheet	$ 4,430	$ 1,555

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Netting of Financial Instruments - Derivative Assets, Financial Assets, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Total
Net amounts of assets presented in the balance sheet	$ 135,777	$ 50,280
Net amount	135,777	50,280
Barclays
Total
Net amounts of assets presented in the balance sheet	8,431	72
Net amount	8,431	72
RJ O'Brien
Total
Net amounts of assets presented in the balance sheet	8,634	2,246
Net amount	8,634	2,246
JP Morgan
Total
Net amounts of assets presented in the balance sheet	4,067
Net amount	4,067
Fannie Mae
Total
Net amounts of assets presented in the balance sheet	3,471	453
Net amount	3,471	453
Citibank, N.A.
Total
Net amounts of assets presented in the balance sheet	1,738
Net amount	1,738
Morgan Stanley Bank
Total
Net amounts of assets presented in the balance sheet	731
Net amount	731
Wells Fargo Bank, N.A.
Total
Net amounts of assets presented in the balance sheet		53
Net amount		53
Goldman Sachs
Total
Net amounts of assets presented in the balance sheet	836	471
Net amount	836	471
Jefferies & Co.
Total
Net amounts of assets presented in the balance sheet	343	888
Net amount	343	888
Other
Total
Net amounts of assets presented in the balance sheet	399	212
Net amount	399	212
Interest rate lock commitments
Total
Net amounts of assets presented in the balance sheet	107,127	45,885
Net amount	$ 107,127	$ 45,885

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Netting of Financial Instruments - Offsetting of Derivative and Financial Liabilites (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Derivatives not subject to master netting arrangements
Gross amounts of recognized liabilities	$ 1,609	$ 2,112
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	49,567	16,751
Netting	(46,750)	(9,780)
Net amounts of liabilities presented in the balance sheet	2,817	6,971
Total
Gross amounts of recognized liabilities	51,176	18,863
Net amounts of liabilities presented in the consolidated balance sheet	4,426	9,083
Mortgage loans sold under agreements to repurchase
Net amounts of liabilities presented in the consolidated balance sheet	2,491,762
Debt Issuance Costs
Debt issuance costs, gross	(396)	(674)
Debt issuance costs	(396)	(674)
Gross amounts of recognized liabilities	2,491,366	1,166,731
Net amount of liabilities in the consolidated balance sheet	2,491,366	1,166,731
Total
Gross amounts of recognized liabilities	2,542,542	1,185,594
Gross amounts offset in the consolidated balance sheet	(46,750)	(9,780)
Net amounts of liabilities presented in the consolidated balance sheet	2,496,188	1,175,814
Net amount of liabilities in the consolidated balance sheet	4,426	9,083
Receivable from Counterparties
Total
Net amounts of liabilities presented in the consolidated balance sheet	2,495,792	1,175,814
Assets sold under agreements to repurchase
Mortgage loans sold under agreements to repurchase
Gross amounts of recognized liabilities	2,491,762	1,167,405
Net amounts of liabilities presented in the consolidated balance sheet	2,491,762	1,167,405
Net amounts of liabilities presented in the consolidated balance sheet	2,491,762	1,167,405
Debt Issuance Costs
Debt issuance costs	(396)	(674)
Net amount of liabilities in the consolidated balance sheet	2,491,366	1,166,731
Forward contracts | Purchases
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	2,584	9,004
Net amounts of liabilities presented in the balance sheet	2,584	9,004
Forward contracts | Sales
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	45,085	7,497
Net amounts of liabilities presented in the balance sheet	45,085	7,497
Interest rate lock commitments
Total
Net amounts of liabilities presented in the consolidated balance sheet	1,609	2,112
Net amount of liabilities in the consolidated balance sheet	1,609	2,112
Put options on interest rate futures | Purchases
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	1,500	203
Net amounts of liabilities presented in the balance sheet	1,500	203
Call options on interest rate futures | Purchases
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	398	47
Net amounts of liabilities presented in the balance sheet	$ 398	$ 47

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Netting of Financial Instruments - Derivative Liabilites, Financial Liabilities, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	$ 2,496,188	$ 1,175,814
Financial instruments	(2,491,762)	(1,166,731)
Net amount of liabilities in the consolidated balance sheet	4,426	9,083
Credit Suisse First Boston Mortgage Capital LLC
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	1,174,487	795,179
Financial instruments	(1,174,288)	(794,470)
Net amount of liabilities in the consolidated balance sheet	199	709
Bank of America, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	449,502	271,130
Financial instruments	(449,371)	(269,510)
Net amount of liabilities in the consolidated balance sheet	131	1,620
Citibank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	396,423	55,948
Financial instruments	(396,423)	(53,904)
Net amount of liabilities in the consolidated balance sheet		2,044
Morgan Stanley Bank
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	185,688	49,763
Financial instruments	(185,688)	(49,521)
Net amount of liabilities in the consolidated balance sheet		242
Barclays
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	154,665
Financial instruments	(154,665)
JP Morgan
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	131,327	672
Financial instruments	(131,327)
Net amount of liabilities in the consolidated balance sheet		672
Wells Fargo Bank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	1,323
Net amount of liabilities in the consolidated balance sheet	1,323
Nomura
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	396
Net amount of liabilities in the consolidated balance sheet	396
Raymond James & Associates
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	232
Net amount of liabilities in the consolidated balance sheet	232
Bank of Oklahoma
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	167	135
Net amount of liabilities in the consolidated balance sheet	167	135
BNP Paribas
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	128	738
Net amount of liabilities in the consolidated balance sheet	128	738
Bank of NY Mellon
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	77	154
Net amount of liabilities in the consolidated balance sheet	77	154
Other
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	164	657
Net amount of liabilities in the consolidated balance sheet	164	657
Interest rate lock commitments
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	1,609	2,112
Net amount of liabilities in the consolidated balance sheet	$ 1,609	$ 2,112

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Fair Value - Financial Statement Items Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair value
Interest rate threshold used in determination of accounting for loans underlying mortgage servicing rights (as a percent)	4.50%
Assets:
Short-term investments at fair value	$ 58,749	$ 46,319
Mortgage loans held for sale at fair value	3,127,377	1,101,204
Derivative assets:
Derivative asset, before netting	182,445	58,822
Netting	(46,668)	(8,542)
Total derivative assets	135,777	50,280
Mortgage servicing rights at fair value	492,028	660,247
Derivative liabilities:
Derivative liability, before netting	51,176	18,863
Netting	(46,750)	(9,780)
Net amounts of liabilities presented in the consolidated balance sheet	4,426	9,083
Mortgage servicing liabilities	13,045	1,399
PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,169	1,145
Recurring basis
Assets:
Short-term investments at fair value	58,749	46,319
Mortgage loans held for sale at fair value	3,127,377	1,101,204
Derivative assets:
Derivative asset, before netting	182,445	58,822
Netting	(46,668)	(8,542)
Total derivative assets	135,777	50,280
Mortgage servicing rights at fair value	492,028	660,247
Total assets	3,815,100	1,859,195
Derivative liabilities:
Derivative liability, before netting	51,176	18,863
Netting	(46,750)	(9,780)
Net amounts of liabilities presented in the consolidated balance sheet	4,426	9,083
Mortgage servicing liabilities	13,045	1,399
Total liabilities	297,838	422,907
Recurring basis | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,169	1,145
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate	280,367	412,425
Recurring basis | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	107,127	45,885
Derivative liabilities:
Derivative liability, before netting	1,609	2,112
Recurring basis | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	54,574	4,181
Derivative liabilities:
Derivative liability, before netting	2,584	9,004
Recurring basis | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	3,588	4,965
Derivative liabilities:
Derivative liability, before netting	45,085	7,497
Recurring basis | MBS put options
Derivative assets:
Derivative asset, before netting	6,019	404
Recurring basis | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	4,430	1,555
Derivative liabilities:
Derivative liability, before netting	398	47
Recurring basis | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	6,707	1,832
Derivative liabilities:
Derivative liability, before netting	1,500	203
Recurring basis | Level 1
Assets:
Short-term investments at fair value	58,749	46,319
Derivative assets:
Derivative asset, before netting	11,137	3,387
Total derivative assets	11,137	3,387
Total assets	71,055	50,851
Derivative liabilities:
Derivative liability, before netting	1,898	250
Net amounts of liabilities presented in the consolidated balance sheet	1,898	250
Total liabilities	1,898	250
Recurring basis | Level 1 | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	1,169	1,145
Recurring basis | Level 1 | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	4,430	1,555
Derivative liabilities:
Derivative liability, before netting	398	47
Recurring basis | Level 1 | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	6,707	1,832
Derivative liabilities:
Derivative liability, before netting	1,500	203
Recurring basis | Level 2
Assets:
Mortgage loans held for sale at fair value	3,081,003	1,052,673
Derivative assets:
Derivative asset, before netting	64,181	9,550
Total derivative assets	64,181	9,550
Total assets	3,145,184	1,062,223
Derivative liabilities:
Derivative liability, before netting	47,669	16,501
Net amounts of liabilities presented in the consolidated balance sheet	47,669	16,501
Total liabilities	47,669	16,501
Recurring basis | Level 2 | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	54,574	4,181
Derivative liabilities:
Derivative liability, before netting	2,584	9,004
Recurring basis | Level 2 | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	3,588	4,965
Derivative liabilities:
Derivative liability, before netting	45,085	7,497
Recurring basis | Level 2 | MBS put options
Derivative assets:
Derivative asset, before netting	6,019	404
Recurring basis | Level 3
Assets:
Mortgage loans held for sale at fair value	46,374	48,531
Derivative assets:
Derivative asset, before netting	107,127	45,885
Total derivative assets	107,127	45,885
Mortgage servicing rights at fair value	492,028	660,247
Total assets	645,529	754,663
Derivative liabilities:
Derivative liability, before netting	1,609	2,112
Net amounts of liabilities presented in the consolidated balance sheet	1,609	2,112
Mortgage servicing liabilities	13,045	1,399
Total liabilities	295,021	415,936
Recurring basis | Level 3 | PMT
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate	280,367	412,425
Recurring basis | Level 3 | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	107,127	45,885
Derivative liabilities:
Derivative liability, before netting	$ 1,609	$ 2,112

XML

Fair Value - Level 3 Input Roll Forward, Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Assumption of mortgage servicing liability			$ 5,736
Mortgage servicing liabilities resulting from mortgage loan sales			11,810	$ 20,442
Recurring basis
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	$ 654,635	$ 643,091	752,551	567,692
Purchases	750,721	500,709	1,239,530	1,237,127
Sales	(621,446)	(286,481)	(899,763)	(798,335)
Repayments	(9,629)	(14,465)	(29,488)	(34,467)
Interest rate lock commitments issued, net	148,315	73,133	329,533	217,278
Mortgage servicing rights resulting from mortgage loan sales	3,913	6,989	13,201	13,107
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	2,487		3,178	4,054
Other factors	30,050	31,763	35,986	315
Total changes in fair value included in income	32,537	31,763	39,164	4,369
Transfers of mortgage loans held for sale from Level 3 to Level 2	(113,826)	(61,921)	(315,591)	(175,436)
Transfers of interest rate lock commitments to mortgage loans held for sale	(201,300)	(115,991)	(485,217)	(254,508)
Balance at the end of the year	643,920	776,827	643,920	776,827
Changes in fair value recognized during the period relating to assets still held at the end of the period	67,093	15,202	(75,419)	(5,694)
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	299,232	370,893	413,824	197,472
Accrual of interest on excess servicing spread financing	4,827	8,026	17,555	17,596
Repayments	(16,342)	(24,717)	(54,623)	(55,800)
Repurchases			(59,045)
Assumption of mortgage servicing liability	5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales	6,401	8,358	11,810	20,442
Changes in fair value included in income	(7,880)	(19,696)	(46,884)	(26,698)
Balance at the end of the year	293,412	429,297	293,412	429,297
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(7,880)	(19,696)	(39,674)	(26,698)
Recurring basis | Excess servicing spread financing
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	294,551	359,102	412,425	191,166
Accrual of interest on excess servicing spread financing	4,827	8,026	17,555	17,596
Repayments	(16,342)	(24,717)	(54,623)	(55,800)
Repurchases			(59,045)
Changes in fair value included in income	(4,107)	(10,271)	(40,984)	(10,674)
Balance at the end of the year	280,367	418,573	280,367	418,573
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(4,107)	(10,271)	(33,774)	(10,674)
Recurring basis | Excess Servicing Spread Financing for Cash
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Issuances		84,165		271,452
Recurring basis | Excess Servicing Spread Financing Pursuant to Recapture Agreement
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Issuances	1,438	2,268	5,039	4,833
Recurring basis | Mortgage servicing liabilities
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	4,681	11,791	1,399	6,306
Assumption of mortgage servicing liability	5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales	6,401	8,358	11,810	20,442
Changes in fair value included in income	(3,773)	(9,425)	(5,900)	(16,024)
Balance at the end of the year	13,045	10,724	13,045	10,724
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(3,773)	(9,425)	(5,900)	(16,024)
Recurring basis | Mortgage loans held for sale
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	38,079	34,085	48,531	209,908
Purchases	750,709	391,578	1,239,507	857,863
Sales	(621,446)	(286,481)	(899,763)	(798,335)
Repayments	(9,629)	(14,465)	(29,488)	(34,467)
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	2,487		3,178	4,054
Other factors		826		35
Total changes in fair value included in income	2,487	826	3,178	4,089
Transfers of mortgage loans held for sale from Level 3 to Level 2	(113,826)	(61,921)	(315,591)	(175,436)
Balance at the end of the year	46,374	63,622	46,374	63,622
Changes in fair value recognized during the period relating to assets still held at the end of the period	(234)	(614)	506	(1,145)
Recurring basis | Interest rate lock commitments
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	90,262	27,737	43,773	32,401
Interest rate lock commitments issued, net	148,315	73,133	329,533	217,278
Changes in fair value included in income arising from:
Other factors	68,241	58,659	217,429	48,367
Total changes in fair value included in income	68,241	58,659	217,429	48,367
Transfers of interest rate lock commitments to mortgage loans held for sale	(201,300)	(115,991)	(485,217)	(254,508)
Balance at the end of the year	105,518	43,538	105,518	43,538
Changes in fair value recognized during the period relating to assets still held at the end of the period	105,518	43,538	105,518	43,538
Recurring basis | Mortgage servicing rights
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	526,294	581,269	660,247	325,383
Purchases	12	109,131	23	379,264
Mortgage servicing rights resulting from mortgage loan sales	3,913	6,989	13,201	13,107
Changes in fair value included in income arising from:
Other factors	(38,191)	(27,722)	(181,443)	(48,087)
Total changes in fair value included in income	(38,191)	(27,722)	(181,443)	(48,087)
Balance at the end of the year	492,028	669,667	492,028	669,667
Changes in fair value recognized during the period relating to assets still held at the end of the period	$ (38,191)	$ (27,722)	$ (181,443)	$ (48,087)

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Fair Value - Changes in Fair Value, Fair Value Option, Recurring Basis (Details) - Recurring basis - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Liabilities.
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	$ 7,880	$ 19,696	$ 46,884	$ 26,698
Liabilities. | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	7,880	19,696	46,884	26,698
Excess servicing spread financing
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	4,107	10,271	40,984	10,674
Excess servicing spread financing | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	4,107	10,271	40,984	10,674
Mortgage servicing liabilities
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	3,773	9,425	5,900	16,024
Mortgage servicing liabilities | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	3,773	9,425	5,900	16,024
Assets
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	160,258	108,397	317,615	237,849
Assets | Net gains on mortgage loans held for sale at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	198,449	136,119	499,058	285,936
Assets | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	(38,191)	(27,722)	(181,443)	(48,087)
Mortgage loans held for sale
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	198,449	136,119	499,058	285,936
Mortgage loans held for sale | Net gains on mortgage loans held for sale at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	198,449	136,119	499,058	285,936
Mortgage servicing rights at fair value
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	(38,191)	(27,722)	(181,443)	(48,087)
Mortgage servicing rights at fair value | Net loan servicing fees
Net gains (losses) from changes in estimated fair values included in earnings for financial statement items carried at estimated fair value
Total gains (losses) from changes in estimated fair values included in earnings	$ (38,191)	$ (27,722)	$ (181,443)	$ (48,087)

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Fair Value - Fair Value Option Maturities, Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair value
Total fair value	$ 3,127,377	$ 1,101,204
Recurring basis
Fair value
Total fair value	3,127,377	1,101,204
Mortgage loans held for sale | Recurring basis
Fair value
Current through 89 days delinquent	3,107,437	1,068,548
Not in foreclosure	15,223	26,399
In foreclosure	4,717	6,257
Total fair value	3,127,377	1,101,204
Principal amount due upon maturity
Current through 89 days delinquent	2,924,778	1,016,314
Not in foreclosure	15,343	26,999
In foreclosure	5,344	6,598
Total principal amount due upon maturity	2,945,465	1,049,911
Difference
Current through 89 days delinquent	182,659	52,234
Not in foreclosure	(120)	(600)
In foreclosure	(627)	(341)
Total difference	$ 181,912	$ 51,293

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Fair Value - Measurement Basis, Nonrecurring (Details) - Nonrecurring basis - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Financial statement items measured at fair value on a nonrecurring basis
Mortgage servicing rights at lower of amortized cost or fair value	$ 845,646		$ 845,646		$ 202,991
Real estate acquired in settlement of loans	173		173
Total assets	845,819		845,819		202,991
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Mortgage servicing rights at lower of amortized cost or fair value	(25,206)	$ (33,301)	(174,926)	$ (51,427)
Real estate acquired in settlement of loans	42
Total gains on assets measured at estimated fair values on a nonrecurring basis	(25,164)	$ (33,301)	(174,926)	$ (51,427)
Level 3
Financial statement items measured at fair value on a nonrecurring basis
Mortgage servicing rights at lower of amortized cost or fair value	845,646		845,646		202,991
Real estate acquired in settlement of loans	173		173
Total assets	$ 845,819		$ 845,819		$ 202,991

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Fair Value - Level 3 Unobservable Inputs, Mortgage Loans and IRLC (Details) - Level 3	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Mortgage loans held for sale | Minimum
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Discount rate (as a percent)	2.50%	2.50%
Twelve-month projected housing price index change (as a percent)	2.80%	1.80%
Prepayment / resale speed (1)	0.10%	0.60%
Total prepayment speed (as a percent)	0.10%	0.70%
Mortgage loans held for sale | Maximum
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Discount rate (as a percent)	8.10%	9.10%
Twelve-month projected housing price index change (as a percent)	5.20%	5.00%
Prepayment / resale speed (1)	25.80%	20.10%
Total prepayment speed (as a percent)	41.30%	37.60%
Mortgage loans held for sale | Weighted average
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Discount rate (as a percent)	3.10%	2.80%
Twelve-month projected housing price index change (as a percent)	4.50%	3.70%
Prepayment / resale speed (1)	20.80%	16.60%
Total prepayment speed (as a percent)	33.10%	30.90%
Interest rate lock commitments | Minimum
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Pull-through rate (as a percent)	35.00%	54.10%
Mortgage servicing rights value expressed as: Servicing fee multiple	1.2	1.0
Mortgage servicing rights value expressed as: Percentage of unpaid principal balance	0.20%	0.20%
Interest rate lock commitments | Maximum
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Pull-through rate (as a percent)	100.00%	100.00%
Mortgage servicing rights value expressed as: Servicing fee multiple	5.5	5.8
Mortgage servicing rights value expressed as: Percentage of unpaid principal balance	2.70%	3.80%
Interest rate lock commitments | Weighted average
Quantitative summary of key inputs or assumptions used in the valuation of financial statement items
Pull-through rate (as a percent)	83.70%	90.10%
Mortgage servicing rights value expressed as: Servicing fee multiple	4.2	4.4
Mortgage servicing rights value expressed as: Percentage of unpaid principal balance	1.20%	1.50%

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Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Rights - Initial Recognition (Details) - Level 3 - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Fair Values | Mortgage servicing rights
MSR and pool characteristics
Weighted-average servicing fee rate (as a percent)			0.32%		0.32%
Fair Values | Mortgage servicing rights | Minimum
Inputs:
Pricing spread (as a percent)			7.60%		7.20%
Annual total prepayment speed (as a percent)			6.70%		5.30%
Life (in years)			2 years 1 month 6 days		1 year 10 months 24 days
Annual per-loan cost of servicing			$ 78		$ 68
Fair Values | Mortgage servicing rights | Maximum
Inputs:
Pricing spread (as a percent)			14.40%		14.10%
Annual total prepayment speed (as a percent)			26.50%		43.80%
Life (in years)			8 years 10 months 24 days		9 years
Annual per-loan cost of servicing			$ 102		$ 97
Fair Values | Mortgage servicing rights | Weighted average
Inputs:
Pricing spread (as a percent)			9.70%		8.90%
Annual total prepayment speed (as a percent)			12.30%		9.70%
Life (in years)			6 years		6 years 10 months 24 days
Annual per-loan cost of servicing			$ 93		$ 86
Fair Values | MSRs at the time of initial reconition, excluding MSR purchases
MSR and pool characteristics
Amount recognized	$ 0	$ 6,989	0	$ 13,107
Unpaid principal balance of underlying mortgage loans	$ 0	$ 550,073	$ 0	$ 1,072,203
Weighted-average servicing fee rate (as a percent)	0.33%	0.32%	0.33%	0.32%
Fair Values | MSRs at the time of initial reconition, excluding MSR purchases | Minimum
Inputs:
Pricing spread (as a percent)	7.60%	7.00%	7.20%	7.00%
Annual total prepayment speed (as a percent)	5.00%	7.70%	3.30%	7.70%
Life (in years)	1 year 8 months 12 days	1 year 4 months 24 days	1 year 3 months 18 days	1 year 1 month 6 days
Annual per-loan cost of servicing	$ 78	$ 59	$ 68	$ 59
Fair Values | MSRs at the time of initial reconition, excluding MSR purchases | Maximum
Inputs:
Pricing spread (as a percent)	10.50%	14.40%	10.50%	14.40%
Annual total prepayment speed (as a percent)	42.80%	52.30%	52.30%	62.40%
Life (in years)	10 years 9 months 18 days	7 years 6 months	11 years 9 months 18 days	7 years 6 months
Annual per-loan cost of servicing	$ 103	$ 101	$ 105	$ 101
Fair Values | MSRs at the time of initial reconition, excluding MSR purchases | Weighted average
Inputs:
Pricing spread (as a percent)	9.30%	8.90%	8.90%	9.40%
Annual total prepayment speed (as a percent)	12.40%	11.90%	12.60%	11.60%
Life (in years)	6 years 6 months	6 years 6 months	6 years 6 months	6 years 6 months
Annual per-loan cost of servicing	$ 92	$ 75	$ 87	$ 75
Amortized cost | Mortgage servicing rights
MSR and pool characteristics
Weighted-average servicing fee rate (as a percent)			0.31%		0.32%
Amortized cost | Mortgage servicing rights | Minimum
Inputs:
Pricing spread (as a percent)			7.60%		7.20%
Annual total prepayment speed (as a percent)			6.70%		5.70%
Life (in years)			1 year 6 months		1 year 9 months 18 days
Annual per-loan cost of servicing			$ 79		$ 68
Amortized cost | Mortgage servicing rights | Maximum
Inputs:
Pricing spread (as a percent)			14.40%		12.80%
Annual total prepayment speed (as a percent)			46.70%		46.70%
Life (in years)			9 years 3 months 18 days		9 years 1 month 6 days
Annual per-loan cost of servicing			$ 102		$ 95
Amortized cost | Mortgage servicing rights | Weighted average
Inputs:
Pricing spread (as a percent)			10.20%		8.90%
Annual total prepayment speed (as a percent)			12.10%		9.50%
Life (in years)			6 years 6 months		7 years 4 months 24 days
Annual per-loan cost of servicing			$ 92		$ 84
Amortized cost | MSRs at the time of initial reconition, excluding MSR purchases
MSR and pool characteristics
Amount recognized	0	154,707	0	347,549
Unpaid principal balance of underlying mortgage loans	$ 0	$ 11,369,493	$ 0	$ 25,268,602
Weighted-average servicing fee rate (as a percent)	0.29%	0.34%	0.30%	0.35%
Amortized cost | MSRs at the time of initial reconition, excluding MSR purchases | Minimum
Inputs:
Pricing spread (as a percent)	7.60%	6.80%	7.20%	6.80%
Annual total prepayment speed (as a percent)	3.40%	7.50%	3.40%	7.50%
Life (in years)	1 year 8 months 12 days	1 year 10 months 24 days	1 year 3 months 18 days	1 year 9 months 18 days
Annual per-loan cost of servicing	$ 78	$ 59	$ 68	$ 59
Amortized cost | MSRs at the time of initial reconition, excluding MSR purchases | Maximum
Inputs:
Pricing spread (as a percent)	14.40%	16.20%	14.40%	16.20%
Annual total prepayment speed (as a percent)	42.90%	35.00%	50.90%	39.40%
Life (in years)	12 years 2 months 12 days	9 years 1 month 6 days	12 years 2 months 12 days	9 years 1 month 6 days
Annual per-loan cost of servicing	$ 102	$ 95	$ 106	$ 95
Amortized cost | MSRs at the time of initial reconition, excluding MSR purchases | Weighted average
Inputs:
Pricing spread (as a percent)	9.50%	9.10%	9.20%	9.20%
Annual total prepayment speed (as a percent)	9.70%	9.20%	10.00%	8.80%
Life (in years)	7 years 7 months 6 days	7 years	7 years 6 months	7 years
Annual per-loan cost of servicing	$ 91	$ 78	$ 88	$ 76

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Fair Value - Level 3 Unobservable Inputs, Mortgage Services Rights, Effect of Change In Inputs on Fair Value (Details) - Mortgage servicing rights - Level 3 - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair Values
MSR and pool characteristics
Carrying value	$ 492,028	$ 660,247
Unpaid principal balance of underlying mortgage loans	$ 46,236,558	$ 54,182,477
Weighted-average note interest rate (as a percent)	4.70%	4.10%
Weighted-average servicing fee rate (as a percent)	0.32%	0.32%
Pricing spread
Effect on fair value of 5% adverse change	$ (8,318)	$ (11,115)
Effect on fair value of 10% adverse change	(16,346)	(21,857)
Effect on fair value of 20% adverse change	(31,585)	(42,293)
Prepayment speed
Effect on fair value of 5% adverse change	(10,448)	(12,475)
Effect on fair value of 10% adverse change	(20,482)	(24,499)
Effect on fair value of 20% adverse change	(39,396)	(47,286)
Annual per-loan cost of servicing
Effect on fair value of 5% adverse change	(5,720)	(6,812)
Effect on fair value of 10% adverse change	(11,441)	(13,624)
Effect on fair value of 20% adverse change	$ (22,882)	$ (27,247)
Fair Values | Minimum
Inputs
Pricing spread (as a percent)	7.60%	7.20%
Pricing spread
Average life of MSRs (in years)	2 years 1 month 6 days	1 year 10 months 24 days
Prepayment speed of MSRs (as a percent)	6.70%	5.30%
Prepayment speed
Annual per-loan cost of servicing	$ 78	$ 68
Fair Values | Maximum
Inputs
Pricing spread (as a percent)	14.40%	14.10%
Pricing spread
Average life of MSRs (in years)	8 years 10 months 24 days	9 years
Prepayment speed of MSRs (as a percent)	26.50%	43.80%
Prepayment speed
Annual per-loan cost of servicing	$ 102	$ 97
Fair Values | Weighted average
Inputs
Pricing spread (as a percent)	9.70%	8.90%
Pricing spread
Average life of MSRs (in years)	6 years	6 years 10 months 24 days
Prepayment speed of MSRs (as a percent)	12.30%	9.70%
Prepayment speed
Annual per-loan cost of servicing	$ 93	$ 86
Amortized cost
MSR and pool characteristics
Carrying value	845,646	751,688
Unpaid principal balance of underlying mortgage loans	$ 75,076,431	$ 56,420,227
Weighted-average note interest rate (as a percent)	3.80%	3.80%
Weighted-average servicing fee rate (as a percent)	0.31%	0.32%
Pricing spread
Effect on fair value of 5% adverse change	$ (15,356)	$ (13,467)
Effect on fair value of 10% adverse change	(30,149)	(26,472)
Effect on fair value of 20% adverse change	(58,160)	(51,183)
Prepayment speed
Effect on fair value of 5% adverse change	(18,008)	(14,360)
Effect on fair value of 10% adverse change	(35,280)	(28,197)
Effect on fair value of 20% adverse change	(67,777)	(54,406)
Annual per-loan cost of servicing
Effect on fair value of 5% adverse change	(7,101)	(5,725)
Effect on fair value of 10% adverse change	(14,202)	(11,451)
Effect on fair value of 20% adverse change	$ (28,405)	$ (22,901)
Amortized cost | Minimum
Inputs
Pricing spread (as a percent)	7.60%	7.20%
Pricing spread
Average life of MSRs (in years)	1 year 6 months	1 year 9 months 18 days
Prepayment speed of MSRs (as a percent)	6.70%	5.70%
Prepayment speed
Annual per-loan cost of servicing	$ 79	$ 68
Amortized cost | Maximum
Inputs
Pricing spread (as a percent)	14.40%	12.80%
Pricing spread
Average life of MSRs (in years)	9 years 3 months 18 days	9 years 1 month 6 days
Prepayment speed of MSRs (as a percent)	46.70%	46.70%
Prepayment speed
Annual per-loan cost of servicing	$ 102	$ 95
Amortized cost | Weighted average
Inputs
Pricing spread (as a percent)	10.20%	8.90%
Pricing spread
Average life of MSRs (in years)	6 years 6 months	7 years 4 months 24 days
Prepayment speed of MSRs (as a percent)	12.10%	9.50%
Prepayment speed
Annual per-loan cost of servicing	$ 92	$ 84

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Fair Value - Level 3 Unobservable Inputs, ESS (Details) - Level 3 - Excess servicing spread financing - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Carrying value	$ 280,367	$ 412,425
Unpaid principal balance of underlying mortgage loans	$ 34,189,425	$ 51,966,405
Average servicing fee rate (as a percent)	0.34%	0.32%
Average excess servicing spread (as a percent)	0.19%	0.17%
Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Pricing spread (as a percent)	4.70%	4.80%
Average life of ESS (in years)	2 years 2 months 12 days	1 year 4 months 24 days
Annualized prepayment speed of ESS (as a percent)	6.70%	5.20%
Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Pricing spread (as a percent)	5.90%	6.50%
Average life of ESS (in years)	8 years 10 months 24 days	9 years
Annualized prepayment speed of ESS (as a percent)	23.30%	52.40%
Weighted average
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Pricing spread (as a percent)	5.50%	5.70%
Average life of ESS (in years)	6 years 2 months 12 days	6 years 10 months 24 days
Annualized prepayment speed of ESS (as a percent)	12.20%	9.60%

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Mortgage Loans Held for Sale at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value	$ 3,127,377	$ 1,101,204
Fair value of mortgage loans pledged to secure assets sold under agreements to repurchase	2,278,952	833,748
Fair value of mortgage loans pledged to secure mortgage loan participation and sale agreement	815,665	245,741
Pledged Assets Separately Reported, Loans Pledged as Collateral, at Fair Value, Total	3,094,617	1,079,489
Government-insured or guaranteed
Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value	2,971,838	992,805
Conventional mortgage loans
Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value	109,165	59,868
Mortgage loans purchased from Ginnie Mae pools serviced by the entity
Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value	38,433	42,600
Mortgage loans repurchased pursuant to representations and warranties
Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value	$ 7,941	$ 5,931

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Dec. 31, 2015
Derivative assets:
Derivative asset, before netting					$ 182,445	$ 58,822
Netting					(46,668)	(8,542)
Total derivative assets					135,777	50,280
Derivative liabilities:
Derivative liability, before netting					51,176	18,863
Netting					(46,750)	(9,780)
Net amounts of liabilities presented in the consolidated balance sheet					4,426	9,083
Net gains on mortgage loans held for sale at fair value | Interest rate lock commitments and mortgage loans held for sale
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	$ (27,546)	$ (63,954)	$ (145,665)	$ (44,713)
Net loan servicing fees | Mortgage servicing rights
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	19,026	30,455	142,694	19,259
Margin Deposits
Derivative assets:
Derivative asset, before netting					(82)	(1,238)
Not designated as hedging instrument | Interest rate lock commitments
Derivative Instruments
Notional amount	4,674,721		3,487,366		4,674,721	3,487,366
Derivative assets:
Derivative asset, before netting					107,127	45,885
Derivative liabilities:
Derivative liability, before netting					1,609	2,112
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			3,487,366
Balance end of period	4,674,721		4,674,721
Not designated as hedging instrument | Forward contracts | Purchases
Derivative Instruments
Notional amount	13,510,863	6,202,418	5,254,293	2,634,218	17,116,174	5,254,293
Derivative assets:
Derivative asset, before netting					54,574	4,181
Derivative liabilities:
Derivative liability, before netting					2,584	9,004
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	13,510,863	6,202,418	5,254,293	2,634,218
Additions	63,091,757	33,050,370	140,774,477	78,426,073
Dispositions/expirations	(59,486,446)	(33,189,047)	(128,912,596)	(74,996,550)
Balance end of period	17,116,174	6,063,741	17,116,174	6,063,741
Not designated as hedging instrument | Forward contracts | Sales
Derivative Instruments
Notional amount	13,614,196	9,789,564	6,230,811	3,901,851	17,768,293	6,230,811
Derivative assets:
Derivative asset, before netting					3,588	4,965
Derivative liabilities:
Derivative liability, before netting					45,085	7,497
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	13,614,196	9,789,564	6,230,811	3,901,851
Additions	77,956,736	42,709,764	173,875,141	107,084,874
Dispositions/expirations	(73,802,639)	(45,383,082)	(162,337,659)	(103,870,479)
Balance end of period	17,768,293	7,116,246	17,768,293	7,116,246
Not designated as hedging instrument | MBS put options
Derivative Instruments
Notional amount	3,550,000	327,500	1,275,000	340,000	5,500,000	1,275,000
Derivative assets:
Derivative asset, before netting					6,019	404
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	3,550,000	327,500	1,275,000	340,000
Additions	6,150,000	1,260,000	15,600,000	2,502,500
Dispositions/expirations	(4,200,000)	(677,500)	(11,375,000)	(1,932,500)
Balance end of period	5,500,000	910,000	5,500,000	910,000
Not designated as hedging instrument | MBS call options
Derivative Instruments
Notional amount		160,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period		160,000
Additions				160,000
Dispositions/expirations		(160,000)		(160,000)
Not designated as hedging instrument | Put options on interest rate futures | Purchases
Derivative Instruments
Notional amount	1,000,000	2,019,500	1,650,000	755,000	3,525,000	1,650,000
Derivative assets:
Derivative asset, before netting					6,707	1,832
Derivative liabilities:
Derivative liability, before netting					1,500	203
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	1,000,000	2,019,500	1,650,000	755,000
Additions	4,025,000	3,365,000	8,700,000	7,190,000
Dispositions/expirations	(1,500,000)	(2,009,500)	(6,825,000)	(4,570,000)
Balance end of period	3,525,000	3,375,000	3,525,000	3,375,000
Not designated as hedging instrument | Put options on interest rate futures | Sales
Derivative Instruments
Notional amount				50,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period				50,000
Additions				50,000
Dispositions/expirations				(100,000)
Not designated as hedging instrument | Call options on interest rate futures | Purchases
Derivative Instruments
Notional amount	452,100	1,025,000	600,000	630,000	300,000	600,000
Derivative assets:
Derivative asset, before netting					4,430	1,555
Derivative liabilities:
Derivative liability, before netting					398	$ 47
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	452,100	1,025,000	600,000	630,000
Additions	900,000	2,140,000	4,537,500	5,055,000
Dispositions/expirations	(1,052,100)	(1,990,000)	(4,837,500)	(4,510,000)
Balance end of period	300,000	$ 1,175,000	300,000	1,175,000
Not designated as hedging instrument | Call options on interest rate futures | Sales
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions				35,100
Dispositions/expirations				$ (35,100)
Not designated as hedging instrument | Treasury future | Purchases
Derivative Instruments
Notional amount	325,000		325,000		$ 325,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions	493,700		493,700
Dispositions/expirations	(168,700)		(168,700)
Balance end of period	325,000		325,000
Not designated as hedging instrument | Treasury future | Sales
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions	168,700		168,700
Dispositions/expirations	$ (168,700)		$ (168,700)

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Mortgage Servicing Rights (Activity in MSRs at fair value) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Activity in MSRs carried at fair value
Balance at beginning of year			$ 660,247
Change in fair value:
Balance at end of year	$ 492,028		492,028
Mortgage servicing rights
Activity in MSRs carried at fair value
Balance at beginning of year	526,294	$ 581,269	660,247	$ 325,383
Additions - Purchases	12	109,131	23	379,264
Additions - Mortgage servicing rights resulting from mortgage loan sales	3,913	6,989	13,201	13,107
Additions	3,925	116,120	13,224	392,371
Change in fair value:
Changes in valuation inputs used in valuation model	(17,573)	(5,651)	(118,304)	2,942
Other changes in fair value	(20,618)	(22,071)	(63,139)	(51,029)
Total change in fair value	(38,191)	(27,722)	(181,443)	(48,087)
Balance at end of year	492,028	$ 669,667	492,028	$ 669,667
Fair value of mortgage servicing rights pledged to secure: Assets sold under agreements to repurchase	391,563		391,563		$ 37,705
Fair value of mortgage servicing rights pledged to secure: Note payable	99,805		99,805		20,881
Total	$ 491,368		$ 491,368		$ 58,586

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Mortgage Servicing Rights (Activity in MSRs carried at lower of Amortize Cost or FV) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Estimated amortization
2017	$ 149,968		$ 149,968
2018	126,485		126,485
2019	108,364		108,364
2020	93,669		93,669
2021	81,397		81,397
Thereafter	495,149		495,149
Total	1,055,032		1,055,032
Mortgage servicing rights
Amortized cost:
Amortized cost at beginning of year	961,591	$ 581,558	798,925	$ 415,245
Mortgage servicing rights resulting from mortgage loan sales	146,448	154,707	370,414	347,549
Amortization	(40,230)	(19,522)	(101,530)	(46,051)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary impairment	(12,777)		(12,777)
Amortized cost at end of year	1,055,032	716,743	1,055,032	716,743
Valuation allowance:
Balance at beginning of year	(196,957)	(27,317)	(47,237)	(9,800)
(Additions) reversals	(25,206)	(51,701)	(174,926)	(69,218)
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary impairment	12,777		12,777
Balance at end of year	(209,386)	(79,018)	(209,386)	(79,018)
Additional disclosures
Mortgage servicing rights, net	845,646	637,725	845,646	637,725
Fair value of mortgage servicing rights at beginning of year	845,646	647,942	845,646	647,942	$ 764,634	$ 766,345	$ 569,969	$ 416,802
Fair value of mortgage servicing rights at end of year	845,646	$ 647,942	845,646	$ 647,942	$ 764,634	766,345	$ 569,969	$ 416,802
Fair value of mortgage servicing rights pledged to secure: Assets sold under agreements to repurchase	818,321		818,321			744,974
Fair value of mortgage servicing rights pledged to secure: Note payable	23,389		23,389
Total	$ 841,710		$ 841,710			$ 744,974

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Mortgage Servicing Rights (Estimate of future amortization) (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Estimated amortization
2017	$ 149,968
2018	126,485
2019	108,364
2020	93,669
2021	81,397
Thereafter	495,149
Total	$ 1,055,032

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Mortgage Servicing Rights (Servicing, late, ancillary and other fees relating to MSRs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Contractually Specified Servicing Fees, Late Fees, and Ancillary Fees Earned in Exchange for Servicing Financial Assets [Line Items]
Contractually Specified Servicing Fees, Amount	$ 98,865	$ 83,424	$ 282,962	$ 200,392
Late Fees and Ancillary Fees Earned in Exchange for Servicing Financial Assets [Abstract]
Ancillary Fee Income Generated by Servicing Financial Assets, Amount	11,913	10,096	34,183	33,131
Bank Servicing Fees	45,864	57,258	89,938	152,583
Mortgage servicing rights
Contractually Specified Servicing Fees, Late Fees, and Ancillary Fees Earned in Exchange for Servicing Financial Assets [Line Items]
Contractually Specified Servicing Fees, Amount	98,865	83,424	282,962	200,392
Late Fees and Ancillary Fees Earned in Exchange for Servicing Financial Assets [Abstract]
Late Fee Income Generated by Servicing Financial Assets, Amount	4,798	1,420	14,164	4,538
Ancillary Fee Income Generated by Servicing Financial Assets, Amount	1,316	478	3,393	1,880
Bank Servicing Fees	$ 104,979	$ 85,322	$ 300,519	$ 206,810

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Mortgage Servicing Rights (Mortgage servicing liabilities carried at FV) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Amortized cost:
Assumption of mortgage servicing liability			$ 5,736
Mortgage servicing liabilities resulting from mortgage loan sales			11,810	$ 20,442
Mortgage servicing liabilities
Amortized cost:
Balance at beginning of year	$ 4,681	$ 11,791	1,399	6,306
Assumption of mortgage servicing liability	5,736		5,736
Mortgage servicing liabilities resulting from mortgage loan sales	6,401	8,358	11,810	20,442
Change in fair value	(3,773)	(9,425)	(5,900)	(16,024)
Balance at end of year	$ 13,045	$ 10,724	$ 13,045	$ 10,724

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Carried Interest Due from Investment Funds (Details) - Investment Funds $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) item	Sep. 30, 2015 USD ($)
Activity in the carried interest
Balance at beginning of year	$ 70,763	$ 68,713	$ 69,926	$ 67,298
Carried Interest recognized during the year	107	1,483	944	2,898
Balance at end of year	$ 70,870	$ 70,196	$ 70,870	$ 70,196
Additional disclosures
Number of times when agreement will be extended | item			3
Agreement extensions term			1 year

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Borrowings - Assets Sold Under Agreement to Repurchase (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
During the period:
Total interest expense	$ 12,951	$ 5,661	$ 33,863	$ 14,159
Carrying value:
Unpaid principal balance	2,491,762		2,491,762
Unamortized issuance costs	(396)		(396)		$ (674)
Total loans sold under agreements to repurchase	2,491,366		2,491,366		1,166,731
Amortization of commitment fees excluded from calculation of Weighted average interest rate			7,944	5,688
Assets sold under agreements to repurchase
During the period:
Average balance of mortgage loans sold under agreements to repurchase	$ 1,515,632	$ 975,724	$ 1,303,313	$ 805,517
Weighted-average interest rate (as a percent)	2.87%	1.84%	2.87%	1.82%
Total interest expense	$ 12,951	$ 5,661	$ 33,863	$ 14,159
Maximum daily amount outstanding	2,550,035	1,496,306	2,550,035	1,496,306
Carrying value:
Unpaid principal balance	2,491,762		2,491,762		1,167,405
Unamortized issuance costs	(396)		(396)		(674)
Total loans sold under agreements to repurchase	2,491,366		2,491,366		1,166,731
Unused amount	350,238		350,238		40,178
Fair value of assets pledged to secure	$ 3,488,836		$ 3,488,836		$ 1,616,427
Weighted average interest rate (as a percent)	2.63%		2.63%		2.50%
Margin deposits placed with counterparties	$ 3,000		$ 3,000		$ 2,500
Amortization of commitment fees excluded from calculation of Weighted average interest rate	1,800	$ 1,100	5,400	$ 3,100
Assets sold under agreements to repurchase | Mortgage Loans
Carrying value:
Fair value of assets pledged to secure	2,278,952		2,278,952		833,748
Assets sold under agreements to repurchase | Mortgage servicing rights
Carrying value:
Fair value of assets pledged to secure	$ 1,209,884		$ 1,209,884		$ 782,679

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Borrowings - Maturities of Outstanding Advances Under Repurchase Agreements (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 2,491,762
Unamortized issuance costs	(396)	$ (674)
Total loans sold under agreements to repurchase	$ 2,491,366	$ 1,166,731
Weighted-average maturity (in months)	1 month 21 days
Within 30 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 161,828
Over 30 to 90 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	2,325,774
Over 90 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 4,160

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Borrowings - Mortgage Loans Sold Under Agreement to Repurchase by Counterparty (Details) - Assets sold under agreements to repurchase $ in Thousands	Sep. 30, 2016 USD ($)
Credit Suisse First Boston Mortgage Capital LLC Tranche One
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 820,256
Credit Suisse First Boston Mortgage Capital LLC Tranche Two
Mortgage loans sold under agreement to repurchase
Amount at risk	70,451
Bank of America, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	47,433
JP Morgan
Mortgage loans sold under agreement to repurchase
Amount at risk	11,800
Morgan Stanley Bank
Mortgage loans sold under agreement to repurchase
Amount at risk	20,279
Citibank, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	27,027
Barclays
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 76,502

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Borrowings - Mortgage Loan Particpation and Sale Agreement (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
During the period:
Total interest expense	$ 1,887,000	$ 814,000	$ 3,585,000	$ 2,053,000
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	782,913,000		782,913,000		$ 234,872,000
Amortization of debt issuance costs and commitment fees relating to financing facilities			7,944,000	5,688,000
Mortgage Loan Participation and Sale Agreement member
During the period:
Average balance	$ 365,112,000	$ 200,510,000	$ 241,131,000	$ 163,365,000
Weighted-average interest rate (as a percent)	1.75%	1.44%	1.72%	1.43%
Total interest expense	$ 1,887,000	$ 814,000	$ 3,585,000	$ 2,053,000
Carrying value:
Unpaid principal balance of mortgage loan participation and sale agreement secured by mortgage loan participation certificates	782,942,000		782,942,000		234,898,000
Unamortized issuance costs	(29,000)		(29,000)		(26,000)
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 782,913,000		$ 782,913,000		$ 234,872,000
Weighted-average interest rate (as a percent)	1.77%		1.77%		1.45%
Fair value of mortgage servicing rights pledged to secure: Note payable	$ 815,665,000		$ 815,665,000		$ 245,741,000
Amortization of debt issuance costs and commitment fees relating to financing facilities	250,000	74,000	435,000	276,000
Maximum | Mortgage Loan Participation and Sale Agreement member
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 793,395,000	$ 250,325,000	$ 793,395,000	$ 250,325,000

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Borrowings - Note Payable (Details) - USD ($)		3 Months Ended		9 Months Ended
	Dec. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Carrying value:
Note Payable		$ 110,619,000		$ 110,619,000		$ 61,136,000
During the period:
Total interest expense		2,129,000	$ 3,760,000	6,018,000	$ 7,858,000
Amortization of Financing Costs				7,944,000	5,688,000
Note Payable
Carrying value:
Unpaid principal balance		111,014,000		111,014,000		62,677,000
Unamortized issuance costs		(395,000)		(395,000)		(1,541,000)
Note Payable		110,619,000		110,619,000		61,136,000
Unused amount		88,986,000		88,986,000		57,328,000
During the period:
Average balance		$ 100,390,000	$ 361,488,000	$ 102,492,000	$ 239,935,000
Weighted-average interest rate (as a percent)		4.55%	3.07%	4.50%	3.03%
Total interest expense		$ 2,129,000	$ 3,760,000	$ 6,018,000	$ 7,858,000
Maximum daily amount outstanding		115,006,000	$ 407,000,000	128,849,000	$ 407,000,000
Amortization of Financing Costs		760,000		2,100,000
Note Payable | Revolving credit agreement
During the period:
Maximum loan amount	$ 100,000,000
Term of loan	364 days
Note Payable | Mortgage servicing rights
Carrying value:
Assets pledged to secure		123,194,000		123,194,000		20,881,000
Note Payable | Cash.
Carrying value:
Assets pledged to secure		84,851,000		84,851,000		93,757,000
Note Payable | Carried interest
Carrying value:
Assets pledged to secure		$ 70,870,000		$ 70,870,000		$ 69,296,000

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Borrowings - Obligations Under Capital Lease (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Dec. 31, 2015
Obligations Under Capital Lease
Average balance	$ 21,975	$ 17,451
Weighted average interest rate	2.46%	2.45%
Total interest expense	$ 139	$ 363
Unpaid principal balance	20,700	20,700	$ 13,579
Furniture, fixtures, equipment and building improvements pledged to creditors	22,281	22,281	14,034
Capitalized software pledged to creditors	444	444	$ 783
Maximum
Obligations Under Capital Lease
Maximum daily amount outstanding	$ 23,263	$ 24,720

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Borrowings - ESS (Details) - Recurring basis - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	$ 299,232	$ 370,893	$ 413,824	$ 197,472
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
Accrual of interest expense	4,827	8,026	17,555	17,596
Repurchases			(59,045)
Change in fair value	(7,880)	(19,696)	(46,884)	(26,698)
Balance at the end of the year	293,412	429,297	293,412	429,297
Excess servicing spread financing
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the year	294,551	359,102	412,425	191,166
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
Accrual of interest expense	4,827	8,026	17,555	17,596
Repayments	(16,342)	(24,717)	(54,623)	(55,800)
Repurchases			(59,045)
Change in fair value	(4,107)	(10,271)	(40,984)	(10,674)
Balance at the end of the year	280,367	418,573	280,367	418,573
Excess Servicing Spread Financing for Cash
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
Issuances		84,165		271,452
Excess Servicing Spread Financing Pursuant to Recapture Agreement
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust:
Issuances	$ 1,438	$ 2,268	$ 5,039	$ 4,833

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Liability for Losses Under Representations and Warranties (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
During the year:
Balance at beginning of year	$ 24,277	$ 16,257	$ 20,611	$ 13,259
Provision for losses relating to representations and warranties on loans sold pursuant to mortgage loan sales	852	2,292	5,220	5,535
Provision for losses relating to representations and warranties on loans sold reduction in liability due to change in estimate	(6,648)		(6,648)
Incurred losses	(8)	(71)	(710)	(316)
Balance at end of year	18,473	18,478	18,473	18,478
Unpaid principal balance of mortgage loans subject to representations and warranties at year end	$ 80,050,420	$ 54,259,297	$ 80,050,420	$ 54,259,297

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Income Taxes - Effective Tax Rates (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Reconciliation of the entity's provision for income taxes at statutory rates to the provision for income taxes at the entity's effective tax rate
Effective tax rate (as a percent)	12.20%	11.60%	12.00%	11.50%

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Noncontrolling Interest (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Noncontrolling Interest [Line Items]
Noncontrolling interest in Private National Mortgage Acceptance Company, LLC (as a percent)	70.70%		70.70%		71.10%
Net income and the effects of changes in noncontrolling interest
Net Income (Loss) Available to Common Stockholders, Basic	$ 23,685	$ 12,680	$ 43,335	$ 34,457
Stock Issued During Period, Value, Conversion of Units	$ 1,398	$ 487	$ 4,038	$ 2,919
Class A Common Stock
Noncontrolling Interest [Line Items]
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (in shares)	73	44	166	177

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Net Gains on Mortgage Loans Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Cash gain (loss):
Mortgage Loans	$ 40,381	$ (33,957)	$ 82,612	$ (70,171)
Hedging activities	(13,526)	(51,469)	(163,659)	(51,803)
Cash gain (loss), net of effects of cash hedging, on sale of mortgage loans held for sale	26,855	(85,426)	(81,047)	(121,974)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from mortgage loan sales, net	143,960	153,338	371,805	340,214
Provision for losses relating to representations and warranties on loans sold pursuant to mortgage loan sales	(852)	(2,292)	(5,220)	(5,535)
Provision for losses relating to representations and warranties on loans sold reduction in liability due to change in estimate	6,648		6,648
Change in fair value relating to loans and hedging derivatives held at period end:
Interest rate lock commitments	15,256	15,800	61,744	11,137
Mortgage loans	5,964	16,809	37,481	16,890
Hedging derivatives	(14,020)	(12,485)	17,994	7,090
From non-affiliates	183,811	85,744	409,405	247,822
Recapture payable to PennyMac Mortgage Investment Trust	(1,690)	(3,098)	(5,557)	(5,843)
Net gains on mortgage loans held for sale at fair value	$ 182,121	$ 82,646	$ 403,848	$ 241,979

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Net Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest income:
Short-term investments	$ 1,756	$ 94	$ 2,212	$ 428
Mortgage loans held for sale at fair value	14,835	12,518	38,578	32,657
Custodial funds	4,144	1,152	10,204	2,263
Interest income, excluding related parties	20,735	13,764	50,994	35,348
Interest income	22,709	15,053	56,792	37,170
Interest expense:
Assets sold under agreements to repurchase	12,951	5,661	33,863	14,159
Mortgage loan participation and sale agreement	1,887	814	3,585	2,053
Note payable	2,129	3,760	6,018	7,858
Obligations under capital lease	139		363
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations	4,587	1,803	10,114	5,003
Interest on mortgage loan impound deposits	996	880	2,471	2,453
Interest expense, non-affiliates	22,689	12,918	56,414	31,526
Interest expense	27,516	20,944	73,969	49,122
Net interest expense:	(4,807)	(5,891)	(17,177)	(11,952)
PMT
Interest income:
From PennyMac Mortgage Investment Trust	1,974	1,289	5,798	1,822
Interest expense:
To PennyMac Mortgage Investment Trust Excess servicing spread financing at fair value	4,827	8,026	17,555	17,596
Assets sold under agreements to repurchase
Interest expense:
Assets sold under agreements to repurchase	$ 12,951	$ 5,661	$ 33,863	$ 14,159

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Stock-based Compensation - Compensation Expense by Award (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Stock-Based Compensation
Stock-based compensation expense	$ 4,233	$ 4,506	$ 12,560	$ 13,104
Stock Options
Stock-Based Compensation
Stock-based compensation expense	1,073	1,396	3,576	4,392
Performance-based RSUs
Stock-Based Compensation
Stock-based compensation expense	2,514	2,474	6,947	6,819
Time-based RSUs
Stock-Based Compensation
Stock-based compensation expense	632	581	1,980	1,718
Exchangable PNMAC Units
Stock-Based Compensation
Stock-based compensation expense	$ 14	$ 55	$ 57	$ 175

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Stock-based Compensation - Activity of Equity Awards (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Stock Options
Summary of equity awards, options
Balance at beginning of period (in units)	2,786	1,869	1,845	1,167
Granted (in units)			962	715
Exercised (in units)	(2)		(2)
Forfeited or canceled (in units)	(28)	(11)	(49)	(24)
Balance at end of period (in units)	2,756	1,858	2,756	1,858
Performance-based RSUs
Summary of equity award grants, RSUs
Balance at beginning of period (in units)	2,673	2,381	2,351	1,257
Granted (in units)			813	1,143
Forfeited or canceled (in units)	(189)	(19)	(680)	(38)
Balance at end of period (in units)	2,484	2,362	2,484	2,362
Time-based RSUs
Summary of equity award grants, RSUs
Balance at beginning of period (in units)	398	276	271	202
Granted (in units)	10		261	150
Vested (in units)	(6)		(121)	(75)
Exercised (in units)		(4)
Forfeited or canceled (in units)	(11)	(4)	(20)	(9)
Balance at end of period (in units)	391	268	391	268
Exchangable PNMAC Units
Summary of equity award grants, RSUs
Balance at beginning of period (in units)	76,109	76,015	76,029	75,936
Granted (in units)	37	9	117	88
Balance at end of period (in units)	76,146	76,024	76,146	76,024

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Supplemental Cash Flow Information
Cash paid for interest	$ 70,897	$ 47,867
Cash paid for income taxes	452	1,909
Non-cash investing activity:
Mortgage servicing rights resulting from mortgage loan sales	383,615	360,656
Mortgage servicing liabilities resulting from mortgage loan sales	11,810	20,442
Non-cash financing activity:
Transfer of excess servicing spread pursuant to recapture agreement with PennyMac Mortgage Investment Trust	5,039	4,833
Issuance of common stock in settlement of director fees	$ 230	$ 223

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Regulatory Net Worth and Agency Capital Requirements (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fannie Mae / Freddie Mac - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth	$ 1,166,706	$ 835,157
Capital Requirement	317,441	283,655
Liquidity	132,969	145,431
Liquidity requirement	43,055	38,936
Ginnie Mae - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth	957,613	633,222
Capital Requirement	390,520	386,732
Liquidity	132,969	145,431
Liquidity requirement	107,079	95,868
Ginnie Mae - PennyMac
Regulatory Net Worth and Agency Capital Requirements
Net worth	1,135,605	894,731
Capital Requirement	429,572	425,405
HUD - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth	957,613	633,222
Capital Requirement	$ 2,500	$ 2,500

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Commitments and Contingencies (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Commitment and Contingencies.
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust	$ 2,383,191
Commitments to fund mortgage loans	2,291,530
Total commitments to purchase and fund mortgage loans	$ 4,674,721

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Segments and Related Information - Effect of Change in Allocations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Segments and Related Information
Operating Expenses	$ 152,117	$ 115,282	$ 388,927	$ 323,910

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Segments and Related Information - Financial Hilights by Segment (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) item	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segments and Related Information
Number of segments | item			3
Revenues:
Net gains (losses) on mortgage loans held for sale at fair value	$ 182,121	$ 82,646	$ 403,848	$ 241,979
Mortgage loan origination fees	34,621	29,448	85,962	70,551
Net servicing fees	45,864	57,258	89,938	152,583
Management fees	5,521	6,456	17,163	21,908
Net interest (expense) income:
Interest income	22,709	15,053	56,792	37,170
Interest expense	27,516	20,944	73,969	49,122
Net interest expense:	(4,807)	(5,891)	(17,177)	(11,952)
Interest expense, before non-segment activities	27,516	21,004	74,019	49,182
Net interest expense, before non-segment activities	(4,807)	(5,951)	(17,227)	(12,012)
Other	713	252	2,624	2,151
Total net revenues, before non-segment activities	291,395	189,145	642,553	525,810
Expenses	152,117	115,282	388,927	323,910
Income (loss) before provision for income taxes and non-segement activites	139,278	73,863	253,626	201,900
Non-segment activities		60	49	60
Income before provision for income taxes	139,278	73,923	253,675	201,960
Assets:
Segment assets at period end	5,596,194		5,596,194		$ 3,505,294
Deferred tax asset					$ 18,378
PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	27,255	17,553	59,301	45,752
Management fees	5,025	5,742	15,576	18,524
Investment Funds
Revenues:
Management fees	496	714	1,587	3,384
Carried Interest from Investment Funds	107	1,483	$ 944	2,898
Mortgage banking
Segments and Related Information
Number of segments | item			2
Operating segment
Assets:
Segment assets at period end	5,589,338	3,789,754	$ 5,589,338	3,789,754
Deferred tax asset		25,900		25,900
Working capital	6,900		6,900
Operating segment | Investment management
Revenues:
Management fees	5,521	6,456	17,163	21,908
Net interest (expense) income:
Interest income			1
Interest expense, before non-segment activities	11		37
Net interest expense, before non-segment activities	(11)		(36)
Other		(141)	204	(109)
Total net revenues, before non-segment activities	5,617	7,798	18,275	24,697
Expenses	5,413	5,618	16,205	17,631
Income (loss) before provision for income taxes and non-segement activites	204	2,180	2,070	7,066
Income before provision for income taxes	204	2,180	2,070	7,066
Assets:
Segment assets at period end	90,746	87,365	90,746	87,365
Operating segment | Investment management | Investment Funds
Revenues:
Carried Interest from Investment Funds	107	1,483	944	2,898
Operating segment | Mortgage banking
Revenues:
Net gains (losses) on mortgage loans held for sale at fair value	182,121	82,646	403,848	241,979
Mortgage loan origination fees	34,621	29,448	85,962	70,551
Net servicing fees	45,864	57,258	89,938	152,583
Net interest (expense) income:
Interest income	22,709	15,053	56,791	37,170
Interest expense, before non-segment activities	27,505	21,004	73,982	49,182
Net interest expense, before non-segment activities	(4,796)	(5,951)	(17,191)	(12,012)
Other	713	393	2,420	2,260
Total net revenues, before non-segment activities	285,778	181,347	624,278	501,113
Expenses	146,704	109,664	372,722	306,279
Income (loss) before provision for income taxes and non-segement activites	139,074	71,683	251,556	194,834
Income before provision for income taxes	139,074	71,683	251,556	194,834
Assets:
Segment assets at period end	5,498,592	3,702,389	5,498,592	3,702,389
Operating segment | Mortgage banking | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	27,255	17,553	59,301	45,752
Operating segment | Mortgage banking Production
Revenues:
Net gains (losses) on mortgage loans held for sale at fair value	166,506	81,005	360,614	244,361
Mortgage loan origination fees	34,621	29,448	85,962	70,551
Net interest (expense) income:
Interest income	13,013	13,228	32,918	30,041
Interest expense, before non-segment activities	9,323	6,290	21,031	15,131
Net interest expense, before non-segment activities	3,690	6,938	11,887	14,910
Other	508	272	1,596	1,420
Total net revenues, before non-segment activities	232,580	135,216	519,360	376,994
Expenses	82,767	57,477	196,634	155,542
Income (loss) before provision for income taxes and non-segement activites	149,813	77,739	322,726	221,452
Income before provision for income taxes	149,813	77,739	322,726	221,452
Assets:
Segment assets at period end	3,221,446	1,723,137	3,221,446	1,723,137
Operating segment | Mortgage banking Production | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	27,255	17,553	59,301	45,752
Operating segment | Mortgage banking Servicing
Revenues:
Net gains (losses) on mortgage loans held for sale at fair value	15,615	1,641	43,234	(2,382)
Net servicing fees	45,864	57,258	89,938	152,583
Net interest (expense) income:
Interest income	9,696	1,825	23,873	7,129
Interest expense, before non-segment activities	18,182	14,714	52,951	34,051
Net interest expense, before non-segment activities	(8,486)	(12,889)	(29,078)	(26,922)
Other	205	121	824	840
Total net revenues, before non-segment activities	53,198	46,131	104,918	124,119
Expenses	63,937	52,187	176,088	150,737
Income (loss) before provision for income taxes and non-segement activites	(10,739)	(6,056)	(71,170)	(26,618)
Income before provision for income taxes	(10,739)	(6,056)	(71,170)	(26,618)
Assets:
Segment assets at period end	$ 2,277,146	$ 1,979,252	$ 2,277,146	$ 1,979,252

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Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Recently Issued Accounting Pronouncements.
Amount reclassified from Other assets	$ 60,061	$ 45,594

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Subsequent Events (Details) - USD ($) $ in Millions	Nov. 03, 2016	Dec. 12, 2016	Nov. 01, 2016	Oct. 17, 2016	Oct. 14, 2016	Oct. 11, 2016	Oct. 04, 2016	Sep. 30, 2016
Morgan Stanley Bank
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price								$ 200.0
Aggregate purchase price, amount committed								125.0
Bank of America, N.A. | Forecast [Member]
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate transaction amount		$ 250.0
Citibank, N.A.
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price								200.0
Aggregate purchase price, uncommitted amount								50.0
Credit Suisse First Boston Mortgage Capital LLC
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price								907.0
Credit Suisse First Boston Mortgage Capital LLC | CSFB Repurchase Agreement
Securities Sold under Agreements to Repurchase [Abstract]
Aggregate purchase price, amount committed								700.0
Credit Suisse First Boston Mortgage Capital LLC | MSR Repo
Securities Sold under Agreements to Repurchase [Abstract]
Aggregate purchase price, amount committed								$ 407.0
Subsequent Event [Member] | Morgan Stanley Bank
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price							$ 300.0
Aggregate purchase price, amount committed							$ 175.0
Subsequent Event [Member] | Bank of America, N.A.
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate transaction amount						$ 800.0
Subsequent Event [Member] | Citibank, N.A.
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price					$ 400.0
Aggregate purchase price, uncommitted amount					$ 250.0
Subsequent Event [Member] | Credit Suisse First Boston Mortgage Capital LLC
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate purchase price				$ 1,207.0
Subsequent Event [Member] | JP Morgan
Securities Sold under Agreements to Repurchase [Abstract]
Maximum aggregate transaction amount			$ 500.0
Subsequent Event [Member] | BALC
Securities Sold under Agreements to Repurchase [Abstract]
Leased equipment	$ 4.3
Lease term	3 years