Fair Value (Tables)

12 Months Ended

Dec. 31, 2019

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


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	74,611	$	—	$	—	$	74,611
Loans held for sale at fair value		—		4,529,075		383,878		4,912,953
Derivative assets:
Interest rate lock commitments		—		—		138,511		138,511
Repurchase agreement derivatives		—		—		8,187		8,187
Forward purchase contracts		—		12,364		—		12,364
Forward sales contracts		—		17,097		—		17,097
MBS put options		—		3,415		—		3,415
Swaptions		—		2,409				2,409
Put options on interest rate futures purchase contracts		3,945		—		—		3,945
Call options on interest rate futures purchase contracts		1,469		—		—		1,469
Total derivative assets before netting		5,414		35,285		146,698		187,397
Netting		—		—		—		(27,711)
Total derivative assets		5,414		35,285		146,698		159,686
Mortgage servicing rights at fair value		—		—		2,926,790		2,926,790
Investment in PennyMac Mortgage Investment Trust		1,672		—		—		1,672
	$	81,697	$	4,564,360	$	3,457,366	$	8,075,712
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	178,586	$	178,586
Derivative liabilities:
Interest rate lock commitments		—		—		1,861		1,861
Forward purchase contracts		—		19,040		—		19,040
Forward sales contracts		—		18,045		—		18,045
Total derivative liabilities before netting		—		37,085		1,861		38,946
Netting		—		—		—		(16,616)
Total derivative liabilities		—		37,085		1,861		22,330
Mortgage servicing liabilities at fair value		—		—		29,140		29,140
	$	—	$	37,085	$	209,587	$	230,056


	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


	Year ended December 31, 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		5,163,730		570,072		15,019		227,445		5,976,266
Capitalization of interest and advances		72,302		—		—		—		72,302
Sales and repayments		(3,456,856)		—		(31,993)		—		(3,488,849)
Mortgage servicing rights resulting from loan sales		—		—		—		884,876		884,876
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(6,332)		—		—		—		(6,332)
Other factors		—		331,067		(1,609)		(1,006,143)		(676,685)
		(6,332)		331,067		(1,609)		(1,006,143)		(683,017)
Transfers from Level 3 to Level 2		(1,646,554)		—		—		—		(1,646,554)
Transfers to real estate acquired in settlement of loans		(2,420)		—		—		—		(2,420)
Transfers of interest rate lock commitments to loans held for sale		—		(813,827)		—		—		(813,827)
Balance, December 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Changes in fair value recognized during the year relating to assets still held at December 31, 2019	$	(5,755)	$	136,650	$	165	$	(1,006,143)	$	(875,083)

(1)

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


	Year ended December 31, 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		1,757		—		1,757
Accrual of interest		10,291		—		10,291
Repayments		(40,316)		—		(40,316)
Mortgage servicing liabilities resulting from loan sales		—		37,988		37,988
Changes in fair value included in income		(9,256)		(17,529)		(26,785)
Balance, December 31, 2019	$	178,586	$	29,140	$	207,726
Changes in fair value recognized during the year relating to liabilities still outstanding at December 31, 2019	$	(9,256)	$	(17,529)	$	(26,785)


	Year ended December 31, 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		2,972,042		195,974		49,725		237,803		3,455,544
Sales and repayments		(1,360,667)		—		(31,907)		—		(1,392,574)
Mortgage servicing rights resulting from loan sales		—		—		—		591,757		591,757
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		158		—		—		—		158
Other factors		—		1,285		(1,704)		(129,384)		(129,803)
		158		1,285		(1,704)		(129,384)		(129,645)
Transfers from Level 3 to Level 2		(2,128,551)		—		—		—		(2,128,551)
Transfers to real estate acquired in settlement of loans		(5,185)		—		—		—		(5,185)
Transfers of interest rate lock commitments to loans held for sale		—		(206,193)		—		—		(206,193)
Balance, December 31, 2018	$	260,008	$	49,338	$	26,770	$	2,820,612	$	3,156,728
Changes in fair value recognized during the year relating to assets still held at December 31, 2018	$	(263)	$	49,338	$	—	$	(129,384)	$	(80,309)

(1)

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


	Year ended December 31, 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		2,688		—		2,688
Accrual of interest		15,138		—		15,138
Repayments		(46,750)		—		(46,750)
Mortgage servicing liabilities resulting from loan sales		—		7,601		7,601
Changes in fair value included in income		8,500		(13,040)		(4,540)
Balance, December 31, 2018	$	216,110	$	8,681	$	224,791
Changes in fair value recognized during the year relating to liabilities still outstanding at December 31, 2018	$	8,500	$	(13,040)	$	(4,540)


	Year ended December 31, 2017
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, December 31, 2016	$	47,271	$	59,391	$	—	$	515,925	$	622,587
Purchases and issuances, net		2,928,249		302,389		10,986		183,850		3,425,474
Sales and repayments		(1,339,580)		—		—		—		(1,339,580)
Mortgage servicing rights resulting from loan sales		—		—		—		24,471		24,471
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(1,794)		—		—		—		(1,794)
Other factors		—		115,434		(330)		(86,236)		28,868
		(1,794)		115,434		(330)		(86,236)		27,074
Transfers from Level 3 to Level 2		(851,935)		—		—		—		(851,935)
Transfers of interest rate lock commitments to loans held for sale		—		(418,942)		—		—		(418,942)
Balance, December 31, 2017	$	782,211	$	58,272	$	10,656	$	638,010	$	1,489,149
Changes in fair value recognized during the year relating to assets still held at December 31, 2017	$	(556)	$	58,272	$	(330)	$	(86,236)	$	(28,850)

(1)

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


	Year ended December 31, 2017
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2016	$	288,669	$	15,192	$	303,861
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		5,244		—		5,244
Accrual of interest		16,951		—		16,951
Repayments		(54,980)		—		(54,980)
Mortgage servicing liabilities resulting from loan sales		—		17,229		17,229
Changes in fair value included in income		(19,350)		(18,301)		(37,651)
Balance, December 31, 2017	$	236,534	$	14,120	$	250,654
Changes in fair value recognized during the year relating to liabilities still outstanding at December 31, 2017	$	(19,350)	$	(18,301)	$	(37,651)

Summary of net gains (losses) from changes in fair values included in earnings for financial statement items carried at fair value


	Year ended December 31,
	2019						2018						2017
	Net		Net gains on				Net		Net gains on				Net		Net gains on
	loan		loans held				loan		loans held				loan		loans held
	servicing		for sale at				servicing		for sale at				servicing		for sale at
	fees		fair value		Total		fees		fair value		Total		fees		fair value		Total
	(in thousands)
Assets:
Loans held for sale	$	—	$	811,895	$	811,895	$	—	$	188,611	$	188,611	$	—	$	426,092	$	426,092
Mortgage servicing rights		(1,006,143)		—		(1,006,143)		(129,384)		—		(129,384)		(86,236)		—		(86,236)
	$	(1,006,143)	$	811,895	$	(194,248)	$	(129,384)	$	188,611	$	59,227	$	(86,236)	$	426,092	$	339,856
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	9,256	$	—	$	9,256	$	(8,500)	$	—	$	(8,500)	$	19,350	$	—	$	19,350
Mortgage servicing liabilities		17,529		—		17,529		13,040		—		13,040		18,301		—		18,301
	$	26,785	$	—	$	26,785	$	4,540	$	—	$	4,540	$	37,651	$	—	$	37,651

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


	December 31, 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	$	4,628,333	$	4,431,854	$	196,479	$	2,324,203	$	2,220,371	$	103,832
90 days or more delinquent:
Not in foreclosure		236,650		241,958		(5,308)		143,631		144,011		(380)
In foreclosure		47,970		50,194		(2,224)		53,813		56,254		(2,441)
	$	4,912,953	$	4,724,006	$	188,947	$	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)
December 31, 2019	$	—	$	—	$	9,850	$	9,850
December 31, 2018	$	—	$	—	$	2,150	$	2,150

Summary of total gains (losses) on assets measured at estimated fair values on a nonrecurring basis


	Year ended December 31,
	2019		2018		2017
	(in thousands)
Real estate acquired in settlement of loans	$	(1,913)	$	(75)	$	(125)
Mortgage servicing rights at lower of amortized cost or fair value		—		—		(6,853)
	$	(1,913)	$	(75)	$	(6,978)

Summary of carrying value and fair value of debt


Term Notes	December 31, 2019		December 31, 2018
	(in thousands)
Fair value	$	1,303,047	$	1,285,894
Carrying value	$	1,294,070	$	1,292,291

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


	December 31, 2019	December 31, 2018
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,926,790	$ 2,820,612
Pool characteristics:
Unpaid principal balance of underlying loans	$ 225,787,103	$ 201,054,144
Weighted average note interest rate	3.9%	4.0%
Weighted average servicing fee rate (in basis points)	35	33
Key inputs (1):
Pricing spread (2):
Range	6.8% – 15.8%	5.8% – 16.1%
Weighted average	8.5%	8.7%
Effect on fair value of:
5% adverse change	($44,561)	($45,268)
10% adverse change	($87,734)	($89,073)
20% adverse change	($170,155)	($172,556)
Prepayment speed (3):
Range	9.3% – 40.9%	8.4% – 32.6%
Weighted average	12.7%	9.9%
Average life (in years):
Range	1.4 – 7.4	1.5 – 7.9
Weighted average	6.1	7.2
Effect on fair value of:
5% adverse change	($63,569)	($47,687)
10% adverse change	($124,411)	($93,626)
20% adverse change	($238,549)	($180,623)
Annual per-loan cost of servicing:
Range	$77 – $100	$78 – $99
Weighted average	$97	$93
Effect on fair value of:
5% adverse change	($24,516)	($22,944)
10% adverse change	($49,032)	($45,888)
20% adverse change	($98,065)	($91,775)

(1)

Weighted average inputs are based on UPB of the underlying mortgage 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. Equivalent average life is included for informational purposes.

Mortgage servicing liabilities

Fair Value

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


		December 31,
		2019		2018
Fair value (in thousands)	$	29,140	$	8,681
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	2,758,454	$	1,160,938
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		8.2%		7.3%
Prepayment speed (2)		29.2%		32.2%
Average life (in years)		3.9		3.8
Annual per-loan cost of servicing	$	300	$	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


	December 31,	December 31,
	2019	2018
Fair value (in thousands)	$ 178,586	$ 216,110
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 19,904,571	$ 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	3.1%	3.1%
Annualized prepayment speed (3):
Range	8.7% – 16.2%	8.2% – 29.5%
Weighted average	11.0%	9.7%
Average life (in years):
Range	2.7 – 7.2	1.6 – 7.6
Weighted average	6.1	6.8

(1)

Weighted average inputs are based on UPB of the underlying mortgage 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. Equivalent average life is included for informational purposes.

Interest rate lock commitments

Fair Value

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



	December 31, 2019		December 31, 2018
Fair value (in thousands) (1)	$	136,650	$	49,338
Key inputs (2):
Pull-through rate:
Range		12.2% – 100%		16.6% – 100%
Weighted average		86.5%		84.1%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		1.4 – 5.7		1.5 – 5.5
Weighted average		4.2		3.8
Percentage of unpaid principal balance:
Range		0.3% – 2.8%		0.4% – 3.2%
Weighted average		1.6%		1.5%

(1)

For purposes of this table, the IRLC assets and liability positions are shown net.

(2)

Weighted average inputs are based on the committed amounts.

Mortgage servicing rights

Fair Value

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


	Year ended December 31,
	2019	2018	2017
	Fair	Fair	Fair	Amortized
	value	value	value	cost
	(Amount recognized and unpaid principal balance of underlying mortgage loans amounts in thousands)
MSR and pool characteristics:
Amount recognized	$884,876	$591,757	$24,471	$556,630
Unpaid principal balance of underlying mortgage loans	$56,038,354	$42,008,585	$2,316,539	$44,664,551
Weighted average servicing fee rate (in basis points)	41	36	31	31
Key inputs (1):
Pricing spread (2):
Range	5.5% – 16.2%	5.8% – 16.4%	7.6% – 11.2%	7.6% – 15.2%
Weighted average	8.5%	9.9%	10.5%	10.7%
Prepayment speed (3):
Range	7.7% – 32.8%	3.9% – 61.8%	3.9% – 71.8%	3.4% – 47.6%
Weighted average	13.5%	10.8%	12.6%	9.1%
Average life (in years):
Range	2.6 – 8.2	0.5 – 11.6	0.8 – 11.7	1.5 – 12.2
Weighted average	6.2	7.3	6.6	8.1
Annual per-loan cost of servicing:
Range	$78 – $100	$78 – $99	$78 – $101	$79 – $101
Weighted average	$97	$91	$89	$89

(1)

Weighted average inputs are based on UPB of the underlying mortgage 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. Equivalent average life is included for informational purposes.

Loans held for sale

Fair Value

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



	December 31, 2019		December 31, 2018
Fair value (in thousands)	$	383,878	$	260,008
Key inputs (1):
Discount rate:
Range		3.0% – 9.2%		2.8% – 9.2%
Weighted average		3.0%		2.9%
Twelve-month projected housing price index change:
Range		2.6% – 3.2%		2.2% – 5.0%
Weighted average		2.8%		3.5%
Voluntary prepayment/resale speed (2):
Range		0.4% – 21.4%		0.1% – 21.8%
Weighted average		18.2%		20.1%
Total prepayment speed (3):
Range		0.5% – 39.2%		0.1% – 40.5%
Weighted average		36.2%		37.7%

(1)

Weighted average inputs are based on 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.

All changes in fair value relating to loans held for sale