Fair Value (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value

Summary of financial statement items measured at estimated fair value on a recurring basis

	September 30, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	90,663	$	—	$	—	$	90,663
Loans held for sale at fair value		—		4,437,954		85,017		4,522,971
Derivative assets:
Interest rate lock commitments		—		—		147,400		147,400
Repurchase agreement derivatives		—		—		8,187		8,187
Forward purchase contracts		—		17,943		—		17,943
Forward sales contracts		—		6,141		—		6,141
MBS put options		—		10,040		—		10,040
Put options on interest rate futures purchase contracts		6,266		—		—		6,266
Call options on interest rate futures purchase contracts		2,414		—		—		2,414
Total derivative assets before netting		8,680		34,124		155,587		198,391
Netting		—		—		—		34,557
Total derivative assets		8,680		34,124		155,587		232,948
Mortgage servicing rights at fair value		—		—		2,556,253		2,556,253
Investment in PennyMac Mortgage Investment Trust		1,667		—		—		1,667
	$	101,010	$	4,472,078	$	2,796,857	$	7,404,502
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	183,141	$	183,141
Derivative liabilities:
Interest rate lock commitments		—		—		2,276		2,276
Forward purchase contracts		—		51,585		—		51,585
Forward sales contracts		—		34,498		—		34,498
Total derivative liabilities before netting		—		86,083		2,276		88,359
Netting		—		—		—		(74,324)
Total derivative liabilities		—		86,083		2,276		14,035
Mortgage servicing liabilities at fair value		—		—		34,294		34,294
	$	—	$	86,083	$	219,711	$	231,470

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	117,824	$	—	$	—	$	117,824
Loans held for sale at fair value		—		2,261,639		260,008		2,521,647
Derivative assets:
Interest rate lock commitments		—		—		50,507		50,507
Repurchase agreement derivatives		—		—		26,770		26,770
Forward purchase contracts		—		35,916		—		35,916
Forward sales contracts		—		437		—		437
MBS put options		—		720		—		720
MBS call options		—		2,135		—		2,135
Put options on interest rate futures purchase contracts		866		—		—		866
Call options on interest rate futures purchase contracts		5,965		—		—		5,965
Total derivative assets before netting		6,831		39,208		77,277		123,316
Netting		—		—		—		(26,969)
Total derivative assets		6,831		39,208		77,277		96,347
Mortgage servicing rights at fair value		—		—		2,820,612		2,820,612
Investment in PennyMac Mortgage Investment Trust		1,397		—		—		1,397
	$	126,052	$	2,300,847	$	3,157,897	$	5,557,827
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	216,110	$	216,110
Derivative liabilities:
Interest rate lock commitments		—		—		1,169		1,169
Forward purchase contracts		—		215		—		215
Forward sales contracts		—		26,762		—		26,762
Total derivative liabilities before netting		—		26,977		1,169		28,146
Netting		—		—		—		(25,082)
Total derivative liabilities		—		26,977		1,169		3,064
Mortgage servicing liabilities at fair value		—		—		8,681		8,681
	$	—	$	26,977	$	225,960	$	227,855

Summary of roll forward of items measured using Level 3 inputs on a recurring basis

	Quarter ended September 30, 2019
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, June 30, 2019	$	217,998	$	111,776	$	16,015	$	2,720,335	$	3,066,124
Purchases and issuances, net		1,861,769		199,274		1,502		46		2,062,591
Sales and repayments		(1,582,564)		—		(9,422)		—		(1,591,986)
Mortgage servicing rights resulting from loan sales		—		—		—		246,757		246,757
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		4,252		—		—		—		4,252
Other factors		—		92,138		92		(410,885)		(318,655)
		4,252		92,138		92		(410,885)		(314,403)
Transfers from Level 3 to Level 2		(416,062)		—		—		—		(416,062)
Transfers to real estate acquired in settlement of loans		(376)		—		—		—		(376)
Transfers of interest rate lock commitments to loans held for sale		—		(258,064)		—		—		(258,064)
Balance, September 30, 2019	$	85,017	$	145,124	$	8,187	$	2,556,253	$	2,794,581
Changes in fair value recognized during the quarter relating to assets still held at September 30, 2019	$	(2,328)	$	145,124	$	41	$	(410,885)	$	(268,048)

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

	Quarter ended September 30, 2019
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, June 30, 2019	$	194,156	$	12,948	$	207,104
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		377		—		377
Accrual of interest		2,291		—		2,291
Repayments		(9,819)		—		(9,819)
Mortgage servicing liabilities resulting from loan sales		—		19,501		19,501
Changes in fair value included in income		(3,864)		1,845		(2,019)
Balance, September 30, 2019	$	183,141	$	34,294	$	217,435
Changes in fair value recognized during the quarter relating to liabilities still outstanding at September 30, 2019	$	(3,864)	$	1,845	$	(2,019)

	Quarter ended September 30, 2018
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, June 30, 2018	$	334,166	$	55,689	$	25,781	$	2,486,157	$	2,901,793
Purchases and issuances, net		1,008,662		41,721		12,903		163,511		1,226,797
Sales and repayments		(231,921)		—		(11,982)		—		(243,903)
Mortgage servicing rights resulting from loan sales		—		—		—		149,000		149,000
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		84		—		—		—		84
Other factors		—		10,696		(227)		(12,704)		(2,235)
		84		10,696		(227)		(12,704)		(2,151)
Transfers from Level 3 to Level 2		(744,324)		—		—		—		(744,324)
Transfers to real estate acquired in settlement of loans		(1,364)		—		—		—		(1,364)
Transfers of interest rate lock commitments to loans held for sale		—		(70,943)		—		—		(70,943)
Balance, September 30, 2018	$	365,303	$	37,163	$	26,475	$	2,785,964	$	3,214,905
Changes in fair value recognized during the quarter relating to assets still held at September 30, 2018	$	(4,811)	$	37,163	$	—	$	(12,704)	$	19,648

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

	Quarter ended September 30, 2018
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, June 30, 2018	$	229,470	$	10,253	$	239,723
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		499		—		499
Accrual of interest		3,740		—		3,740
Repayments		(11,543)		—		(11,543)
Mortgage servicing liabilities resulting from loan sales		—		1,741		1,741
Changes in fair value included in income		1,109		(2,225)		(1,116)
Balance, September 30, 2018	$	223,275	$	9,769	$	233,044
Changes in fair value recognized during the quarter relating to liabilities still outstanding at September 30, 2018	$	1,109	$	(2,225)	$	(1,116)

	Nine months ended September 30, 2019
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, December 31, 2018	$	260,008	$	49,338	$	26,770	$	2,820,612	$	3,156,728
Purchases and issuances, net		3,537,177		376,137		15,019		227,445		4,155,778
Sales and repayments		(2,414,899)		—		(31,994)		—		(2,446,893)
Mortgage servicing rights resulting from loan sales		—		—		—		545,839		545,839
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(2,025)		—		—		—		(2,025)
Other factors		—		248,889		(1,608)		(1,037,643)		(790,362)
		(2,025)		248,889		(1,608)		(1,037,643)		(792,387)
Transfers from Level 3 to Level 2		(1,292,824)		—		—		—		(1,292,824)
Transfers to real estate acquired in settlement of loans		(2,420)		—		—		—		(2,420)
Transfers of interest rate lock commitments to loans held for sale		—		(529,240)		—		—		(529,240)
Balance, September 30, 2019	$	85,017	$	145,124	$	8,187	$	2,556,253	$	2,794,581
Changes in fair value recognized during the period relating to assets still held at September 30, 2019	$	(2,478)	$	145,124	$	165	$	(1,037,643)	$	(894,832)

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

	Nine months ended September 30, 2019
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2018	$	216,110	$	8,681	$	224,791
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,327		—		1,327
Accrual of interest		8,124		—		8,124
Repayments		(30,901)		—		(30,901)
Mortgage servicing liabilities resulting from loan sales		—		27,133		27,133
Changes in fair value included in income		(11,519)		(1,520)		(13,039)
Balance, September 30, 2019	$	183,141	$	34,294	$	217,435
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2019	$	(11,519)	$	(1,520)	$	(13,039)

	Nine months ended September 30, 2018
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, December 31, 2017	$	782,211	$	58,272	$	10,656	$	638,010	$	1,489,149
Reclassification of mortgage servicing rights previously accounted for under the amortization method pursuant to adoption of the fair value method of accounting		—		—		—		1,482,426		1,482,426
Balance, January 1, 2018		782,211		58,272		10,656		2,120,436		2,971,575
Purchases and issuances, net		2,480,523		157,649		36,624		193,640		2,868,436
Sales and repayments		(1,122,448)		—		(19,460)		—		(1,141,908)
Mortgage servicing rights resulting from loan sales		—		—		—		448,604		448,604
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(4,944)		—		—		—		(4,944)
Other factors		—		(28,627)		(1,345)		23,284		(6,688)
		(4,944)		(28,627)		(1,345)		23,284		(11,632)
Transfers from Level 3 to Level 2		(1,765,854)		—		—		—		(1,765,854)
Transfers to real estate acquired in settlement of loans		(4,185)		—		—		—		(4,185)
Transfers of interest rate lock commitments to loans held for sale		—		(150,131)		—		—		(150,131)
Balance, September 30, 2018	$	365,303	$	37,163	$	26,475	$	2,785,964	$	3,214,905
Changes in fair value recognized during the period relating to assets still held at September 30, 2018	$	(4,912)	$	37,163	$	—	$	23,284	$	55,535

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

	Nine months ended September 30, 2018
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2017	$	236,534	$	14,120	$	250,654
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		1,983		—		1,983
Accrual of interest		11,584		—		11,584
Repayments		(35,852)		—		(35,852)
Mortgage servicing liabilities resulting from loan sales		—		5,548		5,548
Changes in fair value included in income		9,026		(9,899)		(873)
Balance, September 30, 2018	$	223,275	$	9,769	$	233,044
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2018	$	9,026	$	(9,899)	$	(873)

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,
	2019						2018
	Net		Net gains on				Net		Net gains on
	loan		loans held				loan		loans held
	servicing		for sale at				servicing		for sale at
	fees		fair value		Total		fees		fair value		Total
	(in thousands)
Assets:
Loans held for sale	$	—	$	263,339	$	263,339	$	—	$	67,709	$	67,709
Mortgage servicing rights		(410,885)		—		(410,885)		(12,704)		—		(12,704)
	$	(410,885)	$	263,339	$	(147,546)	$	(12,704)	$	67,709	$	55,005
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	3,864	$	—	$	3,864	$	(1,109)	$	—	$	(1,109)
Mortgage servicing liabilities		(1,845)		—		(1,845)		2,225		—		2,225
	$	2,019	$	—	$	2,019	$	1,116	$	—	$	1,116

	Nine months ended September 30,
	2019						2018
	Net		Net gains on				Net		Net gains on
	loan		loans held				loan		loans held
	servicing		for sale at				servicing		for sale at
	fees		fair value		Total		fees		fair value		Total
	(in thousands)
Assets:
Loans held for sale	$	—	$	538,086	$	538,086	$	—	$	118,452	$	118,452
Mortgage servicing rights		(1,037,643)		—		(1,037,643)		23,284		—		23,284
	$	(1,037,643)	$	538,086	$	(499,557)	$	23,284	$	118,452	$	141,736
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	11,519	$	—	$	11,519	$	(9,026)	$	—	$	(9,026)
Mortgage servicing liabilities		1,520		—		1,520		9,899		—		9,899
	$	13,039	$	—	$	13,039	$	873	$	—	$	873

Schedule of fair value and related principal amounts due upon maturity of assets and liabilities accounted for under the fair value option

	September 30, 2019						December 31, 2018
			Principal						Principal
			amount						amount
	Fair		due upon				Fair		due upon
Loans held for sale	value		maturity		Difference		value		maturity		Difference
	(in thousands)
Current through 89 days delinquent	$	4,478,965	$	4,275,981	$	202,984	$	2,324,203	$	2,220,371	$	103,832
90 days or more delinquent:
Not in foreclosure		20,972		22,145		(1,173)		143,631		144,011		(380)
In foreclosure		23,034		25,126		(2,092)		53,813		56,254		(2,441)
	$	4,522,971	$	4,323,252	$	199,719	$	2,521,647	$	2,420,636	$	101,011

Summary of financial statement items measured at estimated fair value on a nonrecurring basis

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
September 30, 2019	$	—	$	—	$	8,575	$	8,575
December 31, 2018	$	—	$	—	$	2,150	$	2,150

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,
	2019		2018		2019		2018
	(in thousands)
Real estate acquired in settlement of loans	$	139	$	(41)	$	162	$	(72)

Summary of carrying value and fair value of debt

Term Notes	September 30, 2019		December 31, 2018
	(in thousands)
Fair value	$	1,306,828	$	1,285,894
Carrying value	$	1,293,625	$	1,292,291

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items, excluding MSR purchases

	Quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	246,757	$	149,000	$	545,839	$	448,604
Unpaid principal balance of underlying loans	$	15,709,249	$	10,790,398	$	35,532,425	$	32,095,458
Weighted average servicing fee rate (in basis points)		43		37		42		36
Key inputs (1):
Pricing spread (2)
Range		5.5% – 16.2%		7.3% – 13.6%		5.5% – 16.2%		7.3% – 14.1%
Weighted average		8.3%		10.1%		8.6%		10.2%
Annual total prepayment speed (3)
Range		8.8% – 32.1%		4.4% – 55.7%		7.7% – 32.8%		3.9% – 61.8%
Weighted average		15.7%		11.8%		15.0%		10.6%
Life (in years)
Range		2.7 – 7.5		0.5 – 11.3		2.6 – 7.8		0.5 – 11.6
Weighted average		5.5		6.9		5.8		7.5
Per-loan annual cost of servicing
Range		$78 – $100		$78 – $98		$78 – $100		$78 – $98
Weighted average		$97		$92		$97		$90

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

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

(3) 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

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

	September 30, 2019	December 31, 2018
	(Carrying value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
MSR and pool characteristics:
Carrying value	$    2,556,253	$    2,820,612
Unpaid principal balance of underlying loans	$    221,215,993	$    201,054,144
Weighted average note interest rate	4.0%	4.0%
Weighted average servicing fee rate (in basis points)	34	33
Key inputs (1):
Pricing spread (2):
Range	5.9% – 15.8%	5.8% – 16.1%
Weighted average	8.5%	8.7%
Effect on fair value of:
5% adverse change	($35,830)	($45,268)
10% adverse change	($70,578)	($89,073)
20% adverse change	($137,016)	($172,556)
Prepayment speed (3):
Range	9.8% – 33.0%	8.4% – 32.6%
Weighted average	15.6%	9.9%
Average life (in years):
Range	1.4 – 7.2	1.5 – 7.9
Weighted average	5.2	7.2
Effect on fair value of:
5% adverse change	($64,047)	($47,687)
10% adverse change	($124,892)	($93,626)
20% adverse change	($237,822)	($180,623)
Annual per-loan cost of servicing:
Range	$77 – $100	$78 – $99
Weighted average	$96	$93
Effect on fair value of:
5% adverse change	($21,731)	($22,944)
10% adverse change	($43,462)	($45,888)
20% adverse change	($86,925)	($91,775)

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

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

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

Mortgage servicing liabilities

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

		September 30,		December 31,
		2019		2018
MSL and pool characteristics:
Carrying value (in thousands)	$	34,294	$	8,681
Unpaid principal balance of underlying loans (in thousands)	$	2,327,687	$	1,160,938
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		8.0%		7.3%
Prepayment speed (2)		31.6%		32.2%
Average life (in years)		3.3		3.8
Annual per-loan cost of servicing	$	338	$	373

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

Prepayment speed is measured using Life Total CPR

Excess servicing spread financing

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

	September 30,	December 31,
	2019	2018
Carrying value (in thousands)	$    183,141	$    216,110
ESS and pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$    20,794,571	$    23,196,033
Average servicing fee rate (in basis points)	34	34
Average excess servicing spread (in basis points)	19	19
Key inputs (1):
Pricing spread (2):
Range	3.0% – 3.3%	2.8% – 3.2%
Weighted average	3.2%	3.1%
Annualized prepayment speed (3):
Range	8.9% – 15.0%	8.2% – 29.5%
Weighted average	11.7%	9.7%
Average life (in years):
Range	2.8 – 7.1	1.6 – 7.6
Weighted average	5.9	6.8

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

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

(3) 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

	September 30, 2019		December 31, 2018
Carrying value (in thousands) (1)	$	145,124	$	49,338
Key inputs (2):
Pull-through rate:
Range		12.2% – 100%		16.6% – 100%
Weighted average		85.6%		84.1%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		1.4 – 5.7		1.5 – 5.5
Weighted average		4.0		3.8
Percentage of unpaid principal balance:
Range		0.3% – 2.9%		0.4% – 3.2%
Weighted average		1.6%		1.5%

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

(2) Weighted average inputs are based on the committed amounts.

Loans held for sale

Fair Value

Quantitative summary of key inputs or assumptions used in the valuation of financial statement items

	September 30, 2019		December 31, 2018
Carrying value (in thousands)	$	85,017	$	260,008
Key inputs (1):
Discount rate:
Range		3.2% – 9.2%		2.8% – 9.2%
Weighted average		3.4%		2.9%
Twelve-month projected housing price index change:
Range		2.6% – 3.2%		2.2% – 5.0%
Weighted average		2.9%		3.5%
Voluntary prepayment/resale speed (2):
Range		0.3% – 19.2%		0.1% – 21.8%
Weighted average		15.8%		20.1%
Total prepayment speed (3):
Range		0.6% – 34.8%		0.1% – 40.5%
Weighted average		29.6%		37.7%

(1) Weighted average inputs are based on the fair value of loans.

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

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