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, 2020

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: 001-38727

PennyMac Financial Services, Inc.

(formerly known as New PennyMac Financial Services, Inc.)

(Exact name of registrant as specified in its charter)

Delaware	83-1098934
(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	PFSI	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 4, 2020
Common Stock, $0.0001 par value	72,444,213

PENNYMAC FINANCIAL SERVICES, INC.

FORM 10-Q

September 30, 2020

TABLE OF CONTENTS

		Page
	Special Note Regarding Forward-Looking Statements	3
PART I. FINANCIAL INFORMATION		5
Item 1.	Financial Statements (Unaudited):	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	80
Item 4.	Controls and Procedures	82
PART II. OTHER INFORMATION		83
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	87

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, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2020.

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

● our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, and pandemics, such as COVID-19;

● 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;

● foreclosure delays and changes in foreclosure practices;

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

● our ability to manage third-party service providers and vendors and their compliance with laws, regulations and investor requirements;

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

3

● difficulties inherent in growing loan production volume;

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

● maintaining sufficient capital and liquidity to support business growth including compliance with financial covenants;

● changes in prevailing interest rates;

● 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;

● 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 exposure to counterparties that are unwilling or unable to honor contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans;

● our ability to realize the anticipated benefit of potential future acquisitions of mortgage servicing rights (“MSRs”);

● our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances;

● decreases in the 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 PMT;

● 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;

● our ability to effectively deploy new information technology applications and infrastructure;

● our ability to mitigate cybersecurity risks and cyber incidents;

● our ability to pay dividends to our stockholders; and

● our organizational structure and certain requirements in our charter documents.

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,
	2020		2019
	(in thousands, except share amounts)
ASSETS
Cash (includes $52,599 pledged to creditors at December 31, 2019)	$	529,166	$	188,291
Short-term investments at fair value		102,136		74,611
Loans held for sale at fair value (includes $9,011,545 and $4,846,138 pledged to creditors)		9,126,172		4,912,953
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		86,958		107,512
Derivative assets		578,254		159,686
Servicing advances, net (includes valuation allowance of $141,964 and $82,157; $232,519 and $207,460 pledged to creditors)		393,654		331,169
Mortgage servicing rights at fair value (includes $2,330,600 and $2,920,603 pledged to creditors)		2,333,821		2,926,790
Operating lease right-of-use assets		72,133		73,090
Investment in PennyMac Mortgage Investment Trust at fair value		991		1,672
Receivable from PennyMac Mortgage Investment Trust		122,478		48,159
Loans eligible for repurchase		17,183,873		1,046,527
Other (includes $207,547 and $32,598 pledged to creditors)		651,229		333,557
Total assets	$	31,180,865	$	10,204,017
Assets sold under agreements to repurchase	$	7,259,188	$	4,141,053
Mortgage loan participation purchase and sale agreements		535,063		497,948
Obligations under capital lease		13,957		20,810
Notes payable secured by mortgage servicing assets		1,295,143		1,294,070
Unsecured senior notes		492,358		—
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value		142,990		178,586
Derivative liabilities		24,537		22,330
Mortgage servicing liabilities at fair value		31,698		29,140
Operating lease liabilities		92,005		91,320
Accounts payable and accrued expenses		278,403		175,273
Payable to PennyMac Mortgage Investment Trust		77,136		73,280
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		35,784		46,158
Income taxes payable		673,149		504,569
Liability for loans eligible for repurchase		17,183,873		1,046,527
Liability for losses under representations and warranties		28,504		21,446
Total liabilities		28,163,788		8,142,510
Commitments and contingencies – Note 15
STOCKHOLDERS’ EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 72,400,490 and 78,515,047 shares, respectively		7		8
Additional paid-in capital		1,116,428		1,335,107
Retained earnings		1,900,642		726,392
Total stockholders' equity		3,017,077		2,061,507
Total liabilities and stockholders’ equity	$	31,180,865	$	10,204,017

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,
	2020		2019		2020		2019
	(in thousands, except per share amounts)
Revenues
Net gains on loans held for sale at fair value:
From non-affiliates	$	865,044	$	175,070	$	1,819,175	$	345,045
From PennyMac Mortgage Investment Trust		(9,775)		60,662		62,549		122,996
		855,269		235,732		1,881,724		468,041
Loan origination fees:
From non-affiliates		69,496		45,212		177,747		100,721
From PennyMac Mortgage Investment Trust		6,076		4,222		14,344		9,567
		75,572		49,434		192,091		110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		54,839		45,149		149,594		102,313
Net loan servicing fees:
Loan servicing fees:
From non-affiliates		203,696		185,967		601,527		533,510
From PennyMac Mortgage Investment Trust		18,752		12,964		48,806		35,102
Other		27,920		26,018		85,218		74,043
		250,368		224,949		735,551		642,655
Change in fair value of mortgage servicing rights and mortgage servicing liabilities		(127,217)		(412,730)		(1,368,219)		(1,036,123)
Change in fair value of excess servicing spread financing payable to PennyMac Mortgage Investment Trust		3,135		3,864		18,293		11,519
Hedging results		6,521		250,146		1,027,327		587,883
		(117,561)		(158,720)		(322,599)		(436,721)
Net loan servicing fees		132,807		66,229		412,952		205,934
Net interest (expense) income:
Interest income:
From non-affiliates		52,276		81,925		170,148		207,670
From PennyMac Mortgage Investment Trust		676		1,527		2,686		5,015
		52,952		83,452		172,834		212,685
Interest expense:
To non-affiliates		61,109		54,089		171,482		138,723
To PennyMac Mortgage Investment Trust		2,070		2,291		6,416		8,124
		63,179		56,380		177,898		146,847
Net interest (expense) income		(10,227)		27,072		(5,064)		65,838
Management fees from PennyMac Mortgage Investment Trust		8,508		10,098		25,851		26,178
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust		(288)		66		(602)		377
Results of real estate acquired in settlement of loans		1,214		188		803		1,205
Other		2,298		2,379		6,102		6,855
Total net revenues		1,119,992		436,347		2,663,451		987,029
Expenses
Compensation		202,440		141,132		550,762		362,449
Servicing		71,110		47,909		169,779		107,210
Loan origination		53,752		34,851		150,677		72,419
Technology		28,964		20,385		69,976		52,431
Professional services		18,307		9,682		44,211		21,876
Occupancy and equipment		8,491		7,257		24,822		21,075
Other		8,637		8,934		29,841		23,491
Total expenses		391,701		270,150		1,040,068		660,951
Income before provision for income taxes		728,291		166,197		1,623,383		326,078
Provision for income taxes		193,131		44,724		429,303		85,774
Net income	$	535,160	$	121,473	$	1,194,080	$	240,304
Earnings per share
Basic	$	7.39	$	1.55	$	15.65	$	3.08
Diluted	$	7.03	$	1.51	$	15.00	$	3.01
Weighted average shares outstanding
Basic		72,439		78,361		76,292		78,119
Diluted		76,138		80,382		79,618		79,821
Dividend declared per share	$	0.15	$	—	$	0.39	$	—

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)

	Quarter ended September 30, 2020
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, June 30, 2020	72,358	$	7	$	1,113,412	$	1,365,774	$	2,479,193
Net income	—		—		—		535,160		535,160
Stock-based compensation	159		—		9,895		—		9,895
Issuance of common stock in settlement of directors' fees	1		—		48		—		48
Repurchase of common stock	(118)		—		(6,927)		—		(6,927)
Common stock dividend ($0.15 per share)	—		—		—		(292)		(292)
Balance, September 30, 2020	72,400	$	7	$	1,116,428	$	1,900,642	$	3,017,077

	Quarter ended September 30, 2019
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, June 30, 2019	78,305	$	8	$	1,317,023	$	461,966	$	1,778,997
Net income	—		—		—		121,473		121,473
Stock-based compensation	128		—		11,095		—		11,095
Issuance of common stock in settlement of directors' fees	2		—		48		—		48
Balance, September 30, 2019	78,435	$	8	$	1,328,166	$	583,439	$	1,911,613

	Nine months ended September 30, 2020
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, December 31, 2019	78,515	$	8	$	1,335,107	$	726,392	$	2,061,507
Net income	—		—		—		1,194,080		1,194,080
Stock-based compensation	1,212		—		29,386		—		29,386
Issuance of common stock in settlement of directors' fees	4		—		144		—		144
Repurchase of common stock	(7,331)		(1)		(248,209)		—		(248,210)
Common stock dividends ($0.39 per share)	—		—		—		(19,830)		(19,830)
Balance, September 30, 2020	72,400	$	7	$	1,116,428	$	1,900,642	$	3,017,077

	Nine months ended September 30, 2019
				Additional				Total
	Number of	Par		paid-in		Retained		stockholders'
	shares	value		capital		earnings		equity
	(in thousands)
Balance, December 31, 2018	77,494	$	8	$	1,310,648	$	343,135	$	1,653,791
Net income	—		—		—		240,304		240,304
Stock-based compensation	984		—		18,390		—		18,390
Issuance of common stock in settlement of directors' fees	8		—		184		—		184
Repurchase of common stock	(51)		—		(1,056)		—		(1,056)
Balance, September 30, 2019	78,435	$	8	$	1,328,166	$	583,439	$	1,911,613

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,
	2020		2019
	(in thousands)
Cash flow from operating activities
Net income	$	1,194,080	$	240,304
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on loans held for sale at fair value		(1,881,724)		(468,041)
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread		1,349,926		1,024,604
Mortgage servicing rights hedging gains		(1,027,327)		(587,883)
Capitalization of interest and advance on loans held for sale at fair value		(55,920)		(56,800)
Accrual of interest on excess servicing spread financing payable to PennyMac Mortgage Investment Trust		6,416		8,124
Amortization of net debt issuance costs and (premiums)		12,163		(6,601)
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust		681		(270)
Results of real estate acquired in settlement in loans		(803)		(1,205)
Stock-based compensation expense		26,220		19,124
Provision for servicing advance losses		79,402		19,973
Depreciation and amortization		17,126		10,650
Amortization of right-of-use assets		9,176		7,258
Purchase of loans held for sale from PennyMac Mortgage Investment Trust		(43,721,458)		(32,619,639)
Origination of loans held for sale		(20,580,388)		(7,249,762)
Purchase of loans held for sale from non-affiliates		(2,515,624)		(1,132,749)
Purchase of loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale		(5,980,081)		(4,172,281)
Sale to non-affiliates and principal payments of loans held for sale		67,209,239		39,084,441
Sale of loans held for sale to PennyMac Mortgage Investment Trust		2,248,896		4,095,079
Repurchase of loans subject to representations and warranties		(43,664)		(15,427)
Settlement of repurchase agreement derivatives		8,270		31,993
Increase in servicing advances		(156,964)		(9,871)
Increase in receivable from PennyMac Mortgage Investment Trust		(80,531)		(9,598)
Sale of real estate acquired in settlement of loans		27,842		17,141
Increase in other assets		(305,100)		(22,415)
Decrease in operating lease liabilities		(10,378)		(9,234)
Increase in accounts payable and accrued expenses		102,789		78,800
Decrease in payable to PennyMac Mortgage Investment Trust		(14,001)		(45,869)
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		(10,374)		—
Increase in income taxes payable		168,580		80,013
Net cash used in operating activities		(3,923,531)		(1,690,141)
Cash flow from investing activities
(Increase) decrease in short-term investments		(27,525)		27,161
Net change in assets purchased from PMT under agreement to resell		20,554		23,347
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights		1,000,865		542,139
Purchase of mortgage servicing rights		(25,473)		(227,445)
Purchase of furniture, fixtures, equipment and leasehold improvements		(5,584)		(5,534)
Acquisition of capitalized software		(38,443)		(22,190)
Decrease (increase) in margin deposits		205		(168,062)
Net cash provided by investing activities		924,599		169,416
Cash flow from financing activities
Sale of assets under agreements to repurchase		68,122,809		41,296,345
Repurchase of assets sold under agreements to repurchase		(64,997,443)		(39,692,086)
Issuance of mortgage loan participation purchase and sale certificates		17,814,845		17,498,589
Repayment of mortgage loan participation purchase and sale certificates		(17,777,414)		(17,516,431)
Advance of obligations under capital lease		—		25,123
Repayment of obligations under capital lease		(6,853)		(7,847)
Issuance of unsecured senior notes		500,000		—
Repayment of excess servicing spread financing		(25,112)		(30,901)
Payment of debt issuance costs		(26,362)		(4,489)
Issuance of common stock pursuant to exercise of stock options		8,431		3,900
Payment of withholding taxes relating to stock-based compensation		(5,265)		(4,634)
Payment of dividend to holders of common stock		(19,830)		—
Repurchase of common stock		(248,210)		(1,056)
Net cash provided by financing activities		3,339,596		1,566,513
Net increase in cash and restricted cash		340,664		45,788
Cash and restricted cash at beginning of period		188,578		155,924
Cash and restricted cash at end of period	$	529,242	$	201,712
Cash and restricted cash at end of period are comprised of the following:
Cash	$	529,166	$	201,268
Restricted cash included in Other assets		76		444
	$	529,242	$	201,712

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

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) is a holding corporation and its primary assets are direct and indirect equity interests in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac, and it operates and controls all of the businesses and affairs of PennyMac, 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 and servicing. PennyMac’s investment management activities and a portion of its loan servicing activities are conducted on behalf of PennyMac Mortgage Investment Trust (“PMT”), a real estate mortgage investment trust that invests primarily in mortgage-related assets. PennyMac’s primary wholly owned subsidiaries are:

● PennyMac Loan Services, LLC (“PLS”) — a Delaware limited liability company that services portfolios of residential mortgage loans on behalf of non-affiliates and PMT, purchases, originates and sells new prime credit quality residential mortgage and home equity 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 (“FHA”) 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 Capital Management, LLC (“PCM”)— a Delaware limited liability company registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management agreement with PMT.

Note 2—Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation

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 Securities and Exchange Commission’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. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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 presented, but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2020. Intercompany accounts and transactions have been eliminated.

Preparation of financial statements in compliance with GAAP requires management to make judgments and estimates 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.

Certain asset amounts separately presented in prior periods have been reclassified to Other assets to conform to the current period presentation. Such amounts are detailed in Note 11—Other Assets.

9

Accounting Change

Effective January 1, 2020, the Company adopted FASB Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”), using the modified retrospective approach. The adoption of ASU 2016-13 did not have any effect on the Company’s consolidated statements of income, stockholder’s equity or cash flows.

Note 3—Concentration of Risk

A substantial portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, change in fair value of excess servicing spread financing (“ESS”), net interest, management fees, and change in fair value of investment in and dividends received from PMT) totaled 7% and 32% of total net revenue for the quarters ended September 30, 2020 and 2019, respectively, and 12% and 31% for the nine months ended September 30, 2020 and 2019, respectively.

Note 4—Related Party Transactions

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.

Through June 30, 2020, pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinanced mortgage loans for which PMT previously held the MSRs, the Company was generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs related to all such mortgage loans. On June 30, 2020, the MSR recapture agreement was amended and restated for a term of five years (the “2020 MSR Recapture Agreement”).

Effective July 1, 2020, the 2020 MSR Recapture agreement changes the recapture fee payable by the Company to a tiered amount equal to:

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;

● 35% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 15% and up to 30%; and

● 30% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 30%.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month. The Company has further agreed to allocate sufficient resources to target a recapture rate of 15%.

The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee.

10

Through June 30, 2020, pursuant to the terms of a mortgage banking services agreement, the monthly fulfillment fee was an amount equal to:

a) no greater than the product of (i) 0.35% and (ii) the aggregate initial unpaid principal balance (the “Initial UPB”) of all mortgage loans purchased in such month, plus

b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided, however, that no fulfillment fee was due or payable to the Company with respect to any mortgage loans underwritten to the Ginnie Mae Mortgage-Backed Securities (“MBS”) Guide.

PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and, through June 30, 2020, 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 before being purchased by the Company. While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

Effective July 1, 2020, the fulfillment fees and sourcing fees were revised as follows:

● Fulfillment fees shall not exceed the following:

(i) the number of loan commitments multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus

(ii) $315 multiplied by the number of purchased loans up to the and including 16,500 per quarter and $195 multiplied by the number of purchased loans in excess of 16,500 per quarter, plus

(iii) $750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae and Freddie Mac; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans.

● Sourcing fees charged to PLS range from one to two basis points, generally based on the average number of calendar days the loans are held by PMT before purchase by PLS.

Following is a summary of loan production activities, including MSR recapture between the Company and PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT	$	1	$	62,558	$	81,295	$	127,423
Mortgage servicing rights and excess servicing spread recapture incurred		(9,776)		(1,896)		(18,746)		(4,427)
	$	(9,775)	$	60,662	$	62,549	$	122,996
Sale of loans held for sale to PMT	$	27	$	1,876,358	$	2,248,896	$	4,095,079
Tax service fees earned from PMT included in Loan origination fees	$	6,076	$	4,222	$	14,344	$	9,567
Fulfillment fee revenue	$	54,839	$	45,149	$	149,594	$	102,313
Sourcing fees paid to PMT	$	1,658	$	4,206	$	9,143	$	9,355
Unpaid principal balance of loans purchased from PMT	$	16,690,482	$	14,022,222	$	41,641,327	$	31,183,950

11

Loan Servicing

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of MSRs. The Servicing Agreement provides for servicing fees of per-loan monthly amounts based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or the real estate acquired in settlement of loans (“REO”). The Company also remains entitled to customary ancillary income and market-based fees and charges relating to loans it services for PMT. These include boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Prime Servicing

● The base servicing fees for non-distressed loans are calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that non-distressed loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $10 to $55 per month and based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO. The Company is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees.

● Effective July 1, 2020, the Company also receives certain fees for COVID-19-related forbearance and modification activities provided for under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Special Servicing (Distressed loans)

● The base servicing fee rates for distressed loans range from $30 per month for current loans up to $85 per month for loans where the borrower has declared bankruptcy. The base servicing fee rate for REO is $75 per month.

● Because PMT has a small number of employees and limited infrastructure, the Company 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, the Company receives a supplemental servicing fee of $25 per month for each distressed loan. The Company is entitled to reimbursement for all customary, good faith reasonable and necessary out-of-pocket expenses incurred by the Company in the performance of its servicing obligations.

● The Company is also entitled to certain activity-based fees for distressed loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a full modification or liquidation and $500 for a deed-in-lieu of foreclosure. The Company is not entitled to earn more than one liquidation fee, reperformance fee or modification fee per loan in any 18-month period.

● To the extent the Company facilitates rentals of PMT's REO under its REO rental program, the Company collects 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 the Company’s 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 the Company provides property management services directly. The Company is also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.

12

● Except as otherwise provided in the MSR recapture agreement, when the Company 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 the Company originates a loan to facilitate the disposition of a REO, the Company is entitled to receive from PMT market-based fees and compensation consistent with pricing and terms the Company offers unaffiliated parties on a retail basis.

● The Company is entitled to retain any incentive payments made to it and to which it is entitled under the U.S. Department of Treasury’s Home Affordable Modification Plan; provided, however, that with respect to any such incentive payments paid to the Company in connection with a loan modification for which PMT previously paid the Company a modification fee, the Company is required to reimburse PMT an amount equal to the incentive payments.

Following is a summary of loan servicing and property management fees earned from PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	452	$	507	$	1,595	$	1,131
Loans at fair value		187		858		675		1,938
Mortgage servicing rights		18,113		11,599		46,536		32,033
	$	18,752	$	12,964	$	48,806	$	35,102
Property management fees received from PMT included in Other income	$	—	$	70	$	—	$	295

On June 30, 2020, the Servicing Agreement was amended and restated for a term of five years (the “2020 Servicing Agreement”). The terms of the 2020 Servicing Agreement are substantially similar to those in the prior servicing agreement except that they now include the fees described above relating to COVID-19 related forbearance and modification activities provided for under the CARES Act.

Investment Management Activities

The Company has a management agreement with PMT (“Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees, for which PFSI collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

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

● The performance incentive fee is calculated quarterly at a defined annualized 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 return on “equity.”

The performance incentive fee is equal to the sum of: (a) 10% of the amount by which PMT’s “net income” for the quarter exceeds (i) an 8% return on equity plus the “high watermark,” up to (ii) a 12% return on PMT’s equity; plus (b) 15% of the amount by which PMT’s “net income” for the quarter exceeds (i) a 12% return on PMT’s equity plus the “high watermark,” up to (ii) a 16% return on PMT’s equity; plus (c) 20% of the amount by which PMT’s “net income” for the quarter exceeds a 16% return on equity plus the “high watermark.”

13

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.

“Equity” is the weighted average of the issue price per common share of all of PMT’s public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the rolling four-quarter period.

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 average Fannie Mae 30-year MBS yield (the “Target Yield”) for the four quarters then ended. 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 amounts required for the Company to earn a performance incentive fee are 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 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.

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.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Base management	$	8,508	$	7,914	$	25,851	$	20,862
Performance incentive		—		2,184		—		5,316
	$	8,508	$	10,098	$	25,851	$	26,178

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company 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. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $120,000 per fiscal quarter through June 30, 2020.

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

14

On June 30, 2020, the Management Agreement was amended and restated for a term of five years (the “2020 Management Agreement”). The terms of the 2020 Management Agreement are materially consistent with those of the prior management agreement, except that, effective July 1, 2020, PMT’s reimbursement of PCM’s and its affiliate’s compensation expenses was increased from $120,000 to $165,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by the Company or its affiliates.

The Company received reimbursements from PMT for expenses as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,389	$	1,543	$	4,514	$	4,055
Compensation		165		120		405		360
Expenses incurred on PMT's behalf, net		2,852		1,942		5,561		3,001
	$	4,406	$	3,605	$	10,480	$	7,416
Payments and settlements during the quarter (1)	$	58,479	$	68,191	$	228,514	$	111,411

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Conditional Reimbursement of Underwriting Fees

In connection with its initial public offering of common shares of beneficial interest 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. 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. On February 1, 2019, the term of the reimbursement agreement was extended to February 1, 2023. The Company received $211,000 and $219,000 in reimbursement of underwriting fees from PMT during the nine months ended September 30, 2020 and 2019, respectively.

Investing Activities

Master Repurchase Agreement

On December 19, 2016, the Company, through PLS, entered into a master repurchase agreement with one of PMT’s wholly-owned subsidiaries, PennyMac Holdings, LLC (“PMH”) (the “PMH Repurchase Agreement”), pursuant to which PMH may borrow from the Company for the purpose of financing PMH’s participation certificates representing beneficial ownership in ESS. PLS then re-pledges such participation certificates to PNMAC GMSR ISSUER TRUST (the “Issuer Trust”) under a master repurchase agreement by and among PLS, the Issuer Trust and PennyMac, as guarantor (the “PC Repurchase Agreement”). The Issuer Trust was formed for the purpose of allowing PLS to finance MSRs and ESS relating to such MSRs (the “GNMA MSR Facility”).

In connection with the GNMA MSR Facility, PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of the PC Repurchase Agreement. In return, the Issuer Trust (a) has issued to PLS, pursuant to the terms of an indenture, the Series 2016-MSRVF1 Variable Funding Note, dated December 19, 2016, known as the “PNMAC GMSR ISSUER TRUST MSR Collateralized Notes, Series 2016-MSRVF1” (the “VFN”), and (b) has issued and may, from time to time pursuant to the terms of any supplemental indenture, issue to institutional investors additional term notes, in each case secured on a pari passu basis by the participation certificates relating to the MSRs and ESS. The maximum principal balance of the VFN is $1,000,000,000.

15

The principal amount paid by PLS for the participation certificates under the PMH Repurchase Agreement is based upon a percentage of the market value of the underlying ESS. Upon PMH’s repurchase of the participation certificates, PMH is required to repay PLS the principal amount relating thereto plus accrued interest (at a rate reflective of the current market and consistent with the weighted average note rate of the VFN and any outstanding term notes) to the date of such repurchase. PLS is then required to repay the Issuer Trust the corresponding amount under the PC Repurchase Agreement.

Common Shares of Beneficial Interest of PennyMac Mortgage Investment Trust

The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	676	$	1,527	$	2,686	$	5,015
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received	$	31	$	36	$	79	$	107
Change in fair value of investment		(319)		30		(681)		270
	$	(288)	$	66	$	(602)	$	377

	September 30,		December 31,
	2020		2019
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958	$	107,512
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	991	$	1,672
Number of shares		75		75

Financing Activities

Spread Acquisition and MSR Servicing Agreements

The Company has a master spread acquisition and MSR servicing agreement with PMT (the “Spread Acquisition Agreement”) which was amended and restated effective December 19, 2016, pursuant to which the Company may sell to PMT, from time to time, the right to receive participation certificates representing beneficial ownership in ESS arising from Ginnie Mae MSRs acquired by the Company, in which case the Company generally would be required to service or subservice the related mortgage loans for Ginnie Mae. The primary purpose of the amendment and restatement was to facilitate the continued financing of the ESS owned by PMT in connection with the parties’ participation in the GNMA MSR Facility.

To the extent the Company refinances any of the mortgage loans relating to the ESS it has issued, the Spread Acquisition Agreement also contains recapture provisions requiring that the Company transfer to PMT, at no cost, the ESS relating to a certain percentage of the unpaid principal balance of the newly originated mortgage loans. However, under the Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the refinanced mortgage loans, the Company is 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 equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the modified mortgage loans, the Spread Acquisition Agreement contains provisions that require the Company to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, the Company may, at its option, settle its obligation to PMT in cash in an amount equal to such fair market value in lieu of transferring such ESS.

16

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Excess servicing spread financing:
Balance at beginning of period	$	151,206	$	194,156	$	178,586	$	216,110
Issuance pursuant to recapture agreement		531		377		1,393		1,327
Accrual of interest		2,070		2,291		6,416		8,124
Repayment		(7,682)		(9,819)		(25,112)		(30,901)
Change in fair value		(3,135)		(3,864)		(18,293)		(11,519)
Balance at end of period	$	142,990	$	183,141	$	142,990	$	183,141
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	525	$	429	$	1,441	$	1,311

Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:

	September 30,		December 31,
	2020		2019
	(in thousands)
Receivable from PMT:
Margin settlements relating to loan sales	$	48,243	$	—
Allocated expenses and expenses incurred on PMT's behalf		30,207		3,724
Fulfillment fees		18,060		18,285
Correspondent production fees		11,285		10,606
Management fees		8,509		10,579
Servicing fees		6,121		4,659
Interest on assets purchased under agreements to resell		43		85
Conditional reimbursement		10		221
	$	122,478	$	48,159
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	58,264	$	70,520
Mortgage servicing rights recapture payable		197		149
Other		18,675		2,611
	$	77,136	$	73,280

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

On May 8, 2013, the Company entered into a tax receivable agreement with certain former owners of PennyMac that provides for the payment from time to time by the Company to PennyMac’s exchanged unitholders of an amount equal to 85% of the amount of the net tax 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 exchanges of ownership interests in PennyMac 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.

Although a reorganization in November 2018 eliminated the potential for unitholders to exchange any additional units subject to this tax receivable agreement, the Company continues to be subject to the agreement and will be required to make payments, to the extent any of the tax benefits specified above are deemed to be realized, under the tax receivable agreement to those certain prior owners of PennyMac who effected exchanges of ownership interests in PennyMac for the Company’s common stock prior to the closing of the reorganization.

17

The Company has recorded $35.8 million and $46.2 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of September 30, 2020 and December 31, 2019, respectively. The Company made $10.4 million of payments under the tax receivable agreement during the nine months ended September 30, 2020 and did not make any payments during the nine months ended September 30, 2019.

.

Note 5—Loan Sales and Servicing Activities

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

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cash flows:
Sales proceeds	$	26,683,234	$	17,897,693	$	67,209,239	$	39,084,441
Servicing fees received (1)	$	166,316	$	149,210	$	491,743	$	426,774
Net servicing advances (recoveries)	$	71,890	$	8,605	$	68,992	$	(23,583)

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

The following table summarizes unpaid principal balance (the “UPB”) of the loans sold by the Company in which it maintains continuing involvement in the form of owned servicing obligations:

	September 30,		December 31,
	2020		2019
	(in thousands)
Unpaid principal balance of loans outstanding	$	188,854,796	$	168,842,011
Delinquencies:
30-89 days	$	7,237,198	$	7,947,560
90 days or more:
Not in foreclosure	$	19,423,346	$	3,237,563
In foreclosure	$	621,649	$	888,136
Foreclosed	$	13,730	$	15,387
Bankruptcy	$	1,288,443	$	1,343,816

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The following tables summarize the UPB of the Company’s loan servicing portfolio:

	September 30, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	188,854,796	$	—	$	188,854,796
Purchased		47,795,763		—		47,795,763
		236,650,559		—		236,650,559
PennyMac Mortgage Investment Trust				156,496,568		156,496,568
Loans held for sale		8,749,673		—		8,749,673
	$	245,400,232	$	156,496,568	$	401,896,800
Delinquent loans (1):
30 days	$	5,924,488	$	1,435,686	$	7,360,174
60 days		3,178,614		621,723		3,800,337
90 days or more:
Not in foreclosure		24,324,945		5,622,954		29,947,899
In foreclosure		831,239		37,293		868,532
Foreclosed		16,409		45,925		62,334
	$	34,275,695	$	7,763,581	$	42,039,276
Bankruptcy	$	1,815,833	$	158,182	$	1,974,015
Delinquent loans in COVID-19 related forbearance:
30 days	$	2,344,986	$	474,168	$	2,819,154
60 days		2,289,880		476,220		2,766,100
90 days or more not in foreclosure		17,827,122		4,716,956		22,544,078
	$	22,461,988	$	5,667,344	$	28,129,332
Custodial funds managed by the Company (2)	$	10,364,855	$	6,347,559	$	16,712,414

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

19

	December 31, 2019
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	168,842,011	$	—	$	168,842,011
Purchased		59,703,547		—		59,703,547
		228,545,558		—		228,545,558
PennyMac Mortgage Investment Trust		—		135,414,668		135,414,668
Loans held for sale		4,724,006		—		4,724,006
	$	233,269,564	$	135,414,668	$	368,684,232
Delinquent loans:
30 days	$	7,987,132	$	857,660	$	8,844,792
60 days		2,490,797		172,263		2,663,060
90 days or more:
Not in foreclosure		4,070,482		274,592		4,345,074
In foreclosure		1,113,806		68,331		1,182,137
Foreclosed		18,315		89,421		107,736
	$	15,680,532	$	1,462,267	$	17,142,799
Bankruptcy	$	1,898,367	$	136,818	$	2,035,185
Custodial funds managed by the Company (1)	$	6,412,291	$	2,529,984	$	8,942,275

(1) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

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

	September 30,		December 31,
State	2020		2019
	(in thousands)
California	$	58,062,643	$	57,311,867
Florida		33,545,822		28,940,696
Texas		31,893,436		27,909,821
Virginia		24,378,162		22,115,619
Maryland		18,700,592		16,829,320
All other states		235,316,145		215,576,909
	$	401,896,800	$	368,684,232

20

Note 6—Fair Value

Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. 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 significant 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.

● 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. Such differences may result in significantly different fair value measurements. 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

The Company identified its MSRs, its mortgage servicing liabilities (“MSLs”) and all of its non-cash financial assets other than Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, 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. The Company has also identified its ESS financing to be accounted for at fair value as a means of hedging the related MSRs’ fair value risk.

21

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a summary of assets and liabilities that are measured at fair value on a recurring basis:

	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	102,136	$	—	$	—	$	102,136
Loans held for sale at fair value		—		6,351,175		2,774,997		9,126,172
Derivative assets:
Interest rate lock commitments		—		—		544,151		544,151
Forward purchase contracts		—		72,640		—		72,640
Forward sales contracts		—		21,652		—		21,652
MBS put options		—		27,336		—		27,336
MBS call options		—		4,255		—		4,255
Swaptions		—		5,568		—		5,568
Put options on interest rate futures purchase contracts		5,910		—		—		5,910
Call options on interest rate futures purchase contracts		1,570		—		—		1,570
Total derivative assets before netting		7,480		131,451		544,151		683,082
Netting		—		—		—		(104,828)
Total derivative assets		7,480		131,451		544,151		578,254
Mortgage servicing rights at fair value		—		—		2,333,821		2,333,821
Investment in PennyMac Mortgage Investment Trust		991		—		—		991
	$	110,607	$	6,482,626	$	5,652,969	$	12,141,374
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	142,990	$	142,990
Derivative liabilities:
Interest rate lock commitments		—		—		2,706		2,706
Forward purchase contracts		—		15,903		—		15,903
Forward sales contracts		—		98,765		—		98,765
Total derivative liabilities before netting		—		114,668		2,706		117,374
Netting		—		—		—		(92,837)
Total derivative liabilities		—		114,668		2,706		24,537
Mortgage servicing liabilities at fair value		—		—		31,698		31,698
	$	—	$	114,668	$	177,394	$	199,225

22

	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

23

As shown above, all or a portion of the Company’s loans held for sale, Interest Rate Lock Commitments (“IRLCs”), repurchase agreement derivatives, MSRs, ESS and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of assets and liabilities measured at fair value using “Level 3” inputs at either the beginning or the end of the period presented for the quarter and nine month periods ended September 30, 2020 and 2019:

	Quarter ended September 30, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, June 30, 2020	$	661,719	$	368,064	$	8,187	$	2,213,539	$	3,251,509
Purchases (purchase adjustment) and issuances, net		2,734,321		593,065		—		(287)		3,327,099
Capitalization of interest and advances		22,262		—		—		—		22,262
Sales and repayments		(88,955)		—		(8,270)		—		(97,225)
Mortgage servicing rights resulting from loan sales		—		—		—		245,946		245,946
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		42,029		—		—		—		42,029
Other factors		—		311,790		83		(125,377)		186,496
		42,029		311,790		83		(125,377)		228,525
Transfers from Level 3 to Level 2		(597,134)		—		—		—		(597,134)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(731,474)		—		—		(731,474)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the quarter relating to assets still held at September 30, 2020	$	38,217	$	541,445	$	—	$	(125,377)	$	454,285

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

	Quarter ended September 30, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, June 30, 2020	$	151,206	$	29,858	$	181,064
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		531		—		531
Accrual of interest		2,070		—		2,070
Repayments		(7,682)		—		(7,682)
Changes in fair value included in income		(3,135)		1,840		(1,295)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the quarter relating to liabilities still outstanding at September 30, 2020	$	(3,135)	$	1,840	$	(1,295)

24

	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)

25

	Nine months ended September 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		4,664,408		1,431,194		—		25,473		6,121,075
Capitalization of interest and advances		55,283		—		—		—		55,283
Sales and repayments		(888,247)		—		(8,270)		—		(896,517)
Mortgage servicing rights resulting from loan sales		—		—		—		753,795		753,795
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		35,638		—		—		—		35,638
Other factors		—		808,906		83		(1,372,237)		(563,248)
		35,638		808,906		83		(1,372,237)		(527,610)
Transfers from Level 3 to Level 2		(1,476,027)		—		—		—		(1,476,027)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(1,835,305)		—		—		(1,835,305)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the period relating to assets still held at September 30, 2020	$	31,389	$	541,445	$	—	$	(1,372,237)	$	(799,403)

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

	Nine months ended September 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		1,393		—		1,393
Accrual of interest		6,416		—		6,416
Repayments		(25,112)		—		(25,112)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(18,293)		(4,018)		(22,311)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2020	$	(18,293)	$	(4,018)	$	(22,311)

26

	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)

The Company had transfers among the fair value levels arising from transfers of IRLCs to loans held for sale at fair value upon purchase or funding of the respective loans and from the return to salability in the active secondary market of certain loans held for sale.

27

Assets and Liabilities Measured at Fair Value under the Fair Value Option

Net changes in fair values included in income for assets and liabilities 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,
	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	$	773,313	$	—	$	773,313	$	263,339	$	—	$	263,339
Mortgage servicing rights		—		(125,377)		(125,377)		—		(410,885)		(410,885)
	$	773,313	$	(125,377)	$	647,936	$	263,339	$	(410,885)	$	(147,546)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	3,135	$	3,135	$	—	$	3,864	$	3,864
Mortgage servicing liabilities		—		(1,840)		(1,840)		—		(1,845)		(1,845)
	$	—	$	1,295	$	1,295	$	—	$	2,019	$	2,019

	Nine months ended September 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	$	1,911,828	$	—	$	1,911,828	$	538,086	$	—	$	538,086
Mortgage servicing rights		—		(1,372,237)		(1,372,237)		—		(1,037,643)		(1,037,643)
	$	1,911,828	$	(1,372,237)	$	539,591	$	538,086	$	(1,037,643)	$	(499,557)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	18,293	$	18,293	$	—	$	11,519	$	11,519
Mortgage servicing liabilities		—		4,018		4,018		—		1,520		1,520
	$	—	$	22,311	$	22,311	$	—	$	13,039	$	13,039

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

	September 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	$	8,670,895	$	8,279,163	$	391,732	$	4,628,333	$	4,431,854	$	196,479
90 days or more delinquent:
Not in foreclosure		392,866		404,183		(11,317)		236,650		241,958		(5,308)
In foreclosure		62,411		66,327		(3,916)		47,970		50,194		(2,224)
	$	9,126,172	$	8,749,673	$	376,499	$	4,912,953	$	4,724,006	$	188,947

28

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a summary of assets that were measured at fair value on a nonrecurring basis:

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
September 30, 2020	$	—	$	—	$	7,346	$	7,346
December 31, 2019	$	—	$	—	$	9,850	$	9,850

The following table summarizes the (losses) gains recognized on assets when they were remeasured at fair value on a nonrecurring basis:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Real estate acquired in settlement of loans	$	(825)	$	139	$	(2,059)	$	162

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Obligations under capital lease, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.

These assets and liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these assets and liabilities other than the 2018-GTI Notes and 2018-GT2 Notes (the “2018 Term Notes”) included in Notes payable secured by mortgage servicing assets and the Unsecured Notes (as hereafter defined) approximate their carrying values due to their short terms and/or variable interest rates.

The Company estimates the fair value of the 2018 Term Notes and the Unsecured Notes based on non-affiliate broker indications of fair value. The fair value and carrying value of these notes are summarized below:

	September 30, 2020				December 31, 2019
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
2018 Term Notes	$	1,259,619	$	1,295,143	$	1,303,047	$	1,294,070
Unsecured Notes	$	510,000	$	492,358	$	—	$	—

Valuation Governance

Most of the Company’s financial assets, and all of its MSRs, ESS, derivative liabilities 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 derivative liabilities and all of its MSRs, ESS, and MSLs are “Level 3” fair value assets and liabilities which require 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 assets and liabilities, the Company 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 assets and liabilities other than IRLCs.

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With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. As of September 30, 2020, the Company’s senior management valuation committee includes the Company’s chief financial, investment and risk officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.

The FAV group is responsible for reporting to the Company’s senior management valuation committee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, 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.

The Company has assigned responsibility for developing the fair values of IRLCs 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.

Valuation Techniques and Inputs

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

Loans Held for Sale

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

Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:

● Government guaranteed or insured loans purchased by the Company from Ginnie Mae guaranteed pools in its loan servicing portfolio. The Company’s right to purchase government guaranteed or insured loans arises as the result of the loan being at least three months delinquent on the date 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 loans may be resold to investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed security. Such eligibility occurs when the repurchased loans become current either through the borrower’s reperformance or through completion of a modification of the loan’s terms or after six months of timely payments following the completion of certain types of payment deferral programs.

● Loans that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect.

● Home equity lines of credit held for sale to PMT. At present, an active market with observable inputs that are significant to the estimation of fair value of home equity lines of credit does not exist.

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

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

	September 30, 2020		December 31, 2019
Fair value (in thousands)	$	2,774,997	$	383,878
Key inputs (1):
Discount rate:
Range		3.2% – 9.2%		3.0% – 9.2%
Weighted average		3.2%		3.0%
Twelve-month projected housing price index change:
Range		2.1% – 2.6%		2.6% – 3.2%
Weighted average		2.2%		2.8%
Voluntary prepayment/resale speed (2):
Range		0.5% – 24.9%		0.4% – 21.4%
Weighted average		19.6%		18.2%
Total prepayment speed (3):
Range		0.6% – 38.7%		0.5% – 39.2%
Weighted average		29.9%		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.

Changes in fair value of loans held for sale attributable to changes in the loan’s instrument-specific credit risk are measured with reference to the change in the respective 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 loans held for sale are included in Net gains on 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 “Level 3” fair value assets or liabilities. The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and the probability that the loan will be funded or 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 the IRLCs’ 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 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 loans held for sale at fair value in the consolidated statements of income.

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Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

	September 30, 2020		December 31, 2019
Fair value (in thousands) (1)	$	541,445	$	136,650
Key inputs (2):
Pull-through rate:
Range		11.8% – 100%		12.2% – 100%
Weighted average		80.6%		86.5%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		1.0 – 5.1		1.4 – 5.7
Weighted average		3.5		4.2
Percentage of loan commitment amount
Range		0.2% – 2.5%		0.3% – 2.8%
Weighted average		1.1%		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.

Hedging Derivatives

Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.

Changes in the fair value of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Hedging results, as applicable, in the consolidated statements of income.

Repurchase Agreement Derivatives

Through August 21, 2019, the Company had a master repurchase agreement that included incentives for financing loans approved for satisfying designated consumer relief characteristics. These incentives are classified for financial reporting purposes as embedded derivatives and are separated for reporting purposes from the master repurchase agreement. Repurchase agreement derivatives are categorized as “Level 3” fair value assets. The significant unobservable inputs used in the valuation of repurchase agreement derivative assets are the discount rate and the Company’s expected approval rate of the loans financed under the master repurchase agreement. The resulting ratio included in the Company’s fair value estimate was 99.0% at December 31, 2019.

Mortgage Servicing Rights

MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable pricing spread (discount rate), prepayment rates of the underlying loans, and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

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Following are the key inputs used in determining the fair value of MSRs received by the Company when it retains the obligation to service the mortgage loans it sells:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	245,946	$	246,757	$	753,795	$	545,839
Unpaid principal balance of underlying loans	$	25,369,941	$	15,709,249	$	63,766,627	$	35,532,425
Weighted average servicing fee rate (in basis points)		32		43		36		42
Key inputs (1):
Pricing spread (2)
Range		8.0% – 17.6%		5.5% – 16.2%		6.8% – 18.1%		5.5% – 16.2%
Weighted average		9.6%		8.3%		9.3%		8.6%
Annual total prepayment speed (3)
Range		7.2% – 41.0%		8.8% – 32.1%		7.2% – 49.8%		7.7% – 32.8%
Weighted average		10.4%		15.7%		12.4%		15.0%
Equivalent average life (in years)
Range		2.3 – 9.1		2.7 – 7.5		1.5 – 9.1		2.6 – 7.8
Weighted average		7.3		5.5		6.6		5.8
Per-loan annual cost of servicing
Range		$80 – $110		$78 – $100		$77 – $110		$78 – $100
Weighted average		$102		$97		$100		$97

(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.

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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:

	September 30, 2020	December 31, 2019
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,333,821	$ 2,926,790
Pool characteristics:
Unpaid principal balance of underlying loans	$ 234,850,997	$ 225,787,103
Weighted average note interest rate	3.8%	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	10.1%	8.5%
Effect on fair value of:
5% adverse change	($42,266)	($44,561)
10% adverse change	($82,935)	($87,734)
20% adverse change	($159,813)	($170,155)
Annual total prepayment speed (3):
Range	10.4% – 32.3%	9.3% – 40.9%
Weighted average	15.3%	12.7%
Equivalent average life (in years)
Range	1.7 – 6.8	1.4 – 7.4
Weighted average	5.4	6.1
Effect on fair value of:
5% adverse change	($67,933)	($63,569)
10% adverse change	($132,698)	($124,411)
20% adverse change	($253,474)	($238,549)
Annual per-loan cost of servicing:
Range	$78 – $110	$77 – $100
Weighted average	$104	$97
Effect on fair value of:
5% adverse change	($25,138)	($24,516)
10% adverse change	($50,275)	($49,032)
20% adverse change	($100,551)	($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.

The preceding sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the 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.

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Excess Servicing Spread Financing at Fair Value

ESS is categorized as a “Level 3” fair value liability. Because ESS is a claim to a portion of the cash flows from MSRs, the fair value measurement of the ESS is similar to that of MSRs. The Company uses the same discounted cash flow approach to measuring the ESS as it uses to measure MSRs except that certain inputs relating to the cost to service the mortgage loans underlying the MSRs and certain ancillary income are not included as these cash flows do not accrue to the holder of the ESS.

The key inputs used in the estimation of ESS fair value include pricing spread (discount rate) 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 directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally discourage mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing the fair value of this financing. Changes in the fair value of ESS are included in Net loan servicing fees—Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust.

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

	September 30,	December 31,
	2020	2019
Fair value (in thousands)	$ 142,990	$ 178,586
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 17,070,283	$ 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	9.6% – 17.6%	8.7% – 16.2%
Weighted average	11.8%	11.0%
Equivalent average life (in years)
Range	2.4 – 6.7	2.7 – 7.2
Weighted average	5.8	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.

Mortgage Servicing Liabilities

MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable pricing spread (discount rate), prepayment rates, and the annual per-loan cost to service the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

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Following are the key inputs used in determining the fair value of MSLs:

		September 30,		December 31,
		2020		2019
Fair value (in thousands)	$	31,698	$	29,140
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	1,799,562	$	2,758,454
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.1%		8.2%
Annual total prepayment speed (2)		35.1%		29.2%
Equivalent average life (in years)		2.9		3.9
Annual per-loan cost of servicing	$	343	$	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.

Note 7—Loans Held for Sale at Fair Value

Loans held for sale at fair value include the following:

	September 30,		December 31,
Loan type	2020		2019
	(in thousands)
Government-insured or guaranteed	$	5,219,448	$	4,222,010
Conventional conforming		1,131,727		307,065
Purchased from Ginnie Mae pools serviced by the Company		2,759,032		374,121
Repurchased pursuant to representations and warranties		15,965		9,244
Home equity lines of credit		—		513
	$	9,126,172	$	4,912,953
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	8,453,522	$	4,322,789
Mortgage loan participation purchase and sale agreements		558,023		523,349
	$	9,011,545	$	4,846,138

Note 8—Derivative Financial Instruments

The Company holds and issues derivative financial instruments in connection with its operating activities. Derivative financial instruments are created as a result of certain of the Company’s operations and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created as a result of the Company’s operations include:

● IRLCs that are created when the Company commits to purchase or originate a loan for sale.

● Derivatives that were embedded in a master repurchase agreement that provided for the Company to receive incentives for financing mortgage loans that satisfied certain consumer relief characteristics under the master repurchase agreement.

The Company also engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of the its assets. 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 loans held for sale and the portion of its MSRs not financed with ESS.

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The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

Derivative Notional Amounts and Fair Value of Derivatives

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

	September 30, 2020					December 31, 2019
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	18,873,579	$	544,151	$	2,706	7,122,316	$	138,511	$	1,861
Repurchase agreement derivatives			—		—			8,187		—
Used for hedging purposes (1):
Forward purchase contracts	31,443,783		72,640		15,903	13,618,361		12,364		19,040
Forward sales contracts	42,438,243		21,652		98,765	16,220,526		17,097		18,045
MBS put options	12,950,000		27,336		—	6,100,000		3,415		—
MBS call options	1,850,000		4,255		—	—		—		—
Swaption purchase contracts	3,125,000		5,568		—	1,750,000		2,409		—
Put options on interest rate futures purchase contracts	2,275,000		5,910		—	2,250,000		3,945		—
Call options on interest rate futures purchase contracts	950,000		1,570		—	750,000		1,469		—
Treasury futures purchase contracts	1,000,000		—		—	1,276,000		—		—
Treasury futures sale contracts	450,000		—		—	1,010,000		—		—
Interest rate swap futures purchase contracts	3,585,000		—		—	3,210,000		—		—
Total derivatives before netting			683,082		117,374			187,397		38,946
Netting			(104,828)		(92,837)			(27,711)		(16,616)
		$	578,254	$	24,537		$	159,686	$	22,330
Collateral received from derivative counterparties, net		$	(11,991)				$	(11,095)

(1) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

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

	Notional amounts, quarter ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	20,709,914	143,902,517	(133,168,648)	31,443,783
Forward sale contracts	25,302,147	175,642,745	(158,506,649)	42,438,243
MBS put options	11,200,000	29,850,000	(28,100,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	3,375,000	3,625,000	(3,875,000)	3,125,000
Swaption sale contracts	—	3,875,000	(3,875,000)	—
Put options on interest rate futures purchase contracts	350,000	3,325,000	(1,400,000)	2,275,000
Call options on interest rate futures purchase contracts	1,800,000	1,200,000	(2,050,000)	950,000
Put options on interest rate futures sale contracts	—	1,400,000	(1,400,000)	—
Call options on interest rate futures sale contracts	—	2,050,000	(2,050,000)	—
Treasury futures purchase contracts	925,000	1,561,500	(1,486,500)	1,000,000
Treasury futures sale contracts	450,000	1,486,500	(1,486,500)	450,000
Interest rate swap futures purchase contracts	3,460,000	1,200,000	(1,075,000)	3,585,000
Interest rate swap futures sales contracts	—	1,075,000	(1,075,000)	—

	Notional amounts, quarter ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	19,497,698	100,139,970	(103,807,843)	15,829,825
Forward sale contracts	14,276,156	122,174,329	(121,333,675)	15,116,810
MBS put options	12,775,000	29,575,000	(32,300,000)	10,050,000
MBS call options	2,250,000	—	(2,250,000)	—
Put options on interest rate futures purchase contracts	2,835,000	9,850,000	(8,335,000)	4,350,000
Call options on interest rate futures purchase contracts	3,687,500	1,750,000	(4,837,500)	600,000
Put options on interest rate futures sale contracts	—	8,335,000	(8,335,000)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	486,100	5,132,000	(4,209,600)	1,408,500
Treasury futures sale contracts	1,550,000	3,792,100	(4,209,600)	1,132,500
Interest rate swap futures purchase contracts	2,900,000	1,800,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

	Notional amounts, nine months ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,618,361	370,704,328	(352,878,906)	31,443,783
Forward sale contracts	16,220,526	444,965,072	(418,747,355)	42,438,243
MBS put options	6,100,000	79,600,000	(72,750,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	1,750,000	14,700,000	(13,325,000)	3,125,000
Swaption sale contracts	—	13,325,000	(13,325,000)	—
Put options on interest rate futures purchase contracts	2,250,000	12,025,000	(12,000,000)	2,275,000
Call options on interest rate futures purchase contracts	750,000	9,740,000	(9,540,000)	950,000
Put options on interest rate futures sale contracts	—	12,000,000	(12,000,000)	—
Call options on interest rate futures sale contracts	—	9,540,000	(9,540,000)	—
Treasury futures purchase contracts	1,276,000	5,516,700	(5,792,700)	1,000,000
Treasury futures sale contracts	1,010,000	5,232,700	(5,792,700)	450,000
Interest rate swap futures purchase contracts	3,210,000	4,150,000	(3,775,000)	3,585,000
Interest rate swap futures sales contracts	—	3,775,000	(3,775,000)	—

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	Notional amounts, nine months ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,657,026	237,370,321	(228,197,522)	15,829,825
Forward sale contracts	6,890,046	275,749,351	(267,522,587)	15,116,810
MBS put options	4,635,000	77,185,000	(71,770,000)	10,050,000
MBS call options	1,450,000	6,750,000	(8,200,000)	—
Put options on interest rate futures purchase contracts	3,085,000	19,422,500	(18,157,500)	4,350,000
Call options on interest rate futures purchase contracts	1,512,500	13,127,800	(14,040,300)	600,000
Put options on interest rate futures sale contracts	—	27,297,800	(27,297,800)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	835,000	11,943,400	(11,369,900)	1,408,500
Treasury futures sale contracts	1,450,000	11,052,400	(11,369,900)	1,132,500
Interest rate swap futures purchase contracts	625,000	4,075,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

Derivative Balances and Netting of Financial Instruments

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 and repurchase agreement derivatives.

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts:

	September 30, 2020						December 31, 2019
	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 master netting arrangements:
Interest rate lock commitments	$	544,151	$	—	$	544,151	$	138,511	$	—	$	138,511
Repurchase agreement derivatives		—		—		—		8,187		—		8,187
		544,151		—		544,151		146,698		—		146,698
Derivatives subject to master netting arrangements:
Forward purchase contracts		72,640		—		72,640		12,364		—		12,364
Forward sale contracts		21,652		—		21,652		17,097		—		17,097
MBS put options		27,336		—		27,336		3,415		—		3,415
MBS call options		4,255		—		4,255		—		—		—
Swaption purchase contracts		5,568		—		5,568		2,409		—		2,409
Put options on interest rate futures purchase contracts		5,910		—		5,910		3,945		—		3,945
Call options on interest rate futures purchase contracts		1,570		—		1,570		1,469		—		1,469
Netting		—		(104,828)		(104,828)		—		(27,711)		(27,711)
		138,931		(104,828)		34,103		40,699		(27,711)		12,988
	$	683,082	$	(104,828)	$	578,254	$	187,397	$	(27,711)	$	159,686

39

Derivative Assets, Financial Instruments, and Cash 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 meet the accounting guidance qualifying for netting.

	September 30, 2020								December 31, 2019
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	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	$	544,151	$	—	$	—	$	544,151	$	138,511	$	—	$	—	$	138,511
JPMorgan Chase Bank, N.A.		18,772		—		—		18,772		2,196		—		—		2,196
RJ O'Brien		7,480		—		—		7,480		5,414		—		—		5,414
Wells Fargo Bank, N.A.		5,256		—		—		5,256		—		—		—		—
Goldman Sachs		1,148		—		—		1,148		2,548		—		—		2,548
Deutsche Bank		—		—		—		—		9,138		—		—		9,138
Mizuho Securities		—		—		—		—		1,597		—		—		1,597
Others		1,447		—		—		1,447		282		—		—		282
	$	578,254	$	—	$	—	$	578,254	$	159,686	$	—	$	—	$	159,686

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. Assets sold under agreements to repurchase do not qualify for netting.

	September 30, 2020						December 31, 2019
					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 master netting arrangements – Interest rate lock commitments	$	2,706	$	—	$	2,706	$	1,861	$	—	$	1,861
Derivatives subject to a master netting arrangement:
Forward purchase contracts		15,903		—		15,903		19,040		—		19,040
Forward sale contracts		98,765		—		98,765		18,045		—		18,045
Netting		—		(92,837)		(92,837)		—		(16,616)		(16,616)
		114,668		(92,837)		21,831		37,085		(16,616)		20,469
Total derivatives		117,374		(92,837)		24,537		38,946		(16,616)		22,330
Assets sold under agreements to repurchase:
Amount outstanding		7,267,046		—		7,267,046		4,141,680		—		4,141,680
Unamortized debt issuance cost, net		(7,858)		—		(7,858)		(627)		—		(627)
		7,259,188		—		7,259,188		4,141,053		—		4,141,053
	$	7,376,562	$	(92,837)	$	7,283,725	$	4,179,999	$	(16,616)	$	4,163,383

40

Derivative Liabilities, Financial Instruments, 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, 2020								December 31, 2019
			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	$	2,706	$	—	$	—	$	2,706	$	1,861	$	—	$	—	$	1,861
Credit Suisse First Boston Mortgage Capital LLC		3,613,132		(3,607,746)		—		5,386		1,235,430		(1,235,430)		—		—
Morgan Stanley Bank, N.A.		784,434		(784,434)		—		—		582,941		(582,941)		—		—
Bank of America, N.A.		767,391		(767,391)		—		—		379,400		(374,190)		—		5,210
JPMorgan Chase Bank, N.A.		741,341		(741,341)		—		—		936,172		(936,172)		—		—
Citibank, N.A.		637,347		(632,928)		—		4,419		655,831		(653,170)		—		2,661
BNP Paribas		370,013		(370,013)		—		—		183,880		(183,880)		—		—
Royal Bank of Canada		363,193		(363,193)		—		—		175,897		(175,897)		—		—
Federal Home Loan Mortgage Corporation		5,755		—		—		5,755		—		—		—		—
Mizuho Securities		2,366		—		—		2,366		—		—		—		—
Barclays Capital		1,648		—		—		1,648		—		—		—		—
Wells Fargo Bank, N.A.		—		—		—		—		11,212		—		—		11,212
Others		2,257		—		—		2,257		1,386		—		—		1,386
	$	7,291,583	$	(7,267,046)	$	—	$	24,537	$	4,164,010	$	(4,141,680)	$	—	$	22,330

41

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

		Quarter ended September 30,				Nine months ended September 30,
Derivative activity	Income statement line	2020		2019		2020		2019
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	173,381	$	33,347	$	404,795	$	95,785
Repurchase agreement derivatives	Interest expense	$	83	$	92	$	83	$	(1,608)
Hedged item (2):
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	(77,320)	$	(55,540)	$	(403,992)	$	(157,362)
Mortgage servicing rights	Net loan servicing fees–Change in fair value of mortgage servicing rights and mortgage servicing liabilities	$	6,521	$	250,146	$	1,027,327	$	587,883

(1) Represents net increase in fair value of IRLCs from the beginning to the end of the reporting period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loans are shown in the rollforward of IRLCs for the period in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

(2) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	2,213,539	$	2,720,335	$	2,926,790	$	2,820,612
Additions:
Resulting from loan sales		245,946		246,757		753,795		545,839
Purchases (purchase adjustments), net		(287)		46		25,473		227,445
		245,659		246,803		779,268		773,284
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(26,208)		(286,880)		(1,040,751)		(704,967)
Other changes in fair value (2)		(99,169)		(124,005)		(331,486)		(332,676)
Total change in fair value		(125,377)		(410,885)		(1,372,237)		(1,037,643)
Balance at end of period	$	2,333,821	$	2,556,253	$	2,333,821	$	2,556,253
					September 30,		December 31,
					2020		2019
					(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets					$	2,330,600	$	2,920,603

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

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

42

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	29,858	$	12,948	$	29,140	$	8,681
Mortgage servicing liabilities resulting from loan sales		—		19,501		6,576		27,133
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		10,822		8,630		24,927		14,687
Other changes in fair value (2)		(8,982)		(6,785)		(28,945)		(16,207)
Total change in fair value		1,840		1,845		(4,018)		(1,520)
Balance at end of period	$	31,698	$	34,294	$	31,698	$	34,294

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

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

Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Contractual servicing fees	$	203,696	$	185,967	$	601,527	$	533,510
Other fees:
Late charges		7,615		12,430		28,718		31,258
Other		6,960		4,846		17,781		9,119
	$	218,271	$	203,243	$	648,026	$	573,887

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Note 10—Leases

The Company has operating lease agreements relating to its facilities. The Company’s operating lease agreements have remaining terms ranging from less than one year to ten years; some of these operating lease agreements include options to extend the term for up to five years. None of the Company’s operating lease agreements require the Company to make variable lease payments.

The Company’s lease agreements are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in thousands)
Lease expense:
Operating leases	$	4,144	$	3,356	$	12,110	$	9,817
Short-term leases		457		213		937		644
Sublease income		—		(35)		—		(94)
Net lease expense included in Occupancy and equipment	$	4,601	$	3,534	$	13,047	$	10,367
Other information:
Cash payments for operating leases	$	4,418	$	4,063	$	13,212	$	11,793
Operating lease right-of-use assets recognized:
Upon adoption Accounting Standards Update 2016-02, Leases (Topic 842)	$	—	$	—	$	—	$	58,713
New leases		1,721		1,929		8,219		1,929
	$	1,721	$	1,929	$	8,219	$	60,642
Period end weighted averages:
Remaining lease term (in years)		6.4		5.8
Discount rate		4.2%		4.6%

Lease payments of the Company’s operating lease liabilities are summarized below:

Twelve months ended September 30,	Operating leases
	(in thousands)
2021	$	18,586
2022		16,405
2023		16,792
2024		14,474
2025		13,296
Thereafter		27,224
Total lease payments		106,777
Less imputed interest		(14,772)
Total	$	92,005

44

Note 11—Other Assets

Other assets are summarized below:

		September 30,		December 31,
	2020		2019
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Margin deposits		90,156		84,118
Capitalized software, net		91,237		63,130
Furniture, fixture, equipment and building improvements, net		29,274		30,480
Real estate acquired in settlement of loans		14,395		20,326
Other		233,570		135,503
	$	651,229	$	333,557
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		8,862		12,192
Furniture, fixture, equipment and building improvements, net		6,088		20,406
	$	207,547	$	32,598

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, 2020.

Assets Sold Under Agreements to Repurchase

The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by loans held for sale at fair value or participation certificates backed by MSRs. Eligible loans and participation certificates backed by MSRs are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on LIBOR. Loans and MSRs financed under these agreements may be re-pledged by the lenders.

On April 1, 2020, the Company issued a series of variable funding notes, the Series 2020-SPIADVF1 Notes (“GMSR Servicing Advance Notes”), to be sold under agreement to repurchase pursuant to a Master Repurchase Agreement, dated as of April 1, 2020, with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), acting as administrative agent on behalf of Credit Suisse AG, Cayman Islands Branch (“CSCIB”), as buyer (the “GMSR Servicing Advances Repurchase Agreement”).

The GMSR Servicing Advance Notes leverage the GNMA MSR Facility to support a separately defined servicing advance facility within the existing structure and provide the Company enhanced ability to finance its servicing advance obligations to Ginnie Mae and its security holders as necessary. Specifically, the GMSR Servicing Advances Repurchase Agreement provides the Company with financing secured by its servicing advances to pay, in accordance with the Ginnie Mae requirements, in the event borrowers are delinquent: (i) regularly scheduled monthly principal and interest to mortgage-backed securities holders; (ii) taxes, homeowner’s insurance, and other escrowed items; and (iii) other expenses related to servicing delinquent loans as specified by (A) state and federal laws and (B) government agencies, including the FHA, the VA, and the USDA.

The borrowing capacity under the GMSR Servicing Advances Repurchase Agreement, shared with VFN financing capacity, is $600 million, all of which is committed and may be used to finance the servicing advances related to delinquent FHA, VA, and USDA loans, including delinquencies caused by forbearance in accordance with the CARES Act.

45

Assets sold under agreements to repurchase are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	3,363,140		$	2,098,208		$	2,669,336		$	1,861,086
Weighted average interest rate (1)		2.68	%		3.66	%		3.06	%		4.08	%
Total interest expense (2)	$	27,322		$	19,429		$	70,493		$	47,709
Maximum daily amount outstanding	$	7,267,046		$	3,539,459		$	7,267,046		$	3,539,459

		September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	7,267,046		$	4,141,680
Unamortized debt issuance costs		(7,858)			(627)
	$	7,259,188		$	4,141,053
Weighted average interest rate		1.85	%		3.29	%
Available borrowing capacity (3):
Committed	$	17,072		$	125,810
Uncommitted		2,940,882			782,510
	$	2,957,954		$	908,320
Fair value of assets securing repurchase agreements:
Loans held for sale	$	8,453,522		$	4,322,789
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958		$	107,512
Servicing advances (4)	$	232,519		$	207,460
Mortgage servicing rights (4)	$	2,283,876		$	2,902,721
Deposits (4)	$	192,597		$	—
Margin deposits placed with counterparties (5)	$	4,375		$	5,000

(1) Excludes the effect of amortization of net issuance costs of $4.8 million and $9.2 million for the quarter and nine months ended September 30, 2020, respectively, and net issuance costs and premiums of $0.2 million and $9.2 million for the quarter and nine months ended September 30, 2019, respectively.

(2) In 2017, PFSI 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 $1.6 million and $14.7 million of such incentives as reductions in Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

(3) 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 financed.

(4) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, the 2018 Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

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

46

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

Remaining maturity at September 30, 2020	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	1,490,837
Over 30 to 90 days		5,365,208
Over 90 to 180 days		361,001
Over 180 days to one year		50,000
Total assets sold under agreements to repurchase	$	7,267,046
Weighted average maturity (in months)		2.0

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 assets sold under agreements to repurchase is summarized by counterparty below as of September 30, 2020:

			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	1,092,694	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	460,264	October 19, 2020	April 23, 2021
Bank of America, N.A.	$	410,222	November 2, 2020	March 11, 2021
JP Morgan Chase Bank, N.A.	$	192,579	December 2, 2020	January 7, 2021
Morgan Stanley Bank, N.A.	$	62,630	November 3, 2020	November 3, 2020
Citibank, N.A.	$	48,231	December 15, 2020	August 3, 2021
Royal Bank of Canada	$	33,343	October 30, 2020	October 30, 2020
BNP Paribas	$	27,646	December 16, 2020	July 30, 2021

(1) The calculation of the amount at risk includes the VFN and the 2018 Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018 Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

The Company is subject to margin calls during the period the repurchase 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 Purchase and Sale Agreements

Certain of the borrowing facilities secured by loans held for sale are in the form of mortgage loan participation purchase 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 a 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.

47

The mortgage loan participation purchase and sale agreements are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	235,713		$	258,169		$	227,460		$	249,023
Weighted average interest rate (1)		1.40	%		3.36	%		1.98	%		3.55	%
Total interest expense	$	999		$	2,304		$	3,870		$	7,034
Maximum daily amount outstanding	$	538,074		$	524,095		$	540,977		$	548,038

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $135,000 for the quarters ended September 30, 2020 and 2019, respectively, and $490,000 and $405,000 for the nine months ended September 30, 2020 and 2019, respectively.

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	535,378		$	497,948
Unamortized debt issuance costs		(315)			—
	$	535,063		$	497,948
Weighted average interest rate		1.40	%		3.05	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	558,023		$	523,349

Obligations Under Capital Lease

The Company has a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on June 13, 2022 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,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	15,179		$	25,812		$	17,253		$	13,380
Weighted average interest rate		2.16	%		4.47	%		2.69	%		4.48	%
Total interest expense	$	83		$	274		$	354		$	476
Maximum daily amount outstanding	$	16,749		$	28,295		$	20,810		$	28,295

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Unpaid principal balance	$	13,957		$	20,810
Weighted average interest rate		2.15	%		3.74	%
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	6,088		$	20,406
Capitalized software	$	8,862		$	12,192

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Notes Payable Secured by Mortgage Servicing Assets

2018 Term Notes

The Company, through the Issuer Trust, issued the 2018 Term Notes to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The 2018 Term Notes rank pari passu with each other and with the VFN issued by the Issuer Trust to PLS and are secured by certain participation certificates relating to Ginnie Mae MSRs and ESS that are financed pursuant to the GNMA MSR Facility.

Following is a summary of the issued and outstanding 2018 Term Notes:

Issuance Date	Principal		Stated interest rate (1)	Maturity date (2)
	(in thousands)		(Annually)
February 28, 2018 (the "2018-GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "2018-GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The 2018 Term Notes indentures provide the Company with the option to extend the maturity of the 2018 Term Notes by two years after the stated maturity.

MSR Note Payable

On February 1, 2018, the Company issued a note payable that is secured by Freddie Mac MSRs. Interest is charged at a rate based on LIBOR plus the applicable contract margin. The facility expires on October 21, 2020. The maximum amount that the Company may borrow under the note payable is $600 million, less any amount outstanding under the agreement to repurchase pursuant to which the Company finances the VFN. The Company did not borrow under this note payable during the periods presented.

Notes payable are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.99	%		5.11	%		3.57	%		5.21	%
Total interest expense	$	10,177		$	17,044		$	36,131		$	52,118
Maximum daily amount outstanding	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000

(1) Excludes the effect of amortization of debt issuance costs totaling $459,000 and $445,000 for the quarters ended September 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the nine month periods ended September 30, 2020 and 2019, respectively.

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	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(4,857)			(5,930)
	$	1,295,143		$	1,294,070
Weighted average interest rate		2.93	%		4.46	%
Assets pledged to secure notes payable (1):
Servicing advances	$	232,519		$	207,460
Mortgage servicing rights	$	2,213,344		$	2,861,442
Deposits	$	192,597		$	—

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the 2018 Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheet.

Unsecured Senior Notes

On September 29, 2020, the Company issued $500 million aggregate principal amount of 5.375% senior notes (the “Unsecured Notes”). Interest on the Unsecured Notes accrues beginning on September 29, 2020 at a rate of 5.375% per year. Interest on the Unsecured Notes is payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2021. The Unsecured Notes mature on October 15, 2025.

Before October 15, 2022, the Company may, at its option and on any one or more occasions redeem:

● some or all of the Unsecured Notes at a price equal to 100% of the principal amount of the Unsecured Notes redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, plus a make-whole premium; and

● up to 40% of the aggregate principal amount of the Unsecured Notes with an amount equal to or less than the net proceeds from certain equity offerings at a redemption price of 105.375% plus accrued and unpaid interest to, but excluding, the redemption date.

On or after October 15, 2022, the Company may, at its option and on any one or more occasions, redeem some or all of the Unsecured Notes at the applicable redemption prices set forth in the indenture under which the Unsecured Notes were issued, plus accrued and unpaid interest to, but excluding, the redemption date.

If a “change of control” (as defined in the indenture under which the Unsecured Notes were issued) occurs, the holders of the Unsecured Notes may require the Company to purchase for cash all or a portion of their Unsecured Notes at a purchase price equal to 101% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest to, but excluding, the repurchase date.

The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinated indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinated to any future secured indebtedness of the Company to the extent of the value of collateral securing such indebtedness.

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The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of PFSI’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinated indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinated to any future secured indebtedness of the guarantors to the extent of the value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinated to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.

Corporate Revolving Line of Credit

The Company, through its subsidiary PennyMac, entered into an amended and restated credit agreement on November 18, 2016, as amended (the “Credit Agreement”) under which PennyMac established a revolving line of credit in an amount not to exceed $150 million. Certain cash accounts with balances totaling $52.6 million at December 31, 2019, were pledged to secure this revolving line of credit. PennyMac did not borrow under the revolving line of credit during the periods presented and terminated the Credit Agreement on September 29, 2020 concurrent with the issuance the Unsecured Notes. Debt issuance costs and non-utilization fees totaled $561,000 and $481,000 for the quarters ended September 30, 2020 and 2019, respectively, and $1.5 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

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,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	25,909	$	18,709	$	21,446	$	21,155
Provision for losses on loans sold:
Resulting from sales of loans		5,219		2,508		13,120		5,222
Reduction in liability due to change in estimate		(2,473)		(1,175)		(5,419)		(6,305)
Losses incurred, net		(151)		(74)		(643)		(104)
Balance at end of period	$	28,504	$	19,968	$	28,504	$	19,968
Unpaid principal balance of loans subject to representations and warranties at end of period	$	199,194,983	$	166,541,153

Note 14—Income Taxes

The Company’s effective income tax rates were 26.5% and 26.9% for the quarters ended September 30, 2020 and 2019, respectively and 26.4% and 26.3% for the nine months ended September 30, 2020 and 2019, respectively.

The CARES Act, passed in March 2020, introduced a number of tax law changes which are generally taxpayer favorable. The Company does not anticipate any material changes in its effective income tax rates resulting from the CARES Act.

Note 15—Commitments and Contingencies

Litigation

From time to time, the Company may be a party to legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

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On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into a corporate reorganization (the “Reorganization”), without ensuring that the Reorganization was entirely fair to the Company or public shareholders. In connection with the Reorganization, the Company was formed as a Delaware corporation on July 2, 2018, and became the top-level parent holding company for the consolidated PennyMac business on November 1, 2018, The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and is currently pending approval. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. While no assurance can be provided to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending. Any potential range of loss cannot be reasonably estimated at this time primarily because the matter involves complex factual and legal issues; there is substantial uncertainty regarding any alleged damages, and the matter is at a preliminary stage of litigation.

Regulatory Matters

The Company and/or its subsidiaries are subject to various state and federal regulations related to its loan production and servicing operations by the various states it operates in as well as federal agencies such as the Consumer Financial Protection Bureau, HUD, and the FHA and is subject to the requirements of the Agencies to which it sells loans and for which it performs loan servicing activities. As a result, the Company may become involved in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by such various federal, state and local regulatory bodies.

Commitments to Purchase and Fund Mortgage Loans

The Company’s commitments to purchase and fund loans totaled $18.9 billion as of September 30, 2020.

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Note 16—Stockholders’ Equity

In June 2020, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $50 million to $500 million. The Company entered into a privately negotiated transaction with The BlackRock Foundation under the revised stock repurchase program to repurchase 6,975,323 shares of the Company’s common stock at a price of $34 per share.

Following is a summary of activity under the stock repurchase program:

	Quarter ended September 30,				Nine months ended September 30,				Cumulative
	2020		2019		2020		2019		total (1)
	(in thousands)
Shares of common stock repurchased		118		—		7,331		51		8,147
Cost of shares of common stock repurchased	$	6,927	$	—	$	248,210	$	1,056	$	263,158

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program through September 30, 2020.

Note 17—Net Gains on Loans Held for Sale

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
From non-affiliates:
Cash gain (loss):
Loans	$	605,559	$	(22,838)	$	1,219,732	$	(77,659)
Hedging activities		(72,268)		(148,128)		(421,947)		(230,200)
		533,291		(170,966)		797,785		(307,859)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		245,946		227,256		747,219		518,706
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(5,219)		(2,508)		(13,120)		(5,222)
Reduction in liability due to change in estimate		2,473		1,175		5,419		6,305
Change in fair value of loans and derivatives held at period end:
Interest rate lock commitments		173,381		33,347		404,795		95,785
Loans		(79,776)		(5,822)		(140,878)		(35,508)
Hedging derivatives		(5,052)		92,588		17,955		72,838
		865,044		175,070		1,819,175		345,045
From PennyMac Mortgage Investment Trust (1)		(9,775)		60,662		62,549		122,996
	$	855,269	$	235,732	$	1,881,724	$	468,041

(1) Gain on sale of loans to PMT are detailed in Note 4–Related Party Transactions.

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Note 18—Net Interest Income

Net interest income is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	1,259	$	2,894	$	4,863	$	7,533
Loans held for sale at fair value		41,854		35,800		120,866		101,509
Placement fees relating to custodial funds		9,163		43,231		44,419		98,628
		52,276		81,925		170,148		207,670
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		676		1,527		2,686		5,015
		52,952		83,452		172,834		212,685
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase (1)		27,322		19,429		70,493		47,709
Mortgage loan participation purchase and sale agreements		999		2,304		3,870		7,034
Obligations under capital lease		83		274		354		476
Notes payable		10,738		17,525		37,668		53,559
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		20,711		12,453		54,536		24,978
Interest on mortgage loan impound deposits		1,256		2,104		4,561		4,967
		61,109		54,089		171,482		138,723
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		2,070		2,291		6,416		8,124
		63,179		56,380		177,898		146,847
	$	(10,227)	$	27,072	$	(5,064)	$	65,838

(1) In 2017, the Company entered into a master repurchase agreement that provided the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $1.6 million and $14.7 million of such incentives as reductions of Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

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Note 19—Stock-based Compensation

As of September 30, 2020, the Company had one stock-based compensation plan. Following is a summary of the stock-based compensation activity:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Grants:
Units:
Performance-based RSUs		—		—		422		665
Stock options		—		—		273		344
Time-based RSUs		—		4		310		334
Grant date fair value:
Performance-based RSUs	$	—	$	—	$	14,788	$	15,253
Stock options		—		—		2,770		2,965
Time-based RSUs		—		102		10,823		7,647
Total	$	—	$	102	$	28,381	$	25,865
Vestings and exercises:
Performance-based RSUs vested		—		—		603		648
Stock options exercised		152		127		476		245
Time-based RSUs vested		7		3		355		294
Compensation expense	$	7,095	$	8,941	$	26,220	$	19,124

Note 20—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined by dividing net income 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 net income 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 stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands, except per share amounts)
Net income	$	535,160	$	121,473	$	1,194,080	$	240,304
Weighted average basic shares of common stock outstanding		72,439		78,361		76,292		78,119
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		3,699		2,021		3,326		1,702
Weighted average shares of common stock applicable to diluted earnings per share		76,138		80,382		79,618		79,821
Basic earnings per share of common stock	$	7.39	$	1.55	$	15.65	$	3.08
Diluted earnings per share of common stock	$	7.03	$	1.51	$	15.00	$	3.01

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Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding performance-based restricted share units (“RSUs”) and stock options excluded from the calculation of diluted earnings per share:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		—		1,157		335		985
Stock options (2)		—		566		217		888
Total anti-dilutive shares and units		—		1,723		552		1,873
Weighted average exercise price of anti-dilutive stock options (2)	$	—	$	23.50	$	35.03	$	23.98

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

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

Note 21—Supplemental Cash Flow Information

	Nine months ended September 30,
	2020		2019
	(in thousands)
Cash paid for interest	$	184,087	$	125,987
Cash paid for income taxes, net	$	260,723	$	5,761
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	753,795	$	545,839
Mortgage servicing liabilities resulting from loan sales	$	6,576	$	27,133
Operating right-of-use assets recognized	$	8,219	$	60,642
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	1,393	$	1,327
Issuance of common stock in settlement of directors' fees	$	144	$	184

Note 22—Regulatory Capital and Liquidity Requirements

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

The Company is subject to financial eligibility requirements established by the Federal Housing Finance Agency (“FHFA”) for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac. The eligibility requirements include:

● tangible net worth of $2.5 million plus 25 basis points of the UPB of the Company’s total 1-4 unit servicing portfolio, excluding mortgage loans subserviced for others;

● before June 30, 2020, a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 600 basis points; and

● effective June 30, 2020, a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB less 70% of such nonperforming Agency servicing UPB in excess of 600 basis points where the underlying loans are in COVID-19 forbearance but were current at the time they entered forbearance.

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On January 31, 2020, FHFA proposed changes to the eligibility requirements, which would increase the tangible net worth requirement to $2.5 million plus 35 basis points of the UPB of loans serviced for Ginnie Mae and 25 basis points of the UPB of all other 1-4 unit loans serviced, and increase the liquidity requirement to 4 basis points of the aggregate UPB serviced for Fannie Mae and Freddie Mac and 10 basis points of the UPB serviced for Ginnie Mae plus 300 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 400 basis points. On June 15, 2020, FHFA announced that it will be re-proposing changes to these requirements.

The Company is also subject to financial eligibility requirements for Ginnie Mae single-family issuers. The eligibility requirements include net worth of $2.5 million plus 35 basis points of PLS' outstanding Ginnie Mae single-family obligations and a liquidity requirement equal to the greater of $1.0 million or 10 basis points of PLS' outstanding Ginnie Mae single-family securities.

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

	September 30, 2020						December 31, 2019
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	3,841,356		$	616,001		$	2,247,751		$	585,674
Ginnie Mae – PLS	$	3,139,830		$	980,469		$	1,907,398		$	910,456
HUD – PLS	$	3,139,830		$	2,500		$	1,907,398		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	607,064		$	82,828		$	257,794		$	79,991
Ginnie Mae – PLS	$	607,064		$	217,648		$	257,794		$	216,119
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		10	%		6	%		19	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		12	%		6	%		22	%		6	%

(1) Calculated in compliance with the respective Agency’s 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.

Note 23—Segments

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

Two of the segments are in the mortgage banking business: production and servicing. The production segment performs loan origination, acquisition and sale activities. The servicing segment performs servicing of loans, execution and management of early buyout loan transactions and servicing of loans sourced and managed by the investment management segment for PMT, 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 and managing the acquired assets and correspondent production activities for PMT.

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Financial performance and results by segment are as follows:

	Quarter ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	700,830	$	154,439	$	855,269	$	—	$	855,269
Loan origination fees		75,572		—		75,572		—		75,572
Fulfillment fees from PennyMac Mortgage Investment Trust		54,839		—		54,839		—		54,839
Net loan servicing fees		—		132,807		132,807		—		132,807
Net interest income (expense):
Interest income		26,050		26,902		52,952		—		52,952
Interest expense		18,325		44,850		63,175		4		63,179
		7,725		(17,948)		(10,223)		(4)		(10,227)
Management fees		—		—		—		8,508		8,508
Other		132		1,802		1,934		1,290		3,224
Total net revenue		839,098		271,100		1,110,198		9,794		1,119,992
Expenses		225,817		159,407		385,224		6,477		391,701
Income before provision for income taxes	$	613,281	$	111,693	$	724,974	$	3,317	$	728,291
Segment assets at quarter end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Quarter ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	216,132	$	19,600	$	235,732	$	—	$	235,732
Loan origination fees		49,434		—		49,434		—		49,434
Fulfillment fees from PennyMac Mortgage Investment Trust		45,149		—		45,149		—		45,149
Net loan servicing fees		—		66,229		66,229		—		66,229
Net interest income (expense):
Interest income		22,445		61,007		83,452		—		83,452
Interest expense		18,423		37,936		56,359		21		56,380
		4,022		23,071		27,093		(21)		27,072
Management fees		—		—		—		10,098		10,098
Other		324		567		891		1,742		2,633
Total net revenue		315,061		109,467		424,528		11,819		436,347
Expenses		135,777		127,581		263,358		6,792		270,150
Income before provision for income taxes	$	179,284	$	(18,114)	$	161,170	$	5,027	$	166,197
Segment assets at quarter end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

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	Nine months ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	1,637,193	$	244,531	$	1,881,724	$	—	$	1,881,724
Loan origination fees		192,091		—		192,091		—		192,091
Fulfillment fees from PennyMac Mortgage Investment Trust		149,594		—		149,594		—		149,594
Net loan servicing fees		—		412,952		412,952		—		412,952
Net interest income (expense):
Interest income		71,840		100,994		172,834		—		172,834
Interest expense		51,124		126,756		177,880		18		177,898
		20,716		(25,762)		(5,046)		(18)		(5,064)
Management fees		—		—		—		25,851		25,851
Other		483		1,473		1,956		4,347		6,303
Total net revenue		2,000,077		633,194		2,633,271		30,180		2,663,451
Expenses		608,602		413,071		1,021,673		18,395		1,040,068
Income before provision for income taxes	$	1,391,475	$	220,123	$	1,611,598	$	11,785	$	1,623,383
Segment assets at period end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Nine months ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	407,713	$	60,328	$	468,041	$	—	$	468,041
Loan origination fees		110,288		—		110,288		—		110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		102,313		—		102,313		—		102,313
Net loan servicing fees		—		205,934		205,934		—		205,934
Net interest income (expense):
Interest income		55,714		156,971		212,685		—		212,685
Interest expense		36,236		110,572		146,808		39		146,847
		19,478		46,399		65,877		(39)		65,838
Management fees		—		—		—		26,178		26,178
Other		929		2,664		3,593		4,844		8,437
Total net revenue		640,721		315,325		956,046		30,983		987,029
Expenses		316,187		324,949		641,136		19,815		660,951
Income before provision for income taxes	$	324,534	$	(9,624)	$	314,910	$	11,168	$	326,078
Segment assets at period end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

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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 19, 2020, The Company issued an additional $150 million in principal amount of unsecured senior notes under a supplemental indenture governing the Unsecured Notes described in Note 12 – Borrowings. The additional unsecured senior notes have the same terms, other than the issuance date and issuance price, as the Unsecured Notes.

● On November 5, 2020, the Company announced that its board of directors declared a cash dividend of $0.15 per common share. The dividend will be paid on November 25, 2020 to common shareholders of record as of November 16, 2020.

● All agreements to repurchase assets that matured before the date of this Report were extended or renewed.

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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 including 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 and consolidate the financial results of Private National Mortgage Acceptance Company, LLC (“PennyMac”). 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 were formed as a Delaware corporation on July 2, 2018. We became the top-level parent holding company for the consolidated PennyMac business pursuant to a corporate reorganization (the “Reorganization”) that was consummated on November 1, 2018. Before the Reorganization, PNMAC Holdings, Inc. (formerly known as PennyMac Financial Services, Inc.) (“PNMAC Holdings”) was our top-level parent holding company and our public company registrant.

One result of the consummation of the Reorganization was that our equity structure was changed to create a single class of publicly-held common stock as opposed to the two classes that were in place before the Reorganization. For tax purposes, the Reorganization was treated as an integrated transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and/or a transfer described in Section 351(a) of the Internal Revenue Code. PNMAC Holdings’ financial statements remain our historical financial statements.

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We conduct our business in three segments: production, servicing (together, production and servicing comprise our mortgage banking activities) and investment management.

● The production segment performs loan origination, acquisition and sale activities.

● The servicing segment performs loan servicing for both newly originated loans we are holding for sale and loans we service for others, including for PMT.

● The investment management segment represents our investment management activities, which include the activities associated with investment asset acquisitions and dispositions such as sourcing, due diligence, negotiation and settlement.

Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC (“PLS”), is a non-bank producer and servicer of mortgage and home equity 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”). PLS is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), and a lender/servicer of the Veterans Administration (“VA”) and the U.S. Department of Agriculture (“USDA”). 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 is PNMAC Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the SEC as an investment adviser under the Investment Advisers 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.

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Results of Operations

Our results of operations are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands, except per share amounts)
Revenues:
Net gains on loans held for sale at fair value	$	855,269		$	235,732		$	1,881,724		$	468,041
Loan origination fees		75,572			49,434			192,091			110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		54,839			45,149			149,594			102,313
Net loan servicing fees		132,807			66,229			412,952			205,934
Net interest (expense) income		(10,227)			27,072			(5,064)			65,838
Management fees		8,508			10,098			25,851			26,178
Other		3,224			2,633			6,303			8,437
Total net revenue		1,119,992			436,347			2,663,451			987,029
Expenses		391,701			270,150			1,040,068			660,951
Income before provision for income taxes		728,291			166,197			1,623,383			326,078
Provision for income taxes		193,131			44,724			429,303			85,774
Net income	$	535,160		$	121,473		$	1,194,080		$	240,304
Earnings per share
Basic	$	7.39		$	1.55		$	15.65		$	3.08
Diluted	$	7.03		$	1.51		$	15.00		$	3.01
Annualized return on average common stockholders' equity		77.6	%		26.2	%		63.8	%		18.2	%
Income before provision for income taxes by segment:
Mortgage banking:
Production	$	613,281		$	179,284		$	1,391,475		$	324,534
Servicing		111,693			(18,114)			220,123			(9,624)
Total mortgage banking		724,974			161,170			1,611,598			314,910
Investment management		3,317			5,027			11,785			11,168
	$	728,291		$	166,197		$	1,623,383		$	326,078
Adjusted Earning Before Interest, Taxes, Depreciation and Amortization ("EBITDA") (1)	$	769,805		$	221,293		$	1,688,677		$	478,021
During the period:
Interest rate lock commitments issued	$	36,564,786		$	22,423,177		$	87,334,326		$	49,291,237
At end of period:
Interest rate lock commitments outstanding	$	18,873,579		$	8,311,786
Unpaid principal balance of loan servicing portfolio:
Owned:
Mortgage servicing rights	$	234,850,997		$	221,215,993
Mortgage servicing liabilities		1,799,562			2,327,687
Loans held for sale		8,749,673			4,323,252
		245,400,232			227,866,932
Subserviced for PMT		156,496,568			120,608,076
	$	401,896,800		$	348,475,008
Net assets of PennyMac Mortgage Investment Trust	$	2,281,266		$	2,219,611
Book value per share	$	41.67		$	24.37

(1) To provide investors with information in addition to our results as determined by accounting principles generally accepted in the United States (“GAAP”), we disclose Adjusted EBITDA as a non-GAAP measure which is a measure that is frequently used in our industry to measure performance and we believe that this measure provides supplemental information that is useful to investors. Adjusted EBITDA is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net income, or any other performance measure calculated in accordance with GAAP.

We define “Adjusted EBITDA” as net income plus provision for income taxes, depreciation and amortization, excluding decrease (increase) in fair value of MSRs and MSLs due to changes in valuation inputs used in valuation model, increase (decrease) in fair value of ESS payable to PMT, hedging losses (gains) associated with MSRs, stock-based compensation and interest expense on corporate debt or corporate revolving credit facilities and capital leases to the extent such items existed in the periods presented.

We believe that the presentation of Adjusted EBITDA provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the

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performance and value of our business. However, other companies may define Adjusted EBITDA differently, and as a result, our measures of Adjusted EBITDA may not be directly comparable to those of other companies.

Adjusted EBITDA measures have limitations as analytical tools, and should not be considered them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

(a) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

(b) they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

(c) they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

Because of these limitations, Adjusted EBITDA measures are not intended as alternatives to net income as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net income	$	535,160	$	121,473	$	1,194,080	$	240,304
Provision for income taxes		193,131		44,724		429,303		85,774
Income befoe provisions for income taxes		728,291		166,197		1,623,383		326,078
Depreciation and amortization		6,401		3,900		17,126		10,650
Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in valuation model		37,030		295,510		1,065,678		719,654
Decrease in fair value of ESS payable to PennyMac Mortgage Investment Trust		(3,135)		(3,864)		(18,293)		(11,519)
Hedging gains associated with MSRs		(6,521)		(250,146)		(1,027,327)		(587,883)
Stock‑based compensation		7,095		8,941		26,220		19,124
Interest expense on corporate debt or corporate revolving credit facilities and capital lease		644		755		1,890		1,917
Adjusted EBITDA	$	769,805	$	221,293	$	1,688,677	$	478,021

During the nine months ended September 30, 2020, the United States was significantly impacted by the ongoing effects of the COVID-19 Pandemic (the “Pandemic” or “COVID-19”) and the effects of market and government responses to the Pandemic. These developments have resulted in an economic recession in the United States and increased unemployment that have created financial hardships for many existing borrowers.

As part of its response to the Pandemic, the federal government included requirements in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that we provide borrowers with loans we service for the Agencies with substantial payment forbearance. As a result of this requirement, we have seen a large increase in delinquencies in our servicing portfolio which has increased our cost to service those loans and may require us to finance substantial amounts of advances of principal and interest payments to the investors holding these loans, as well as property taxes, insurance and other costs to protect investors’ interest in the properties collateralizing the loans. As of September 30, 2020, 9.2% of loans in our predominately government-insured or guaranteed MSR portfolio were in forbearance plans and delinquent resulting in an increase in the level of servicing advances we have been required to make in order to fund borrower delinquencies.

This development may have a negative effect on the earnings of our servicing segment before taking into account the effect of future developments on the valuation of our MSRs by, among other things, reducing servicing fee income, reducing the amount of placement fees we earn on custodial deposits related to these loans, increasing our cost to service due to higher delinquency and default rates, as well as increased financing costs due to the need to advance funds on behalf of delinquent borrowers. We expect these losses to be offset by growth in our loan servicing portfolio and gains on early buyout loans as those borrowers reperform.

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Before the onset of the Pandemic, the mortgage origination market was experiencing healthy demand owing to historically low interest rates in the United States. The government’s response to the onset of the Pandemic, including fiscal stimulus and infusions of additional liquidity by the Federal Reserve into financial markets acted to further lower market mortgage interest rates. These developments have acted to sustain heightened demand for new mortgage loans despite the slowdown in overall economic activity. The mortgage origination market for 2019 was estimated at $2.3 trillion; current forecasts estimate the origination market to approximate $3.6 trillion for 2020 and range from $2.5 trillion to $2.7 trillion for 2021. This increase in demand for mortgage loans, combined with constraints on mortgage industry origination capacity that existed before the Pandemic, has allowed us to realize higher gain-on sale margins in our production segment. Fannie Mae and Freddie Mac are expected to add a 50 basis point adverse market refinance fee applicable to most mortgage refinances on December 1, 2020 that could have a negative impact on future refinances.

The current environment caused by the Pandemic in the United States is historically unprecedented and the source of much uncertainty surrounding future economic and market prospects and the ongoing effects on our future prospects are difficult to anticipate, for further discussion of the potential impacts of the Pandemic please also see “Risk Factors” in Part II, Item 1A.

For the quarter and nine months ended September 30, 2020, income before provision for income taxes increased $562.1 million and $1.3 billion, respectively, compared to the same periods ended September 30, 2019. The increases were primarily due to an increase in production income (Net gains on loans held for sale at fair value, Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust) which reflects higher production volume and improved margins and an increase in Net loan servicing fees primarily due to growth in our loan servicing portfolio and increase in income from buying loans out of Ginnie Mae securities for potential resecuritization, partially offset by an increase in total expenses. The increase in total expenses were mainly due to increases in compensation, servicing and loan origination expenses reflecting the continuing growth of our mortgage banking activities and the impact of the Pandemic on our servicing portfolio and operations.

Net Gains on Loans Held for Sale at Fair Value

During the quarter and nine months ended September 30, 2020, we recognized Net gains on loans held for sale at fair value totaling $855.3 million and $1.9 billion, respectively, an increase of $619.5 million and $1.4 billion, compared to the same periods in 2019. The increases were primarily due to the combined effects of decreasing interest rates on demand for loans and of temporary disruption of industry capacity at the onset of the Pandemic, both of which increased profit margins during 2020 as compared to 2019.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
From non-affiliates:
Cash gain (loss):
Loans	$	605,559	$	(22,838)	$	1,219,732	$	(77,659)
Hedging activities		(72,268)		(148,128)		(421,947)		(230,200)
Total cash gain (loss)		533,291		(170,966)		797,785		(307,859)
Non-cash gain:
Change in fair value of loans and derivative financial instruments outstanding at end of period:
Interest rate lock commitments		173,381		33,347		404,795		95,785
Loans		(79,776)		(5,822)		(140,878)		(35,508)
Hedging derivatives		(5,052)		92,588		17,955		72,838
		88,553		120,113		281,872		133,115
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		245,946		227,256		747,219		518,706
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(5,219)		(2,508)		(13,120)		(5,222)
Reduction in liability due to change in estimate		2,473		1,175		5,419		6,305
Total non-cash gain		331,753		346,036		1,021,390		652,904
Total gains on sale from non-affiliates		865,044		175,070		1,819,175		345,045
From PennyMac Mortgage Investment Trust		(9,775)		60,662		62,549		122,996
	$	855,269	$	235,732	$	1,881,724	$	468,041
During the period:
Interest rate lock commitments issued:
Government-insured or guaranteed mortgage loans	$	26,629,871	$	19,383,044	$	63,728,308	$	42,574,349
Conventional mortgage loans		9,934,915		3,031,076		23,596,038		6,686,393
Jumbo mortgage loans		—		6,087		8,304		23,452
Home equity lines of credit		—		2,970		1,676		7,043
	$	36,564,786	$	22,423,177	$	87,334,326	$	49,291,237
At end of period:
Loans held for sale at fair value	$	9,126,172	$	4,522,971
Commitments to fund and purchase loans	$	18,873,579	$	8,311,786

Our gain on sale of loans held for sale includes both cash and non-cash elements. We recognize a significant portion of our gain on sale of loans when we make a commitment to purchase or fund a mortgage loan. We recognize this gain in the form of an interest rate lock commitment. We adjust our initial gain amount as the loan purchase or origination process progresses until the loan is either funded or cancelled. We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur liabilities for mortgage servicing liabilities (which represent the fair value of the costs we expect to incur in excess of the fees we receive for early buyout of delinquent loans (“EBO loans”) we have resold) and for the fair value of our estimate of the losses we expect to incur relating to the representation and warranties we provide in our loan sale transactions.

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Non-cash elements of gain on sale of loans held for sale

The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 39% and 54% of our gain on sale of loans held for sale at fair value for the quarter and nine months ended September 30, 2020, respectively, as compared to 147% and 140% for the quarter and nine months ended September 30, 2019, respectively. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. How we measure and update our measurements of IRLCs, MSRs and MSLs is detailed in Note 6 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.

Our agreements with the purchasers and insurers include representations and warranties related to the loans we sell. 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 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 loans with the identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent originators that sold such loans to us 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 seller.

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

The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of 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 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. 

The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent 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 relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $5.2 million and $13.1 million for the quarter and nine months ended September 30, 2020, respectively, compared to $2.5 million and $5.2 million for the quarter and nine months ended September 30, 2019, respectively. The increase in the provision relating to current loan sales is primarily attributable to increased sales of loans supplemented by increased loss assumptions relating to our securitizations of early buyout loans. We also recorded reductions in the liability of $2.5 million and $5.4 million during the quarter and nine months ended September 30, 2020, respectively, compared to $1.2 million and $6.3 million during the quarter and nine months ended September 30, 2019, respectively. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
During the period:
Indemnification activity:
Loans indemnified by PFSI at beginning of period	$	16,396	$	12,928	$	15,366	$	8,899
New indemnifications		1,285		5,582		3,731		9,848
Less indemnified loans sold, repaid or refinanced		2,053		1,587		3,469		1,824
Loans indemnified by PFSI at end of period	$	15,628	$	16,923	$	15,628	$	16,923
Repurchase activity:
Total loans repurchased by PFSI	$	9,146	$	4,115	$	43,699	$	15,427
Less:
Loans repurchased by correspondent lenders		7,207		2,677		23,713		9,961
Loans repaid by borrowers or resold with defects resolved		5,282		1,663		12,649		4,258
Net loans (resolved) repurchased with losses chargeable to liability for representations and warranties	$	(3,343)	$	(225)	$	7,337	$	1,208
Net losses charged to liability for representations and warranties	$	151	$	74	$	643	$	104
At end of period:
Unpaid principal balance of loans subject to representations and warranties	$	199,194,983	$	166,541,153
Liability for representations and warranties	$	28,504	$	19,968

During the quarter and nine months ended September 30, 2020, we repurchased loans totaling $9.1 million and $43.7 million in UPB, respectively. We recorded losses of $151,000 and $643,000 net of recoveries during the quarter and nine months ended September 30, 2020, respectively. If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase.

Loan origination fees

Loan origination fees increased $26.1 million and $81.8 million during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were primarily due to an increase in volume of loans we produced.

Fulfillment fees from PennyMac Mortgage Investment Trust

Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees were calculated as a percentage of the UPB of the loans we fulfilled for PMT through June 30, 2020. Effective July 1, 2020, fulfillment fees are calculated based on the number of loans we fulfill for PMT.

Fulfillment fees increased $9.7 million and $47.3 million during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were primarily due to an increase in PMT’s loan production volume, partially offset by the effect of the amendment to the fulfillment fee structure during the quarter and nine month period ended September 30, 2020, compared to the same periods in 2019.

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Net Loan Servicing Fees

Following is a summary of our net loan servicing fees:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net loan servicing fees:
Loan servicing fees:
From non-affiliates	$	203,696	$	185,967	$	601,527	$	533,510
From PennyMac Mortgage Investment Trust		18,752		12,964		48,806		35,102
Other		27,920		26,018		85,218		74,043
		250,368		224,949		735,551		642,655
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results		(117,561)		(158,720)		(322,599)		(436,721)
Net loan servicing fees	$	132,807	$	66,229	$	412,952	$	205,934
Average loan servicing portfolio	$	394,392,315	$	341,369,904	$	386,004,037	$	325,658,620

Change in fair value of mortgage servicing rights and excess servicing spread are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Realization of cash flows	$	(90,187)	$	(117,220)	$	(302,541)	$	(316,469)
Other changes in fair value of mortgage servicing rights and mortgage servicing liabilities		(37,030)		(295,510)		(1,065,678)		(719,654)
Change in fair value of excess servicing spread		3,135		3,864		18,293		11,519
Hedging results		6,521		250,146		1,027,327		587,883
Total change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results	$	(117,561)	$	(158,720)	$	(322,599)	$	(436,721)
Average balances:
Mortgage servicing rights	$	2,252,504	$	2,601,069	$	2,364,573	$	2,757,948
Mortgage servicing liabilities	$	31,070	$	23,997	$	29,635	$	14,649
Excess servicing spread financing	$	149,035	$	187,088	$	158,636	$	199,911
At period end:
Mortgage servicing rights	$	2,333,821	$	2,556,253
Mortgage servicing liabilities	$	31,698	$	34,294
Excess servicing spread financing	$	142,990	$	183,141

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Following is a summary of our loan servicing portfolio:

	September 30,		December 31,
	2020		2019
	(in thousands)
Loans serviced
Prime servicing:
Owned:
Mortgage servicing rights
Originated	$	187,134,080	$	166,188,825
Acquired		47,716,917		59,598,279
		234,850,997		225,787,104
Mortgage servicing liabilities		1,799,562		2,758,454
Loans held for sale		8,749,673		4,724,006
		245,400,232		233,269,564
Subserviced for PMT		156,425,439		135,288,944
Total prime servicing		401,825,671		368,558,508
Special servicing for PMT		71,129		125,724
Total loans serviced	$	401,896,800	$	368,684,232

Net loan servicing fees increased $66.6 million and $207.0 million, respectively, during the quarter and nine months ended September 30, 2020 compared to the same periods ended September 30, 2019. The increases were due to $41.1 million and $114.1 million, respectively, less in fair value losses relating to MSRs, mortgage servicing liabilities (“MSLs”), and ESS, net of hedging results and an increase of $25.4 million and $92.9 million, respectively, in loan servicing fees resulting from an increase in our average servicing portfolio during the quarter and nine months ended September 30, 2020, compared to the same periods in 2019.

During the nine months ended September 30, 2020, the prepayment expectations resulting from the decreasing interest rate environment, along with expectations of higher costs to service loans in the coming months and increased returns demanded by market participants in response to the uncertainties created by the Pandemic, resulted in a 36% reduction in fair value (as measured by the December 31, 2019 fair value) of our investment in MSRs. This reduction in fair value was offset by our hedging results and change in fair value of ESS.

There can be no assurance that our hedging activities will continue to perform in a like manner in the future. As discussed above, we expect the ongoing effects of the Pandemic and the requirements of the CARES Act to reduce our servicing income and to increase our servicing expenses due to the increased number of delinquent loans, and significant levels of forbearance that we have and continue to grant, as well as the resolution of loans that we expect to ultimately default as the result of the Pandemic.

Net Interest (Expense) Income

Net interest income decreased $37.3 million during the quarter ended September 30, 2020 compared to the same period in 2019. The decrease was primarily due to:

● a decrease in placement fees we receive relating to custodial funds that we manage due to decreased earning rates which reflect the lower interest rate environment; and

● an increase in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of increased borrower refinancing activity due to the lower interest rates in 2020 as compared to 2019; partially offset by

● an increase in interest income on loans held for sale due to larger average loan inventory balances during the quarter ended September 30, 2020 as compared to 2019.

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Net interest income decreased $70.9 million during the nine months ended September 30, 2020 compared to the same period in 2019. The decrease was primarily due to:

● a decrease in placement fees we receive relating to custodial funds that we manage due to low earning rates;

● an increase in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of increased borrower refinancing activity due to the lower interest rates in 2020 as compared to 2019;

● an increase in interest expense on repurchase agreements, reflecting the expiration of a master repurchase agreement in August 2019 that provided us with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. We recorded $14.7 million of such incentives as reductions in Interest expense during the nine months ended September 30, 2019; partially offset by

● an increase in interest income on loans held for sale due to larger average loan inventory balances during the nine months ended September 30, 2020 as compared to 2019.

Management fees

Management fees are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Management fees:
PennyMac Mortgage Investment Trust:
Base management	$	8,508	$	7,914	$	25,851	$	20,862
Performance incentive		—		2,184		—		5,316
	$	8,508	$	10,098	$	25,851	$	26,178
Net assets of PMT at end of period	$	2,281,266	$	2,219,611

Management fees decreased $1.6 million and $327,000, respectively, during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The decrease was due to a decrease of $2.2 million and $5.3 million, respectively, in incentive fees during the quarter and nine months ended September 30, 2020 compared to the same period in 2019 reflecting the losses PMT incurred during the nine months ended September 30, 2020, partially offset by an increase of $594,000 and $5.0 million, respectively, in base management fees reflecting the increases in PMT’s average shareholders’ equity, upon which its base management fees are based. The increase in PMT’s average shareholders’ equity during 2020 as compared to 2019 is the result of PMT’s equity offerings throughout 2019. We do not expect to recognize performance incentive fees for the foreseeable future because of the losses PMT incurred during the three months ended March 31, 2020.

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Expenses

Compensation

Compensation expenses are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Salaries and wages	$	117,230	$	77,748	$	308,629	$	212,135
Incentive compensation		57,257		39,824		154,597		86,587
Taxes and benefits		20,858		14,619		61,316		44,603
Stock and unit-based compensation		7,095		8,941		26,220		19,124
	$	202,440	$	141,132	$	550,762	$	362,449
Head count:
Average		5,672		3,751		4,978		3,591
Quarter end		6,019		3,907

Compensation expense increased $61.3 million and $188.3 million during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were primarily due to growth in head count made to accommodate the growth in our loan production and servicing activities as well as to increases in incentive compensation resulting from performance-based incentives and higher than expected attainment of profitability targets.

Servicing

Servicing expenses increased $23.2 million and $62.6 million during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. This increase in servicing expense was primarily the result of the increase in delinquencies we experienced due to the effects on borrower delinquencies of the Pandemic.

Loan origination

Loan origination expense increased $18.9 million and $78.3 million during the quarter and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were primarily resulting from increased consumer and broker direct lending activities, partially offset by cost reduction initiatives related to lender paid fees during the quarter and nine months ended September 30, 2020 compared to the same periods during 2019.

Provision for Income Taxes

Our effective income tax rates were 26.5% and 26.4% during the quarter and nine months ended September 30, 2020, respectively, compared to 26.9% and 26.3% during the same periods in 2019.

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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,
	2020		2019
	(in thousands)
ASSETS
Cash and short-term investments	$	631,302	$	262,902
Loans held for sale at fair value		9,126,172		4,912,953
Servicing advances, net		393,654		331,169
Investments in and advances to affiliates		210,427		157,343
Mortgage servicing rights		2,333,821		2,926,790
Loans eligible for repurchase		17,183,873		1,046,527
Other		1,301,616		566,333
Total assets	$	31,180,865	$	10,204,017
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt	$	7,794,251	$	4,639,001
Long-term debt		1,944,448		1,493,466
Liability for loans eligible for repurchase		17,183,873		1,046,527
Income taxes payable		673,149		504,569
Other		568,067		458,947
Total liabilities		28,163,788		8,142,510
Stockholders' equity		3,017,077		2,061,507
Total liabilities and stockholders' equity	$	31,180,865	$	10,204,017

Total assets increased $21.0 billion from $10.2 billion at December 31, 2019 to $31.2 billion at September 30, 2020. The increase was primarily due to an increase of $16.1 billion in loans eligible for repurchase, $4.2 billion in loans held for sale at fair value, $368.4 million in cash and short-term investments, $418.6 million in derivative assets and $317.7 million in other assets, partially offset by a decrease of $593.0 million in MSRs. The increase in loans eligible for repurchase reflects an increase in delinquent loans as a result of the Pandemic and the CARES Act forbearance requirements. The decrease in MSRs reflects the $1.0 billion in fair value losses discussed above, partially offset by additions resulting from our loan production activities. We increased our holding of cash and short-term investments during the nine months ended September 30, 2020 as a means of enhancing our liquidity during the Pandemic.

Total liabilities increased $20.1 billion from $8.1 billion at December 31, 2019 to $28.2 billion at September 30, 2020. The increase was primarily attributable to the increase in liability for loans eligible for repurchase.

Cash Flows

Our cash flows for the nine months ended September 30, 2020 and 2019 are summarized below:

	Nine months ended September 30,
	2020		2019		Change
	(in thousands)
Operating	$	(3,923,531)	$	(1,690,141)	$	(2,233,390)
Investing		924,599		169,416		755,183
Financing		3,339,596		1,566,513		1,773,083
Net increase in cash and restricted cash	$	340,664	$	45,788	$	294,876

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Our cash flows resulted in a net increase in cash and restricted cash of $340.7 million during the nine months ended September 30, 2020 as discussed below.

Operating activities

Net cash used in operating activities totaled $3.9 billion during the nine months ended September 30, 2020 compared with net cash used in operating activities totaled $1.7 billion during the same period in 2019. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans as shown below:

	Nine months ended September 30,
	2020		2019
	(in thousands)
Cash flows from:
Loans held for sale	$	(3,383,080)	$	(2,010,338)
Other operating (uses) sources		(540,451)		320,197
	$	(3,923,531)	$	(1,690,141)

The decrease in cash flows from other operating activities during the nine months ended September 30, 2020 compared to the same period in 2019 primarily reflects an increase in deposits securing certain of our borrowings and increases in servicing advances caused by COVID-19 induced borrower delinquencies.

Investing activities

Net cash provided by investing activities during the nine months ended September 30, 2020 totaled $924.6 million primarily due to $1.0 billion in net settlement of derivative financial instruments used to hedge our investment in MSRs. Net cash provided by investing activities during the nine months ended September 30, 2019 totaled $169.4 million, primarily due to $542.1 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, partially offset by the purchase of MSRs totaling $227.4 million and increase in margin deposit of $168.1 million.

Financing activities

Net cash provided by financing activities totaled $3.3 billion during the nine months ended September 30, 2020, primarily due to net repurchase of assets sold under agreement to repurchase, reflecting an increase in our financing of mortgage loans held for sale and issuance of unsecured notes to finance the growth in our loans held for sale. Net cash provided by financing activities totaled $1.6 billion during the nine months ended September 30, 2019, primarily to finance the growth in our inventory of mortgage loans held for sale and our investments in MSRs.

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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, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), 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 bank borrowings, proceeds from and issuance of ESS and/or equity or debt offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.

The effect of the Pandemic on our operations, liquidity and capital resources remain uncertain and difficult to predict, for further discussion of the potential impacts of the Pandemic please also see “Risk Factors” in Part II, Item 1A.

The CARES Act allows borrowers with federally-backed loans to request temporary payment forbearance in response to the increased borrower hardships resulting from the Pandemic and may require the servicer to advance principal and interest, property taxes, insurance premiums and other expenses to the investor for up to four months on Fannie Mae and Freddie Mac loans and longer on Ginnie Mae and other government agency backed loans. In April 2020, the Company entered into a new Ginnie Mae servicing advance financing allowing the Company to borrow $600 million against Ginnie Mae MSRs and servicing advances. The Ginnie Mae servicing advances eligible for financing include advances made to support regularly scheduled monthly principal and interest to mortgage-backed securities holders, taxes, homeowners insurance and escrowed items and other expenses related to servicing delinquent loans. We are also in ongoing discussions with our lending partners to procure additional advance financing.

The Pandemic has significantly increased the number of loans that are delinquent in our Ginnie Mae MSR portfolio. The Ginnie Mae program provides us with the option to purchase loans that are at least three months delinquent out of the underlying Ginnie Mae securities as an alternative to continuing to advance principal and interest payments to the holders of the Ginnie Mae securities. We refer to such loans as “early buyout” or EBO loans.

During the quarter ended September 30, 2020, we repurchased $2.7 billion in UPB of EBO loans from our Ginnie Mae MSR portfolio. Our objective is to work with the borrowers to cure the loan delinquency through either borrower reperformance or modification of the loans’ terms. When curing the delinquency is not feasible, we work to settle the loan and collect our claims from the applicable insurer or guarantor. When we are able to cure the delinquency, we are able to re-deliver the cured loan into another Ginnie Mae guaranteed security. Depending on the method used to cure a borrower delinquency, the Ginnie Mae program may require at least a six month period of timely borrower payments before we are able to re-deliver the loan. Therefore, regardless of whether we cure or settle the repurchased loan, our investment in the EBO loans may require a substantial holding period.

Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, ESS financing, notes payable, a capital lease and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for terms of approximately one year. Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing. On September 29, 2020, we issued $500 million of long term Unsecured Notes that mature on October 15, 2025. We used the proceeds from the Unsecured Notes to repay some of our existing short-term borrowings.

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, maximum daily and ending balances:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Average balance	$	3,363,140	$	2,098,208	$	2,669,336	$	1,861,086
Maximum daily balance	$	7,267,046	$	3,539,459	$	7,267,046	$	3,539,459
Balance at period end	$	7,267,046	$	3,539,459

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The differences between the average and maximum daily balances on our repurchase agreements reflect the fluctuations throughout the month of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.

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

● positive net income during one of the two most recent calendar quarters;

● a minimum in unrestricted cash and cash equivalents of $40 million;

● a minimum tangible net worth of $1.25 billion;

● 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 that are similar to those being financed under certain of our existing secured financing agreements.

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

In addition to the covenants noted above, the indenture governing our Unsecured Notes contains covenants that limit our and our restricted subsidiaries’ ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things:

● pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments;

● incur, assume or guarantee additional debt or issue preferred stock;

● incur liens on assets;

● merge or consolidate with another person or sell all or substantially all of our assets to another person;

● transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries;

● enter into transactions with affiliates; and

● allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us.

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”) for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established

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minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for its approved single-family issuers, as summarized below:

● Effective June 30, 2020, 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 (reduced by 70% of the UPB of nonperforming Agency loans that are in COVID-19 payment forbearance and were current when they entered such forbearance) 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 minimum net worth of $2.5 million plus 0.25% (25 basis points) of UPB for total 1-4 unit residential mortgage loans serviced and 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.

On January 31, 2020, FHFA proposed changes to the eligibility requirements, which would increase the tangible net worth requirement to $2.5 million plus 35 basis points of the UPB of loans serviced for Ginnie Mae and 25 basis points of the UPB of all other 1-4 unit loans serviced, and increase the liquidity requirement to 4 basis points of the aggregate UPB serviced for Fannie Mae and Freddie Mac and 10 basis points of the UPB serviced for Ginnie Mae plus 300 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 4% of total Agency servicing UPB. On June 15, 2020, FHFA announced that it will be re-proposing changes to these requirements.

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 is based on the current fair value of such ESS and amounts received on the underlying mortgage loans.

On June 10, 2020, our Board of Directors increased our common stock repurchase program from $50 million to $500 million. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through September 30, 2020, we have repurchased $263.2 million of shares under our stock repurchase program.

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, 2020, we have not entered into any off-balance sheet arrangements.

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Contractual Obligations

As of September 30, 2020, we had contractual obligations aggregating $29.1 billion, comprised of borrowings, commitments to purchase and originate mortgage loans and a payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under a tax receivable agreement. We also lease our office facilities.

Payment obligations under these agreements are summarized below:

	Payments due by year
			Less than		1-3		3-5		More than
Contractual obligations	Total		1 year		years		years		5 years
	(in thousands)
Commitments to purchase and originate loans	$	18,873,579	$	18,873,579	$	—	$	—	$	—
Short-term debt		7,802,424		7,802,424		—		—		—
Long-term debt		1,956,947		7,677		656,280		650,000		642,990
Interest on long-term debt		284,901		72,850		126,843		67,445		17,763
Office leases		106,777		18,586		33,197		27,770		27,224
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		35,784		5,940		—		—		29,844
Total	$	29,060,412	$	26,781,056	$	816,320	$	745,215	$	717,821

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 purchase and sale agreements, notes payable (including a revolving credit agreement), ESS and a capital lease. The borrower under each of these facilities is PLS or the Issuer Trust with the exception of the capital lease 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, 2020, we believe 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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Our debt obligations have the following size and maturities:

	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)	$	3,557,746	$	3,400,000	$	100,000	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC (3)	$	50,000	$	600,000	$	600,000	April 23, 2021
JPMorgan Chase Bank, N.A.	$	—	$	2,000,000	$	—	September 30, 2022
JPMorgan Chase Bank, N.A.	$	741,341	$	750,000	$	50,000	January 7, 2021
Citibank, N.A.	$	632,928	$	1,000,000	$	650,000	August 3, 2021
Bank of America, N.A.	$	767,391	$	800,000	$	500,000	March 11, 2021
Morgan Stanley Bank, N.A.	$	784,434	$	800,000	$	100,000	November 2, 2022
Royal Bank of Canada	$	363,193	$	500,000	$	180,000	January 29, 2021
BNP Paribas	$	370,013	$	375,000	$	200,000	July 30, 2021
Wells Fargo Bank, N.A.	$	—	$	175,000	$	175,000	October 6, 2022
Mortgage loan participation purchase and sale agreements
Bank of America, N.A.	$	535,378	$	550,000	$	—	March 11, 2021
Notes payable
GMSR 2018-GT1 Term Note	$	650,000	$	650,000			February 25, 2023
GMSR 2018-GT2 Term Note	$	650,000	$	650,000			August 25, 2023
Unsecured senior notes	$	500,000	$	650,000			October 15, 2025
Credit Suisse AG (3)	$	—	$	—	$	—	April 23, 2021
Obligations under capital lease
Banc of America Leasing and Capital LLC	$	13,957	$	25,000	$	—	June 13, 2022

(1) Outstanding indebtedness as of September 30, 2020.

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

(3) The borrowing of $50 million with Credit Suisse First Boston Mortgage Capital LLC is in the form of a sale of a variable funding note under an agreement to repurchase up to a maximum of $600 million, less any amount utilized under the Credit Suisse AG note payable, an agreement to repurchase relating to the financing of Fannie Mae MSRs and an agreement to repurchase relating to the financing of GNMA servicing advances.

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, 2020:

			Weighted average
			maturity of
			advances under
Counterparty	Amount at risk		repurchase agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	1,092,694	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC (2)	$	460,264	October 19, 2020	April 23, 2021
Bank of America, N.A.	$	410,222	November 2, 2020	March 11, 2021
JP Morgan Chase Bank, N.A.	$	192,579	December 2, 2020	January 7, 2021
Morgan Stanley Bank, N.A.	$	62,630	November 3, 2020	November 3, 2020
Citibank, N.A.	$	48,231	December 15, 2020	August 3, 2021
Royal Bank of Canada	$	33,343	October 30, 2020	October 30, 2020
BNP Paribas	$	27,646	December 16, 2020	July 30, 2021

(1) The borrowing facility with Credit Suisse First Boston Mortgage Capital LLC is in the form of a sale of a variable funding note under an agreement to repurchase.

(2) The borrowing facility with Credit Suisse First Boston Mortgage Capital LLC is in the form of an asset sale under agreement to repurchase.

All debt financing arrangements that matured between September 30, 2020 and the date of this Report have been renewed or extended and are described in Note 12—Borrowings to the accompanying consolidated financial

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statements.

Item 3. 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 fair value risk, interest rate risk and prepayment risk.

Fair Value Risk

Our IRLCs, mortgage loans held for sale, MSRs, MSLs and ESS financing are reported at their fair values. The fair value of these assets fluctuates primarily due to changes in interest rates. The fair value risk we face is primarily attributable to interest rate risk and prepayment risk.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in interest rates affect both the fair value of, and interest income we earn from, our mortgage-related investments and our derivative financial instruments. This effect is most pronounced with fixed-rate mortgage assets.

In general, rising interest rates negatively affect the fair value of our IRLCs, inventory of mortgage loans held for sale and ESS financing and positively affect the fair value of our MSRs. Changes in interest rate significantly influence the prepayment speeds of the loans underlying our investments in MSRs and ESS, which can have a significant effect on their fair values. Changes in interest rate are most prominently reflected in the prepayment speeds of the loans underlying our investments in MSRs and ESS and the discount rate used in their valuation.

Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Presently our debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.

Prepayment Risk

To the extent that the actual prepayment rate on the mortgage loans underlying our MSRs differs from what we projected when we initially recognized these assets and liabilities when we measure fair value as of the end of each reporting period, the carrying value of these assets and liabilities will be affected. In general, a decrease in the principal balances of the mortgage loans underlying our MSRs or an increase in prepayment expectations will decrease our estimates of the fair value of the MSRs, thereby reducing net servicing income, partially offset by the beneficial effect on net servicing income of a corresponding reduction in the fair value of our MSLs and ESS.

Risk Management Activities

We engage in risk management activities primarily in an effort to mitigate the effect of changes in interest rates on the fair value of our assets. To manage this price risk, we use derivative financial instruments acquired with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair value of our assets, primarily prepayment exposure on our MSR investments as well as IRLCs and our inventory of loans held for sale. Our objective is to minimize our hedging expense and maximize our loss coverage based on a given hedge expense target. We do not use derivative financial instruments other than IRLCs and repurchase agreement derivatives (both of which arise from our operations) for purposes other than in support of our risk management activities.

Our strategies are reviewed daily within a disciplined risk management framework. We use a variety of interest rate and spread shifts and scenarios and define target limits for market value and liquidity loss in those scenarios. With respect to our IRLCs and inventory of loans held for sale, we use MBS forward sale contracts to lock in the price at which we will sell the mortgage loans or resulting MBS, and further use MBS put options to mitigate the risk of our IRLCs not closing at the rate we expect. With respect to our MSRs, we seek to mitigate mortgage-based loss exposure utilizing MBS forward purchase and sale contracts, address exposures to smaller interest rate shifts with Treasury and interest rate swap futures, and use options and swaptions to achieve target coverage levels for larger interest rate shocks.

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Fair Value Sensitivities

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 inputs 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.

Mortgage Servicing Rights

The following tables summarize the estimated change in fair value of MSRs as of September 30, 2020, 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	$	2,520,756		$	2,423,512		$	2,377,775		$	2,291,555		$	2,250,885		$	2,174,008
Change in fair value:
$	$	186,935		$	89,691		$	43,954		$	(42,266)		$	(82,935)		$	(159,813)
%		8.0	%		3.8	%		1.9	%		(1.8)	%		(3.6)	%		(6.8)	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	2,641,609		$	2,480,030		$	2,405,127		$	2,265,888		$	2,201,123		$	2,080,347
Change in fair value:
$	$	307,788		$	146,209		$	71,306		$	(67,933)		$	(132,698)		$	(253,474)
%		13.2	%		6.3	%		3.1	%		(2.9)	%		(5.7)	%		(10.9)	%

Per-loan servicing cost shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	2,434,372		$	2,384,096		$	2,358,959		$	2,308,683		$	2,283,546		$	2,233,270
Change in fair value:
$	$	100,551		$	50,275		$	25,138		$	(25,138)		$	(50,275)		$	(100,551)
%		4.3	%		2.2	%		1.1	%		(1.1)	%		(2.2)	%		(4.3)	%

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, 2020, 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	$	149,307		$	146,083		$	144,520		$	141,490		$	140,021		$	137,170
Change in fair value:
$	$	6,317		$	3,093		$	1,531		$	(1,500)		$	(2,969)		$	(5,820)
%		4.4	%		2.2	%		1.1	%		(1.0)	%		(2.1)	%		(4.1)	%

Prepayment speed shift in %	-20%			-10%			-5%			+5%			+10%			+20%
	(dollar amounts in thousands)
Fair value	$	158,408		$	150,372		$	146,604		$	139,522		$	136,193		$	129,919
Change in fair value:
$	$	15,418		$	7,382		$	3,614		$	(3,468)		$	(6,797)		$	(13,071)
%		10.8	%		5.2	%		2.5	%		(2.4)	%		(4.8)	%		(9.1)	%

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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.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, 2020 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, the Company may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company. Set forth below are material updates to legal proceedings of the Company.

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into the Reorganization without ensuring that the Reorganization was entirely fair to the Company or public shareholders. The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and is currently pending approval. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. While no assurance can be provided to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending. Any potential range of loss cannot be reasonably estimated at this time primarily because the matter involves complex factual and legal issues; there is substantial uncertainty regarding any alleged damages, and the matter is at a preliminary stage of litigation.

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, 2019, filed with the SEC on February 28, 2020, except for the following:

Our business, financial condition and results of operations have been, and will likely continue to be, adversely affected by the emergence of the COVID-19 pandemic.

The COVID-19 pandemic has created unprecedented economic, financial and public health disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition and results of operations. The extent to which COVID-19 continues to negatively affect our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to COVID-19.

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The federal government enacted the CARES Act, which allows borrowers with federally-backed loans to request temporary payment forbearance in response to the increased borrower hardships resulting from COVID-19. As a result of the CARES Act forbearance requirements, we expect to record additional increases in delinquencies in our servicing portfolio that may require us to finance substantial amounts of advances of principal and interest payments to the investors holding those loans, as well as advances of property taxes, insurance premiums and other expenses to protect investors’ interests in the properties securing the loans.. We also expect the effects of the CARES Act forbearance requirements to reduce our servicing income and increase our servicing expenses due to the increased number of delinquent loans, significant levels of forbearance that we have granted and continue to grant, as well as the resolution of loans that we expect to ultimately default as the result of COVID-19. Future servicing advances will be driven by the number of borrower delinquencies, including those resulting from payment forbearance; the amount of time borrowers remain delinquent; and the level of successful resolution of delinquent payments, all of which will be impacted by the pace at which the economy recovers from the Pandemic.

Financial markets have experienced substantial volatility and reduced liquidity, resulting in unprecedented federal government intervention to lower the federal funds rate to near zero and support market liquidity by purchasing assets in many financial markets, including the mortgage-backed securities market. The CARES Act forbearance requirements and the decline in financial markets have negatively impacted the fair value of our servicing assets. In addition, the CARES Act forbearance requirements and the decline in financial markets have caused PMT to report material losses and negatively affected PMT's shareholders' equity and, as a result, our net assets under management.  Consequently, we have experienced a reduction in our base management fees from PMT, and we do not expect to earn performance incentive fees from PMT for the foreseeable future. Further market volatility may result in additional declines in the value of our servicing assets, lower base management fees and make it increasingly difficult to optimize our hedging activities. Also, our liquidity and/or regulatory capital could be adversely impacted by volatility and disruptions in the capital and credit markets. In addition, if we fail to meet or satisfy any of the covenants in our repurchase agreements or other financing arrangements as a result of the impact of the COVID-19 pandemic, we would be in default under these agreements, which could result in a cross-default or cross-acceleration under other financing arrangements, and our lenders could elect to declare outstanding amounts due and payable (or such amounts may automatically become due and payable), terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral.

We may also have difficulty accessing debt and equity capital on attractive terms, or at all, as a result of the impact of the COVID-19 pandemic, which may adversely affect our access to capital necessary to fund our operations or address maturing liabilities on a timely basis. This includes renewals of our existing credit facilities with our lenders who are also adversely impacted by the volatility and dislocations in the financial markets and may not be willing to continue to extend us credit on the same terms, or on favorable terms, or at all.

In addition, our business could be disrupted if we are unable to operate due to changing governmental restrictions such as travel bans and quarantines placed on our employees or operations, including, successfully operating our business from remote locations, ensuring the protection of our employees’ health and maintaining our information technology infrastructure. 

Governmental authorities have taken additional measures to stabilize the financial markets and support the economy. The success of these measures are unknown and they may not be sufficient to address the current market dislocations or avert severe and prolonged reductions in economic activity. We may also face increased risks of disputes with our business partners, litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19. The scope and duration of COVID-19 and the efficacy of the extraordinary measures put in place to address it are currently unknown. Even after COVID-19 subsides, the economy may not fully recover for some time and we may be materially and adversely affected by a prolonged recession or economic downturn.

Our Unsecured Notes have increased our overall indebtedness and contain restrictive covenants limiting our flexibility in operating our business.

On September 29, 2020 and October 19, 2020, we issued $650 million aggregate principal amount of 5.375% unsecured senior notes due on October 15, 2025 (the “Unsecured Notes”). As our unsecured obligations, the repayment of the Unsecured Notes will depend in part on our restricted subsidiaries’ generation of cash flow and our restricted subsidiaries’ ability to make such cash available to us, by dividend, debt repayment or other means. The Unsecured Notes’ indenture contain restrictive covenants that limit our and our restricted subsidiaries’ ability to engage in specified types of transactions, including our ability and/or the ability of our restricted subsidiaries to:

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• pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments;

• incur, assume or guarantee additional debt or issue preferred stock;

• incur liens on assets;

• merge or consolidate with another person or sell all or substantially all of our assets to another person;

• transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries;

• enter into transactions with affiliates; and

• allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us.

We may be unable to take advantage of future business opportunities because of the limitations imposed on us by the Unsecured Notes’ restrictive covenants. If we fail to comply with the Unsecured Notes’ restrictive covenants and are unable to obtain a waiver or amendment, an event of default would result under the terms of the Unsecured Notes’ indenture. In addition, the Unsecured Notes’ restrictive covenants and our overall level of indebtedness including our indebtedness under the Unsecured Notes could limit our ability to obtain additional financing on acceptable terms, or at all, for working capital and general corporate purposes.

To the extent the COVID-19 pandemic adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors.”

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

There were no sales of unregistered equity securities during the quarter ended September 30, 2020.

The following table summarizes information about our stock repurchase during the quarter ended September 30, 2020:

	Total number of shares purchased		​ Average price paid per share		Total number of shares purchased as part of publicly announced plans or program (1)		Approximate dollar value of shares that may yet be purchased under the plans or program (1)
July 1, 2020 – July 31, 2020		—	$	—		—	$	243,769,499
August 1, 2020 – August 31, 2020		—	$	—		—	$	243,769,499
September 1, 2020 – September 30, 2020		118,141	$	58.64		118,141	$	236,842,078
Total		118,141	$	58.64		118,141	$	236,842,078

(1) In June 2020, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $50 million to $500 million. In addition, the Company entered into a privately negotiated transaction with The BlackRock Foundation under the revised stock repurchase program to repurchase 6,975,323 shares of the Company’s common stock at a price of $34 per share. The stock repurchase program does not require the Company to purchase a specific number of shares, and the timing and amount of any shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Stock repurchases may be effected through privately negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The stock repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

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Item 6. Exhibits

		Incorporated by Reference from the Below-Listed Form (Each Filed under SEC File Number 15-68669 or 001-38727)
Exhibit No.	Exhibit Description	Form	Filing Date
2.1	Contribution Agreement and Plan of Merger, dated as of August 2, 2018, by and among PennyMac Financial Services, Inc., New PennyMac Financial Services, Inc., New PennyMac Merger Sub, LLC, Private National Mortgage Acceptance Company, LLC, and the Contributors.	8-K12B	November 1, 2018
3.1	Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.1.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.2	Amended and Restated Bylaws of New PennyMac Financial Services, Inc.	8-K12B	November 1, 2018
3.2.1	Amendment to Amended and Restated Bylaws of PennyMac Financial Services, Inc. (formerly known as New PennyMac Financial Services, Inc.).	10-Q	November 4, 2019
4.1	Indenture, dated as of September 29, 2020, among PennyMac Financial Services, Inc., the guarantors party thereto and U.S. Bank, National Association, as trustee, relating to the 5.375% Senior Notes due 2025.	8-K	September 29, 2020
4.2	Form of Global Note for 5.375% Senior Notes due 2025 (Included in Exhibit 4.1).	8-K	September 29, 2020
4.3	First Supplemental Indenture, dated as of October 19, 2020, among PennyMac Financial Services, Inc., the guarantors party thereto and U.S. Bank, National Association, as trustee, relating to the 5.375% Senior Notes due 2025.	*
10.1	Eighth Amendment to Master Repurchase Agreement, dated as of August 24, 2020, between PennyMac Loan Services, LLC and JPMorgan Chase Bank, N.A.	*
10.2	Ninth Amendment to Master Repurchase Agreement, dated as of October 9, 2020, between PennyMac Loan Services, LLC and JPMorgan Chase Bank, N.A.	*
10.3	Tenth Amendment to Master Repurchase Agreement, dated as of October 21, 2020, between PennyMac Loan Services, LLC and JPMorgan Chase Bank, N.A.	*
10.4˄	Joint Amendment No. 2 to the Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 2 to the Pricing Side Letter, dated as of August 25, 2020, among Credit Suisse First	*

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	Boston Mortgage Capital, LLC, Credit Suisse AG, Cayman Islands Branch and PennyMac Loan Services, LLC.
10.5	Amendment No. 1 to the Amended and Restated Series 2020-SPIADVF1 Indenture Supplement, dated as of August 25, 2020, among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC, and Credit Suisse First Boston Mortgage Capital LLC.	*
10.6˄	Joint Amendment No. 4 to the Series 2016-MSRVF1 Repurchase Agreement and Amendment No. 3 to the Pricing Side Letter, dated as of August 25, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, and PennyMac Loan Services, LLC.	*
10.7˄	Amendment No. 3 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of August 25, 2020, among PNMAC GMSR ISSUER TRUST, Citibank, N.A., PennyMac Loan Services, LLC, and Credit Suisse First Boston Mortgage Capital LLC.	*
10.8	Fourth Amended and Restated Master Repurchase Agreement, dated as of September 9, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Alpine Securitization Ltd, PennyMac Loan Services, LLC, and Private National Mortgage Acceptance Company, LLC.	*
10.9˄	Joint Amendment No. 4 to Loan and Security Agreement and Amendment No. 3 to Pricing Side Letter, dated as of October  21, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Cayman Islands Branch, Private National Mortgage Acceptance Company, LLC, and PennyMac Loan Services, LLC.	*
10.10˄	Joint Amendment No. 2 to the MSR PC Repo Agreement and Amendment No. 3 to the Pricing Side Letter, dated as of October 21, 2020, among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse, AG, Cayman Islands Branch, PennyMac Loan Services, LLC, and Private National Mortgage Acceptance Company, LLC.	*
31.1	Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Andrew S. Chang pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of David A. Spector 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 Andrew S. Chang 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.	**

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101	The following financial statements from the Company’s Quarterly Report on Form 10-Q were formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (ii) the Consolidated Statements of Income for the quarters ended September 30, 2020 and September 30, 2019, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended September 30, 2020 and September 30, 2019, (iv) the Consolidated Statements of Cash Flows for the quarters ended September 30, 2020 and September 30, 2019 and (v) the Notes to the Consolidated Financial Statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).
˄Portions of the exhibit have been redacted.
*Filed herewith
**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.

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SIGNATURES

Pursuant to the requirements 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 6, 2020	By:	/s/ DAVID A. SPECTOR
		David A. Spector
		President and Chief Executive Officer
Dated: November 6, 2020	By:	/s/ ANDREW S. CHANG
		Andrew S. Chang
		Senior Managing Director and Chief Financial Officer

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EX-4.3

Exhibit 4.3

Execution Version

PENNYMAC FINANCIAL SERVICES, INC.,

EACH OF THE GUARANTORS NAMED

ON THE SIGNATURE PAGES HERETO

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

FIRST SUPPLEMENTAL INDENTURE

Dated as of October 19, 2020

$150,000,000 5.375% Senior Notes due 2025

-1-

This FIRST SUPPLEMENTAL INDENTURE, dated as of October 19, 2020 (this “Supplemental Indenture”), is among PennyMac Financial Services, Inc., a Delaware corporation (the “Issuer”), the Guarantors listed on Schedule A hereto (the “Guarantors” and, collectively with the Issuer, the “PennyMac Parties”), and U.S. Bank National Association, as trustee (the “Trustee”) under the Indenture referred to below.

WHEREAS, the Issuer, the Guarantors and the Trustee have executed and delivered an indenture, dated as of September 29, 2020 (the “Base Indenture” and, together with this Supplemental Indenture, the “Indenture”), providing for the issuance by the Issuer of $500,000,000 principal amount of its 5.375% Senior Notes due 2025 (the “2025 Notes”);

WHEREAS, on September 29, 2020, the Issuer issued $500,000,000 aggregate principal amount of 2025 Notes (the “Initial Notes”) pursuant to the Base Indenture;

WHEREAS, Sections 2.02 and 9.01 of the Base Indenture provide that, without notice to or consent of the Holders, the Issuer may, from time to time and in accordance therewith, create and issue Additional Notes (subject to the Issuer’s compliance with Article Ten of the Indenture), and such Additional Notes shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes;

WHEREAS, each of the PennyMac Parties desires to execute and deliver this Supplemental Indenture for the purpose of issuing $150,000,000 in aggregate principal amount of additional 2025 Notes (the “Additional Senior Notes” and, together with the Initial Notes, the “Notes”);

WHEREAS, the Additional Senior Notes shall constitute Additional Notes pursuant to the Indenture; and

WHEREAS, pursuant to the satisfaction of the conditions set forth in Section 9.03 of the Base Indenture, the Trustee is authorized and directed to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to establish the terms of the Additional Senior Notes, the PennyMac Parties and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of Additional Senior Notes as follows:

(1)        Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Base Indenture.

(2)        Reference to and Effect on Base Indenture. Upon the date hereof, each reference in the Base Indenture to “this Indenture,” “hereunder,” “hereof,” or “herein” shall mean and be a reference to the Base Indenture as supplemented by this Supplemental Indenture, unless the context requires otherwise. This Supplemental Indenture shall form a part of the Base Indenture for all purposes.

-2-

(3)        Additional Senior Notes. As of the date hereof, the Issuer will issue, and the Trustee is directed to authenticate and deliver, the Additional Senior Notes in the manner contemplated by the Base Indenture. The Additional Senior Notes shall be consolidated with and form a single class with the Initial Notes and shall have the same terms and conditions in all respects with the Initial Notes, except that the issue date of the Additional Senior Notes shall be October 19, 2020. Each of the Guarantors reaffirms its Guarantee, in each case, as set forth in Article Twelve of the Base Indenture with regard to such Additional Senior Notes.

(4)        Form of Additional Senior Notes. The Additional Senior Notes shall initially be evidenced by one or more Global Notes, substantially in the form of Exhibit A hereto.

(5)        No Personal Liability of Directors, Managers, Officers, Employees and Stockholders. No past, present or future director, manager, officer, employee, incorporator, member, partner or stockholder of the Issuer or any Guarantor or any of their parent companies or entities shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

(6)        Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.

(7)        Counterpart Originals. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

(8)        Headings. The Section headings herein are for convenience or reference only and are not intended to be considered a part hereof and shall not affect the construction hereof.

(9)        Successors. All agreements of the Issuer in this Supplemental Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Supplemental Indenture shall bind its successors. All agreements of each Guarantor in this Supplemental Indenture shall bind such Guarantor’s successors.

(10)      Continued Effect. Except as expressly supplemented and amended by this Supplemental Indenture, the Base Indenture shall continue in full force and effect in accordance with the provisions thereof, and the Base Indenture (as supplemented and amended by this

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Supplemental Indenture) is in all respects hereby ratified and confirmed. This Supplemental Indenture and all the terms and conditions of this Supplemental Indenture, with respect to the Notes, shall be and be deemed to be part of the terms and conditions of the Base Indenture for any and all purposes.

[Signature pages follow.]

-4-

SIGNATURES

IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

PENNYMAC FINANCIAL SERVICES, INC., as Issuer
By:	/s/ Andrew S. Chang
Name:	Andrew S. Chang
Title:	Senior Managing Director and Chief Financial Officer
PNMAC HOLDINGS, INC., as a Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer
PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as a Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer
PNMAC CAPITAL MANAGEMENT, LLC, as a Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

Signature Page to Supplemental Indenture

PENNYMAC LOAN SERVICES, LLC, as a Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer
PENNYMAC SERVICES, INC., as a Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

Signature Page to Supplemental Indenture

U.S. BANK NATIONAL ASSOCIATION,as Trustee
By:	/s/ Joshua A. Hahn
Name:	Joshua A. Hahn
Title:	Vice President

Signature Page to Supplemental Indenture

SCHEDULE A

No.	Guarantor	Jurisdiction
1.	PNMAC Holdings, Inc.	Delaware
2.	Private National Mortgage Acceptance Company, LLC	Delaware
3.	PNMAC Capital Management, LLC	Delaware
4.	PennyMac Loan Services, LLC	Delaware
5.	PennyMac Services, Inc.	California

Sched. A-1

EXHIBIT A

[FORM OF FACE OF INITIAL NOTE]

[Global Notes Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO THE DEPOSITORY, TO NOMINEES OF THE DEPOSITORY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Notes Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”)) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”) AND (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER SUCH SECURITY, ONLY (A) TO THE ISSUER OR ANY PARENT OR SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME OR BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (OTHER THAN PURSUANT TO RULE 144), SUBJECT TO THE ISSUER’S

Ex. A-1

RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO THE ISSUER.

BY ITS ACQUISITION OF THIS SECURITY, THE HOLDER HEREOF WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (I) IT IS NOT ACQUIRING OR HOLDING THIS SECURITY (OR ANY INTEREST HEREIN) WITH THE ASSETS OF ANY (A) EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), (B) PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER ARRANGEMENT THAT IS SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR PROVISIONS UNDER ANY OTHER U.S. OR NON-U.S. FEDERAL, STATE, LOCAL, OR OTHER LAWS OR REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, “SIMILAR LAWS”), OR (C) ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE “PLAN ASSETS” (WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA) OF ANY SUCH PLAN, ACCOUNT OR ARRANGEMENT DESCRIBED IN CLAUSE (A) OR (B), OR (II) THE ACQUISITION AND HOLDING OF THIS SECURITY (OR ANY INTEREST HEREIN) BY IT WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A SIMILAR VIOLATION UNDER ANY APPLICABLE SIMILAR LAWS.

[Additional Regulation S Restricted Notes Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH NOTES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF FORTY DAYS FROM THE LATER OF (I) THE DATE ON WHICH THESE NOTES WERE FIRST OFFERED AND (II) THE DATE OF ISSUE OF THESE NOTES.

[Definitive Notes Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Ex. A-2

5.375% Senior Note Due 2025

No. $____________

CUSIP No.____________

PennyMac Financial Services, Inc. (the “Issuer”), a Delaware corporation, promises to pay to [________]¹, or registered assigns, the principal sum [of ________ U.S. dollars]² on October 15, 2025.

Interest Payment Dates: April 15 and October 15 (commencing on April 15, 2021).

Regular Record Dates: April 1 and October 1.

Additional provisions of this Note are set forth on the other side of this Note.

¹                    For Global Notes insert: Cede & Co.

²                    For Global Notes insert: set forth on the Schedule of Increases or Decreases in Global Note attached hereto

Ex. A-3

Dated:
PENNYMAC FINANCIAL SERVICES, INC.
By:
	Name:
	Title:

Ex. A-4

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Dated: _________________

This is one of the Notes referred to in the within-mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By:
	Authorized Signatory

Ex. A-5

[FORM OF REVERSE SIDE OF INITIAL NOTE]

5.375% Senior Note Due 2025

1.          Principal and Interest.

The Issuer will pay the principal of this Note on October 15, 2025.

The Issuer promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate of [ ]% per annum.

Interest will be payable semi-annually in arrears (to the Holders of record at the close of business (if applicable) on the April 1 or October 1 (whether or not a Business Day) immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing April 15, 2021.

Interest on this Note will accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from September 29, 2020; provided that, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

The Issuer shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest borne by the Notes.

2.          Method of Payment.

The Issuer will pay interest (except Defaulted Interest) on the principal amount of the Notes on each April 15 and October 15 (commencing on April 15, 2021) to the Persons who are Holders of Notes (as reflected in the Note Register at the close of business (if applicable) on the April 1 and October 1 (whether or not a Business Day) immediately preceding the Interest Payment Date), in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such Regular Record Date; provided that, with respect to the payment of principal or premium, if any, the Issuer will make payment to the Holder that surrenders this Note to the Paying Agent on or after the date such principal or premium is due and payable.

The Issuer will pay principal (and premium, if any) and interest in U.S. dollars. However, the Issuer may pay principal (and premium, if any) and interest by its check payable in such money. The Issuer may pay interest on the Notes either (a) by mailing a check for such interest to a Holder’s registered address (as reflected in the Note Register) or (b) subject to the provisions of the Indenture, by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period.

3.          Paying Agent and Note Registrar.

The Issuer initially appoints U.S. Bank National Association, in New York as Paying Agent and Note Registrar. The Issuer may change any Paying Agent or Note Registrar without prior notice to the Holders. The Issuer or any of its Subsidiaries may act as Paying Agent, Note Registrar or co-registrar.

Ex. A-6

4.          Indenture.

The Issuer issued the Notes under an Indenture, dated as of October 15, 2020 (the “Indenture”), among the Issuer, the Guarantors and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control.

The Notes are unsecured senior obligations of the Issuer. The Indenture does not limit the aggregate principal amount of the Notes.

5.          Redemption.

Optional Redemption. At any time prior to October 15, 2022, the Issuer may, at its option and on one or more occasions, redeem all or a part of the Notes, upon notice as described in Section 11.06 of the Indenture, at a Redemption Price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but excluding, the Redemption Date, subject to the rights of Holders of record of Notes on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date falling on or prior to the Redemption Date.

On and after October 15, 2022, the Issuer may, at its option and on one or more occasions, redeem the Notes, in whole or in part, upon notice as described in Section 11.06 of the Indenture, at the Redemption Prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the applicable Redemption Date, subject to the right of Holders of record of Notes on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date falling on or prior to the Redemption Date, if redeemed during the twelve-month period beginning on October 15 of each of the years indicated below:

Year	Percentage
2022	102.688%
2023	101.344%
2024 and thereafter	100.000%

In addition, until October 15, 2022, the Issuer may, at its option and on one or more occasions, upon notice as described in Section 11.06 of the Indenture, redeem up to 40% of the aggregate principal amount of Notes (including Additional Notes) issued under the Indenture at a Redemption Price (as calculated by the Issuer) equal to (i) 105.375% of the aggregate principal amount thereof, with an amount equal to or less than the net cash proceeds from one or more Equity Offerings to the extent such net cash proceeds are received by or contributed to the Issuer plus (ii) accrued and unpaid interest thereon, if any, to, but excluding, the applicable Redemption Date, subject to the right of Holders of record of Notes on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date falling on or prior to the Redemption Date; provided that (a) at least 50% of the sum of the original aggregate principal amount of Notes issued under the Indenture on the Issue Date and the original principal amount of any Additional Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption and (b) each such redemption occurs within 180 days of the date of closing of each such Equity Offering.

Ex. A-7

6.          Repurchase upon a Change of Control and Asset Sales.

Upon the occurrence of (a) a Change of Control, the Holders will have the right to require that the Issuer purchase such Holder’s Outstanding Notes, in whole or in part, at a purchase price of 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase and (b) Asset Sales, the Issuer may be obligated to make offers to purchase Notes and Pari Passu Indebtedness of the Issuer with a portion of the Net Proceeds of such Asset Sales at a Redemption Price of 100% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to, but excluding, the date of purchase.

7.          Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in denominations of $2,000 principal amount and integral multiples of $1,000 in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Note Registrar and the Issuer may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Note Registrar and the Issuer need not register the transfer or exchange of any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes tendered (and not withdrawn) for repurchase in connection with a Change of Control Offer, an Asset Sale Offer or other tender offer. Also, the Note Registrar and the Issuer need not register the transfer or exchange of any Notes for a period of ten days before delivering a notice of redemption of Notes to be redeemed.

8.          Persons Deemed Owners.

A registered Holder of a Note may be treated as the owner of such Note for all purposes.

9.          Unclaimed Money.

If money for the payment of principal (premium, if any) or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Issuer at its written request. After that, Holders entitled to the money must look to the Issuer for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.

10.        Discharge and Defeasance Prior to Redemption or Maturity.

If the Issuer irrevocably deposits, or causes to be deposited, with the Trustee money or Government Securities sufficient to pay the then outstanding principal of (premium, if any) and accrued but unpaid interest on the Notes to the Redemption Date or Stated Maturity, the Issuer will be discharged from its obligations under the Indenture with respect to the Notes and the Notes, except in certain circumstances for certain covenants thereof, or will be discharged from certain covenants set forth in the Indenture with respect to the Notes.

11.        Amendment; Supplement; Waiver.

Subject to certain exceptions, the Indenture, the Notes or any Guarantee may be amended or supplemented with the consent of the Issuer and the Holders of at least a majority in aggregate principal amount of the then Outstanding Notes, and any existing Default or Event of Default or compliance with any provision of the Indenture, the Notes or any Guarantees may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then Outstanding Notes.

Ex. A-8

Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture, the Notes or the Guarantees to, among other things, cure any ambiguity, omission, mistake, defect or inconsistency and make any change that does not adversely affect the legal rights under the Indenture of any Holder in any material respect.

12.        Restrictive Covenants.

The Indenture contains certain covenants, including covenants with respect to the following matters: (i) Restricted Payments; (ii) incurrence of Indebtedness and issuance of Disqualified Stock and Preferred Stock; (iii) Liens; (iv) transactions with Affiliates; (v) dividend and other payment restrictions affecting Restricted Subsidiaries; (vi) guarantees of Indebtedness by Restricted Subsidiaries; (vii) merger and certain transfers of assets; (viii) purchase of Notes upon a Change of Control; and (ix) disposition of proceeds of Asset Sales. Within 120 days after the end of each fiscal year, the Issuer must report to the Trustee on compliance with such limitations.

13.        Successor Persons.

When a successor Person or other entity assumes all the obligations of its predecessor under the Notes or the Guarantees and the Indenture, the predecessor Person will be released from those obligations.

14.        Remedies for Events of Default.

If an Event of Default, as defined in the Indenture (other than an Event of Default specified in Section 5.01(6) of the Indenture), occurs and is continuing, the Trustee or the Holders of at least 30% in aggregate principal amount of the then total Outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then Outstanding Notes to be due and payable immediately by a notice in writing to the Issuer (and to the Trustee if given by Holders). Notwithstanding the foregoing, in the case of an Event of Default arising under Section 5.01(6) of the Indenture, all Outstanding Notes will become due and payable without further action or notice. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered indemnity or security against any loss, liability, claim or expense satisfactory to the Trustee. Subject to certain restrictions, the Holders of a majority in principal amount of the Outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

15.        Guarantees.

On and following the Issue Date, the Issuer’s obligations under the Notes will be fully, irrevocably and unconditionally guaranteed on a senior unsecured basis, to the extent set forth in the Indenture, by each of the Guarantors.

16.        Trustee Dealings with Issuer.

The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Issuer and its Affiliates as if it were not the Trustee.

Ex. A-9

17.        Authentication.

This Note shall not be valid until the Trustee manually signs the certificate of authentication on the other side of this Note.

18.        Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

19.        CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice and reliance may be placed only on the other identification numbers placed thereon. Notwithstanding anything otherwise to the contrary in the Indenture or the Notes, the Issuer may, and, at the Issuer’s direction, the Trustee shall, exchange Notes then outstanding, including, in the case of any Global Notes, through a mandatory exchange at the Depository or otherwise in accordance with Applicable Procedures, to reflect any change in the name of the Issuer, and/or the CUSIP numbers and ISIN numbers with respect to the Notes as may be necessary or appropriate to give effect to the exchange.

20.        Governing Law.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE ISSUER AGREES TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE INDENTURE.

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to PennyMac Financial Services, Inc., 3043 Townsgate Road, Westlake Village, California 91361 (fax: (818) 337-6519), Attention: Derek W. Stark, Senior Managing Director and Chief Legal Officer and Secretary.

Ex. A-10

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint ___________________ agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date: __________________ Your Signature:

Sign exactly as your name appears on the other side of this Note.

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is one year after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Issuer or any “Affiliate” of the Issuer within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the undersigned confirms that such Notes are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

◻          to the Issuer or any parent or subsidiary thereof; or

(1)         ◻         pursuant to an effective registration statement under the Securities Act; or

(2)         ◻         inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act; or

(3)         ◻         outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof.

Signature
Signature Guarantee:
Signature must be guaranteed	Signature

Ex. A-11

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

Ex. A-12

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	Notice: To be executed by an executive officer

Ex. A-13

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The initial principal amount of this Global Note is $______________. The following increases or decreases in this Global Note have been made:

Date of Exchange Amount of
decrease in
Principal amount
of this Global Note Amount of
increase in
Principal amount
of this Global Note Principal amount
of this Global Note
following such
decrease or
increase Signature of
authorized
signatory of
Trustee or Notes
Custodian

Ex. A-14

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to Section 10.16 or 10.17 of the Indenture, check the box: ◻

◻If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 10.16 or 10.17 of the Indenture, state the amount in principal amount: $ .

($2,000 or integral multiples of $1,000 in excess thereof, provided that the unpurchased portion of a Note must be in a minimum principal amount of $2,000)

Date:	Your Signature:
		(Sign exactly as your name appears on the other side of this Note)

Signature Guarantee:
	(Signature must be guaranteed)

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

Ex. A-15

EX-10.1

Exhibit 10.1

EIGHTH AMENDMENT TO MASTER REPURCHASE AGREEMENT

Dated as of August 24, 2020

Between:

PENNYMAC LOAN SERVICES, LLC, as Seller

and

JPMORGAN CHASE BANK, N.A., as Buyer

The Parties have agreed to amend the Master Repurchase Agreement dated August 19, 2016 between them (the “Original MRA”, as amended by the First Amendment to Master Repurchase Agreement dated May 23, 2017, the Second Amendment to Master Repurchase Agreement dated September 27, 2017, the Third Amendment to Master Repurchase Agreement dated October 13, 2017, the Fourth Amendment to Master Repurchase Agreement dated October 13, 2017, the Fifth Amendment to Master Repurchase Agreement dated October 12, 2018 and the Sixth Amendment to Master Repurchase Agreement dated July 23, 2019, the Seventh Amendment to Master Repurchase Agreement dated October 11, 2019, and Omnibus Letter Agreement dated April 30, 2020 (the “Amended MRA”) and as amended hereby and as further supplemented, amended or restated from time to time (the “MRA”)), to amend the definition of Eligible Mortgage Loan, amend various other definitions, and they hereby amend the Amended MRA as follows.

All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment have the same meanings here as there.

1.         Definitions; Interpretation

The following definitions are amended to read as follows:

“Cash Out Refinancing Loan” means a Mortgage Loan (w) that refinances an ‎existing ‎Mortgage Loan, (x) whose proceeds exceed the unpaid balance of such ‎existing Mortgage Loan ‎‎(and related closing costs), (y) part or all of such ‎excess is paid out to its Mortgagor or its ‎Mortgagor’s designee(s), and (z) is eligible for takeout by Fannie Mae or Freddie Mac.

“Eligible Mortgage Loan” means, on any date of determination, a Mortgage Loan:

(i)         for which each of the applicable representations and warranties set forth on Exhibit B is true and correct as of such date of determination;

(ii)       that is either a Conventional Conforming Loan or a Government Loan;

(iii)      if (x) not a Correspondent Loan, whose Origination Date was no more than thirty (30) days before the Purchase Date of the initial Transaction in which it was purchased by Buyer, or (y) a Correspondent Loan, whose Origination

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Date was no more than sixty (60) days before the Purchase Date of such initial Transaction;

(iv)       that is eligible for sale to an Approved Takeout Investor under its Takeout Guidelines;

(v)        that has a scheduled Repurchase Date not later than the following number of days after the Purchase Date for the initial Transaction to which that Mortgage Loan was subject:

Type of Mortgage Loan	Number of days
Conventional Conforming Loan	30
Government Loan	30
Moderately Aged Loan	45
Long Aged Loan	60

(vi)       that does not have a Combined Loan-to-Value Ratio in excess of one hundred five percent (105%) in the case of a Conventional Conforming Loan or a Government Loan (or, in each case, such other percentage determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) and, if its Loan-to-Value Ratio is in excess of eighty percent (80%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time), it has private mortgage insurance in an amount required by the applicable Agency Guidelines, unless pursuant to Agency Guidelines in existence at the time such Mortgage Loan was originated, private mortgage insurance is not required for such Mortgage Loan;

(vii)     whose Mortgagor has a FICO Score of at least (i) 660 in the case of a Conventional Conforming Loan, Government Loan, Second Home Loan, or Investor Loan, (ii) 620 in the case of a Low FICO Conventional Conforming Loan or Low FICO Government Loan, or (iii) 700 in the case of a Jumbo Loan (or such other minimum FICO Score as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time);

(viii)    if a Government Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Government Loans that are then subject to Transactions, is less than or equal to seventy percent (70%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any other day, provided, however, that the sum of the Purchase Prices of all Low FICO Government Loans that are then subject to Transactions, shall not exceed Twenty-Six Million Two Hundred Fifty Thousand Dollars ($26,250,000);

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(ix)       if a Wet Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Wet Loans that are then subject to Transactions, is less than or equal to seventy-five percent (75%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any other day;

(x)        if a Long Aged Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Long Aged Loans that are then subject to Transactions, is less than or equal to five percent (5%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;

(xi)       if a Second Home Loan or an Investor Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Second Home Loans and Investor Loans that are then subject to Transactions, is less than or equal to ten percent (10%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;

(xi)       if a Cash Out Refinancing Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Cash Out Refinancing Loans that are then subject to Transactions, is less than or equal to ten percent (10%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;

(xii)     if a Low FICO Conventional Conforming Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Low FICO Conventional Conforming Loans that are then subject to Transactions, is less than or equal to five percent (5%) (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;

(xiii)    that, if subject to a Takeout Commitment, (a) is not subject to a Takeout Agreement that has expired or been terminated or cancelled by the Approved Takeout Investor or with respect to which Seller is in default, (b) has not been rejected or excluded for any reason (other than default by Buyer) from the related Takeout Commitment by the Approved Takeout Investor;

(xiv)     that, if subject to a Hedging Arrangement, is not subject to a Hedging Arrangement that has expired or been cancelled by the Hedging Arrangement counterparty or with respect to which Seller is in default or a termination event has occurred;

(xv)      for which, if not a Wet Loan, a complete Loan File has been delivered to Buyer on or before its Purchase Date;

(xvi)     for which, if a Wet Loan:

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(A)     on or before its Purchase Date, a written fraud detection report acceptable to Buyer in its sole discretion has been delivered to Buyer;

(B)      if requested by Buyer, all applicable items listed in clauses (i) through (iii) of the definition of Loan File have been delivered to Buyer or Custodian, as applicable, on or before its Purchase Date; and

(C)      at or before its Wet Funding Deadline, a complete Loan File has been delivered to Buyer;

(xvii)   if and to the extent that Buyer elects by notice to Seller to review and approve them, for which Buyer has approved the underwriting, the Takeout Commitment and other related information;

(xviii)  that is not a Mortgage Loan that Seller has failed to repurchase when required by the terms of this Agreement;

(xix)     for which the related Mortgage Note has not been out of the possession of Buyer pursuant to a Trust Release Letter for more than five (5) Business Days after the date of that Trust Release Letter;

(xx)      for which neither the related Mortgage Note nor the Mortgage has been out of the possession of Buyer pursuant to a Bailee Letter for more than the number of days specified in such Bailee Letter; and

(xxi)     that is not a Defaulted Loan.

“Moderately Aged Loan” means, on any day, a Purchased Mortgage Loan whose Purchase Date was more than thirty (30) days but not more than forty-five (45) days before that day.

B.         The following definitions are added to Section 2(a) of the Amended MRA in alphabetical order:

“Low FICO Conventional Conforming Loan” means a Conventional Conforming Loan whose Mortgagor’s FICO Score is 620 or higher but less than 660, and whose underwriting, appraisal and all related documentation that Buyer elects to review are approved by Buyer.

“Low FICO Government Loan” means a Government Loan whose Mortgagor’s FICO Score is 620 or higher but less than 660, and whose underwriting, appraisal and all related documentation that Buyer elects to review are approved by Buyer.

EXHIBIT B

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A.        Clause (nnn) of Exhibit B of the Amended MRA is amended in its entirety to read as ‎follows:‎

(nnn)    Ineligible Loan Types.  The Mortgage Loan is not (i) a negative amortization loan, (ii) a second lien loan, (iii) a home equity line of credit or similar loan, (iv) a reverse mortgage, (v) a subprime Mortgage Loan or alt-A Mortgage Loan or (vi) considered an “Expanded Approval” loan or a similar loan such as is described in the applicable Agency’s eligibility certification.  For the avoidance of doubt, even if specified or referenced in the definition of “Eligible Mortgage Loan” under this Agreement as amended and in effect before the effective date of the Omnibus Letter Agreement dated April 30, 2020, the following Loan Types and any similarly specially-designated Loan Types are ineligible for inclusion in any Transaction entered into on or after that effective date:

High-CLTV Loans, Manufactured Housing Loans, State Bond Loans, Freddie Mac Small Balance Loans, Government High CLTV Loans, Jumbo Loans and RHS Loans

(The remainder of this page is intentionally blank; counterpart signature pages follow)

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As amended hereby, the Amended MRA remains in full force and effect, and the Parties hereby ratify and confirm it.

JPMORGAN CHASE BANK, N.A.
By:	/s/ Lindsay R. Schelstrate
	Lindsay R. Schelstrate
	Authorized Officer

PENNYMAC LOAN SERVICES, LLC
By:	/s/ Pamela Marsh
	Pamela Marsh
	Senior Managing Director and Treasurer

Counterpart signature page to Eighth Amendment to Master Repurchase Agreement

EX-10.2

Exhibit 10.2

NINTH AMENDMENT TO MASTER REPURCHASE AGREEMENT

Dated as of October 9, 2020

Between:

PENNYMAC LOAN SERVICES, LLC, as Seller

and

JPMORGAN CHASE BANK, N.A., as Buyer

The Parties have agreed to amend the Master Repurchase Agreement dated August 19, 2016 between them (the “Original MRA”, as amended by the First Amendment to Master Repurchase Agreement dated May 23, 2017, the Second Amendment to Master Repurchase Agreement dated September 27, 2017, the Third Amendment to Master Repurchase Agreement dated October 13, 2017, the Fourth Amendment to Master Repurchase Agreement dated October 13, 2017, the Fifth Amendment to Master Repurchase Agreement dated October 12, 2018 and the Sixth Amendment to Master Repurchase Agreement dated July 23, 2019, the Seventh Amendment to Master Repurchase Agreement dated October 11, 2019, Omnibus Letter Agreement dated April 30, 2020, and the Eighth Amendment to Master Repurchase Agreement dated August 24, 2020 (the “Amended MRA”) and as amended hereby and as further supplemented, amended or restated from time to time (the “MRA”)), to extend the latest Termination Date, and they hereby amend the Amended MRA as follows.

All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment have the same meanings here as there.

2.         Definitions; Interpretation

The following definition in Section 2(a) of the Amended MRA is amended to read as follows:

“Termination Date” means the earliest of (i) the Business Day, if any, that Sellers designate as the Termination Date by written notice given to Buyer at least sixty (60) days (or, if Section 8(d) is applicable, thirty (30) days) before such date, (ii) if a Change in Executive Management has occurred, the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Sellers at least ninety (90) days before such date, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i), and (iv) January 7, 2021.

(The remainder of this page is intentionally blank; counterpart signature pages follow)

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As amended hereby, the Amended MRA remains in full force and effect, and the Parties hereby ratify and confirm it.

JPMORGAN CHASE BANK, N.A.
By:	/s/ Lindsay R. Schelstrate
	Lindsay R. Schelstrate
	Authorized Officer

PENNYMAC LOAN SERVICES, LLC
By:	/s/ Pamela Marsh
	Pamela Marsh
	Senior Managing Director and Treasurer

Counterpart signature page to Ninth Amendment to Master Repurchase Agreement

EX-10.3

Exhibit 10.3

TENTH AMENDMENT TO MASTER REPURCHASE AGREEMENT

Dated as of October 21, 2020

Between:

PENNYMAC LOAN SERVICES, LLC, as Seller

and

JPMORGAN CHASE BANK, N.A., as Buyer

The Parties have agreed to amend the Master Repurchase Agreement dated August 19, 2016 between them (the “Original MRA”, as amended by the First Amendment to Master Repurchase Agreement dated May 23, 2017, the Second Amendment to Master Repurchase Agreement dated September 27, 2017, the Third Amendment to Master Repurchase Agreement dated October 13, 2017, the Fourth Amendment to Master Repurchase Agreement dated October 13, 2017, the Fifth Amendment to Master Repurchase Agreement dated October 12, 2018 and the Sixth Amendment to Master Repurchase Agreement dated July 23, 2019, the Seventh Amendment to Master Repurchase Agreement dated October 11, 2019, Omnibus Letter Agreement dated April 30, 2020, the Eighth Amendment to Master Repurchase Agreement dated August 24, 2020, and the Ninth Amendment to the Master Repurchase Agreement dated October 9, 2020 (the “Amended MRA”) and as amended hereby and as further supplemented, amended or restated from time to time (the “MRA”)), to increase the Uncommitted Facility Amount, and they hereby amend the Amended MRA as follows.

All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment have the same meanings here as there.

‎3.‎         Facilities; Initiation; Confirmations; Termination

A.        The unnumbered grammatical paragraph added by the First Amendment to MRA ‎immediately after the caption of Section 3 of the Amended MRA and before its Section 3(a) is ‎amended to read as follows:‎

Subject to the terms and conditions set forth in this Agreement and the Side Letter, Buyer (i) agrees and is committed to enter into Transactions from time to time with respect to Eligible Mortgage Loans having a maximum aggregate Purchase Price outstanding at any one time of Fifty Million Dollars ($50,000,000) (such maximum amount, the “Committed Facility Amount”), from May 23, 2017 (the effective date of the First Amendment to MRA) until the Termination Date (such facility, the “Committed Facility”), and (ii) agrees to consider engaging, on an uncommitted and wholly discretionary basis, in additional Transactions from time to time from July 23, 2019 until the Termination Date and (only) when the Committed Facility Amount is fully funded and outstanding, of up to a maximum aggregate Purchase Price outstanding at any one time of One Billion Two Hundred Million Dollars ($1,200,000,000) more than the Committed Facility Amount (the “Uncommitted Facility Amount”.  The One Billion Two Hundred Fifty Million

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Dollar ($1,250,000,000) sum of the Committed Facility Amount and the Uncommitted Facility Amount is the “Facility Amount”.

(The remainder of this page is intentionally blank; counterpart signature pages follow)

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As amended hereby, the Amended MRA remains in full force and effect, and the Parties hereby ratify and confirm it.

JPMORGAN CHASE BANK, N.A.
By:	/s/ Lindsay R. Schelstrate
	Lindsay R. Schelstrate
	Authorized Officer

PENNYMAC LOAN SERVICES, LLC
By:	/s/ Pamela Marsh
	Pamela Marsh
	Senior Managing Director and Treasurer

Counterpart signature page to Tenth Amendment to Master Repurchase Agreement

EX-10.4

Exhibit 10.4

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 2 TO

THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 2 TO THE PRICING SIDE LETTER

This Joint Amendment No. 2 to the Series 2020-SPIADVF1 Repurchase Agreement (as defined below) and Amendment No. 2 to the Pricing Side Letter (as defined below), is entered into as of August 25, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”) and PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and acknowledged by PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Series 2020-SPIADVF1 Repurchase Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer and the Seller are parties to that certain Master Repurchase Agreement, dated as of April 1, 2020 (as amended by Amendment No.1, dated as of April 24, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”) and the related Pricing Side Letter, dated as of April 1, 2020 (as amended by Amendment No. 1, dated as of April 24, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter;

WHEREAS, the Guarantor is party to that certain Amended and Restated Guaranty (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), dated as of April 1, 2020, by the Guarantor in favor of the Buyer;

WHEREAS, as a condition precedent to amending the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the Guaranty on the date hereof;

WHEREAS, PNMAC GMSR Issuer Trust, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such

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capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), the PLS, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), the Administrative Agent and Pentalpha Surveillance LLC, as credit manager, are parties to that certain Third Amended and Restated Base Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), as supplemented by the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as February 28, 2018 (as amended by Amendment No. 1, dated as of August 10, 2018 and Amendment No. 2, dated as of April 24, 2020, and Amendment No. 3, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”), and by the Series 2020-SPIADVF1 Indenture Supplement, dated April 1, 2020 (as amended by Amendment No. 1, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”), by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent;

WHEREAS, pursuant to Section 10.3(e)(iii) of the Base Indenture, so long as any Note is Outstanding and until all obligations have been paid in full, PLS shall not consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent; and

WHEREAS, the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter are Transaction Documents.

NOW THEREFORE, the Administrative Agent, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1.   Amendments to the Series 2020-SPIADVF1 Repurchase Agreement.

(a)        Section 1.01 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting the definition of “Market Value” in its entirety and replacing it with the following in proper alphabetical order:

“Market Value” means, with respect to the Note as of any date of determination, and without duplication, the fair market value of the Note on such date as determined by Buyer (or an Affiliate thereof) in its sole discretion.

(b)        Section 9.02(a) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by adding the following sentence immediately after the last sentence of the paragraph:

“Buyer shall provide notice to Ginnie Mae within five (5) Business Days of any participation made in accordance with this Section 9.02(a).”

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(c)        Section 9.02(b) of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(b)        Buyer may in accordance with applicable law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a “Transferee”) all or a portion of Buyer’s rights and obligations under this Agreement and the other Program Agreements; provided, that (i) Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, Seller’s consent shall not be required in the event that (A) such Transferee is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) absent an Event of Default, Buyer shall give at least ten days’ prior notice thereof to Seller; (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more; (iv) such Transferee shall have also acquired the same percentage interest in each other Series of Variable Funding Notes, unless such Transferee is an Affiliate of Buyer or unless Ginnie Mae has consented in writing to waive this requirement, and (v) other than with respect to an assignment, pledge, hypothecation or transfer consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer received an opinion of a nationally recognized tax counsel experienced in such matters that such assignment, pledge, hypothecation or transfer  will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes.  Buyer shall provide notice to Ginnie Mae within five (5) Business Days of any assignment, pledge or hypothecation made in accordance with this Section 9.02(b).  In the event of any such assignment, pledge, hypothecation or transfer by Buyer of Buyer’s rights under this Agreement and the other Program Agreements, Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement.  Buyer (acting as agent for Seller) shall maintain at its address referred to in Section 10.05 a register (the “Register”) for the recordation of the names and addresses of Transferees, and the Purchase Price outstanding and Price Differential in the Transactions held by each thereof.  The entries in the Register shall be prima facie conclusive and binding, and Seller may treat each Person whose name is recorded in the Register as the owner of the Transactions recorded therein for all purposes of this Agreement.  No assignment shall be effective until it is recorded in the Register.

(c)        Clause (C) of Section 3.11 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

“(C) makes a claim individually or in the aggregate in an amount greater than 5% of Seller’s Adjusted Tangible Net Worth,”

(d)        Clause (ii) of Section 6.01 of the Series 2020-SPIADVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(ii) makes a claim individually or in the aggregate in an amount greater than 5% of Seller’s Adjusted Tangible Net Worth,”

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SECTION 2.   Amendments to the Pricing Side Letter.

(a)        Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Margin” and “Termination Date” in their entirety and replacing them with the following:

“Margin” means (i) (A) with respect to the Note prior to the occurrence of an Event of Default, [*****] per annum or (B) upon the occurrence of an Initial Term Note Offering, the margin over the related swap rate in effect for the Term Notes subject to such Initial Term Note Offering plus [*****] , and (ii) with respect to the Note following the occurrence of an Event of Default, the amount calculated pursuant to clause (i) plus an additional [*****] per annum.

“Termination Date” means the earliest of (a) April 23, 2021; (b) the Obligations having become immediately due and payable pursuant to Section 7.03 of the Repurchase Agreement; (c) upon termination of the Indenture; and (d) at Buyer’s or Seller’s option pursuant to Section 2.16 of the Repurchase Agreement; provided, that, if by the sixtieth (60^th) calendar day prior to the then-existing Termination Date as determined pursuant to clause (a), the Administrative Agent does not deliver a notice of termination to Seller (a “Termination Notice”), the Termination Date shall be extended for another calendar day thereafter, and shall continue to extend in such a manner until such Termination Notice is so delivered.  Upon delivery of such Termination Notice, the Termination Date determined pursuant to clause (a) shall be fixed on the date that is sixty (60) calendar days following the date of such Termination Notice, and shall cease to extend as contemplated herein.

(b)        Section 1 of the Pricing Side Letter is hereby amended by adding the definition of “Initial Term Note Offering” in proper alphabetical order:

“Initial Term Note Offering” means the issuance of at least $200,000,000 in Term Notes to third party investors in accordance with the Base Indenture.

SECTION 3.   Reaffirmation of Guaranty.  The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of the Seller to the Buyer under the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter and the related Program Agreements, as amended hereby.

SECTION 4.   Conditions Precedent.  This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of the Buyer, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyer and the Seller.

SECTION 5.   Representations and Warranties.  The Seller hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the Series 2020-SPIADVF1 Repurchase Agreement and Pricing Side Letter on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article III of the Series 2020-SPIADVF1 Repurchase Agreement.

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SECTION 6.   Limited Effect.  Except as expressly amended and modified by this Amendment, the Series 2020-SPIADVF1 Repurchase Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 7.   Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

SECTION 8.    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 9. GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer and as 100% of the VFN Noteholder of the Outstanding Notes
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR Issuer Trust – Joint Amendment No. 2 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

PENNYMAC LOAN SERVICES, LLC, as Seller
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 2 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 2 to Series 2020-SPIADVF1 Repurchase Agreement and Amendment No. 2 to Pricing Side Letter]

EX-10.5

Exhibit 10.5

EXECUTION VERSION

===============================================================================

PNMAC GMSR ISSUER TRUST,

as Issuer

and

CITIBANK, N.A.,

as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

and

PENNYMAC LOAN SERVICES, LLC,

as Administrator and as Servicer

and

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and consented to by

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Noteholder

AMENDMENT NO. 1

Dated as of August 25, 2020

to the

SERIES 2020-SPIADVF1 INDENTURE SUPPLEMENT

Dated as of April 1, 2020

PNMAC GMSR ISSUER TRUST

MSR COLLATERALIZED NOTES,

SERIES 2020-SPIADVF1

===============================================================================

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AMENDMENT NO. 1 TO AMENDED AND RESTATED SERIES 2020-SPIADVF1 INDENTURE SUPPLEMENT

This Amendment No. 1 to the Amended and Restated Series 2020-SPIADVF1 Indenture Supplement (this “Amendment”) is dated as of August 25, 2020, by and among PNMAC GMSR ISSUER TRUST, as issuer (the “Issuer”), CITIBANK, N.A. (“Citibank”), as indenture trustee (the “Indenture Trustee”), PENNYMAC LOAN SERVICES, LLC, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (the “Administrative Agent”), and is consented to by CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB”), as the sole noteholder of 100% of the Series 2020-SPIADVF1 Note (the “Noteholder”).

RECITALS

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent are parties to that certain Third Amended and Restated Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Series 2020-SPIADVF1 Indenture Supplement, dated as of April 1, 2020 (as amended, restated, supplement or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”, and together with the Base Indenture, the “Indenture”), among the Issuer, Citibank, the Servicer, the Administrator and the Administrative Agent.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture;

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer, the Administrative Agent and the Noteholder have agreed, subject to the terms and conditions of this Amendment, that the Series 2020-SPIADVF1 Indenture Supplement be amended to reflect certain agreed upon revisions to the terms of the Series 2020-SPIADVF1 Indenture Supplement;

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied (the “Authorization

1

Opinion”); provided, that no such Authorization Opinion shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement;

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with (unless 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion);

WHEREAS, pursuant to Section 11.1 of the Trust Agreement, prior to the execution of any amendment to any Transaction Documents to which the Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreement and that all conditions precedent have been met;

WHEREAS, pursuant to Section 4.1(a)(iii) of the Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreement) (unless an Event of Default has occurred and is continuing), the Administrative Agent and the Series Required Noteholders of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 12.1 thereof);

WHEREAS, the Series 2020-SPIADVF1 Note (the “Series 2020-SPIADVF1 Note”), was issued to PennyMac Loan Services, LLC (“PLS”) pursuant to the terms of the Series 2020-SPIADVF1 Indenture Supplement, and was purchased by CSCIB under the Master Repurchase Agreement, dated as of April 1, 2020 (as amended by Amendment No. 1, dated as of April 24, 2020, and Amendment No. 2, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Repurchase Agreement”), by and among the Administrative Agent, CSCIB, as buyer, and PLS, as seller, pursuant to which PLS sold all of rights, title and interest in the Series 2020-SPIADVF1 Note to CSCIB;

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner and (ii) pursuant to the Series 2020-SPIADVF1 Indenture Supplement, with respect to the Series 2020-SPIADVF1 Note, any Action provided by the Base Indenture or the Series 2020-SPIADVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2020-SPIADVF1 Note under the Series 2020-SPIADVF1 Repurchase Agreement;

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WHEREAS, pursuant to Section 10 of the Series 2020-SPIADVF1 Indenture Supplement, the parties hereto may enter into an amendment to supplement, amend or revise any term or provision of the Series 2020-SPIADVF1 Indenture Supplement pursuant to the terms and provisions of Section 12.2 of the Base Indenture with the consent of the Noteholder of 100% of the Series 2020-SPIADVF1 Note; and

WHEREAS, as of the date hereof, the Series 2020-SPIADVF1 Note is not rated by any Note Rating Agency.

NOW, THEREFORE, the Issuer, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Series 2020-SPIADVF1 Indenture Supplement is hereby amended as follows:

Section 1.        Amendments to the Series 2020-SPIADVF1 Indenture Supplement.

(a)        Section 2 of the Series 2020-SPIADVF1 Indenture Supplement is hereby amended by deleting the definition of “Margin” in its entirety and replacing it with the following:

“Margin” means, for the Series 2020-SPIADVF1 Notes, (i) 4.25% per annum or (ii) upon the occurrence of an Initial Term Note Offering, the margin over the related swap rate in effect for the Term Notes subject to such Initial Term Note Offering plus 0.25%.

(b)        Section 2 of the Series 2020-SPIADVF1 Indenture Supplement is hereby amended by adding the following definition of “Initial Term Note Offering”:

“Initial Term Note Offering” means the issuance of at least $200,000,000 in Term Notes to third party investors in accordance with the Base Indenture.

Section 2.        Effective Date of Margin and Note Interest Rate.  For the avoidance of doubt, the Note Interest Rate will be recalculated using the revised Margin on the date this Amendment is executed.  When determining the Interest Payment Amount for the first Payment Date or Interim Payment Date immediately following execution of this Amendment, the previously defined Margin and related Note Interest Rate that were effective prior to the date of this Amendment will be used to accrue interest from the beginning of the Interest Accrual Period through the calendar day before the execution of this Amendment and the revised Margin and related Note Interest Rate will be used to accrue interest from the date this Amendment was executed through the end of the Interest Accrual Period.

Section 3.       No Note Rating Agency.  As of the date hereof and prior to the execution of this Amendment, the Series 2020-SPIADVF1 Note is not rated by any Note Rating Agency.

Section 4.       Conditions to Effectiveness of this Amendment.  This Amendment shall become effective (i) upon the execution and delivery of this Amendment by all parties hereto (the “Amendment Effective Date”) and (ii) upon delivery of the Issuer Tax Opinion pursuant to

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Section 12.2 of the Base Indenture and Opinion of Counsel pursuant to Section 11.1 of the Trust Agreement.

Section 5.        Consent, Acknowledgment and Waiver.  By execution of this Amendment, CSCIB, as Noteholder of 100% of the Series 2020-SPIADVF1 Note, hereby consents to this Amendment.  The Noteholder certifies that it is the sole Noteholder of the Series 2020-SPIADVF1 Note with the right to instruct the Indenture Trustee.  In addition, the Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of the Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by Noteholder of this Amendment should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Amendment shall become effective on the Amendment Effective Date.  The Noteholder further hereby instructs the Indenture Trustee to execute this Amendment, thereby waiving the requirement for the delivery of the Authorization Opinion and the Officer’s Certificate pursuant to Sections 1.3 and 12.3 of the Base Indenture.

Section 6.       Representations and Warranties.  The Issuer hereby represents and warrants to the Indenture Trustee, the Administrative Agent and the Noteholder that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.

Section 7.       Limited Effect.  Except as expressly amended and modified by this Amendment, the Indenture shall continue to be, and shall remain, in full force and effect in accordance with its terms and the execution of this Amendment.

Section 8.       No Recourse.  It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer in this Amendment and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment or any other related documents.

4

Section 9.        Successors and Assigns.  This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 10.      GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11.      Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

Section 12.      Entire Agreement.  The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 13.      Recitals.  The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness.  The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder.)  In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

[Signature Pages Follow]

5

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

PNMAC GMSR ISSUER TRUST, as Issuer
By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee
By:	/s/ Mary Emily Pagano
Name:	Mary Emily Pagano
Title:	Assistant Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 1 to Series 2020-SPIADVF1 Indenture Supplement]

PENNYMAC LOAN SERVICES, LLC, as Servicer, as Administrator and sole Owner
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR ISSUER TRUST – Amendment No. 1 to Series 2020-SPIADVF1 Indenture Supplement]

CITIBANK, N.A., as Indenture Trustee, and not in its individual capacity
By:	/s/ Valerie Delgado
Name:	Valerie Delgado
Title:	Senior Trust Officer

[PNMAC GMSR ISSUER TRUST – Amendment No. 1 to Series 2020-SPIADVF1 Indenture Supplement]

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Domininc Obaditch
Name:	Dominic Obaditch
Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 1 to Series 2020-SPIADVF1 Indenture Supplement]

CONSENTED TO BY:
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Noteholder of 100% of the Series 2020-SPIADVF1 Note
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR ISSUER TRUST – Amendment No. 1 to Series 2020-SPIADVF1 Indenture Supplement]

EX-10.6

Exhibit 10.6

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 4 TO THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 3 TO THE FOURTH AMENDED AND RESTATED PRICING SIDE LETTER

This Joint Amendment No. 4 to the Series 2016-MSRVF1 Repurchase Agreement (as defined below) and Amendment No. 3 to the Pricing Side Letter (as defined below), is entered into as of August 25, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”) and PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and acknowledged by PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Series 2016-MSRVF1 Repurchase Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer and the Seller are parties to that certain Master Repurchase Agreement, dated as of December 19, 2016 (as amended by Amendment No. 1, dated as of February 28, 2019, Amendment No. 2, dated as of April 1, 2020, Amendment No. 3, dated as of April 24, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”) and the related Fourth Amended and Restated Pricing Side Letter, dated as of April 27, 2018 (as amended by Amendment No. 1, dated as of April 1, 2020, Amendment No. 2, dated as of April 24, 2020, and this Amendment, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter;

WHEREAS, the Guarantor is party to that certain Amended and Restated Guaranty (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), dated as of April 1, 2020, by the Guarantor in favor of the Buyer;

WHEREAS, as a condition precedent to amending the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the Guaranty on the date hereof;

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WHEREAS, PNMAC GMSR Issuer Trust, as issuer (the “Issuer”), Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), the PLS, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), the Administrative Agent and Pentalpha Surveillance LLC, as credit manager, are parties to that certain Third Amended and Restated Base Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), as supplemented by the Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as February 28, 2018 (as amended by Amendment No. 1, dated as of August 10, 2018, and Amendment No. 2, dated as April 24, 2020, and Amendment No. 3, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”), and by the Series 2020-SPIADVF1 Indenture Supplement, dated April 1, 2020 (as amended by Amendment No. 1, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2020-SPIADVF1 Indenture Supplement”), by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent;

WHEREAS, pursuant to Section 10.3(e)(iii) of the Base Indenture, so long as any Note is Outstanding and until all obligations have been paid in full, PLS shall not consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent; and

WHEREAS, the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter are Transaction Documents.

NOW THEREFORE, the Administrative Agent, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1.   Amendments to the Series 2016-MSRVF1 Repurchase Agreement.

(a)        Section 1.01 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting the definition of “Market Value” in its entirety and replacing it with the following in proper alphabetical order:

“Market Value” means, with respect to the Note as of any date of determination, and without duplication, the fair market value of the Note on such date as determined by Buyer (or an Affiliate thereof) in its sole discretion.

(b)        Section 9.03(a) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by adding the following sentence immediately after the last sentence of the paragraph:

“Buyer shall provide notice to Ginnie Mae within five (5) Business Days of any participation made in accordance with this Section 9.03(a).”

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(c)        Section 9.03(b) of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

(b)        Buyer may in accordance with applicable law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a “Transferee”) all or a portion of Buyer’s rights and obligations under this Agreement so long as a Noteholder of an MBS Advance VFN continues to own interests in the outstanding Series of VFNs that are funded in an aggregate amount that equals or exceeds the amount required to avoid an Early Amortization Event under any outstanding Series of Term Notes and the other Program Agreements; provided, that (i) Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, Seller’s consent shall not be required in the event that (A) such Transferee is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) absent an Event of Default, Buyer shall give at least ten days’ prior notice thereof to Seller; (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more; (iv) such Transferee shall have also acquired the same percentage interest in each other Series of Variable Funding Notes, unless such Transferee is an Affiliate of Buyer or unless Ginnie Mae has consented in writing to waive this requirement and (v) other than with respect to an assignment, pledge, hypothecation or transfer consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer received an opinion of a nationally recognized tax counsel experienced in such matters that such assignment, pledge, hypothecation or transfer  will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes.  Buyer shall provide notice to Ginnie Mae within five (5) Business Days of any assignment, pledge or hypothecation made in accordance with this Section 9.03(b).  In the event of any such assignment, pledge, hypothecation or transfer by Buyer of Buyer’s rights under this Agreement and the other Program Agreements, Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement.  Buyer (acting as agent for Seller) shall maintain at its address referred to in Section 10.05 a register (the “Register”) for the recordation of the names and addresses of Transferees, and the Purchase Price outstanding and Price Differential in the Transactions held by each thereof.  The entries in the Register shall be prima facie conclusive and binding, and Seller may treat each Person whose name is recorded in the Register as the owner of the Transactions recorded therein for all purposes of this Agreement.  No assignment shall be effective until it is recorded in the Register.

(c)        Clause (C) of Section 3.11 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

“(C) makes a claim individually or in the aggregate in an amount greater than 5% of Seller’s Adjusted Tangible Net Worth,”

(d)        Clause (ii) of Section 6.01 of the Series 2016-MSRVF1 Repurchase Agreement is hereby amended by deleting in its entirety and replacing it with the following:

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(ii) makes a claim individually or in the aggregate in an amount greater than 5% of Seller’s Adjusted Tangible Net Worth,”

SECTION 2.   Amendments to the Pricing Side Letter.

(a)        Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Margin” and “Termination Date” in their entirety and replacing them with the following:

“Margin” means (i) (A) with respect to the Note prior to the occurrence of an Event of Default, [*****] per annum or (B) upon the occurrence of an Initial Term Note Offering, the margin over the related swap rate in effect for the Term Notes subject to such Initial Term Note Offering plus [*****], and (ii) with respect to the Note following the occurrence of an Event of Default, the amount calculated pursuant to clause (i) plus an additional [*****] per annum.

“Termination Date” means the earliest of (a) April 23, 2021; (b) the Obligations having become immediately due and payable pursuant to Section 7.03 of the Repurchase Agreement; (c) upon termination of the Indenture; and (d) at Buyer’s or Seller’s option pursuant to Section 2.16 of the Repurchase Agreement; provided, that, if by the sixtieth (60^th) calendar day prior to the then-existing Termination Date as determined pursuant to clause (a), the Administrative Agent does not deliver a notice of termination to Seller (a “Termination Notice”), the Termination Date shall be extended for another calendar day thereafter, and shall continue to extend in such a manner until such Termination Notice is so delivered.  Upon delivery of such Termination Notice, the Termination Date determined pursuant to clause (a) shall be fixed on the date that is sixty (60) calendar days following the date of such Termination Notice, and shall cease to extend as contemplated herein.

(b)        Section 1 of the Pricing Side Letter is hereby amended by adding the definition of “Initial Term Note Offering” in proper alphabetical order:

“Initial Term Note Offering” means the issuance of at least $200,000,000 in Term Notes to third party investors in accordance with the Base Indenture.

SECTION 3.   Reaffirmation of Guaranty.  The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and acknowledges and agrees that the term “Obligations” as used in the Guaranty shall apply to all of the Obligations of the Seller to the Buyer under the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter and the related Program Agreements, as amended hereby.

SECTION 4.   Conditions Precedent.  This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of the Buyer, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyer and the Seller.

SECTION 5.   Representations and Warranties.  The Seller hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the Series 2016-MSRVF1 Repurchase Agreement and Pricing Side

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Letter on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article III of the Series 2016-MSRVF1 Repurchase Agreement.

SECTION 6.   Limited Effect.  Except as expressly amended and modified by this Amendment, the Series 2016-MSRVF1 Repurchase Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 7.   Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

SECTION 8.    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 9. GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer and as 100% of the VFN Noteholder of the Outstanding Notes
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR Issuer Trust – Joint Amendment No. 4 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 3 to Fourth A&R Pricing Side Letter]

PENNYMAC LOAN SERVICES, LLC, as Seller
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 4 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 3 to Fourth A&R Pricing Side Letter]

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR Issuer Trust – Joint Amendment No. 4 to Series 2016-MSRVF1 Master Repurchase Agreement and Amendment No. 3 to Fourth A&R Pricing Side Letter]

EX-10.7

Exhibit 10.7

EXECUTION VERSION

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

PNMAC GMSR ISSUER TRUST,

as Issuer

and

CITIBANK, N.A.,

as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

and

PENNYMAC LOAN SERVICES, LLC,

as Administrator and as Servicer

and

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,

as Administrative Agent

and consented to by

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Noteholder

AMENDMENT NO. 3

Dated as of August 25, 2020

to the

AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

Dated as of February 28, 2018

PNMAC GMSR ISSUER TRUST

MSR COLLATERALIZED NOTES,

SERIES 2016-MSRVF1

1

AMENDMENT NO. 3 TO AMENDED AND RESTATED SERIES 2016-MSRVF1 INDENTURE SUPPLEMENT

This Amendment No. 3 to the Amended and Restated Series 2016-MSRVF1 Indenture Supplement (this “Amendment”) is dated as of August 25, 2020, by and among PNMAC GMSR ISSUER TRUST, as issuer (the “Issuer”), CITIBANK, N.A. (“Citibank”), as indenture trustee (the “Indenture Trustee”), PENNYMAC LOAN SERVICES, LLC (“PLS”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (the “Administrative Agent”), and is consented to by CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB”), as the sole noteholder of 100% of the Series 2016-MSRVF1 Note (the “Noteholder”).

RECITALS

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent are parties to that certain Third Amended and Restated Indenture, dated as of April 1, 2020 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Amended and Restated Series 2016-MSRVF1 Indenture Supplement, dated as of February 28, 2018 (as amended by Amendment No. 1, dated as of August 10, 2018, and Amendment No. 2, dated as of April 24, 2020, and as may be further amended, restated, supplement or otherwise modified from time to time, the “Series 2016-MSRVF1 Indenture Supplement”, and together with the Base Indenture, the “Indenture”), among the Issuer, Citibank, the Servicer, the Administrator and the Administrative Agent.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture;

WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer, the Administrative Agent and the Noteholder have agreed, subject to the terms and conditions of this Amendment, that the Series 2016-MSRVF1 Indenture Supplement be amended to reflect certain agreed upon revisions to the terms of the Series 2016-MSRVF1 Indenture Supplement;

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture

1

and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”); provided, that no such Authorization Opinion shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement;

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with (unless 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion);

WHEREAS, pursuant to Section 11.1 of the Trust Agreement, prior to the execution of any amendment to any Transaction Documents to which the Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreement and that all conditions precedent have been met;

WHEREAS, pursuant to Section 4.1(a)(iii) of the Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreement) (unless an Event of Default has occurred and is continuing), the Administrative Agent and the Series Required Noteholders of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 12.1 thereof);

WHEREAS, the Series 2016-MSRVF1 Note (the “Series 2016-MSRVF1 Note”), was issued to PennyMac Loan Services, LLC (“PLS”) pursuant to the terms of the Series 2016-MSRVF1 Indenture Supplement, and was purchased by CSCIB under the Master Repurchase Agreement, dated as of December 19, 2016 (as amended by Amendment No. 1, dated as of February 28, 2019, Amendment No. 2, dated as of April 1, 2020, Amendment No. 3, dated as of April 24, 2020, and Amendment No. 4, dated as of August 25, 2020, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2016-MSRVF1 Repurchase Agreement”), by and among the Administrative Agent, CSCIB, as buyer, and PLS, as seller, pursuant to which PLS sold all of rights, title and interest in the Series 2016-MSRVF1 Note to CSCIB;

WHEREAS, (i) pursuant to the Trust Agreement, PLS is the sole Owner and (ii) pursuant to the Series 2016-MSRVF1 Indenture Supplement, with respect to the Series 2016-MSRVF1 Note, any Action provided by the Base Indenture or the Series 2016-MSRVF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by CSCIB, as the buyer of the Series 2016-MSRVF1 Note under the Series 2016-MSRVF1 Repurchase Agreement;

2

WHEREAS, pursuant to Section 10 of the Series 2016-MSRVF1 Indenture Supplement, the parties hereto may enter into an amendment to supplement, amend or revise any term or provision of the Series 2016-MSRVF1 Indenture Supplement pursuant to the terms and provisions of Section 12.2 of the Base Indenture with the consent of the Noteholder of 100% of the Series 2016-MSRVF1 Note; and

WHEREAS, as of the date hereof, the Series 2016-MSRVF1 Note is not rated by any Note Rating Agency.

NOW, THEREFORE, the Issuer, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Series 2016-MSRVF1 Indenture Supplement is hereby amended as follows:

Section 1.        Amendments to the Series 2016-MSRVF1 Indenture Supplement.

(a)        Section 2 of the Series 2016-MSRVF1 Indenture Supplement is hereby amended by deleting the definition of “Margin” in its entirety and replacing it with the following:

“Margin” means, for the Series 2016-MSRVF1 Notes, (i) [*****] per annum or (ii) upon the occurrence of an Initial Term Note Offering, the margin over the related swap rate in effect for the Term Notes subject to such Initial Term Note Offering plus [*****].

(b)        Section 2 of the Series 2016-MSRVF1 Indenture Supplement is hereby amended by adding the following definition of “Initial Term Note Offering”:

“Initial Term Note Offering” means the issuance of at least $200,000,000 in Term Notes to third party investors in accordance with the Base Indenture.

Section 2.        Effective Date of Margin and Note Interest Rate.  For the avoidance of doubt, the Note Interest Rate will be recalculated using the revised Margin on the date this Amendment is executed.  When determining the Interest Payment Amount for the first Payment Date or Interim Payment Date immediately following execution of this Amendment, the previously defined Margin and related Note Interest Rate that were effective prior to the date of this Amendment will be used to accrue interest from the beginning of the Interest Accrual Period through the calendar day before the execution of this Amendment and the revised Margin and related Note Interest Rate will be used to accrue interest from the date this Amendment was executed through the end of the Interest Accrual Period.

Section 3.       No Note Rating Agency.  As of the date hereof and prior to the execution of this Amendment, the Series 2016-MSRVF1 Note is not rated by any Note Rating Agency.

Section 4.       Conditions to Effectiveness of this Amendment.  This Amendment shall become effective (i) upon the execution and delivery of this Amendment by all parties hereto (the “Amendment Effective Date”) and (ii) upon delivery of the Issuer Tax Opinion pursuant to Section

3

12.2 of the Base Indenture and Opinion of Counsel pursuant to Section 11.1 of the Trust Agreement.

Section 5.        Consent, Acknowledgment and Waiver.  By execution of this Amendment, CSCIB, as Noteholder of 100% of the Series 2016-MSRVF1 Note, hereby consents to this Amendment.  The Noteholder certifies that it is the sole Noteholder of the Series 2016-MSRVF1 Note with the right to instruct the Indenture Trustee.  In addition, the Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of the Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by Noteholder of this Amendment should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Amendment shall become effective on the Amendment Effective Date.  The Noteholder further hereby instructs the Indenture Trustee to execute this Amendment, thereby waiving the requirement for the delivery of the Authorization Opinion and the Officer’s Certificate pursuant to Sections 1.3 and 12.3 of the Base Indenture.

Section 6.       Representations and Warranties.  The Issuer hereby represents and warrants to the Indenture Trustee, the Administrative Agent and the Noteholder that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.

Section 7.       Limited Effect.  Except as expressly amended and modified by this Amendment, the Indenture shall continue to be, and shall remain, in full force and effect in accordance with its terms and the execution of this Amendment.

Section 8.       No Recourse.  It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer in this Amendment and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment or any other related documents.

Section 9.        Successors and Assigns.  This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

4

Section 10.      GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11.      Counterparts.  This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.

Section 12.      Entire Agreement.  The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 13.      Recitals.  The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness.  The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder.)  In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

[Signature Pages Follow]

5

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

PNMAC GMSR ISSUER TRUST, as Issuer
By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee
By:	/s/ Mary Emily Pagano
Name:	Mary Emily Pagano
Title:	Assistant Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 3 to A&R Series 2016-MSRVF1 Indenture Supplement]

PENNYMAC LOAN SERVICES, LLC, as Servicer, as Administrator and sole Owner
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[PNMAC GMSR ISSUER TRUST – Amendment No. 3 to A&R Series 2016-MSRVF1 Indenture Supplement]

CITIBANK, N.A., as Indenture Trustee, and not in its individual capacity
By:	/s/ Valerie Delgado
Name:	Valerie Delgado
Title:	Senior Trust Officer

[PNMAC GMSR ISSUER TRUST – Amendment No. 3 to A&R Series 2016-MSRVF1 Indenture Supplement]

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President

[PNMAC GMSR ISSUER TRUST – Amendment No. 3 to A&R Series 2016-MSRVF1 Indenture Supplement]

CONSENTED TO BY:
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Noteholder of 100% of the Series 2016-MSRVF1 Note
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[PNMAC GMSR ISSUER TRUST – Amendment No. 3 to A&R Series 2016-MSRVF1 Indenture Supplement]

EX-10.8

Exhibit 10.8

EXECUTION

FOURTH AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent

(“Administrative Agent”),

CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, as buyer (“Buyer”), ALPINE SECURITIZATION LTD, as buyer and other Buyers from time to time (“Buyers”),

PENNYMAC LOAN SERVICES, LLC, as seller (“Seller”) and

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (“Guarantor”)

Dated September 9, 2020

TABLE OF CONTENTS

		Page
1.	Applicability	1
2.	Definitions	2
3.	Program; Initiation of Transactions	28
4.	Repurchase	31
5.	Price Differential.	32
6.	Margin Maintenance; Reallocation of Purchase Price	33
7.	Income Payments	34
8.	Security Interest	35
9.	Payment and Transfer	37
10.	Conditions Precedent	38
11.	Program; Costs	42
12.	Servicing	45
13.	Representations and Warranties	46
14.	Covenants	52
15.	Events of Default	59
16.	Remedies Upon Default	62
17.	Reports	65
18.	Repurchase Transactions	69
19.	Single Agreement	69
20.	Notices and Other Communications	70
21.	Entire Agreement; Severability	72
22.	Non Assignability	72
23.	Set-off	73

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24.	Binding Effect; Governing Law; Jurisdiction	73
25.	No Waivers, Etc.	74
26.	Intent	74
27.	Disclosure Relating to Certain Federal Protections	75
28.	Power of Attorney	76
29.	Buyers May Act Through Administrative Agent	76
30.	Indemnification; Obligations	76
31.	Counterparts	77
32.	Confidentiality	78
33.	Recording of Communications	79
34.	Commitment Fee	79
35.	Periodic Due Diligence Review	79
36.	Authorizations	80
37.	Acknowledgment of Assignment and Administration of Repurchase Agreement	80
38.	Acknowledgement of Anti-Predatory Lending Policies	81
39.	Documents Mutually Drafted	81
40.	General Interpretive Principles	81
41.	Conflicts	82
42	Pool Subdivisions	82
43.	Bankruptcy Non-Petition	82
44.	Limited Recourse	82
45.	Amendment and Restatement	83
46.	Reaffirmation of Guaranty.	83

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SCHEDULES

Schedule 1-A – Representations and Warranties with Respect to Purchased Mortgage Loans

Schedule 1-B – Representations and Warranties with Respect to Servicer Advances

Schedule 2 – Authorized Representatives

Schedule 3 – Responsible Officers of Seller and Guarantor

EXHIBITS

Exhibit A – Form of Transaction Request

Exhibit B – Reserved

Exhibit C – Form of Mortgage Loan Schedule

Exhibit D – Reserved

Exhibit E – Form of Power of Attorney

Exhibit F – Underwriting Guidelines

Exhibit G – Reserved

Exhibit H – Seller’s and Guarantor’s Tax Identification Number

Exhibit I – Existing Indebtedness

Exhibit J – Form of Escrow Instruction Letter

Exhibit K – Custodial and Securities Intermediary Fee Schedule

Exhibit L – Form of Trade Assignment

- iii -

This is a FOURTH AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, dated as of September 9, 2020, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC ( “Administrative Agent”) on behalf of Buyers, including but not limited to Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (“CS Cayman” and a “Committed Buyer”) and Alpine Securitization LTD (“Alpine” and a “Buyer”), PENNYMAC LOAN SERVICES, LLC., as seller (“Seller”), and PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (“Guarantor”).

The Administrative Agent, the Guarantor and the Seller previously entered into a Third Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017 (the “Existing Master Repurchase Agreement”), which amended and restated that certain Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, which amended and restated that certain Amended and Restated Master Repurchase Agreement, dated as of May 3, 2013, which amended and restated that certain Master Repurchase Agreement, dated as of August 14, 2009;

Pursuant to that certain Assignment, Assumption and Appointment Agreement, dated as of June 16, 2016 by and among Administrative Agent, CS Cayman, as a buyer, and certain Buyers identified therein (as amended, restated, supplemented or otherwise modified from time to time, the “Assignment, Assumption and Appointment Agreement”), Administrative Agent sold and assigned its right, title and interest in the Transactions and the related Purchased Mortgage Loans and Repurchase Assets hereunder to such Buyers and was retained as Administrative Agent hereunder;

The parties hereto have requested that the Existing Master Repurchase Agreement be amended and restated, in its entirety, on the terms and subject to the conditions set forth herein;

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

1.         Applicability

From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Administrative Agent on behalf of Buyers Mortgage Loans (as hereinafter defined) on a servicing released basis against the transfer of funds by Administrative Agent, with a simultaneous agreement by Administrative Agent on behalf of Buyers to transfer to Seller such Mortgage Loans, on a servicing released basis at a date certain or on demand, against the transfer of funds by Seller.  This Agreement is a commitment by Administrative Agent on behalf of Committed Buyers to engage in the Transactions as set forth herein up to the Maximum Regular Way Committed Purchase Price; provided, that Administrative Agent on behalf of Buyers shall have no commitment to enter into any Transaction requested that would result in the aggregate Purchase Price of then-outstanding Transactions to exceed the Maximum Regular Way Committed Purchase Price. The aggregate Purchase Price of Purchased Mortgage Loans subject to outstanding Transactions shall not exceed the Maximum Regular Way Purchase Price. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be

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governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder. For the avoidance of doubt, and for administrative and tracking purposes, (a) the purchase and sale of each Purchased Mortgage Loan shall be deemed a separate Transaction and (b) with respect to each Designated Mortgage Loan, such Designated Mortgage Loan may, at Buyers’ option, be sold to different Buyers on a pro rata basis, such that a Buyer pays the Purchase Price-Base and other Buyers pay the Purchase Price-Incremental 1 and Purchase Price-Incremental 2, as applicable, and, in which case, the Administrative Agent shall own the Designated Mortgage Loan, for the benefit of all purchasing Buyers, on a pro rata, pari passu basis.

2.         Definitions

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings; provided, that, any terms used but not otherwise defined herein shall have the meanings given to them in the Pricing Side Letter:

“Acceptable State” means any state acceptable pursuant to the Underwriting Guidelines.

“Accepted Servicing Practices” means, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.

“Act” has the meaning set forth in Section 32.b hereof.

“Act of Insolvency” means, with respect to any Person or its Affiliates, (i) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (ii) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (iii) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (iv) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (v) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (vi) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.

“Additional Buyers” has the meaning set forth in Section 37 hereof.

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“Adjusted Tangible Net Worth” has the meaning assigned to such term in the Pricing Side Letter.

“Administrative Agent” means CSFBMC or any successor thereto under this Agreement.

“Affiliate” means, with respect to any Person, any “affiliate” of such Person, as such term is defined in the Bankruptcy Code; provided, however, that in respect of Seller or Guarantor the term “Affiliate” shall include only Guarantor and its wholly-owned Subsidiaries, which shall also include, for the avoidance of doubt, with respect to Administrative Agent only, any CP Conduit.

“Aged 360 GNMA EBO” means a GNMA EBO which has been subject to a Transaction hereunder for a period of greater than 360 days.

“Agency” means Freddie Mac or Fannie Mae, as applicable.

“Agency Mortgage Loan” means, collectively, Conforming Mortgage Loans, FHA Loans, VA Loans, Conforming High CLTV Loans, FHA 203(k) Loans and USDA Loans.

“Agency-Required eNote Legend” means the legend or paragraph required by Fannie Mae or Freddie Mac, as applicable, to be set forth in the text of an eNote, which includes the provisions set forth on Exhibit P to the Custodial Agreement, as may be amended from time to time by Fannie Mae or Freddie Mac, as applicable.

“Agency Security” means a mortgage-backed security issued by an Agency.

“Agent” means DLJ Mortgage Capital, Inc.

“Aggregate Purchase Price-Base” has the meaning assigned to such term in the Pricing Side Letter.

“Aggregate Purchase Price-Incremental 1” has the meaning assigned to such term in the Pricing Side Letter.

“Aggregate Purchase Price-Incremental 2” has the meaning assigned to such term in the Pricing Side Letter.

“Aging Limit” has the meaning assigned to such term in the Pricing Side Letter.

“Agreement” means this Fourth Amended and Restated Master Repurchase Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Appraised Value” means the value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property or the most recently delivered BPO Value, to the extent one has been delivered.

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“Approved Product Type” means the type of Mortgage Loans set forth on the Asset Matrix and that are applicable to the terms of the Program Agreements.

“Asset Confirm” means, with respect to any Transaction as of any date, a confirmation in the form attached as an exhibit to the Custodial Agreement.

“Asset Tape” means a remittance report on a monthly basis or requested by Administrative Agent pursuant to Section 17.d hereof containing servicing information, including, without limitation, those fields reasonably requested by Administrative Agent from time to time, on a loan-by-loan basis and in the aggregate, with respect to the Purchased Mortgage Loans serviced by Seller or any Servicer for the month (or any portion thereof) prior to the Reporting Date.

“Asset Value” has the meaning assigned to such term in the Pricing Side Letter.

“Asset Value-Base” has the meaning assigned to such term in the Pricing Side Letter.

“Assignment and Acceptance” has the meaning set forth in Section 22 hereof.

“Assignment of Mortgage” means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage.

“Assignment of Proprietary Lease” means the specific agreement creating a first lien on and pledge of the Co-op Shares and the appurtenant Proprietary Lease securing a Co-op Loan.

“Authoritative Copy” means, with respect to an eNote, the unique copy of such eNote that is within the Control of the Controller.

“Bailee Letter” has the meaning assigned to such term in the Custodial Agreement.

“Bankruptcy Code” means the United States Bankruptcy Code of 1978, as amended from time to time.

“BPO” means an opinion of the fair market value of a Mortgaged Property given by a licensed real estate agent or broker which generally includes three comparable sales and three comparable listings.

“BPO Value” means the property value of a Mortgaged Property determined pursuant to a BPO.  All BPO Values shall be delivered to Buyer in electronic form acceptable to Buyer. With respect to each BPO Value, upon the request of Buyer, Seller shall deliver to Buyer the related BPO, in form acceptable to Buyer; provided, that no BPO shall be valid if it is dated earlier than one hundred and eighty (180) days prior to the date of determination.

“Business Day” means any day other than (A) a Saturday or Sunday and (B) a public or bank holiday in New York City.

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“Buyer” means CS Cayman, Alpine and each Buyer identified by the Administrative Agent from time to time and their successors in interest and assigns pursuant to Section 22 and, with respect to Section 11, its participants.

“Capital Lease Obligations” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“Cash Equivalents” means  (a) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits of Administrative Agent or its Affiliate or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of Administrative Agent or its Affiliate or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven (7) days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody’s and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by Administrative Agent or its Affiliate or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.

“Change in Control” means any of the following except to the extent contemplated by PennyMac Financial Services, Inc.’s Registration Statement on Form S-1, filed on February 7, 2013:

(a)        any transaction or event as a result of which Guarantor ceases to own, beneficially or of record, 100% of the stock of Seller, except with respect to an initial public offering of Seller’s common stock on a U.S. national securities exchange;

(b)        if Seller or Guarantor is a Delaware limited liability company, such Seller or Guarantor, as applicable, enters into any transaction or series of transactions to adopt, file, effect or consummate a Division, or otherwise permits any such Division to be adopted, filed, effected or consummated;

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(c)        the sale, transfer, or other disposition of all or substantially all of Seller’s or Guarantor’s assets (excluding any such action taken in connection with any securitization transaction); or

(d)        the consummation of a merger or consolidation of Seller or Guarantor with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s stock outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders of Seller or Guarantor immediately prior to such merger, consolidation or other reorganization.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collection Policy” means Seller’s policies regarding Collections and remittance in accordance with the provisions of this Agreement and shall include the application of reimbursements of Servicer Advances in accordance with its usual and customary procedures with respect to priority for reimbursements, which is to apply such reimbursements to the earliest Servicer Advances that have been made with respect to a particular Mortgage Loan that remains unreimbursed.

“Collections” means, with respect to any GNMA EBO as of any date: (a) the sum of all amounts, whether in the form of wire transfer, cash, checks, drafts, or other instruments, received by Seller in payment of, or applied to, any amount owed with respect to a GNMA EBO on or before such date, including, without limitation, all amounts received on account of such GNMA EBO, and (b) cash Proceeds with respect to such GNMA EBO.

“Control” means, with respect to an eNote, the “control” of such eNote within the meaning of UETA and/or, as applicable, E-SIGN, which is established by reference to the MERS eRegistry and any party designated therein as the Controller.

“Control Failure” means, with respect to an eNote, (i) if the Controller status of the eNote shall not have been transferred to Administrative Agent, (ii) Administrative Agent shall otherwise not be designated as the Controller of such eNote in the MERS eRegistry (other than pursuant to a Bailee Letter), (iii) if the eVault shall have released the Authoritative Copy of an eNote in contravention of the requirements of the Custodial Agreement, or (iv) if the Custodian initiated any changes on the MERS eRegistry in contravention of the terms of the Custodial Agreement.

“Controller” means, with respect to an eNote, the party designated in the MERS eRegistry as the “Controller”, and who in such capacity shall be deemed to be “in control” or to be the “controller” of such eNote within the meaning of UETA or E-SIGN, as applicable.

“Commitment Fee” has the meaning assigned to such term in the Pricing Side Letter.  

“Committed Buyer” means CS Cayman or any successor thereto.

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“Committed Mortgage Loan” means a Mortgage Loan which is the subject of a Take-out Commitment with a Take-out Investor.

“Conforming High CLTV Loan” shall have the meaning given to such term in the Pricing Side Letter.

“Conforming Mortgage Loan” means a first lien Mortgage Loan originated in accordance with the criteria of an Agency for purchase of Mortgage Loans, including, without limitation, conventional Mortgage Loans, FHA Loans and VA Loans, as determined by Administrative Agent in its sole discretion.

“Conventional MSR Loan Agreement” means that certain Loan and Security Agreement dated as of February 1, 2018 by and among Seller, Guarantor and CS Cayman, as amended, restated, supplemented or otherwise modified from time to time.

“Conventional MSR Loan Facility Documents” means the Conventional MSR Loan Agreement and the other “Facility Documents” as defined in the Conventional MSR Loan Agreement.

“Co-op” means a private, cooperative housing corporation, having only one class of stock outstanding, which owns or leases land and all or part of a building or buildings, including apartments, spaces used for commercial purposes and common areas therein and whose board of directors authorizes the sale of stock and the issuance of a Proprietary Lease.

“Co-op Corporation” means, with respect to any Co-op Loan, the cooperative apartment corporation that holds legal title to the related Co-op Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.

“Co-op Loan” means a Mortgage Loan secured by the pledge of stock allocated to a dwelling unit in a residential cooperative housing corporation and collateral assignment of the related Proprietary Lease.

“Co-op Project” means, with respect to any Co-op Loan, all real property and improvements thereto and rights therein and thereto owned by a Co-op Corporation including without limitation the land, separate dwelling units and all common elements.

“Co-op Shares” means, with respect to any Co-op Loan, the shares of stock issued by a Co-op Corporation and allocated to a Co-op Unit and represented by Stock Certificates.

“Co-op Unit” means, with respect to any Co-op Loan, a specific unit in a Co-op Project.

“Correspondent Loan” means a Mortgage Loan which is (i) originated by a Correspondent Seller and underwritten in accordance with the Underwriting Guidelines and (ii) acquired by the Seller from PennyMac Corp. or a Correspondent Seller in the ordinary course of business, for sale to the Buyers pursuant to this Agreement.  

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“Correspondent Seller” means a mortgage loan originator that sells Mortgage Loans originated by it to Seller as a “correspondent” client.  

“Correspondent Release” means, with respect to any Correspondent Loan, a release by any third party lender that has a secured interest in the Correspondent Loan of all right, title and interest, including any such security interest, in such Correspondent Loan.  The form of such Correspondent Release shall be mutually acceptable to the Administrative Agent and Seller.

“CP Conduit” means a commercial paper conduit, including but not limited to Alpine Securitization LTD, administered, managed or supported by CSFBMC or an Affiliate of CSFBMC.

“Credit Limit” means, with respect to each HELOC, the maximum amount permitted under the terms of the related Credit Line Agreement as identified in the related Mortgage Loan Schedule.

“Credit Line Agreement” means, with respect to each HELOC, the related home equity line of credit agreement, account agreement and promissory note (if any) executed by the related Mortgagor and any amendment or modification thereof.

“CSFBMC” means Credit Suisse First Boston Mortgage Capital LLC, or any successors or assigns.

“Custodial Agreement” means the second amended and restated custodial agreement dated as of February 11, 2019, among Seller, Administrative Agent, Buyers and Custodian, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Custodial Mortgage Loan Schedule” has the meaning assigned to such term in the Custodial Agreement.

“Custodian” means Deutsche Bank National Trust Company or such other party specified by Administrative Agent and agreed to by Seller, which approval shall not be unreasonably withheld.

“DE Compare Ratio” means the Two Year FHA Direct Endorsement Lender Compare Ratio, excluding streamline FHA refinancings, as made publicly available by HUD.

“Debtor Relief Law” means any law, administration, or regulation relating to reorganization, winding up, administration, composition or adjustment of debts or otherwise relating to bankruptcy or insolvency.

“Default” means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

“Delegatee” means, with respect to an eNote, the party designated in the MERS eRegistry as the “Delegatee” or “Delegatee for Transfers”, who in such capacity is authorized by

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the Controller to perform certain MERS eRegistry transactions on behalf of the Controller such as Transfers of Control and Transfers of Control and Location.

“Delinquency Advance” means any advance made by Seller with respect to GNMA EBOs while still in a GNMA Security, to cover due, but uncollected or unavailable as a result of funds not yet being cleared, principal and interest payments on the GNMA EBOs.

“Designated Mortgage Loan” means a Mortgage Loan that is identified by Administrative Agent as eligible for a Purchase Price-Base, a Purchase Price-Incremental 1 and/or Purchase Price-Incremental 2.

“Disqualification Event” has the meaning assigned to such term in the Pricing Side Letter.

“Division” means the division of a limited liability company into two or more limited liability companies pursuant to and in accordance with Section 18-217 of Chapter 18 of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended.

“Dollars” and “$” means dollars in lawful currency of the United States of America.

“Draw” means, with respect to each HELOC, an additional borrowing by the Mortgagor in accordance with the related Credit Line Agreement.

“Due Date” means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

“Due Diligence Cap” has the meaning assigned to such term in the Pricing Side Letter.

“Due Diligence Costs” has the meaning set forth in Section 35 hereof.

“Early Buyout” means the purchase of a modified or defaulted Mortgage Loan by Seller from a GNMA Security.

“Effective Date” means the date upon which the conditions precedent set forth in Section 10 shall have been satisfied.

“Electronic Agent” means MERSCORP Holdings, Inc., or its successor in interest or assigns.

“Electronic Record” means, as the context requires, (i) “Record” and “Electronic Record,” both as defined in E-SIGN, and shall include but not be limited to, recorded telephone conversations, fax copies or electronic transmissions, including without limitation, those involving the Warehouse Electronic System, and (ii) with respect to an eMortgage Loan, the related eNote and all other documents comprising the Mortgage File electronically created and that are stored in an electronic format, if any.

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“Electronic Tracking Agreement” means one (1) or more Electronic Tracking Agreements with respect to (x) the tracking of changes in the ownership, mortgage servicers and servicing rights ownership of Purchased Mortgage Loans held on the MERS System, and (y) the tracking of the Control of eNotes held on the MERS eRegistry, in a form acceptable to Administrative Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“eMortgage Loan” means a Mortgage Loan that is a Conforming Mortgage Loan (other than an FHA Loan or VA Loan) with respect to which there is an eNote and as to which some or all of the other documents comprising the related Mortgage File may be created electronically and not by traditional paper documentation with a pen and ink signature.

“eNote” means, with respect to any eMortgage Loan, the electronically created and stored Mortgage Note that is a Transferable Record.

“eNote Delivery Requirement” has the meaning assigned to such term in Section 3.f hereof.

“eNote Replacement Failure” has the meaning assigned to such term in the Custodial Agreement.

“EO 13224” has the meaning set forth in Section 13.a(27) hereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any corporation or trade or business that, together with Seller or Guarantor is treated as a single employer under Section 414(b) or (c) of the Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as single employer described in Section 414 of the Code.

“Escrow Instruction Letter” means the Escrow Instruction Letter from Seller to the Settlement Agent, in the form of Exhibit J hereto, as the same may be modified, supplemented and in effect from time to time.

“Escrow Payments” means, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

“E-SIGN” means the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq.

“eVault” means an electronic repository established and maintained by an eVault Provider for delivery and storage of eNotes.

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“eVault Provider” means Document Systems, Inc. d/b/a DocMagic, or its successor in interest or assigns, or such other entity agreed upon by Seller, Custodian and Administrative Agent.

“Event of Default” has the meaning specified in Section 15 hereof.

“Event of Termination” means with respect to Seller or Guarantor (i) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, or (ii) the withdrawal of Seller, Guarantor or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the failure by Seller, Guarantor or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code (or Section 430 (j) of the Code as amended by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303 (j) of ERISA, as amended by the Pension Protection Act), or (iv) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Seller, Guarantor or any ERISA Affiliate thereof to terminate any plan, or (v) the failure to meet requirements of Section 436 of the Code resulting in the loss of qualified status under  Section 401(a)(29) of the Code, or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (vii) the receipt by Seller, Guarantor or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vi) has been taken by the PBGC with respect to such Multiemployer Plan, or (viii) any event or circumstance exists which may reasonably be expected to constitute grounds for Seller, Guarantor or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412 (b) or 430 (k) of the Code with respect to any Plan.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Buyer or other recipient of any payment hereunder or required to be withheld or deducted from a payment to such Buyer or such other recipient: (a) Taxes based on (or measured by) net income or net profits, franchise Taxes and branch profits Taxes that are imposed on a Buyer or other recipient of any payment hereunder as a result of (i) being organized under the laws of, or having its principal office or its applicable lending office located in the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) a present or former connection between such Buyer or other recipient and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or Taxing authority thereof (other than connections arising from such Buyer or other recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced under this Agreement or any Program Agreement, or sold or assigned an interest in any Purchased Mortgage Loan); (b) any Tax imposed on a Buyer or other recipient of a payment hereunder that is attributable to such Buyer’s or other recipient’s failure to comply with relevant requirements set forth in Section 11.e(ii); (c) any withholding Tax that is imposed on amounts payable to or for the account of such Buyer or other recipient of a payment hereunder pursuant to a law in effect on the date such person becomes a party to or under this Agreement, or such person changes its lending office, except in each case to the extent that amounts with respect to Taxes were payable either to such person’s assignor immediately before

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such person became a party hereto or to such person immediately before it changed its lending office;  and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Existing Indebtedness” has the meaning specified in Section 13.a(23) hereof.

“Fannie Mae” means Fannie Mae, the government sponsored enterprise formerly known as the Federal National Mortgage Association or any successor thereto.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

“FDIA” has the meaning set forth in Section 26.c hereof.

“FDICIA” has the meaning set forth in Section 26.d hereof.

“FHA” means the Federal Housing Administration, an agency within the United States Department of HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of HUD where appropriate under the FHA Regulations.

“FHA 203(k) Loan” means an FHA Loan that is eligible for FHA’s 203(k) loan program.

“FHA Approved Mortgagee” means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.

“FHA Insured Non-Performing Loan” means a FHA Loan which is a Non-Performing Mortgage Loan.

“FHA Loan” means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.

“FHA Mortgage Insurance” means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.

“FHA Mortgage Insurance Contract” means the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.

“FHA Regulations” means the regulations promulgated by HUD under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.

“FICO” means Fair Isaac & Co., or any successor thereto.

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“Fidelity Insurance” means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount acceptable to Seller’s regulators.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation or any successor thereto.

“GAAP” means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.

“GNMA” means the Government National Mortgage Association and any successor thereto.

“GNMA Account” means the account as designated in writing by Administrative Agent, in each case, as contemplated by Section 14.ee hereof.

“GNMA EBO” means a FHA Loan, VA Loan or USDA Loan which is subject to an Early Buyout or an FHA Insured Non-Performing Loan, VA Guaranteed Non-Performing Loan or USDA Guaranteed Non-Performing Loan that was never pooled in a GNMA Security.

“GNMA Guide” means the GNMA Mortgage-Backed Securities Guide, Handbook 5500.3, Rev. 1, as amended from time to time, and any related announcements, directives and correspondence issued by GNMA.  

“GNMA Security” means a mortgage-backed security guaranteed by GNMA pursuant to the GNMA Guide.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Seller, Guarantor, Administrative Agent or any Buyer, as applicable.

“Gross Margin” means, with respect to each adjustable rate Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note.

“Guarantee” means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include (i) endorsements for collection or deposit in the ordinary course of business, or (ii) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgaged Property, to the extent required by Administrative Agent.  The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.  The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

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“Guarantor” means Private National Mortgage Acceptance Company, LLC, in its capacity as guarantor under the Guaranty.

“Guaranty” means the amended and restated guaranty of Private National Mortgage Acceptance Company, LLC dated as of April 28, 2017, in favor of the Administrative Agent for the benefit of Buyers, as the same may be amended from time to time, pursuant to which Guarantor fully and unconditionally guarantees the obligations of Seller hereunder as it may be amended, supplemented or otherwise modified from time to time.

“Hash Value” means, with respect to an eNote, the unique, tamper-evident digital signature of such eNote that is stored with MERS.

“HELOC” means a home equity revolving line of credit secured by a first or second lien on the related Mortgaged Property.

“High Cost Mortgage Loan” means a Mortgage Loan classified as (a) a “high cost” loan under the Home Ownership and Equity Protection Act of 1994 or (b) a “high cost,” “threshold,” “covered,” or “predatory” loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).

“HUD” means the United States Department of Housing and Urban Development or any successor thereto.

“Income” means with respect to any Purchased Mortgage Loan at any time until repurchased by Seller, any principal received thereon or in respect thereof and all interest, dividends or other distributions thereon.

“Indebtedness” means, for any Person at any time, and only to the extent outstanding at such time: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within 90 days after the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements, including, without limitation, any Indebtedness arising hereunder; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness of general partnerships of

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which such Person is a general partner; and (j) with respect to clauses (a) – (i) above, both on and off balance sheet.

“Indemnified Party” has the meaning set forth in Section 30 hereof.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Seller hereunder or under any Program Agreement and (b) Other Taxes.

“Index” means, with respect to any adjustable rate Mortgage Loan, the index identified on the Mortgage Loan Schedule and set forth in the related Mortgage Note for the purpose of calculating the applicable Mortgage Interest Rate.

“Interest Only Adjustment Date” means, with respect to each Interest Only Loan, the date, specified in the related Mortgage Note on which the Monthly Payment will be adjusted to include principal as well as interest.

“Interest Only Loan” means a Mortgage Loan which only requires payments of interest for a period of time specified in the related Mortgage Note.

“Interest Rate Adjustment Date” means the date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.

“Interest Rate Protection Agreement” means, with respect to any or all of the Purchased Mortgage Loans, any short sale of a U.S. Treasury Security, or futures contract, or mortgage related security, or eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement or Take-out Commitment, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller and an Affiliate of Administrative Agent or such other party acceptable to Administrative Agent in its sole discretion, which agreement is acceptable to Administrative Agent in its sole discretion.

“Irrevocable Instruction Letter” shall have the meaning assigned to such term in Section 8.c hereof.

“LIBOR” has the meaning assigned to such term in the Pricing Side Letter.

“Lien” means any mortgage, lien, pledge, charge, security interest or similar encumbrance.

“Loan to Value Ratio” or “LTV” means with respect to any Mortgage Loan, the ratio of the original outstanding principal amount of such Mortgage Loan to the lesser of (a) (x) with respect to a Mortgage Loan other than a GNMA EBO, the Appraised Value of the Mortgaged Property at origination or (y) with respect to a GNMA EBO,  the BPO Value or such other valuation acceptable to Administrative Agent in its sole discretion or (b) if the Mortgaged Property was purchased within 12 months of the origination of such Mortgage Loan, the purchase price of the Mortgaged Property.

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“Location” means, with respect to an eNote, the location of such eNote which is established by reference to the MERS eRegistry.

“Low Percentage Margin Call” has the meaning specified in Section 6.b hereof.

“Margin Call” has the meaning specified in Section 6.a hereof.

“Margin Deadline” has the meaning specified in Section 6.b hereof.

“Margin Deficit” has the meaning specified in Section 6.a hereof.

“Market Value” has the meaning assigned to such term in the Pricing Side Letter.

“Master Servicer Field” means with respect to an eNote, the field entitled “Master Servicer” in the MERS eRegistry.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of Seller, Guarantor or any Affiliate that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of Seller, Guarantor or any Affiliate that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against Seller, Guarantor or any Affiliate that is a party to any Program Agreement, in each case as determined by the Administrative Agent in its sole discretion.

“Maximum Aggregate Purchase Price-Incremental 1” has the meaning assigned to such term in the Pricing Side Letter.

“Maximum Aggregate Purchase Price-Incremental 2” has the meaning assigned to such term in the Pricing Side Letter.

“Maximum Purchase Price-Incremental 1” has the meaning assigned to such term in the Pricing Side Letter.

“Maximum Purchase Price-Incremental 2” has the meaning assigned to such term in the Pricing Side Letter.

“Maximum Regular Way Committed Purchase Price” has the meaning set forth in the Pricing Side Letter.

“Maximum Regular Way Purchase Price” has the meaning set forth in the Pricing Side Letter.

“MERS” means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.

“MERS eDelivery” means the transmission system operated by the Electronic Agent that is used to deliver eNotes, other Electronic Records and data from one MERS eRegistry

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member to another using a system-to-system interface and conforming to the standards of the MERS eRegistry.

“MERS eRegistry” means the electronic registry operated by the Electronic Agent that acts as the legal system of record that identifies the Controller, Delegatee and Location of the Authoritative Copy of registered eNotes.

“MERS Org ID” means a number assigned by the Electronic Agent that uniquely identifies MERS members, or, in the case of a MERS Org ID that is a “Secured Party Org ID”, uniquely identifies MERS eRegistry members, which assigned numbers for each of Administrative Agent, Seller and Custodian have been provided to the parties hereto.

“MERS System” means the mortgage electronic registry system operated by the Electronic Agent that tracks changes in Mortgage ownership, mortgage servicers and servicing rights ownership.

“Minimum Purchase Price-Incremental 2” has the meaning set forth in the Pricing Side Letter.

“Minimum Purchase Price Percentage-Incremental 2” has the meaning set forth in the Pricing Side Letter.

“Monthly Payment” means the scheduled monthly payment of principal and/or interest on a Mortgage Loan.

“Moody’s” means Moody’s Investors Service, Inc. or any successors thereto.

“Mortgage” means each mortgage, deed of trust, deed to secure debt or similar instrument creating and evidencing a lien on real property and other property and rights incidental thereto, unless such Mortgage is granted in connection with a Co-op Loan, in which case the first lien position is in the stock of the subject cooperative association and in the tenant’s rights in the cooperative lease relating to such stock.

“Mortgage File” means, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and set forth in Exhibit F-1 to the Custodial Agreement.

“Mortgage Interest Rate” means the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.

“Mortgage Interest Rate Cap” means, with respect to an adjustable rate Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth in the related Mortgage Note.

“Mortgage Loan” means any Approved Product Type which is a fixed or floating rate, one to four family residential mortgage loan evidenced by a promissory note and secured by a mortgage, which satisfies the requirements set forth in the Underwriting Guidelines and Section

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13.b hereof; provided, however, that, Mortgage Loans shall not include any High Cost Mortgage Loans.

“Mortgage Loan Documents” means the documents in the related Mortgage File to be delivered to Custodian.

“Mortgage Loan Schedule” means with respect to any Transaction as of any date, a mortgage loan schedule in the form of either (a) Exhibit C attached hereto or (b) a computer tape or other electronic medium generated by Seller or Guarantor, and delivered to Administrative Agent and Custodian, which provides information required by Administrative Agent to enter into Transactions (including, without limitation, the information set forth on Exhibit C attached hereto) relating to the Purchased Mortgage Loans in a format acceptable to Administrative Agent.

“Mortgage Note” means the promissory note, Credit Line Agreement or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.

“Mortgaged Property” means the real property or other Co-op Loan collateral securing repayment of the debt evidenced by a Mortgage Note.

“Mortgagor” means the obligor or obligors on a Mortgage Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.

“MSR PC Repo Agreement” means that certain Master Repurchase Agreement dated as of September 11, 2019, by and among Seller, Guarantor, Administrative Agent and CS Cayman, as amended, restated, supplemented or otherwise modified from time to time.

“MSR PC Repo Documents” means the MSR PC Repo Agreement and the other “Facility Documents” as defined in the MSR PC Repo Agreement.

“MSR Valuation” means the lesser of (i) the value of the mortgage servicing rights owned by the Seller as set forth in the Seller’s most recent balance sheet as determined by the Seller as of such date in accordance with GAAP, (ii) the Administrative Agent’s valuation of such mortgage servicing rights as determined by the Administrative Agent or (iii) a Third Party Evaluator’s valuation of such mortgage servicing rights as determined by such Third Party Evaluator.

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.

“Net Income” means, for any period and any Person, the net income of such Person for such period as determined in accordance with GAAP.

“Net Worth” means, with respect to any Person, an amount equal to, on a consolidated basis, such Person’s stockholder equity (determined in accordance with GAAP).

“1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.

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“Non-Affiliate Buyer” has the meaning specified in Section 19 hereof.

“Non-Affiliate MRA” has the meaning specified in Section 19 hereof.

“Non-Affiliate Transactions” has the meaning specified in Section 19 hereof.

“Non-Agency Non-QM Mortgage Loan” means a Non-Agency QM Mortgage Loan that (a) does not meet the criteria for a Qualified Mortgage Loan; (b) meets all applicable criteria as set forth in the Underwriting Guidelines; and (c) is otherwise acceptable to Administrative Agent in its sole discretion.

“Non-Agency QM Mortgage Loan” means a Mortgage Loan that (a)  meets all applicable criteria as set forth in the Underwriting Guidelines, but (b) has an original principal balance in an amount in excess of the then applicable conventional conforming limits, including general limits and high-cost area limits, for Mortgaged Properties securing Mortgage Loans in such county or local area; provided, however, that Non-Agency QM Mortgage Loans shall not include any Mortgage Loan with an original principal balance in excess of $2,000,000, and (c) is otherwise acceptable to Administrative Agent in its sole discretion.

“Non-Performing Mortgage Loan” means (i) any Mortgage Loan for which any payment of principal or interest is more than thirty (30) days past due, (ii) any Mortgage Loan with respect to which the related mortgagor is in bankruptcy or (iii) any Mortgage Loan with respect to which the related mortgaged property is in foreclosure.

“Non-Recourse Debt” shall mean Indebtedness payable solely from the assets sold or pledged to secure such Indebtedness and under which Indebtedness no party has recourse to Seller, Guarantor or any of their Affiliates if such assets are inadequate or unavailable to pay off such Indebtedness, and neither Seller, Guarantor nor any of their Affiliates effectively has any obligation to directly or indirectly pay any such deficiency.

“Notice Date” has the meaning given to it in Section 3.b hereof.

“Obligations” means (a) all of Seller’s indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Price Differential Payment Date, and other obligations and liabilities, to Administrative Agent and Buyers, its Affiliates or Custodian arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums paid by Administrative Agent, Buyers or Administrative Agent on behalf of Buyers in order to preserve any Purchased Mortgage Loan or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller’s indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Mortgage Loan, or of any exercise by Administrative Agent or Buyers of their rights under the Program Agreements, including, without limitation, attorneys’ fees and disbursements and court costs; (d) all of Seller’s indemnity obligations to Administrative Agent, Buyers and Custodian or both pursuant to the Program Agreements; (e) all of Seller’s obligations under the VFN Facility Documents; (f) all of Seller’s obligations under the Conventional MSR Loan Facility Documents; (g) all of Seller’s obligations under the MSR PC Repo Documents and (h) all of Seller’s obligations under the SPIA VPN Repo Documents.

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“OFAC” has the meaning set forth in Section 13.a(27) hereof.

“Officer’s Compliance Certificate” has the meaning assigned to such term in the Pricing Side Letter.

“Other Taxes” means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Program Agreement.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Pension Protection Act” means the Pension Protection Act of 2006.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Plan” means an employee benefit or other plan, established or maintained by any Seller or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.

“Pool” means a subset of Mortgage Loans subject to Transactions which shall be identified from time to time by the Administrative Agent.

“Pooled Mortgage Loan” means any Purchased Mortgage Loan that is subject to a Transaction hereunder and is part of a pool of Purchased Mortgage Loans certified by Custodian to an Agency to be either (a) purchased by such Agency or (b) swapped for an Agency Security backed by such pool, in each case, in accordance with the terms of the guidelines issued by the applicable Agency.

“Pool Subdivision Notice” means a written notice delivered by Administrative Agent to Seller, which shall identify the discrete Mortgage Loans which shall be allocated to different Pools.

“Post-Default Rate” has the meaning assigned to such term in the Pricing Side Letter.

“Power of Attorney” has the meaning specified in Section 28 hereto.

“Price Differential” has the meaning assigned to such term in the Pricing Side Letter.

“Price Differential-Base” has the meaning assigned to such term in the Pricing Side Letter.

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“Price Differential-Incremental 1” has the meaning assigned to such term in the Pricing Side Letter.

“Price Differential-Incremental 2” has the meaning assigned to such term in the Pricing Side Letter.

“Price Differential Payment Date” means, the 5^th day of the month following the related Purchase Date and each succeeding 5^th day of the month thereafter; provided, that, with respect to such Purchased Mortgage Loan, the final Price Differential Payment Date shall be the related Repurchase Date; and provided, further, that if any such day is not a Business Day, the Price Differential Payment Date shall be the next succeeding Business Day.

“Pricing Rate” has the meaning assigned to such term in the Pricing Side Letter.

“Pricing Period” means, with respect to each Price Differential Payment Date, the period commencing on (and including) the date that is the first calendar day of the preceding month and terminating on (and including) the last calendar day of the preceding month; provided, that the initial Pricing Period shall commence on the initial Purchase Date.

“Pricing Side Letter” means the third amended and restated letter agreement dated as of the date hereof, among Administrative Agent for the benefit of Buyers, Seller and Guarantor as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Proceeds” means “proceeds” as defined in Section 9-102(a)(64) of the UCC.

“Program Agreements” means, collectively, this Agreement, the Custodial Agreement, the Pricing Side Letter, the Electronic Tracking Agreement, if entered into, the Guaranty, the Securities Account Control Agreement and the Power of Attorney.

“Prohibited Person” has the meaning set forth in Section 13.a(27) hereof.

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“Proprietary Lease” means the lease on a Co-op Unit evidencing the possessory interest of the owner in the Co-op Shares in such Co-op Unit.

“Protective Advance” means any servicing advance (including, but not limited to, any advance made to pay taxes and insurance premiums; any advance to pay the costs of protecting the value of any real property or other security for a mortgage loan; and any advance to pay the costs of realizing on the value of any such security) made by Sellers in connection with any Purchased Mortgage Loans.

“Purchase Date” means the date on which Purchased Mortgage Loans or Servicer Advances are to be transferred by Seller to Administrative Agent for the benefit of Buyers or on which Servicer Advances are funded by the Administrative Agent.

“Purchase Price” has the meaning assigned to such term in the Pricing Side Letter.

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“Purchase Price-Base” has the meaning assigned to such term in the Pricing Side Letter.

“Purchase Price-Incremental 1” has the meaning assigned to such term in the Pricing Side Letter.

“Purchase Price-Incremental 2” has the meaning assigned to such term in the Pricing Side Letter.

“Purchase Price Percentage” has the meaning assigned to such term in the Pricing Side Letter.

“Purchased Mortgage Loans” means the collective reference to Mortgage Loans together with Servicer Advances and the Repurchase Assets related to such Mortgage Loans transferred by Seller to Administrative Agent for the benefit of Buyers in a Transaction hereunder, listed on the related Mortgage Loan Schedule attached to the related Transaction Request, which such Mortgage Loans Custodian has been instructed to hold for the benefit of Administrative Agent pursuant to the Custodial Agreement.

“Qualified Insurer” means an insurance company duly authorized and licensed where required by law to transact insurance business and approved as an insurer by Fannie Mae or Freddie Mac.

“Qualified Mortgage Loan” means a Mortgage Loan which is a “Qualified Mortgage” as defined in 12 CFR 1026.43(e).

“Qualified Originator” means an originator of Mortgage Loans which is acceptable under the Underwriting Guidelines.

“Recognition Agreement” means, an agreement among a Co-op Corporation, a lender and a Mortgagor with respect to a Co-op Loan whereby such parties (i) acknowledge that such lender may make, or intends to make, such Co-op Loan, and (ii) make certain agreements with respect to such Co-op Loan.

“Records” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller, Servicer or any other person or entity with respect to a Purchased Mortgage Loan or Servicer Advance.  Records shall include the Mortgage Notes, any Mortgages, any Credit Line Agreements, the Mortgage Files, the credit files related to the Purchased Mortgage Loan and Servicer Advance and any other instruments necessary to document or service a Mortgage Loan.  

“Register” has the meaning set forth in Section 22 hereof.

“REO Property” means real property acquired by Seller, including a Mortgaged Property acquired through foreclosure of a Mortgage Loan or by deed in lieu of such foreclosure.

“Reporting Date” means the 5^th day of each month or, if such day is not a Business Day, the next succeeding Business Day.

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“Repledge Transaction” has the meaning set forth in Section 18 hereof.

“Repledgee” means each Repledgee identified by the Administrative Agent from time to time.

“Repurchase Assets” has the meaning assigned thereto in Section 8 hereof.

“Repurchase Date” means the earliest of (i) the Termination Date, (ii) the date determined by application of Section 16 hereof or (iii) the date identified to the Administrative Agent by Seller as the date that the related Mortgage Loan is to be sold pursuant to a Take-out Commitment.

“Repurchase Price” means the price at which Purchased Mortgage Loans are to be transferred from the Administrative Agent for the benefit of Buyers to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the accrued but unpaid Price Differential as of the date of such determination.

“Request for Certification” means a notice sent to Custodian reflecting the sale of one or more Purchased Mortgage Loans to Administrative Agent for the benefit of Buyers hereunder.

“Requirement of Law” means, as to any Person, any law, treaty, rule, regulation, procedure or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, and includes all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Seller, at any time in force affecting Seller, Mortgage Loan or REO Property or any part thereof.

“Responsible Officer” means as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person; provided, however, that the Responsible Officers of Seller and Guarantor as of the date hereof are listed on Schedule 3 hereto.

“S&P” means Standard & Poor’s Ratings Services, or any successor thereto.

“Scratch and Dent Mortgage Loan” means a first lien Mortgage Loan (i) originated by Seller in accordance with the criteria of an Agency Mortgage Loan or Non-Agency QM Mortgage Loan, as applicable, except such Mortgage Loan is not eligible for sale to the original Take-out Investor or has been subsequently repurchased from such original Take-out Investor, in each case, for reasons other than delinquent payment under such Mortgage Loan and (ii) is acceptable to Buyers or Administrative Agent in their sole discretion.

“SEC” means the Securities and Exchange Commission, or any successor thereto.

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“Second Lien Mortgage Loan” means a Mortgage Loan or a home equity revolving line of credit (“HELOC”) secured by a second lien on the related Mortgaged Property.

“Securities Account” means the account established pursuant to the Securities Account Control Agreement, into which all collections and proceeds on or in respect of the Mortgage Loans shall be deposited by Servicer.

“Securities Account Control Agreement” means that certain Amended and Restated Securities Account Control Agreement dated as of October 31, 2014, among Administrative Agent, Administrative Agent in its capacity as lender under the Servicing Facility Agreement, Seller, Seller in its capacity as borrower under the Servicing Facility Agreement, Seller in its capacity as servicer under the Agreement, and Securities Intermediary and other parties as joined thereto from time to time, as may be amended, supplemented or replaced from time to time.

“Securities Intermediary” means City National Bank, and its permitted successors and assigns, or such other party specified by Administrative Agent and agreed to by Seller, which approval shall not be unreasonably withheld.

“Seller” means PennyMac Loan Services, LLC or its permitted successors and assigns.

“Servicer” means any servicer approved by Administrative Agent in its sole discretion, which may be Seller or its permitted successors and assigns.

“Servicer Advance” means a Delinquency Advance or a Protective Advance.

“Subservicer Field” means, with respect to an eNote, the field entitled, “Subservicer” in the MERS eRegistry.

“Servicing Rights” means rights of any Person to administer, service or subservice, the Purchased Mortgage Loans or to possess related Records.

“Settlement Agent” means, with respect to any Transaction the subject of which is a Wet-Ink Mortgage Loan, the entity approved by Administrative Agent, in its sole good-faith discretion, which may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction where the related Wet-Ink Mortgage Loan is being originated.  A Settlement Agent is deemed approved unless Administrative Agent notifies Seller otherwise at any time electronically or in writing.

“Severance Notice” has the meaning specified in Section 19 hereof.

“SIPA” means the Securities Investor Protection Act of 1970, as amended from time to time.

“SPIA VFN Repo Agreement” means that certain Master Repurchase Agreement dated as of April 1, 2020 by and among Seller, Administrative Agent and CS Cayman, as amended, restated, supplemented or otherwise modified from time to time.

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“SPIA VPN Repo Documents” means the SPIA VFN Repo Agreement and the other “Program Agreements” as defined in the SPIA VPN Repo Agreement.

“Statement Date” has the meaning set forth in Section 13.a(5)(a) hereof.

“Stock Certificate” means, with respect to a Co-op Loan, the certificates evidencing ownership of the Co-op Shares issued by the Co-op Corporation.

“Stock Power” means, with respect to a Co-op Loan, an assignment of the Stock Certificate or an assignment of the Co-op Shares issued by the Co-op Corporation.

“Streamlined Mortgage Loan” means an FHA Loan originated in accordance with FHA’s streamlined mortgage loan refinance program as set forth in FHA’s Underwriting Guidelines.

“Submitted GNMA EBO” means a GNMA EBO which is subject to a Transaction hereunder and for which a claim has been submitted to HUD.

“Subordinated Debt” means, Indebtedness of Seller which is (i) unsecured, (ii) no part of the principal of such Indebtedness is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the date which is one year following the Termination Date and (iii) the payment of the principal of and interest on such Indebtedness and other obligations of Seller in respect of such Indebtedness are subordinated to the prior payment in full of the principal of and interest (including post-petition obligations) on the Transactions and all other obligations and liabilities of Seller to Administrative Agent and Buyers hereunder on terms and conditions approved in writing by Administrative Agent and all other terms and conditions of which are satisfactory in form and substance to Administrative Agent.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, trust or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, limited liability company, partnership, trust or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, limited liability company, partnership, trust or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“Successor Rate” means a rate determined by Administrative Agent in accordance with Section 5.c hereof.

“Successor Rate Conforming Changes” means with respect to any proposed Successor Rate, any spread adjustments or other conforming changes to the timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of Administrative Agent, to reflect the adoption of such Successor

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Rate and to permit the administration thereof by Administrative Agent in a manner substantially consistent with market practice.

“Take-out Commitment” means a commitment of Seller to either (a) sell one or more identified Mortgage Loans to a Take-out Investor or (b) (i) swap one or more identified Mortgage Loans with a Take-out Investor that is an Agency for an Agency Security, and (ii) sell the related Agency Security to a Take-out Investor, and in each case, the corresponding Take-out Investor’s commitment back to Seller to effectuate any of the foregoing, as applicable. With respect to any Take-out Commitment with an Agency, the applicable agency documents list Administrative Agent as sole subscriber.

“Take-out Investor” means (i) an Agency or (ii) other institution which has made a Take-out Commitment and has been approved by Administrative Agent for the benefit of Buyers.

“Taxes” means any and all present or future taxes (including social security contributions and value added taxes), levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges), withholdings (including backup withholding), assessments, fees or other charges of any nature whatsoever imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Termination Date” means the earlier of (a) the date of the occurrence of an Event of Default, and (b) April 23, 2021; provided that, if by the sixtieth (60^th) calendar day prior to the then-existing Termination Date, the Administrative Agent does not deliver a Termination Notice to Seller, the Termination Date shall be extended for another calendar day thereafter, and shall continue to extend in such a manner until such Termination Notice is so delivered.  Upon delivery of such Termination Notice, the Termination Date shall be fixed on the date that is sixty (60) calendar days following the date of such Termination Notice, and shall cease to extend as contemplated herein.

“Termination Notice” means written notice delivered by Administrative Agent to Seller stating that Administrative Agent shall no longer extend the Termination Date.

“Test Period” means any one fiscal quarter.

“Third Party Evaluator” means an appraiser approved by Administrative Agent in its sole good faith discretion.

“TILA-RESPA Integrated Disclosure Rule” means the Truth-in-Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Finance Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.

“Trade Assignment” means an assignment to the Administrative Agent of a forward trade between a Takeout Investor and Seller with respect to one or more Purchased Mortgage Loans that are Pooled Mortgage Loans substantially in the form of Exhibit L hereto.

“Transaction” has the meaning set forth in Section 1 hereof.

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“Transaction Request” means a request via email from Seller to Administrative Agent, in the form attached as Exhibit A hereto, notifying Administrative Agent that Seller wishes to enter into a Transaction hereunder that indicates that it is a Transaction Request under this Agreement. For the avoidance of doubt, a Transaction Request may refer to multiple Mortgage Loans; provided, that each Mortgage Loan shall be deemed to be subject to its own Transaction.

“Transfer of Control” means, with respect to an eNote, a MERS eRegistry transfer transaction used to request a change to the current Controller of such eNote.

“Transfer of Location” means, with respect to an eNote, a MERS eRegistry transfer transaction used to request a change to the current Location of such eNote.

“Transferable Record” means an Electronic Record under E-SIGN and UETA that (i) would be a note under the Uniform Commercial Code if the Electronic Record were in writing, (ii) the issuer of the Electronic Record has expressly agreed is a “transferable record”, and (iii) for purposes of E-SIGN, relates to a loan secured by real property.

“Transfer of Servicing”:  With respect to an eNote, a MERS eRegistry transfer transaction used to request a change to the current Servicing Master Servicer Field or Subservicer Field of such eNote.

“UETA” means the Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999.

“Unauthorized Master Servicer or Subservicer Modification” means, with respect to an eNote, a Transfer of Location, Transfer of Servicing or a change in any other information, status of data initiated by the Seller, any Servicer or a vendor of the Master Servicer Field or Subservicer Field with respect to such eNote on the MERS eRegistry.

“Underwriting Guidelines” means the standards, procedures and guidelines of Seller for underwriting Mortgage Loans, which are set forth in the written policies and procedures of Seller, the Fannie Mae Single-Family Selling and Servicing Guide, the Freddie Mac Single-Family Seller/Servicer Guide, the Freddie Mac Multifamily Seller/Servicer Guide, FHA Underwriting Guidelines or VA Underwriting Guidelines, a copy of which is attached hereto as Exhibit F and such other guidelines as are identified and approved in writing by Administrative Agent.

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.

“USDA Guaranteed Non-Performing Loan” means a USDA Loan which is a Non-Performing Mortgage Loan.

“USDA Loan” means a first lien Mortgage Loan originated in accordance with the criteria established by and guaranteed by the United States Department of Agriculture.

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“U.S. Tax Compliance Certificate” has the meaning set forth in Section 11.e(ii)(B) hereof.

“VA” means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.

“VA Approved Lender” means a lender which is approved by the VA to act as a lender in connection with the origination of VA Loans.

“VA Guaranteed Non-Performing Loan” means a VA Loan which is a Non-Performing Mortgage Loan.

“VA Loan” means a Mortgage Loan which is the subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate, or a Mortgage Loan which is a vendor loan sold by the VA.

“VA Loan Guaranty Agreement” means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.

“VFN Facility Documents” means the VFN Repurchase Agreement and the other “Program Agreements” as defined in the VFN Repurchase Agreement.

“VFN Irrevocable Instruction Letter” has the meaning set forth in Section 8.b hereof.

“VFN Repurchase Agreement” means that certain Amended and Restated Master Repurchase Agreement (PNMAC GMSR Issuer Trust MSR Collateralized Notes, Series 2016-MSRVF1), dated as of December 19, 2016, among the Buyer, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch, and the Seller, as amended, restated, supplemented or otherwise modified from time to time.

“Warehouse Electronic System” means the system utilized by or Administrative Agent either directly, or through its vendors, and which may be accessed by Seller in connection with delivering and obtaining information and requests in connection with the Program Agreements.

“Wet-Ink Documents” means, with respect to any Wet-Ink Mortgage Loan, the (a) Transaction Request and (b) the Mortgage Loan Schedule.

“Wet-Ink Mortgage Loan” means a Mortgage Loan which Seller is selling to Buyer simultaneously with the origination thereof or in the case of a GNMA EBO, Seller is selling to Buyer simultaneously with the purchase of such Mortgage Loan from a GNMA Security.  

3.         Program; Initiation of Transactions

a.    From time to time, Administrative Agent (for the benefit of Buyers) will purchase by Buyers from Seller certain Mortgage Loans that have either been

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originated by Seller or purchased by Seller from a Correspondent Seller.  This Agreement is a commitment by Administrative Agent on behalf of the Committed Buyers to enter into Transactions with respect to Mortgage Loans with Seller for an aggregate amount equal to the Maximum Regular Way Committed Purchase Price.  This Agreement is not a commitment by Administrative Agent on behalf of Buyers to enter into Transactions with respect to Mortgage Loans with Seller for amounts exceeding the Maximum Regular Way Committed Purchase Price, but rather, sets forth the procedures to be used in connection with periodic requests for Administrative Agent on behalf of Buyers to enter into Transactions with Seller.  Seller hereby acknowledges that, beyond the Maximum Regular Way Committed Purchase Price, Administrative Agent on behalf of Buyers is under no obligation to agree to enter into, or to enter into, any Transaction with respect to Mortgage Loans pursuant to this Agreement.  All Purchased Mortgage Loans shall exceed or meet the Underwriting Guidelines and shall be serviced by Servicer.  The sum of (i) the Aggregate Purchase Price-Base, (ii) the Aggregate Purchase Price-Incremental 1 plus (iii) the Aggregate Purchase Price-Incremental 2 (solely for Non-Participated Purchase Price-Incremental 2) shall not exceed the Maximum Regular Way Purchase Price.  The Aggregate Purchase Price-Incremental 1 of Purchased Mortgage Loans subject to outstanding Transactions shall not exceed the Maximum Aggregate Purchase Price-Incremental 1.  The Aggregate Purchase Price-Incremental 2 of Purchased Mortgage Loans subject to outstanding Transactions shall not exceed the Maximum Aggregate Purchase Price-Incremental 2.

b.   With respect to each Transaction involving Mortgage Loans which are not Wet-Ink Mortgage Loans, Seller shall give Administrative Agent and Custodian prior notice of any proposed Purchase Date on or prior to 11:00 a.m. (New York City time) two (2) Business Days’ prior to the Purchase Date (the date on which such notice is given, the “Notice Date”); provided, that if Seller is delivering 251 or more Mortgage Loans, which are not Wet-Ink Mortgage Loans, on a Purchase Date, Seller shall give Administrative Agent and Custodian prior notice of any proposed Purchase Date on or prior to 11:30 a.m. (New York City time) three (3) Business Days’ prior to the Purchase Date.  With respect to Wet-Ink Mortgage Loans, Seller shall deliver notice of any proposed purchase on or before 11:30 a.m. (New York City time) on the Purchase Date.  On the Notice Date, Seller shall (i) request that Buyers enter into a Transaction by furnishing to Administrative Agent a Transaction Request, (ii) deliver to Administrative Agent and Custodian a Mortgage Loan Schedule and (iii) deliver to Custodian, or Administrative Agent, with respect to each Wet-Ink Mortgage Loan, either a Request for Certification and each Mortgage File or Wet-Ink Documents for each Wet-Ink Mortgage Loan, as applicable, in accordance with Section 10.b(3) hereof. With respect to requested Transactions that would cause the aggregate outstanding Purchase Price for all outstanding Transactions to exceed the Maximum Regular Way Committed Purchase Price, Administrative Agent may enter into such requested Transaction or may notify Seller of its intention not to enter into such Transaction. In the event the Mortgage Loan Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned,

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Administrative Agent shall provide written or electronic notice to Seller describing such error and Seller may either (a) give Administrative Agent written or electronic authority to correct the computer data, reformat the Mortgage Loans or properly align the computer fields or (b) correct the computer data, reformat or properly align the computer fields itself and resubmit the Mortgage Loan Schedule as required herein. In the event that Seller gives Administrative Agent authority to correct the computer data, reformat the Mortgage Loan Schedule or properly align the computer fields, Seller shall hold Administrative Agent harmless for such correction, reformatting or realigning, as applicable, except as otherwise expressly provided herein.  

c.    Upon the satisfaction of the applicable conditions precedent set forth in Section 10 hereof, all of Seller’s interest in the Repurchase Assets shall pass to Administrative Agent on behalf of Buyers on the Purchase Date, against the transfer of the Purchase Price to Seller.  Upon transfer of the Mortgage Loans to Administrative Agent on behalf of Buyers as set forth in this Section and until termination of any related Transactions as set forth in Sections 4 or 16 of this Agreement, beneficial ownership of each Mortgage Loan, including each document in the related Mortgage File and Records, is vested in Administrative Agent on behalf of Buyers; provided that, prior to the recordation by Custodian as provided for in the Custodial Agreement record title in the name of Seller to each Mortgage shall be retained by Seller for the benefit of Administrative Agent, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Mortgage Loans. For the avoidance of doubt, the parties acknowledge and agree that the Purchased Mortgage Loans shall be held by the Administrative Agent for the benefit of Buyers.

d.   With respect to each Wet-Ink Mortgage Loan, by no later than 12:00 noon, (New York City time) on the seventh Business Day following the applicable Purchase Date, Seller shall cause the related Settlement Agent to deliver to Custodian the remaining documents in the Mortgage File.

e.    Agent shall act as agent solely with respect to performance of the following duties, in each case, on behalf of Buyers to the extent contemplated by Section 14.hh: (i) receiving from HUD and VA all amounts with respect to all Purchased Mortgage Loans, (ii) maintaining the GNMA Account, (iii) taking such actions as Agent deems appropriate to administer the GNMA Account, and (iv) acting as mortgagee of record with respect to each Submitted GNMA EBO and Aged 360 GNMA EBO pursuant to Section 14.hh hereof.  The Agent shall have no duties or responsibilities except those expressly set forth in this Section 3.g.

f.    With respect to any eMortgage Loan, Seller shall deliver to Custodian each of Administrative Agent’s and Seller’s MERS Org IDs, and shall cause (i) the Authoritative Copy of the related eNote to be delivered to the eVault via a secure electronic file, (ii) the Controller status of the related eNote to be transferred to Administrative Agent, (iii) the Location status of the related eNote to be transferred to Custodian, (iv) the Delegatee status of the related eNote to be transferred to

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Custodian, in each case using MERS eDelivery and the MERS eRegistry (v) the Master Servicer Field status of the related eNote to be transferred to Seller and (vi) the Subservicer Field status of the related eNote to be blank (collectively, the “eNote Delivery Requirements”).

g.   With respect to each Designated Mortgage Loan, the Seller shall fully draw upon the Purchase Price-Base, the Maximum Purchase Price-Incremental 1 and the Minimum Purchase Price-Incremental 2 and may from time to time request additional Purchase Price-Incremental 2 in an amount not to exceed the Maximum Purchase Price-Incremental 2. For the avoidance of doubt, (i) the Purchase Price-Incremental 1 shall not be drawn upon until such time that the Purchase Price-Base has been fully drawn and (ii) the Purchase Price-Incremental 2 shall not be drawn upon until such time that the Maximum Purchase Price-Incremental 1 has been fully drawn.

4.         Repurchase

a.    Seller shall repurchase the related Purchased Mortgage Loans from Administrative Agent for the benefit of Buyers on each related Repurchase Date. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan (but liquidation or foreclosure proceeds received by Administrative Agent shall be applied to reduce the Repurchase Price for such Purchased Mortgage Loan on each Price Differential Payment Date except as otherwise provided herein).  Seller is obligated to repurchase and take physical possession of the Purchased Mortgage Loans from Administrative Agent or its designee (including the Custodian) at Seller’s expense on the related Repurchase Date. For the avoidance of doubt, in connection with a payment of the Repurchase Price with respect to any Designated Mortgage Loan, Seller shall only be entitled to pay either (a) the full Repurchase Price or (b) a portion of the Repurchase Price so long as the remaining outstanding Repurchase Price is at least equal to the Minimum Purchase Price-Incremental 2. To the extent that (i) the Repurchase Date shall have occurred, (ii) there exists no Default, (iii) Seller wishes to enter into a new Transaction with respect to the related Mortgage Loans, (iv) such Mortgage Loans have a Market Value in excess of zero and (v) the Purchase Price shall not cause the aggregate Purchase Price of all Transactions to exceed the Maximum Regular Way Committed Purchase Price nor cause a Margin Deficit, then Seller may request a new Transaction in accordance with the provisions of Section 3 hereof and Administrative Agent shall enter the same.

b.   Provided that no Default shall have occurred and is continuing, and Administrative Agent has received the related Repurchase Price (excluding accrued and unpaid Price Differential, which, for the avoidance of doubt, shall be paid on the next succeeding Price Differential Payment Date) upon repurchase of the Purchased Mortgage Loans, Administrative Agent and Buyers will each be deemed to have released their respective interests hereunder in the Purchased Mortgage Loans (including, the Repurchase Assets related thereto) at the request of Seller.  

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With respect to payments in full by the related Mortgagor of a Purchased Mortgage Loan, Seller agrees to (i) provide Administrative Agent with a copy of a report from the related Servicer indicating that such Purchased Mortgage Loan has been paid in full, (ii) remit to Administrative Agent for the benefit of Buyers, within two Business Days, the Repurchase Price with respect to such Purchased Mortgage Loans and (iii)  provide Administrative Agent a notice specifying each Purchased Mortgage Loan that has been prepaid in full. Administrative Agent and Buyers agree to release their respective interests in Purchased Mortgage Loans which have been prepaid in full after receipt of evidence of compliance with clauses (i) through (iii) of the immediately preceding sentence.

5.         Price Differential.

a.    On each Business Day that a Transaction is outstanding, the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential shall be settled in cash on each related Price Differential Payment Date.  Two Business Days prior to the Price Differential Payment Date, Administrative Agent shall give Seller written or electronic notice of the amount of the Price Differential due on such Price Differential Payment Date.  On the Price Differential Payment Date, Seller shall pay to Administrative Agent the Price Differential for the benefit of Buyers for such Price Differential Payment Date (along with any other amounts to be paid pursuant to Sections 7 and 35 hereof), by wire transfer in immediately available funds.

b.   If Seller fails to pay all or part of the Price Differential by 3:00 p.m. (New York City time) on the related Price Differential Payment Date, with respect to any Purchased Mortgage Loan, Seller shall be obligated to pay to Administrative Agent for the benefit of Buyers (in addition to, and together with, the amount of such Price Differential) interest on the unpaid Repurchase Price at a rate per annum equal to the Post-Default Rate until the Price Differential is received in full by Administrative Agent for the benefit of Buyers.

c.    If prior to any Price Differential Payment Date, Administrative Agent determines in its sole discretion that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR, LIBOR is no longer in existence, or the administrator of LIBOR or a Governmental Authority having jurisdiction over Administrative Agent has made a public statement identifying a specific date after which LIBOR shall no longer be made available or used for determining the interest rate of loans, Administrative Agent may give prompt notice thereof to Seller, whereupon the rate for such period that will replace LIBOR for such period, and for all subsequent periods until such notice has been withdrawn by Administrative Agent, shall be the greater of (i) an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein) and (ii) zero, together with any proposed Successor Rate Conforming Changes, as determined by Administrative Agent in its sole discretion (any such rate, a “Successor Rate”). Any such determination of the Successor Rate shall be made by Administrative Agent in a

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manner substantially consistent with market practice with respect to similarly situated counterparties with substantially similar assets in similar facilities; provided, that the foregoing standard shall only apply to repurchase transactions that are under the supervision of Administrative Agent’s investment bank New York mortgage finance business that administers the Transactions.

6.         Margin Maintenance; Reallocation of Purchase Price

a.    If at any time the outstanding Purchase Price of any Purchased Mortgage Loan subject to a Transaction is greater than the Asset Value of such Purchased Mortgage Loan subject to a Transaction (a “Margin Deficit”), then Administrative Agent may by notice to Seller require Seller to transfer to Administrative Agent for the benefit of Buyers cash in an amount at least equal to the Margin Deficit (such requirement, a “Margin Call”).

b.   Notice delivered pursuant to Section 6.a may be given by any written or electronic means.  With respect to a Margin Call in the amount of less than 5% of  the Purchase Price for all Transactions (a “Low Percentage Margin Call”), any notice given before 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day; notice given after 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the second Business Day following the date of such notice. With respect to all Margin Calls other than Low Percentage Margin Calls, any notice given before 1:00 p.m. (New York City time) on a Business  Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on such Business Day; notice given after 1:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 1:00 p.m. (New York City time) on the following Business Day. The foregoing time requirements for satisfaction of a Margin Call are referred to as the “Margin Deadlines”).  The failure of Administrative Agent, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Administrative Agent to do so at a later date.  Seller and Administrative Agent each agree that a failure or delay by Administrative Agent to exercise its rights hereunder shall not limit or waive Administrative Agent’s or Buyers’ rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.

c.    In the event that a Margin Deficit exists, Administrative Agent may retain any funds received by it to which Seller would otherwise be entitled hereunder, which funds (i) shall be held by Administrative Agent against the related Margin Deficit and (ii) may be applied by Administrative Agent against the Repurchase Price of any Purchased Mortgage Loan for which the related Margin Deficit remains otherwise unsatisfied.  Notwithstanding the foregoing, the Administrative Agent retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 6.

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d.   If at any time the outstanding Purchase Price-Base of any Purchased Mortgage Loan which is subject to a Transaction is greater than the Asset Value-Base of such Purchased Mortgage Loan (a “Purchase Price Deficit-Base”), and such Purchase Price Deficit-Base does not constitute a Margin Deficit, then the amount of such Purchase Price Deficit-Base shall be reallocated by the Administrative Agent and added first to the Purchase Price-Incremental 1 and if any amount remains, then the Purchase Price-Incremental 2; provided that the Administrative Agent agrees to promptly notify (which for this purpose may be by electronic communication) the Seller after such reallocation; provided further that the failure to give such notice shall not affect the validity of such reallocation and application of such funds.

7.         Income Payments

a.    The Securities Account is established by Servicer in accordance with the Securities Account Control Agreement.  Administrative Agent on behalf of Buyers shall have sole dominion and control over the Securities Account.  If Income is paid in respect of any Purchased Mortgage Loan during the term of a Transaction, such Income shall be the property of Administrative Agent for the benefit of Buyers and shall be deposited in the Securities Account on a daily basis.  Notwithstanding the foregoing, and provided no Event of Default has occurred and is continuing, Administrative Agent agrees that if a third-party Servicer is in place for any Purchased Mortgage Loans, such Servicer shall deposit such Income to the Securities Account.  Seller shall deposit all Income received in its capacity as Servicer of any Purchased Mortgage Loans to the Securities Account in accordance with Section 12.c hereof.

b.   Provided that no Event of Default has occurred and is continuing, funds deposited in the Securities Account and GNMA Account, as applicable, shall be held therein until the next Price Differential Payment Date.  Subject to the terms of the Securities Account Control Agreement, Seller shall withdraw any funds on deposit in the Securities Account and Buyer shall withdraw from the GNMA Account and distribute, respectively, such funds as follows:

(1)  first, to Administrative Agent for the benefit of Buyers in payment of any accrued and unpaid Price Differential, to the extent not paid by Seller to Administrative Agent pursuant to Section 5;

(2)  second, without limiting the rights of Administrative Agent or Buyers under Section 6 of this Agreement, to Administrative Agent for the benefit of Buyers, in the amount of any unpaid Margin Deficit;

(3)  third, to Administrative Agent for the benefit of Buyers in reduction of the Repurchase Price of the Purchased Mortgage Loans, an amount equal to the full or partial prepayments of principal received on or with respect to such Purchased Mortgage Loans and, in the event that a Servicer Advance is paid in full, to the payment of the Purchase Price therefor;

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(4)  fourth, to the payment of all other costs and fees payable to Administrative Agent or Buyers pursuant to this Agreement; and

(5)  fifth, to Seller, any remaining amounts.

c.    In the event that an Event of Default has occurred and is continuing, notwithstanding any provision set forth herein, Seller shall (A) remit all Income received with respect to each Purchased Mortgage Loan into the Securities Account or such other account and on such other date or dates as Administrative Agent notifies Seller in writing and (B) may apply all funds in the GNMA Account as Administrative Agent determines.

d.   Notwithstanding any provision to the contrary in this Section 7, within two (2) Business Days of receipt by Seller of any prepayment of principal in full, with respect to a Purchased Mortgage Loan, Seller shall remit such amount to Administrative Agent for the benefit of Buyers and Administrative Agent shall immediately apply any such amount received by Administrative Agent to reduce the amount of the Repurchase Price due upon termination of the related Transaction.

8.         Security Interest

a.    On each Purchase Date, Seller hereby sells, assigns and conveys all rights and interests in the Purchased Mortgage Loans identified on the related Mortgage Loan Schedule and, the Repurchase Assets to Administrative Agent for the benefit of Buyers and Repledgees. Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, Seller hereby pledges to Administrative Agent as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to Administrative Agent a fully perfected first priority security interest in the Purchased Mortgage Loans, Servicer Advances, the Records, and all related Servicing Rights, with respect to GNMA EBOs, all Servicer Advances payable by HUD and/or VA and all debenture interest payable by HUD on account of such Mortgage Loans, the Program Agreements (to the extent such Program Agreements and Seller’s right thereunder relate to the Purchased Mortgage Loans), any related Take-out Commitments, any Property relating to the Purchased Mortgage Loans, all insurance policies and insurance proceeds relating to any Purchased Mortgage Loan or the related Mortgaged Property, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts and VA Loan Guaranty Agreements (if any), Income, the Securities Account and any account to which such amount is deposited, Interest Rate Protection Agreements, accounts (including any interest of Seller in escrow accounts) and any other contract rights, instruments, accounts, payments, rights to payment (including payments of interest or finance charges) general intangibles and other assets relating to the Purchased Mortgage Loans (including, without limitation, any other accounts) or any interest in the Purchased Mortgage Loans, and any proceeds (including the related securitization proceeds) and

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distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Asset Confirm, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “Repurchase Assets”).

b.   Administrative Agent and Seller hereby agree that in order to further secure Seller’s Obligations hereunder, Seller hereby grants to Administrative Agent, for the benefit of Buyers, a security interest in (i) Seller’s rights under the VFN Facility Documents, including, without limitation, any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created, and (ii) all collateral however defined or described under the VFN Facility Documents to the extent not otherwise included under the definition of Repurchase Assets therein. Seller shall deliver an irrevocable instruction (the “VFN Irrevocable Instruction Letter”) to the buyer under the VFN Facility Documents that upon receipt of a notice of an Event of Default under this Agreement, the buyer thereunder is authorized and instructed to remit to Administrative Agent for the benefit of Buyers hereunder directly any amounts otherwise payable to Seller and to deliver to Administrative Agent for the benefit of Buyers all collateral otherwise deliverable to Seller. In furtherance of foregoing, the VFN Irrevocable Instruction Letter shall also require, upon repayment of the entire Obligations (as defined in the VFN Facility Documents) under the VFN Repurchase Agreement and the termination of all obligations of the buyer thereunder or other termination of the VFN Facility Documents following the repayment of all obligations thereunder that the buyer thereunder deliver to Administrative Agent for the benefit of Buyers hereunder any collateral then in its possession or control.

The foregoing provision (a) is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Agreement and  Transactions hereunder as defined under Sections 101(47)(v) and 741(7)(x) of the Bankruptcy Code.

c.    Administrative Agent and Seller hereby agree that in order to further secure Seller’s Obligations hereunder, Seller hereby grants to Administrative Agent, for the benefit of Buyers, a security interest in (i) Seller’s rights under the Conventional MSR Loan Facility Documents, SPIA VFN Repo Documents and the MSR PC Repo Documents, including, without limitation, any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created, and (ii) all collateral however defined or described under the Conventional MSR Loan Facility Documents, SPIA VFN Repo Documents and the MSR PC Repo Documents (the “Additional Collateral”). Seller hereby instructs Buyer, as lender under the Conventional MSR Loan Facility Documents, as the buyer under the SPIA VFN Repo Documents and the buyer under the MSR PC Repo Documents that upon receipt of a notice of an Event of Default under this Agreement, the Buyer, as the lender or buyer, as applicable, thereunder, is authorized and instructed to remit to Administrative Agent for the benefit of Buyers hereunder directly any amounts otherwise payable to Seller under the Conventional MSR Loan Facility Documents, the SPIA VFN Repo Documents

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and the MSR PC Repo Documents and to deliver to Administrative Agent for the benefit of Buyers all collateral otherwise deliverable to Seller. In furtherance of the foregoing, upon repayment of the entire “Obligations” (as defined in the Conventional MSR Loan Facility Documents) under the Conventional MSR Loan Agreement and the termination of all obligations of the lender thereunder or other termination of the Conventional MSR Loan Facility Documents following the repayment of all obligations thereunder that the lender thereunder deliver to Administrative Agent for the benefit of Buyers hereunder any collateral then in its possession or control. In furtherance of the foregoing, upon repayment of the entire “Obligations” (as defined in the MSR PC Repo Documents) under the MSR PC Repo Agreement and the termination of all obligations of the lender thereunder or other termination of the MSR PC Repo Documents following the repayment of all obligations thereunder that the lender thereunder deliver to Administrative Agent for the benefit of Buyers hereunder any collateral then in its possession or control.  In furtherance of the foregoing, upon repayment of the entire “Obligations” (as defined in the SPIA VFN Repo Documents) under the SPIA VFN Repo Agreement and the termination of all obligations of the lender thereunder or other termination of the SPIA VFN Repo Documents following the repayment of all obligations thereunder that the lender thereunder deliver to Administrative Agent for the benefit of Buyers hereunder any collateral then in its possession or control. The foregoing provision c. is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Agreement and Transactions hereunder as defined under Sections 101(47)(v) and 741(7)(x) of the Bankruptcy Code.  

d.   Seller agrees to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Administrative Agent’s security interest created hereby.  Furthermore, Seller hereby authorizes Administrative Agent to file financing statements relating to the Repurchase Assets, as Administrative Agent, at its option, may deem appropriate. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 8.

9.         Payment and Transfer

Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Administrative Agent at the following account maintained by Administrative Agent: Account No. 30809505, for the account of CSFB Administrative Agent/PennyMac Loan Services, LLC Seller-Inbound Account, Citibank, ABA No. 021 000 089 or such other account as Administrative Agent shall specify to Seller in writing.  Seller acknowledges that it has no rights of withdrawal from the foregoing account.  All Purchased Mortgage Loans transferred by one party hereto to the other party shall be in the case of a purchase by a Buyer in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as Administrative Agent may reasonably request.  All Purchased Mortgage Loans shall be evidenced by an Asset Confirm.  Any Repurchase Price received by the Administrative Agent after 2:00 p.m. (New York City time) shall be deemed received on the next succeeding Business Day.

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10.       Conditions Precedent

a.    Effective Date.  As conditions precedent to the Effective Date, Administrative Agent shall have received on or before the day of entering into additional Transactions the following, in form and substance satisfactory to Administrative Agent and duly executed by Seller, Guarantor and each other party thereto:

(1)  Program Agreements.  The applicable Program Agreements duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.

(2)  Security Interest.  Evidence that all other actions necessary or, in the opinion of Administrative Agent, desirable to perfect and protect Administrative Agent’s and Buyers’ interest in the Purchased Mortgage Loans and Servicer Advances and other Repurchase Assets have been taken, including, without limitation, duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1 and Form UCC-3.

(3)  Organizational Documents.  A certificate of the corporate secretary of each of Seller and Guarantor, attaching certified copies of Seller’s and Guarantor’s charter, bylaws and corporate resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the applicable Program Agreements.

(4)  Good Standing Certificate.  A certified copy of a good standing certificate from the jurisdiction of organization of Seller and Guarantor, dated as of the date hereof.

(5)  Incumbency Certificate.  An incumbency certificate of the corporate secretary of each of Seller and Guarantor, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.

(6)  Opinion of Counsel.  An opinion of Seller’s and Guarantor’s counsel, in form and substance acceptable to Administrative Agent in its sole discretion.

(7)  Underwriting Guidelines.  A true and correct copy of the Underwriting Guidelines certified by an officer of Seller.

(8)  Irrevocable Instruction Letter.  The Irrevocable Instruction Letter duly executed and delivered by Seller and being in full force and effect, free of any modification or waiver.

(9)  Amended and Restated Power of Attorney. The Amended and Restated Power of Attorney duly executed by Seller.

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(10)      Fees.  Payment of any fees due to Administrative Agent and Buyers hereunder.

(11)      Insurance.  Evidence that Seller has added Administrative Agent as an additional loss payee under the Seller’s Fidelity Insurance.

b.   All Transactions.  The obligation of the Administrative Agent for the benefit of Buyers to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:

(1)  Due Diligence Review.  Without limiting the generality of Section 35 hereof, Administrative Agent and Buyers shall have completed, to their satisfaction, its due diligence review of the related Mortgage Loans, Servicer Advances and Seller, Guarantor and the Servicer.

(2)  Required Documents.

(a)      With respect to each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan, the Mortgage File has been delivered to the Custodian in accordance with the Custodial Agreement.

(b)      With respect to each Wet-Ink Mortgage Loan, the Wet-Ink Documents have been delivered to Administrative Agent or Custodian, as the case may be, in accordance with the Custodial Agreement.

(c)      With respect to each Correspondent Loan in which a third party lender has a secured interest, Administrative Agent shall have received a Correspondent Release for such Purchased Mortgage Loan that is duly executed and delivered by such third party lender on or prior to the Purchase Date.

(d)     With respect to each Correspondent Loan, the related Correspondent Seller shall either be identified on Schedule 6 to the most recent Officer Compliance Certificate or otherwise approved by Administrative Agent on or prior to the Purchase Date, and in either case Seller shall not have received notice from Administrative Agent that such Correspondent Seller is no longer approved.

(3)  Transaction Documents.  Administrative Agent or its designee shall have received on or before the day of such Transaction (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Administrative Agent and (if applicable) duly executed:

(a)      A Transaction Request delivered pursuant to Section 3.c hereof.

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(b)      The Request for Certification and the related Custodial Mortgage Loan Schedule and the Asset Confirm.

(c)      Such certificates, opinions of counsel or other documents as Administrative Agent may reasonably request.

(4)  No Default.  No Default or Event of Default shall have occurred and be continuing.

(5)  Requirements of Law.  Neither Administrative Agent nor Buyers shall have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent or any Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer to enter into Transactions with a Pricing Rate based on the Reference Rate.

(6)  Representations and Warranties.  Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by Seller in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

(7)  Electronic Tracking Agreement. To the extent Seller is selling Mortgage Loans which are registered on the MERS System, an Electronic Tracking Agreement entered into, duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver; provided that, executed signature pages by MERS and MERSCORP Holdings, Inc. may be provided following the date hereof.

(8)  Account Agreements. A Securities Account Control Agreement satisfactory to the Administrative Agent, entered into, duly executed and delivered by Administrative Agent, Seller and Securities Intermediary.

(9)  Material Adverse Change.  None of the following shall have occurred and/or be continuing:

(a)  Credit Suisse AG, New York Branch’s corporate bond rating as calculated by S&P or Moody’s has been lowered or downgraded to a rating below investment grade by S&P or Moody’s;

(b)  an event or events shall have occurred in the good faith determination of a Buyer resulting in the effective absence of a “repo market” or comparable “lending market” for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in such Buyer not being able to finance Purchased Mortgage Loans through the “repo market” or

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“lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or

(c)  an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by mortgage loans or an event or events shall have occurred resulting in such Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events; or

(d)  there shall have occurred a material adverse change in the financial condition of a Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of such Buyer to fund its obligations under this Agreement.

(10)      Pooled Mortgage Loans.  Solely with respect to Transactions the subject of which are Pooled Mortgage Loans, the Administrative Agent shall have received the related Trade Assignment on or prior to the Purchase Date with respect thereto.

(11)      Ineligible Loans.  With respect to any Transaction, the Administrative Agent shall have determined in the course of its due diligence that the greater (by count) of 5% or twenty (20) of the Mortgage Loans are ineligible for sale to Administrative Agent in accordance with the terms of this Agreement.

(12)      DE Compare Ratio.  Seller’s DE Compare Ratio is less than 250%; and

(13)      No HUD Suspension.  HUD has not suspended Seller’s ability to originate FHA Loans in any jurisdiction.

(14)      With respect to each GNMA EBO, Seller shall have delivered to Administrative Agent a BPO valuation, or such other valuation acceptable to Administrative Agent in its sole discretion, and valuation date.

(15)      Designated Mortgage Loans.  With respect to each proposed Transaction for which the Purchase Price-Incremental 1 or Purchase Price-Incremental 2 for a Designated Mortgage Loan will be funded, (x) no Disqualification Event shall have occurred and be continuing, (y) with respect to any Purchase Price-Incremental 1, the Purchase Price-Base shall be fully drawn and the Purchase Price for such Designated Mortgage Loan shall be increased by an amount equal to the Maximum Purchase Price-Incremental 1 and (z) with respect to any Purchase Price-Incremental 2, the Maximum Purchase Price-Incremental 1 shall be fully drawn and Purchase Price for such Designated Mortgage Loan shall be increased by an amount at least equal to the Minimum Purchase Price-Incremental 2 but shall not exceed the Maximum Purchase Price-Incremental 2.

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(16)      Maintenance of Profitability.  Seller has maintained a profitability of at least $1.00 in Net Income for at least one of the two (2) prior Test Periods.

(17)      eMortgage Loans. Prior to the funding of any Transactions, the subject of which are eMortgage Loans, Seller shall (i) deliver (or cause to be delivered) to Administrative Agent an Electronic Tracking Agreement addendum and Custodial Agreement amendment, duly executed by the parties thereto and in form and substance satisfactory to Administrative Agent and (ii) obtain a new MERS Org ID in connection with such Transactions.

11.       Program; Costs

a.    Seller shall pay the fees and expenses of Administrative Agent’s and Buyers’ counsel in connection with the original preparation and execution of the Program Agreements. Seller shall reimburse Administrative Agent and Buyers for any of Administrative Agent’s and Buyers’ reasonable out-of-pocket costs, including due diligence review costs and reasonable attorney’s fees as further described below and in Section 35, incurred by Administrative Agent and Buyers in determining the acceptability to Administrative Agent and Buyers of any Mortgage Loans.  Seller shall also pay, or reimburse Administrative Agent and Buyers if Administrative Agent or Buyers shall pay, any termination fee, which may be due any servicer.  Legal fees for any subsequent amendments to this Agreement or related documents shall be borne by Seller. Seller shall pay reasonable and customary ongoing custodial and securities intermediary fees and expenses as set forth on Exhibit K hereto, and any other reasonable and customary ongoing fees and expenses under any other Program Agreement.

b.   If any Buyer determines that, due to the introduction of, any change in, or the compliance by such Buyer with (i) any eurocurrency reserve requirement or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be an increase in the cost to such Buyer in engaging in the present or any future Transactions, then Seller agrees to pay to such Buyer, from time to time, upon demand by such Buyer (with a copy to Custodian) the actual cost of additional amounts as specified by such Buyer to compensate such Buyer for such increased costs.

c.   With respect to any Transaction, Administrative Agent and Buyers may conclusively rely upon, and shall incur no liability to Seller in acting upon, any request or other communication that Administrative Agent and Buyers reasonably believe to have been given or made by a person authorized to enter into a Transaction on Seller’s behalf.  In each such case, Seller hereby waives the right to dispute Administrative Agent’s or Buyers’ record of the terms of the request or other communication.

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d.   Notwithstanding the assignment of the Program Agreements with respect to each Purchased Mortgage Loan to Administrative Agent for the benefit of Buyers, Seller agrees and covenants with Administrative Agent and Buyers to enforce diligently Seller’s rights and remedies set forth in the Program Agreements.

e.           (i)  Any payments made by Seller or Guarantor to Administrative Agent or a Buyer or a Buyer assignee or participant hereunder or any Program Agreement shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If Seller or Guarantor shall be required by applicable law (as determined in the good faith discretion of the applicable withholding agent) to deduct or withhold any Tax from any sums payable to Administrative Agent or a Buyer or Buyer assignee or participant, then (i) the Seller or Guarantor shall make such deductions or withholdings and pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; (ii) to the extent the withheld or deducted Tax is an Indemnified Tax or Other Tax, the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 11.e) Administrative Agent receives an amount equal to the sum it would have received had no such deductions or withholdings been made; and (iii) the Seller shall notify the Administrative Agent of the amount paid and shall provide the original or a certified copy of a receipt issued by the relevant Governmental Authority evidencing such payment within ten (10) days thereafter. Seller or Guarantor shall otherwise indemnify Administrative Agent and such Buyer, within ten (10) days after demand therefor, for any Indemnified Taxes or Other Taxes imposed on Administrative Agent or such Buyer (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 11.e) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.  

(ii)  Administrative Agent shall cause each Buyer and Buyer assignee and participant to deliver to each of the Seller or Guarantor, at the time or times reasonably requested by the Seller or Guarantor, such properly completed and executed documentation reasonably requested by the Seller or Guarantor as will permit payments made hereunder to be made without withholding or at a reduced rate of withholding. In addition, Administrative Agent shall cause each Buyer and Buyer assignee and participant, if reasonably requested by Seller or Guarantor, to deliver such other documentation prescribed by applicable law or reasonably requested by the Seller or Guarantor as will enable the Seller or Guarantor to determine whether or not such Buyer or Buyer assignee or participant is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in this Section 11, the completion, execution and submission of such documentation (other than such documentation in Section 11.e(ii)(A), (B) and (C) below) shall not be required if in the Buyer’s or any Buyer’s assignee’s or participant’s judgment such completion, execution or submission would subject such Buyer or Buyer assignee or participant to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Buyer or Buyer assignee or participant. Without limiting the generality of the foregoing, Administrative

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Agent shall cause a Buyer or Buyer assignee or participant to deliver to each of the Seller or Guarantor, to the extent legally entitled to do so:    

(A) in the case of a Buyer or Buyer assignee or participant which is a “U.S. Person” as defined in section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (“IRS”)  Form W-9 certifying that it is not subject to U.S. federal backup withholding tax;  

(B) in the case of a Buyer or Buyer assignee or participant which is not a “U.S. Person” as defined in Code section 7701(a)(30): (I) a properly completed and executed IRS Form W-8BEN, W-8BENE-E or W-8ECI, as appropriate, evidencing entitlement to a zero percent or reduced rate of U.S. federal income tax withholding on any payments made hereunder, (II) in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Code sections 871(h) or 881(c) with respect to payments of “portfolio interest,” a duly executed certificate (a “U.S. Tax Compliance Certificate”) to the effect that such non-U.S. Person is not (x) a “bank” within the meaning of Code section 881(c)(3)(A), (y) a “10 percent shareholder” of Seller, Guarantor or affiliate thereof, within the meaning of Code section 881(c)(3)(B), or (z) a “controlled foreign corporation” described in Code section 881(c)(3)(C), (III) to the extent such non-U.S. person is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if such  non-U.S. person is a partnership and one or more direct or indirect partners of such non-U.S. person are claiming the portfolio interest exemption, such non-U.S. person may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner, and (IV) executed originals of any other form or supplementary documentation prescribed by law as a basis for claiming exemption from or a reduction in United States federal withholding tax together with such supplementary documentation as may be prescribed by law to permit Seller or Guarantor to determine the withholding or deduction required to be made.

(C) if a payment made to a Buyer or Buyer assignee or participant under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Buyer or assignee or participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Administrative Agent on behalf of such Buyer or assignee or participant shall deliver to the Seller or Guarantor at the time or times prescribed by law and at such time or times reasonably requested by the Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Seller as may be necessary for the Seller to comply with their obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 11.e, “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

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The applicable IRS forms referred to above shall be delivered by Administrative Agent on behalf of each applicable Buyer or Buyer assignee or participant on or prior to the date on which such person becomes a Buyer or Buyer assignee or participant under this Agreement, as the case may be, and upon the obsolescence or invalidity of any IRS form previously delivered by it hereunder

f.          Any indemnification payable by Seller or Guarantor to Administrative Agent or a Buyer or Buyer assignee or participant for Indemnified Taxes or Other Taxes that are imposed on such Buyer or Buyer assignee or participant, as described in Section 11.e(i) hereof, shall be paid by Seller or Guarantor within ten (10) days after demand therefor from Administrative Agent.  A certificate as to the amount of such payment or liability delivered to the Seller or Guarantor by the Administrative Agent on behalf of a Buyer or Buyer assignee or participant shall be conclusive absent manifest error.

g.         Each party’s obligations under this Section 11 shall survive any assignment of rights by, or the replacement of, a Buyer or a Buyer assignee or participant, and the repayment, satisfaction or discharge of all obligations under any Program Agreement.

h.         Each party to this Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise taxes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Mortgage Loans, and the Purchased Mortgage Loans as owned by Seller in the absence of an Event of Default by Seller. Administrative Agent on behalf of Buyers and Seller agree that they will treat and report for all tax purposes the Transactions entered into hereunder as one or more loans from a Buyer to Seller secured by the Purchased Mortgage Loans, unless otherwise prohibited by law or upon a final determination by any taxing authority that the Transactions are not loans for tax purposes.

12.Servicing

a.    Seller, on Administrative Agent’s and Buyers’ behalf, shall service the Mortgage Loans consistent with the degree of skill and care that Seller customarily requires with respect to similar Mortgage Loans owned or managed by it and in accordance with Accepted Servicing Practices and Agency, GNMA, HUD, FHA and VA guidelines, as applicable.  The Servicer shall (i) comply with all applicable federal, state and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities hereunder and (iii) not impair the rights of Administrative Agent or Buyers in any Mortgage Loans or any payment thereunder.  Administrative Agent may terminate the servicing of any Mortgage Loan with the then existing Servicer in accordance with Section 12.d hereof.

b.   Seller shall hold or cause to be held all escrow funds collected by Seller as Servicer with respect to any Purchased Mortgage Loans in trust accounts and shall apply the same for the purposes for which such funds were collected.  

c.    Seller shall deposit all collections received by Seller and Servicer on the Purchased Mortgage Loans in the Securities Account on a daily basis within one

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(1) Business Day following receipt; provided, however, that any amounts required to be remitted to Administrative Agent shall be deposited in the Securities Account on or prior to the day on which such remittance is to occur.  

d.   Upon the occurrence and continuance of an Event of Default hereunder, Administrative Agent shall have the right to immediately terminate Seller’s right to service the Purchased Mortgage Loans without payment of any penalty or termination fee. Seller shall cooperate in transferring the servicing of the Purchased Mortgage Loans to a successor servicer appointed by Administrative Agent on behalf of Buyers in its sole discretion. For the avoidance of doubt any termination of the Servicer’s rights to service by the Administrative Agent as a result of an Event of Default shall be deemed part of an exercise of the Administrative Agent’s rights to cause the liquidation, termination or acceleration of this Agreement.

e.    If Seller should discover that, for any reason whatsoever, Seller or any entity responsible to Seller for managing or servicing any such Purchased Mortgage Loan has failed to perform fully Seller’s obligations under the Program Agreements or any of the obligations of such entities with respect to the Purchased Mortgage Loans, Seller shall promptly notify Administrative Agent.

f.    For the avoidance of doubt, Seller retains no economic rights to the servicing of the Purchased Mortgage Loans. As such, Seller expressly acknowledges that the Purchased Mortgage Loans are sold to Administrative Agent for the benefit of Buyers on a “servicing-released” basis with such servicing retained by Seller.

13.       Representations and Warranties

a.    Each of Seller and Guarantor represents and warrants to Administrative Agent and Buyers as of the date hereof and as of each Purchase Date for any Transaction that:

(1)    Seller and Guarantor Existence.  Each of Seller and Guarantor has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.  

(2)    Licenses.  Each of Seller and Guarantor is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect and is not in default of such state’s applicable laws, rules and regulations.  Seller has the requisite power and authority and legal right and necessary licenses (including from VA and FHA, if applicable) to originate and purchase Mortgage Loans (as applicable) and to own, sell and grant a lien on all of its right, title and interest in and to the Mortgage Loans.  Each of Seller and Guarantor has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the

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terms and conditions of, this Agreement, each Program Agreement and any Transaction Request.  Seller is an FHA Approved Mortgagee.

(3)    Power.  Each of Seller and Guarantor has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.

(4)    Due Authorization.  Each of Seller and Guarantor has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable.  This Agreement, any Transaction Request and the Program Agreements have been (or, in the case of Program Agreements and any Transaction Request not yet executed, will be) duly authorized, executed and delivered by Seller and Guarantor, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against Seller and Guarantor in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.

(5)    Financial Statements.  

a.    Guarantor has heretofore furnished to Administrative Agent a copy of its consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the fiscal year of Guarantor ended December 31, 2019 and the related consolidated statements of income for Guarantor and its consolidated Subsidiaries for such fiscal year, with the opinion thereon of Deloitte & Touche LLP.  All such financial statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of Guarantor and its Subsidiaries and the consolidated results of their operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis.  Since December 31, 2019, there has been no material adverse change in the consolidated business, operations or financial condition of Guarantor and its consolidated Subsidiaries taken as a whole from that set forth in said financial statements nor is Guarantor aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change.  Guarantor has, on the date of the statements delivered pursuant to this Section (the “Statement Date”) no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Guarantor except as heretofore disclosed to Administrative Agent in writing.

b.    Seller has heretofore furnished to Administrative Agent a copy of its balance sheet for the fiscal year of Seller ended December 31, 2019

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and the related statements of income for Seller for such fiscal year, with the opinion thereon of Deloitte & Touche LLP.  All such financial statements are complete and correct and fairly present, in all material respects, the financial condition of Seller and the results of its operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis.  Since December 31, 2019, there has been no material adverse change in the consolidated business, operations or financial condition of Seller from that set forth in said financial statements nor is Seller aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change.  Seller has, on the Statement Date no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Seller except as heretofore disclosed to Administrative Agent in writing.

(6)    Event of Default.  There exists no Event of Default under Section 15.b hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 15.b hereof, under any mortgage, borrowing agreement or other instrument or agreement pertaining to indebtedness for borrowed money or to the repurchase of mortgage loans or securities.

(7)    Solvency.  Each of Seller and Guarantor is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business.  Neither Seller nor Guarantor intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature and is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets.  The amount of consideration being received by Seller upon the sale of the Purchased Mortgage Loans to Administrative Agent for the benefit of Buyers constitutes reasonably equivalent value and fair consideration for such Purchased Mortgage Loans.  Seller is not transferring any Purchased Mortgage Loans with any intent to hinder, delay or defraud any of its creditors.

(8)    No Conflicts.  The execution, delivery and performance by each of Seller and Guarantor of this Agreement or any Transaction Request hereunder and the Program Agreements do not conflict with any term or provision of the organizational documents of Seller or Guarantor or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to Seller or Guarantor of any court, regulatory body, administrative agency or governmental body having jurisdiction over Seller or Guarantor, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement or obligation to which Seller or Guarantor is a party.

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(9)        True and Complete Disclosure.  All information, reports, exhibits, schedules, financial statements or certificates of Seller, Guarantor or any Affiliate thereof or any of their officers furnished or to be furnished to Administrative Agent or Buyers in connection with the initial or any ongoing due diligence of Seller, Guarantor or any Affiliate or officer thereof, negotiation, preparation, or delivery of the Program Agreements are true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading.  All financial statements have been prepared in accordance with GAAP.

(10)      Approvals.  No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by Seller or Guarantor of this Agreement, any Transaction Request and the Program Agreements.

(11)      Litigation.   There is no action, proceeding or investigation pending with respect to which either Seller or Guarantor has received service of process or, to the best of Seller’s or Guarantor’s knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of this Agreement, any Transaction, Transaction Request or any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, any Transaction Request or any Program Agreement, (C) making a claim individually or in the aggregate in an amount greater than five percent (5%) of Seller’s Net Worth, (D) which requires filing with the Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder or (E) which might materially and adversely affect the validity of the Mortgage Loans or the performance by it of its obligations under, or the validity or enforceability of, this Agreement, any Transaction Request or any Program Agreement.

(12)      Material Adverse Change.  There has been no material adverse change in the business, operations, financial condition, properties or prospects of Seller, Guarantor or their Affiliates since the date set forth in the most recent financial statements supplied to Administrative Agent as determined by Administrative Agent in its sole good faith discretion.

(13)      Ownership.  Upon payment of the Purchase Price and the filing of the financing statement and delivery of the Mortgage Files to the Custodian and Custodian’s receipt of the related Request for Certification, the Administrative Agent shall become the sole owner of the Purchased Mortgage Loans and related Repurchase Assets for the benefit of Buyers and Repledgees, free and clear of all liens and encumbrances.

(14)      Underwriting Guidelines. The Underwriting Guidelines provided to Administrative Agent are the true and correct Underwriting Guidelines of Seller.

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(15)      Taxes. Seller, Guarantor and their Subsidiaries have timely filed all tax returns that are required to be filed by them and have paid all taxes, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided.  The charges, accruals and reserves on the books of Seller, Guarantor and their Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Seller or Guarantor, as applicable, adequate.

(16)      Investment Company.  Neither Seller nor any of its Subsidiaries is required to register as an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; provided, however, that any entity that is under the management of PNMAC Capital Management LLC in its capacity as an “investment adviser” within the meaning of the Investment Advisers Act of 1940 and is otherwise not directly or indirectly owned or controlled by Seller shall not be deemed a “Subsidiary” for the purposes of this Section 13.a(16).

(17)      Chief Executive Office; Jurisdiction of Organization.  On the Effective Date, Seller’s chief executive office, is, and has been, located at 3043 Townsgate Road, Westlake Village, CA 91361. On the Effective Date, Seller’s jurisdiction of organization is the State of Delaware.  Seller shall provide Administrative Agent with thirty days advance notice of any change in Seller’s principal office or place of business or jurisdiction.  Seller has no trade name.  During the preceding five (5) years, Seller has not been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.

(18)      Location of Books and Records.  The location where Seller keeps its books and records, including all computer tapes and records relating to the Purchased Mortgage Loans and the related Repurchase Assets is its chief executive office.

(19)      Adjusted Tangible Net Worth.  Seller’s Adjusted Tangible Net Worth shall comply with the requirements set forth in Section 14.bb(1) hereof.  

(20)      ERISA.  Each Plan to which Seller, Guarantor or their Subsidiaries make direct contributions, and, to the knowledge of Seller and Guarantor, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.

(21)      Adverse Selection.  Seller has not selected the Purchased Mortgage Loans in a manner so as to adversely affect Buyers’ interests.

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(22)      Agreements.  Neither Seller nor any Subsidiary of Seller is a party to any agreement, instrument, or indenture or subject to any restriction materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 13.a(5) hereof.  Neither Seller nor any Subsidiary of Seller is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default could have a material adverse effect on the business, operations, properties, or financial condition of Seller as a whole.  No holder of any indebtedness of Seller or of any of its Subsidiaries has given notice of any asserted default thereunder.

(23)      Other Indebtedness.  All Indebtedness (other than Indebtedness evidenced by this Agreement) of Seller existing on the date hereof is listed on Exhibit I hereto (the “Existing Indebtedness”).

(24)      Agency Approvals.  With respect to each Agency Security and to the extent necessary, Seller is an FHA Approved Mortgagee. Seller is also  approved by Fannie Mae as an approved seller/servicer and Freddie Mac as an approved seller/servicer, and, to the extent necessary, approved by the Secretary of HUD pursuant to Sections 203 and 211 of the National Housing Act.  In each such case, Seller is in good standing, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur prior to the issuance of the Agency Security or the consummation of the Take-out Commitment, as the case may be, including, without limitation, a change in insurance coverage which would either make Seller unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to the relevant Agency or to the HUD FHA or, only to the extent that Seller is a VA Approved Lender as of the relevant Purchase Date, VA.  Should Seller for any reason cease to possess all such applicable approvals, or should notification to the relevant Agency or to the HUD, FHA or VA (only to the extent that Seller is a VA Approved Lender as of the relevant Purchase Date), be required, Seller shall so notify Administrative Agent immediately in writing.  Servicer has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices.  

(25)      No Reliance.  Each of Seller and Guarantor has made its own independent decisions to enter into the Program Agreements and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary.  Neither Seller nor Guarantor is relying upon any advice from Administrative Agent or Buyers as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.

(26)      Plan Assets. Neither Seller nor Guarantor is an employee benefit plan as defined in Section 3 of  Title I of ERISA, or a plan described in

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Section 4975(e)(1) of the Code, and the Purchased Mortgage Loans are not “plan assets” within the meaning of 29 CFR §2510.3 101 as amended by Section 3(42) of ERISA, in Seller’s or Guarantor’s hands, and transactions by or with Seller or Guarantor are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

(27)      No Prohibited Persons. Neither Seller nor any of its Affiliates, officers, directors, partners or members, is an entity or person (or to  Seller’s knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO 13224”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, https://www.treasury.gov/ofac/downloads/sdnlist.pdf); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “Prohibited Person”).

b.   Each of Seller and Guarantor jointly and severally represents and warrants to Administrative Agent and Buyers as of the applicable Purchase Date for any Transaction and each date thereafter that (i) with respect to every Purchased Mortgage Loan, each representation and warranty set forth on Schedule 1 is true and correct.  

c.    The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Mortgage Loans to Administrative Agent for the benefit of Buyers and to each Buyer and shall continue for so long as the Purchased Mortgage Loans are subject to this Agreement.  Upon discovery by Seller, Servicer or Administrative Agent of any breach of any of the representations or warranties set forth in this Agreement, the party discovering such breach shall promptly give notice of such discovery to the others.

14.       Covenants

Each of Seller and Guarantor covenants with Administrative Agent and Buyers that, during the term of this facility:

a.    Litigation. Seller and Guarantor, as applicable, will promptly, and in any event within ten (10) days after service of process on any of the following, give to Administrative Agent notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting Seller, Guarantor or any of their Subsidiaries or affecting any of the Property of any of

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them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually or in the aggregate in an amount greater than five percent (5%) of Seller’s Net Worth, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. On each Reporting Date, Seller and Guarantor, as applicable, will provide to Administrative Agent a litigation docket listing all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting Seller, Guarantor or any of their Subsidiaries or affecting any of the Property of any of them before any Governmental Authority. Seller and Guarantor, as applicable, will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.

b.   Prohibition of Fundamental Changes.  Seller shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that Seller may merge or consolidate with (a) any wholly owned Subsidiary of Seller, or (b) any other Person if Seller is the surviving entity; and provided further, that if after giving effect thereto, no Default would exist hereunder.

c.    MERS.  Seller shall comply in all material respects with the rules and procedures of MERS in connection with the servicing of all Purchased Mortgage Loans that are registered with MERS and, with respect to Purchased Mortgage Loans that are eMortgage Loans, the maintenance of the related eNotes on the MERS eRegistry for as long as such Purchased Mortgage Loans are so registered.

d.   Servicer; Asset Tape.  Upon the occurrence of any of the following (a) the occurrence and continuation of an Event of Default, (b) the fifth (5^th) Business Day of each month, or (c) within two (2) Business Days following the request of Administrative Agent, Seller shall cause Servicer to provide to Administrative Agent, electronically, in a format mutually acceptable to Administrative Agent and Seller, an Asset Tape.  Seller shall not cause the Mortgage Loans to be serviced by any servicer other than a servicer expressly approved in writing by Administrative Agent on behalf of Buyers, which approval shall be deemed granted by Administrative Agent on behalf of Buyers with respect to Seller with the execution of this Agreement.

e.    Insurance.  Seller or Guarantor shall continue to maintain, for Seller, Servicer and their Subsidiaries, Fidelity Insurance in an aggregate amount at least equal to $1,400,000.  Seller or Guarantor shall maintain, for Seller, Servicer and their Subsidiaries, Fidelity Insurance in respect of its officers, employees and agents, with respect to any claims made in connection with all or any portion of the Repurchase Assets.  Seller or Guarantor shall notify the Administrative Agent of any material change in the terms of any such Fidelity Insurance.

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f.    No Adverse Claims.  Seller warrants and will defend, and shall cause any Servicer to defend, the right, title and interest of Administrative Agent and Buyers in and to all Purchased Mortgage Loans and the related Repurchase Assets against all adverse claims and demands.

g.   Assignment.  Except as permitted herein, neither Seller nor any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Mortgage Loans or any interest therein, provided that this Section shall not prevent any transfer of Purchased Mortgage Loans in accordance with the Program Agreements.

h.   Security Interest.  Seller shall do all things necessary to preserve the Purchased Mortgage Loans and the related Repurchase Assets so that they remain subject to a first priority perfected security interest hereunder.  Without limiting the foregoing, Seller will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Mortgage Loans or the related Repurchase Assets to comply with all applicable rules, regulations and other laws.  Seller will not allow any default for which Seller is responsible to occur under any Purchased Mortgage Loans or the related Repurchase Assets or any Program Agreement and Seller shall fully perform or cause to be performed when due all of its obligations under any Purchased Mortgage Loans or the related Repurchase Assets and any Program Agreement.

i.    Records.

(1)  Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Mortgage Loans in accordance with industry custom and practice for assets similar to the Purchased Mortgage Loans, and all such Records shall be in Custodian’s possession unless Administrative Agent otherwise approves.  Seller will not allow any such papers, records or files that are an original or an only copy to leave Custodian’s possession, except for individual items removed in connection with servicing a specific Mortgage Loan, in which event Seller will obtain or cause to be obtained a receipt from a financially responsible person for any such paper, record or file.  Seller or the Servicer of the Purchased Mortgage Loans will maintain all such Records not in the possession of Custodian in good and complete condition in accordance with industry practices for assets similar to the Purchased Mortgage Loans and preserve them against loss.

(2)  For so long as Administrative Agent has an interest in or lien on any Purchased Mortgage Loan, Seller will hold or cause to be held all related Records in trust for Administrative Agent.  Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Administrative Agent granted hereby.

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(3)  Upon reasonable advance notice from Custodian or Administrative Agent, Seller shall (x) make any and all such Records available to Custodian, Administrative Agent or a Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Administrative Agent or a Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.

j.    Books.  Seller shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Mortgage Loans to Administrative Agent for the benefit of Buyers.

k.   Approvals.  Seller shall maintain all licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Agreements, and Seller shall conduct its business in all material respects in accordance with applicable law.

l.    Material Change in Business.  Neither Seller nor Guarantor shall make any material change in the nature of its business as carried on at the date hereof.

m.  Underwriting Guidelines.  Without the prior written consent of Administrative Agent, Seller shall not amend or otherwise modify the Underwriting Guidelines in any material respect.  Without limiting the foregoing, in the event that Seller makes any amendment or modification to the Underwriting Guidelines, Seller shall promptly deliver to Administrative Agent a complete copy of the amended or modified Underwriting Guidelines, specifying in detail the amendments and modifications set forth therein from the previous copy delivered.

n.   Distributions.  If an Event of Default has occurred and is continuing, neither Seller nor Guarantor shall pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller or Guarantor.

o.   Applicable Law.  Seller and Guarantor shall comply in all material respects with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.

p.   Existence.  Each of Seller and Guarantor shall preserve and maintain its legal existence and all of its material rights, privileges, material licenses and franchises.

q.   Chief Executive Office; Jurisdiction of Organization.  Seller shall not move its chief executive office from the address referred to in Section 13.a(17) or change its jurisdiction of organization from the jurisdiction referred to in Section 13.a(17) unless it shall have provided Administrative Agent thirty (30) days’ prior written notice of such change.

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r.    Taxes.  Seller and Guarantor shall timely file all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

s.    Transactions with Affiliates.  Seller will not enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under the Program Agreements, (b) in the ordinary course of Seller’s business and (c) upon fair and reasonable terms no less favorable to Seller than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section to any Affiliate.

t.    Guarantees.  Seller shall not create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in Seller’s financial statements or notes thereto and (ii) to the extent the aggregate Guarantees of Seller do not exceed $250,000.

u.   Indebtedness. Seller shall not incur any additional material Indebtedness (other than (i) the Existing Indebtedness in amounts not to exceed the amounts specified on Exhibit I hereto, (ii) except for Indebtedness incurred with Administrative Agent or its Affiliates, (iii) Indebtedness required to be obtained pursuant to the Program Agreements and (iv) usual and customary accounts payable for a mortgage company) without the prior written consent of Administrative Agent.

v.   Hedging. Seller has entered into Interest Rate Protection Agreements with respect to the Conforming Mortgage Loans, having terms with respect to protection against fluctuations in interest rates acceptable to Administrative Agent in its sole discretion.  In the event that Seller intends to make any change to its policy regarding Interest Rate Protection Agreements, Seller shall notify Administrative Agent in writing thirty (30) days prior to implementing any such change.  

w.   True and Correct Information.  All information, reports, exhibits, schedules, financial statements or certificates of Seller, Guarantor any Affiliate thereof or any of their officers furnished to Administrative Agent and/or Buyers hereunder and during Administrative Agent’s and/or Buyers’ diligence of Seller and Guarantor are and will be true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading.  All required financial statements, information and reports delivered by Seller and Guarantor to Administrative Agent and/or Buyers pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.

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x.   Agency Approvals; Servicing.  Seller shall maintain its status with Fannie Mae as an approved lender and Freddie Mac as an approved seller/servicer, in each case in good standing (“Agency Approvals”).  Servicer shall service all Purchased Mortgage Loans which are Committed Mortgage Loans in accordance with the applicable agency guide.  Should Servicer, for any reason, cease to possess all such applicable Agency Approvals, or should notification to the relevant Agency or to the HUD, FHA or VA be required, such Seller shall so notify Administrative Agent immediately in writing.  Notwithstanding the preceding sentence, Servicer shall take all necessary action to maintain all of their applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction. Servicer shall maintain adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices.

y.   Take-out Payments. With respect to each Committed Mortgage Loan, Seller shall arrange that all payments under the related Take-out Commitment shall be paid directly to Administrative Agent at the account set forth in Section 9 hereof, or to an account approved by Administrative Agent in writing prior to such payment. With respect to any Agency Take-out Commitment, if applicable, (1) with respect to the wire transfer instructions as set forth in Freddie Mac Form 987 (Wire Transfer Authorization for a Cash Warehouse Delivery) such wire transfer instructions are identical to Administrative Agent’s wire instructions or Administrative Agent has approved such wire transfer instructions in writing in its sole discretion, or (2) the Payee Number set forth on Fannie Mae Form 1068 (Fixed-Rate, Graduated-Payment, or Growing-Equity Mortgage Loan Schedule) or Fannie Mae Form 1069 (Adjustable-Rate Mortgage Loan Schedule), as applicable, is identical to the Payee Number that has been identified by Administrative Agent in writing as Administrative Agent’s Payee Number or Administrative Agent has previously approved the related Payee Number in writing in its sole discretion; with respect to any Take-out Commitment with an Agency, the applicable agency documents shall list Administrative Agent as sole subscriber, unless otherwise agreed to in writing by Administrative Agent, in Administrative Agent’s sole discretion.

z.    No Pledge.  Neither Seller nor Guarantor shall pledge, transfer or convey any security interest in the Securities Account to any Person without the express written consent of Administrative Agent.

aa.  Plan Assets. Seller shall not be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and Seller shall not use “plan assets” within the meaning of 29 CFR §2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement or any Transaction hereunder. Transactions by or with Seller or Guarantor shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

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bb. Financial Covenants.  Seller shall at all times comply with any and all financial covenants and/or financial ratios set forth below:

(1)        Adjusted Tangible Net Worth. Seller shall maintain an Adjusted Tangible Net Worth of at least equal to $1,250,000,000.

(2)       Indebtedness to Adjusted Tangible Net Worth Ratio. Seller’s ratio of Indebtedness (excluding (A) Non-Recourse Debt, including any securitization debt, and (B) any intercompany debt eliminated in consolidation) to Adjusted Tangible Net Worth shall not exceed 10:1.

(3)        Maintenance of Liquidity.  The Seller shall ensure that, at all times, it has cash (other than Restricted Cash) and Cash Equivalents in an amount not less than $40,000,000.

(4)       Additional Warehouse Line. The Seller shall maintain one or more additional warehouse or repurchase facilities in order to finance mortgage loans in an aggregate amount at least equal to 55% of the Maximum Regular Way Committed Purchase Price.

cc.  Sharing of Information.  Seller shall allow the Administrative Agent and Buyers to exchange information related to Seller and the Transactions hereunder with third party lenders and Seller shall permit each third party lender to share such information with the Administrative Agent and Buyers.

dd.       Liens on Substantially All Assets.  Seller shall not grant a security interest to any Person other than Administrative Agent or an Affiliate of Administrative Agent in substantially all assets of Seller unless Seller has entered into an amendment to this Agreement that grants to Administrative Agent for the benefit of Buyers a pari passu security interest on such assets.

ee.  GNMA EBO.

(a)  With respect to any GNMA EBO that is not (i) an Aged 360 GNMA EBO or (ii) a Submitted GNMA EBO, Seller shall remain, on the FHA Connect system, the mortgagee of record with respect to such GNMA EBO.  With respect to any Purchased Mortgage Loan that is an Aged 360 GNMA EBO and prior to any GNMA EBO becoming a Submitted GNMA EBO, Seller shall transfer the mortgagee of record on the FHA Connect system to Agent; provided, further, following the occurrence of an Event of Default, Seller shall transfer the mortgagee of record on the FHA Connect system to Agent with respect to each Purchased Mortgage Loan that is a GNMA EBO. Notwithstanding this subsection (a), in the event of receipt of any proceeds from HUD with respect to any Purchased Mortgage Loan that is a GNMA EBO, Seller shall remit such amounts within four (4) Business Days to the GNMA Account pursuant to the definition of “GNMA Account”. To the extent HUD deducts any amounts owing by Seller to HUD, Seller shall deposit, within four (4) Business Days following notice or knowledge of such deduction by HUD, such deducted amounts into the applicable GNMA Account.  

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On each Price Differential Payment Date, Seller shall instruct Securities Intermediary to remit all amounts on deposit in any GNMA Account to the Securities Account for distribution in accordance with the Securities Account Control Agreement.  

(b)  With respect to each Aged 360 GNMA EBO and Submitted GNMA EBO, Seller shall cause Agent to be designated as mortgagee of record on the FHA Connect system under mortgagee number 34522, and shall submit all claims to HUD under such applicable number for remittance of amounts to the GNMA Account pursuant to the definition of “GNMA Account”.  On each Price Differential Payment Date, Seller shall instruct Securities Intermediary to remit all amounts on deposit in any GNMA Account to the Securities Account for distribution in accordance with the Securities Account Control Agreement.

(c)  Seller shall cooperate and do all things deemed necessary or appropriate by Agent to effectuate the steps as contemplated in this Section 14.hh.

ff.   HELOC Provisions.  With respect to each HELOC, if a Mortgagor requests an increase in the related Credit Limit, the Sellers, shall, in their sole discretion, either accept or reject the Mortgagor’s request in accordance with Underwriting Guidelines and notify the Administrative Agent in writing of Sellers’ decision.  If the request for a Credit Limit increase is accepted by the Sellers, the increase will be effected by the Sellers through modification of the HELOC with the Mortgagor.  Sellers shall deliver to the Administrative Agent an updated Asset Schedule reflecting the modification to the HELOC and shall deliver any modified Mortgage Loan documents to the Custodian.  Notwithstanding anything to the contrary herein, in no event shall Administrative Agent or Buyers have any obligation to fund any Draws with respect to any HELOC, which obligations shall be retained by the Sellers.  Notwithstanding the foregoing, after the Seller funds such Draws, the Seller may request the Administrative Agent to enter additional Transactions involving the HELOCs, as applicable, to include the aggregate new Draws in the Purchase Price of the related HELOCs.

15.       Events of Default

Each of the following shall constitute an “Event of Default” hereunder:

a.    Payment Failure.  Failure of Seller to (i) make any payment of Price Differential or Repurchase Price or any other sum which has become due, on a Price Differential Payment Date or a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Administrative Agent or Buyers or to any Affiliate of Administrative Agent or Buyers, or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof.

b.   Cross Default.  Seller, Guarantor or Affiliates thereof shall be in default under (i) the VFN Facility Documents, (ii) the Conventional MSR Loan Facility

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Documents, (iii) the MSR PC Repo Documents, (iv) the SPIA VFN Repo Documents, (v) any Indebtedness, in the aggregate, in excess of $1 million of Seller, Guarantor or any Affiliate thereof, including amounts owed under the VFN Facility Documents, SPIA VFN Repo Documents or the MSR PC Repo Documents, which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (vi) any other contract or contracts, in the aggregate in excess of $1 million to which Seller, Guarantor or any Affiliate thereof is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract.  

c.    Assignment.  Assignment or attempted assignment by Seller or Guarantor of this Agreement or any rights hereunder without first obtaining the specific written consent of Administrative Agent, or the granting by Seller of any security interest, lien or other encumbrances on any Purchased Mortgage Loans or Servicer Advances to any person other than Administrative Agent.

d.   Insolvency.  An Act of Insolvency shall have occurred with respect to Seller, Guarantor or any Affiliate thereof.

e.    Material Adverse Change.  Any material adverse change in the Property, business, financial condition or operations of Seller, Guarantor or any of their Affiliates shall occur, in each case as determined by Administrative Agent in its sole good faith discretion, or any other condition shall exist which, in Administrative Agent’s sole good faith discretion, constitutes a material impairment of Seller’s or Guarantor’s ability to perform its obligations under this Agreement or any other Program Agreement.

f.    Breach of Financial Representation or Covenant or Obligation. A breach by Seller or Guarantor of any of the representations, warranties or covenants or obligations set forth in (i) Sections 13.a(1)(Seller and Guarantor Existence), 13.a(7)(Solvency), 13.a(12)(Material Adverse Change), 13.a(19)(Adjusted Tangible Net Worth), 14.b(Prohibition of Fundamental Changes), 14.n (Distributions), 14.p(Existence), 14.t(Guarantees), or 14.aa(Plan Assets) of this Agreement or (ii) Sections 13(a)(23)(Other Indebtedness), 14.u(Indebtedness) or 14.bb(Financial Covenants) of this Agreement and such breach identified in this clause (ii) shall remain unremedied for one (1) Business Day.

g.   Breach of Non-Financial Representation or Covenant.  A breach by Seller or Guarantor of any other representation, warranty or covenant set forth in this Agreement in any material respect (and not otherwise specified in Section 15.f above) or any other Program Agreement, if such breach is not cured within five (5) Business Days (other than the representations and warranties set forth in Schedule 1, which shall be considered solely for the purpose of determining the Market Value, the existence of a Margin Deficit and the obligation to repurchase such Mortgage Loan or Servicer Advances unless (i) such party shall have made any

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such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Administrative Agent in its sole discretion to be materially false or misleading on a regular basis, or (iii) Administrative Agent, in its sole discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party, its Subsidiaries or Affiliates; or (B) Administrative Agent’s determination to enter into this Agreement or Transactions with such party, then such breach shall constitute an immediate Event of Default and neither Seller nor Guarantor shall have any cure right hereunder).

h.   Guarantor Breach.  A breach by Guarantor of any material representation, warranty or covenant set forth in the Guaranty or any other Program Agreement, any “event of default” by Guarantor under the Guaranty, any repudiation of the Guaranty by Guarantor, or if the Guaranty is not enforceable against Guarantor.

i.    Change in Control.  The occurrence of a Change in Control.

j.    Failure to Transfer.  Seller fails to transfer the Purchased Mortgage Loans and/or Servicer Advances to Administrative Agent for the benefit of the applicable Buyer on the applicable Purchase Date (provided the Administrative Agent, on behalf of the applicable Buyer, has tendered the related Purchase Price).

k.   Judgment.  A final judgment or judgments for the payment of money in excess of $10,000,000 shall be rendered against Seller, Guarantor or any of their Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof.

l.    Government Action.  Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of Seller, Guarantor or any Affiliate thereof, or shall have taken any action to displace the management of Seller, Guarantor or any Affiliate thereof or to curtail its authority in the conduct of the business of Seller, Guarantor or any Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of Seller, Guarantor or Affiliate as an issuer, buyer or a seller/servicer of Mortgage Loans or securities backed thereby, and such action provided for in this subparagraph l shall not have been discontinued or stayed within thirty (30) days.

m.  Inability to Perform.  A Responsible Officer of Seller or Guarantor shall admit its inability to, or its intention not to, perform any of Seller’s Obligations or Guarantor’s obligations hereunder or the Guaranty.

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n.   Security Interest.  This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Purchased Mortgage Loans, Servicer Advances or other Repurchase Assets purported to be covered hereby.

o.   Financial Statements.  Seller’s or PennyMac Financial Services, Inc.’s (“PFS”) audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or PFS as a “going concern” or a reference of similar import.

An Event of Default shall be deemed to be continuing unless expressly waived by Administrative Agent in writing.

16.       Remedies Upon Default

In the event that an Event of Default shall have occurred:

a.    Administrative Agent may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency of Seller or any Affiliate of Seller), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled).  Administrative Agent shall (except upon the occurrence of an Act of Insolvency of Seller or any Affiliate of Seller) give notice to Seller and Guarantor of the exercise of such option as promptly as practicable.

b.   If Administrative Agent exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Section, (i) Seller’s obligations in such Transactions to repurchase all Purchased Mortgage Loan, including Servicer Advances, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Section, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Administrative Agent and applied, in Administrative Agent’s sole discretion, to the aggregate unpaid Repurchase Prices for all outstanding Transactions and any other amounts owing by Seller (provided that any determination with respect to what portion of the Purchase Price is attributed to the Purchase Price-Base, Purchase Price-Incremental 1 or Purchase Price-Incremental 2 shall be made in accordance with the Purchase Price definition), and (iii) Seller shall immediately deliver to Administrative Agent the Mortgage Files relating to any Purchased Mortgage Loans and Servicer Advances subject to such Transactions then in Seller’s possession or control.

c.    Administrative Agent also shall have the right to obtain physical possession, and to commence an action to obtain physical possession, of all Records and files

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of Seller relating to the Purchased Mortgage Loans, Servicer Advances and all documents relating to the Purchased Mortgage Loans and Servicer Advances (including, without limitation, any legal, credit or servicing files with respect to the Purchased Mortgage Loans and Servicer Advances) which are then or may thereafter come in to the possession of Seller or any third party acting for Seller.  To obtain physical possession of any Purchased Mortgage Loans held by Custodian, Administrative Agent shall present to Custodian an Asset Confirm.  Without limiting the rights of Administrative Agent hereto to pursue all other legal and equitable rights available to Administrative Agent for Seller’s failure to perform its obligations under this Agreement, Seller acknowledges and agrees that the remedy at law for any failure to perform obligations hereunder would be inadequate and Administrative Agent shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Administrative Agent from pursuing any other remedies for such breach, including the recovery of monetary damages.

d.   Administrative Agent shall have the right to direct all servicers then servicing any Purchased Mortgage Loans to remit all collections thereon to Administrative Agent, and if any such payments are received by Seller, Seller shall not commingle the amounts received with other funds of Seller and shall promptly pay them over to Administrative Agent.  Administrative Agent shall also have the right to terminate any one or all of the servicers then servicing any Purchased Mortgage Loans with or without cause.  In addition, Administrative Agent shall have the right to immediately sell the Purchased Mortgage Loans and Servicer Advances and liquidate all Repurchase Assets.  Such disposition of Purchased Mortgage Loans and Servicer Advances may be, at Administrative Agent’s option, on either a servicing-released or a servicing-retained basis.  Administrative Agent shall not be required to give any warranties as to the Purchased Mortgage Loans and Servicer Advances with respect to any such disposition thereof.  Administrative Agent may specifically disclaim or modify any warranties of title or the like relating to the Purchased Mortgage Loans or Servicer Advances.  The foregoing procedure for disposition of the Purchased Mortgage Loans and Servicer Advances and liquidation of the Repurchase Assets shall not be considered to adversely affect the commercial reasonableness of any sale thereof.  Seller agrees that it would not be commercially unreasonable for Administrative Agent to dispose of the Purchased Mortgage Loan, Servicer Advances or the Repurchase Assets or any portion thereof by using Internet sites that provide for the auction of assets similar to the Purchased Mortgage Loans or the Repurchase Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets.  Administrative Agent shall be entitled to place the Purchased Mortgage Loans and Servicer Advances in a pool for issuance of mortgage-backed securities at the then-prevailing price for such securities and to sell such securities for such prevailing price in the open market.  Administrative Agent shall also be entitled to sell any or all of such Mortgage Loans and Servicer Advances individually for the prevailing price. Administrative Agent shall also be entitled, in its sole discretion to elect, in lieu of selling all or a portion of such Purchased Mortgage Loans and Servicer Advances, to give Seller credit for

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such Purchased Mortgage Loans, Servicer Advances and the Repurchase Assets in an amount equal to the Market Value of the Purchased Mortgage Loans and Servicer Advances against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder.

e.    Upon the happening of one or more Events of Default, Administrative Agent may apply any proceeds from the liquidation of the Purchased Mortgage Loans, Servicer Advances and Repurchase Assets to the Repurchase Prices hereunder and all other Obligations in the manner Administrative Agent deems appropriate in its sole discretion.

f.    Seller shall be liable to Administrative Agent and each Buyer for (i) the amount of all reasonable legal or other expenses (including, without limitation, all costs and expenses of Administrative Agent and each Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting  creditors’ rights generally, further including, without limitation, the reasonable fees and expenses of counsel (including the costs of internal counsel of Administrative Agent and Buyers) incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.

g.   To the extent permitted by applicable law, Seller shall be liable to Administrative Agent and each Buyer for interest on any amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller or (ii) satisfied in full by the exercise of Administrative Agent’s and Buyers’ rights hereunder.  Interest on any sum payable by Seller under this Section 16.g shall be at a rate equal to the Post-Default Rate.

h.   Administrative Agent shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.

i.    Administrative Agent may exercise one or more of the remedies available to Administrative Agent immediately upon the occurrence of an Event of Default and, except to the extent provided in subsections (a) and (d) of this Section, at any time thereafter without notice to Seller.  All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Administrative Agent may have.

j.    Administrative Agent may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Administrative Agent to enforce its rights by judicial process.  Seller also waives any defense (other than a defense of payment

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or performance) Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies.  Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

k.   Administrative Agent shall have the right to perform reasonable due diligence with respect to Seller, the Mortgage Loans and Servicer Advances, which review shall be at the expense of Seller.

17.       Reports

a.    Notices.  Seller or Guarantor shall furnish to Administrative Agent (x) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, breaches, potential defaults or potential breaches) and any material financial information that is not otherwise required to be provided by Seller or Guarantor hereunder which is given to Seller’s lenders, (y) immediately, notice of the occurrence of any Event of Default hereunder or default or breach by Seller, Guarantor or Servicer of any obligation under any Program Agreement or any material contract or agreement of Seller, Guarantor or Servicer or the occurrence of any event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default or such a default or breach by such party and (z) the following:

(1)  as soon as available and in any event within forty-five (45) calendar days after the end of each calendar month, the unaudited consolidated balance sheets of Guarantor and its consolidated Subsidiaries and the unaudited balance sheet of Seller, each as at the end of such period and the related unaudited consolidated statements of income for Guarantor and its consolidated Subsidiaries and Seller for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Guarantor or Seller, as applicable, which certificate shall state that said consolidated financial statements or financial statements, as applicable, fairly present in all material respects the consolidated financial condition or financial condition, as applicable, and results of operations of Guarantor and its consolidated Subsidiaries or Seller, as applicable, in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);

(2)  as soon as available and in any event within forty-five (45) calendar days after the end of each calendar quarter, the unaudited consolidated cash flow statements of Guarantor and its consolidated Subsidiaries and the unaudited cash flow statements of Seller, each as at the end of such period  and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Guarantor or Seller, as applicable, which certificate shall state that said consolidated financial statements or financial statements, as applicable, fairly present in all material respects the consolidated

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financial condition or financial condition, as applicable, and results of operations of Guarantor and its consolidated Subsidiaries or Seller, as applicable, in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);

(3)  as soon as available and in any event within ninety (90) days after the end of each fiscal year of PFS and Seller, the consolidated balance sheets of PFS and its consolidated Subsidiaries and the balance sheet of Seller, each as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for PFS and its consolidated Subsidiaries and Seller for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion and the scope of audit shall be acceptable to Administrative Agent in its sole discretion, shall have no “going concern” qualification and shall state that said consolidated financial statements or financial statements, as applicable, fairly present the consolidated financial condition or financial condition, as applicable, and results of operations of PFS and its respective consolidated Subsidiaries or Seller, as applicable, as at the end of, and for, such fiscal year in accordance with GAAP;

(4)  such other prepared statements that Administrative Agent may reasonably request;

(5)  if applicable, copies of any 10-Ks, 10-Qs, registration statements and other “corporate finance” SEC filings (other than 8-Ks) by Guarantor, Seller or any Affiliate, within 5 Business Days of their filing with the SEC; provided, that, Guarantor, Seller or any Affiliate will provide Administrative Agent and Credit Suisse First Boston Corporation with a copy of the annual 10-K filed with the SEC by Guarantor, Seller or their Affiliates, no later than ninety (90) days after the end of the year;

(6)  as soon as available, and in any event within thirty (30) days of receipt, copies of relevant portions of all final written Agency, FHA, VA, Governmental Authority and investor audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required, (ii) material sanctions proposed, imposed or required, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (iii) “report cards,” “grades” or other classifications of the quality of Seller’s operations;

(7)  from time to time such other information regarding the financial condition, operations, or business of Seller or Guarantor as Administrative Agent may reasonably request;

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(8)  as soon as reasonably possible, and in any event within thirty (30) days after a Responsible Officer of Seller or Guarantor has knowledge of the occurrence of any Event of Termination, stating the particulars of such Event of Termination in reasonable detail; or

(9)  As soon as reasonably possible, notice of any of the following events:

(a)  change in the insurance coverage required of Seller, Servicer or any other Person pursuant to any Program Agreement, with a copy of evidence of same attached;

(b)  any material dispute, litigation, investigation, proceeding or suspension between Seller or Servicer, on the one hand, and any Governmental Authority or any Person;

(c)  any material change in accounting policies or financial reporting practices of Seller or Servicer;

(d)  with respect to any Purchased Mortgage Loan, immediately upon receipt of notice or knowledge thereof, that the underlying Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Mortgage Loan;

(e)  any material issues raised upon examination of Seller or Seller’s facilities by any Governmental Authority;

(f)   any material change in the Indebtedness of Seller, including, without limitation, any default, renewal, non-renewal, termination, increase in available amount or decrease in available amount related thereto;

(g)  promptly upon receipt of notice or knowledge of (i) any default related to any Repurchase Asset, (ii) any lien or security interest (other than security interests created hereby or by the other Program Agreements) on, or claim asserted against, any of the Purchased Mortgage Loans or Servicer Advances;

(h)  a summary of the portfolio performance on a rolling monthly period, commencing on the calendar quarter following the date hereof, stratified by percentage repurchase demands for: representation breaches, missing document breaches, repurchases due to fraud, early payment default requests, summarized on the basis of (i) pending repurchase demands (including weighted average duration of outstanding request), (ii) satisfied repurchase demands and (iii) total repurchase demands;

(i)   any other event, circumstance or condition that has resulted, or has a possibility of resulting, in a Material Adverse Effect with respect to Seller or Servicer; or

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(j)   the occurrence of any material employment dispute and a description of the strategy for resolving it that has the possibility of resulting in a Material Adverse Effect.

b.   Officer’s Certificates.  Seller will furnish to Administrative Agent, at the time Seller furnishes each set of financial statements pursuant to Section 17.a(1), (2) and (3) above, a certificate of a Responsible Officer of Seller in the form of Exhibit A to the Pricing Side Letter.

c.    Mortgage Loan Reports.  Within ten (10) days of the end of each calendar month, Seller will furnish to Administrative Agent monthly electronic Mortgage Loan performance data, including, without limitation, delinquency reports and volume information and responses thereto, broken down by product (i.e., delinquency, foreclosure and net charge-off reports).

d.   Asset Tape.  Seller shall provide to Administrative Agent, electronically, in a format mutually acceptable to Administrative Agent and Seller, an Asset Tape by no later than the Reporting Date.

e.    Quality Control Reports.  Periodic internal quality control reports and internal audit reports as they are distributed to the board of directors of Seller or Guarantor.

f.    MSR Reports.  Seller shall provide the market value analysis for the MSR Valuation as determined (i) internally for each monthly fiscal period and (ii) by a Third Party Evaluator for each quarterly fiscal period to the extent received, in all instances as set forth in the Officer’s Compliance Certificate delivered pursuant to Section 17.b. herein.

g.   Other Reports. Seller shall deliver to Administrative Agent any other reports or information reasonably requested by Administrative Agent or as otherwise required pursuant to this Agreement.

h.   Portfolio Performance Data.  At the time Seller furnishes each set of financial statements pursuant to Section 17.a(1), (2) and (3) above, Seller will furnish to Administrative Agent (i) in the event the Mortgage Loans are serviced on a “retained” basis, an electronic Mortgage Loan performance data, including, without limitation, delinquency reports and volume information, broken down by product (i.e., delinquency, foreclosure and net charge-off reports) and (ii) electronically, in a format mutually acceptable to Administrative Agent and Seller, servicing information, including, without limitation, those fields reasonably requested by Administrative Agent from time to time, on a loan-by-loan basis and in the aggregate, with respect to the Mortgage Loans serviced by Seller for the calendar month corresponding to the financial statements being delivered including, with respect to a GNMA EBO, the current BPO and the current BPO date.

i.    DE Compare Ratio and HUD Reports. Seller shall furnish to Administrative Agent the following notices:

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1.     In the event Seller’s DE Compare Ratio equals or exceeds 250%, Seller shall provide Administrative Agent with written notice of such occurrence within five (5) Business Days, which notice shall include a written summary of actions Seller is taking to correct its DE Compare Ratio.  

2.     In the event Seller receives any inquiry or notice from HUD regarding its DE Compare Ratio, Seller shall provide Administrative Agent with written notice of such inquiry or notice within five (5) Business Days, regardless of Seller’s current DE Compare Ratio.  

3.     In the event any action plan with respect to Seller’s DE Compare Ratio is agreed to between Seller and HUD or imposed upon Seller by HUD, Seller shall provide Administrative Agent with a written summary of such agreement or imposition, as applicable, within five (5) Business Days.

j.    Control Failure. Seller shall furnish to Administrative Agent written notice immediately upon Seller becoming aware of any Control Failure with respect to a Purchased Mortgage Loan that is an eMortgage Loan or any eNote Replacement Failure.

18.       Repurchase Transactions

A Buyer may, in its sole election, engage in repurchase transactions (as “seller” thereunder) with any or all of the Purchased Mortgage Loans and/or Repurchase Assets or pledge, hypothecate, assign, transfer or otherwise convey any or all of the Purchased Mortgage Loans and/or Repurchase Assets with a counterparty of Buyer’s choice (such transaction, a “Repledge Transaction”).  Any Repledge Transaction shall be effected by notice to the Administrative Agent, and shall be reflected on the books and records of the Administrative Agent.  No such Repledge Transaction shall relieve such Buyer of its obligations to transfer Purchased Mortgage Loans and Repurchase Assets to Seller (and not substitutions thereof) pursuant to the terms hereof.  In furtherance, and not by limitation of, the foregoing, it is acknowledged that each counterparty under a Repledge Transaction (a “Repledgee”), is a repledgee as contemplated by Sections 9-207 and 9-623 of the UCC (and the relevant Official Comments thereunder).  Administrative Agent and Buyers are each hereby authorized to share any information delivered hereunder with the Repledgee; provided, that, Administrative Agent or such Buyer will cause such Repledgee to execute and deliver a non-disclosure agreement agreeing to keep such information delivered by Administrative Agent or any Buyer to such Repledgee confidential, on substantially similar terms as set forth in Section 32 of this Agreement.

19.       Single Agreement

Administrative Agent, Buyers and Seller acknowledge they have entered hereunto, and will enter into each Transaction hereunder, in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other.  Accordingly, each of Administrative Agent, Buyers and

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Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, and (ii)  that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. Notwithstanding anything in this Agreement to the contrary, in the event that (a) a Buyer is not an Affiliate of Administrative Agent, Alpine or CS Cayman (a “Non-Affiliate Buyer”), (b) an Event of Default shall have occurred and is continuing and (c) Administrative Agent provides written notice to the Seller to sever each Non-Affiliate Buyer’s Transactions (the “Non-Affiliate Transactions”) and treat such Non-Affiliate Transactions as separate Transactions under this Agreement (a “Severance Notice”), then Administrative Agent, Buyers and Seller Parties acknowledge that each such Non-Affiliate Transaction shall be deemed a separate Transaction under a separate and distinct agreement with the same terms and conditions as set forth herein (each a “Non-Affiliate MRA”), and each such Non-Affiliate Buyer shall be deemed to be the administrative agent with respect to its respective Non-Affiliate Transactions under its respective Non-Affiliate MRA; provided, that Transactions owned by Administrative Agent, Alpine and CS Cayman or any respective Affiliate shall continue to be deemed a single Transaction with Administrative Agent serving as the administrative agent for Alpine, CS Cayman or any respective Affiliate, in each case, pursuant to the terms and conditions of this Agreement.

20.       Notices and Other Communications

Any and all notices (with the exception of Transaction Requests, which shall be delivered via electronic mail or other electronic medium agreed to by the Administrative Agent and the Seller), statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other.  All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence. In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.

If to Seller or Guarantor:

PennyMac Loan Services, LLC

3043 Townsgate Road, Suite 200

Westlake Village, California 91361

Attention: Pamela Marsh/Richard Hetzel

Phone Number: (805) 330-6059/(805) 254-6088

E-mail: pamela.marsh@pnmac.com ; Richard.hetzel@pnmac.com

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with a copy to:

PennyMac Loan Services, LLC

3043 Townsgate Road, Suite 200

Westlake Village, California 91361

Attention: Derek Stark

Phone Number: (818) 746-2289

E-mail: derek.stark@pnmac.com

If to Administrative Agent:

For Transaction Requests:

CSFBMC LLC

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 2nd floor

New York, New York 10010

Attention: Christopher Bergs, Resi Mortgage Warehouse Ops

Phone: 212-538-5087

E-mail: christopher.bergs@credit-suisse.com

with a copy to:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

Eleven Madison Avenue, 4th Floor

New York, New York 10010

Attention: Margaret Dellafera

Phone Number: 212-325-6471

Fax Number: 212-743-4810

E-mail: margaret.dellafera@credit-suisse.com

For all other Notices:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

Eleven Madison Avenue, 4th Floor

New York, New York 10010

Attention: Margaret Dellafera

Phone Number: 212-325-6471

Fax Number: 212-743-4810

E-mail: margaret.dellafera@credit-suisse.com

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with a copy to:

Credit Suisse First Boston Mortgage Capital LLC

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 9th Floor

New York, NY 10010

Attention: Legal Department—RMBS Warehouse Lending

Fax Number: (212) 322-2376

21.       Entire Agreement; Severability

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  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.

22.       Non Assignability

a.    Assignments. The Program Agreements are not assignable by Seller or Guarantor. Subject to Section 37 (Acknowledgment of Assignment and Administration of Repurchase Agreement) hereof, the Administrative Agent and Buyers may from time to time assign all or a portion of their rights and obligations under this Agreement and the Program Agreements; provided, that, unless an Event of Default has occurred, (i) an assignment by a Committed Buyer or (ii) an assignment to a non-Affiliate of Administrative Agent or Buyers, shall, in each case, require Seller’s prior consent, such consent not to be unreasonably withheld; provided, further, that Administrative Agent shall maintain, solely for this purpose as a non-fiduciary agent of Seller, for review by Seller upon written request, a register of assignees or participants (the “Register”) and a copy of an executed assignment and acceptance by Administrative Agent and assignee (“Assignment and Acceptance”), specifying the percentage or portion of such rights and obligations assigned.  The entries in the Register shall be conclusive absent manifest error, and the Seller, Guarantor, Administrative Agent and Buyers shall treat each Person whose name is recorded in the Register pursuant to the preceding sentence as a Buyer hereunder. Upon such assignment and recordation in the Register, (a) such assignee shall be a party hereto and to each Program Agreement to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Administrative Agent and Buyers hereunder, as applicable, and (b) Administrative Agent and Buyers shall, to the extent that such rights and obligations have been so assigned by them pursuant to this Section, be released from its obligations hereunder and under the Program Agreements.  Any assignment hereunder shall be deemed a joinder of such assignee as a Buyer hereto. Unless otherwise stated in the Assignment and Acceptance, Seller shall continue to take directions solely from Administrative Agent unless otherwise notified by Administrative Agent in writing.  Administrative Agent and Buyers may distribute to any prospective or actual assignee this Agreement, the other Program Agreements, any document or other information delivered to Administrative Agent and/or Buyers by Seller.

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b.   Participations.  Any Buyer may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement and under the Program Agreements; provided, however, that (i) such Buyer’s obligations under this Agreement and the other Program Agreements shall remain unchanged, (ii) such Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller shall continue to deal solely and directly with Administrative Agent and/or Buyers in connection with such Buyer’s rights and obligations under this Agreement and the other Program Agreements except as provided in Section 11.  Administrative Agent and Buyers may distribute to any prospective or actual participant this Agreement, the other Program Agreements any document or other information delivered to Administrative Agent and/or Buyers by Seller; provided, that, Administrative Agent or Buyers, as applicable, will cause such party to execute and deliver a non-disclosure agreement whereby such prospective or actual participant agrees to  keep such information delivered by Administrative Agent or any Buyer to such party confidential, on substantially similar terms as set forth in Section 32 of this Agreement.

23.       Set-off

In addition to any rights and remedies of the Administrative Agent and Buyers hereunder and by law, the Administrative Agent and Buyers shall have the right, without prior notice to Seller or Guarantor, any such notice being expressly waived by Seller and Guarantor to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from Seller, Guarantor or any Affiliate thereof to a Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from a Buyer or any Affiliate thereof to or for the credit or the account of Seller, Guarantor or any Affiliate thereof. Administrative Agent agrees promptly to notify the Seller or Guarantor after any such set off and application made by a Buyer; provided that the failure to give such notice shall not affect the validity of such set off and application.

24.       Binding Effect; Governing Law; Jurisdiction

a.    This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Seller acknowledges that the obligations of Administrative Agent and Buyers hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Administrative Agent and Buyers.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

b.   EACH OF SELLER AND GUARANTOR HEREBY WAIVES TRIAL BY JURY.  EACH OF SELLER AND GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE

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STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING.  EACH OF SELLER AND GUARANTOR HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

25.       No Waivers, Etc.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder.  No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto.  Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 6.a, 16.a or otherwise, will not constitute a waiver of any right to do so at a later date.

26.       Intent

a.    The parties recognize that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of Title 11 of the United States Code, as amended, a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended, and a “master netting agreement” as that term is defined in Section 101(38A)(A) of the Bankruptcy Code, that all payments hereunder are deemed “margin payments” or “settlement payments” as defined in Title 11 of the United States Code, and that the pledge of the Repurchase Assets constitutes “a security agreement or other arrangement or other credit enhancement” that is “related to” the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Each of Seller, Guarantor, Administrative Agent and Buyers further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).  

b.   Administrative Agent’s or a Buyer’s right to liquidate the Purchased Assets, Repurchase Assets and Mortgage Loans delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies pursuant to Section 16 hereof is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561; any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be considered a “margin payment” as such term is defined in Bankruptcy Code Section 741(5).

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c.    The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

d.   It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

e.    This Agreement is intended to be a “repurchase agreement” and a “securities contract,” within the meaning of Section 101(47), Section 555, Section 559 and Section 741 under the Bankruptcy Code.

f.    Each party agrees that this Agreement is intended to create mutuality of obligations among the parties, and as such, the Agreement constitutes a contract which (i) is between all of the parties and (ii) places each party in the same right and capacity.

g.   For U.S. federal tax purposes, the Seller, the Guarantor, the Administrative Agent, each Administrative Agent assignee, the Buyers, and each Buyer assignee by acquiring an interest in any Transaction agree to treat and report each Transaction as indebtedness issued by the Seller or the Guarantor as the case may be, which indebtedness, in the case of each obligor, shall have but a single maturity for purposes of Code section 7701(i)(2)(A)(ii) and U.S. Treasury Regulation section 301.7701(i)-1(e).

27.       Disclosure Relating to Certain Federal Protections

The parties acknowledge that they have been advised that:

a.    in the case of Transactions in which one of the parties is a broker or dealer registered with the SEC under Section 15 of the 1934 Act, the Securities Investor Protection Corporation has taken the position that the provisions of the SIPA do not protect the other party with respect to any Transaction hereunder;

b.   in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

c.    in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not

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a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

28.       Power of Attorney

Seller hereby authorizes Administrative Agent to file such financing statement or statements relating to the Repurchase Assets as Administrative Agent, at its option, may deem appropriate.  Seller hereby appoints Administrative Agent as Seller’s agent and attorney-in-fact to execute any such financing statement or statements in Seller’s name and to perform all other acts which Administrative Agent deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Repurchase Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing, and sign assignments on behalf of Seller as its agent and attorney-in-fact.  This agency and power of attorney is coupled with an interest and is irrevocable without Administrative Agent’s consent.  Notwithstanding the foregoing, the power of attorney hereby granted may be exercised only during the occurrence and continuance of any Default hereunder. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 28.  In addition the foregoing, Seller agrees to execute an amended and restated power of attorney in the form of Exhibit E hereto (the “Power of Attorney”), to be delivered on the date hereof.

29.       Buyers May Act Through Administrative Agent

Each Buyer has designated the Administrative Agent for the purpose of performing any action hereunder.

30.       Indemnification; Obligations

a.    Each of Seller and Guarantor agrees to hold Administrative Agent, Buyers and each of their respective Affiliates and their officers, directors, employees, agents and advisors (each, an “Indemnified Party”) harmless from and indemnify each Indemnified Party (and will reimburse each Indemnified Party as the same is incurred) against all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of any kind which may be imposed on, incurred by, or asserted against any Indemnified Party relating to or arising out of this Agreement, any Transaction Request, any Program Agreement or any transaction contemplated hereby or thereby (including, without limitation, (i) any such liabilities, losses, damages, judgments, costs and expenses arising from any acts or omissions of such party and (ii) any wire fraud or data or systems intrusions which causes Administrative Agent or Buyers to suffer any such liability, loss, damage, judgment, cost and/or expense) resulting from anything other than the Indemnified Party’s gross negligence or willful misconduct.  Each of Seller and Guarantor also agrees to reimburse each Indemnified Party for all reasonable expenses in connection with the enforcement of this Agreement and the exercise of any right or remedy provided for herein, any Transaction Request and any Program Agreement, including, without limitation, the reasonable fees and disbursements of counsel.  Seller’s and Guarantor’s agreements in this Section 30

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shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement.  Each of Seller and Guarantor hereby acknowledges that its obligations hereunder are recourse obligations of Seller and Guarantor and are not limited to recoveries each Indemnified Party may have with respect to the Purchased Mortgage Loans.  Each of Seller and Guarantor also agrees not to assert any claim against Administrative Agent or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby.  THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

b.   Without limitation to the provisions of Section 4, if any payment of the Repurchase Price of any Transaction is made by Seller other than on the then scheduled Repurchase Date thereto as a result of an acceleration of the Repurchase Date pursuant to Section 16 or for any other reason, Seller shall, upon demand by Administrative Agent, pay to Administrative Agent on behalf of Buyers an amount sufficient to compensate Buyers for any losses, costs or expenses that it may reasonably incur as of a result of such payment.

c.    Without limiting the provisions of Section 30.a hereof, if Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of Seller by Administrative Agent (subject to reimbursement by Seller), in its sole discretion.

31.       Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement in a Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement.  The parties agree that this Agreement, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the E-SIGN, UETA and any applicable state law.  Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service providers with appropriate document access tracking, electronic signature tracking and document retention as may be approved by the Administrative Agent in its sole discretion.

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32.       Confidentiality

a.    This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Administrative Agent, Buyers and Agent or Seller and Guarantor, as applicable and shall be held by each party hereto, as applicable in strict confidence and shall not be disclosed to any third party without the written consent of Administrative Agent, Seller or Guarantor, as applicable, except for (i) disclosure to the disclosing party’s direct and indirect Affiliates and Subsidiaries, attorneys, accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, (ii)  disclosure required by law, rule, regulation or order of a court or other regulatory body (“Governmental Order”) or rating agency in connection with any securities issued by Buyer or an Affiliate of a Buyer, (iii) disclosure as Administrative Agent and Buyers deem appropriate in connection with the enforcement of Administrative Agent’s or Buyers’ rights hereunder or under any Transaction or in connection with working with Administrative Agent’s and Buyer’s affiliates, Subsidiaries and representatives in connection with the management and/or review of the Transactions, (iv) disclosure of any confidential terms that are in the public domain other than due to a breach of this covenant, and (v) disclosure made to an assignee, participant, repledgee or any of their direct and indirect affiliates and Subsidiaries, representatives, attorneys or accountants, but only to the extent such disclosure is necessary in connection with the transactions or performing rights or obligations hereunder. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreement, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Seller may not disclose the name of or identifying information with respect to Administrative Agent and Buyers or Agent or any pricing terms (including, without limitation, the Commitment Fee, Aggregate Purchase Price-Base, Aggregate Purchase Price-Incremental 1, Aggregate Purchase Price-Incremental 2, Asset Value, Asset Value-Base, Asset Value-Incremental 1, Asset Value-Incremental 2, Maximum Aggregate Purchase Price-Incremental 1, Maximum Aggregate Purchase Price-Incremental 2, Maximum Purchase Price-Incremental 1, Maximum Purchase Price Percentage-Incremental 2, Maximum Purchase Price Percentage-Incremental 1, Maximum Purchase Price Percentage-Incremental 2, Maximum Value Amount, Minimum Purchase Price-Incremental 2, Minimum Purchase Price Percentage-Incremental 2, Price Differential, Price Differential-Base, Price Differential-Incremental 1, Price Differential-Incremental 2, Pricing Rate, Pricing Rate-Base, Pricing Rate-Incremental 1, Purchase Price-Incremental 2, Purchase Price, Purchase Price-Base, Purchase Price -Incremental 1, Purchase Price-Incremental 2, Purchase Price Percentage, Purchase Price Percentage-Base, Purchase Price Percentage-Incremental 1, Purchase Price Percentage-Incremental 2 and any other fees specified in the Pricing Side Letter) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the Administrative Agent.

b.   Notwithstanding anything in this Agreement to the contrary, Seller shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Purchased Mortgage Loans and/or any applicable terms of this Agreement (the “Confidential Information”).  Seller understands that the Confidential Information may contain “nonpublic personal information”, as

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that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the “Act”), and Seller agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the Act and other applicable federal and state privacy laws.  Seller shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the Act) of  Administrative Agent and Buyers or any Affiliate of Administrative Agent or Buyers which Seller holds (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Seller represents and warrants that it has implemented appropriate measures to meet the objectives of Section 501(b) of the Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect.  Upon request, Seller will provide evidence reasonably satisfactory to allow Administrative Agent and/or Buyers to confirm that the providing party has satisfied its obligations as required under this Section.  Without limitation, this may include Administrative Agent’s or Buyers’ review of audits, summaries of test results, and other equivalent evaluations of Seller.  Seller shall notify the Administrative Agent immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Administrative Agent, Buyers or any Affiliate of Buyers provided directly to Seller by Administrative Agent, Buyers or such Affiliate.  Seller shall provide such notice to Administrative Agent by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.

33.       Recording of Communications

Administrative Agent, Buyers, Seller and Guarantor shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions.  Administrative Agent, Buyers, Seller and Guarantor consent to the admissibility of such tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticated transcript of such a tape recording shall be deemed to be a writing conclusively evidencing the parties’ agreement.

34.       Commitment Fee

No later than the date hereof, Seller shall pay to Administrative Agent for the benefit of the Committed Buyers in immediately available funds a non-refundable Commitment Fee. The Commitment Fee shall be paid in quarterly equal installments which shall be paid on the date hereof and on the Price Differential Payment Date every third (3^rd) month hereafter.  All payments of the Commitment Fee shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Administrative Agent for the benefit of Committed Buyers at such account designated by Administrative Agent.

35.       Periodic Due Diligence Review

Seller acknowledges that Administrative Agent and Buyers have the right to perform continuing due diligence reviews with respect to Seller and the Mortgage Loans, for purposes of verifying compliance with the representations, warranties and specifications made

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hereunder, or otherwise, and Seller agrees that upon reasonable (but no less than one (1) Business Day’s) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to Seller, Administrative Agent, Buyers or their authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession or under the control of Seller and/or Custodian.  Seller also shall make available to Administrative Agent and Buyers a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans.  Without limiting the generality of the foregoing, Seller acknowledges that Administrative Agent and Buyers may purchase Mortgage Loans from Seller based solely upon the information provided by Seller to Administrative Agent and Buyers in the Mortgage Loan Schedule and the representations, warranties and covenants contained herein, and that Administrative Agent or Buyers, at their option, have the right at any time to conduct a partial or complete due diligence review on some or all of the Mortgage Loans purchased in a Transaction, including, without limitation, ordering BPOs, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan. Administrative Agent or Buyers may underwrite such Mortgage Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting.  Seller agrees to cooperate with Administrative Agent, Buyers and any third party underwriter in connection with such underwriting, including, but not limited to, providing Administrative Agent, Buyers and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of Seller.  Seller further agrees that Seller shall pay all out-of-pocket costs and expenses incurred by Administrative Agent and Buyers in connection with Administrative Agent’s and Buyers’ activities pursuant to this Section 35 (“Due Diligence Costs”); provided, that such Due Diligence Costs shall not exceed the Due Diligence Cap per calendar year unless a Default or Event of Default shall have occurred, in which event Administrative Agent and Buyers shall have the right to perform due diligence, at the sole expense of Seller without regard to the dollar limitation set forth herein.

36.       Authorizations  

Any of the persons whose signatures and titles appear on Schedule 2 are authorized, acting singly, to act for Seller or Administrative Agent to the extent set forth therein, as the case may be, under this Agreement.  The Seller may amend Schedule 2 from time to time by delivering a revised Schedule 2 to Administrative Agent and expressly stating that such revised Schedule 2 shall replace the existing Schedule 2.

37.       Acknowledgment of Assignment and Administration of Repurchase Agreement

Pursuant to Section 22 (Non assignability) of this Agreement, Administrative Agent may sell, transfer and convey or allocate certain Purchased Mortgage Loans, Purchased Assets and the related Repurchase Assets and related Transactions to certain affiliates of Administrative Agent and/or one or more CP Conduits (the “Additional Buyers”).  Seller and Guarantor each hereby acknowledges and agrees to the joinder of such Additional Buyers.  The Administrative Agent shall administer the provisions of this Agreement.  For the avoidance of

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doubt, all payments, notices, communications and agreements pursuant to this Agreement shall be delivered to, and entered into by, the Administrative Agent for the benefit of the Buyers and/or the Repledgees, as applicable.  Furthermore, to the extent that the Administrative Agent exercises remedies pursuant to this Agreement, any of the Administrative Agent and/or any Buyer will have the right to bid on and/or purchase any of the Repurchase Assets pursuant to Section 16 (Remedies Upon Default).  The benefit of all representations, rights, remedies and covenants set forth in the Agreement shall inure to the benefit of the Administrative Agent on behalf of each Buyer and Repledgees, as applicable.  All provisions of the Agreement shall survive the transfers contemplated herein (including any Repledge Transactions).  Notwithstanding that multiple Buyers may purchase individual Mortgage Loans subject to Transactions entered into under this Agreement, all Transactions shall continue to be deemed a single Transaction and all of the Repurchase Assets shall be security for all of the Obligations hereunder.

38.       Acknowledgement of Anti-Predatory Lending Policies

Administrative Agent has in place internal policies and procedures that expressly prohibit its purchase of any High Cost Mortgage Loan.

39.       Documents Mutually Drafted

The Seller, the Guarantor, the Administrative Agent and the Buyers agree that this Agreement and each other Program Agreement prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.

40.       General Interpretive Principles

For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

a.    the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;

b.   accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles;

c.    references herein to “Articles”, “Sections”, “Subsections”, “Paragraphs”, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

d.   a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;

e.    the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision;

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f.    the term “include” or “including” shall mean without limitation by reason of enumeration;

g.   all times specified herein or in any other Program Agreement  (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and

h.   all references herein or in any Program Agreement to "good faith" means good faith as defined in Section 1-201(b)(20) of the UCC as in effect in the State of New York.

41.       Conflicts

In the event of any conflict between the terms of this Agreement and any other Program Agreement, the documents shall control in the following order of priority:  first, the terms of the Pricing Side Letter shall prevail, then the terms of this Agreement shall prevail, and then the terms of the other Program Agreements shall prevail.

42.Pool Subdivisions

The Administrative Agent may from time to time deliver to Seller a Pool Subdivision Notice which notice shall identify a Pool of Purchased Mortgage Loans that shall be treated separately from the remaining Purchased Mortgage Loans (which remaining Purchased Mortgage Loans shall constitute another Pool).  The Administrative Agent may modify any such Pool Subdivision Notice from time to time to readjust the composition of the Pools identified therein.  Following delivery of a Pool Subdivision Notice, the calculations with respect to Price Differential (and all of the component calculations used in determining such calculation) shall be calculated separately on the basis of the Purchased Mortgage Loans comprising each Pool, which shall result in a separate Price Differential for each Pool.  For the avoidance of doubt, a Pool Subdivision Notice shall not (a) modify or otherwise affect the rights and obligations of the parties under the Program Agreements except as expressly contemplated in this Section 42; and (b) shall not be construed as a Severance Notice as contemplated by Section 19 of this Agreement.

43.       Bankruptcy Non-Petition

The parties hereby agree that they shall not institute against, or join any other person in instituting against, any Buyer that is a CP Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing commercial paper note issued by the applicable CP Conduit is paid in full.

44.       Limited Recourse

The obligations of each Buyer under this Agreement or any other Program Agreement are solely the corporate obligations of such Buyer. No recourse shall be had for the payment of any amount owing by any Buyer under this Agreement, or for the payment by any Buyer of any fee in respect hereof or any other obligation or claim of or against such Buyer arising out of or based on this Agreement, against any stockholder, partner, member, employee, officer, director or

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incorporator or other authorized person of such Buyer. In addition, notwithstanding any other provision of this Agreement, the Parties agree that all payment obligations of any Buyer that is a CP Conduit under this Agreement shall be limited recourse obligations of such Buyer, payable solely from the funds of such Buyer available for such purpose in accordance with its commercial paper program documents. Each party waives payment of any amount which such Buyer does not pay pursuant to the operation of the preceding sentence until the day which is at least one year and one day after the payment in full of the latest maturing commercial paper note (and waives any "claim" against such Buyer within the meaning of Section 101(5) of the Bankruptcy Code or any other Debtor Relief Law for any such insufficiency until such date).

45.       Amendment and Restatement

Administrative Agent, Seller and Guarantor previously entered into the Existing Master Repurchase Agreement.  Administrative Agent, Seller and Guarantor desire to enter into this Agreement in order to amend and restate the Existing Master Repurchase Agreement in its entirety.  The amendment and restatement of the Existing Master Repurchase Agreement shall become effective on the date hereof, and each of Administrative Agent, Seller and Guarantor shall hereafter be bound by the terms and conditions of this Agreement and the other Program Agreements.  This Agreement amends and restates the terms and conditions of the Existing Master Repurchase Agreement, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Existing Master Repurchase Agreement.  Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Existing Master Repurchase Agreement are hereby ratified and affirmed by the parties hereto and remain in full force and effect.   For the avoidance of doubt, it is the intent of the Administrative Agent, Seller and Guarantor that the security interests and liens granted in the Purchased Mortgage Loans pursuant to Section 8 of the Existing Master Repurchase Agreement shall continue in full force and effect.  All references to the Existing Master Repurchase Agreement in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof.

46.       Reaffirmation of Guaranty.

Guarantor hereby (i) agrees that the liability of Guarantor or rights of Administrative Agent under the Guaranty shall not be affected as a result of amending and restating this Agreement, (ii) ratifies and affirms all of the terms, covenants, conditions and obligations of the Guaranty and (iii) acknowledges and agrees that such Guaranty is and shall continue to be in full force and effect.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.

CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, as Administrative Agent
By:	/s/ Margaret Dellafera
	Name: Margaret Dellafera
	Title: Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH, as a Committed Buyer and as a Buyer
By:	/s/ Margaret Dellafera
	Name: Margaret Dellafera
	Title: Vice President
By:	/s/ Elie Chau
	Name: Elie Chau
	Title: Vice President
ALPINE SECURITIZATION LTD, as a Buyer, by
Credit Suisse AG, New York Branch as Attorney-in-Fact
By:	/s/ Elie Chau
	Name: Elie Chau
	Title: Vice President
By:	/s/ Patrick Duggan
	Name: Patrick Duggan
	Title: Vice President

Signature Page to Fourth Amended and Restated Master Repurchase Agreement

PENNYMAC LOAN SERVICES, LLC, as Seller
By:	/s/ Pamela Marsh
	Name: Pamela Marsh
	Title: Senior Managing Director and Treasurer
PRIVATE NATIONAL MORTGAGE
ACCEPTANCE COMPANY, LLC, as Guarantor
By:	/s/ Pamela Marsh
	Name: Pamela Marsh
	Title: Senior Managing Director and Treasurer

Signature Page to Fourth Amended and Restated Master Repurchase Agreement

SCHEDULE 1-A

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASED MORTGAGE LOANS

Seller makes the following representations and warranties to Administrative Agent with respect to each Purchased Mortgage Loan that is at all times subject to a Transaction hereunder and at all times while the Program Agreements and any Transaction hereunder is in full force and effect.  With respect to those representations and warranties which are made to the best of a Seller’s knowledge, if it is discovered by such Seller or Administrative Agent that the substance of such representation and warranty is inaccurate, notwithstanding such Seller’s lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty for purposes of determining Asset Value.

(a)        Payments Current.  Except with respect to a Mortgage Loan that is a GNMA EBO, all payments required to be made up to the Purchase Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited.  Except with respect to a Mortgage Loan that is a GNMA EBO, no payment required under the Mortgage Loan is delinquent nor has any payment under the Mortgage Loan been delinquent at any time since the origination of the Mortgage Loan and, if the Mortgage Loan is a Co-op Loan, no foreclosure action or private or public sale under the Uniform Commercial Code has ever to the knowledge of Seller, been threatened or commenced with respect to the Co-op Loan.  The first Monthly Payment shall be made, or shall have been made, with respect to the Mortgage Loan on its Due Date or within the grace period, all in accordance with the terms of the related Mortgage Note.

(b)        No Outstanding Charges.  All taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable.  Neither Seller nor the Qualified Originator from which Seller acquired the Mortgage Loan has advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is earlier, to the day which precedes by one month the Due Date of the first installment of principal and/or interest thereunder.

(c)        Original Terms Unmodified.  The terms of the Mortgage Note (and the Proprietary Lease, the Assignment of Proprietary Lease and Stock Power with respect to each Co-op Loan) and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination; except (i) by a written instrument which has been duly recorded or transmitted for recording, if necessary to protect the interests of Buyers, and which has been delivered to Custodian and the terms of which are reflected in the Custodial Mortgage Loan Schedule and (ii) with respect to  a Mortgage Loan that is a GNMA EBO.  The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent

Schedule 1-A-1

required, and its terms are reflected on the Custodial Mortgage Loan Schedule.  No Mortgagor in respect of the Mortgage Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Mortgage File delivered to Custodian and the terms of which are reflected in the Custodial Mortgage Loan Schedule.  

(d)        No Defenses.  The Mortgage Loan (and the Assignment of Proprietary Lease related to each Co-op Loan) is not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any state or Federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated.  Seller has no knowledge nor has it received any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.

(e)        Hazard Insurance.  The Mortgaged Property is insured by a fire and extended perils insurance policy, issued by a Qualified Insurer, and such other hazards as are customary in the area where the Mortgaged Property is located, and to the extent required by Seller as of the date of origination consistent with the Underwriting Guidelines, against earthquake and other risks insured against by Persons operating like properties in the locality of the Mortgaged Property, in an amount not less than the greatest of (i) 100% of the replacement cost of all improvements to the Mortgaged Property, (ii) the outstanding principal balance of the Mortgage Loan, (iii) the amount necessary to avoid the operation of any co-insurance provisions with respect to the Mortgaged Property, or (iv) with respect to a GNMA EBO, the BPO Value, and consistent with the amount that would have been required as of the date of origination in accordance with the Underwriting Guidelines.  If any portion of the Mortgaged Property is in an area identified by any federal Governmental Authority as having special flood hazards, and flood insurance is available, a flood insurance policy meeting the current guidelines of the Federal Emergency Management Agency is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (1) the outstanding principal balance of the Mortgage Loan (2) the full insurable value of the Mortgaged Property, and (3) the maximum amount of insurance available under the National Flood Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973.  All such insurance policies (collectively, the “hazard insurance policy”) contain a standard mortgagee clause naming Seller, its successors and assigns (including, without limitation, subsequent owners of the Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled without 30 days’ prior written notice to the mortgagee.  No such notice has been received by Seller.  All premiums on such insurance policy have been paid.  The related Mortgage obligates the Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the mortgagee to maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor.  Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a “master” or “blanket” hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development.  The hazard insurance policy is the valid and binding obligation of the insurer and is in full force and effect.  Seller has not engaged in, and has no knowledge of the

Schedule 1-A-2

Mortgagor’s having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.

(f)         Compliance with Applicable Laws.  Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations, and Seller shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Administrative Agent, and shall deliver to Administrative Agent, upon demand, evidence of compliance with all such requirements.

(g)        No Satisfaction of Mortgage.  The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would affect any such release, cancellation, subordination or rescission (except with respect to subordination of a second lien HELOC to the first priority lien or security interest).  Except with respect to a Mortgage Loan that is a GNMA EBO, Seller has not waived the performance by the Mortgagor of any action, if the Mortgagor’s failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.

(h)        Location and Type of Mortgaged Property.  The Mortgaged Property is located in an Acceptable State as identified in the Custodial Mortgage Loan Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a low-rise Co-op Project, or such other dwelling(s) conforming with the applicable Fannie Mae and Freddie Mac requirements; provided that no residence or dwelling is a mobile home. No portion of the Mortgaged Property is used for commercial purposes; provided, that, the Mortgaged Property may be a mixed use property if such Mortgaged Property conforms to underwriting guidelines acceptable to Administrative Agent in its sole discretion.

(i)         Valid First Lien.  The Mortgage is a valid, subsisting, enforceable and, with respect to Mortgage Loans other than Second Lien Mortgage Loans, perfected first priority lien and first priority security interest or, with respect to Second Lien Mortgage Loans, a second lien or a second priority security interest, in each case, on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property.  The appraisal of the Mortgaged Property does not list any material repair or maintenance items.  The lien of the Mortgage is subject only to:

a.    the lien of current real property taxes and assessments not yet due and payable;

Schedule 1-A-3

b.    covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in lender’s title insurance policy delivered to the originator of the Mortgage Loan and (a) referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal;

c.    other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property; and

d.    with respect to Second Lien Mortgage Loans, a first lien.

Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable (a) with respect to Mortgage Loans other than Second Lien Mortgage Loans, first lien and first priority security interest and (b) with respect to Second Lien Mortgage Loans, second lien and second priority interest, in each case, on the property described therein and Seller has full right to pledge and assign the same to Administrative Agent.  The Mortgaged Property was not, as of the date of origination of the Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or other security instrument creating a lien subordinate to the lien of the Mortgage.

(j)         Validity of Mortgage Documents.  The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms.  All parties to the Mortgage Note, the Mortgage and any other such related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any other such related agreement have been duly and properly executed by such related parties.  No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Mortgage Loan has taken place on the part of any Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan.  Seller has reviewed all of the documents constituting the Mortgage File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.  To the best of Seller’s knowledge, except as disclosed to Administrative Agent in writing, all tax identifications and property descriptions are legally sufficient; and tax segregation, where required, has been completed.  Such Purchased Mortgage Loan is a “closed” loan, is fully funded by Seller (except with respect to a HELOC), and held in Seller’s name.

(k)        Full Disbursement of Proceeds.  Except with respect to (i) a HELOC, (ii) a FHA 203(k) Loan, or (iii) an eligible, single-close, renovation or construction-to-permanent Agency Mortgage Loan, there is no further requirement for future advances under the Mortgage Loan, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with.  All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were

Schedule 1-A-4

paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage.

(l)         Ownership.  Seller has full right to sell the Mortgage Loan to Buyers free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell each Mortgage Loan pursuant to this Agreement and following the sale of each Mortgage Loan, Buyers will own such Mortgage Loan (and with respect to any Co-op Loan, the sole owner of the related Assignment of Proprietary Lease) free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.

(m)       Doing Business.  All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (D) not doing business in such state.

(n)        Title Insurance.  The Mortgage Loan is covered by either (i) an attorney’s opinion of title and abstract of title, the form and substance of which is acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located or (ii) except with respect to HELOCs covered by a Master Secondary Loan Policy acquired from Old Republic Home Protection and/or an errors and omissions policy approved by the Buyers in their sole discretion, an ALTA lender’s title insurance policy or other generally acceptable form of policy or insurance acceptable to Administrative Agent with respect to Non-Agency QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans, and each such title insurance policy is issued by a title insurer acceptable to Administrative Agent with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans, and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage, other than Second Lien Mortgage Loans, and with respect to Second Lien Mortgage Loans as to the second priority lien of the related Mortgage, as applicable, in the original principal amount of the Mortgage Loan, with respect to a Mortgage Loan, or, with respect to a HELOC, the original Credit Limit, (or to the extent a Mortgage Note provides for negative amortization, the maximum amount of negative amortization in accordance with the Mortgage), subject only to the exceptions contained in clauses (a), (b) and (c) of paragraph (i) of this Schedule 1 with respect to Non-Agency QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans. Seller, its successors and assigns, are the sole insureds of such lender’s title insurance policy, and such lender’s title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender’s title insurance

Schedule 1-A-5

policy, and no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance or other acceptable policy, including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.

(o)        No Defaults.  Except with respect to a Mortgage Loan that is a GNMA EBO, there is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event has occurred which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration; and with respect to each Co-op Loan, there is no default in complying with the terms of the Mortgage Note, the Assignment of Proprietary Lease and the Proprietary Lease and all maintenance charges and assessments (including assessments payable in the future installments, which previously became due and owing) have been paid, and Seller has the right under the terms of the Mortgage Note, Assignment of Proprietary Lease and Recognition Agreement to pay any maintenance charges or assessments owed by the Mortgagor.

(p)        No Mechanics’ Liens.  There are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.

(q)        Location of Improvements; No Encroachments.  All improvements which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property.  No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building law, ordinance or regulation.

(r)         Origination; Payment Terms.  The Mortgage Loan was originated by or in conjunction with a mortgagee approved by the Secretary of HUD pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority.  Except with respect to HELOCs, principal and/or interest payments on the Mortgage Loan commenced no more than sixty (60) days after funds were disbursed in connection with the Mortgage Loan.  With respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans, the Mortgagor contributed from their own funds to the purchase price for the Mortgaged Property, as required by the applicable Agency. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest 0.125%), subject to the Mortgage Interest Rate Cap. Except with respect to HELOCs, the Mortgage Note is payable on the first day of each month in equal monthly installments of principal and/or interest (subject to an “interest-only” period in the case of Interest Only Loans), which installments of interest (a) with respect to adjustable rate Mortgage Loans are subject to change on the Interest Rate Adjustment Date due to adjustments to the

Schedule 1-A-6

Mortgage Interest Rate on each Interest Rate Adjustment Date and (b) with respect to Interest Only Loans are subject to change on the Interest Only Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Only Adjustment Date, in both cases, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization.  The Due Date of the first payment under the Mortgage Note is no more than sixty (60) days from the date of the Mortgage Note.  

(s)        Customary Provisions.  The Mortgage Note has a stated maturity.  The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure.  Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or other right available to the Mortgagor or any other person, or restriction on Seller or any other person, including without limitation, any federal, state or local, law, ordinance, decree, regulation, guidance, attorney general action, or other pronouncement, whether temporary or permanent in nature, that would interfere with, restrict or delay, either (y) the ability of Seller, Administrative Agent, a Buyer or any servicer or any successor servicer to sell the related Mortgaged Property at a trustee’s sale or otherwise, or (z) the ability of Seller, Administrative Agent, a Buyer or any servicer or any successor servicer to foreclose on the related Mortgage. Except with respect to HELOCs, the Mortgage Note and Mortgage are on forms acceptable to Freddie Mac or Fannie Mae.  If the Mortgage Loan is an eMortgage Loan, the related eNote contains the Agency-Required eNote Legend.

(t)         Occupancy of the Mortgaged Property.  As of the Purchase Date the Mortgaged Property is lawfully occupied under applicable law.  All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities.  Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be.  Seller has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license or certificate.  With respect to any Mortgage Loan originated with an “owner-occupied” Mortgaged Property, the Mortgagor represented at the time of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primary residence.

(u)        No Additional Collateral.  The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (i) above.

(v)        Deeds of Trust.  In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or

Schedule 1-A-7

will become payable by Custodian or Administrative Agent to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.

(w)       Transfer of Mortgage Loans.  Except with respect to Mortgage Loans intended for purchase by GNMA and for Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.

(x)        Due-On-Sale.  Except with respect to Mortgage Loans originated pursuant to FHA Guidelines and as may otherwise be prohibited by applicable law, the Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.

(y)        No Buydown Provisions; No Graduated Payments or Contingent Interests.  Except with respect to Agency Mortgage Loans, the Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a “buydown” provision.  The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.

(z)        Consolidation of Future Advances.  Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term.  The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority with respect to Mortgage Loans other than Second Lien Mortgage Loans, or second lien priority with respect to Second Lien Mortgage Loans, in each case, by a title insurance policy, an endorsement to the policy insuring the mortgagee’s consolidated interest or by other title evidence acceptable to Administrative Agent with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and acceptable to Fannie Mae and Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans.  The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan.

(aa)      Mortgaged Property Undamaged; No Condemnation Proceeding.  There have not been any condemnation proceedings with respect to the Mortgaged Property and Seller has no knowledge of any such proceedings. The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty or if damaged, such physical damage (i) is not adequately insured against or (ii) would materially and adversely affect the value of the Mortgaged Property as security for the Purchased Mortgage Loan or the use for which the premises were intended, or the eligibility of any Purchased Mortgage Loan for FHA Mortgage Insurance, the VA Loan Guaranty, or primary mortgage insurance, as applicable, except where the existence of such physical damage would not be the contractual or legal responsibility of, or result in any liability to, Buyer and would not adversely affect the rights of Buyer with respect to the ownership and administration of the Purchased Assets or the value of the related Mortgage Servicing Rights.

Schedule 1-A-8

(bb)      Origination; Collection Practices; Escrow Deposits; Interest Rate Adjustments.  Each Mortgage Loan was originated by Seller or a Correspondent Seller.  The origination and collection practices used by Seller or Correspondent Seller as originator, each servicer of the Mortgage Loan and Seller with respect to the Mortgage Loan have been in all respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper.  With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made.  All Escrow Payments have been collected in full compliance with state and federal law.  An escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable.  No escrow deposits or Escrow Payments or other charges or payments due Seller or a Correspondent Seller have been capitalized under the Mortgage or the Mortgage Note.  All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note.  Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.

(cc)      Servicemembers Civil Relief Act.  The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.

(dd)      Appraisal; Valuation.  With respect to each Agency Mortgage Loan, the Mortgage File contains either (i) to the extent permitted by the applicable Agency, a Property Inspection Waiver (as defined in the applicable Agency guidelines) or any other valuation method permitted by the Agency and acceptable to the Buyers in their sole discretion, or (ii) an appraisal of the related Mortgaged Property signed prior to the funding of the Mortgage Loan by a qualified appraiser, duly appointed by Seller, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of Fannie Mae or Freddie Mac and Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated thereunder (“FIRREA”), all as in effect on the date the Mortgage Loan was originated.  With respect to each Mortgage Loan that is not an Agency Mortgage Loan, the Mortgage File contains a property valuation acceptable to the Administrative Agent and Buyers in their sole discretion.

(ee)      Disclosure Materials.  The Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans, and Seller maintains such statement in the Mortgage File.

(ff)       Construction or Rehabilitation of Mortgaged Property.  No Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property, expect with respect to (i) a HELOC, where a Mortgagor may use a Draw for rehabilitation of the Mortgaged Property, (ii) a FHA 203(k) Loan, or (iii) an eligible, single-close, renovation or construction-to-permanent Agency Mortgage Loan.

Schedule 1-A-9

(gg)      Capitalization of Interest.  The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.

(hh)      No Equity Participation.  No document relating to the Mortgage Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property.  The indebtedness evidenced by the Mortgage Note is not convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does it own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.

(ii)        Proceeds of Mortgage Loan.  Except with respect to a HELOC, the proceeds of the Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or any Affiliate or correspondent of Seller, except in connection with a refinanced Mortgage Loan.

(jj)        Origination Date. The Purchase Date for a Mortgage Loan other than a Correspondent Loan, Scratch and Dent Mortgage Loan or a GNMA EBO is no more than thirty (30) days following the origination date and the Purchase Date for a Correspondent Loan is no more than one hundred eighty (180) days following the origination date.

(kk)      Mortgage Submitted for Recordation.  The Mortgage either has been or will promptly be submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(ll)        Other Encumbrances.  To the best of Seller’s knowledge, any property subject to any security interest given in connection with such Purchased Mortgage Loan is not subject to any other encumbrances other than a stated first mortgage or, with respect to Second Lien Mortgage Loans, a stated second mortgage, if applicable and encumbrances which may be allowed under the Underwriting Guidelines.

(mm)    Description.  Each Purchased Mortgage Loan conforms to the description thereof as set forth on the related Custodial Mortgage Loan Schedule delivered to Custodian and Administrative Agent.

(nn)      Located in U.S.  No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to a Purchased Mortgage Loan is located in any jurisdiction other than in one of the fifty (50) states of the United States of America or the District of Columbia.

(oo)      Underwriting Guidelines.  Each Purchased Mortgage Loan has been originated in accordance with the Underwriting Guidelines (including all supplements or amendments thereto) previously provided to Administrative Agent.

(pp)      Committed Mortgage Loans.  Each Committed Mortgage Loan is covered by a Take-out Commitment, does not exceed the availability under such Take-out Commitment (taking into consideration mortgage loans which have been purchased by the respective Take-out Investor under the Take-out Commitment and mortgage loan which Seller has identified to Administrative Agent as covered by such Take-out Commitment) and conforms to the

Schedule 1-A-10

requirements and the specifications set forth in such Take-out Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Take-out Investor and is eligible for sale to and insurance or guaranty by, respectively the applicable Take-out Investor and applicable insurer.  Each Take-out Commitment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(qq)      Primary Mortgage Guaranty Insurance.  Each Mortgage Loan is insured as to payment defaults by a policy of primary mortgage guaranty insurance in the amount required where applicable, and by an insurer approved, by the applicable Take-out Investor, if applicable, and all provisions of such primary mortgage guaranty insurance have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid.  Each Mortgage Loan which is represented to Administrative Agent to have, or to be eligible for, FHA insurance is insured, or eligible to be insured, pursuant to the National Housing Act.  Each Mortgage Loan which is represented by Seller to be guaranteed, or to be eligible for guaranty, by the VA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code.  As to each FHA insurance certificate or each VA guaranty certificate, Seller has complied with applicable provisions of the insurance for guaranty contract and federal statutes and regulations, all premiums or other charges due in connection with such insurance or guarantee have been paid, there has been no act or omission which would or may invalidate any such insurance or guaranty, and the insurance or guaranty is, or when issued, will be, in full force and effect with respect to each Mortgage Loan.  There are no defenses, counterclaims, or rights of setoff affecting the Mortgage Loans or affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA guaranty with respect to the Mortgage Loans.

(rr)       Predatory Lending Regulations; High Cost Loans.  None of the Mortgage Loans are classified as High Cost Mortgage Loans.

(ss)       Wet-Ink Mortgage Loans.  With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan, the Settlement Agent has been instructed in writing by Seller to hold the related Mortgage Loan Documents as agent and bailee for Administrative Agent or Administrative Agent agent and to promptly forward such Mortgage Loan Documents in accordance with the provisions of the Custodial Agreement and the Escrow Instruction Letter.

(tt)        FHA Mortgage Insurance; VA Loan Guaranty.  With respect to the FHA Loans, the FHA Mortgage Insurance Contract is in full force and effect and there exists no impairment to full recovery without indemnity to the HUD or the FHA under FHA Mortgage Insurance.  With respect to the VA Loans, the VA Loan Guaranty Agreement is in full force and effect to the maximum extent stated therein.  All necessary steps have been taken to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the FHA and the VA, respectively, to the full extent thereof, without surcharge, set-off or defense.  Each FHA Loan and VA Loan was originated in accordance with the criteria of an Agency for purchase of such Mortgage Loans.

Schedule 1-A-11

(uu)      Negative Amortization.  None of the Mortgage Notes relating to any of the Mortgage Loans provides for negative amortization.

(vv)      Non-Agency QM Mortgage Loans. Except with respect to a Non-Agency QM Mortgage Loan and Non-Agency Non-QM Mortgage Loan, none of the Mortgage Loans are an “A” quality first lien Mortgage Loan that is not eligible for sale to an Agency.

(ww)    Co-op Loan: Valid First Lien.  With respect to each Co-op Loan, the related Mortgage is a valid, enforceable and subsisting first security interest on the related cooperative shares securing the related cooperative note and lease, subject only to (a) liens of the cooperative for unpaid assessments representing the Mortgagor’s pro rata share of the cooperative’s payments for its blanket mortgage, current and future real property taxes, insurance premiums, maintenance fees and other assessments to which like collateral is commonly subject and (b) other matters to which like collateral is commonly subject which do not materially interfere with the benefits of the security intended to be provided by the security interest.  There are no liens against or security interests in the cooperative shares relating to each Co-op Loan (except for unpaid maintenance, assessments and other amounts owed to the related cooperative which individually or in the aggregate will not have a material adverse effect on such Co-op Loan), which have priority equal to or over Seller’s security interest in such Co-op Shares.

(xx)      Co-op Loan: Compliance with Law.  With respect to each Co-op Loan, the related cooperative corporation that owns title to the related cooperative apartment building is a “cooperative housing corporation” within the meaning of Section 216 of the Internal Revenue Code, and is in material compliance with applicable federal, state and local laws which, if not complied with, could have a material adverse effect on the Mortgaged Property.

(yy)      Co-op Loan: No Pledge.  With respect to each Co-op Loan, there is no prohibition against pledging the shares of the cooperative corporation or assigning the Proprietary Lease. With respect to each Co-op Loan, (i) the term of the related Proprietary Lease is longer than the term of the Co-op Loan, (ii) there is no provision in any Proprietary Lease which requires the Mortgagor to offer for sale the Co-op Shares owned by such Mortgagor first to the Co-op Corporation, (iii) there is no prohibition in any Proprietary Lease against pledging the Co-op Shares or assigning the Proprietary Lease and (iv) the Recognition Agreement is on a form of agreement published by Aztech Document Systems, Inc. as of the date hereof or includes provisions which are no less favorable to the lender than those contained in such agreement.

(zz)      Co-op Loan: Acceleration of Payment.  With respect to each Co-op Loan, each Assignment of Proprietary Lease contains enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization of the material benefits of the security provided thereby.  The Assignment of Proprietary Lease contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Note in the event the Co-op Unit is transferred or sold without the consent of the holder thereof.

(aaa)     Qualified Mortgage.  Notwithstanding anything to the contrary set forth in this Agreement, on and after January 10, 2014 (or such later date as set forth in the relevant regulations), (i) prior to the origination of each Mortgage Loan, the originator made a reasonable and good faith determination that the Mortgagor had a reasonable ability to repay the loan

Schedule 1-A-12

according to its terms, in accordance with, at a minimum, the eight (8) underwriting factors set forth in 12 CFR 1026.43(c) and (ii) each Mortgage Loan, other than a Non-Agency Non-QM Mortgage Loan, Scratch and Dent Mortgage Loan, HELOC, a Non-Agency Non-QM Mortgage Loan, is a “Qualified Mortgage” as defined in 12 CFR 1026.43(e); provided that a modification subsequent to the date listed above shall not be considered an “origination” of a Mortgage Loan or a “covered transaction” as long as no new Mortgage Note is executed and delivered and the interest rate of the related Mortgage Loan is not increased.

(bbb)    Aging.  Such Mortgage Loan has not been subject to a Transaction hereunder for more than the applicable Aging Limit.

(ccc)     TRID Compliance.  With respect to each Mortgage Loan (other than a HELOC) where the Mortgagor’s loan application for the Mortgage Loan was taken on or after October 3, 2015, such Mortgage Loan was originated in compliance with the TILA-RESPA Integrated Disclosure Rule.

(ddd)    Property Value.  With respect to a GNMA EBO, Seller has delivered to Administrative Agent a BPO Value and valuation date given by a licensed real estate agent or broker in conformity with customary and usual business practices, which includes comparable sales and comparable listings and complies with the criteria set forth in FIRREA for an “appraisal” or an “evaluation”, as applicable, and such other information in further compliance with this Agreement.  The person performing any BPO received no benefit from, and such person’s compensation or flow of business from the Seller were not affected by, the acquisition of the Mortgage Loan by the Seller or any other applicable transferee.

(eee)     Terms.  With respect to HELOCs, the related Mortgagor may request advances up to the Credit Limit within the first (1st) ten (10) years following the date of origination, subject to termination or suspension under the terms of the Credit Line Agreement.

(fff)      Revolving Term.  Each HELOC provides for an initial period (the “Revolving Period”) during which the Mortgagor is required to make monthly payments of interest payable in arrears and requires repayment of the unpaid principal balance thereof over a period following the Revolving Period (the “Repayment Period”) which is not in excess of two hundred forty (240) months. As of the Purchase Date no HELOC was in its Repayment Period.  The Mortgage Interest Rate on each Mortgage Loan adjusts periodically in accordance with the Credit Line Agreement.  On each Interest Rate Adjustment Date the related Seller has made interest rate adjustments on the Mortgage Loan which are in compliance with the related Mortgage, Mortgage Note and Credit Line Agreement and applicable law.

(ggg)    Draws In Compliance With Laws.  Each Draw under the HELOC has been disbursed in accordance with all applicable laws, rules and regulations, including, without limitation, all state and local licensing requirements.

(hhh)    Enforcement of Remedies.  Each Credit Line Agreement permits the holder to enforce its full remedies, with respect to, among other things, material events of default by the Mortgagor, and to suspend or terminate the right to make additional Draws or reduce the Credit Limit if the value of the related Mortgaged Property declines significantly, the Mortgagor’s

Schedule 1-A-13

financial circumstances materially change, or certain other events occur as described in the Credit Line Agreement.

(iii)       eNotes.  With respect to each eMortgage Loan, the related eNote satisfies all of the following criteria:

(i)         the eNote bears a digital or electronic signature;

(ii)        the Hash Value of the eNote indicated in the MERS eRegistry matches the Hash Value of the eNote as reflected in the eVault;

(iii)       there is a single Authoritative Copy of the eNote, as applicable and within the meaning of Section 9-105 of the UCC, Section 16 of the UETA or Section 7021 of E-SIGN, as applicable, that is held in the eVault;

(iv)       the Location status of the eNote on the MERS eRegistry reflects the MERS Org ID of the Custodian;

(v)        the Controller status of the eNote on the MERS eRegistry reflects the MERS Org ID of Administrative Agent;

(vi)       the Delegatee status of the eNote on the MERS eRegistry reflects the MERS Org ID of Custodian;

(vii)      the Master Servicer Field status of the eNote on the MERS eRegistry reflects the MERS Org ID of the Seller;

(viii)     the Subservicer Field status of the eNote on the MERS eRegistry is blank;

(ix)       there is no Control Failure, eNote Replacement Failure or Unauthorized Master Servicer or Subservicer Modification with respect to such eNote;

(x)        the eNote is a valid and enforceable Transferable Record or comprises “electronic chattel paper” within the meaning of the UCC;

(xi)       there is no defect with respect to the eNote that would result in Administrative Agent having less than full rights, benefits and defenses of “Control” (within the meaning of the UETA or the UCC, as applicable) of the Transferable Record; and

(xii)      the single Authoritative Copy of the eNote is maintained electronically and has not been papered-out, nor is there another paper representation of such eNote.

(jjj)       eNote Legend.  If the Mortgage Loan is an eMortgage Loan, the related eNote contains the Agency-Required eNote Legend.

Schedule 1-A-14

SCHEDULE 1-B

REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER ADVANCES

The Seller makes the following representations and warranties to the Administrative Agent, with respect to Servicer Advances subject to each Transaction, as of the date of this Agreement, the date of any Transaction, and while the Program Agreements are in full force and effect.  For purposes of this Schedule 1-B and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured if and when the Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Servicer Advances.

(1)        No Liens.  Each Servicer Advances conveyed and pledged on such Purchase Date is owned by the related Seller free and clear of any Lien, except as provided herein, and is not subject to any dispute or other adverse claim, except as provided herein.  The Administrative Agent’s security interest in such Servicer Advances and the Collections with respect thereto, is free and clear of any Lien, except as provided herein.  The Seller has not and will not prior to the time of the pledge of any such interest to the Administrative Agent have sold, pledged, assigned, transferred or subjected and will not thereafter sell, pledge, assign, transfer or subject to a Lien any of such Servicer Advances or the Collections other than in accordance with the terms of this Agreement.

(2)        Collection Policy.  Seller has complied in all material respects with the Collection Policy in regard to each Servicer Advances and related GNMA guidelines.

(3)        Bona Fide Asset.  Each Servicer Advance being sold and/or pledged on a Purchase Date is an obligation arising out of the making of a Servicer Advance by the related Seller or a predecessor servicer, in its capacity as a servicer or subservicer of a portfolio of mortgage loans.  The Seller has no knowledge of any fact that should have led it to expect at the time of the creation of each Servicer Advances that such Servicer Advances would not be paid in full when due.  As of the Purchase Date, the Seller has not received any Collections or other payments in respect of the Servicer Advances.

(4)        Compliance with FHA and VA Requirements.  Each Servicer Advance has been made in accordance with the terms of the related FHA requirements or VA requirements, as applicable.

Schedule 1-B-1

SCHEDULE 2

AUTHORIZED REPRESENTATIVES

SELLER AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller under this Agreement:

Authorized Representatives for execution of Program Agreements and amendments

Name	Title	Authorized Signature
Andrew S. Chang	Senior Managing Director and Chief Financial Officer
Pamela Marsh	Senior Managing Director and Treasurer
Maurice Watkins	Managing Director, Capital Markets

Authorized Representatives for execution of Transaction Requests and day-to-day operational functions

Name	Title	Authorized Signature
Pamela Marsh	Senior Managing Director and Treasurer
Maurice Watkins	Managing Director, Capital Markets
Thomas Rettinger	Managing Director, Portfolio Risk Management
Paul Newman	Executive Vice President, Treasury
Richard Hetzel	Senior Vice President, Treasury
Angela Everest	Authorized Representative
Ryan Huddleston	Authorized Representative
Adeshola Makinde	Authorized Representative

Schedule 2-1

ADMINISTRATIVE AGENT AND BUYER AUTHORIZATIONS

Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Administrative Agent and/or Buyers under this Agreement:

Name	Title	Signature
Margaret Dellafera	Vice President
Elie Chau	Vice President
Robert Durden	Vice President
Ron Tarantino	Vice President
Pete Sack	Vice President
Kwaw De Graft-Johnson	Vice President
Dominic Obaditch	Vice President
Sean Walker	Vice President
Ernest Calabrese	Vice President
Jonathan Braus	Vice President
Charles Trombley	Vice President

Schedule 2-2

SCHEDULE 3

RESPONSIBLE OFFICERS OF SELLER

Name	Title
Andrew S. Chang	Senior Managing Director and Chief Financial Officer
Pamela Marsh	Senior Managing Director and Treasurer
Derek W. Stark	Senior Managing Director and Chief Legal Officer and Secretary

RESPONSIBLE OFFICERS OF GUARANTOR

Name	Title
Andrew S. Chang	Senior Managing Director and Chief Financial Officer
Pamela Marsh	Senior Managing Director and Treasurer
Derek W. Stark	Senior Managing Director and Chief Legal Officer and Secretary

Schedule 3-1

EXHIBIT A

FORM OF TRANSACTION REQUEST

[Date]

Re:       Fourth Amended and Restated Master Repurchase Agreement dated as of September 9, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) by and among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Credit Suisse First Boston Mortgage Capital LLC (“Administrative Agent”), on behalf of Buyers.

PennyMac Loan Services, LLC hereby requests that Administrative Agent enter into a Transaction with respect to the Mortgage Loans listed on the Custodial Mortgage Loan Schedule attached hereto on Attachment 1 and as set forth below, pursuant to the Agreement.

TOTAL NUMBER OF MORTGAGE LOANS	___ Mortgage Loans – (See Custodial Mortgage Loan Schedule)
ORIGINAL PRINCIPAL AMOUNT OF MORTGAGE LOANS:	$
CURRENT PRINCIPAL AMOUNT OF MORTGAGE LOANS:	$
PROPOSED PURCHASE PRICE:	$
PURCHASE PRICE INCREASE:	$
AGGREGATE PURCHASE PRICE:	$
PROPOSED PURCHASE DATE:

The Agreement is incorporated by reference into this Transaction Request and is made a part hereof as if it were fully set forth herein.  (All capitalized terms used herein but not defined herein shall have the meanings specified in the Agreement.)

PennyMac Loan Services, LLC
By:
	Name:
	Title:

Exhibit A-1

[wire instructions]

Exhibit A-2

[Mortgage Loan Schedule]

Exhibit A-3

EXHIBIT B

RESERVED

Exhibit B-1

EXHIBIT C

MORTGAGE LOAN SCHEDULE

MORTGAGE LOAN CHARACTERISTICS

1.	Customer Name
2.	Collateral Number
3.	Primary Borrower Last Name
4.	Primary Borrower First Name
5.	Co-Borrower Last Name *
6.	Co-Borrower First Name *
7.	Property Address
8.	City
9.	State
10.	Zip Code
11.	County
12.	SS Number
13.	SS # Co-borrower *
14.	Product Type/Code
15.	Loan Amount
16.	Original monthly principal and interest
17.	Original interest rate
18.	Original date of Mortgage Note
19.	Closing Date
20.	First Payment Date
21.	Maturity Date
22.	Loan Type (adjustable, fixed, etc)
23.	Purchase Date
24.	Funding Method Code (wire disbursement, etc.)
25.	Closing Agent
26.	Address
27.	City
28.	State
29.	Zip Code
30.	Account Number
31.	ABA Number
32.	Closing Schedule
33.	Instructions
34.	Name of Bank
35.	Address of Bank
36.	City of Bank
37.	State of Bank
38.	Zip of Bank
39.	Other Account Bank *
40.	Further Instructions *

Exhibit C-1

41.	Investor *
42.	Investor Commitment Number *
43.	Price *
44.	Commitment Date *
45.	Commitment Expiration Date *
46.	Property Type
47.	Lien Position
48.	LTV
49.	CLTV
50.	FICO
51.	Amortization Term
52.	Purpose
53.	No. of Units
54.	Original Appraised Value
55.	Name of appraiser
56.	Certificate Number for each loan with primary mortgage insurance*
57.	Margin*
58.	Life floor*
59.	Index type*
60.	Initial rate floor*
61.	Periodic rate cap*
62.	Life cap*
63.	First interest rate adjustment date*
64.	Protective Advances*
65.	Delinquent Advances*

* If applicable.

Exhibit C-2

EXHIBIT D

RESERVED

Exhibit D-1

EXHIBIT E

FORM OF POWER OF ATTORNEY

Re:Fourth Amended and Restated Master Repurchase Agreement, dated as of September 9, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) among PennyMac Loan Services, LLC (the “Seller”), Private National Mortgage Acceptance Company, LLC (the “Guarantor”) and Credit Suisse First Boston Mortgage Capital LLC (the “Administrative Agent”) on behalf of Buyers.

KNOW ALL MEN BY THESE PRESENTS, that Seller hereby irrevocably constitutes and appoints Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Administrative Agent’s discretion:

(a)       in the name of Seller, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Administrative Agent on behalf of certain Buyers and/or Repledgees under the Fourth Amended and Restated Master Repurchase Agreement (as amended, restated, supplemented or otherwise modified from time to time) dated September 9, 2020 (the “Assets”) including, without limitation, all Servicer Advances arising under or related to any Asset and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Administrative Agent for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;

(b)       to pay or discharge taxes and liens levied or placed on or threatened against the Assets;

(c)       (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Administrative Agent or as Administrative Agent shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Seller with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as Administrative Agent may deem appropriate; and (vii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Administrative

Exhibit E-1

Agent were the absolute owner thereof for all purposes, and to do, at Administrative Agent’s option and Seller’s expense, at any time, and from time to time, all acts and things which Administrative Agent deems necessary to protect, preserve or realize upon the Assets and Administrative Agent’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do;

(d)       for the purpose carrying out the transfer of servicing with respect to the Mortgage Loans from Seller to a successor servicer appointed by Administrative Agent in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller hereby gives Administrative Agent the power and right, on behalf of Seller, without assent by Seller, to, in the name of Seller or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters and Section 404 Notices to all mortgagors under the Mortgage Loans, transferring the servicing of the Mortgage Loans to a successor servicer appointed by Administrative Agent in its sole discretion.

(e)       for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.

Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.

Seller also authorizes Administrative Agent, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.

The powers conferred on Administrative Agent hereunder are solely to protect Administrative Agent’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND ADMINISTRATIVE AGENT ON ITS OWN BEHALF AND ON BEHALF OF ADMINISTRATIVE AGENT’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]

Exhibit E-2

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and Seller’s seal to be affixed this _____ day of __________, 202__.

PENNYMAC LOAN SERVICES, LLC
By:
	Name:
	Title:

Exhibit E-3

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA

COUNTY OF ______________

On ______________________, 20__, before me, ____________________________, a Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ________________________________

(Seal)

Exhibit E-4

EXHIBIT F

UNDERWRITING GUIDELINES

On file with Administrative Agent

Exhibit F-1

EXHIBIT G

RESERVED

Exhibit G-1

EXHIBIT H

SELLER’S AND GUARANTOR’S TAX IDENTIFICATION NUMBERS

Entity Name	Tax Identification Number
PennyMac Loan Services, LLC	26-2049351
Private National Mortgage Acceptance Company, LLC	26-1740587

Exhibit H-1

EXHIBIT I

EXISTING INDEBTEDNESS

See attached.

Exhibit J-1

EXHIBIT J

FORM OF ESCROW INSTRUCTION LETTER TO BE PROVIDED BY SELLER BEFORE CLOSING

The escrow instruction letter (the “Escrow Instruction Letter”) shall also include the following instruction to the Settlement Agent (the “Escrow Agent”):

Credit Suisse First Boston Mortgage Capital LLC (the “Administrative Agent”) on behalf of Buyers, has agreed to provide funds (“Escrow Funds”) to PennyMac Loan Services, LLC to finance certain mortgage loans (the “Mortgage Loans”) for which you are acting as Escrow Agent.  

You hereby agree that (a) you shall receive such Escrow Funds from Administrative Agent to be disbursed in connection with this Escrow Instruction Letter, (b) you will hold such Escrow Funds in trust, without deduction, set-off or counterclaim for the sole and exclusive benefit of Administrative Agent until such Escrow Funds are fully disbursed on behalf of Administrative Agent in accordance with the instructions set forth herein, and (c) you will disburse such Escrow Funds on the date specified for closing (the “Closing Date”) only after you have followed the Escrow Instruction Letter’s requirements with respect to the Mortgage Loans.  In the event that the Escrow Funds cannot be disbursed on the Closing Date in accordance with the Escrow Instruction Letter, you agree to promptly remit the Escrow Funds to Administrative Agent by re-routing via wire transfer the Escrow Funds in immediately available funds, without deduction, set-off or counterclaim, back to the account specified in Administrative Agent’s incoming wire transfer.

You further agree that, upon disbursement of the Escrow Funds, you will hold all Mortgage Loan Documents specified in the Escrow Instruction Letter in escrow as agent and bailee for Administrative Agent, and will forward the Mortgage Loan Documents and original Escrow Instruction Letter in connection with such Mortgage Loans by overnight courier (y) to Custodian within seven (7) Business Days following the date of origination.

You agree that all fees, charges and expenses regarding your services to be performed pursuant to the Escrow Instruction Letter are to be paid by Seller or its borrowers, and Administrative Agent shall have no liability with respect thereto.

You represent, warrant and covenant that you are not an affiliate of or otherwise controlled by Seller, and that you are acting as an independent contractor and not as an agent of Seller.

The provisions of this Escrow Instruction Letter may not be modified, amended or altered, except by written instrument, executed by the parties hereto and Administrative Agent.  You understand that Administrative Agent shall act in reliance upon the provisions set forth in this

Exhibit J-1

Escrow Instruction Letter, and that Administrative Agent on behalf of Buyers is an intended third party beneficiary hereof.

Whether or not an Escrow Instruction Letter executed by you is received by Custodian, your acceptance of the Escrow Funds shall be deemed to constitute your acceptance of the Escrow Instruction Letter.

Exhibit J-2

EXHIBIT K

CUSTODIAL AND SECURITIES INTERMEDIARY FEE SCHEDULE

On file with Administrative Agent

Exhibit L-1

EXHIBIT L

FORM OF TRADE ASSIGNMENT

[NAME] (“Takeout Investor”)
[Address]

[Address]

Attention: [__]

[DATE]

Ladies and Gentlemen:

Attached hereto is a correct and complete copy of your confirmation of commitment (the “Commitment”) for the following security (the “Security”):

Trade Date:	[__]
Settlement Date:	[__]
Security Description:	[__]
Coupon:	[__]
Price:	[__]
Par Amount:	[__]
Pool Number:	[__]

The undersigned customer (the “Customer”) has assigned the Security to Credit Suisse First Boston Mortgage Capital LLC (“Credit Suisse”) as security for Customer’s Obligations under the Master Repurchase Agreement, as amended (the “Agreement”), by and between Customer and Credit Suisse.

This is to confirm that (i) Takeout Investor’s obligation to purchase the Security on the above terms in accordance with the Commitment is in full force and effect, (ii) Takeout Investor will accept delivery of the Security directly from Credit Suisse, (iii) Takeout Investor will pay Credit Suisse for the Security, (iv) Customer unconditionally guarantees payment to Credit Suisse of all sums due under the Commitment, (v) Credit Suisse shall deliver the Security to Takeout Investor on the above terms and in accordance with the Commitment.  Payment will be made “delivery versus payment” to Takeout Investor in immediately available funds. Capitalized terms used, but not otherwise defined herein, shall have the respective meanings assigned to such terms in the Agreement.

Very truly yours,	Agreed to, confirmed and accepted:
[CUSTOMER]	[TAKEOUT INVESTOR]
By:	By:
Name:	Name:
Title:	Title:

Exhibit L-1

EX-10.9

Exhibit 10.9

EXECUTION COPY

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT (FREDDIE MAC MSRS) AND AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT AMENDED AND RESTATED PRICING SIDE LETTER

This Joint Amendment No. 4 to Loan and Security Agreement and Amendment No. 3 to Pricing Side Letter (this “Amendment”) is made as of this 21^th day of October, 2020, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the “Lender”), PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC (the “Guarantor”) and PENNYMAC LOAN SERVICES, LLC (the “ Borrower” and the “Servicer”), and amends that certain Loan and Security Agreement, dated as of February 1, 2018, as amended by Amendment No. 1, dated as of January 29, 2020, Amendment No. 2, dated as of April 1, 2020, and Amendment No. 3, dated as of April 24, 2020 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Lender, the Guarantor and the Borrower, and that certain Loan and Security Agreement Amended and Restated Pricing Side Letter, dated as of September 11, 2019, as amended by Amendment No. 1, dated as of April 1, 2020, and Amendment No. 2, dated as of April 24, 2020 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter” and Pricing Side Letter, together with the Loan Agreement, the “Agreements”), by and among the Borrower, the Guarantor and the Lender.

WHEREAS, the Administrative Agent, the Lender, the Guarantor and the Borrower have agreed to amend the Loan Agreement and the Pricing Side Letter 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 to the Loan Agreement. Effective as of the date hereof:

(a)         Section 1.1 of Schedule I of the Loan Agreement is hereby amended by deleting the defined terms “Default Rate” and “Maturity Date” in their entirety and replacing such terms with the following:

“Default Rate” means, with respect to any Loan for any Interest Period, and any late payment of fees or other amounts due hereunder, the Base Rate for the related Interest Period (or for all successive Interest Periods during which such fees or other amounts were delinquent), plus [*****] per annum.

“Maturity Date” means April 23, 2021.

SECTION 2.      Amendment to the Pricing Side Letter. Effective as of the date hereof:

(a)         Section 1 of the Pricing Side Letter is hereby amended by deleting the defined term “Applicable Margin” in its entirety and replacing it with the following:

“Applicable Margin” means with respect to the Note, (i) prior to the occurrence of an Event of Default, [*****] per annum, and (ii) following the occurrence and during the continuance of an Event of Default [*****] per annum.

SECTION 3.      Fees and Expenses. The Borrower agrees to pay to the Lender all fees and out of pocket expenses incurred by the Lender in connection with this Amendment, including all reasonable fees and out of pocket costs and expenses of the legal counsel to the Lender incurred in connection with this Amendment, in accordance with Section 3.03 of the Loan Agreement.

SECTION 4.     Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement or the Pricing Side Letter, as applicable.

SECTION 5.      Limited Effect. Except as amended hereby, each Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Agreements 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 Agreements, any reference in any of such items to the Agreements being sufficient to refer to the Agreements as amended hereby.

SECTION 6.      Representations. In order to induce the Lender and the Administrative Agent to execute and deliver this Amendment, each of the Borrower and the Guarantor hereby represents to the Administrative Agent and the Lender that as of the date hereof, (i) each of the Borrower and the Guarantor is in full compliance with all of the terms and conditions of the Facility Documents and remains bound by the terms thereof, and (ii) no default or event of default has occurred and is continuing under the Facility Documents.

SECTION 7.      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 conflicts of laws (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law which shall be applicable).

SECTION 8.     Counterparts. For the purpose of facilitating the execution of this Amendment, and for other purposes, this Amendment may be executed in any number of counterparts and all of such counterparts shall be an original, but all of which shall together constitute one and the same instrument.  The parties agree that this Amendment, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention, including but not limited to DocuSign.

SECTION 9.      Miscellaneous.

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

2

(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 Agreements or any provision hereof or thereof.

[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

3

IN WITNESS WHEREOF, the Lender, the Administrative Agent, the Guarantor and the Borrower 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.

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,as Administrative Agent
By:	/s/ Dominic Obaditch
	Name:   Dominic Obaditch
	Title:     Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,as Lender
By:	/s/ Dominic Obaditch
	Name:    Dominic Obaditch
	Title:      Authorized Signatory
By:	/s/ Margaret Dellafera
	Name:    Margaret Dellafera
	Title:      Authorized Signatory

[Joint Amendment No. 4 to Loan and Security Agreement and

Amendment No. 3 to Pricing Side Letter (CS – PLS Freddie)]

PENNYMAC LOAN SERVICES, LLC,as Borrower
By:	/s/ Pamela Marsh
	Name:    Pamela Marsh
	Title:      Senior Managing Director and Treasurer

[Joint Amendment No. 4 to Loan and Security Agreement and

Amendment No. 3 to Pricing Side Letter (CS – PLS Freddie)]

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC,as Guarantor
By	/s/ Pamela Marsh
	Name:    Pamela Marsh
	Title:      Senior Managing Director and Treasurer

[Joint Amendment No. 4 to Loan and Security Agreement and

Amendment No. 3 to Pricing Side Letter (CS – PLS Freddie)]

EX-10.10

Exhibit 10.10

EXECUTION COPY

[Information indicated with brackets has been excluded from this exhibit because it is not material and would be competitively harmful if publicly disclosed]

JOINT AMENDMENT NO. 2 TO THE MASTER REPURCHASE AGREEMENT AND AMENDMENT NO. 3 TO THE PRICING SIDE LETTER

This Joint Amendment No. 2 to the MSR PC Repo Agreement (as defined below) and Amendment No. 3 to the Pricing Side Letter (as defined below), is entered into as of October 21, 2020 (this “Amendment”), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “Administrative Agent”), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“CSCIB” or the “Buyer”), PENNYMAC LOAN SERVICES, LLC (“PLS” or the “Seller”) and PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as guarantor (the “Guarantor”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the MSR PC Repo Agreement.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Buyer, the Guarantor and the Seller are parties to that certain Master Repurchase Agreement, dated as of September 11, 2019 (as amended by Amendment No. 1, dated as of April 24, 2020, and this Amendment and as may be further restated, supplemented or otherwise modified from time to time, the “MSR PC Repo Agreement”) and the related Pricing Side Letter, dated as of September 11, 2019 (as amended by Amendment No. 1, dated as of April 1, 2020, Amendment No. 2, dated as of April 24, 2020, and this Amendment and as may be further restated, supplemented or otherwise modified from time to time, the “Pricing Side Letter”);

WHEREAS, the Administrative Agent, the Buyer, the Seller and the Guarantor have agreed, subject to the terms and conditions of this Amendment, that the MSR PC Repo Agreement and the Pricing Side Letter be amended to reflect the certain agreed upon revisions to the terms of the MSR PC Repo Agreement and the Pricing Side Letter; and

WHEREAS, as a condition precedent to amending the MSR PC Repo Agreement and the Pricing Side Letter, the Buyer has required the Guarantor to ratify and affirm the guaranty under Section 11.13 of the MSR PC Repo Agreement on the date hereof.

NOW THEREFORE, the Administrative Agent, the Buyer, the Seller and the Guarantor hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the MSR PC Repo Agreement and the Pricing Side Letter are hereby amended as follows:

SECTION 1.   Amendment to the MSR PC Repo Agreement.

(a)        Section 1.1 of Schedule I the MSR PC Repo Agreement is hereby amended by deleting the definition of “Default Rate” in its entirety and replacing it with the following:

-1-

“Default Rate” means, with respect to any Price Differential for any Price Differential Period, and any late payment of fees or other amounts due hereunder, the Base Rate for the related Price Differential Period (or for all successive Price Differential Periods during which such fees or other amounts were delinquent), plus [*****] per annum.

SECTION 2.   Amendment to the Pricing Side Letter.

(a)        Section 1 of the Pricing Side Letter is hereby amended by deleting the definitions of “Applicable Margin” and “Maturity Date” in their entirety and replacing them with the following:

“Applicable Margin” means with respect to the Participation Certificate, (i) prior to the occurrence of an Event of Default, [*****] per annum, and (ii) following the occurrence and during the continuation of an Event of Default [*****] per annum.

“Maturity Date” means April 23, 2021.

SECTION 3.   Conditions Precedent.  This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of the Buyer, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyer, the Seller and the Guarantor.

SECTION 4.   Representations and Warranties.  Each Seller and Guarantor hereby represents and warrants to the Administrative Agent and the Buyer that it is in compliance with all the terms and provisions set forth in the MSR PC Repo Agreement and the Pricing Side Letter on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article VI of the MSR PC Repo Agreement.

SECTION 5.   Reaffirmation of Guaranty.  The Guarantor hereby ratifies and affirms all of the terms, covenants, conditions and obligations contained in Section 11.13 of the MSR PC Repo Agreement.

SECTION 6.   Limited Effect.  Except as expressly amended and modified by this Amendment, each of the MSR PC Repo Agreement and the Pricing Side Letter shall continue to be, and shall remain, in full force and effect in accordance with its respective terms.

SECTION 7.   Counterparts.  For the purpose of facilitating the execution of this Amendment, and for other purposes, this Amendment may be executed in any number of counterparts and all of such counterparts shall be an original, but all of which shall together constitute one and the same instrument.  The parties agree that this Amendment, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted,

-2-

executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention, including but not limited to DocuSign.

SECTION 8.    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 9. GOVERNING LAW.  THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]

-3-

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer
By:	/s/ Dominic Obaditch
Name:	Dominic Obaditch
Title:	Authorized Signatory
By:	/s/ Margaret Dellafera
Name:	Margaret Dellafera
Title:	Authorized Signatory

[Joint Amendment No. 2 to FNMA PC Repurchase Agreement and

Amendment No. 3 to Pricing Side Letter (CS-PLS – Fannie)]

PENNYMAC LOAN SERVICES, LLC, as Seller
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[Joint Amendment No. 2 to FNMA PC Repurchase Agreement and

Amendment No. 3 to Pricing Side Letter (CS-PLS – Fannie)]

PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC, as Guarantor
By:	/s/ Pamela Marsh
Name:	Pamela Marsh
Title:	Senior Managing Director and Treasurer

[Joint Amendment No. 2 to FNMA PC Repurchase Agreement and

Amendment No. 3 to Pricing Side Letter (CS-PLS – Fannie)]

EX-31.1

Exhibit 31.1

CERTIFICATION

I, David A. Spector, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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 6, 2020
By:	/s/ David A. Spector
	David A. Spector
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Andrew S. Chang, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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 6, 2020
By:	/s/ Andrew S. Chang
	Andrew S. Chang
	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, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Spector, 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 6, 2020
By:	/s/ David A. Spector
	David A. Spector
	President 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, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew S. Chang, 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 6, 2020
By:	/s/ Andrew S. Chang
	Andrew S. Chang
	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, 2020	Nov. 04, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-38727
Entity Registrant Name	PennyMac Financial Services, Inc.
Entity Central Index Key	0001745916
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	83-1098934
Entity Address, Address Line One	3043 Townsgate Road
Entity Address, City or Town	Westlake Village
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91361
City Area Code	818
Local Phone Number	224-7442
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	PFSI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		72,444,213
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
ASSETS
Cash (includes $52,599 pledged to creditors at December 31, 2019)	$ 529,166	$ 188,291
Short-term investments at fair value	102,136	74,611
Loans held for sale at fair value (includes $9,011,545 and $4,846,138 pledged to creditors)	9,126,172	4,912,953
Derivative assets	578,254	159,686
Servicing advances, net (includes valuation allowance of $141,964 and $82,157; $232,519 and $207,460 pledged to creditors)	393,654	331,169
Mortgage servicing rights at fair value (includes $2,330,600 and $2,920,603 pledged to creditors)	2,333,821	2,926,790
Operating lease right-of-use assets	72,133	73,090
Loans eligible for repurchase	17,183,873	1,046,527
Other (includes $207,547 and $32,598 pledged to creditors)	651,229	333,557
Total assets	31,180,865	10,204,017
LIABILITIES
Assets sold under agreements to repurchase	7,259,188	4,141,053
Mortgage loans participation purchase and sale agreements	535,063	497,948
Obligations under capital lease	13,957	20,810
Notes payable secured by mortgage servicing assets	1,295,143	1,294,070
Unsecured senior notes	492,358
Derivative liabilities	24,537	22,330
Mortgage servicing liabilities at fair value	31,698	29,140
Operating lease liabilities	92,005	91,320
Accounts payable and accrued expenses	278,403	175,273
Income taxes payable	673,149	504,569
Liability for loans eligible for repurchase	17,183,873	1,046,527
Liability for losses under representations and warranties	28,504	21,446
Total liabilities	28,163,788	8,142,510
Commitments and contingencies - Note 15
STOCKHOLDERS' EQUITY
Additional paid-in capital	1,116,428	1,335,107
Retained earnings	1,900,642	726,392
Total stockholders' equity	3,017,077	2,061,507
Total liabilities and stockholders' equity	31,180,865	10,204,017
Common Stock
STOCKHOLDERS' EQUITY
Common stock - authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 72,400,490 and 78,515,047 shares respectively	7	8
PMT
ASSETS
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors	86,958	107,512
Investment in PennyMac Mortgage Investment Trust at fair value	991	1,672
Receivable, from PennyMac Investment Trust	122,478	48,159
LIABILITIES
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	142,990	178,586
Payable to PennyMac Mortgage Investment Trust	77,136	73,280
Private National Mortgage Acceptance Company, LLC
LIABILITIES
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	$ 35,784	$ 46,158

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Cash pledged to creditors		$ 52,599
Mortgage loans held for sale, pledged to creditors	$ 9,011,545	4,846,138
Servicing advances, net, valuation allowance	141,964	82,157
Servicing advances pledged to creditors	232,519	207,460
Mortgage servicing rights pledged to creditors	2,330,600	2,920,603
Other assets pledged to creditors	$ 207,547	$ 32,598
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	72,400,490	78,515,047
Common stock, shares outstanding	72,400,490	78,515,047

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net gains on loans held for sale at fair value:
From non-affiliates	$ 865,044	$ 175,070	$ 1,819,175	$ 345,045
Net gains on loans held for sale at fair value	855,269	235,732	1,881,724	468,041
Loan origination fees from non-affiliates	69,496	45,212	177,747	100,721
Loan origination fees	75,572	49,434	192,091	110,288
Fulfillment fees from PennyMac Mortgage Investment Trust			149,594	102,313
Loan servicing fees
From non-affiliates	203,696	185,967	601,527	533,510
Other	27,920	26,018	85,218	74,043
Loan servicing fees	250,368	224,949	735,551	642,655
Change in fair value of mortgage servicing rights and mortgage servicing liabilities	127,217	412,730	1,368,219	1,036,123
Hedging results	6,521	250,146	1,027,327	587,883
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust	(117,561)	(158,720)	(322,599)	(436,721)
Net loan servicing fees	132,807	66,229	412,952	205,934
Interest income:
From non-affiliates	52,276	81,925	170,148	207,670
Interest income	52,952	83,452	172,834	212,685
Interest expense:
To non-affiliates	61,109	54,089	171,482	138,723
Interest expense	63,179	56,380	177,898	146,847
Net interest (expense) income	(10,227)	27,072	(5,064)	65,838
Management fees, net:
Management fees	8,508	10,098	25,851	26,178
Result of real estate acquired in settlement of loans	1,214	188	803	1,205
Other	2,298	2,379	6,102	6,855
Total net revenue	1,119,992	436,347	2,663,451	987,029
Expenses
Compensation	202,440	141,132	550,762	362,449
Servicing	71,110	47,909	169,779	107,210
Loan origination	53,752	34,851	150,677	72,419
Technology	28,964	20,385	69,976	52,431
Professional services	18,307	9,682	44,211	21,876
Occupancy and equipment	8,491	7,257	24,822	21,075
Other	8,637	8,934	29,841	23,491
Total expenses	391,701	270,150	1,040,068	660,951
Income before provision for income taxes	728,291	166,197	1,623,383	326,078
Provision for income taxes	193,131	44,724	429,303	85,774
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$ 535,160	$ 121,473	$ 1,194,080	$ 240,304
Earnings per share
Basic (in dollars per share)	$ 7.39	$ 1.55	$ 15.65	$ 3.08
Diluted (in dollars per share)	$ 7.03	$ 1.51	$ 15.00	$ 3.01
Weighted-average shares outstanding
Basic (in shares)	72,439	78,361	76,292	78,119
Diluted (in shares)	76,138	80,382	79,618	79,821
Dividend declared per share (in dollars per share)	$ 0.15		$ 0.39
PMT
Net gains on loans held for sale at fair value:
From PennyMac Mortgage Investment Trust	$ (9,775)	$ 60,662	$ 62,549	$ 122,996
Loan origination fees from PennyMac Mortgage Investment Trust	6,076	4,222	14,344	9,567
Fulfillment fees from PennyMac Mortgage Investment Trust	54,839	45,149	149,594	102,313
Loan servicing fees
Loan servicing fees from affiliates	18,752	12,964	48,806	35,102
Changes in fair value included in income	3,135	3,864	18,293	11,519
Interest income:
From PennyMac Mortgage Investment Trust	676	1,527	2,686	5,015
Interest expense:
To PennyMac Mortgage Investment Trust	2,070	2,291	6,416	8,124
Management fees, net:
Management fees	8,508	10,098	25,851	26,178
Change in fair value of investment in and dividends received from affiliate	$ (288)	$ 66	$ (602)	$ 377

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock.	Additional paid-in capital	Retained earnings	Common Stock	Total
Balance at Dec. 31, 2018	$ 8	$ 1,310,648	$ 343,135		$ 1,653,791
Balance (in shares) at Dec. 31, 2018	77,494
Changes in stockholders' equity
Net income			240,304		240,304
Stock based compensation		18,390			18,390
Stock based compensation (in shares)	984
Issuance of common stock in settlement of director fees		184			184
Issuance of common stock in settlement of director fees (in shares)	8
Repurchase of common stock		(1,056)		$ (1,056)	(1,056)
Repurchase of common stock (in shares)	(51)			(51)
Balance at Sep. 30, 2019	$ 8	1,328,166	583,439		1,911,613
Balance (in shares) at Sep. 30, 2019	78,435
Balance at Jun. 30, 2019	$ 8	1,317,023	461,966		1,778,997
Balance (in shares) at Jun. 30, 2019	78,305
Changes in stockholders' equity
Net income			121,473		121,473
Stock based compensation		11,095			11,095
Stock based compensation (in shares)	128
Issuance of common stock in settlement of director fees		48			48
Issuance of common stock in settlement of director fees (in shares)	2
Balance at Sep. 30, 2019	$ 8	1,328,166	583,439		1,911,613
Balance (in shares) at Sep. 30, 2019	78,435
Balance at Dec. 31, 2019	$ 8	1,335,107	726,392		2,061,507
Balance (in shares) at Dec. 31, 2019	78,515
Changes in stockholders' equity
Net income			1,194,080		1,194,080
Stock based compensation		29,386			29,386
Stock based compensation (in shares)	1,212
Common stock dividends			(19,830)		(19,830)
Issuance of common stock in settlement of director fees		144			144
Issuance of common stock in settlement of director fees (in shares)	4
Repurchase of common stock	$ (1)	(248,209)		$ (248,210)	(248,210)
Repurchase of common stock (in shares)	(7,331)			(7,331)
Balance at Sep. 30, 2020	$ 7	1,116,428	1,900,642		3,017,077
Balance (in shares) at Sep. 30, 2020	72,400
Balance at Jun. 30, 2020	$ 7	1,113,412	1,365,774		2,479,193
Balance (in shares) at Jun. 30, 2020	72,358
Changes in stockholders' equity
Net income			535,160		535,160
Stock based compensation		9,895			9,895
Stock based compensation (in shares)	159
Common stock dividends			(292)		(292)
Issuance of common stock in settlement of director fees		48			48
Issuance of common stock in settlement of director fees (in shares)	1
Repurchase of common stock		(6,927)		$ (6,927)	(6,927)
Repurchase of common stock (in shares)	(118)			(118)
Balance at Sep. 30, 2020	$ 7	$ 1,116,428	$ 1,900,642		$ 3,017,077
Balance (in shares) at Sep. 30, 2020	72,400

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock dividends (in dollars per share)	$ 0.15	$ 0.39

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flow from operating activities
Net income	$ 1,194,080	$ 240,304
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on loans held for sale at fair value	(1,881,724)	(468,041)
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread	1,349,926	1,024,604
Mortgage servicing rights hedging gains	(1,027,327)	(587,883)
Capitalization of interest on loans held for sale at fair value	(55,920)	(56,800)
Amortization of net debt issuance cost and (premiums)	12,163	(6,601)
Results of real estate acquired in settlement of loans	(803)	(1,205)
Stock based compensation expense	26,220	19,124
Provision for servicing advance losses	79,402	19,973
Depreciation and amortization	17,126	10,650
Amortization of right-to-use assets	9,176	7,258
Origination of loans held for sale	(20,580,388)	(7,249,762)
Purchase of loans held for sale from non-affiliates	(2,515,624)	(1,132,749)
Purchase of loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale	(5,980,081)	(4,172,281)
Sale to non-affiliates and principal payments of loans held for sale	67,209,239	39,084,441
Repurchase of loans subject to representations and warranties	(43,664)	(15,427)
Settlement of repurchase agreement derivatives	8,270	31,993
Increase in servicing advances	(156,964)	(9,871)
Sale of real estate acquired in settlement of loans	27,842	17,141
Increase in other assets	(305,100)	(22,415)
Decrease in operating lease liabilities	(10,378)	(9,234)
Increase in accounts payable and accrued expenses	102,789	78,800
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	(10,374)
Net cash used in operating activities	(3,923,531)	(1,690,141)
Cash flow from investing activities
(Increase) decrease in short-term investments	(27,525)	27,161
Net settlement of derivative financial instruments used for hedging of mortgage servicing rights	1,000,865	542,139
Purchase of mortgage servicing rights	(25,473)	(227,445)
Purchase of furniture, fixtures, equipment and leasehold improvements	(5,584)	(5,534)
Acquisition of capitalized software	(38,443)	(22,190)
Decrease (increase) in margin deposits	205	(168,062)
Net cash provided by investing activities	924,599	169,416
Cash flow from financing activities
Sale of assets under agreements to repurchase	68,122,809	41,296,345
Repurchase of assets sold under agreements to repurchase	(64,997,443)	(39,692,086)
Issuance of mortgage loan participation purchase and sale certificates	17,814,845	17,498,589
Repayment of mortgage loan participation purchase and sale certificates	(17,777,414)	(17,516,431)
Advances of obligations under capital lease		25,123
Repayments of obligations under capital lease	(6,853)	(7,847)
Issuance of unsecured senior notes	500,000
Repayment of excess servicing spread financing	(25,112)	(30,901)
Payment of debt issuance costs	(26,362)	(4,489)
Issuance of common stock pursuant to exercise of stock options	8,431	3,900
Payment of withholding taxes relating to stock-based compensation	(5,265)	(4,634)
Payment of dividend to holders of common stock	(19,830)
Repurchase of common stock	(248,210)	(1,056)
Net cash provided by financing activities	3,339,596	1,566,513
Net increase in cash and restricted cash	340,664	45,788
Cash and restricted cash at beginning of period	188,578	155,924
Cash and restricted cash at end of period	529,242	201,712
Cash	529,166	201,268
Restricted cash included in Other assets	76	444
PMT
Adjustments to reconcile net income to net cash used in operating activities:
Accrual of interest on excess servicing spread financing payable to PennyMac Mortgage Investment Trust	6,416	8,124
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust	681	(270)
Purchase of loans held for sale from PennyMac Mortgage Investment Trust	(43,721,458)	(32,619,639)
Sale of loans held for sale to Penny Mac Mortgage Investment Trust	2,248,896	4,095,079
Increase in receivable from affiliates	(80,531)	(9,598)
Decrease in payable to affiliate	(14,001)	(45,869)
Increase in income taxes payable	168,580	80,013
Cash flow from investing activities
Net change in assets purchased from PMT under agreement to resell	$ 20,554	$ 23,347

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Organization

9 Months Ended

Sep. 30, 2020

Organization

Organization

PENNYMAC FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization

PennyMac Financial Services, Inc. (“PFSI” or the “Company”) is a holding corporation and its primary assets are direct and indirect equity interests in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac, and it operates and controls all of the businesses and affairs of PennyMac, 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 and servicing. PennyMac’s investment management activities and a portion of its loan servicing activities are conducted on behalf of PennyMac Mortgage Investment Trust (“PMT”), a real estate mortgage investment trust that invests primarily in mortgage-related assets. PennyMac’s primary wholly owned subsidiaries are:

● PennyMac Loan Services, LLC (“PLS”) — a Delaware limited liability company that services portfolios of residential mortgage loans on behalf of non-affiliates and PMT, purchases, originates and sells new prime credit quality residential mortgage and home equity 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 (“FHA”) 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 Capital Management, LLC (“PCM”)— a Delaware limited liability company registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management agreement with PMT.

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Basis of Presentation and Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 30, 2020

Basis of Presentation and Recently Adopted Accounting Pronouncements

Basis of Presentation and Recently Adopted Accounting Pronouncements

Note 2—Basis of Presentation and Recently Adopted Accounting Pronouncement

Basis of Presentation

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 Securities and Exchange Commission’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. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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 presented, but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2020. Intercompany accounts and transactions have been eliminated.

Preparation of financial statements in compliance with GAAP requires management to make judgments and estimates 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.

Certain asset amounts separately presented in prior periods have been reclassified to Other assets to conform to the current period presentation. Such amounts are detailed in Note 11—Other Assets.

Accounting Change

Effective January 1, 2020, the Company adopted FASB Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”), using the modified retrospective approach. The adoption of ASU 2016-13 did not have any effect on the Company’s consolidated statements of income, stockholder’s equity or cash flows.

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Concentration of Risk

9 Months Ended

Sep. 30, 2020

Concentration of Risk

Concentration of Risk

Note 3—Concentration of Risk

A substantial portion of the Company’s activities relate to PMT. Revenues generated from PMT (generally comprised of gains on loans held for sale, loan origination and fulfillment fees, loan servicing fees, change in fair value of excess servicing spread financing (“ESS”), net interest, management fees, and change in fair value of investment in and dividends received from PMT) totaled 7% and 32% of total net revenue for the quarters ended September 30, 2020 and 2019, respectively, and 12% and 31% for the nine months ended September 30, 2020 and 2019, respectively.

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions

Related Party Transactions

Note 4—Related Party Transactions

Transactions with PMT

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.

Through June 30, 2020, pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinanced mortgage loans for which PMT previously held the MSRs, the Company was generally required to transfer and convey to PMT cash in an amount equal to 30% of the fair market value of the MSRs related to all such mortgage loans. On June 30, 2020, the MSR recapture agreement was amended and restated for a term of five years (the “2020 MSR Recapture Agreement”).

Effective July 1, 2020, the 2020 MSR Recapture agreement changes the recapture fee payable by the Company to a tiered amount equal to:

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;

● 35% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 15% and up to 30%; and

● 30% of the fair market value of the MSRs relating to the recaptured loans subject to the recapture rate in excess of 30%.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month. The Company has further agreed to allocate sufficient resources to target a recapture rate of 15%.

The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee.

Through June 30, 2020, pursuant to the terms of a mortgage banking services agreement, the monthly fulfillment fee was an amount equal to:

a) no greater than the product of (i) 0.35% and (ii) the aggregate initial unpaid principal balance (the “Initial UPB”) of all mortgage loans purchased in such month, plus

b) in the case of all mortgage loans other than mortgage loans sold to or securitized through Fannie Mae or Freddie Mac, no greater than the product of (i) 0.50% and (ii) the aggregate Initial UPB of all such mortgage loans sold and securitized in such month; provided, however, that no fulfillment fee was due or payable to the Company with respect to any mortgage loans underwritten to the Ginnie Mae Mortgage-Backed Securities (“MBS”) Guide.

PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and, through June 30, 2020, 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 before being purchased by the Company. While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

Effective July 1, 2020, the fulfillment fees and sourcing fees were revised as follows:

● Fulfillment fees shall not exceed the following:

(i) the number of loan commitments multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus

(ii) $315 multiplied by the number of purchased loans up to the and including 16,500 per quarter and $195 multiplied by the number of purchased loans in excess of 16,500 per quarter, plus

(iii) $750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae and Freddie Mac; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans.

● Sourcing fees charged to PLS range from one to two basis points, generally based on the average number of calendar days the loans are held by PMT before purchase by PLS.

Following is a summary of loan production activities, including MSR recapture between the Company and PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT	$	1	$	62,558	$	81,295	$	127,423
Mortgage servicing rights and excess servicing spread recapture incurred		(9,776)		(1,896)		(18,746)		(4,427)
	$	(9,775)	$	60,662	$	62,549	$	122,996
Sale of loans held for sale to PMT	$	27	$	1,876,358	$	2,248,896	$	4,095,079
Tax service fees earned from PMT included in Loan origination fees	$	6,076	$	4,222	$	14,344	$	9,567
Fulfillment fee revenue	$	54,839	$	45,149	$	149,594	$	102,313
Sourcing fees paid to PMT	$	1,658	$	4,206	$	9,143	$	9,355
Unpaid principal balance of loans purchased from PMT	$	16,690,482	$	14,022,222	$	41,641,327	$	31,183,950

Loan Servicing

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides servicing for PMT’s portfolio of residential mortgage loans and subservicing for its portfolio of MSRs. The Servicing Agreement provides for servicing fees of per-loan monthly amounts based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or the real estate acquired in settlement of loans (“REO”). The Company also remains entitled to customary ancillary income and market-based fees and charges relating to loans it services for PMT. These include boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Prime Servicing

● The base servicing fees for non-distressed loans are calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan is a fixed-rate or adjustable-rate loan. The base servicing fee rates are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that non-distressed loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $10 to $55 per month and based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO. The Company is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees.

● Effective July 1, 2020, the Company also receives certain fees for COVID-19-related forbearance and modification activities provided for under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Special Servicing (Distressed loans)

● The base servicing fee rates for distressed loans range from $30 per month for current loans up to $85 per month for loans where the borrower has declared bankruptcy. The base servicing fee rate for REO is $75 per month.

● Because PMT has a small number of employees and limited infrastructure, the Company 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, the Company receives a supplemental servicing fee of $25 per month for each distressed loan. The Company is entitled to reimbursement for all customary, good faith reasonable and necessary out-of-pocket expenses incurred by the Company in the performance of its servicing obligations.

● The Company is also entitled to certain activity-based fees for distressed loans that are charged based on the achievement of certain events. These fees range from $750 for a streamline modification to $1,750 for a full modification or liquidation and $500 for a deed-in-lieu of foreclosure. The Company is not entitled to earn more than one liquidation fee, reperformance fee or modification fee per loan in any 18-month period.

● To the extent the Company facilitates rentals of PMT's REO under its REO rental program, the Company collects 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 the Company’s 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 the Company provides property management services directly. The Company is also entitled to retain any tenant paid application fees and late rent fees and seek reimbursement for certain third-party vendor fees.

● Except as otherwise provided in the MSR recapture agreement, when the Company 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 the Company originates a loan to facilitate the disposition of a REO, the Company is entitled to receive from PMT market-based fees and compensation consistent with pricing and terms the Company offers unaffiliated parties on a retail basis.

● The Company is entitled to retain any incentive payments made to it and to which it is entitled under the U.S. Department of Treasury’s Home Affordable Modification Plan; provided, however, that with respect to any such incentive payments paid to the Company in connection with a loan modification for which PMT previously paid the Company a modification fee, the Company is required to reimburse PMT an amount equal to the incentive payments.

Following is a summary of loan servicing and property management fees earned from PMT:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	452	$	507	$	1,595	$	1,131
Loans at fair value		187		858		675		1,938
Mortgage servicing rights		18,113		11,599		46,536		32,033
	$	18,752	$	12,964	$	48,806	$	35,102
Property management fees received from PMT included in Other income	$	—	$	70	$	—	$	295

On June 30, 2020, the Servicing Agreement was amended and restated for a term of five years (the “2020 Servicing Agreement”). The terms of the 2020 Servicing Agreement are substantially similar to those in the prior servicing agreement except that they now include the fees described above relating to COVID-19 related forbearance and modification activities provided for under the CARES Act.

Investment Management Activities

The Company has a management agreement with PMT (“Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees, for which PFSI collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

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

● The performance incentive fee is calculated quarterly at a defined annualized 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 return on “equity.”

The performance incentive fee is equal to the sum of: (a) 10% of the amount by which PMT’s “net income” for the quarter exceeds (i) an 8% return on equity plus the “high watermark,” up to (ii) a 12% return on PMT’s equity; plus (b) 15% of the amount by which PMT’s “net income” for the quarter exceeds (i) a 12% return on PMT’s equity plus the “high watermark,” up to (ii) a 16% return on PMT’s equity; plus (c) 20% of the amount by which PMT’s “net income” for the quarter exceeds a 16% return on equity plus the “high watermark.”

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.

“Equity” is the weighted average of the issue price per common share of all of PMT’s public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the rolling four-quarter period.

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 average Fannie Mae 30-year MBS yield (the “Target Yield”) for the four quarters then ended. 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 amounts required for the Company to earn a performance incentive fee are 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 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.

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.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Base management	$	8,508	$	7,914	$	25,851	$	20,862
Performance incentive		—		2,184		—		5,316
	$	8,508	$	10,098	$	25,851	$	26,178

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company 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. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $120,000 per fiscal quarter through June 30, 2020.

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

On June 30, 2020, the Management Agreement was amended and restated for a term of five years (the “2020 Management Agreement”). The terms of the 2020 Management Agreement are materially consistent with those of the prior management agreement, except that, effective July 1, 2020, PMT’s reimbursement of PCM’s and its affiliate’s compensation expenses was increased from $120,000 to $165,000 per fiscal quarter, such amount to be reviewed annually and not preclude reimbursement for any other services performed by the Company or its affiliates.

The Company received reimbursements from PMT for expenses as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,389	$	1,543	$	4,514	$	4,055
Compensation		165		120		405		360
Expenses incurred on PMT's behalf, net		2,852		1,942		5,561		3,001
	$	4,406	$	3,605	$	10,480	$	7,416
Payments and settlements during the quarter (1)	$	58,479	$	68,191	$	228,514	$	111,411

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Conditional Reimbursement of Underwriting Fees

In connection with its initial public offering of common shares of beneficial interest 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. 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. On February 1, 2019, the term of the reimbursement agreement was extended to February 1, 2023. The Company received $211,000 and $219,000 in reimbursement of underwriting fees from PMT during the nine months ended September 30, 2020 and 2019, respectively.

Investing Activities

Master Repurchase Agreement

On December 19, 2016, the Company, through PLS, entered into a master repurchase agreement with one of PMT’s wholly-owned subsidiaries, PennyMac Holdings, LLC (“PMH”) (the “PMH Repurchase Agreement”), pursuant to which PMH may borrow from the Company for the purpose of financing PMH’s participation certificates representing beneficial ownership in ESS. PLS then re-pledges such participation certificates to PNMAC GMSR ISSUER TRUST (the “Issuer Trust”) under a master repurchase agreement by and among PLS, the Issuer Trust and PennyMac, as guarantor (the “PC Repurchase Agreement”). The Issuer Trust was formed for the purpose of allowing PLS to finance MSRs and ESS relating to such MSRs (the “GNMA MSR Facility”).

In connection with the GNMA MSR Facility, PLS pledges and/or sells to the Issuer Trust participation certificates representing beneficial interests in MSRs and ESS pursuant to the terms of the PC Repurchase Agreement. In return, the Issuer Trust (a) has issued to PLS, pursuant to the terms of an indenture, the Series 2016-MSRVF1 Variable Funding Note, dated December 19, 2016, known as the “PNMAC GMSR ISSUER TRUST MSR Collateralized Notes, Series 2016-MSRVF1” (the “VFN”), and (b) has issued and may, from time to time pursuant to the terms of any supplemental indenture, issue to institutional investors additional term notes, in each case secured on a pari passu basis by the participation certificates relating to the MSRs and ESS. The maximum principal balance of the VFN is $1,000,000,000.

The principal amount paid by PLS for the participation certificates under the PMH Repurchase Agreement is based upon a percentage of the market value of the underlying ESS. Upon PMH’s repurchase of the participation certificates, PMH is required to repay PLS the principal amount relating thereto plus accrued interest (at a rate reflective of the current market and consistent with the weighted average note rate of the VFN and any outstanding term notes) to the date of such repurchase. PLS is then required to repay the Issuer Trust the corresponding amount under the PC Repurchase Agreement.

Common Shares of Beneficial Interest of PennyMac Mortgage Investment Trust

The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	676	$	1,527	$	2,686	$	5,015
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received	$	31	$	36	$	79	$	107
Change in fair value of investment		(319)		30		(681)		270
	$	(288)	$	66	$	(602)	$	377

	September 30,		December 31,
	2020		2019
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958	$	107,512
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	991	$	1,672
Number of shares		75		75

Financing Activities

Spread Acquisition and MSR Servicing Agreements

The Company has a master spread acquisition and MSR servicing agreement with PMT (the “Spread Acquisition Agreement”) which was amended and restated effective December 19, 2016, pursuant to which the Company may sell to PMT, from time to time, the right to receive participation certificates representing beneficial ownership in ESS arising from Ginnie Mae MSRs acquired by the Company, in which case the Company generally would be required to service or subservice the related mortgage loans for Ginnie Mae. The primary purpose of the amendment and restatement was to facilitate the continued financing of the ESS owned by PMT in connection with the parties’ participation in the GNMA MSR Facility.

To the extent the Company refinances any of the mortgage loans relating to the ESS it has issued, the Spread Acquisition Agreement also contains recapture provisions requiring that the Company transfer to PMT, at no cost, the ESS relating to a certain percentage of the unpaid principal balance of the newly originated mortgage loans. However, under the Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the refinanced mortgage loans, the Company is 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 equal to at least 90% of the product of the excess servicing fee rate and the unpaid principal balance of the modified mortgage loans, the Spread Acquisition Agreement contains provisions that require the Company to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, the Company may, at its option, settle its obligation to PMT in cash in an amount equal to such fair market value in lieu of transferring such ESS.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Excess servicing spread financing:
Balance at beginning of period	$	151,206	$	194,156	$	178,586	$	216,110
Issuance pursuant to recapture agreement		531		377		1,393		1,327
Accrual of interest		2,070		2,291		6,416		8,124
Repayment		(7,682)		(9,819)		(25,112)		(30,901)
Change in fair value		(3,135)		(3,864)		(18,293)		(11,519)
Balance at end of period	$	142,990	$	183,141	$	142,990	$	183,141
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	525	$	429	$	1,441	$	1,311

Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:

	September 30,		December 31,
	2020		2019
	(in thousands)
Receivable from PMT:
Margin settlements relating to loan sales	$	48,243	$	—
Allocated expenses and expenses incurred on PMT's behalf		30,207		3,724
Fulfillment fees		18,060		18,285
Correspondent production fees		11,285		10,606
Management fees		8,509		10,579
Servicing fees		6,121		4,659
Interest on assets purchased under agreements to resell		43		85
Conditional reimbursement		10		221
	$	122,478	$	48,159
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	58,264	$	70,520
Mortgage servicing rights recapture payable		197		149
Other		18,675		2,611
	$	77,136	$	73,280

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

On May 8, 2013, the Company entered into a tax receivable agreement with certain former owners of PennyMac that provides for the payment from time to time by the Company to PennyMac’s exchanged unitholders of an amount equal to 85% of the amount of the net tax 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 exchanges of ownership interests in PennyMac 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.

Although a reorganization in November 2018 eliminated the potential for unitholders to exchange any additional units subject to this tax receivable agreement, the Company continues to be subject to the agreement and will be required to make payments, to the extent any of the tax benefits specified above are deemed to be realized, under the tax receivable agreement to those certain prior owners of PennyMac who effected exchanges of ownership interests in PennyMac for the Company’s common stock prior to the closing of the reorganization.

The Company has recorded $35.8 million and $46.2 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of September 30, 2020 and December 31, 2019, respectively. The Company made $10.4 million of payments under the tax receivable agreement during the nine months ended September 30, 2020 and did not make any payments during the nine months ended September 30, 2019.

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Loan Sales and Servicing Activities

9 Months Ended

Sep. 30, 2020

Loan Sales and Servicing Activities

Loan Sales and Servicing Activities

Note 5—Loan Sales and Servicing Activities

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

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cash flows:
Sales proceeds	$	26,683,234	$	17,897,693	$	67,209,239	$	39,084,441
Servicing fees received (1)	$	166,316	$	149,210	$	491,743	$	426,774
Net servicing advances (recoveries)	$	71,890	$	8,605	$	68,992	$	(23,583)

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

The following table summarizes unpaid principal balance (the “UPB”) of the loans sold by the Company in which it maintains continuing involvement in the form of owned servicing obligations:

	September 30,		December 31,
	2020		2019
	(in thousands)
Unpaid principal balance of loans outstanding	$	188,854,796	$	168,842,011
Delinquencies:
30-89 days	$	7,237,198	$	7,947,560
90 days or more:
Not in foreclosure	$	19,423,346	$	3,237,563
In foreclosure	$	621,649	$	888,136
Foreclosed	$	13,730	$	15,387
Bankruptcy	$	1,288,443	$	1,343,816

The following tables summarize the UPB of the Company’s loan servicing portfolio:

	September 30, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	188,854,796	$	—	$	188,854,796
Purchased		47,795,763		—		47,795,763
		236,650,559		—		236,650,559
PennyMac Mortgage Investment Trust				156,496,568		156,496,568
Loans held for sale		8,749,673		—		8,749,673
	$	245,400,232	$	156,496,568	$	401,896,800
Delinquent loans (1):
30 days	$	5,924,488	$	1,435,686	$	7,360,174
60 days		3,178,614		621,723		3,800,337
90 days or more:
Not in foreclosure		24,324,945		5,622,954		29,947,899
In foreclosure		831,239		37,293		868,532
Foreclosed		16,409		45,925		62,334
	$	34,275,695	$	7,763,581	$	42,039,276
Bankruptcy	$	1,815,833	$	158,182	$	1,974,015
Delinquent loans in COVID-19 related forbearance:
30 days	$	2,344,986	$	474,168	$	2,819,154
60 days		2,289,880		476,220		2,766,100
90 days or more not in foreclosure		17,827,122		4,716,956		22,544,078
	$	22,461,988	$	5,667,344	$	28,129,332
Custodial funds managed by the Company (2)	$	10,364,855	$	6,347,559	$	16,712,414

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

	December 31, 2019
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	168,842,011	$	—	$	168,842,011
Purchased		59,703,547		—		59,703,547
		228,545,558		—		228,545,558
PennyMac Mortgage Investment Trust		—		135,414,668		135,414,668
Loans held for sale		4,724,006		—		4,724,006
	$	233,269,564	$	135,414,668	$	368,684,232
Delinquent loans:
30 days	$	7,987,132	$	857,660	$	8,844,792
60 days		2,490,797		172,263		2,663,060
90 days or more:
Not in foreclosure		4,070,482		274,592		4,345,074
In foreclosure		1,113,806		68,331		1,182,137
Foreclosed		18,315		89,421		107,736
	$	15,680,532	$	1,462,267	$	17,142,799
Bankruptcy	$	1,898,367	$	136,818	$	2,035,185
Custodial funds managed by the Company (1)	$	6,412,291	$	2,529,984	$	8,942,275

(1) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

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

	September 30,		December 31,
State	2020		2019
	(in thousands)
California	$	58,062,643	$	57,311,867
Florida		33,545,822		28,940,696
Texas		31,893,436		27,909,821
Virginia		24,378,162		22,115,619
Maryland		18,700,592		16,829,320
All other states		235,316,145		215,576,909
	$	401,896,800	$	368,684,232

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Fair Value

9 Months Ended

Sep. 30, 2020

Fair Value

Fair Value

Note 6—Fair Value

Most of the Company’s assets and certain of its liabilities are measured at or based on their fair values. 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 significant 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.

● 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. Such differences may result in significantly different fair value measurements. 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

The Company identified its MSRs, its mortgage servicing liabilities (“MSLs”) and all of its non-cash financial assets other than Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, 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. The Company has also identified its ESS financing to be accounted for at fair value as a means of hedging the related MSRs’ fair value risk.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a summary of assets and liabilities that are measured at fair value on a recurring basis:

	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	102,136	$	—	$	—	$	102,136
Loans held for sale at fair value		—		6,351,175		2,774,997		9,126,172
Derivative assets:
Interest rate lock commitments		—		—		544,151		544,151
Forward purchase contracts		—		72,640		—		72,640
Forward sales contracts		—		21,652		—		21,652
MBS put options		—		27,336		—		27,336
MBS call options		—		4,255		—		4,255
Swaptions		—		5,568		—		5,568
Put options on interest rate futures purchase contracts		5,910		—		—		5,910
Call options on interest rate futures purchase contracts		1,570		—		—		1,570
Total derivative assets before netting		7,480		131,451		544,151		683,082
Netting		—		—		—		(104,828)
Total derivative assets		7,480		131,451		544,151		578,254
Mortgage servicing rights at fair value		—		—		2,333,821		2,333,821
Investment in PennyMac Mortgage Investment Trust		991		—		—		991
	$	110,607	$	6,482,626	$	5,652,969	$	12,141,374
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	142,990	$	142,990
Derivative liabilities:
Interest rate lock commitments		—		—		2,706		2,706
Forward purchase contracts		—		15,903		—		15,903
Forward sales contracts		—		98,765		—		98,765
Total derivative liabilities before netting		—		114,668		2,706		117,374
Netting		—		—		—		(92,837)
Total derivative liabilities		—		114,668		2,706		24,537
Mortgage servicing liabilities at fair value		—		—		31,698		31,698
	$	—	$	114,668	$	177,394	$	199,225

	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

As shown above, all or a portion of the Company’s loans held for sale, Interest Rate Lock Commitments (“IRLCs”), repurchase agreement derivatives, MSRs, ESS and MSLs are measured using Level 3 fair value inputs. Following are roll forwards of assets and liabilities measured at fair value using “Level 3” inputs at either the beginning or the end of the period presented for the quarter and nine month periods ended September 30, 2020 and 2019:

	Quarter ended September 30, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, June 30, 2020	$	661,719	$	368,064	$	8,187	$	2,213,539	$	3,251,509
Purchases (purchase adjustment) and issuances, net		2,734,321		593,065		—		(287)		3,327,099
Capitalization of interest and advances		22,262		—		—		—		22,262
Sales and repayments		(88,955)		—		(8,270)		—		(97,225)
Mortgage servicing rights resulting from loan sales		—		—		—		245,946		245,946
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		42,029		—		—		—		42,029
Other factors		—		311,790		83		(125,377)		186,496
		42,029		311,790		83		(125,377)		228,525
Transfers from Level 3 to Level 2		(597,134)		—		—		—		(597,134)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(731,474)		—		—		(731,474)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the quarter relating to assets still held at September 30, 2020	$	38,217	$	541,445	$	—	$	(125,377)	$	454,285

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

	Quarter ended September 30, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, June 30, 2020	$	151,206	$	29,858	$	181,064
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		531		—		531
Accrual of interest		2,070		—		2,070
Repayments		(7,682)		—		(7,682)
Changes in fair value included in income		(3,135)		1,840		(1,295)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the quarter relating to liabilities still outstanding at September 30, 2020	$	(3,135)	$	1,840	$	(1,295)

	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)

	Nine months ended September 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		4,664,408		1,431,194		—		25,473		6,121,075
Capitalization of interest and advances		55,283		—		—		—		55,283
Sales and repayments		(888,247)		—		(8,270)		—		(896,517)
Mortgage servicing rights resulting from loan sales		—		—		—		753,795		753,795
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		35,638		—		—		—		35,638
Other factors		—		808,906		83		(1,372,237)		(563,248)
		35,638		808,906		83		(1,372,237)		(527,610)
Transfers from Level 3 to Level 2		(1,476,027)		—		—		—		(1,476,027)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(1,835,305)		—		—		(1,835,305)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the period relating to assets still held at September 30, 2020	$	31,389	$	541,445	$	—	$	(1,372,237)	$	(799,403)

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

	Nine months ended September 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		1,393		—		1,393
Accrual of interest		6,416		—		6,416
Repayments		(25,112)		—		(25,112)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(18,293)		(4,018)		(22,311)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2020	$	(18,293)	$	(4,018)	$	(22,311)

	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)

The Company had transfers among the fair value levels arising from transfers of IRLCs to loans held for sale at fair value upon purchase or funding of the respective loans and from the return to salability in the active secondary market of certain loans held for sale.

Assets and Liabilities Measured at Fair Value under the Fair Value Option

Net changes in fair values included in income for assets and liabilities 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,
	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	$	773,313	$	—	$	773,313	$	263,339	$	—	$	263,339
Mortgage servicing rights		—		(125,377)		(125,377)		—		(410,885)		(410,885)
	$	773,313	$	(125,377)	$	647,936	$	263,339	$	(410,885)	$	(147,546)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	3,135	$	3,135	$	—	$	3,864	$	3,864
Mortgage servicing liabilities		—		(1,840)		(1,840)		—		(1,845)		(1,845)
	$	—	$	1,295	$	1,295	$	—	$	2,019	$	2,019

	Nine months ended September 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	$	1,911,828	$	—	$	1,911,828	$	538,086	$	—	$	538,086
Mortgage servicing rights		—		(1,372,237)		(1,372,237)		—		(1,037,643)		(1,037,643)
	$	1,911,828	$	(1,372,237)	$	539,591	$	538,086	$	(1,037,643)	$	(499,557)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	18,293	$	18,293	$	—	$	11,519	$	11,519
Mortgage servicing liabilities		—		4,018		4,018		—		1,520		1,520
	$	—	$	22,311	$	22,311	$	—	$	13,039	$	13,039

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

	September 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	$	8,670,895	$	8,279,163	$	391,732	$	4,628,333	$	4,431,854	$	196,479
90 days or more delinquent:
Not in foreclosure		392,866		404,183		(11,317)		236,650		241,958		(5,308)
In foreclosure		62,411		66,327		(3,916)		47,970		50,194		(2,224)
	$	9,126,172	$	8,749,673	$	376,499	$	4,912,953	$	4,724,006	$	188,947

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a summary of assets that were measured at fair value on a nonrecurring basis:

Real estate acquired in settlement of loans	Level 1		Level 2		Level 3		Total
	(in thousands)
September 30, 2020	$	—	$	—	$	7,346	$	7,346
December 31, 2019	$	—	$	—	$	9,850	$	9,850

The following table summarizes the (losses) gains recognized on assets when they were remeasured at fair value on a nonrecurring basis:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Real estate acquired in settlement of loans	$	(825)	$	139	$	(2,059)	$	162

Fair Value of Financial Instruments Carried at Amortized Cost

The Company’s Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell, Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Obligations under capital lease, Notes payable secured by mortgage servicing assets and Unsecured senior notes are carried at amortized cost.

These assets and liabilities are classified as “Level 3” fair value items due to the Company’s reliance on unobservable inputs to estimate their fair values. The Company has concluded that the fair values of these assets and liabilities other than the 2018-GTI Notes and 2018-GT2 Notes (the “2018 Term Notes”) included in Notes payable secured by mortgage servicing assets and the Unsecured Notes (as hereafter defined) approximate their carrying values due to their short terms and/or variable interest rates.

The Company estimates the fair value of the 2018 Term Notes and the Unsecured Notes based on non-affiliate broker indications of fair value. The fair value and carrying value of these notes are summarized below:

	September 30, 2020				December 31, 2019
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
2018 Term Notes	$	1,259,619	$	1,295,143	$	1,303,047	$	1,294,070
Unsecured Notes	$	510,000	$	492,358	$	—	$	—

Valuation Governance

Most of the Company’s financial assets, and all of its MSRs, ESS, derivative liabilities 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 derivative liabilities and all of its MSRs, ESS, and MSLs are “Level 3” fair value assets and liabilities which require 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 assets and liabilities, the Company 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 assets and liabilities other than IRLCs.

With respect to the non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. As of September 30, 2020, the Company’s senior management valuation committee includes the Company’s chief financial, investment and risk officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.

The FAV group is responsible for reporting to the Company’s senior management valuation committee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, 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.

The Company has assigned responsibility for developing the fair values of IRLCs 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.

Valuation Techniques and Inputs

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

Loans Held for Sale

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

Certain of the Company’s loans held for sale are not saleable into active markets and are therefore categorized as “Level 3” fair value assets. Loans held for sale categorized as “Level 3” fair value assets include:

● Government guaranteed or insured loans purchased by the Company from Ginnie Mae guaranteed pools in its loan servicing portfolio. The Company’s right to purchase government guaranteed or insured loans arises as the result of the loan being at least three months delinquent on the date 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 loans may be resold to investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed security. Such eligibility occurs when the repurchased loans become current either through the borrower’s reperformance or through completion of a modification of the loan’s terms or after six months of timely payments following the completion of certain types of payment deferral programs.

● Loans that are not saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a loan with an identified defect.

● Home equity lines of credit held for sale to PMT. At present, an active market with observable inputs that are significant to the estimation of fair value of home equity lines of credit does not exist.

The Company uses a discounted cash flow model to estimate the fair value of its “Level 3” fair value loans held for sale. The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value loans held for sale are discount rates, home price projections, voluntary prepayment/resale and total prepayment speeds. Significant changes in any of those inputs in isolation could result in a significant change to the 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 loans held for sale:

	September 30, 2020		December 31, 2019
Fair value (in thousands)	$	2,774,997	$	383,878
Key inputs (1):
Discount rate:
Range		3.2% – 9.2%		3.0% – 9.2%
Weighted average		3.2%		3.0%
Twelve-month projected housing price index change:
Range		2.1% – 2.6%		2.6% – 3.2%
Weighted average		2.2%		2.8%
Voluntary prepayment/resale speed (2):
Range		0.5% – 24.9%		0.4% – 21.4%
Weighted average		19.6%		18.2%
Total prepayment speed (3):
Range		0.6% – 38.7%		0.5% – 39.2%
Weighted average		29.9%		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.

Changes in fair value of loans held for sale attributable to changes in the loan’s instrument-specific credit risk are measured with reference to the change in the respective 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 loans held for sale are included in Net gains on 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 “Level 3” fair value assets or liabilities. The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and the probability that the loan will be funded or 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 the IRLCs’ 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 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 loans held for sale at fair value in the consolidated statements of income.

Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

	September 30, 2020		December 31, 2019
Fair value (in thousands) (1)	$	541,445	$	136,650
Key inputs (2):
Pull-through rate:
Range		11.8% – 100%		12.2% – 100%
Weighted average		80.6%		86.5%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		1.0 – 5.1		1.4 – 5.7
Weighted average		3.5		4.2
Percentage of loan commitment amount
Range		0.2% – 2.5%		0.3% – 2.8%
Weighted average		1.1%		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.

Hedging Derivatives

Fair values of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities; fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities.

Changes in the fair value of hedging derivatives are included in Net gains on loans held for sale at fair value, or Net loan servicing fees – Hedging results, as applicable, in the consolidated statements of income.

Repurchase Agreement Derivatives

Through August 21, 2019, the Company had a master repurchase agreement that included incentives for financing loans approved for satisfying designated consumer relief characteristics. These incentives are classified for financial reporting purposes as embedded derivatives and are separated for reporting purposes from the master repurchase agreement. Repurchase agreement derivatives are categorized as “Level 3” fair value assets. The significant unobservable inputs used in the valuation of repurchase agreement derivative assets are the discount rate and the Company’s expected approval rate of the loans financed under the master repurchase agreement. The resulting ratio included in the Company’s fair value estimate was 99.0% at December 31, 2019.

Mortgage Servicing Rights

MSRs are categorized as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The key inputs used in the estimation of the fair value of MSRs include the applicable pricing spread (discount rate), prepayment rates of the underlying loans, and annual per-loan cost to service the underlying loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

Following are the key inputs used in determining the fair value of MSRs received by the Company when it retains the obligation to service the mortgage loans it sells:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	245,946	$	246,757	$	753,795	$	545,839
Unpaid principal balance of underlying loans	$	25,369,941	$	15,709,249	$	63,766,627	$	35,532,425
Weighted average servicing fee rate (in basis points)		32		43		36		42
Key inputs (1):
Pricing spread (2)
Range		8.0% – 17.6%		5.5% – 16.2%		6.8% – 18.1%		5.5% – 16.2%
Weighted average		9.6%		8.3%		9.3%		8.6%
Annual total prepayment speed (3)
Range		7.2% – 41.0%		8.8% – 32.1%		7.2% – 49.8%		7.7% – 32.8%
Weighted average		10.4%		15.7%		12.4%		15.0%
Equivalent average life (in years)
Range		2.3 – 9.1		2.7 – 7.5		1.5 – 9.1		2.6 – 7.8
Weighted average		7.3		5.5		6.6		5.8
Per-loan annual cost of servicing
Range		$80 – $110		$78 – $100		$77 – $110		$78 – $100
Weighted average		$102		$97		$100		$97

(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.

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:

	September 30, 2020	December 31, 2019
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,333,821	$ 2,926,790
Pool characteristics:
Unpaid principal balance of underlying loans	$ 234,850,997	$ 225,787,103
Weighted average note interest rate	3.8%	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	10.1%	8.5%
Effect on fair value of:
5% adverse change	($42,266)	($44,561)
10% adverse change	($82,935)	($87,734)
20% adverse change	($159,813)	($170,155)
Annual total prepayment speed (3):
Range	10.4% – 32.3%	9.3% – 40.9%
Weighted average	15.3%	12.7%
Equivalent average life (in years)
Range	1.7 – 6.8	1.4 – 7.4
Weighted average	5.4	6.1
Effect on fair value of:
5% adverse change	($67,933)	($63,569)
10% adverse change	($132,698)	($124,411)
20% adverse change	($253,474)	($238,549)
Annual per-loan cost of servicing:
Range	$78 – $110	$77 – $100
Weighted average	$104	$97
Effect on fair value of:
5% adverse change	($25,138)	($24,516)
10% adverse change	($50,275)	($49,032)
20% adverse change	($100,551)	($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.

The preceding sensitivity analyses are limited in that they were performed as of a particular date; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of the 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

ESS is categorized as a “Level 3” fair value liability. Because ESS is a claim to a portion of the cash flows from MSRs, the fair value measurement of the ESS is similar to that of MSRs. The Company uses the same discounted cash flow approach to measuring the ESS as it uses to measure MSRs except that certain inputs relating to the cost to service the mortgage loans underlying the MSRs and certain ancillary income are not included as these cash flows do not accrue to the holder of the ESS.

The key inputs used in the estimation of ESS fair value include pricing spread (discount rate) 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 directly related.

ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally discourage mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing the fair value of this financing. Changes in the fair value of ESS are included in Net loan servicing fees—Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust.

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

	September 30,	December 31,
	2020	2019
Fair value (in thousands)	$ 142,990	$ 178,586
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 17,070,283	$ 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	9.6% – 17.6%	8.7% – 16.2%
Weighted average	11.8%	11.0%
Equivalent average life (in years)
Range	2.4 – 6.7	2.7 – 7.2
Weighted average	5.8	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.

Mortgage Servicing Liabilities

MSLs are categorized as “Level 3” fair value liabilities. The Company uses a discounted cash flow approach to estimate the fair value of MSLs. The key inputs used in the estimation of the fair value of MSLs include the applicable pricing spread (discount rate), prepayment rates, and the annual per-loan cost to service the underlying loans. Changes in the fair value of MSLs are included in Net servicing fees—Change in fair value of mortgage servicing rights and mortgage servicing liabilities in the consolidated statements of income.

Following are the key inputs used in determining the fair value of MSLs:

		September 30,		December 31,
		2020		2019
Fair value (in thousands)	$	31,698	$	29,140
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	1,799,562	$	2,758,454
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.1%		8.2%
Annual total prepayment speed (2)		35.1%		29.2%
Equivalent average life (in years)		2.9		3.9
Annual per-loan cost of servicing	$	343	$	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.

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Loans Held for Sale at Fair Value

9 Months Ended

Sep. 30, 2020

Loans Held for Sale at Fair Value

Loans Held for Sale at Fair Value

Note 7—Loans Held for Sale at Fair Value

Loans held for sale at fair value include the following:

	September 30,		December 31,
Loan type	2020		2019
	(in thousands)
Government-insured or guaranteed	$	5,219,448	$	4,222,010
Conventional conforming		1,131,727		307,065
Purchased from Ginnie Mae pools serviced by the Company		2,759,032		374,121
Repurchased pursuant to representations and warranties		15,965		9,244
Home equity lines of credit		—		513
	$	9,126,172	$	4,912,953
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	8,453,522	$	4,322,789
Mortgage loan participation purchase and sale agreements		558,023		523,349
	$	9,011,545	$	4,846,138

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2020

Derivative Financial Instruments

Derivative Financial Instruments

Note 8—Derivative Financial Instruments

The Company holds and issues derivative financial instruments in connection with its operating activities. Derivative financial instruments are created as a result of certain of the Company’s operations and when the Company enters into derivative transactions as part of its interest rate risk management activities. Derivative financial instruments created as a result of the Company’s operations include:

● IRLCs that are created when the Company commits to purchase or originate a loan for sale.

● Derivatives that were embedded in a master repurchase agreement that provided for the Company to receive incentives for financing mortgage loans that satisfied certain consumer relief characteristics under the master repurchase agreement.

The Company also engages in interest rate risk management activities in an effort to moderate the effect of changes in market interest rates on the fair value of certain of the its assets. 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 loans held for sale and the portion of its MSRs not financed with ESS.

The Company does not designate and qualify any of its derivatives for hedge accounting. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.

Derivative Notional Amounts and Fair Value of Derivatives

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

	September 30, 2020					December 31, 2019
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	18,873,579	$	544,151	$	2,706	7,122,316	$	138,511	$	1,861
Repurchase agreement derivatives			—		—			8,187		—
Used for hedging purposes (1):
Forward purchase contracts	31,443,783		72,640		15,903	13,618,361		12,364		19,040
Forward sales contracts	42,438,243		21,652		98,765	16,220,526		17,097		18,045
MBS put options	12,950,000		27,336		—	6,100,000		3,415		—
MBS call options	1,850,000		4,255		—	—		—		—
Swaption purchase contracts	3,125,000		5,568		—	1,750,000		2,409		—
Put options on interest rate futures purchase contracts	2,275,000		5,910		—	2,250,000		3,945		—
Call options on interest rate futures purchase contracts	950,000		1,570		—	750,000		1,469		—
Treasury futures purchase contracts	1,000,000		—		—	1,276,000		—		—
Treasury futures sale contracts	450,000		—		—	1,010,000		—		—
Interest rate swap futures purchase contracts	3,585,000		—		—	3,210,000		—		—
Total derivatives before netting			683,082		117,374			187,397		38,946
Netting			(104,828)		(92,837)			(27,711)		(16,616)
		$	578,254	$	24,537		$	159,686	$	22,330
Collateral received from derivative counterparties, net		$	(11,991)				$	(11,095)

(1) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

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

	Notional amounts, quarter ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	20,709,914	143,902,517	(133,168,648)	31,443,783
Forward sale contracts	25,302,147	175,642,745	(158,506,649)	42,438,243
MBS put options	11,200,000	29,850,000	(28,100,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	3,375,000	3,625,000	(3,875,000)	3,125,000
Swaption sale contracts	—	3,875,000	(3,875,000)	—
Put options on interest rate futures purchase contracts	350,000	3,325,000	(1,400,000)	2,275,000
Call options on interest rate futures purchase contracts	1,800,000	1,200,000	(2,050,000)	950,000
Put options on interest rate futures sale contracts	—	1,400,000	(1,400,000)	—
Call options on interest rate futures sale contracts	—	2,050,000	(2,050,000)	—
Treasury futures purchase contracts	925,000	1,561,500	(1,486,500)	1,000,000
Treasury futures sale contracts	450,000	1,486,500	(1,486,500)	450,000
Interest rate swap futures purchase contracts	3,460,000	1,200,000	(1,075,000)	3,585,000
Interest rate swap futures sales contracts	—	1,075,000	(1,075,000)	—

	Notional amounts, quarter ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	19,497,698	100,139,970	(103,807,843)	15,829,825
Forward sale contracts	14,276,156	122,174,329	(121,333,675)	15,116,810
MBS put options	12,775,000	29,575,000	(32,300,000)	10,050,000
MBS call options	2,250,000	—	(2,250,000)	—
Put options on interest rate futures purchase contracts	2,835,000	9,850,000	(8,335,000)	4,350,000
Call options on interest rate futures purchase contracts	3,687,500	1,750,000	(4,837,500)	600,000
Put options on interest rate futures sale contracts	—	8,335,000	(8,335,000)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	486,100	5,132,000	(4,209,600)	1,408,500
Treasury futures sale contracts	1,550,000	3,792,100	(4,209,600)	1,132,500
Interest rate swap futures purchase contracts	2,900,000	1,800,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

	Notional amounts, nine months ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,618,361	370,704,328	(352,878,906)	31,443,783
Forward sale contracts	16,220,526	444,965,072	(418,747,355)	42,438,243
MBS put options	6,100,000	79,600,000	(72,750,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	1,750,000	14,700,000	(13,325,000)	3,125,000
Swaption sale contracts	—	13,325,000	(13,325,000)	—
Put options on interest rate futures purchase contracts	2,250,000	12,025,000	(12,000,000)	2,275,000
Call options on interest rate futures purchase contracts	750,000	9,740,000	(9,540,000)	950,000
Put options on interest rate futures sale contracts	—	12,000,000	(12,000,000)	—
Call options on interest rate futures sale contracts	—	9,540,000	(9,540,000)	—
Treasury futures purchase contracts	1,276,000	5,516,700	(5,792,700)	1,000,000
Treasury futures sale contracts	1,010,000	5,232,700	(5,792,700)	450,000
Interest rate swap futures purchase contracts	3,210,000	4,150,000	(3,775,000)	3,585,000
Interest rate swap futures sales contracts	—	3,775,000	(3,775,000)	—

	Notional amounts, nine months ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,657,026	237,370,321	(228,197,522)	15,829,825
Forward sale contracts	6,890,046	275,749,351	(267,522,587)	15,116,810
MBS put options	4,635,000	77,185,000	(71,770,000)	10,050,000
MBS call options	1,450,000	6,750,000	(8,200,000)	—
Put options on interest rate futures purchase contracts	3,085,000	19,422,500	(18,157,500)	4,350,000
Call options on interest rate futures purchase contracts	1,512,500	13,127,800	(14,040,300)	600,000
Put options on interest rate futures sale contracts	—	27,297,800	(27,297,800)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	835,000	11,943,400	(11,369,900)	1,408,500
Treasury futures sale contracts	1,450,000	11,052,400	(11,369,900)	1,132,500
Interest rate swap futures purchase contracts	625,000	4,075,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

Derivative Balances and Netting of Financial Instruments

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 and repurchase agreement derivatives.

Offsetting of Derivative Assets

Following are summaries of derivative assets and related netting amounts:

	September 30, 2020						December 31, 2019
	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 master netting arrangements:
Interest rate lock commitments	$	544,151	$	—	$	544,151	$	138,511	$	—	$	138,511
Repurchase agreement derivatives		—		—		—		8,187		—		8,187
		544,151		—		544,151		146,698		—		146,698
Derivatives subject to master netting arrangements:
Forward purchase contracts		72,640		—		72,640		12,364		—		12,364
Forward sale contracts		21,652		—		21,652		17,097		—		17,097
MBS put options		27,336		—		27,336		3,415		—		3,415
MBS call options		4,255		—		4,255		—		—		—
Swaption purchase contracts		5,568		—		5,568		2,409		—		2,409
Put options on interest rate futures purchase contracts		5,910		—		5,910		3,945		—		3,945
Call options on interest rate futures purchase contracts		1,570		—		1,570		1,469		—		1,469
Netting		—		(104,828)		(104,828)		—		(27,711)		(27,711)
		138,931		(104,828)		34,103		40,699		(27,711)		12,988
	$	683,082	$	(104,828)	$	578,254	$	187,397	$	(27,711)	$	159,686

Derivative Assets, Financial Instruments, and Cash 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 meet the accounting guidance qualifying for netting.

	September 30, 2020								December 31, 2019
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	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	$	544,151	$	—	$	—	$	544,151	$	138,511	$	—	$	—	$	138,511
JPMorgan Chase Bank, N.A.		18,772		—		—		18,772		2,196		—		—		2,196
RJ O'Brien		7,480		—		—		7,480		5,414		—		—		5,414
Wells Fargo Bank, N.A.		5,256		—		—		5,256		—		—		—		—
Goldman Sachs		1,148		—		—		1,148		2,548		—		—		2,548
Deutsche Bank		—		—		—		—		9,138		—		—		9,138
Mizuho Securities		—		—		—		—		1,597		—		—		1,597
Others		1,447		—		—		1,447		282		—		—		282
	$	578,254	$	—	$	—	$	578,254	$	159,686	$	—	$	—	$	159,686

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. Assets sold under agreements to repurchase do not qualify for netting.

	September 30, 2020						December 31, 2019
					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 master netting arrangements – Interest rate lock commitments	$	2,706	$	—	$	2,706	$	1,861	$	—	$	1,861
Derivatives subject to a master netting arrangement:
Forward purchase contracts		15,903		—		15,903		19,040		—		19,040
Forward sale contracts		98,765		—		98,765		18,045		—		18,045
Netting		—		(92,837)		(92,837)		—		(16,616)		(16,616)
		114,668		(92,837)		21,831		37,085		(16,616)		20,469
Total derivatives		117,374		(92,837)		24,537		38,946		(16,616)		22,330
Assets sold under agreements to repurchase:
Amount outstanding		7,267,046		—		7,267,046		4,141,680		—		4,141,680
Unamortized debt issuance cost, net		(7,858)		—		(7,858)		(627)		—		(627)
		7,259,188		—		7,259,188		4,141,053		—		4,141,053
	$	7,376,562	$	(92,837)	$	7,283,725	$	4,179,999	$	(16,616)	$	4,163,383

Derivative Liabilities, Financial Instruments, 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, 2020								December 31, 2019
			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	$	2,706	$	—	$	—	$	2,706	$	1,861	$	—	$	—	$	1,861
Credit Suisse First Boston Mortgage Capital LLC		3,613,132		(3,607,746)		—		5,386		1,235,430		(1,235,430)		—		—
Morgan Stanley Bank, N.A.		784,434		(784,434)		—		—		582,941		(582,941)		—		—
Bank of America, N.A.		767,391		(767,391)		—		—		379,400		(374,190)		—		5,210
JPMorgan Chase Bank, N.A.		741,341		(741,341)		—		—		936,172		(936,172)		—		—
Citibank, N.A.		637,347		(632,928)		—		4,419		655,831		(653,170)		—		2,661
BNP Paribas		370,013		(370,013)		—		—		183,880		(183,880)		—		—
Royal Bank of Canada		363,193		(363,193)		—		—		175,897		(175,897)		—		—
Federal Home Loan Mortgage Corporation		5,755		—		—		5,755		—		—		—		—
Mizuho Securities		2,366		—		—		2,366		—		—		—		—
Barclays Capital		1,648		—		—		1,648		—		—		—		—
Wells Fargo Bank, N.A.		—		—		—		—		11,212		—		—		11,212
Others		2,257		—		—		2,257		1,386		—		—		1,386
	$	7,291,583	$	(7,267,046)	$	—	$	24,537	$	4,164,010	$	(4,141,680)	$	—	$	22,330

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

		Quarter ended September 30,				Nine months ended September 30,
Derivative activity	Income statement line	2020		2019		2020		2019
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	173,381	$	33,347	$	404,795	$	95,785
Repurchase agreement derivatives	Interest expense	$	83	$	92	$	83	$	(1,608)
Hedged item (2):
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	(77,320)	$	(55,540)	$	(403,992)	$	(157,362)
Mortgage servicing rights	Net loan servicing fees–Change in fair value of mortgage servicing rights and mortgage servicing liabilities	$	6,521	$	250,146	$	1,027,327	$	587,883

(1) Represents net increase in fair value of IRLCs from the beginning to the end of the reporting period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loans are shown in the rollforward of IRLCs for the period in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

(2) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

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Mortgage Servicing Rights and Mortgage Servicing Liabilities

9 Months Ended

Sep. 30, 2020

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	2,213,539	$	2,720,335	$	2,926,790	$	2,820,612
Additions:
Resulting from loan sales		245,946		246,757		753,795		545,839
Purchases (purchase adjustments), net		(287)		46		25,473		227,445
		245,659		246,803		779,268		773,284
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(26,208)		(286,880)		(1,040,751)		(704,967)
Other changes in fair value (2)		(99,169)		(124,005)		(331,486)		(332,676)
Total change in fair value		(125,377)		(410,885)		(1,372,237)		(1,037,643)
Balance at end of period	$	2,333,821	$	2,556,253	$	2,333,821	$	2,556,253
					September 30,		December 31,
					2020		2019
					(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets					$	2,330,600	$	2,920,603

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

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

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	29,858	$	12,948	$	29,140	$	8,681
Mortgage servicing liabilities resulting from loan sales		—		19,501		6,576		27,133
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		10,822		8,630		24,927		14,687
Other changes in fair value (2)		(8,982)		(6,785)		(28,945)		(16,207)
Total change in fair value		1,840		1,845		(4,018)		(1,520)
Balance at end of period	$	31,698	$	34,294	$	31,698	$	34,294

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

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

Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Contractual servicing fees	$	203,696	$	185,967	$	601,527	$	533,510
Other fees:
Late charges		7,615		12,430		28,718		31,258
Other		6,960		4,846		17,781		9,119
	$	218,271	$	203,243	$	648,026	$	573,887

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Leases

9 Months Ended

Sep. 30, 2020

Leases

Leases

Note 10—Leases

The Company has operating lease agreements relating to its facilities. The Company’s operating lease agreements have remaining terms ranging from less than one year to ten years; some of these operating lease agreements include options to extend the term for up to five years. None of the Company’s operating lease agreements require the Company to make variable lease payments.

The Company’s lease agreements are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in thousands)
Lease expense:
Operating leases	$	4,144	$	3,356	$	12,110	$	9,817
Short-term leases		457		213		937		644
Sublease income		—		(35)		—		(94)
Net lease expense included in Occupancy and equipment	$	4,601	$	3,534	$	13,047	$	10,367
Other information:
Cash payments for operating leases	$	4,418	$	4,063	$	13,212	$	11,793
Operating lease right-of-use assets recognized:
Upon adoption Accounting Standards Update 2016-02, Leases (Topic 842)	$	—	$	—	$	—	$	58,713
New leases		1,721		1,929		8,219		1,929
	$	1,721	$	1,929	$	8,219	$	60,642
Period end weighted averages:
Remaining lease term (in years)		6.4		5.8
Discount rate		4.2%		4.6%

Lease payments of the Company’s operating lease liabilities are summarized below:

Twelve months ended September 30,	Operating leases
	(in thousands)
2021	$	18,586
2022		16,405
2023		16,792
2024		14,474
2025		13,296
Thereafter		27,224
Total lease payments		106,777
Less imputed interest		(14,772)
Total	$	92,005

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Other Assets

9 Months Ended

Sep. 30, 2020

Other Asset

Other Assets

Note 11—Other Assets

Other assets are summarized below:

		September 30,		December 31,
	2020		2019
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Margin deposits		90,156		84,118
Capitalized software, net		91,237		63,130
Furniture, fixture, equipment and building improvements, net		29,274		30,480
Real estate acquired in settlement of loans		14,395		20,326
Other		233,570		135,503
	$	651,229	$	333,557
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		8,862		12,192
Furniture, fixture, equipment and building improvements, net		6,088		20,406
	$	207,547	$	32,598

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Borrowings

9 Months Ended

Sep. 30, 2020

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, 2020.

Assets Sold Under Agreements to Repurchase

The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by loans held for sale at fair value or participation certificates backed by MSRs. Eligible loans and participation certificates backed by MSRs are sold at advance rates based on the fair value (as determined by the lender) of the assets sold. Interest is charged at a rate based on LIBOR. Loans and MSRs financed under these agreements may be re-pledged by the lenders.

On April 1, 2020, the Company issued a series of variable funding notes, the Series 2020-SPIADVF1 Notes (“GMSR Servicing Advance Notes”), to be sold under agreement to repurchase pursuant to a Master Repurchase Agreement, dated as of April 1, 2020, with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), acting as administrative agent on behalf of Credit Suisse AG, Cayman Islands Branch (“CSCIB”), as buyer (the “GMSR Servicing Advances Repurchase Agreement”).

The GMSR Servicing Advance Notes leverage the GNMA MSR Facility to support a separately defined servicing advance facility within the existing structure and provide the Company enhanced ability to finance its servicing advance obligations to Ginnie Mae and its security holders as necessary. Specifically, the GMSR Servicing Advances Repurchase Agreement provides the Company with financing secured by its servicing advances to pay, in accordance with the Ginnie Mae requirements, in the event borrowers are delinquent: (i) regularly scheduled monthly principal and interest to mortgage-backed securities holders; (ii) taxes, homeowner’s insurance, and other escrowed items; and (iii) other expenses related to servicing delinquent loans as specified by (A) state and federal laws and (B) government agencies, including the FHA, the VA, and the USDA.

The borrowing capacity under the GMSR Servicing Advances Repurchase Agreement, shared with VFN financing capacity, is $600 million, all of which is committed and may be used to finance the servicing advances related to delinquent FHA, VA, and USDA loans, including delinquencies caused by forbearance in accordance with the CARES Act.

Assets sold under agreements to repurchase are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	3,363,140		$	2,098,208		$	2,669,336		$	1,861,086
Weighted average interest rate (1)		2.68	%		3.66	%		3.06	%		4.08	%
Total interest expense (2)	$	27,322		$	19,429		$	70,493		$	47,709
Maximum daily amount outstanding	$	7,267,046		$	3,539,459		$	7,267,046		$	3,539,459

		September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	7,267,046		$	4,141,680
Unamortized debt issuance costs		(7,858)			(627)
	$	7,259,188		$	4,141,053
Weighted average interest rate		1.85	%		3.29	%
Available borrowing capacity (3):
Committed	$	17,072		$	125,810
Uncommitted		2,940,882			782,510
	$	2,957,954		$	908,320
Fair value of assets securing repurchase agreements:
Loans held for sale	$	8,453,522		$	4,322,789
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958		$	107,512
Servicing advances (4)	$	232,519		$	207,460
Mortgage servicing rights (4)	$	2,283,876		$	2,902,721
Deposits (4)	$	192,597		$	—
Margin deposits placed with counterparties (5)	$	4,375		$	5,000

(1) Excludes the effect of amortization of net issuance costs of $4.8 million and $9.2 million for the quarter and nine months ended September 30, 2020, respectively, and net issuance costs and premiums of $0.2 million and $9.2 million for the quarter and nine months ended September 30, 2019, respectively.

(2) In 2017, PFSI 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 $1.6 million and $14.7 million of such incentives as reductions in Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

(3) 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 financed.

(4) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, the 2018 Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

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

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

Remaining maturity at September 30, 2020	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	1,490,837
Over 30 to 90 days		5,365,208
Over 90 to 180 days		361,001
Over 180 days to one year		50,000
Total assets sold under agreements to repurchase	$	7,267,046
Weighted average maturity (in months)		2.0

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 assets sold under agreements to repurchase is summarized by counterparty below as of September 30, 2020:

			Weighted average
			maturity of advances
			under repurchase
Counterparty	Amount at risk		agreement	Facility maturity
	(in thousands)
Credit Suisse First Boston Mortgage Capital LLC (1)	$	1,092,694	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	460,264	October 19, 2020	April 23, 2021
Bank of America, N.A.	$	410,222	November 2, 2020	March 11, 2021
JP Morgan Chase Bank, N.A.	$	192,579	December 2, 2020	January 7, 2021
Morgan Stanley Bank, N.A.	$	62,630	November 3, 2020	November 3, 2020
Citibank, N.A.	$	48,231	December 15, 2020	August 3, 2021
Royal Bank of Canada	$	33,343	October 30, 2020	October 30, 2020
BNP Paribas	$	27,646	December 16, 2020	July 30, 2021

(1) The calculation of the amount at risk includes the VFN and the 2018 Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018 Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

The Company is subject to margin calls during the period the repurchase 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 Purchase and Sale Agreements

Certain of the borrowing facilities secured by loans held for sale are in the form of mortgage loan participation purchase 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 a 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 purchase and sale agreements are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	235,713		$	258,169		$	227,460		$	249,023
Weighted average interest rate (1)		1.40	%		3.36	%		1.98	%		3.55	%
Total interest expense	$	999		$	2,304		$	3,870		$	7,034
Maximum daily amount outstanding	$	538,074		$	524,095		$	540,977		$	548,038

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $135,000 for the quarters ended September 30, 2020 and 2019, respectively, and $490,000 and $405,000 for the nine months ended September 30, 2020 and 2019, respectively.

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	535,378		$	497,948
Unamortized debt issuance costs		(315)			—
	$	535,063		$	497,948
Weighted average interest rate		1.40	%		3.05	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	558,023		$	523,349

Obligations Under Capital Lease

The Company has a capital lease transaction secured by certain fixed assets and capitalized software. The capital lease matures on June 13, 2022 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,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	15,179		$	25,812		$	17,253		$	13,380
Weighted average interest rate		2.16	%		4.47	%		2.69	%		4.48	%
Total interest expense	$	83		$	274		$	354		$	476
Maximum daily amount outstanding	$	16,749		$	28,295		$	20,810		$	28,295

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Unpaid principal balance	$	13,957		$	20,810
Weighted average interest rate		2.15	%		3.74	%
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	6,088		$	20,406
Capitalized software	$	8,862		$	12,192

Notes Payable Secured by Mortgage Servicing Assets

2018 Term Notes

The Company, through the Issuer Trust, issued the 2018 Term Notes to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The 2018 Term Notes rank pari passu with each other and with the VFN issued by the Issuer Trust to PLS and are secured by certain participation certificates relating to Ginnie Mae MSRs and ESS that are financed pursuant to the GNMA MSR Facility.

Following is a summary of the issued and outstanding 2018 Term Notes:

Issuance Date	Principal		Stated interest rate (1)	Maturity date (2)
	(in thousands)		(Annually)
February 28, 2018 (the "2018-GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "2018-GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The 2018 Term Notes indentures provide the Company with the option to extend the maturity of the 2018 Term Notes by two years after the stated maturity.

MSR Note Payable

On February 1, 2018, the Company issued a note payable that is secured by Freddie Mac MSRs. Interest is charged at a rate based on LIBOR plus the applicable contract margin. The facility expires on October 21, 2020. The maximum amount that the Company may borrow under the note payable is $600 million, less any amount outstanding under the agreement to repurchase pursuant to which the Company finances the VFN. The Company did not borrow under this note payable during the periods presented.

Notes payable are summarized below:

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.99	%		5.11	%		3.57	%		5.21	%
Total interest expense	$	10,177		$	17,044		$	36,131		$	52,118
Maximum daily amount outstanding	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000

(1) Excludes the effect of amortization of debt issuance costs totaling $459,000 and $445,000 for the quarters ended September 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the nine month periods ended September 30, 2020 and 2019, respectively.

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(4,857)			(5,930)
	$	1,295,143		$	1,294,070
Weighted average interest rate		2.93	%		4.46	%
Assets pledged to secure notes payable (1):
Servicing advances	$	232,519		$	207,460
Mortgage servicing rights	$	2,213,344		$	2,861,442
Deposits	$	192,597		$	—

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the 2018 Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheet.

Unsecured Senior Notes

On September 29, 2020, the Company issued $500 million aggregate principal amount of 5.375% senior notes (the “Unsecured Notes”). Interest on the Unsecured Notes accrues beginning on September 29, 2020 at a rate of 5.375% per year. Interest on the Unsecured Notes is payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2021. The Unsecured Notes mature on October 15, 2025.

Before October 15, 2022, the Company may, at its option and on any one or more occasions redeem:

● some or all of the Unsecured Notes at a price equal to 100% of the principal amount of the Unsecured Notes redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, plus a make-whole premium; and

● up to 40% of the aggregate principal amount of the Unsecured Notes with an amount equal to or less than the net proceeds from certain equity offerings at a redemption price of 105.375% plus accrued and unpaid interest to, but excluding, the redemption date.

On or after October 15, 2022, the Company may, at its option and on any one or more occasions, redeem some or all of the Unsecured Notes at the applicable redemption prices set forth in the indenture under which the Unsecured Notes were issued, plus accrued and unpaid interest to, but excluding, the redemption date.

If a “change of control” (as defined in the indenture under which the Unsecured Notes were issued) occurs, the holders of the Unsecured Notes may require the Company to purchase for cash all or a portion of their Unsecured Notes at a purchase price equal to 101% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest to, but excluding, the repurchase date.

The Unsecured Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any future subordinated indebtedness of the Company, equally in right of payment with all existing and future senior indebtedness of the Company and effectively subordinated to any future secured indebtedness of the Company to the extent of the value of collateral securing such indebtedness.

The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of PFSI’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries). The guarantees are senior unsecured obligations of the guarantors and will rank senior in right of payment to any future subordinated indebtedness of the guarantors, equally in right of payment with all existing and future senior indebtedness of the guarantors and effectively subordinated to any future secured indebtedness of the guarantors to the extent of the value of collateral securing such indebtedness. The Unsecured Notes and the guarantees are structurally subordinated to the indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Unsecured Notes.

Corporate Revolving Line of Credit

The Company, through its subsidiary PennyMac, entered into an amended and restated credit agreement on November 18, 2016, as amended (the “Credit Agreement”) under which PennyMac established a revolving line of credit in an amount not to exceed $150 million. Certain cash accounts with balances totaling $52.6 million at December 31, 2019, were pledged to secure this revolving line of credit. PennyMac did not borrow under the revolving line of credit during the periods presented and terminated the Credit Agreement on September 29, 2020 concurrent with the issuance the Unsecured Notes. Debt issuance costs and non-utilization fees totaled $561,000 and $481,000 for the quarters ended September 30, 2020 and 2019, respectively, and $1.5 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

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Liability for Losses Under Representations and Warranties

9 Months Ended

Sep. 30, 2020

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,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	25,909	$	18,709	$	21,446	$	21,155
Provision for losses on loans sold:
Resulting from sales of loans		5,219		2,508		13,120		5,222
Reduction in liability due to change in estimate		(2,473)		(1,175)		(5,419)		(6,305)
Losses incurred, net		(151)		(74)		(643)		(104)
Balance at end of period	$	28,504	$	19,968	$	28,504	$	19,968
Unpaid principal balance of loans subject to representations and warranties at end of period	$	199,194,983	$	166,541,153

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Income Taxes

9 Months Ended

Sep. 30, 2020

Income Taxes

Income Taxes

Note 14—Income Taxes

The Company’s effective income tax rates were 26.5% and 26.9% for the quarters ended September 30, 2020 and 2019, respectively and 26.4% and 26.3% for the nine months ended September 30, 2020 and 2019, respectively.

The CARES Act, passed in March 2020, introduced a number of tax law changes which are generally taxpayer favorable. The Company does not anticipate any material changes in its effective income tax rates resulting from the CARES Act.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies.

Commitments and Contingencies

Note 15—Commitments and Contingencies

Litigation

From time to time, the Company may be a party to legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

On December 20, 2018, a purported shareholder of the Company filed a complaint in a putative class and derivative action in the Court of Chancery of the State of Delaware (the “Delaware Court”), captioned Robert Garfield v. BlackRock Mortgage Ventures, LLC et al., Case No. 2018-0917-KSJM (the “Garfield Action”). The Garfield Action alleges, among other things, that certain current directors and officers of the Company breached their fiduciary duties to the Company and its shareholders by, among other things, agreeing to and entering into a corporate reorganization (the “Reorganization”), without ensuring that the Reorganization was entirely fair to the Company or public shareholders. In connection with the Reorganization, the Company was formed as a Delaware corporation on July 2, 2018, and became the top-level parent holding company for the consolidated PennyMac business on November 1, 2018, The Reorganization was approved by 99.8% of voting shareholders on October 24, 2018. On December 19, 2019, the Delaware Court denied a motion to dismiss filed by the Company and certain of its directors and officers. While the Company and its co-defendants believe the Garfield Action is without merit and expressly disclaim any wrongdoing, they have collectively agreed to settle the Garfield Action for an amount equal to $6.85 million in order to avoid the ongoing costs of litigation and further distractions to their respective businesses. A settlement agreement was filed with the Delaware Court on October 9, 2020, and is currently pending approval. The Company’s share of the settlement amount will be paid entirely by one of the Company’s insurers.

On November 5, 2019, Black Knight Servicing Technologies, LLC, a wholly-owned indirect subsidiary of Black Knight, Inc. (“BKI”), filed a Complaint and Demand for Jury Trial in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida (the “Florida State Court”), captioned Black Knight Servicing Technologies, LLC v. PennyMac Loan Services, LLC, Case No. 2019-CA-007908 (the “BKI Complaint”). Allegations contained within the BKI Complaint include breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage-processing system intended to replace the MSP® System. The BKI Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of PLS as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. On March 30, 2020, the Florida State Court granted a motion to compel arbitration filed by the Company. While no assurance can be provided to the ultimate outcome of this claim or the account of any losses to the Company, the Company believes the BKI Complaint is without merit and plans to vigorously defend the matter, which remains pending. Any potential range of loss cannot be reasonably estimated at this time primarily because the matter involves complex factual and legal issues; there is substantial uncertainty regarding any alleged damages, and the matter is at a preliminary stage of litigation.

Regulatory Matters

The Company and/or its subsidiaries are subject to various state and federal regulations related to its loan production and servicing operations by the various states it operates in as well as federal agencies such as the Consumer Financial Protection Bureau, HUD, and the FHA and is subject to the requirements of the Agencies to which it sells loans and for which it performs loan servicing activities. As a result, the Company may become involved in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by such various federal, state and local regulatory bodies.

Commitments to Purchase and Fund Mortgage Loans

The Company’s commitments to purchase and fund loans totaled $18.9 billion as of September 30, 2020.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Stockholders' Equity.

Stockholders' Equity

Note 16—Stockholders’ Equity

In June 2020, the Company’s board of directors approved an increase to the Company’s common stock repurchase program from $50 million to $500 million. The Company entered into a privately negotiated transaction with The BlackRock Foundation under the revised stock repurchase program to repurchase 6,975,323 shares of the Company’s common stock at a price of $34 per share.

Following is a summary of activity under the stock repurchase program:

	Quarter ended September 30,				Nine months ended September 30,				Cumulative
	2020		2019		2020		2019		total (1)
	(in thousands)
Shares of common stock repurchased		118		—		7,331		51		8,147
Cost of shares of common stock repurchased	$	6,927	$	—	$	248,210	$	1,056	$	263,158

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program through September 30, 2020.

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Net Gains on Loans Held for Sale

9 Months Ended

Sep. 30, 2020

Net Gains on Loans Held for Sale

Net Gains on Loans Held for Sale

Note 17—Net Gains on Loans Held for Sale

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
From non-affiliates:
Cash gain (loss):
Loans	$	605,559	$	(22,838)	$	1,219,732	$	(77,659)
Hedging activities		(72,268)		(148,128)		(421,947)		(230,200)
		533,291		(170,966)		797,785		(307,859)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		245,946		227,256		747,219		518,706
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(5,219)		(2,508)		(13,120)		(5,222)
Reduction in liability due to change in estimate		2,473		1,175		5,419		6,305
Change in fair value of loans and derivatives held at period end:
Interest rate lock commitments		173,381		33,347		404,795		95,785
Loans		(79,776)		(5,822)		(140,878)		(35,508)
Hedging derivatives		(5,052)		92,588		17,955		72,838
		865,044		175,070		1,819,175		345,045
From PennyMac Mortgage Investment Trust (1)		(9,775)		60,662		62,549		122,996
	$	855,269	$	235,732	$	1,881,724	$	468,041

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Net Interest Income

9 Months Ended

Sep. 30, 2020

Net Interest Income

Net Interest Income

Note 18—Net Interest Income

Net interest income is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	1,259	$	2,894	$	4,863	$	7,533
Loans held for sale at fair value		41,854		35,800		120,866		101,509
Placement fees relating to custodial funds		9,163		43,231		44,419		98,628
		52,276		81,925		170,148		207,670
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		676		1,527		2,686		5,015
		52,952		83,452		172,834		212,685
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase (1)		27,322		19,429		70,493		47,709
Mortgage loan participation purchase and sale agreements		999		2,304		3,870		7,034
Obligations under capital lease		83		274		354		476
Notes payable		10,738		17,525		37,668		53,559
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		20,711		12,453		54,536		24,978
Interest on mortgage loan impound deposits		1,256		2,104		4,561		4,967
		61,109		54,089		171,482		138,723
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		2,070		2,291		6,416		8,124
		63,179		56,380		177,898		146,847
	$	(10,227)	$	27,072	$	(5,064)	$	65,838

(1) In 2017, the Company entered into a master repurchase agreement that provided the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $1.6 million and $14.7 million of such incentives as reductions of Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

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Stock-based Compensation

9 Months Ended

Sep. 30, 2020

Stock-based Compensation

Stock-based Compensation

Note 19—Stock-based Compensation

As of September 30, 2020, the Company had one stock-based compensation plan. Following is a summary of the stock-based compensation activity:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Grants:
Units:
Performance-based RSUs		—		—		422		665
Stock options		—		—		273		344
Time-based RSUs		—		4		310		334
Grant date fair value:
Performance-based RSUs	$	—	$	—	$	14,788	$	15,253
Stock options		—		—		2,770		2,965
Time-based RSUs		—		102		10,823		7,647
Total	$	—	$	102	$	28,381	$	25,865
Vestings and exercises:
Performance-based RSUs vested		—		—		603		648
Stock options exercised		152		127		476		245
Time-based RSUs vested		7		3		355		294
Compensation expense	$	7,095	$	8,941	$	26,220	$	19,124

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Earnings Per Share of Common Stock

9 Months Ended

Sep. 30, 2020

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Note 20—Earnings Per Share of Common Stock

Basic earnings per share of common stock is determined by dividing net income 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 net income 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 stock-based compensation awards. The Company applies the treasury stock method to determine the diluted weighted average number of shares of common stock outstanding based on the outstanding stock-based compensation awards.

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

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands, except per share amounts)
Net income	$	535,160	$	121,473	$	1,194,080	$	240,304
Weighted average basic shares of common stock outstanding		72,439		78,361		76,292		78,119
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		3,699		2,021		3,326		1,702
Weighted average shares of common stock applicable to diluted earnings per share		76,138		80,382		79,618		79,821
Basic earnings per share of common stock	$	7.39	$	1.55	$	15.65	$	3.08
Diluted earnings per share of common stock	$	7.03	$	1.51	$	15.00	$	3.01

Calculations of diluted earnings per share require certain potentially dilutive shares to be excluded when their inclusion in the diluted earnings per share calculation would be anti-dilutive. The following table summarizes the weighted-average number of anti-dilutive outstanding performance-based restricted share units (“RSUs”) and stock options excluded from the calculation of diluted earnings per share:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		—		1,157		335		985
Stock options (2)		—		566		217		888
Total anti-dilutive shares and units		—		1,723		552		1,873
Weighted average exercise price of anti-dilutive stock options (2)	$	—	$	23.50	$	35.03	$	23.98

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

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 21—Supplemental Cash Flow Information

	Nine months ended September 30,
	2020		2019
	(in thousands)
Cash paid for interest	$	184,087	$	125,987
Cash paid for income taxes, net	$	260,723	$	5,761
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	753,795	$	545,839
Mortgage servicing liabilities resulting from loan sales	$	6,576	$	27,133
Operating right-of-use assets recognized	$	8,219	$	60,642
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	1,393	$	1,327
Issuance of common stock in settlement of directors' fees	$	144	$	184

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Regulatory Capital and Liquidity Requirements

9 Months Ended

Sep. 30, 2020

Regulatory Capital and Liquidity Requirements

Regulatory Capital and Liquidity Requirements

Note 22—Regulatory Capital and Liquidity Requirements

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

The Company is subject to financial eligibility requirements established by the Federal Housing Finance Agency (“FHFA”) for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac. The eligibility requirements include:

● tangible net worth of $2.5 million plus 25 basis points of the UPB of the Company’s total 1-4 unit servicing portfolio, excluding mortgage loans subserviced for others;

● before June 30, 2020, a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 600 basis points; and

● effective June 30, 2020, a liquidity requirement equal to 3.5 basis points of the aggregate UPB serviced for the Agencies plus 200 basis points of total nonperforming Agency servicing UPB less 70% of such nonperforming Agency servicing UPB in excess of 600 basis points where the underlying loans are in COVID-19 forbearance but were current at the time they entered forbearance.

On January 31, 2020, FHFA proposed changes to the eligibility requirements, which would increase the tangible net worth requirement to $2.5 million plus 35 basis points of the UPB of loans serviced for Ginnie Mae and 25 basis points of the UPB of all other 1-4 unit loans serviced, and increase the liquidity requirement to 4 basis points of the aggregate UPB serviced for Fannie Mae and Freddie Mac and 10 basis points of the UPB serviced for Ginnie Mae plus 300 basis points of total nonperforming Agency servicing UPB (including nonperforming Agency loans that are in payment forbearance) in excess of 400 basis points. On June 15, 2020, FHFA announced that it will be re-proposing changes to these requirements.

The Company is also subject to financial eligibility requirements for Ginnie Mae single-family issuers. The eligibility requirements include net worth of $2.5 million plus 35 basis points of PLS' outstanding Ginnie Mae single-family obligations and a liquidity requirement equal to the greater of $1.0 million or 10 basis points of PLS' outstanding Ginnie Mae single-family securities.

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

	September 30, 2020						December 31, 2019
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	3,841,356		$	616,001		$	2,247,751		$	585,674
Ginnie Mae – PLS	$	3,139,830		$	980,469		$	1,907,398		$	910,456
HUD – PLS	$	3,139,830		$	2,500		$	1,907,398		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	607,064		$	82,828		$	257,794		$	79,991
Ginnie Mae – PLS	$	607,064		$	217,648		$	257,794		$	216,119
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		10	%		6	%		19	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		12	%		6	%		22	%		6	%

(1) Calculated in compliance with the respective Agency’s 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.

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Segments

9 Months Ended

Sep. 30, 2020

Segments

Segments

Note 23—Segments

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

Two of the segments are in the mortgage banking business: production and servicing. The production segment performs loan origination, acquisition and sale activities. The servicing segment performs servicing of loans, execution and management of early buyout loan transactions and servicing of loans sourced and managed by the investment management segment for PMT, 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 and managing the acquired assets and correspondent production activities for PMT.

Financial performance and results by segment are as follows:

	Quarter ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	700,830	$	154,439	$	855,269	$	—	$	855,269
Loan origination fees		75,572		—		75,572		—		75,572
Fulfillment fees from PennyMac Mortgage Investment Trust		54,839		—		54,839		—		54,839
Net loan servicing fees		—		132,807		132,807		—		132,807
Net interest income (expense):
Interest income		26,050		26,902		52,952		—		52,952
Interest expense		18,325		44,850		63,175		4		63,179
		7,725		(17,948)		(10,223)		(4)		(10,227)
Management fees		—		—		—		8,508		8,508
Other		132		1,802		1,934		1,290		3,224
Total net revenue		839,098		271,100		1,110,198		9,794		1,119,992
Expenses		225,817		159,407		385,224		6,477		391,701
Income before provision for income taxes	$	613,281	$	111,693	$	724,974	$	3,317	$	728,291
Segment assets at quarter end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Quarter ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	216,132	$	19,600	$	235,732	$	—	$	235,732
Loan origination fees		49,434		—		49,434		—		49,434
Fulfillment fees from PennyMac Mortgage Investment Trust		45,149		—		45,149		—		45,149
Net loan servicing fees		—		66,229		66,229		—		66,229
Net interest income (expense):
Interest income		22,445		61,007		83,452		—		83,452
Interest expense		18,423		37,936		56,359		21		56,380
		4,022		23,071		27,093		(21)		27,072
Management fees		—		—		—		10,098		10,098
Other		324		567		891		1,742		2,633
Total net revenue		315,061		109,467		424,528		11,819		436,347
Expenses		135,777		127,581		263,358		6,792		270,150
Income before provision for income taxes	$	179,284	$	(18,114)	$	161,170	$	5,027	$	166,197
Segment assets at quarter end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

	Nine months ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	1,637,193	$	244,531	$	1,881,724	$	—	$	1,881,724
Loan origination fees		192,091		—		192,091		—		192,091
Fulfillment fees from PennyMac Mortgage Investment Trust		149,594		—		149,594		—		149,594
Net loan servicing fees		—		412,952		412,952		—		412,952
Net interest income (expense):
Interest income		71,840		100,994		172,834		—		172,834
Interest expense		51,124		126,756		177,880		18		177,898
		20,716		(25,762)		(5,046)		(18)		(5,064)
Management fees		—		—		—		25,851		25,851
Other		483		1,473		1,956		4,347		6,303
Total net revenue		2,000,077		633,194		2,633,271		30,180		2,663,451
Expenses		608,602		413,071		1,021,673		18,395		1,040,068
Income before provision for income taxes	$	1,391,475	$	220,123	$	1,611,598	$	11,785	$	1,623,383
Segment assets at period end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Nine months ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	407,713	$	60,328	$	468,041	$	—	$	468,041
Loan origination fees		110,288		—		110,288		—		110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		102,313		—		102,313		—		102,313
Net loan servicing fees		—		205,934		205,934		—		205,934
Net interest income (expense):
Interest income		55,714		156,971		212,685		—		212,685
Interest expense		36,236		110,572		146,808		39		146,847
		19,478		46,399		65,877		(39)		65,838
Management fees		—		—		—		26,178		26,178
Other		929		2,664		3,593		4,844		8,437
Total net revenue		640,721		315,325		956,046		30,983		987,029
Expenses		316,187		324,949		641,136		19,815		660,951
Income before provision for income taxes	$	324,534	$	(9,624)	$	314,910	$	11,168	$	326,078
Segment assets at period end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

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Subsequent Events

9 Months Ended

Sep. 30, 2020

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 19, 2020, The Company issued an additional $150 million in principal amount of unsecured senior notes under a supplemental indenture governing the Unsecured Notes described in Note 12 – Borrowings. The additional unsecured senior notes have the same terms, other than the issuance date and issuance price, as the Unsecured Notes.

● On November 5, 2020, the Company announced that its board of directors declared a cash dividend of $0.15 per common share. The dividend will be paid on November 25, 2020 to common shareholders of record as of November 16, 2020.

● All agreements to repurchase assets that matured before the date of this Report were extended or renewed.

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Related Party Transactions (Tables) - PMT

9 Months Ended

Sep. 30, 2020

Transactions with Affiliates

Summary of lending activity between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net gains on loans held for sale at fair value:
Net gains on loans held for sale to PMT	$	1	$	62,558	$	81,295	$	127,423
Mortgage servicing rights and excess servicing spread recapture incurred		(9,776)		(1,896)		(18,746)		(4,427)
	$	(9,775)	$	60,662	$	62,549	$	122,996
Sale of loans held for sale to PMT	$	27	$	1,876,358	$	2,248,896	$	4,095,079
Tax service fees earned from PMT included in Loan origination fees	$	6,076	$	4,222	$	14,344	$	9,567
Fulfillment fee revenue	$	54,839	$	45,149	$	149,594	$	102,313
Sourcing fees paid to PMT	$	1,658	$	4,206	$	9,143	$	9,355
Unpaid principal balance of loans purchased from PMT	$	16,690,482	$	14,022,222	$	41,641,327	$	31,183,950

Summary of loan servicing fees earned from PMT

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Loan type serviced:
Loans acquired for sale at fair value	$	452	$	507	$	1,595	$	1,131
Loans at fair value		187		858		675		1,938
Mortgage servicing rights		18,113		11,599		46,536		32,033
	$	18,752	$	12,964	$	48,806	$	35,102
Property management fees received from PMT included in Other income	$	—	$	70	$	—	$	295

Summary of management fees earned

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Base management	$	8,508	$	7,914	$	25,851	$	20,862
Performance incentive		—		2,184		—		5,316
	$	8,508	$	10,098	$	25,851	$	26,178

Summary of reimbursement of expenses

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Reimbursement of:
Common overhead incurred by the Company	$	1,389	$	1,543	$	4,514	$	4,055
Compensation		165		120		405		360
Expenses incurred on PMT's behalf, net		2,852		1,942		5,561		3,001
	$	4,406	$	3,605	$	10,480	$	7,416
Payments and settlements during the quarter (1)	$	58,479	$	68,191	$	228,514	$	111,411

(1) Payments and settlements include payments for management fees and correspondent production activities itemized in the preceding tables and netting settlements made pursuant to master netting agreements between the Company and PMT.

Summary of investing activity between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income relating to Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	676	$	1,527	$	2,686	$	5,015
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Dividends received	$	31	$	36	$	79	$	107
Change in fair value of investment		(319)		30		(681)		270
	$	(288)	$	66	$	(602)	$	377

	September 30,		December 31,
	2020		2019
	(in thousands)
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958	$	107,512
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	991	$	1,672
Number of shares		75		75

Summary of financing activity between the Company and affiliate

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Excess servicing spread financing:
Balance at beginning of period	$	151,206	$	194,156	$	178,586	$	216,110
Issuance pursuant to recapture agreement		531		377		1,393		1,327
Accrual of interest		2,070		2,291		6,416		8,124
Repayment		(7,682)		(9,819)		(25,112)		(30,901)
Change in fair value		(3,135)		(3,864)		(18,293)		(11,519)
Balance at end of period	$	142,990	$	183,141	$	142,990	$	183,141
Recapture incurred pursuant to refinancings by the Company of mortgage loans subject to excess servicing spread financing included in Net gains on loans held for sale at fair value	$	525	$	429	$	1,441	$	1,311

Summary of amounts due from and payable to affiliate

	September 30,		December 31,
	2020		2019
	(in thousands)
Receivable from PMT:
Margin settlements relating to loan sales	$	48,243	$	—
Allocated expenses and expenses incurred on PMT's behalf		30,207		3,724
Fulfillment fees		18,060		18,285
Correspondent production fees		11,285		10,606
Management fees		8,509		10,579
Servicing fees		6,121		4,659
Interest on assets purchased under agreements to resell		43		85
Conditional reimbursement		10		221
	$	122,478	$	48,159
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	58,264	$	70,520
Mortgage servicing rights recapture payable		197		149
Other		18,675		2,611
	$	77,136	$	73,280

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Loan Sales and Servicing Activities (Tables)

9 Months Ended

Sep. 30, 2020

Loan Sales and Servicing Activities

Summary of cash flows between the Company and transferees upon sale of loans in transactions

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cash flows:
Sales proceeds	$	26,683,234	$	17,897,693	$	67,209,239	$	39,084,441
Servicing fees received (1)	$	166,316	$	149,210	$	491,743	$	426,774
Net servicing advances (recoveries)	$	71,890	$	8,605	$	68,992	$	(23,583)

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

Summary of sale of loans between the Company and transferees upon sale of loans in transactions

	September 30,		December 31,
	2020		2019
	(in thousands)
Unpaid principal balance of loans outstanding	$	188,854,796	$	168,842,011
Delinquencies:
30-89 days	$	7,237,198	$	7,947,560
90 days or more:
Not in foreclosure	$	19,423,346	$	3,237,563
In foreclosure	$	621,649	$	888,136
Foreclosed	$	13,730	$	15,387
Bankruptcy	$	1,288,443	$	1,343,816

Summary of servicing portfolio

	September 30, 2020
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	188,854,796	$	—	$	188,854,796
Purchased		47,795,763		—		47,795,763
		236,650,559		—		236,650,559
PennyMac Mortgage Investment Trust				156,496,568		156,496,568
Loans held for sale		8,749,673		—		8,749,673
	$	245,400,232	$	156,496,568	$	401,896,800
Delinquent loans (1):
30 days	$	5,924,488	$	1,435,686	$	7,360,174
60 days		3,178,614		621,723		3,800,337
90 days or more:
Not in foreclosure		24,324,945		5,622,954		29,947,899
In foreclosure		831,239		37,293		868,532
Foreclosed		16,409		45,925		62,334
	$	34,275,695	$	7,763,581	$	42,039,276
Bankruptcy	$	1,815,833	$	158,182	$	1,974,015
Delinquent loans in COVID-19 related forbearance:
30 days	$	2,344,986	$	474,168	$	2,819,154
60 days		2,289,880		476,220		2,766,100
90 days or more not in foreclosure		17,827,122		4,716,956		22,544,078
	$	22,461,988	$	5,667,344	$	28,129,332
Custodial funds managed by the Company (2)	$	10,364,855	$	6,347,559	$	16,712,414

(1) Includes delinquent loans in COVID-19 related forbearance plans that were requested by borrowers seeking payment relief in accordance with the CARES Act.

(2) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of income.

	December 31, 2019
			Contract
	Servicing		servicing and		Total
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	168,842,011	$	—	$	168,842,011
Purchased		59,703,547		—		59,703,547
		228,545,558		—		228,545,558
PennyMac Mortgage Investment Trust		—		135,414,668		135,414,668
Loans held for sale		4,724,006		—		4,724,006
	$	233,269,564	$	135,414,668	$	368,684,232
Delinquent loans:
30 days	$	7,987,132	$	857,660	$	8,844,792
60 days		2,490,797		172,263		2,663,060
90 days or more:
Not in foreclosure		4,070,482		274,592		4,345,074
In foreclosure		1,113,806		68,331		1,182,137
Foreclosed		18,315		89,421		107,736
	$	15,680,532	$	1,462,267	$	17,142,799
Bankruptcy	$	1,898,367	$	136,818	$	2,035,185
Custodial funds managed by the Company (1)	$	6,412,291	$	2,529,984	$	8,942,275

(1) Custodial funds include cash accounts holding funds on behalf of borrowers and investors relating to loans serviced under 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 loans’ borrowers and investors, which are 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	2020		2019
	(in thousands)
California	$	58,062,643	$	57,311,867
Florida		33,545,822		28,940,696
Texas		31,893,436		27,909,821
Virginia		24,378,162		22,115,619
Maryland		18,700,592		16,829,320
All other states		235,316,145		215,576,909
	$	401,896,800	$	368,684,232

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value

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

	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	102,136	$	—	$	—	$	102,136
Loans held for sale at fair value		—		6,351,175		2,774,997		9,126,172
Derivative assets:
Interest rate lock commitments		—		—		544,151		544,151
Forward purchase contracts		—		72,640		—		72,640
Forward sales contracts		—		21,652		—		21,652
MBS put options		—		27,336		—		27,336
MBS call options		—		4,255		—		4,255
Swaptions		—		5,568		—		5,568
Put options on interest rate futures purchase contracts		5,910		—		—		5,910
Call options on interest rate futures purchase contracts		1,570		—		—		1,570
Total derivative assets before netting		7,480		131,451		544,151		683,082
Netting		—		—		—		(104,828)
Total derivative assets		7,480		131,451		544,151		578,254
Mortgage servicing rights at fair value		—		—		2,333,821		2,333,821
Investment in PennyMac Mortgage Investment Trust		991		—		—		991
	$	110,607	$	6,482,626	$	5,652,969	$	12,141,374
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	142,990	$	142,990
Derivative liabilities:
Interest rate lock commitments		—		—		2,706		2,706
Forward purchase contracts		—		15,903		—		15,903
Forward sales contracts		—		98,765		—		98,765
Total derivative liabilities before netting		—		114,668		2,706		117,374
Netting		—		—		—		(92,837)
Total derivative liabilities		—		114,668		2,706		24,537
Mortgage servicing liabilities at fair value		—		—		31,698		31,698
	$	—	$	114,668	$	177,394	$	199,225

	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 September 30, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights		Total
	(in thousands)
Balance, June 30, 2020	$	661,719	$	368,064	$	8,187	$	2,213,539	$	3,251,509
Purchases (purchase adjustment) and issuances, net		2,734,321		593,065		—		(287)		3,327,099
Capitalization of interest and advances		22,262		—		—		—		22,262
Sales and repayments		(88,955)		—		(8,270)		—		(97,225)
Mortgage servicing rights resulting from loan sales		—		—		—		245,946		245,946
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		42,029		—		—		—		42,029
Other factors		—		311,790		83		(125,377)		186,496
		42,029		311,790		83		(125,377)		228,525
Transfers from Level 3 to Level 2		(597,134)		—		—		—		(597,134)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(731,474)		—		—		(731,474)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the quarter relating to assets still held at September 30, 2020	$	38,217	$	541,445	$	—	$	(125,377)	$	454,285

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

	Quarter ended September 30, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total
	(in thousands)
Balance, June 30, 2020	$	151,206	$	29,858	$	181,064
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		531		—		531
Accrual of interest		2,070		—		2,070
Repayments		(7,682)		—		(7,682)
Changes in fair value included in income		(3,135)		1,840		(1,295)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the quarter relating to liabilities still outstanding at September 30, 2020	$	(3,135)	$	1,840	$	(1,295)

	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)

	Nine months ended September 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		4,664,408		1,431,194		—		25,473		6,121,075
Capitalization of interest and advances		55,283		—		—		—		55,283
Sales and repayments		(888,247)		—		(8,270)		—		(896,517)
Mortgage servicing rights resulting from loan sales		—		—		—		753,795		753,795
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		35,638		—		—		—		35,638
Other factors		—		808,906		83		(1,372,237)		(563,248)
		35,638		808,906		83		(1,372,237)		(527,610)
Transfers from Level 3 to Level 2		(1,476,027)		—		—		—		(1,476,027)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Reinstatement from real estate acquired in settlement of loans		755		—		—		—		755
Transfers of interest rate lock commitments to loans held for sale		—		(1,835,305)		—		—		(1,835,305)
Balance, September 30, 2020	$	2,774,997	$	541,445	$	—	$	2,333,821	$	5,650,263
Changes in fair value recognized during the period relating to assets still held at September 30, 2020	$	31,389	$	541,445	$	—	$	(1,372,237)	$	(799,403)

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

	Nine months ended September 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		1,393		—		1,393
Accrual of interest		6,416		—		6,416
Repayments		(25,112)		—		(25,112)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(18,293)		(4,018)		(22,311)
Balance, September 30, 2020	$	142,990	$	31,698	$	174,688
Changes in fair value recognized during the period relating to liabilities still outstanding at September 30, 2020	$	(18,293)	$	(4,018)	$	(22,311)

	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)

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,
	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	$	773,313	$	—	$	773,313	$	263,339	$	—	$	263,339
Mortgage servicing rights		—		(125,377)		(125,377)		—		(410,885)		(410,885)
	$	773,313	$	(125,377)	$	647,936	$	263,339	$	(410,885)	$	(147,546)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	3,135	$	3,135	$	—	$	3,864	$	3,864
Mortgage servicing liabilities		—		(1,840)		(1,840)		—		(1,845)		(1,845)
	$	—	$	1,295	$	1,295	$	—	$	2,019	$	2,019

	Nine months ended September 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	$	1,911,828	$	—	$	1,911,828	$	538,086	$	—	$	538,086
Mortgage servicing rights		—		(1,372,237)		(1,372,237)		—		(1,037,643)		(1,037,643)
	$	1,911,828	$	(1,372,237)	$	539,591	$	538,086	$	(1,037,643)	$	(499,557)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	18,293	$	18,293	$	—	$	11,519	$	11,519
Mortgage servicing liabilities		—		4,018		4,018		—		1,520		1,520
	$	—	$	22,311	$	22,311	$	—	$	13,039	$	13,039

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

	September 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	$	8,670,895	$	8,279,163	$	391,732	$	4,628,333	$	4,431,854	$	196,479
90 days or more delinquent:
Not in foreclosure		392,866		404,183		(11,317)		236,650		241,958		(5,308)
In foreclosure		62,411		66,327		(3,916)		47,970		50,194		(2,224)
	$	9,126,172	$	8,749,673	$	376,499	$	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)
September 30, 2020	$	—	$	—	$	7,346	$	7,346
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 September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Real estate acquired in settlement of loans	$	(825)	$	139	$	(2,059)	$	162

Summary of carrying value and fair value of debt

	September 30, 2020				December 31, 2019
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
2018 Term Notes	$	1,259,619	$	1,295,143	$	1,303,047	$	1,294,070
Unsecured Notes	$	510,000	$	492,358	$	—	$	—

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,
	2020		2019		2020		2019
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	245,946	$	246,757	$	753,795	$	545,839
Unpaid principal balance of underlying loans	$	25,369,941	$	15,709,249	$	63,766,627	$	35,532,425
Weighted average servicing fee rate (in basis points)		32		43		36		42
Key inputs (1):
Pricing spread (2)
Range		8.0% – 17.6%		5.5% – 16.2%		6.8% – 18.1%		5.5% – 16.2%
Weighted average		9.6%		8.3%		9.3%		8.6%
Annual total prepayment speed (3)
Range		7.2% – 41.0%		8.8% – 32.1%		7.2% – 49.8%		7.7% – 32.8%
Weighted average		10.4%		15.7%		12.4%		15.0%
Equivalent average life (in years)
Range		2.3 – 9.1		2.7 – 7.5		1.5 – 9.1		2.6 – 7.8
Weighted average		7.3		5.5		6.6		5.8
Per-loan annual cost of servicing
Range		$80 – $110		$78 – $100		$77 – $110		$78 – $100
Weighted average		$102		$97		$100		$97

(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:

	September 30, 2020	December 31, 2019
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 2,333,821	$ 2,926,790
Pool characteristics:
Unpaid principal balance of underlying loans	$ 234,850,997	$ 225,787,103
Weighted average note interest rate	3.8%	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	10.1%	8.5%
Effect on fair value of:
5% adverse change	($42,266)	($44,561)
10% adverse change	($82,935)	($87,734)
20% adverse change	($159,813)	($170,155)
Annual total prepayment speed (3):
Range	10.4% – 32.3%	9.3% – 40.9%
Weighted average	15.3%	12.7%
Equivalent average life (in years)
Range	1.7 – 6.8	1.4 – 7.4
Weighted average	5.4	6.1
Effect on fair value of:
5% adverse change	($67,933)	($63,569)
10% adverse change	($132,698)	($124,411)
20% adverse change	($253,474)	($238,549)
Annual per-loan cost of servicing:
Range	$78 – $110	$77 – $100
Weighted average	$104	$97
Effect on fair value of:
5% adverse change	($25,138)	($24,516)
10% adverse change	($50,275)	($49,032)
20% adverse change	($100,551)	($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

		September 30,		December 31,
		2020		2019
Fair value (in thousands)	$	31,698	$	29,140
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	1,799,562	$	2,758,454
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.1%		8.2%
Annual total prepayment speed (2)		35.1%		29.2%
Equivalent average life (in years)		2.9		3.9
Annual per-loan cost of servicing	$	343	$	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

	September 30,	December 31,
	2020	2019
Fair value (in thousands)	$ 142,990	$ 178,586
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$ 17,070,283	$ 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	9.6% – 17.6%	8.7% – 16.2%
Weighted average	11.8%	11.0%
Equivalent average life (in years)
Range	2.4 – 6.7	2.7 – 7.2
Weighted average	5.8	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

	September 30, 2020		December 31, 2019
Fair value (in thousands) (1)	$	541,445	$	136,650
Key inputs (2):
Pull-through rate:
Range		11.8% – 100%		12.2% – 100%
Weighted average		80.6%		86.5%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		1.0 – 5.1		1.4 – 5.7
Weighted average		3.5		4.2
Percentage of loan commitment amount
Range		0.2% – 2.5%		0.3% – 2.8%
Weighted average		1.1%		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

	September 30, 2020		December 31, 2019
Fair value (in thousands)	$	2,774,997	$	383,878
Key inputs (1):
Discount rate:
Range		3.2% – 9.2%		3.0% – 9.2%
Weighted average		3.2%		3.0%
Twelve-month projected housing price index change:
Range		2.1% – 2.6%		2.6% – 3.2%
Weighted average		2.2%		2.8%
Voluntary prepayment/resale speed (2):
Range		0.5% – 24.9%		0.4% – 21.4%
Weighted average		19.6%		18.2%
Total prepayment speed (3):
Range		0.6% – 38.7%		0.5% – 39.2%
Weighted average		29.9%		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.

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Loans Held for Sale at Fair Value (Tables)

9 Months Ended

Sep. 30, 2020

Loans Held for Sale at Fair Value

Summary of loans held for sale at fair value

	September 30,		December 31,
Loan type	2020		2019
	(in thousands)
Government-insured or guaranteed	$	5,219,448	$	4,222,010
Conventional conforming		1,131,727		307,065
Purchased from Ginnie Mae pools serviced by the Company		2,759,032		374,121
Repurchased pursuant to representations and warranties		15,965		9,244
Home equity lines of credit		—		513
	$	9,126,172	$	4,912,953
Fair value of loans pledged to secure:
Assets sold under agreements to repurchase	$	8,453,522	$	4,322,789
Mortgage loan participation purchase and sale agreements		558,023		523,349
	$	9,011,545	$	4,846,138

XML

Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Financial Instruments

Summary of derivative financial instruments

	September 30, 2020					December 31, 2019
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	18,873,579	$	544,151	$	2,706	7,122,316	$	138,511	$	1,861
Repurchase agreement derivatives			—		—			8,187		—
Used for hedging purposes (1):
Forward purchase contracts	31,443,783		72,640		15,903	13,618,361		12,364		19,040
Forward sales contracts	42,438,243		21,652		98,765	16,220,526		17,097		18,045
MBS put options	12,950,000		27,336		—	6,100,000		3,415		—
MBS call options	1,850,000		4,255		—	—		—		—
Swaption purchase contracts	3,125,000		5,568		—	1,750,000		2,409		—
Put options on interest rate futures purchase contracts	2,275,000		5,910		—	2,250,000		3,945		—
Call options on interest rate futures purchase contracts	950,000		1,570		—	750,000		1,469		—
Treasury futures purchase contracts	1,000,000		—		—	1,276,000		—		—
Treasury futures sale contracts	450,000		—		—	1,010,000		—		—
Interest rate swap futures purchase contracts	3,585,000		—		—	3,210,000		—		—
Total derivatives before netting			683,082		117,374			187,397		38,946
Netting			(104,828)		(92,837)			(27,711)		(16,616)
		$	578,254	$	24,537		$	159,686	$	22,330
Collateral received from derivative counterparties, net		$	(11,991)				$	(11,095)

(1) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

Summary of the notional value activity for derivative contracts used to hedge the IRLCs and inventory of loans held for sale at fair value and MSRs

	Notional amounts, quarter ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	20,709,914	143,902,517	(133,168,648)	31,443,783
Forward sale contracts	25,302,147	175,642,745	(158,506,649)	42,438,243
MBS put options	11,200,000	29,850,000	(28,100,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	3,375,000	3,625,000	(3,875,000)	3,125,000
Swaption sale contracts	—	3,875,000	(3,875,000)	—
Put options on interest rate futures purchase contracts	350,000	3,325,000	(1,400,000)	2,275,000
Call options on interest rate futures purchase contracts	1,800,000	1,200,000	(2,050,000)	950,000
Put options on interest rate futures sale contracts	—	1,400,000	(1,400,000)	—
Call options on interest rate futures sale contracts	—	2,050,000	(2,050,000)	—
Treasury futures purchase contracts	925,000	1,561,500	(1,486,500)	1,000,000
Treasury futures sale contracts	450,000	1,486,500	(1,486,500)	450,000
Interest rate swap futures purchase contracts	3,460,000	1,200,000	(1,075,000)	3,585,000
Interest rate swap futures sales contracts	—	1,075,000	(1,075,000)	—

	Notional amounts, quarter ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	19,497,698	100,139,970	(103,807,843)	15,829,825
Forward sale contracts	14,276,156	122,174,329	(121,333,675)	15,116,810
MBS put options	12,775,000	29,575,000	(32,300,000)	10,050,000
MBS call options	2,250,000	—	(2,250,000)	—
Put options on interest rate futures purchase contracts	2,835,000	9,850,000	(8,335,000)	4,350,000
Call options on interest rate futures purchase contracts	3,687,500	1,750,000	(4,837,500)	600,000
Put options on interest rate futures sale contracts	—	8,335,000	(8,335,000)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	486,100	5,132,000	(4,209,600)	1,408,500
Treasury futures sale contracts	1,550,000	3,792,100	(4,209,600)	1,132,500
Interest rate swap futures purchase contracts	2,900,000	1,800,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

	Notional amounts, nine months ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,618,361	370,704,328	(352,878,906)	31,443,783
Forward sale contracts	16,220,526	444,965,072	(418,747,355)	42,438,243
MBS put options	6,100,000	79,600,000	(72,750,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	1,750,000	14,700,000	(13,325,000)	3,125,000
Swaption sale contracts	—	13,325,000	(13,325,000)	—
Put options on interest rate futures purchase contracts	2,250,000	12,025,000	(12,000,000)	2,275,000
Call options on interest rate futures purchase contracts	750,000	9,740,000	(9,540,000)	950,000
Put options on interest rate futures sale contracts	—	12,000,000	(12,000,000)	—
Call options on interest rate futures sale contracts	—	9,540,000	(9,540,000)	—
Treasury futures purchase contracts	1,276,000	5,516,700	(5,792,700)	1,000,000
Treasury futures sale contracts	1,010,000	5,232,700	(5,792,700)	450,000
Interest rate swap futures purchase contracts	3,210,000	4,150,000	(3,775,000)	3,585,000
Interest rate swap futures sales contracts	—	3,775,000	(3,775,000)	—

	Notional amounts, nine months ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,657,026	237,370,321	(228,197,522)	15,829,825
Forward sale contracts	6,890,046	275,749,351	(267,522,587)	15,116,810
MBS put options	4,635,000	77,185,000	(71,770,000)	10,050,000
MBS call options	1,450,000	6,750,000	(8,200,000)	—
Put options on interest rate futures purchase contracts	3,085,000	19,422,500	(18,157,500)	4,350,000
Call options on interest rate futures purchase contracts	1,512,500	13,127,800	(14,040,300)	600,000
Put options on interest rate futures sale contracts	—	27,297,800	(27,297,800)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	835,000	11,943,400	(11,369,900)	1,408,500
Treasury futures sale contracts	1,450,000	11,052,400	(11,369,900)	1,132,500
Interest rate swap futures purchase contracts	625,000	4,075,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

Summaries of derivative assets and related netting amounts

	September 30, 2020						December 31, 2019
	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 master netting arrangements:
Interest rate lock commitments	$	544,151	$	—	$	544,151	$	138,511	$	—	$	138,511
Repurchase agreement derivatives		—		—		—		8,187		—		8,187
		544,151		—		544,151		146,698		—		146,698
Derivatives subject to master netting arrangements:
Forward purchase contracts		72,640		—		72,640		12,364		—		12,364
Forward sale contracts		21,652		—		21,652		17,097		—		17,097
MBS put options		27,336		—		27,336		3,415		—		3,415
MBS call options		4,255		—		4,255		—		—		—
Swaption purchase contracts		5,568		—		5,568		2,409		—		2,409
Put options on interest rate futures purchase contracts		5,910		—		5,910		3,945		—		3,945
Call options on interest rate futures purchase contracts		1,570		—		1,570		1,469		—		1,469
Netting		—		(104,828)		(104,828)		—		(27,711)		(27,711)
		138,931		(104,828)		34,103		40,699		(27,711)		12,988
	$	683,082	$	(104,828)	$	578,254	$	187,397	$	(27,711)	$	159,686

Summary of the amount of derivative asset positions by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	September 30, 2020								December 31, 2019
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	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	$	544,151	$	—	$	—	$	544,151	$	138,511	$	—	$	—	$	138,511
JPMorgan Chase Bank, N.A.		18,772		—		—		18,772		2,196		—		—		2,196
RJ O'Brien		7,480		—		—		7,480		5,414		—		—		5,414
Wells Fargo Bank, N.A.		5,256		—		—		5,256		—		—		—		—
Goldman Sachs		1,148		—		—		1,148		2,548		—		—		2,548
Deutsche Bank		—		—		—		—		9,138		—		—		9,138
Mizuho Securities		—		—		—		—		1,597		—		—		1,597
Others		1,447		—		—		1,447		282		—		—		282
	$	578,254	$	—	$	—	$	578,254	$	159,686	$	—	$	—	$	159,686

Summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts

	September 30, 2020						December 31, 2019
					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 master netting arrangements – Interest rate lock commitments	$	2,706	$	—	$	2,706	$	1,861	$	—	$	1,861
Derivatives subject to a master netting arrangement:
Forward purchase contracts		15,903		—		15,903		19,040		—		19,040
Forward sale contracts		98,765		—		98,765		18,045		—		18,045
Netting		—		(92,837)		(92,837)		—		(16,616)		(16,616)
		114,668		(92,837)		21,831		37,085		(16,616)		20,469
Total derivatives		117,374		(92,837)		24,537		38,946		(16,616)		22,330
Assets sold under agreements to repurchase:
Amount outstanding		7,267,046		—		7,267,046		4,141,680		—		4,141,680
Unamortized debt issuance cost, net		(7,858)		—		(7,858)		(627)		—		(627)
		7,259,188		—		7,259,188		4,141,053		—		4,141,053
	$	7,376,562	$	(92,837)	$	7,283,725	$	4,179,999	$	(16,616)	$	4,163,383

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, 2020								December 31, 2019
			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	$	2,706	$	—	$	—	$	2,706	$	1,861	$	—	$	—	$	1,861
Credit Suisse First Boston Mortgage Capital LLC		3,613,132		(3,607,746)		—		5,386		1,235,430		(1,235,430)		—		—
Morgan Stanley Bank, N.A.		784,434		(784,434)		—		—		582,941		(582,941)		—		—
Bank of America, N.A.		767,391		(767,391)		—		—		379,400		(374,190)		—		5,210
JPMorgan Chase Bank, N.A.		741,341		(741,341)		—		—		936,172		(936,172)		—		—
Citibank, N.A.		637,347		(632,928)		—		4,419		655,831		(653,170)		—		2,661
BNP Paribas		370,013		(370,013)		—		—		183,880		(183,880)		—		—
Royal Bank of Canada		363,193		(363,193)		—		—		175,897		(175,897)		—		—
Federal Home Loan Mortgage Corporation		5,755		—		—		5,755		—		—		—		—
Mizuho Securities		2,366		—		—		2,366		—		—		—		—
Barclays Capital		1,648		—		—		1,648		—		—		—		—
Wells Fargo Bank, N.A.		—		—		—		—		11,212		—		—		11,212
Others		2,257		—		—		2,257		1,386		—		—		1,386
	$	7,291,583	$	(7,267,046)	$	—	$	24,537	$	4,164,010	$	(4,141,680)	$	—	$	22,330

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,
Derivative activity	Income statement line	2020		2019		2020		2019
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	173,381	$	33,347	$	404,795	$	95,785
Repurchase agreement derivatives	Interest expense	$	83	$	92	$	83	$	(1,608)
Hedged item (2):
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	(77,320)	$	(55,540)	$	(403,992)	$	(157,362)
Mortgage servicing rights	Net loan servicing fees–Change in fair value of mortgage servicing rights and mortgage servicing liabilities	$	6,521	$	250,146	$	1,027,327	$	587,883

(1) Represents net increase in fair value of IRLCs from the beginning to the end of the reporting period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loans are shown in the rollforward of IRLCs for the period in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

(2) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

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Mortgage Servicing Rights and Mortgage Servicing Liabilities (Tables)

9 Months Ended

Sep. 30, 2020

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Schedule of activity in MSRs carried at fair value

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	2,213,539	$	2,720,335	$	2,926,790	$	2,820,612
Additions:
Resulting from loan sales		245,946		246,757		753,795		545,839
Purchases (purchase adjustments), net		(287)		46		25,473		227,445
		245,659		246,803		779,268		773,284
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(26,208)		(286,880)		(1,040,751)		(704,967)
Other changes in fair value (2)		(99,169)		(124,005)		(331,486)		(332,676)
Total change in fair value		(125,377)		(410,885)		(1,372,237)		(1,037,643)
Balance at end of period	$	2,333,821	$	2,556,253	$	2,333,821	$	2,556,253
					September 30,		December 31,
					2020		2019
					(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets					$	2,330,600	$	2,920,603

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

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

Schedule of activity in mortgage servicing liability carried at fair value

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	29,858	$	12,948	$	29,140	$	8,681
Mortgage servicing liabilities resulting from loan sales		—		19,501		6,576		27,133
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		10,822		8,630		24,927		14,687
Other changes in fair value (2)		(8,982)		(6,785)		(28,945)		(16,207)
Total change in fair value		1,840		1,845		(4,018)		(1,520)
Balance at end of period	$	31,698	$	34,294	$	31,698	$	34,294

(1) Principally reflects changes in expected borrower performance and servicer losses given default.

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

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,
	2020		2019		2020		2019
	(in thousands)
Contractual servicing fees	$	203,696	$	185,967	$	601,527	$	533,510
Other fees:
Late charges		7,615		12,430		28,718		31,258
Other		6,960		4,846		17,781		9,119
	$	218,271	$	203,243	$	648,026	$	573,887

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases

Summary of Company's leases

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in thousands)
Lease expense:
Operating leases	$	4,144	$	3,356	$	12,110	$	9,817
Short-term leases		457		213		937		644
Sublease income		—		(35)		—		(94)
Net lease expense included in Occupancy and equipment	$	4,601	$	3,534	$	13,047	$	10,367
Other information:
Cash payments for operating leases	$	4,418	$	4,063	$	13,212	$	11,793
Operating lease right-of-use assets recognized:
Upon adoption Accounting Standards Update 2016-02, Leases (Topic 842)	$	—	$	—	$	—	$	58,713
New leases		1,721		1,929		8,219		1,929
	$	1,721	$	1,929	$	8,219	$	60,642
Period end weighted averages:
Remaining lease term (in years)		6.4		5.8
Discount rate		4.2%		4.6%

Schedule of maturities of operating lease liabilities

Twelve months ended September 30,	Operating leases
	(in thousands)
2021	$	18,586
2022		16,405
2023		16,792
2024		14,474
2025		13,296
Thereafter		27,224
Total lease payments		106,777
Less imputed interest		(14,772)
Total	$	92,005

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Other Assets (Tables)

9 Months Ended

Sep. 30, 2020

Other Asset

Summary of other assets

		September 30,		December 31,
	2020		2019
	(in thousands)
Deposits securing Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Margin deposits		90,156		84,118
Capitalized software, net		91,237		63,130
Furniture, fixture, equipment and building improvements, net		29,274		30,480
Real estate acquired in settlement of loans		14,395		20,326
Other		233,570		135,503
	$	651,229	$	333,557
Deposits pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$	192,597	$	—
Assets pledged to secure Obligation under capital lease:
Capitalized software, net		8,862		12,192
Furniture, fixture, equipment and building improvements, net		6,088		20,406
	$	207,547	$	32,598

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2020

Borrowings

Summary of financial data pertaining to assets sold under agreements to repurchase

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance of assets sold under agreements to repurchase	$	3,363,140		$	2,098,208		$	2,669,336		$	1,861,086
Weighted average interest rate (1)		2.68	%		3.66	%		3.06	%		4.08	%
Total interest expense (2)	$	27,322		$	19,429		$	70,493		$	47,709
Maximum daily amount outstanding	$	7,267,046		$	3,539,459		$	7,267,046		$	3,539,459

		September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	7,267,046		$	4,141,680
Unamortized debt issuance costs		(7,858)			(627)
	$	7,259,188		$	4,141,053
Weighted average interest rate		1.85	%		3.29	%
Available borrowing capacity (3):
Committed	$	17,072		$	125,810
Uncommitted		2,940,882			782,510
	$	2,957,954		$	908,320
Fair value of assets securing repurchase agreements:
Loans held for sale	$	8,453,522		$	4,322,789
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell	$	86,958		$	107,512
Servicing advances (4)	$	232,519		$	207,460
Mortgage servicing rights (4)	$	2,283,876		$	2,902,721
Deposits (4)	$	192,597		$	—
Margin deposits placed with counterparties (5)	$	4,375		$	5,000

(1) Excludes the effect of amortization of net issuance costs of $4.8 million and $9.2 million for the quarter and nine months ended September 30, 2020, respectively, and net issuance costs and premiums of $0.2 million and $9.2 million for the quarter and nine months ended September 30, 2019, respectively.

(2) In 2017, PFSI 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 $1.6 million and $14.7 million of such incentives as reductions in Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

(3) 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 financed.

(4) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes, the 2018 Term Notes described in Notes payable secured by mortgage servicing assets. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

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

Summary of maturities of outstanding advances under repurchase agreements by maturity date

Remaining maturity at September 30, 2020	Unpaid principal balance
	(dollars in thousands)
Within 30 days	$	1,490,837
Over 30 to 90 days		5,365,208
Over 90 to 180 days		361,001
Over 180 days to one year		50,000
Total assets sold under agreements to repurchase	$	7,267,046
Weighted average maturity (in months)		2.0

Summary of amount at risk relating to the assets 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 (1)	$	1,092,694	April 23, 2021	April 23, 2021
Credit Suisse First Boston Mortgage Capital LLC	$	460,264	October 19, 2020	April 23, 2021
Bank of America, N.A.	$	410,222	November 2, 2020	March 11, 2021
JP Morgan Chase Bank, N.A.	$	192,579	December 2, 2020	January 7, 2021
Morgan Stanley Bank, N.A.	$	62,630	November 3, 2020	November 3, 2020
Citibank, N.A.	$	48,231	December 15, 2020	August 3, 2021
Royal Bank of Canada	$	33,343	October 30, 2020	October 30, 2020
BNP Paribas	$	27,646	December 16, 2020	July 30, 2021

(1) The calculation of the amount at risk includes the VFN and the 2018 Term Notes because beneficial interests in the Ginnie Mae MSRs and servicing advances are pledged to the Issuer Trust and together serve as the collateral backing the VFN, 2018 Term Notes described in Notes payable secured by mortgage servicing assets below. The VFN financing is included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheets.

Summary of mortgage loan participations

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	235,713		$	258,169		$	227,460		$	249,023
Weighted average interest rate (1)		1.40	%		3.36	%		1.98	%		3.55	%
Total interest expense	$	999		$	2,304		$	3,870		$	7,034
Maximum daily amount outstanding	$	538,074		$	524,095		$	540,977		$	548,038

(1) Excludes the effect of amortization of debt issuance costs totaling $172,000 and $135,000 for the quarters ended September 30, 2020 and 2019, respectively, and $490,000 and $405,000 for the nine months ended September 30, 2020 and 2019, respectively.

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	535,378		$	497,948
Unamortized debt issuance costs		(315)			—
	$	535,063		$	497,948
Weighted average interest rate		1.40	%		3.05	%
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreements	$	558,023		$	523,349

Summary of obligations under capital lease

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	15,179		$	25,812		$	17,253		$	13,380
Weighted average interest rate		2.16	%		4.47	%		2.69	%		4.48	%
Total interest expense	$	83		$	274		$	354		$	476
Maximum daily amount outstanding	$	16,749		$	28,295		$	20,810		$	28,295

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Unpaid principal balance	$	13,957		$	20,810
Weighted average interest rate		2.15	%		3.74	%
Assets pledged to secure obligations under capital lease:
Furniture, fixtures and equipment	$	6,088		$	20,406
Capitalized software	$	8,862		$	12,192

Summary of term notes issued

Issuance Date	Principal		Stated interest rate (1)	Maturity date (2)
	(in thousands)		(Annually)
February 28, 2018 (the "2018-GT1 Notes")	$	650,000	2.85%	2/25/2023
August 10, 2018 (the "2018-GT2 Notes")		650,000	2.65%	8/25/2023
	$	1,300,000

(1) Spread over one-month LIBOR.

(2) The 2018 Term Notes indentures provide the Company with the option to extend the maturity of the 2018 Term Notes by two years after the stated maturity.

Summary of note payable

	Quarter ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Average balance	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000
Weighted average interest rate (1)		2.99	%		5.11	%		3.57	%		5.21	%
Total interest expense	$	10,177		$	17,044		$	36,131		$	52,118
Maximum daily amount outstanding	$	1,300,000		$	1,300,000		$	1,300,000		$	1,300,000

(1) Excludes the effect of amortization of debt issuance costs totaling $459,000 and $445,000 for the quarters ended September 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the nine month periods ended September 30, 2020 and 2019, respectively.

	September 30,			December 31,
	2020			2019
	(dollars in thousands)
Carrying value:
Unpaid principal balance	$	1,300,000		$	1,300,000
Unamortized debt issuance costs		(4,857)			(5,930)
	$	1,295,143		$	1,294,070
Weighted average interest rate		2.93	%		4.46	%
Assets pledged to secure notes payable (1):
Servicing advances	$	232,519		$	207,460
Mortgage servicing rights	$	2,213,344		$	2,861,442
Deposits	$	192,597		$	—

(1) Beneficial interests in the Ginnie Mae MSRs, servicing advances and deposits are pledged to the Issuer Trust and together serve as the collateral backing the VFN, GMSR Servicing Advance Notes and the 2018 Term Notes. The VFN financing and the GMSR Servicing Advance Notes are included in Assets sold under agreements to repurchase and the 2018 Term Notes are included in Notes payable secured by mortgage servicing assets on the Company's consolidated balance sheet.

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Liability for Losses Under Representations and Warranties (Tables)

9 Months Ended

Sep. 30, 2020

Liability for Losses Under Representations and Warranties

Summary of repurchase activity

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	25,909	$	18,709	$	21,446	$	21,155
Provision for losses on loans sold:
Resulting from sales of loans		5,219		2,508		13,120		5,222
Reduction in liability due to change in estimate		(2,473)		(1,175)		(5,419)		(6,305)
Losses incurred, net		(151)		(74)		(643)		(104)
Balance at end of period	$	28,504	$	19,968	$	28,504	$	19,968
Unpaid principal balance of loans subject to representations and warranties at end of period	$	199,194,983	$	166,541,153

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2020

Stockholders' Equity.

Summary of share repurchase activity

	Quarter ended September 30,				Nine months ended September 30,				Cumulative
	2020		2019		2020		2019		total (1)
	(in thousands)
Shares of common stock repurchased		118		—		7,331		51		8,147
Cost of shares of common stock repurchased	$	6,927	$	—	$	248,210	$	1,056	$	263,158

(1) Amounts represent the total shares of common stock repurchased under the stock repurchase program through September 30, 2020.

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Net Gains on Loans Held for Sale (Tables)

9 Months Ended

Sep. 30, 2020

Net Gains on Loans Held for Sale

Net Gains on Loans Held for Sale

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
From non-affiliates:
Cash gain (loss):
Loans	$	605,559	$	(22,838)	$	1,219,732	$	(77,659)
Hedging activities		(72,268)		(148,128)		(421,947)		(230,200)
		533,291		(170,966)		797,785		(307,859)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales		245,946		227,256		747,219		518,706
Provision for losses relating to representations and warranties:
Pursuant to loan sales		(5,219)		(2,508)		(13,120)		(5,222)
Reduction in liability due to change in estimate		2,473		1,175		5,419		6,305
Change in fair value of loans and derivatives held at period end:
Interest rate lock commitments		173,381		33,347		404,795		95,785
Loans		(79,776)		(5,822)		(140,878)		(35,508)
Hedging derivatives		(5,052)		92,588		17,955		72,838
		865,044		175,070		1,819,175		345,045
From PennyMac Mortgage Investment Trust (1)		(9,775)		60,662		62,549		122,996
	$	855,269	$	235,732	$	1,881,724	$	468,041

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Net Interest Income (Tables)

9 Months Ended

Sep. 30, 2020

Net Interest Income

Summary of net interest income

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Interest income:
From non-affiliates:
Cash and short-term investments	$	1,259	$	2,894	$	4,863	$	7,533
Loans held for sale at fair value		41,854		35,800		120,866		101,509
Placement fees relating to custodial funds		9,163		43,231		44,419		98,628
		52,276		81,925		170,148		207,670
From PennyMac Mortgage Investment Trust—Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell		676		1,527		2,686		5,015
		52,952		83,452		172,834		212,685
Interest expense:
To non-affiliates:
Assets sold under agreements to repurchase (1)		27,322		19,429		70,493		47,709
Mortgage loan participation purchase and sale agreements		999		2,304		3,870		7,034
Obligations under capital lease		83		274		354		476
Notes payable		10,738		17,525		37,668		53,559
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations		20,711		12,453		54,536		24,978
Interest on mortgage loan impound deposits		1,256		2,104		4,561		4,967
		61,109		54,089		171,482		138,723
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value		2,070		2,291		6,416		8,124
		63,179		56,380		177,898		146,847
	$	(10,227)	$	27,072	$	(5,064)	$	65,838

(1) In 2017, the Company entered into a master repurchase agreement that provided the Company with incentives to finance mortgage loans approved for satisfying certain consumer relief characteristics as provided in the agreement. The Company included $1.6 million and $14.7 million of such incentives as reductions of Interest expense during the quarter and nine months ended September 30, 2019, respectively. The master repurchase agreement expired on August 21, 2019.

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Stock-based Compensation

Summary of the stock-based compensation activity

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Grants:
Units:
Performance-based RSUs		—		—		422		665
Stock options		—		—		273		344
Time-based RSUs		—		4		310		334
Grant date fair value:
Performance-based RSUs	$	—	$	—	$	14,788	$	15,253
Stock options		—		—		2,770		2,965
Time-based RSUs		—		102		10,823		7,647
Total	$	—	$	102	$	28,381	$	25,865
Vestings and exercises:
Performance-based RSUs vested		—		—		603		648
Stock options exercised		152		127		476		245
Time-based RSUs vested		7		3		355		294
Compensation expense	$	7,095	$	8,941	$	26,220	$	19,124

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Earnings Per Share of Common Stock (Tables)

9 Months Ended

Sep. 30, 2020

Earnings Per Share of Common Stock

Summary of basic and diluted earnings per share calculations

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands, except per share amounts)
Net income	$	535,160	$	121,473	$	1,194,080	$	240,304
Weighted average basic shares of common stock outstanding		72,439		78,361		76,292		78,119
Effect of dilutive shares:
Common shares issuable under stock-based compensation plan		3,699		2,021		3,326		1,702
Weighted average shares of common stock applicable to diluted earnings per share		76,138		80,382		79,618		79,821
Basic earnings per share of common stock	$	7.39	$	1.55	$	15.65	$	3.08
Diluted earnings per share of common stock	$	7.03	$	1.51	$	15.00	$	3.01

Schedule of anti-dilutive shares outstanding

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands except for weighted-average exercise price)
Performance-based RSUs (1)		—		1,157		335		985
Stock options (2)		—		566		217		888
Total anti-dilutive shares and units		—		1,723		552		1,873
Weighted average exercise price of anti-dilutive stock options (2)	$	—	$	23.50	$	35.03	$	23.98

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

(2) Certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices were above the average stock prices for the period.

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow Information

Schedule of supplemental cash flow information

	Nine months ended September 30,
	2020		2019
	(in thousands)
Cash paid for interest	$	184,087	$	125,987
Cash paid for income taxes, net	$	260,723	$	5,761
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales	$	753,795	$	545,839
Mortgage servicing liabilities resulting from loan sales	$	6,576	$	27,133
Operating right-of-use assets recognized	$	8,219	$	60,642
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement	$	1,393	$	1,327
Issuance of common stock in settlement of directors' fees	$	144	$	184

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Regulatory Capital and Liquidity Requirements (Tables)

9 Months Ended

Sep. 30, 2020

Regulatory Capital and Liquidity Requirements

Summary of agencies' capital and liquidity requirements by each agency

	September 30, 2020						December 31, 2019
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	3,841,356		$	616,001		$	2,247,751		$	585,674
Ginnie Mae – PLS	$	3,139,830		$	980,469		$	1,907,398		$	910,456
HUD – PLS	$	3,139,830		$	2,500		$	1,907,398		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	607,064		$	82,828		$	257,794		$	79,991
Ginnie Mae – PLS	$	607,064		$	217,648		$	257,794		$	216,119
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		10	%		6	%		19	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		12	%		6	%		22	%		6	%

(1) Calculated in compliance with the respective Agency’s requirements.

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Segments (Tables)

9 Months Ended

Sep. 30, 2020

Segments

Schedule of change in expense allocation, by segment

	Quarter ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	700,830	$	154,439	$	855,269	$	—	$	855,269
Loan origination fees		75,572		—		75,572		—		75,572
Fulfillment fees from PennyMac Mortgage Investment Trust		54,839		—		54,839		—		54,839
Net loan servicing fees		—		132,807		132,807		—		132,807
Net interest income (expense):
Interest income		26,050		26,902		52,952		—		52,952
Interest expense		18,325		44,850		63,175		4		63,179
		7,725		(17,948)		(10,223)		(4)		(10,227)
Management fees		—		—		—		8,508		8,508
Other		132		1,802		1,934		1,290		3,224
Total net revenue		839,098		271,100		1,110,198		9,794		1,119,992
Expenses		225,817		159,407		385,224		6,477		391,701
Income before provision for income taxes	$	613,281	$	111,693	$	724,974	$	3,317	$	728,291
Segment assets at quarter end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Quarter ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	216,132	$	19,600	$	235,732	$	—	$	235,732
Loan origination fees		49,434		—		49,434		—		49,434
Fulfillment fees from PennyMac Mortgage Investment Trust		45,149		—		45,149		—		45,149
Net loan servicing fees		—		66,229		66,229		—		66,229
Net interest income (expense):
Interest income		22,445		61,007		83,452		—		83,452
Interest expense		18,423		37,936		56,359		21		56,380
		4,022		23,071		27,093		(21)		27,072
Management fees		—		—		—		10,098		10,098
Other		324		567		891		1,742		2,633
Total net revenue		315,061		109,467		424,528		11,819		436,347
Expenses		135,777		127,581		263,358		6,792		270,150
Income before provision for income taxes	$	179,284	$	(18,114)	$	161,170	$	5,027	$	166,197
Segment assets at quarter end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

	Nine months ended September 30, 2020
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	1,637,193	$	244,531	$	1,881,724	$	—	$	1,881,724
Loan origination fees		192,091		—		192,091		—		192,091
Fulfillment fees from PennyMac Mortgage Investment Trust		149,594		—		149,594		—		149,594
Net loan servicing fees		—		412,952		412,952		—		412,952
Net interest income (expense):
Interest income		71,840		100,994		172,834		—		172,834
Interest expense		51,124		126,756		177,880		18		177,898
		20,716		(25,762)		(5,046)		(18)		(5,064)
Management fees		—		—		—		25,851		25,851
Other		483		1,473		1,956		4,347		6,303
Total net revenue		2,000,077		633,194		2,633,271		30,180		2,663,451
Expenses		608,602		413,071		1,021,673		18,395		1,040,068
Income before provision for income taxes	$	1,391,475	$	220,123	$	1,611,598	$	11,785	$	1,623,383
Segment assets at period end	$	7,319,838	$	23,843,110	$	31,162,948	$	17,917	$	31,180,865

(1) All revenues are from external customers.

	Nine months ended September 30, 2019
	Mortgage Banking						Investment
	Production		Servicing		Total		Management		Total
	(in thousands)
Revenue: (1)
Net gains on loans held for sale at fair value	$	407,713	$	60,328	$	468,041	$	—	$	468,041
Loan origination fees		110,288		—		110,288		—		110,288
Fulfillment fees from PennyMac Mortgage Investment Trust		102,313		—		102,313		—		102,313
Net loan servicing fees		—		205,934		205,934		—		205,934
Net interest income (expense):
Interest income		55,714		156,971		212,685		—		212,685
Interest expense		36,236		110,572		146,808		39		146,847
		19,478		46,399		65,877		(39)		65,838
Management fees		—		—		—		26,178		26,178
Other		929		2,664		3,593		4,844		8,437
Total net revenue		640,721		315,325		956,046		30,983		987,029
Expenses		316,187		324,949		641,136		19,815		660,951
Income before provision for income taxes	$	324,534	$	(9,624)	$	314,910	$	11,168	$	326,078
Segment assets at period end	$	4,850,741	$	4,433,177	$	9,283,918	$	19,281	$	9,303,199

(1) All revenues are from external customers.

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Concentration of Risk (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Sales Revenue | Customer Concentration Risk
Concentration of Risk
Percentage of total net revenue	7.00%	32.00%	12.00%	31.00%

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Related Party Transactions - Correspondent Production (Details) - USD ($)				3 Months Ended		9 Months Ended
	Jul. 01, 2020	Jun. 30, 2020	Sep. 12, 2016	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Lending activity between the entity and affiliate
Fulfillment fee revenue						$ 149,594,000	$ 102,313,000
Ginnie Mae Mortgage Backed Securities Guide Loan
Transactions with Affiliates
Threshold limit of loan commitment	$ 16,500
Maximum Multiplier factor for each pull through adjusted loan commitment	585
Multiplying factor for each pull through adjusted loan commitment in excess of threshold limit per quarter	355
Multiplying factor for number of purchased loans	315
Multiplying factor for number of purchased loans in excess of threshold limit per quarter	$ 195
Ginnie Mae Mortgage Backed Securities Guide Loan | Minimum
Transactions with Affiliates
Pull through factor as a percentage	80.00%
Ginnie Mae Mortgage Backed Securities Guide Loan | Maximum
Transactions with Affiliates
Pull through factor as a percentage	99.00%
Other mortgage loans
Transactions with Affiliates
Multiplying factor for number of purchased loans	$ 750
MBS Agreement
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.35%
Fulfillment fee as a percent of UPB of all other mortgage loans, excluding Ginnie Mae mortgage loans			0.50%
MSR Recapture Agreement
Transactions with Affiliates
Target recapture rate	15.00%
Lending activity between the entity and affiliate
Minimum percent of total UPB of loans originated from refinancing of loans which a related party previously held the MSR required to be transferred			30.00%
Related party transaction, renewal period		5 years
MSR Recapture Agreement | First 15%
Transactions with Affiliates
Percentage of fair market value.	40.00%
Percentage of recapture rate.	15.00%
MSR Recapture Agreement | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of fair market value.	35.00%
MSR Recapture Agreement | In excess of 30%
Transactions with Affiliates
Percentage of fair market value.	30.00%
Percentage of recapture rate.	30.00%
MSR Recapture Agreement | Minimum | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of recapture rate.	15.00%
MSR Recapture Agreement | Maximum | In excess of 15% and upto 30%
Transactions with Affiliates
Percentage of recapture rate.	30.00%
PMT
Lending activity between the entity and affiliate
Total of gain on sale of loans and MSR recapture				$ (9,775,000)	$ 60,662,000	62,549,000	122,996,000
Sale of loans held for sale to PMT						2,248,896,000	4,095,079,000
Fulfillment fee revenue				54,839,000	45,149,000	149,594,000	102,313,000
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust						2,248,896,000	4,095,079,000
PMT | MBS Agreement | Minimum
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.02%
PMT | MBS Agreement | Maximum
Transactions with Affiliates
The administrative fee plus accrued interest and sourcing fee percent			0.035%
PMT | Loan Lending
Lending activity between the entity and affiliate
Net gain on loans held for sale to PMT				1,000	62,558,000	81,295,000	127,423,000
Mortgage servicing rights and excess servicing spread recapture incurred				(9,776,000)	(1,896,000)	(18,746,000)	(4,427,000)
Total of gain on sale of loans and MSR recapture				(9,775,000)	60,662,000	62,549,000	122,996,000
Sale of loans held for sale to PMT				27,000	1,876,358,000	2,248,896,000	4,095,079,000
Tax service fee				6,076,000	4,222,000	14,344,000	9,567,000
Fulfillment fee revenue				54,839,000	45,149,000	149,594,000	102,313,000
Sourcing fees paid				1,658,000	4,206,000	9,143,000	9,355,000
Unpaid principal balance of loans purchased from PMT				16,690,482,000	14,022,222,000	41,641,327,000	31,183,950,000
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust				$ 27,000	$ 1,876,358,000	$ 2,248,896,000	$ 4,095,079,000
PLS | Minimum
Transactions with Affiliates
Sourcing fees (as a percent)	0.01%
PLS | Maximum
Transactions with Affiliates
Sourcing fees (as a percent)	0.02%
PLS | Ginnie Mae Mortgage Backed Securities Guide Loan
Transactions with Affiliates
Fulfilment fee payable	$ 0

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Related Party Transactions - Mortgage Loan Servicing (Details)			3 Months Ended		9 Months Ended
	Jun. 30, 2020	Sep. 12, 2016 USD ($) item	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Loan Servicing Agreement
Transactions with Affiliates
Base servicing fees per month for REO		$ 75
Rental fee per month per REO		30
Renewal fee, per lease renewal, on REO property		$ 100
Property management fees on REOs, as a percent of gross rental income		9.00%
Base servicing fees per month for fixed-rate non-distressed loans subserviced		$ 7.50
Base servicing fees per month for adjustable rate non-distressed loans subserviced		8.50
Supplemental fee per month for each distressed whole loan		25
Activity-based fee, percent, due to a streamline modification		750
Activity-based fee, percent, due to a liquidation		1,750
Activity-based fee due to a deed-in-lieu of foreclosure		$ 500
Maximum number of liquidation, reperformance, or modification fees that can be earned during earnable period | item		1
Liquidation, reperformance, or modification fees earnable period		18 months
Minimum | Loan Servicing Agreement
Transactions with Affiliates
Servicing fees amount per month for current loans		$ 30
Additional servicing fee amount per month for delinquent loans		10
Maximum | Loan Servicing Agreement
Transactions with Affiliates
Servicing fees amount per month for severely delinquent loans		85
Additional servicing fee amount per month for delinquent loans		$ 55
PMT
Summary of mortgage loan servicing fees earned
Loan servicing fees			$ 18,752,000	$ 12,964,000	$ 48,806,000	$ 35,102,000
PMT | Loan Servicing Agreement
Summary of mortgage loan servicing fees earned
Related party transaction, renewal period	5 years
PMT | Loans acquired for sale at fair value
Summary of mortgage loan servicing fees earned
Loan servicing fees			452,000	507,000	1,595,000	1,131,000
PMT | Loans at fair value
Summary of mortgage loan servicing fees earned
Loan servicing fees			187,000	858,000	675,000	1,938,000
PMT | Mortgage servicing rights
Summary of mortgage loan servicing fees earned
Loan servicing fees			$ 18,113,000	11,599,000	$ 46,536,000	32,033,000
PMT | Other income.
Summary of mortgage loan servicing fees earned
Property management fees				$ 70,000		$ 295,000

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Related Party Transactions - Management Fees (Details) - USD ($)		3 Months Ended		9 Months Ended
	Sep. 12, 2016	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Management Fee Revenue Abstract
Management fees		$ 8,508,000	$ 10,098,000	$ 25,851,000	$ 26,178,000
PMT
Management Fee Revenue Abstract
Management fees		8,508,000	10,098,000	25,851,000	26,178,000
PMT | Management Agreement
Transactions with Affiliates
Percentage of change in net income due to quarterly adjustments	8.00%
Management Fee Revenue Abstract
Base management fee		8,508,000	7,914,000	25,851,000	20,862,000
Performance incentive			2,184,000		5,316,000
Management fees		$ 8,508,000	$ 10,098,000	$ 25,851,000	$ 26,178,000
PMT | Management Agreement | Maximum
Transactions with Affiliates
Percentage of performance incentive fee payable by issuance of common shares	50.00%
PMT | Management Agreement | Minimum
Transactions with Affiliates
High watermark	$ 0
PMT | Shareholders Equity Up To 2 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.50%
Base management fee shareholders' equity limit	$ 2,000,000,000
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.375%
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 5,000,000,000
PMT | Shareholders Equity In Excess Of 2 Billion Dollars And Upto 5 Billion Dollars | Minimum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 2,000,000,000
PMT | Shareholders Equity In Excess Of 5 Billion Dollars
Transactions with Affiliates
Base management fee annual rate (as a percent)	1.25%
PMT | Shareholders Equity In Excess Of 5 Billion Dollars | Maximum
Transactions with Affiliates
Base management fee shareholders' equity limit	$ 5,000,000,000
PMT | Return on Shareholders Equity 8 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	10.00%
PMT | Return on Shareholders Equity 8 Percent | Maximum
Transactions with Affiliates
Percentage of return on affiliate's equity	12.00%
PMT | Return on Shareholders Equity 8 Percent | Minimum
Transactions with Affiliates
Percentage of return on affiliate's equity	8.00%
PMT | Return on Shareholders Equity 12 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	15.00%
Percentage of return on affiliate's equity	12.00%
PMT | Return on Shareholders Equity 12 Percent | Maximum
Transactions with Affiliates
Percentage of return on affiliate's equity	16.00%
PMT | Return on Shareholders Equity in Excess of 16 Percent
Transactions with Affiliates
Percentage of net income for calculation of performance incentive fees	20.00%
Percentage of return on affiliate's equity	16.00%

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Related Party Transactions - Other Transactions, Reimbursement of Common Overhead Expenses (Details) - USD ($)			3 Months Ended		9 Months Ended
	Jul. 01, 2020	Sep. 12, 2016	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
PMT
Transactions with Affiliates
Expense reimbursement amount, per quarter, relating to personnel		$ 120,000
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			$ 4,406,000	$ 3,605,000	$ 10,480,000	$ 7,416,000
Payments and settlements during the period			58,479,000	68,191,000	228,514,000	111,411,000
PMT | Common overhead incurred
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			1,389,000	1,543,000	4,514,000	4,055,000
PMT | Compensation
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			165,000	120,000	405,000	360,000
PMT | Expenses incurred by related party (reporting entity), net
Reimbursement of common overhead and expenses incurred on behalf of affiliates
Reimbursement of common overhead and expenses incurred by the Company			$ 2,852,000	$ 1,942,000	$ 5,561,000	$ 3,001,000
PCM
Transactions with Affiliates
Expense reimbursement amount, per quarter, relating to personnel	$ 165,000	$ 120,000
Related party transaction, renewal period	5 years

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Related Party Transactions - Other Transactions, Conditional Reimbursement (Details) - PMT - Conditional Reimbursement - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Aug. 04, 2009
Conditional reimbursement
Payments received	$ 211,000	$ 219,000
Maximum
Conditional reimbursement
Conditional reimbursement			$ 2,900,000

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Related Party Transactions - Investing Activities (Details)		3 Months Ended		9 Months Ended
	Dec. 19, 2016 USD ($) item	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) shares
PennyMac Holdings, L L C Repurchase Agreement
Transactions with Affiliates
Number of subsidiaries entered into master repurchase agreement | item	1
Maximum principal balance of VFN	$ 1,000,000,000
PMT
Transactions with Affiliates
Common shares of beneficial interest owned | shares		75,000		75,000
Repurchase agreement with PennyMac Mortgage Investment Trust:
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors		$ 86,958,000		$ 86,958,000		$ 107,512,000
Activity during the period:
Interest income on receivable from PennyMac Mortgage Investment Trust		676,000	$ 1,527,000	2,686,000	$ 5,015,000
Activity during the period:
Dividends received from PennyMac Mortgage Investment Trust		31,000	36,000	79,000	107,000
Change in fair value of investment in Common shares of PennyMac Mortgage Investment Trust		(319,000)	30,000	(681,000)	270,000
Balance at end of period		(288,000)	66,000	(602,000)	377,000
Loans and Leases Receivable, Related Parties		86,958,000		86,958,000		107,512,000
Fair value of PennyMac Mortgage Investment Trust shares		$ 991,000		$ 991,000		$ 1,672,000
Number of shares | shares		75,000		75,000		75,000
PMT | PennyMac Holdings, L L C Repurchase Agreement
Activity during the period:
Interest income on receivable from PennyMac Mortgage Investment Trust		$ 676,000	$ 1,527,000	$ 2,686,000	$ 5,015,000

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Related Party Transactions - Financing Activities (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Feb. 01, 2013
Financing activities:
Issuance pursuant to recapture agreement			$ 1,393,000	$ 1,327,000
Repayments			25,112,000	30,901,000
PMT
Financing activities:
Interest expense	$ 2,070,000	$ 2,291,000	6,416,000	8,124,000
Change in fair value	3,135,000	3,864,000	18,293,000	11,519,000
Excess servicing spread financing at fair value payable to affiliate	142,990,000		142,990,000		$ 178,586,000
PMT | 2/1/13 Spread Acquisition Agreement
Financing activities:
Maximum ESS recapture obligation						$ 200,000
Excess servicing spread financing | PMT
Financing activities:
Balance at the beginning of the period	151,206,000	194,156,000	178,586,000	216,110,000
Issuance pursuant to recapture agreement	531,000	377,000	1,393,000	1,327,000
Interest expense	2,070,000	2,291,000	6,416,000	8,124,000
Repayments	(7,682,000)	(9,819,000)	(25,112,000)	(30,901,000)
Change in fair value	(3,135,000)	(3,864,000)	(18,293,000)	(11,519,000)
Balance at the end of the period	142,990,000	183,141,000	142,990,000	183,141,000
Excess servicing spread recapture recognized	$ 525,000	$ 429,000	$ 1,441,000	$ 1,311,000

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Related Party Transactions - Amounts due from Affiliate (Details) - PMT - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Amounts due from affiliate
Margin settlement relating to loan sales	$ 48,243
Allocated expenses	30,207	$ 3,724
Fulfillment fees	18,060	18,285
Correspondent production fees	8,509	10,579
Management fees	11,285	10,606
Servicing fees	6,121	4,659
Interest on assets purchased under agreements to resell	43	85
Conditional Reimbursement	10	221
Total due from affiliate	122,478	48,159
Payable to affiliate
Amounts advanced by PMT	58,264	70,520
MSR Recapture Payable to PMT	197	149
Other expenses	18,675	2,611
Payable to affiliates	$ 77,136	$ 73,280

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Related Party Transactions - Exchanged Private National Mortgage Acceptance Company, LLC Unitholders (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Transactions with Affiliates
Amount of tax benefits under the tax sharing agreement (as a percent)	85.00%
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	$ (10,374)
Payable to exchanged PNMAC unitholders under tax receivable agreement	35,800		$ 46,200
Private National Mortgage Acceptance Company, LLC
Transactions with Affiliates
Payment of tax liability under the tax receivable agreement to Private National Mortgage Acceptance Company, LLC unitholders	$ 10,400	$ 0

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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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Cash flows:
Sales proceeds	$ 26,683,234	$ 17,897,693	$ 67,209,239	$ 39,084,441
Servicing fees received	166,316	149,210	491,743	426,774
Net servicing advances	71,890	$ 8,605	68,992	$ (23,583)
Period end information:
Unpaid principal balance of loans outstanding	188,854,796		188,854,796		$ 168,842,011
30-89 days	7,237,198		7,237,198		7,947,560
90 days or more - Not in foreclosure	19,423,346		19,423,346		3,237,563
90 days or more - In foreclosure	621,649		621,649		888,136
90 days or more - Foreclosed	13,730		13,730		15,387
Bankruptcy	$ 1,288,443		$ 1,288,443		$ 1,343,816

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Loan Sales and Servicing Activities - Summary of Mortgage Servicing Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Mortgage servicing portfolio
Loans held for sale	$ 8,749,673	$ 4,724,006
Total loans serviced	401,896,800	368,684,232
Delinquent loans:
30 days	7,360,174	8,844,792
60 days	3,800,337	2,663,060
90 days or more - Not in foreclosure	29,947,899	4,345,074
90 days or more - In foreclosure	868,532	1,182,137
90 days or more - Foreclosed	62,334	107,736
Total delinquent mortgage loans	42,039,276	17,142,799
Bankruptcy	1,974,015	2,035,185
Delinquent loans in COVID-19 related forbearance
30 days	2,819,154
60 days	2,766,100
90 days or more not in foreclosure	22,544,078
Total delinquent loans in COVID-19 related forbearance	28,129,332
Custodial funds managed by the Company	16,712,414	8,942,275
Servicing rights owned
Mortgage servicing portfolio
Loans held for sale	8,749,673	4,724,006
Total loans serviced	245,400,232	233,269,564
Delinquent loans:
30 days	5,924,488	7,987,132
60 days	3,178,614	2,490,797
90 days or more - Not in foreclosure	24,324,945	4,070,482
90 days or more - In foreclosure	831,239	1,113,806
90 days or more - Foreclosed	16,409	18,315
Total delinquent mortgage loans	34,275,695	15,680,532
Bankruptcy	1,815,833	1,898,367
Delinquent loans in COVID-19 related forbearance
30 days	2,344,986
60 days	2,289,880
90 days or more not in foreclosure	17,827,122
Total delinquent loans in COVID-19 related forbearance	22,461,988
Custodial funds managed by the Company	10,364,855	6,412,291
Contract servicing and subservicing
Mortgage servicing portfolio
Total loans serviced	156,496,568	135,414,668
Delinquent loans:
30 days	1,435,686	857,660
60 days	621,723	172,263
90 days or more - Not in foreclosure	5,622,954	274,592
90 days or more - In foreclosure	37,293	68,331
90 days or more - Foreclosed	45,925	89,421
Total delinquent mortgage loans	7,763,581	1,462,267
Bankruptcy	158,182	136,818
Delinquent loans in COVID-19 related forbearance
30 days	474,168
60 days	476,220
90 days or more not in foreclosure	4,716,956
Total delinquent loans in COVID-19 related forbearance	5,667,344
Custodial funds managed by the Company	6,347,559	2,529,984
Non affiliated entities
Mortgage servicing portfolio
Originated	188,854,796	168,842,011
Purchased	47,795,763	59,703,547
Total loans serviced, excluding loans held for sale	236,650,559	228,545,558
Non affiliated entities | Servicing rights owned
Mortgage servicing portfolio
Originated	188,854,796	168,842,011
Purchased	47,795,763	59,703,547
Total loans serviced, excluding loans held for sale	236,650,559	228,545,558
Affiliated entities
Mortgage servicing portfolio
Advised entities	156,496,568	135,414,668
Affiliated entities | Contract servicing and subservicing
Mortgage servicing portfolio
Advised entities	$ 156,496,568	$ 135,414,668

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Loan Sales and Servicing Activities - Geographical Distribution of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Loan Sales and Servicing Activities
Total loans serviced	$ 401,896,800	$ 368,684,232
California
Loan Sales and Servicing Activities
Total loans serviced	58,062,643	57,311,867
Florida
Loan Sales and Servicing Activities
Total loans serviced	33,545,822	28,940,696
Texas
Loan Sales and Servicing Activities
Total loans serviced	31,893,436	27,909,821
Virginia
Loan Sales and Servicing Activities
Total loans serviced	24,378,162	22,115,619
Maryland
Loan Sales and Servicing Activities
Total loans serviced	18,700,592	16,829,320
All other states
Loan Sales and Servicing Activities
Total loans serviced	$ 235,316,145	$ 215,576,909

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Fair Value - Financial Statement Items Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets:
Short-term investments at fair value	$ 102,136	$ 74,611
Loans held for sale	9,126,172	4,912,953
Derivative assets:
Derivative asset, before netting	683,082	187,397
Netting	(104,828)	(27,711)
Total derivative assets	578,254	159,686
Derivative liabilities:
Derivative liability, before netting	117,374	38,946
Netting	(92,837)	(16,616)
Net amounts of liabilities presented in the consolidated balance sheet	24,537	22,330
Mortgage servicing liabilities	31,698	29,140
PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	991	1,672
Interest rate lock commitments
Derivative assets:
Total derivative assets	544,151	138,511
Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	72,640	12,364
Derivative liabilities:
Derivative liability, before netting	15,903	19,040
Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	21,652	17,097
Derivative liabilities:
Derivative liability, before netting	98,765	18,045
MBS put options
Derivative assets:
Derivative asset, before netting	27,336	3,415
MBS call options
Derivative assets:
Derivative asset, before netting	4,255
Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,570	1,469
Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	5,910	3,945
Level 3
Assets:
Loans held for sale	2,774,997	383,878
Level 3 | Interest rate lock commitments
Assets:
Loans held for sale	541,445	136,650
Recurring basis
Assets:
Short-term investments at fair value	102,136	74,611
Loans held for sale	9,126,172	4,912,953
Derivative assets:
Derivative asset, before netting	683,082	187,397
Netting	(104,828)	(27,711)
Total derivative assets	578,254	159,686
Mortgage servicing rights at fair value	2,333,821	2,926,790
Total assets	12,141,374	8,075,712
Derivative liabilities:
Derivative liability, before netting	117,374	38,946
Netting	(92,837)	(16,616)
Net amounts of liabilities presented in the consolidated balance sheet	24,537	22,330
Mortgage servicing liabilities	31,698	29,140
Total liabilities	199,225	230,056
Recurring basis | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	991	1,672
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate	142,990	178,586
Recurring basis | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	544,151	138,511
Derivative liabilities:
Derivative liability, before netting	2,706	1,861
Recurring basis | Repurchase agreement derivatives
Derivative assets:
Derivative asset, before netting		8,187
Recurring basis | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	72,640	12,364
Derivative liabilities:
Derivative liability, before netting	15,903	19,040
Recurring basis | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	21,652	17,097
Derivative liabilities:
Derivative liability, before netting	98,765	18,045
Recurring basis | MBS put options
Derivative assets:
Derivative asset, before netting	27,336	3,415
Recurring basis | MBS call options
Derivative assets:
Derivative asset, before netting	4,255
Recurring basis | Swaptions
Derivative assets:
Derivative asset, before netting	5,568	2,409
Recurring basis | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,570	1,469
Recurring basis | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	5,910	3,945
Recurring basis | Level 1
Assets:
Short-term investments at fair value	102,136	74,611
Derivative assets:
Derivative asset, before netting	7,480	5,414
Total derivative assets	7,480	5,414
Total assets	110,607	81,697
Recurring basis | Level 1 | PMT
Derivative assets:
Investment in PennyMac Mortgage Investment Trust	991	1,672
Recurring basis | Level 1 | Call options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	1,570	1,469
Recurring basis | Level 1 | Put options on interest rate futures | Purchases
Derivative assets:
Derivative asset, before netting	5,910	3,945
Recurring basis | Level 2
Assets:
Loans held for sale	6,351,175	4,529,075
Derivative assets:
Derivative asset, before netting	131,451	35,285
Total derivative assets	131,451	35,285
Total assets	6,482,626	4,564,360
Derivative liabilities:
Derivative liability, before netting	114,668	37,085
Net amounts of liabilities presented in the consolidated balance sheet	114,668	37,085
Total liabilities	114,668	37,085
Recurring basis | Level 2 | Forward contracts | Purchases
Derivative assets:
Derivative asset, before netting	72,640	12,364
Derivative liabilities:
Derivative liability, before netting	15,903	19,040
Recurring basis | Level 2 | Forward contracts | Sales
Derivative assets:
Derivative asset, before netting	21,652	17,097
Derivative liabilities:
Derivative liability, before netting	98,765	18,045
Recurring basis | Level 2 | MBS put options
Derivative assets:
Derivative asset, before netting	27,336	3,415
Recurring basis | Level 2 | MBS call options
Derivative assets:
Derivative asset, before netting	4,255
Recurring basis | Level 2 | Swaptions
Derivative assets:
Derivative asset, before netting	5,568	2,409
Recurring basis | Level 3
Assets:
Loans held for sale	2,774,997	383,878
Derivative assets:
Derivative asset, before netting	544,151	146,698
Total derivative assets	544,151	146,698
Mortgage servicing rights at fair value	2,333,821	2,926,790
Total assets	5,652,969	3,457,366
Derivative liabilities:
Derivative liability, before netting	2,706	1,861
Net amounts of liabilities presented in the consolidated balance sheet	2,706	1,861
Mortgage servicing liabilities	31,698	29,140
Total liabilities	177,394	209,587
Recurring basis | Level 3 | PMT
Derivative liabilities:
Excess servicing spread financing at fair value to affiliate	142,990	178,586
Recurring basis | Level 3 | Interest rate lock commitments
Derivative assets:
Derivative asset, before netting	544,151	138,511
Derivative liabilities:
Derivative liability, before netting	$ 2,706	1,861
Recurring basis | Level 3 | Repurchase agreement derivatives
Derivative assets:
Derivative asset, before netting		$ 8,187

XML

Fair Value - Level 3 Input Roll Forward, Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Mortgage servicing liabilities resulting from loan sales			$ 6,576	$ 27,133
Recurring basis
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	$ 3,251,509	$ 3,066,124	3,455,505	3,156,728
Purchases and issuances, net	3,327,099	2,062,591	6,121,075	4,155,778
Capitalization of interest and advances	22,262		55,283
Sales and repayments	(97,225)	(1,591,986)	(896,517)	(2,446,893)
Mortgage servicing rights resulting from loan sales	245,946	246,757	753,795	545,839
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	42,029	4,252	35,638	(2,025)
Other factors	186,496	(318,655)	(563,248)	(790,362)
Total changes in fair value included in income	228,525	(314,403)	(527,610)	(792,387)
Transfers from mortgage loans held for sale from Level 3 to Level 2	(597,134)	(416,062)	(1,476,027)	(1,292,824)
Transfers to real estate acquired in settlement of loans		(376)	(691)	(2,420)
Reinstatement from real estate acquired in settlement of loans	755		755
Transfers from interest rate lock commitments to loans held for sale	(731,474)	(258,064)	(1,835,305)	(529,240)
Balance at the end of the period	5,650,263	2,794,581	5,650,263	2,794,581
Changes in fair value recognized during the period relating to assets still held at the end of the period	454,285	(268,048)	(799,403)	(894,832)
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	181,064	207,104	207,726	224,791
Issuances	531	377	1,393	1,327
Accrual of interest on excess servicing spread financing	2,070	2,291	6,416	8,124
Repayment	(7,682)	(9,819)	(25,112)	(30,901)
Mortgage servicing liabilities resulting from loan sales		19,501	6,576	27,133
Changes in fair value included in income	(1,295)	(2,019)	(22,311)	(13,039)
Balance at the end of the period	174,688	217,435	174,688	217,435
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(1,295)	(2,019)	(22,311)	(13,039)
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 period	151,206	194,156	178,586	216,110
Issuances	531	377	1,393	1,327
Accrual of interest on excess servicing spread financing	2,070	2,291	6,416	8,124
Repayment	(7,682)	(9,819)	(25,112)	(30,901)
Changes in fair value included in income	(3,135)	(3,864)	(18,293)	(11,519)
Balance at the end of the period	142,990	183,141	142,990	183,141
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	(3,135)	(3,864)	(18,293)	(11,519)
Recurring basis | Mortgage servicing liabilities
Roll forward of liabilities measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	29,858	12,948	29,140	8,681
Mortgage servicing liabilities resulting from loan sales		19,501	6,576	27,133
Changes in fair value included in income	1,840	1,845	(4,018)	(1,520)
Balance at the end of the period	31,698	34,294	31,698	34,294
Changes in fair value recognized during the period relating to liability still outstanding at the end of the period	1,840	1,845	(4,018)	(1,520)
Recurring basis | Loans held for sale
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	661,719	217,998	383,878	260,008
Purchases and issuances, net	2,734,321	1,861,769	4,664,408	3,537,177
Capitalization of interest and advances	22,262		55,283
Sales and repayments	(88,955)	(1,582,564)	(888,247)	(2,414,899)
Changes in fair value included in income arising from:
Changes in instrument specific credit risk	42,029	4,252	35,638	(2,025)
Total changes in fair value included in income	42,029	4,252	35,638	(2,025)
Transfers from mortgage loans held for sale from Level 3 to Level 2	(597,134)	(416,062)	(1,476,027)	(1,292,824)
Transfers to real estate acquired in settlement of loans		(376)	(691)	(2,420)
Reinstatement from real estate acquired in settlement of loans	755		755
Balance at the end of the period	2,774,997	85,017	2,774,997	85,017
Changes in fair value recognized during the period relating to assets still held at the end of the period	38,217	(2,328)	31,389	(2,478)
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 period	368,064	111,776	136,650	49,338
Purchases and issuances, net	593,065	199,274	1,431,194	376,137
Changes in fair value included in income arising from:
Other factors	311,790	92,138	808,906	248,889
Total changes in fair value included in income	311,790	92,138	808,906	248,889
Transfers from interest rate lock commitments to loans held for sale	(731,474)	(258,064)	(1,835,305)	(529,240)
Balance at the end of the period	541,445	145,124	541,445	145,124
Changes in fair value recognized during the period relating to assets still held at the end of the period	541,445	145,124	541,445	145,124
Recurring basis | Repurchase agreement derivatives
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	8,187	16,015	8,187	26,770
Purchases and issuances, net		1,502		15,019
Sales and repayments	(8,270)	(9,422)	(8,270)	(31,994)
Changes in fair value included in income arising from:
Other factors	83	92	83	(1,608)
Total changes in fair value included in income	83	92	83	(1,608)
Balance at the end of the period		8,187		8,187
Changes in fair value recognized during the period relating to assets still held at the end of the period		41		165
Recurring basis | Mortgage servicing rights
Roll forward of assets measured using Level 3 inputs on a recurring basis
Balance at the beginning of the period	2,213,539	2,720,335	2,926,790	2,820,612
Purchases and issuances, net	(287)	46	25,473	227,445
Mortgage servicing rights resulting from loan sales	245,946	246,757	753,795	545,839
Changes in fair value included in income arising from:
Other factors	(125,377)	(410,885)	(1,372,237)	(1,037,643)
Total changes in fair value included in income	(125,377)	(410,885)	(1,372,237)	(1,037,643)
Balance at the end of the period	2,333,821	2,556,253	2,333,821	2,556,253
Changes in fair value recognized during the period relating to assets still held at the end of the period	$ (125,377)	$ (410,885)	$ (1,372,237)	$ (1,037,643)

XML

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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
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	$ 1,295	$ 2,019	$ 22,311	$ 13,039
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	1,295	2,019	22,311	13,039
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	3,135	3,864	18,293	11,519
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	3,135	3,864	18,293	11,519
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	(1,840)	(1,845)	4,018	1,520
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	(1,840)	(1,845)	4,018	1,520
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	647,936	(147,546)	539,591	(499,557)
Assets | Net gains on 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	773,313	263,339	1,911,828	538,086
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	(125,377)	(410,885)	(1,372,237)	(1,037,643)
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	773,313	263,339	1,911,828	538,086
Loans held for sale | Net gains on 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	773,313	263,339	1,911,828	538,086
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	(125,377)	(410,885)	(1,372,237)	(1,037,643)
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	$ (125,377)	$ (410,885)	$ (1,372,237)	$ (1,037,643)

XML

Fair Value - Fair Value Option Maturities, Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair value
Total fair value	$ 9,126,172	$ 4,912,953
Recurring basis
Fair value
Total fair value	9,126,172	4,912,953
Loans held for sale | Recurring basis
Fair value
Current through 89 days delinquent	8,670,895	4,628,333
Not in foreclosure	392,866	236,650
In foreclosure	62,411	47,970
Total fair value	9,126,172	4,912,953
Principal amount due upon maturity
Current through 89 days delinquent	8,279,163	4,431,854
Not in foreclosure	404,183	241,958
In foreclosure	66,327	50,194
Total principal amount due upon maturity	8,749,673	4,724,006
Difference
Current through 89 days delinquent	391,732	196,479
Not in foreclosure	(11,317)	(5,308)
In foreclosure	(3,916)	(2,224)
Total difference	$ 376,499	$ 188,947

XML

Fair Value - Measurement Basis, Nonrecurring (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	$ 1,295,143		$ 1,295,143		$ 1,294,070
Term Notes
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	1,295,143		1,295,143		1,294,070
Unsecured senior note
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	492,358		492,358
Nonrecurring basis
Financial statement items measured at fair value on a nonrecurring basis
Real estate acquired in settlement of loans	7,346		7,346		9,850
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Real estate acquired in settlement of loans	(825)	$ 139	(2,059)	$ 162
Nonrecurring basis | Level 3
Financial statement items measured at fair value on a nonrecurring basis
Real estate acquired in settlement of loans	7,346		7,346		9,850
Fair Values | Term Notes
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	1,259,619		1,259,619		$ 1,303,047
Fair Values | Unsecured senior note
Total gains (losses) on assets measured at estimated fair values on a nonrecurring basis
Notes Payable	$ 510,000		$ 510,000

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Loans and IRLC (Details) $ in Thousands	Sep. 30, 2020 USD ($) item	Dec. 31, 2019 USD ($) item
Excess servicing spread financing
Loans held for sale | $	$ 9,126,172	$ 4,912,953
Level 3
Excess servicing spread financing
Loans held for sale | $	$ 2,774,997	$ 383,878
Loans held for sale | Discount rate | Level 3 | Minimum
Excess servicing spread financing
Input	3.2	3.0
Loans held for sale | Discount rate | Level 3 | Maximum
Excess servicing spread financing
Input	9.2	9.2
Loans held for sale | Discount rate | Level 3 | Weighted average
Excess servicing spread financing
Input	3.2	3.0
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Minimum
Excess servicing spread financing
Input	2.1	2.6
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Maximum
Excess servicing spread financing
Input	2.6	3.2
Loans held for sale | Twelve-month projected housing price index Change | Level 3 | Weighted average
Excess servicing spread financing
Input	2.2	2.8
Loans held for sale | Prepayment/resale speed | Level 3 | Minimum
Excess servicing spread financing
Input	0.5	0.4
Loans held for sale | Prepayment/resale speed | Level 3 | Maximum
Excess servicing spread financing
Input	24.9	21.4
Loans held for sale | Prepayment/resale speed | Level 3 | Weighted average
Excess servicing spread financing
Input	19.6	18.2
Loans held for sale | Total prepayment speed | Level 3 | Minimum
Excess servicing spread financing
Input	0.6	0.5
Loans held for sale | Total prepayment speed | Level 3 | Maximum
Excess servicing spread financing
Input	38.7	39.2
Loans held for sale | Total prepayment speed | Level 3 | Weighted average
Excess servicing spread financing
Input	29.9	36.2
Interest rate lock commitments | Level 3
Excess servicing spread financing
Loans held for sale | $	$ 541,445	$ 136,650
Interest rate lock commitments | Pull-through rate | Level 3 | Minimum
Excess servicing spread financing
Input	11.8	12.2
Interest rate lock commitments | Pull-through rate | Level 3 | Maximum
Excess servicing spread financing
Input	100	100
Interest rate lock commitments | Pull-through rate | Level 3 | Weighted average
Excess servicing spread financing
Input	80.6	86.5
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Minimum
Excess servicing spread financing
Input	1.0	1.4
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Maximum
Excess servicing spread financing
Input	5.1	5.7
Interest rate lock commitments | Mortgage servicing rights value expressed as servicing fee multiple | Level 3 | Weighted average
Excess servicing spread financing
Input	3.5	4.2
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Minimum
Excess servicing spread financing
Input	0.2	0.3
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Maximum
Excess servicing spread financing
Input	2.5	2.8
Interest rate lock commitments | Percentage of unpaid principal balance | Level 3 | Weighted average
Excess servicing spread financing
Input	1.1	1.6
Repurchase agreement derivatives
Excess servicing spread financing
Acceptance rate (as a percent)		99.00%

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Rights - Initial Recognition (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 USD ($) item	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 USD ($) item	Dec. 31, 2019 USD ($) item
Mortgage servicing rights
Inputs
Amount recognized | $	$ 245,946,000	$ 246,757,000	$ 753,795,000	$ 545,839,000
Fair Values | Pricing spread | Level 3 | Minimum
Inputs:
Input				5.5
Fair Values | Annual total prepayment speed | Level 3 | Minimum
Inputs:
Input				7.7
Fair Values | Mortgage servicing rights | Level 3 | Minimum
Inputs:
Annual per-loan cost of servicing | $			78		$ 77
Fair Values | Mortgage servicing rights | Level 3 | Maximum
Inputs:
Annual per-loan cost of servicing | $			110		100
Fair Values | Mortgage servicing rights | Level 3 | Weighted average
Inputs:
Annual per-loan cost of servicing | $			$ 104		$ 97
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Minimum
Inputs:
Input	8.0		8.0		6.8
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Maximum
Inputs:
Input					15.8
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Weighted average
Inputs:
Input	10.1		10.1		8.5
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Minimum
Inputs:
Input	10.4		10.4		9.3
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Maximum
Inputs:
Input	32.3		32.3		40.9
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Weighted average
Inputs:
Input				15.0
Input	15.3		15.3		12.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Minimum
Inputs:
Input	1.7		1.7		1.4
Fair Values | Mortgage servicing rights | Life | Level 3 | Maximum
Inputs:
Input	6.8		6.8		7.4
Fair Values | Mortgage servicing rights | Life | Level 3 | Weighted average
Inputs:
Input	5.4		5.4		6.1
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3
Inputs
Amount recognized | $	$ 245,946,000	246,757,000	$ 753,795,000	$ 545,839,000
Unpaid principal balance of underlying loans | $	$ 25,369,941,000	$ 15,709,249,000	$ 63,766,627,000	$ 35,532,425,000
Weighted-average servicing fee rate (as a percent)	0.32%	0.43%	0.36%	0.42%
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Minimum
Inputs:
Annual per-loan cost of servicing | $	$ 80	$ 78	$ 77	$ 78
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Maximum
Inputs:
Annual per-loan cost of servicing | $	110	100	110	100
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Level 3 | Weighted average
Inputs:
Annual per-loan cost of servicing | $	$ 102	$ 97	$ 100	$ 97
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Minimum
Inputs:
Input	8.0	5.5	6.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Maximum
Inputs:
Input	17.6	16.2	18.1	16.2
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Pricing spread | Level 3 | Weighted average
Inputs:
Input	9.6	8.3	9.3	8.6
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Minimum
Inputs:
Input	7.2	8.8	7.2
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Maximum
Inputs:
Input	41.0	32.1	49.8	32.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Annual total prepayment speed | Level 3 | Weighted average
Inputs:
Input	10.4	15.7	12.4
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Minimum
Inputs:
Input	2.3	2.7	1.5	2.6
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Maximum
Inputs:
Input	9.1	7.5	9.1	7.8
Fair Values | MSRs at the time of initial recognition, excluding MSR purchases | Life | Level 3 | Weighted average
Inputs:
Input	7.3	5.5	6.6	5.8

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Rights, Effect of Change In Inputs on Fair Value (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) item	Dec. 31, 2019 USD ($) item
MSR and pool characteristics
Carrying value	$ 2,333,821,000	$ 2,926,790,000
Mortgage servicing liabilities | Level 3
Prepayment speed
Annual per-loan cost of servicing	$ 343	300
Fair Values | Mortgage servicing liabilities | Pricing spread | Level 3 | Maximum
Inputs
Input | item	17.6
Fair Values | Mortgage servicing rights | Level 3
MSR and pool characteristics
Carrying value	$ 2,333,821,000	2,926,790,000
Unpaid principal balance of underlying loans	$ 234,850,997,000	$ 225,787,103,000
Weighted-average note interest rate (as a percent)	3.80%	3.90%
Weighted-average servicing fee rate (as a percent)	0.35%	0.35%
Pricing spread
Effect on fair value of 5% adverse change	$ (42,266,000)	$ (44,561,000)
Effect on fair value of 10% adverse change	(82,935,000)	(87,734,000)
Effect on fair value of 20% adverse change	(159,813,000)	(170,155,000)
Prepayment speed
Effect on fair value of 5% adverse change	(67,933,000)	(63,569,000)
Effect on fair value of 10% adverse change	(132,698,000)	(124,411,000)
Effect on fair value of 20% adverse change	(253,474,000)	(238,549,000)
Annual per-loan cost of servicing
Effect on fair value of 5% adverse change	(25,138,000)	(24,516,000)
Effect on fair value of 10% adverse change	(50,275,000)	(49,032,000)
Effect on fair value of 20% adverse change	(100,551,000)	(98,065,000)
Fair Values | Mortgage servicing rights | Level 3 | Minimum
Prepayment speed
Annual per-loan cost of servicing	78	77
Fair Values | Mortgage servicing rights | Level 3 | Maximum
Prepayment speed
Annual per-loan cost of servicing	110	100
Fair Values | Mortgage servicing rights | Level 3 | Weighted average
Prepayment speed
Annual per-loan cost of servicing	$ 104	$ 97
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Minimum
Inputs
Input | item	8.0	6.8
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Maximum
Inputs
Input | item		15.8
Fair Values | Mortgage servicing rights | Pricing spread | Level 3 | Weighted average
Inputs
Input | item	10.1	8.5
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Minimum
Inputs
Input | item	10.4	9.3
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Maximum
Inputs
Input | item	32.3	40.9
Fair Values | Mortgage servicing rights | Annual total prepayment speed | Level 3 | Weighted average
Inputs
Input | item	15.3	12.7
Fair Values | Mortgage servicing rights | Life | Level 3 | Minimum
Inputs
Input | item	1.7	1.4
Fair Values | Mortgage servicing rights | Life | Level 3 | Maximum
Inputs
Input | item	6.8	7.4
Fair Values | Mortgage servicing rights | Life | Level 3 | Weighted average
Inputs
Input | item	5.4	6.1

XML

Fair Value - Level 3 Unobservable Inputs, ESS (Details) - Excess servicing spread financing - Level 3 $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) item	Dec. 31, 2019 USD ($) item
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value | $	$ 142,990	$ 178,586
Unpaid principal balance of underlying mortgage loans | $	$ 17,070,283	$ 19,904,571
Average servicing fee rate (as a percent)	0.34%	0.34%
Average excess servicing spread (as a percent)	0.19%	0.19%
Pricing spread | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	4.9	3.0
Pricing spread | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	5.3	3.3
Pricing spread | 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
Input	5.1	3.1
Annual total prepayment speed | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	9.6	8.7
Annual total prepayment speed | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	17.6	16.2
Annual total prepayment speed | 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
Input	11.8	11.0
Life | Minimum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	2.4	2.7
Life | Maximum
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input	6.7	7.2
Life | 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
Input	5.8	6.1

XML

Fair Value - Level 3 Unobservable Inputs, Mortgage Servicing Liabilities (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) item	Dec. 31, 2019 USD ($) item
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value	$ 31,698,000	$ 29,140,000
Mortgage servicing liabilities | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Carrying value	31,698,000	29,140,000
Unpaid principal balance of underlying loans	$ 1,799,562,000	$ 2,758,454,000
Servicing fee rate (as a percent)	0.25%	0.25%
Annual per-loan cost of servicing	$ 343	$ 300
Mortgage servicing liabilities | Pricing spread | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	7.1	8.2
Mortgage servicing liabilities | Annual total prepayment speed | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	35.1	29.2
Mortgage servicing liabilities | Life | Level 3
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption
Input | item	2.9	3.9

XML

Loans Held for Sale at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	$ 9,126,172	$ 4,912,953
Fair value of loans pledged to secure assets sold under agreements to repurchase	8,453,522	4,322,789
Fair value of loans pledged to secure mortgage loan participation purchase and sale agreement	558,023	523,349
Pledged Assets Separately Reported, Loans Pledged as Collateral, at Fair Value, Total	9,011,545	4,846,138
Government-insured or guaranteed
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	5,219,448	4,222,010
Conventional mortgage loans
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	1,131,727	307,065
Purchased from Ginnie Mae pools serviced by the Company
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	2,759,032	374,121
Repurchased pursuant to representations and warranties
Mortgage Loans Held for Sale at Fair Value
Loans held for sale	$ 15,965	9,244
Home equity lines of credit
Mortgage Loans Held for Sale at Fair Value
Loans held for sale		$ 513

XML

Derivative Financial Instruments - Other Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Dec. 31, 2019
Derivative assets:
Margin deposits placed with counterparties					$ (4,375)	$ (5,000)
Derivative asset, before netting					683,082	187,397
Netting					(104,828)	(27,711)
Total derivative assets					578,254	159,686
Derivative liabilities:
Derivative liability, before netting					117,374	38,946
Netting					(92,837)	(16,616)
Net amounts of liabilities presented in the consolidated balance sheet					24,537	22,330
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	$ 6,521	$ 250,146	$ 1,027,327	$ 587,883
Interest Expense. | Repurchase agreement derivative
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	83	92	83	(1,608)
Net gains on loans held for sale at fair value | Interest rate lock commitments and 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	(77,320)	(55,540)	(403,992)	(157,362)
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	6,521	250,146	1,027,327	587,883
Margin Deposits
Derivative assets:
Collateral placed with (received from) derivative counterparties					(11,991)	(11,095)
Interest rate lock commitments
Derivative assets:
Total derivative assets					544,151	138,511
Interest rate lock commitments | Net gains on loans held for sale at fair value
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Gains (losses) recognized on derivative financial instruments	173,381	33,347	404,795	95,785
Forward contracts | Purchases
Derivative Instruments
Notional amount	31,443,783		13,618,361		31,443,783	13,618,361
Derivative assets:
Derivative asset, before netting					72,640	12,364
Derivative liabilities:
Derivative liability, before netting					15,903	19,040
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			13,618,361
Balance at end of period	31,443,783		31,443,783
Forward contracts | Sales
Derivative Instruments
Notional amount	42,438,243		16,220,526		42,438,243	16,220,526
Derivative assets:
Derivative asset, before netting					21,652	17,097
Derivative liabilities:
Derivative liability, before netting					98,765	18,045
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			16,220,526
Balance at end of period	42,438,243		42,438,243
MBS put options
Derivative Instruments
Notional amount	12,950,000		6,100,000		12,950,000	6,100,000
Derivative assets:
Derivative asset, before netting					27,336	3,415
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			6,100,000
Balance at end of period	12,950,000		12,950,000
MBS call options
Derivative Instruments
Notional amount	1,850,000		1,850,000		1,850,000
Derivative assets:
Derivative asset, before netting					4,255
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at end of period	1,850,000		1,850,000
Swaptions | Purchases
Derivative Instruments
Notional amount	3,125,000		1,750,000		3,125,000	1,750,000
Derivative assets:
Derivative asset, before netting					5,568	2,409
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			1,750,000
Balance at end of period	3,125,000		3,125,000
Put options on interest rate futures | Purchases
Derivative Instruments
Notional amount	2,275,000		2,250,000		2,275,000	2,250,000
Derivative assets:
Derivative asset, before netting					5,910	3,945
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			2,250,000
Balance at end of period	2,275,000		2,275,000
Call options on interest rate futures | Purchases
Derivative Instruments
Notional amount	950,000		750,000		950,000	750,000
Derivative assets:
Derivative asset, before netting					1,570	1,469
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			750,000
Balance at end of period	950,000		950,000
Treasury future | Purchases
Derivative Instruments
Notional amount	1,000,000		1,276,000		1,000,000	1,276,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			1,276,000
Balance at end of period	1,000,000		1,000,000
Treasury future | Sales
Derivative Instruments
Notional amount	450,000		1,010,000		450,000	1,010,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			1,010,000
Balance at end of period	450,000		450,000
Interest rate swap futures | Purchases
Derivative Instruments
Notional amount	3,585,000		3,210,000		3,585,000	3,210,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			3,210,000
Balance at end of period	3,585,000		3,585,000
Not designated as hedging instrument | Repurchase agreement derivatives
Derivative assets:
Derivative asset, before netting						8,187
Not designated as hedging instrument | Interest rate lock commitments
Derivative Instruments
Notional amount	18,873,579		7,122,316		18,873,579	7,122,316
Derivative assets:
Derivative asset, before netting					544,151	138,511
Derivative liabilities:
Derivative liability, before netting					2,706	1,861
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period			7,122,316
Balance at end of period	18,873,579		18,873,579
Not designated as hedging instrument | Forward contracts | Purchases
Derivative Instruments
Notional amount	31,443,783	15,829,825	31,443,783	6,657,026	31,443,783	13,618,361
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	20,709,914	19,497,698	13,618,361	6,657,026
Additions	143,902,517	100,139,970	370,704,328	237,370,321
Dispositions/expirations	(133,168,648)	(103,807,843)	(352,878,906)	(228,197,522)
Balance at end of period	31,443,783	15,829,825	31,443,783	15,829,825
Not designated as hedging instrument | Forward contracts | Sales
Derivative Instruments
Notional amount	42,438,243	15,116,810	16,220,526	6,890,046	42,438,243	16,220,526
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	25,302,147	14,276,156	16,220,526	6,890,046
Additions	175,642,745	122,174,329	444,965,072	275,749,351
Dispositions/expirations	(158,506,649)	(121,333,675)	(418,747,355)	(267,522,587)
Balance at end of period	42,438,243	15,116,810	42,438,243	15,116,810
Not designated as hedging instrument | MBS put options
Derivative Instruments
Notional amount	12,950,000	10,050,000	6,100,000	4,635,000	12,950,000	6,100,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	11,200,000	12,775,000	6,100,000	4,635,000
Additions	29,850,000	29,575,000	79,600,000	77,185,000
Dispositions/expirations	(28,100,000)	(32,300,000)	(72,750,000)	(71,770,000)
Balance at end of period	12,950,000	10,050,000	12,950,000	10,050,000
Not designated as hedging instrument | MBS call options
Derivative Instruments
Notional amount	1,850,000	2,250,000	1,850,000	1,450,000	1,850,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period		2,250,000		1,450,000
Additions	1,850,000		1,850,000	6,750,000
Dispositions/expirations		(2,250,000)		(8,200,000)
Balance at end of period	1,850,000		1,850,000
Not designated as hedging instrument | Swaptions | Purchases
Derivative Instruments
Notional amount	3,125,000		3,125,000		3,125,000	1,750,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	3,375,000		1,750,000
Additions	3,625,000		14,700,000
Dispositions/expirations	(3,875,000)		(13,325,000)
Balance at end of period	3,125,000		3,125,000
Not designated as hedging instrument | Swaptions | Sales
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions	3,875,000		13,325,000
Dispositions/expirations	(3,875,000)		(13,325,000)
Not designated as hedging instrument | Put options on interest rate futures | Purchases
Derivative Instruments
Notional amount	2,275,000	4,350,000	2,250,000	3,085,000	2,275,000	2,250,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	350,000	2,835,000	2,250,000	3,085,000
Additions	3,325,000	9,850,000	12,025,000	19,422,500
Dispositions/expirations	(1,400,000)	(8,335,000)	(12,000,000)	(18,157,500)
Balance at end of period	2,275,000	4,350,000	2,275,000	4,350,000
Not designated as hedging instrument | Put options on interest rate futures | Sales
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions	1,400,000	8,335,000	12,000,000	27,297,800
Dispositions/expirations	(1,400,000)	(8,335,000)	(12,000,000)	(27,297,800)
Not designated as hedging instrument | Call options on interest rate futures | Purchases
Derivative Instruments
Notional amount	950,000	600,000	750,000	1,512,500	950,000	750,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	1,800,000	3,687,500	750,000	1,512,500
Additions	1,200,000	1,750,000	9,740,000	13,127,800
Dispositions/expirations	(2,050,000)	(4,837,500)	(9,540,000)	(14,040,300)
Balance at end of period	950,000	600,000	950,000	600,000
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	2,050,000	4,837,500	9,540,000	4,837,500
Dispositions/expirations	(2,050,000)	(4,837,500)	(9,540,000)	(4,837,500)
Not designated as hedging instrument | Treasury future | Purchases
Derivative Instruments
Notional amount	1,000,000	1,408,500	1,000,000	835,000	1,000,000	1,276,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	925,000	486,100	1,276,000	835,000
Additions	1,561,500	5,132,000	5,516,700	11,943,400
Dispositions/expirations	(1,486,500)	(4,209,600)	(5,792,700)	(11,369,900)
Balance at end of period	1,000,000	1,408,500	1,000,000	1,408,500
Not designated as hedging instrument | Treasury future | Sales
Derivative Instruments
Notional amount	450,000	1,132,500	1,010,000	1,450,000	450,000	1,010,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	450,000	1,550,000	1,010,000	1,450,000
Additions	1,486,500	3,792,100	5,232,700	11,052,400
Dispositions/expirations	(1,486,500)	(4,209,600)	(5,792,700)	(11,369,900)
Balance at end of period	450,000	1,132,500	450,000	1,132,500
Not designated as hedging instrument | Interest rate swap futures | Purchases
Derivative Instruments
Notional amount	3,585,000	3,910,000	3,210,000	625,000	$ 3,585,000	$ 3,210,000
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Balance at beginning of period	3,460,000	2,900,000	3,210,000	625,000
Additions	1,200,000	1,800,000	4,150,000	4,075,000
Dispositions/expirations	(1,075,000)	(790,000)	(3,775,000)	(790,000)
Balance at end of period	3,585,000	3,910,000	3,585,000	3,910,000
Not designated as hedging instrument | Interest rate swap futures | Sales
Activity for derivative contracts used to hedge the IRLCs and inventory of mortgage loans at notional value
Additions	1,075,000	790,000	3,775,000	790,000
Dispositions/expirations	$ (1,075,000)	$ (790,000)	$ (3,775,000)	$ (790,000)

XML

Derivative Financial Instruments - Offsetting of Derivative Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Derivatives not subject to master netting arrangements
Gross amounts of recognized assets	$ 544,151	$ 146,698
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	138,931	40,699
Gross amounts offset in the consolidated balance sheet	(104,828)	(27,711)
Net amounts of assets presented in the consolidated balance sheet	34,103	12,988
Total
Gross amounts of recognized assets	683,082	187,397
Net amounts of assets presented in the balance sheet	578,254	159,686
Interest rate lock commitments
Derivatives not subject to master netting arrangements
Gross amounts of recognized assets	544,151	138,511
Total
Net amounts of assets presented in the balance sheet	544,151	138,511
Repurchase agreement derivatives
Derivatives not subject to master netting arrangements
Gross amounts of recognized assets		8,187
MBS put options
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	27,336	3,415
Net amounts of assets presented in the consolidated balance sheet	27,336	3,415
Total
Gross amounts of recognized assets	27,336	3,415
MBS call options
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	4,255
Net amounts of assets presented in the consolidated balance sheet	4,255
Total
Gross amounts of recognized assets	4,255
Swaptions
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	5,568	2,409
Net amounts of assets presented in the consolidated balance sheet	5,568	2,409
Swaptions | Purchases
Total
Gross amounts of recognized assets	5,568	2,409
Forward contracts | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	72,640	12,364
Net amounts of assets presented in the consolidated balance sheet	72,640	12,364
Total
Gross amounts of recognized assets	72,640	12,364
Forward contracts | Sales
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	21,652	17,097
Net amounts of assets presented in the consolidated balance sheet	21,652	17,097
Total
Gross amounts of recognized assets	21,652	17,097
Put options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	5,910	3,945
Net amounts of assets presented in the consolidated balance sheet	5,910	3,945
Total
Gross amounts of recognized assets	5,910	3,945
Call options on interest rate futures | Purchases
Derivatives subject to master netting arrangements:
Gross amounts of recognized assets	1,570	1,469
Net amounts of assets presented in the consolidated balance sheet	1,570	1,469
Total
Gross amounts of recognized assets	$ 1,570	$ 1,469

XML

Derivative Financial Instruments - Offsetting of Derivative Assets - Derivative Assets, Financial Assets, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Total
Net amounts of assets presented in the balance sheet	$ 578,254	$ 159,686
Net amount	578,254	159,686
JP Morgan
Total
Net amounts of assets presented in the balance sheet	18,772	2,196
Net amount	18,772	2,196
RJ O'Brien
Total
Net amounts of assets presented in the balance sheet	7,480	5,414
Net amount	7,480	5,414
Deutsche Bank AG
Total
Net amounts of assets presented in the balance sheet		9,138
Net amount		9,138
Wells Fargo Bank, N.A.
Total
Net amounts of assets presented in the balance sheet	5,256
Net amount	5,256
Mizuho Securities
Total
Net amounts of assets presented in the balance sheet		1,597
Net amount		1,597
Goldman Sachs
Total
Net amounts of assets presented in the balance sheet	1,148	2,548
Net amount	1,148	2,548
Other
Total
Net amounts of assets presented in the balance sheet	1,447	282
Net amount	1,447	282
Interest rate lock commitments
Total
Net amounts of assets presented in the balance sheet	544,151	138,511
Net amount	$ 544,151	$ 138,511

XML

Derivative Financial Instruments - Offsetting of Derivative Assets - Offsetting of Derivative and Financial Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	$ 114,668	$ 37,085
Netting	(92,837)	(16,616)
Net amounts of liabilities presented in the balance sheet	21,831	20,469
Total
Gross amounts of recognized liabilities	117,374	38,946
Net amounts of liabilities presented in the consolidated balance sheet	24,537	22,330
Mortgage loans sold under agreements to repurchase
Net amounts of liabilities presented in the consolidated balance sheet	7,267,046	4,141,680
Debt Issuance Costs
Debt issuance costs, gross	(7,858)	(627)
Debt issuance costs	(7,858)	(627)
Debt issuance costs	(7,858)	(627)
Gross amounts of recognized liabilities	7,259,188	4,141,053
Net amount of liabilities in the consolidated balance sheet	7,259,188	4,141,053
Total
Gross amounts of recognized liabilities	7,376,562	4,179,999
Gross amounts offset in the consolidated balance sheet	(92,837)	(16,616)
Net amounts of liabilities presented in the consolidated balance sheet	7,291,583	4,164,010
Net amount of liabilities in the consolidated balance sheet	24,537	22,330
Receivable from Counterparties
Total
Net amounts of liabilities presented in the consolidated balance sheet	7,283,725	4,163,383
Assets sold under agreements to repurchase
Mortgage loans sold under agreements to repurchase
Gross amounts of recognized liabilities	7,267,046	4,141,680
Net amounts of liabilities presented in the consolidated balance sheet	7,267,046	4,141,680
Forward contracts | Purchases
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	15,903	19,040
Net amounts of liabilities presented in the balance sheet	15,903	19,040
Total
Gross amounts of recognized liabilities	15,903	19,040
Forward contracts | Sales
Derivatives: Subject to master netting arrangements:
Gross amounts of recognized liabilities	98,765	18,045
Net amounts of liabilities presented in the balance sheet	98,765	18,045
Total
Gross amounts of recognized liabilities	98,765	18,045
Interest rate lock commitments
Derivatives not subject to master netting arrangements
Gross amounts of recognized liabilities	2,706	1,861
Total
Net amounts of liabilities presented in the consolidated balance sheet	2,706	1,861
Net amount of liabilities in the consolidated balance sheet	$ 2,706	$ 1,861

XML

Derivative Financial Instruments - Offsetting of Derivative Assets - Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	$ 7,291,583	$ 4,164,010
Financial instruments	(7,267,046)	(4,141,680)
Net amount of liabilities in the consolidated balance sheet	24,537	22,330
Credit Suisse First Boston Mortgage Capital LLC
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	3,613,132	1,235,430
Financial instruments	(3,607,746)	(1,235,430)
Net amount of liabilities in the consolidated balance sheet	5,386
Barclays
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	1,648
Net amount of liabilities in the consolidated balance sheet	1,648
Bank of America, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	767,391	379,400
Financial instruments	(767,391)	(374,190)
Net amount of liabilities in the consolidated balance sheet		5,210
JP Morgan
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	741,341	936,172
Financial instruments	(741,341)	(936,172)
Morgan Stanley Bank
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	784,434	582,941
Financial instruments	(784,434)	(582,941)
BNP Paribas
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	370,013	183,880
Financial instruments	(370,013)	(183,880)
Royal Bank of Canada
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	363,193	175,897
Financial instruments	(363,193)	(175,897)
Citibank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	637,347	655,831
Financial instruments	(632,928)	(653,170)
Net amount of liabilities in the consolidated balance sheet	4,419	2,661
Wells Fargo Bank, N.A.
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet		11,212
Net amount of liabilities in the consolidated balance sheet		11,212
Mizuho Securities
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,366
Net amount of liabilities in the consolidated balance sheet	2,366
Federal National Mortgage Association
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	5,755
Net amount of liabilities in the consolidated balance sheet	5,755
Other
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,257	1,386
Net amount of liabilities in the consolidated balance sheet	2,257	1,386
Interest rate lock commitments
Derivative liabilities:
Net amounts of liabilities presented in the consolidated balance sheet	2,706	1,861
Net amount of liabilities in the consolidated balance sheet	$ 2,706	$ 1,861

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Activity in MSRs at Fair Value (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Change in fair value due to:
Total change in fair value	$ 127,217	$ 412,730	$ 1,368,219	$ 1,036,123
Mortgage servicing rights
Activity in MSRs carried at fair value
Balance at beginning of period	2,213,539	2,720,335	2,926,790	2,820,612
Additions - Resulting from loan sales	245,946	246,757	753,795	545,839
Additions - Purchases (purchase adjustments)	(287)	46	25,473	227,445
Additions	245,659	246,803	779,268	773,284
Change in fair value due to:
Changes in valuation inputs used in valuation model	(26,208)	(286,880)	(1,040,751)	(704,967)
Other changes in fair value	(99,169)	(124,005)	(331,486)	(332,676)
Total change in fair value	(125,377)	(410,885)	(1,372,237)	(1,037,643)
Balance at end of period	2,333,821	$ 2,556,253	2,333,821	$ 2,556,253
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets	$ 2,330,600		$ 2,330,600		$ 2,920,603

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Mortgage Servicing Liabilities Carried at FV (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Amortized cost:
Mortgage servicing liabilities resulting from loan sales			$ 6,576	$ 27,133
Mortgage servicing liabilities
Amortized cost:
Balance at beginning of period	$ 29,858	$ 12,948	29,140	8,681
Mortgage servicing liabilities resulting from loan sales		19,501	6,576	27,133
Changes in valuation inputs used in valuation model	10,822	8,630	24,927	14,687
Other changes in fair value	(8,982)	(6,785)	(28,945)	(16,207)
Total change in fair value	1,840	1,845	(4,018)	(1,520)
Balance at end of period	$ 31,698	$ 34,294	$ 31,698	$ 34,294

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Mortgage Servicing Rights and Mortgage Servicing Liabilities - Servicing, Late, Ancillary and Other Fees Relating to MSRs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Contractual servicing fees	$ 203,696	$ 185,967	$ 601,527	$ 533,510
Other fees:
Other	27,920	26,018	85,218	74,043
Mortgage servicing rights
Contractual servicing fees	203,696	185,967	601,527	533,510
Other fees:
Late charges	7,615	12,430	28,718	31,258
Other	6,960	4,846	17,781	9,119
Bank Servicing Fees	$ 218,271	$ 203,243	$ 648,026	$ 573,887

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Leases
Operating lease option to extend			true
Lease expenses:
Operating leases	$ 4,144	$ 3,356	$ 12,110	$ 9,817
Short-term leases	457	213	937	644
Sublease income		(35)		(94)
Total lease cost	4,601	3,534	13,047	10,367
Cash payments for operating leases	4,418	4,063	13,212	11,793
Upon adoption of ASU 2016-02				58,713
New leases	1,721	1,929	8,219	1,929
Right-of-use assets obtained in exchange for lease obligations	$ 1,721	$ 1,929	$ 8,219	$ 60,642
Remaining lease term (in year)	6 years 4 months 24 days	5 years 9 months 18 days	6 years 4 months 24 days	5 years 9 months 18 days
Discount rate (as a percent)	4.20%	4.60%	4.20%	4.60%
Operating lease liabilities
2021	$ 18,586		$ 18,586
2022	16,405		16,405
2023	16,792		16,792
2024	14,474		14,474
2025	13,296		13,296
Thereafter	27,224		27,224
Total lease payments	106,777		106,777
Less imputed interest	(14,772)		(14,772)
Total	$ 92,005		$ 92,005		$ 91,320
Minimum
Leases
Remaining operating lease term			1 year
Maximum
Leases
Remaining operating lease term			10 years
Operating lease renewal term	5 years		5 years

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Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Carrying value:
Deposits	$ 192,597
Capitalized software, net	91,237	$ 63,130
Margin deposits	90,156	84,118
Furniture, fixtures, equipment and building improvements, net	29,274	30,480
Real estate acquired in settlement of loans	14,395	20,326
Other	233,570	135,503
Other assets	651,229	333,557
Fair value of assets securing revolving line of credit:
Deposits	192,597
Capitalized software, net	8,862	12,192
Furniture, fixture, equipment and building improvements, net	6,088	20,406
Assets securing revolving line of credit	$ 207,547	$ 32,598

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Borrowings - Assets Sold Under Agreement to Repurchase (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Apr. 01, 2020	Dec. 31, 2019
During the period:
Total interest expense	$ 27,322,000	$ 19,429,000	$ 70,493,000	$ 47,709,000
Carrying value:
Unpaid principal balance	7,267,046,000		7,267,046,000			$ 4,141,680,000
Unamortized debt issuance costs and premiums	(7,858,000)		(7,858,000)			(627,000)
Unamortized debt issuance costs	(7,858,000)		(7,858,000)			(627,000)
Total loans sold under agreements to repurchase	$ 7,259,188,000		$ 7,259,188,000			$ 4,141,053,000
Weighted average interest rate (as a percent)	1.85%		1.85%			3.29%
Available borrowing capacity committed	$ 17,072,000		$ 17,072,000			$ 125,810,000
Available borrowing capacity uncommitted	2,940,882,000		2,940,882,000			782,510,000
Available borrowing capacity	2,957,954,000		2,957,954,000			908,320,000
Servicing advances	232,519,000		232,519,000			207,460,000
Margin deposits placed with counterparties	4,375,000		4,375,000			5,000,000
Loans held for sale
Carrying value:
Fair value of assets pledged to secure	8,453,522,000		8,453,522,000			4,322,789,000
Mortgage servicing rights
Carrying value:
Fair value of assets pledged to secure	2,283,876,000		2,283,876,000			2,902,721,000
Servicing advances
Carrying value:
Fair value of assets pledged to secure	232,519,000		232,519,000			207,460,000
Financing receivable
Carrying value:
Fair value of assets pledged to secure	86,958,000		86,958,000			$ 107,512,000
Deposits
Carrying value:
Fair value of assets pledged to secure	192,597,000		192,597,000
Note Payable
During the period:
Average balance of assets sold under agreements to repurchase	1,300,000,000	1,300,000,000	1,300,000,000	1,300,000,000
Carrying value:
Amortization of debt issuance costs	459,000	445,000	1,400,000	1,300,000
Assets sold under agreements to repurchase
During the period:
Average balance of assets sold under agreements to repurchase	$ 3,363,140,000	$ 2,098,208,000	$ 2,669,336,000	$ 1,861,086,000
Weighted-average interest rate (as a percent)	2.68%	3.66%	3.06%	4.08%
Total interest expense	$ 27,322,000	$ 19,429,000	$ 70,493,000	$ 47,709,000
Maximum daily amount outstanding	7,267,046,000	3,539,459,000	7,267,046,000	3,539,459,000
Carrying value:
Amortization of debt issuance costs	$ 4,800,000		$ 9,200,000
Amortization of premium		200,000		9,200,000
Amount of Master Repurchase Agreement incentives to refinance include in interest expense		$ 1,600,000		$ 14,700,000
PLS | Credit Suisse First Boston Mortgage Capital LLC | Note Payable
Mortgage loans sold under agreement to repurchase
Maximum loan amount					$ 600,000,000

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Borrowings - Maturities of Outstanding Advances Under Repurchase Agreements (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 7,267,046	$ 4,141,680
Weighted-average maturity (in months)	2 months
Within 30 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 1,490,837
Over 30 to 90 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	5,365,208
Over 90 to 180 days
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	361,001
Over 180 days to one year
Mortgage loans sold under agreement to repurchase
Unpaid principal balance	$ 50,000

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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, 2020 USD ($)
Credit Suisse First Boston Mortgage Capital LLC Tranche Two
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 1,092,694
Credit Suisse First Boston Mortgage Capital LLC Tranche One
Mortgage loans sold under agreement to repurchase
Amount at risk	460,264
Bank of America, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	410,222
JP Morgan
Mortgage loans sold under agreement to repurchase
Amount at risk	192,579
Citibank, N.A.
Mortgage loans sold under agreement to repurchase
Amount at risk	48,231
Morgan Stanley Bank
Mortgage loans sold under agreement to repurchase
Amount at risk	62,630
BNP Paribas
Mortgage loans sold under agreement to repurchase
Amount at risk	27,646
Royal Bank of Canada
Mortgage loans sold under agreement to repurchase
Amount at risk	$ 33,343

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Borrowings - Mortgage Loan Participation and Sale Agreement (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
During the period:
Total interest expense	$ 999,000	$ 2,304,000	$ 3,870,000	$ 7,034,000
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 535,063,000		$ 535,063,000		$ 497,948,000
Weighted average interest rate (as a percent)	1.85%		1.85%		3.29%
Fair value of loans pledged to secure	$ 558,023,000		$ 558,023,000		$ 523,349,000
Mortgage Loan Participation and Sale Agreement member
During the period:
Average balance	$ 235,713,000	$ 258,169,000	$ 227,460,000	$ 249,023,000
Weighted-average interest rate (as a percent)	1.40%	3.36%	1.98%	3.55%
Total interest expense	$ 999,000	$ 2,304,000	$ 3,870,000	$ 7,034,000
Carrying value:
Unpaid principal balance of mortgage loan participation and sale agreement secured by mortgage loan participation certificates	535,378,000		535,378,000		497,948,000
Unamortized debt issuance costs	(315,000)		(315,000)
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 535,063,000		$ 535,063,000		$ 497,948,000
Weighted average interest rate (as a percent)	1.40%		1.40%		3.05%
Fair value of loans pledged to secure	$ 558,023,000		$ 558,023,000		$ 523,349,000
Amortization of debt issuance costs	172,000	135,000	490,000	405,000
Maximum | Mortgage Loan Participation and Sale Agreement member
Carrying value:
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates	$ 538,074,000	$ 524,095,000	$ 540,977,000	$ 548,038,000

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Borrowings - Obligations Under Capital Lease (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Leases
Average balance	$ 15,179	$ 25,812	$ 17,253	$ 13,380
Weighted average interest rate	2.16%	4.47%	2.69%	4.48%
Total interest expense	$ 83	$ 274	$ 354	$ 476
Unpaid principal balance	$ 13,957		$ 13,957		$ 20,810
Weighted average interest rate	2.15%		2.15%		3.74%
Furniture, fixtures, equipment and building improvements pledged to creditors	$ 6,088		$ 6,088		$ 20,406
Capitalized software pledged to creditors	8,862		8,862		$ 12,192
Maximum
Leases
Maximum daily amount outstanding	$ 16,749	$ 28,295	$ 20,810	$ 28,295

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Borrowings - Note Payable (Details) - USD ($)		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 29, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Nov. 01, 2018	Feb. 01, 2018
During the period:
Total interest expense		$ 10,738,000	$ 17,525,000	$ 37,668,000	$ 53,559,000
Carrying value:
Notes payable		1,295,143,000		1,295,143,000		$ 1,294,070,000
Unused amount		2,957,954,000		2,957,954,000		908,320,000
Notes payable
Maximum loan amount		1,300,000,000		1,300,000,000
Cash pledged to creditors						52,599,000
Note Payable
During the period:
Average balance		$ 1,300,000,000	$ 1,300,000,000	$ 1,300,000,000	$ 1,300,000,000
Weighted-average interest rate (as a percent)		2.99%	5.11%	3.57%	5.21%
Total interest expense		$ 10,177,000	$ 17,044,000	$ 36,131,000	$ 52,118,000
Maximum daily amount outstanding		1,300,000,000	1,300,000,000	1,300,000,000	1,300,000,000
Carrying value:
Unpaid principal balance		1,300,000,000		1,300,000,000		1,300,000,000
Unamortized debt issuance costs		(4,857,000)		(4,857,000)		(5,930,000)
Notes payable		$ 1,295,143,000		$ 1,295,143,000		$ 1,294,070,000
Weighted-average interest rate (as a percent)		2.93%		2.93%		4.46%
Amortization of Financing Costs		$ 459,000	445,000	$ 1,400,000	1,300,000
Note Payable | Revolving credit agreement
Short-term debt
Maximum loan amount							$ 150,000,000
Carrying value:
Amortization of Financing Costs		561,000	$ 481,000	1,500,000	$ 1,400,000
Notes payable
Cash pledged to creditors						$ 52,600,000
Increase in loan amount				0		0
Note Payable | Credit Suisse AG
Short-term debt
Maximum loan amount								$ 600,000,000
Note Payable | Mortgage servicing rights
Carrying value:
Assets pledged to secure		2,213,344,000		2,213,344,000		2,861,442,000
Notes payable
Increase in loan amount				0		0
Note Payable | Servicing advances
Carrying value:
Assets pledged to secure		232,519,000		232,519,000		$ 207,460,000
Note Payable | Deposits
Carrying value:
Assets pledged to secure		192,597,000		$ 192,597,000
Notes Payable Term Loan 2018-GT1
Notes payable
Debt instrument option to extend period				2 years
Notes Payable Term Loan 2018-GT1 | LIBOR
Notes payable
Maximum loan amount		650,000,000		$ 650,000,000
Interest rate spread				2.85%
Notes Payable Term Loan 2018-GT2
Notes payable
Debt instrument option to extend period				2 years
Notes Payable Term Loan 2018-GT2 | LIBOR
Notes payable
Maximum loan amount		$ 650,000,000		$ 650,000,000
Interest rate spread				2.65%
Unsecured Senior Note
Notes payable
Maximum loan amount	$ 500,000,000
Stated interest rate (as a percent)	5.375%
Unsecured Senior Note | Before October 15, 2022
Notes payable
Redemption rate (as a percent)	100.00%
Unsecured Senior Note | Before October 15, 2022 with up to 40% principal redeemed
Notes payable
Redemption rate (as a percent)	105.375%
Unsecured Senior Note | Change of Control
Notes payable
Redemption rate (as a percent)	101.00%
Unsecured Senior Note | Maximum | Before October 15, 2022 with up to 40% principal redeemed
Notes payable
Aggregate principal amount of notes that can be redeemed	$ 40

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Liability for Losses Under Representations and Warranties (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
During the year:
Balance at beginning of period	$ 25,909	$ 18,709	$ 21,446	$ 21,155
Provision for losses on loans sold resulting from sales of loans	5,219	2,508	13,120	5,222
Provision for losses on loans sold reduction in liability due to change in estimate	(2,473)	(1,175)	(5,419)	(6,305)
Losses incurred, net	(151)	(74)	(643)	(104)
Balance at end of period	28,504	19,968	28,504	19,968
Unpaid principal balance of loans subject to representations and warranties at end of year	$ 199,194,983	$ 166,541,153	$ 199,194,983	$ 166,541,153

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Income Taxes - General (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
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)	26.50%	26.90%	26.40%	26.30%

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Commitments and Contingencies - Other (Details) - USD ($) $ in Thousands		9 Months Ended
	Oct. 24, 2018	Sep. 30, 2020
Contingencies
Total commitments to purchase and fund mortgage loans		$ 18,900,000
Garfield Action | Settled Litigation
Contingencies
Percent of shareholder approval for reorganization of the company (as a percent)	99.80%
Litigation settlement amount		$ 6,850

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Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended		40 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Jun. 30, 2020	Jun. 30, 2017
Stockholders' Equity
Cost of shares of common stock repurchased	$ 6,927	$ 248,210	$ 1,056
Common Stock
Stockholders' Equity
Authorized stock repurchase shares					6,975,323
Share Price					$ 34
Authorized stock repurchase amount					$ 500,000	$ 50,000
Shares of common stock repurchased	118,000	7,331,000	51,000	8,147,000
Cost of shares of common stock repurchased	$ 6,927	$ 248,210	$ 1,056	$ 263,158

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Net Gains on Loans Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Cash loss:
Loans	$ 605,559	$ (22,838)	$ 1,219,732	$ (77,659)
Hedging activities	(72,268)	(148,128)	(421,947)	(230,200)
Cash gain (loss), net of effects of cash hedging, on sale of loans held for sale	533,291	(170,966)	797,785	(307,859)
Non-cash gain:
Mortgage servicing rights and mortgage servicing liabilities resulting from loan sales	245,946	227,256	747,219	518,706
Provision for losses relating to representations and warranties on loans sold pursuant to loan sales	(5,219)	(2,508)	(13,120)	(5,222)
Provision for losses relating to representations and warranties on loans sold reduction in liability due to change in estimate	2,473	1,175	5,419	6,305
Change in fair value of loans and derivatives held at period end:
Interest rate lock commitments	173,381	33,347	404,795	95,785
Loans	(79,776)	(5,822)	(140,878)	(35,508)
Hedging derivatives	(5,052)	92,588	17,955	72,838
From non-affiliates	865,044	175,070	1,819,175	345,045
Recapture payable to PennyMac Mortgage Investment Trust	(9,775)	60,662	62,549	122,996
Net gains on loans held for sale at fair value	$ 855,269	$ 235,732	$ 1,881,724	$ 468,041

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Net Interest Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Interest income:
Cash and short-term investments	$ 1,259	$ 2,894	$ 4,863	$ 7,533
Loans held for sale at fair value	41,854	35,800	120,866	101,509
Placement fees relating to custodial funds	9,163	43,231	44,419	98,628
Interest income, excluding related parties	52,276	81,925	170,148	207,670
Interest income	52,952	83,452	172,834	212,685
Interest expense:
Assets sold under agreements to repurchase	27,322	19,429	70,493	47,709
Mortgage loan participation purchase and sale agreements	999	2,304	3,870	7,034
Obligations under capital lease	83	274	354	476
Notes payable	10,738	17,525	37,668	53,559
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations	20,711	12,453	54,536	24,978
Interest on mortgage loan impound deposits	1,256	2,104	4,561	4,967
Interest expense, non-affiliates	61,109	54,089	171,482	138,723
Interest expense	63,179	56,380	177,898	146,847
Net interest (expense) income	(10,227)	27,072	(5,064)	65,838
PMT
Interest income:
From PennyMac Mortgage Investment Trust	676	1,527	2,686	5,015
Interest expense:
To PennyMac Mortgage Investment Trust Excess servicing spread financing at fair value	2,070	2,291	6,416	8,124
Assets sold under agreements to repurchase
Interest expense:
Assets sold under agreements to repurchase	$ 27,322	19,429	$ 70,493	47,709
Incentives recorded		$ 1,600		$ 14,700

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Stock-based Compensation - Other (Details) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) item shares	Sep. 30, 2019 USD ($) shares	Sep. 30, 2020 USD ($) item shares	Sep. 30, 2019 USD ($) shares
Stock-Based Compensation
Number of stock based compensation plans | item	1		1
Grant date fair value | $		$ 102	$ 28,381	$ 25,865
Stock-based compensation expense | $	$ 7,095	$ 8,941	$ 26,220	$ 19,124
Stock Options
Stock-Based Compensation
Granted (in units)			273	344
Grant date fair value | $			$ 2,770	$ 2,965
Exercised (in units)	152	127	476	245
Performance-based RSUs
Stock-Based Compensation
Granted (in units)			422	665
Grant date fair value | $			$ 14,788	$ 15,253
Vested (in units)			603	648
Time-based RSUs
Stock-Based Compensation
Granted (in units)		4	310	334
Grant date fair value | $		$ 102	$ 10,823	$ 7,647
Vested (in units)	7	3	355	294

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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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Basic earnings per share of common stock:
Net income attributable to common stockholders	$ 535,160	$ 121,473	$ 1,194,080	$ 240,304
Weighted-average common stock outstanding (in shares)	72,439	78,361	76,292	78,119
Basic earnings per share of common stock (in dollars per share)	$ 7.39	$ 1.55	$ 15.65	$ 3.08
Diluted earnings per share of common stock:
Net income attributable to common stockholders	$ 535,160	$ 121,473	$ 1,194,080	$ 240,304
Weighted-average common stock outstanding applicable to basic earnings per share (in shares)	72,439	78,361	76,292	78,119
Effect of dilutive shares:
Common shares issuable under stock-based compensation plans (in shares)	3,699	2,021	3,326	1,702
Weighted-average shares of common stock applicable to diluted earnings per share (in shares)	76,138	80,382	79,618	79,821
Diluted earnings per share of common stock (in dollars per share)	$ 7.03	$ 1.51	$ 15.00	$ 3.01
Total anti-dilutive shares and units (in shares)		1,723	552	1,873
Performance-based RSUs
Effect of dilutive shares:
Total anti-dilutive shares and units (in shares)		1,157	335	985
Stock Options
Effect of dilutive shares:
Total anti-dilutive shares and units (in shares)		566	217	888
Weighted-average exercise price of anti-dilutive stock options (in dollars per share)		$ 23.50	$ 35.03	$ 23.98

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Cash paid for interest			$ 184,087	$ 125,987
Cash paid (refunds received) for income taxes, net			260,723	5,761
Non-cash investing activity:
Mortgage servicing rights resulting from loan sales			753,795	545,839
Mortgage servicing liabilities resulting from loan sales			6,576	27,133
Operating right-of-use assets recognized	$ 1,721	$ 1,929	8,219	60,642
Non-cash financing activity:
Issuance of Excess servicing spread payable to PennyMac Mortgage Investment Trust pursuant to a recapture agreement			1,393	1,327
Issuance of common stock in settlement of director fees	$ 48	$ 48	$ 144	$ 184

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Regulatory Capital and Liquidity Requirements (Details) - USD ($) $ in Thousands			9 Months Ended	12 Months Ended
	Jun. 30, 2020	Jan. 31, 2020	Sep. 30, 2020	Dec. 31, 2015	Dec. 31, 2019
Fannie Mae / Freddie Mac - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth			$ 3,841,356		$ 2,247,751
Capital Requirement			616,001		585,674
Liquidity			607,064		257,794
Liquidity requirement			$ 82,828		$ 79,991
Tangible net worth / Total assets ratio actual			12.00%		22.00%
Tangible net worth / Total assets ratio requirement			6.00%		6.00%
Ginnie Mae - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth			$ 3,139,830		$ 1,907,398
FHFA net worth requirement spread		0.35%
FHFA liquidity spread of UPB serviced		0.10%
Capital Requirement			980,469		910,456
Liquidity			607,064		257,794
Liquidity requirement			$ 217,648		$ 216,119
Adjusted net worth / Total assets ratio actual			10.00%		19.00%
Adjusted net worth / Total assets ratio requirement			6.00%		6.00%
Ginnie Mae - PennyMac | 1-4 unit servicing portfolio
Regulatory Net Worth and Agency Capital Requirements
Net worth			$ 2,500
FHFA net worth requirement spread			0.35%
FHFA liquidity spread of UPB serviced			0.10%
Liquidity requirement			$ 1,000
HUD - PLS
Regulatory Net Worth and Agency Capital Requirements
Net worth			3,139,830		$ 1,907,398
Capital Requirement			$ 2,500		$ 2,500
Federal Housing Finance Agency
Regulatory Net Worth and Agency Capital Requirements
Net worth		$ 2,500		$ 2,500
FHFA liquidity spread of UPB serviced	0.035%			0.035%
FHFA additional liquidity spread of UPB in excess of set percent	2.00%	3.00%		2.00%
FHFA additional liquidity spread of UPB excluded	70.00%
Federal Housing Finance Agency | 1-4 unit servicing portfolio
Regulatory Net Worth and Agency Capital Requirements
FHFA net worth requirement spread		0.25%		0.25%

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Segments (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Segments and Related Information
Number of segments | segment			3
Revenues:
Net gains on loans held for sale at fair value	$ 855,269	$ 235,732	$ 1,881,724	$ 468,041
Loan origination fees	75,572	49,434	192,091	110,288
Fulfillment fees from PennyMac Mortgage Investment Trust			149,594	102,313
Net loan servicing fees	132,807	66,229	412,952	205,934
Net interest income (expense):
Interest income	52,952	83,452	172,834	212,685
Interest expense, before non-segment activities	63,179	56,380	177,898	146,847
Net interest expense, before non-segment activities	(10,227)	27,072	(5,064)	65,838
Management fees	8,508	10,098	25,851	26,178
Other	3,224	2,633	6,303	8,437
Total net revenues, before non-segment activities	1,119,992	436,347	2,663,451	987,029
Expenses	391,701	270,150	1,040,068	660,951
Income before provision for income taxes	728,291	166,197	1,623,383	326,078
Assets:
Segment assets at period end	31,180,865		31,180,865		$ 10,204,017
PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	54,839	45,149	149,594	102,313
Net interest income (expense):
Management fees	8,508	10,098	$ 25,851	26,178
Mortgage banking
Segments and Related Information
Number of segments | segment			2
Operating segment
Assets:
Segment assets at period end	31,180,865	9,303,199	$ 31,180,865	9,303,199
Operating segment | Investment management
Net interest income (expense):
Interest expense, before non-segment activities	4	21	18	39
Net interest expense, before non-segment activities	(4)	(21)	(18)	(39)
Management fees	8,508	10,098	25,851	26,178
Other	1,290	1,742	4,347	4,844
Total net revenues, before non-segment activities	9,794	11,819	30,180	30,983
Expenses	6,477	6,792	18,395	19,815
Income before provision for income taxes	3,317	5,027	11,785	11,168
Assets:
Segment assets at period end	17,917	19,281	17,917	19,281
Operating segment | Mortgage banking
Revenues:
Net gains on loans held for sale at fair value	855,269	235,732	1,881,724	468,041
Loan origination fees	75,572	49,434	192,091	110,288
Fulfillment fees from PennyMac Mortgage Investment Trust			149,594	102,313
Net loan servicing fees	132,807	66,229	412,952	205,934
Net interest income (expense):
Interest income	52,952	83,452	172,834	212,685
Interest expense, before non-segment activities	63,175	56,359	177,880	146,808
Net interest expense, before non-segment activities	(10,223)	27,093	(5,046)	65,877
Other	1,934	891	1,956	3,593
Total net revenues, before non-segment activities	1,110,198	424,528	2,633,271	956,046
Expenses	385,224	263,358	1,021,673	641,136
Income before provision for income taxes	724,974	161,170	1,611,598	314,910
Assets:
Segment assets at period end	31,162,948	9,283,918	31,162,948	9,283,918
Operating segment | Mortgage banking | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	54,839	45,149
Operating segment | Mortgage banking Production
Revenues:
Net gains on loans held for sale at fair value	700,830	216,132	1,637,193	407,713
Loan origination fees	75,572	49,434	192,091	110,288
Fulfillment fees from PennyMac Mortgage Investment Trust			149,594	102,313
Net interest income (expense):
Interest income	26,050	22,445	71,840	55,714
Interest expense, before non-segment activities	18,325	18,423	51,124	36,236
Net interest expense, before non-segment activities	7,725	4,022	20,716	19,478
Other	132	324	483	929
Total net revenues, before non-segment activities	839,098	315,061	2,000,077	640,721
Expenses	225,817	135,777	608,602	316,187
Income before provision for income taxes	613,281	179,284	1,391,475	324,534
Assets:
Segment assets at period end	7,319,838	4,850,741	7,319,838	4,850,741
Operating segment | Mortgage banking Production | PMT
Revenues:
Fulfillment fees from PennyMac Mortgage Investment Trust	54,839	45,149
Operating segment | Mortgage banking Servicing
Revenues:
Net gains on loans held for sale at fair value	154,439	19,600	244,531	60,328
Net loan servicing fees	132,807	66,229	412,952	205,934
Net interest income (expense):
Interest income	26,902	61,007	100,994	156,971
Interest expense, before non-segment activities	44,850	37,936	126,756	110,572
Net interest expense, before non-segment activities	(17,948)	23,071	(25,762)	46,399
Other	1,802	567	1,473	2,664
Total net revenues, before non-segment activities	271,100	109,467	633,194	315,325
Expenses	159,407	127,581	413,071	324,949
Income before provision for income taxes	111,693	(18,114)	220,123	(9,624)
Assets:
Segment assets at period end	$ 23,843,110	$ 4,433,177	$ 23,843,110	$ 4,433,177

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Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Oct. 19, 2020	Sep. 30, 2020	Nov. 05, 2020
Subsequent Event
Issuance of unsecured senior notes		$ 500,000
Subsequent Event
Subsequent Event
Dividends declared (in dollars per share)			$ 0.15
Issuance of unsecured senior notes	$ 150,000