Note 18—Net Interest Income (Expense)

Net interest income (expense) is summarized below:


	Quarter ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
	(in thousands)
Interest income:
From non-affiliates:
Short-term investments	$	814	$	733	$	2,001	$	1,727
Mortgage loans held for sale at fair value		34,941		28,199		95,982		68,528
Placement fees relating to custodial funds		23,397		13,394		55,014		27,073
		59,152		42,326		152,997		97,328
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		1,812		2,116		5,686		5,946
		60,964		44,442		158,683		103,274

Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase (1)		4,676		19,203		15,943		52,249
Mortgage loan participation purchase and sale agreements		2,533		1,484		6,450		3,780
Notes payable		21,369		11,747		55,939		24,746
Obligations under capital lease		122		205		444		585
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		4,883		4,602		14,259		11,529
Interest on mortgage loan impound deposits		1,452		1,253		3,517		2,943
		35,035		38,494		96,552		95,832
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		3,740		3,998		11,584		13,011
		38,775		42,492		108,136		108,843
	$	22,189	$	1,950	$	50,547	$	(5,569)

(1)

In 2017, the Company entered into a master repurchase agreement that provides the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $12.8 million and $35.5 million of such incentives as a reduction in Interest expense during the quarter and nine months ended September 30, 2018, respectively. The master repurchase agreement is subject to a rolling six-month term through August 21, 2019, unless terminated earlier at the option of the lender. There can be no assurance that the lender will not terminate this agreement before its stated maturity.