Fair Value (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value

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

	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	7,746	$	—	$	—	$	7,746
Loans held for sale at fair value		—		4,256,534		661,719		4,918,253
Derivative assets:
Interest rate lock commitments		—		—		369,455		369,455
Repurchase agreement derivatives		—		—		8,187		8,187
Forward purchase contracts		—		93,136		—		93,136
Forward sales contracts		—		5,271		—		5,271
MBS put options		—		8,543		—		8,543
Swaptions		—		5,318		—		5,318
Put options on interest rate futures purchase contracts		273		—		—		273
Call options on interest rate futures purchase contracts		3,438		—		—		3,438
Total derivative assets before netting		3,711		112,268		377,642		493,621
Netting		—		—		—		(93,319)
Total derivative assets		3,711		112,268		377,642		400,302
Mortgage servicing rights at fair value		—		—		2,213,539		2,213,539
Investment in PennyMac Mortgage Investment Trust		1,310		—		—		1,310
	$	12,767	$	4,368,802	$	3,252,900	$	7,541,150
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	151,206	$	151,206
Derivative liabilities:
Interest rate lock commitments		—		—		1,391		1,391
Forward purchase contracts		—		4,184		—		4,184
Forward sales contracts		—		109,371		—		109,371
MBS put options		—		2		—		2
Total derivative liabilities before netting		—		113,557		1,391		114,948
Netting		—		—		—		(93,794)
Total derivative liabilities		—		113,557		1,391		21,154
Mortgage servicing liabilities at fair value		—		—		29,858		29,858
	$	—	$	113,557	$	182,455	$	202,218

	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

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

	Quarter ended June 30, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, March 31, 2020	$	806,587	$	315,194	$	8,187	$	2,193,697	$	3,323,665
Purchases and issuances, net		288,856		496,149		—		—		785,005
Capitalization of interest and advances		14,994		—		—		—		14,994
Sales and repayments		(60,364)		—		—		—		(60,364)
Mortgage servicing rights resulting from loan sales		—		—		—		225,534		225,534
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		1,132		—		—		—		1,132
Other factors		—		297,198		—		(205,692)		91,506
		1,132		297,198		—		(205,692)		92,638
Transfers from Level 3 to Level 2		(389,486)		—		—		—		(389,486)
Transfers of interest rate lock commitments to loans held for sale		—		(740,477)		—		—		(740,477)
Balance, June 30, 2020	$	661,719	$	368,064	$	8,187	$	2,213,539	$	3,251,509
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2020	$	(717)	$	368,064	$	—	$	(205,692)	$	161,655

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

	Quarter ended June 30, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, March 31, 2020	$	157,109	$	29,761	$	186,870
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		483		—		483
Accrual of interest		2,372		—		2,372
Repayments		(8,122)		—		(8,122)
Mortgage servicing liabilities resulting from loan sales		—		—		—
Changes in fair value included in income		(636)		97		(539)
Balance, June 30, 2020	$	151,206	$	29,858	$	181,064
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2020	$	(636)	$	97	$	(539)

	Quarter ended June 30, 2019
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total
	(in thousands)
Balance, March 31, 2019	$	455,533	$	66,065	$	24,632	$	2,905,090	$	3,451,320
Purchases (purchase adjustments) and issuances, net		891,146		119,880		3,662		(373)		1,014,315
Sales and repayments		(656,033)		—		(11,136)		—		(667,169)
Mortgage servicing rights resulting from loan sales		—		—		—		183,331		183,331
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(186)		—		—		—		(186)
Other factors		—		96,773		(1,143)		(367,713)		(272,083)
		(186)		96,773		(1,143)		(367,713)		(272,269)
Transfers from Level 3 to Level 2		(471,599)		—		—		—		(471,599)
Transfers to real estate acquired in settlement of loans		(863)		—		—		—		(863)
Transfers of interest rate lock commitments to loans held for sale		—		(170,942)		—		—		(170,942)
Balance, June 30, 2019	$	217,998	$	111,776	$	16,015	$	2,720,335	$	3,066,124
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2019	$	(3,911)	$	111,776	$	244	$	(367,713)	$	(259,604)

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

	Quarter ended June 30, 2019
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, March 31, 2019	$	205,081	$	7,844	$	212,925
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		442		—		442
Accrual of interest		2,767		—		2,767
Repayments		(10,530)		—		(10,530)
Mortgage servicing liabilities resulting from loan sales		—		6,838		6,838
Changes in fair value included in income		(3,604)		(1,734)		(5,338)
Balance, June 30, 2019	$	194,156	$	12,948	$	207,104
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2019	$	(3,604)	$	(1,734)	$	(5,338)

	Six months ended June 30, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, December 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Purchases and issuances, net		1,930,087		838,129		—		25,760		2,793,976
Capitalization of interest and advances		33,021		—		—		—		33,021
Sales and repayments		(799,292)		—		—		—		(799,292)
Mortgage servicing rights resulting from loan sales		—		—		—		507,849		507,849
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(6,391)		—		—		—		(6,391)
Other factors		—		497,116		—		(1,246,860)		(749,744)
		(6,391)		497,116		—		(1,246,860)		(756,135)
Transfers from Level 3 to Level 2		(878,893)		—		—		—		(878,893)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Transfers of interest rate lock commitments to loans held for sale		—		(1,103,831)		—		—		(1,103,831)
Balance, June 30, 2020	$	661,719	$	368,064	$	8,187	$	2,213,539	$	3,251,509
Changes in fair value recognized during the period relating to assets still held at June 30, 2020	$	(563)	$	368,064	$	—	$	(1,246,860)	$	(879,359)

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

	Six months ended June 30, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, December 31, 2019	$	178,586	$	29,140	$	207,726
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		862		—		862
Accrual of interest		4,346		—		4,346
Repayments		(17,430)		—		(17,430)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(15,158)		(5,858)		(21,016)
Balance, June 30, 2020	$	151,206	$	29,858	$	181,064
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2020	$	(15,158)	$	(5,858)	$	(21,016)

	Six months ended June 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		1,675,408		176,863		13,517		227,399		2,093,187
Sales and repayments		(832,335)		—		(22,572)		—		(854,907)
Mortgage servicing rights resulting from loan sales		—		—		—		299,082		299,082
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(6,277)		—		—		—		(6,277)
Other factors		—		156,751		(1,700)		(626,758)		(471,707)
		(6,277)		156,751		(1,700)		(626,758)		(477,984)
Transfers from Level 3 to Level 2		(876,762)		—		—		—		(876,762)
Transfers to real estate acquired in settlement of loans		(2,044)		—		—		—		(2,044)
Transfers of interest rate lock commitments to loans held for sale		—		(271,176)		—		—		(271,176)
Balance, June 30, 2019	$	217,998	$	111,776	$	16,015	$	2,720,335	$	3,066,124
Changes in fair value recognized during the period relating to assets still held at June 30, 2019	$	(4,380)	$	111,776	$	244	$	(626,758)	$	(519,118)

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

	Six months ended June 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		950		—		950
Accrual of interest		5,833		—		5,833
Repayments		(21,082)		—		(21,082)
Mortgage servicing liabilities resulting from loan sales		—		7,632		7,632
Changes in fair value included in income		(7,655)		(3,365)		(11,020)
Balance, June 30, 2019	$	194,156	$	12,948	$	207,104
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2019	$	(7,655)	$	(3,365)	$	(11,020)

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

	Quarter ended June 30,
	2020						2019
	Net gains on		Net				Net gains on		Net
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
Assets:
Loans held for sale	$	739,797	$	—	$	739,797	$	172,752	$	—	$	172,752
Mortgage servicing rights		—		(205,692)		(205,692)		—		(367,713)		(367,713)
	$	739,797	$	(205,692)	$	534,105	$	172,752	$	(367,713)	$	(194,961)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	636	$	636	$	—	$	3,604	$	3,604
Mortgage servicing liabilities		—		(97)		(97)		—		1,734		1,734
	$	—	$	539	$	539	$	—	$	5,338	$	5,338

	Six months ended June 30,
	2020						2019
	Net gains on		Net				Net gains on		Net
	loans held		loan				loans held		loan
	for sale at		servicing				for sale at		servicing
	fair value		fees		Total		fair value		fees		Total
Assets:
Loans held for sale	$	1,138,515	$	—	$	1,138,515	$	274,747	$	—	$	274,747
Mortgage servicing rights		—		(1,246,860)		(1,246,860)		—		(626,758)		(626,758)
	$	1,138,515	$	(1,246,860)	$	(108,345)	$	274,747	$	(626,758)	$	(352,011)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	15,158	$	15,158	$	—	$	7,655	$	7,655
Mortgage servicing liabilities		—		5,858		5,858		—		3,365		3,365
	$	—	$	21,016	$	21,016	$	—	$	11,020	$	11,020

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

	June 30, 2020						December 31, 2019
			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	$	4,376,517	$	4,114,182	$	262,335	$	4,628,333	$	4,431,854	$	196,479
90 days or more delinquent:
Not in foreclosure		467,334		480,268		(12,934)		236,650		241,958		(5,308)
In foreclosure		74,402		77,721		(3,319)		47,970		50,194		(2,224)
	$	4,918,253	$	4,672,171	$	246,082	$	4,912,953	$	4,724,006	$	188,947

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)
June 30, 2020	$	—	$	—	$	8,838	$	8,838
December 31, 2019	$	—	$	—	$	9,850	$	9,850

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

	Quarter ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Real estate acquired in settlement of loans	$	(1,001)	$	105	$	(2,283)	$	111

Summary of carrying value and fair value of debt

Term Notes	June 30, 2020		December 31, 2019
	(in thousands)
Fair value	$	1,255,719	$	1,303,047
Carrying value	$	1,294,949	$	1,294,070

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

	Quarter ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	225,534	$	183,331	$	507,849	$	299,082
Unpaid principal balance of underlying loans	$	20,066,302	$	11,677,325	$	38,396,686	$	19,823,176
Weighted average servicing fee rate (in basis points)		36		42		38		41
Key inputs (1):
Pricing spread (2)
Range		8.1% – 18.1%		5.9% – 15.8%		6.8% – 18.1%		5.8% – 15.8%
Weighted average		9.9%		8.7%		9.1%		8.8%
Annual total prepayment speed (3)
Range		8.8% – 29.1%		8.7% – 32.8%		8.8% – 49.8%		7.7% – 32.8%
Weighted average		13.0%		13.8%		13.7%		14.4%
Equivalent average life (in years)
Range		2.9 – 8.1		2.6 – 7.8		1.5 – 8.1		2.6 – 7.8
Weighted average		6.3		6.1		6.1		6.0
Per-loan annual cost of servicing
Range		$79 – $110		$78 – $100		$77 – $110		$78 – $100
Weighted average		$101		$97		$99		$96

(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) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is included for informational purposes.

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 of the Company’s MSRs and the effect on the fair value from adverse changes in those inputs:

	June 30, 2020	December 31, 2019
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,213,539	$ 2,926,790
Pool characteristics:
Unpaid principal balance of underlying loans	$ 233,807,729	$ 225,787,103
Weighted average note interest rate	3.9%	3.9%
Weighted average servicing fee rate (in basis points)	35	35
Key inputs (1):
Pricing spread (2):
Range	8.0% – 17.6%	6.8% – 15.8%
Weighted average	10.2%	8.5%
Effect on fair value of:
5% adverse change	($39,039)	($44,561)
10% adverse change	($76,624)	($87,734)
20% adverse change	($147,730)	($170,155)
Annual total prepayment speed (3):
Range	10.5% – 33.4%	9.3% – 40.9%
Weighted average	16.9%	12.7%
Equivalent average life (in years)
Range	1.3 – 6.8	1.4 – 7.4
Weighted average	5.0	6.1
Effect on fair value of:
5% adverse change	($69,081)	($63,569)
10% adverse change	($134,729)	($124,411)
20% adverse change	($256,580)	($238,549)
Annual per-loan cost of servicing:
Range	$79 – $111	$77 – $100
Weighted average	$106	$97
Effect on fair value of:
5% adverse change	($24,484)	($24,516)
10% adverse change	($48,967)	($49,032)
20% adverse change	($97,934)	($98,065)

(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) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. 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

		June 30,		December 31,
		2020		2019
Fair value (in thousands)	$	29,858	$	29,140
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	2,130,520	$	2,758,454
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.9%		8.2%
Annual total prepayment speed (2)		32.7%		29.2%
Equivalent average life (in years)		3.1		3.9
Annual per-loan cost of servicing	$	317	$	300

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

(2) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is included for informational purposes.

Excess servicing spread financing

Fair Value

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

	June 30,	December 31,
	2020	2019
Fair value (in thousands)	$ 151,206	$ 178,586
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 18,197,844	$ 19,904,571
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	4.9% – 5.3%	3.0% – 3.3%
Weighted average	5.1%	3.1%
Annual total prepayment speed (3):
Range	9.5% – 17.9%	8.7% – 16.2%
Weighted average	12.1%	11.0%
Equivalent average life (in years)
Range	2.4 – 6.7	2.7 – 7.2
Weighted average	5.7	6.1

(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) Annual total prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. 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

	June 30, 2020		December 31, 2019
Fair value (in thousands) (1)	$	368,064	$	136,650
Key inputs (2):
Pull-through rate:
Range		11.8% – 100%		12.2% – 100%
Weighted average		79.8%		86.5%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		0.8 – 5.5		1.4 – 5.7
Weighted average		2.9		4.2
Percentage of unpaid principal balance:
Range		0.2% – 2.5%		0.3% – 2.8%
Weighted average		0.9%		1.6%

(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

	June 30, 2020		December 31, 2019
Fair value (in thousands)	$	661,719	$	383,878
Key inputs (1):
Discount rate:
Range		2.9% – 9.2%		3.0% – 9.2%
Weighted average		3.0%		3.0%
Twelve-month projected housing price index change:
Range		0.8% – 1.3%		2.6% – 3.2%
Weighted average		0.9%		2.8%
Voluntary prepayment/resale speed (2):
Range		0.4% – 20.2%		0.4% – 21.4%
Weighted average		17.5%		18.2%
Total prepayment speed (3):
Range		0.6% – 37.7%		0.5% – 39.2%
Weighted average		35.0%		36.2%

(1) Weighted average inputs are based on the fair value of the “Level 3” 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, which includes both voluntary and involuntary prepayments/resale and defaults.