Fair Value (Tables)

3 Months Ended

Mar. 31, 2021

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


	March 31, 2021
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets:
Short-term investments	$	24,850	$	—	$	—	$	24,850
Loans held for sale at fair value		—		8,183,724		5,202,065		13,385,789
Derivative assets:
Interest rate lock commitments		—		—		362,923		362,923
Forward purchase contracts		—		14,318		—		14,318
Forward sales contracts		—		333,198		—		333,198
MBS put options		—		99,670		—		99,670
Swaption purchase contracts		—		50,973		—		50,973
Put options on interest rate futures purchase contracts		27,133		—		—		27,133
Call options on interest rate futures purchase contracts		1,539		—		—		1,539
Total derivative assets before netting		28,672		498,159		362,923		889,754
Netting		—		—		—		(358,902)
Total derivative assets		28,672		498,159		362,923		530,852
Mortgage servicing rights at fair value		—		—		3,268,910		3,268,910
Investment in PennyMac Mortgage Investment Trust		1,470		—		—		1,470
	$	54,992	$	8,681,883	$	8,833,898	$	17,211,871
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	24,983	$	24,983
Forward purchase contracts		—		192,793		—		192,793
Forward sales contracts		—		32,729		—		32,729
MBS put options		—		34,873		—		34,873
Put options on interest rate futures sale contracts		15,881		—		—		15,881
Call options on interest rate futures sale contracts		1,061		—		—		1,061
Total derivative liabilities before netting		16,942		260,395		24,983		302,320
Netting		—		—		—		(233,763)
Total derivative liabilities		16,942		260,395		24,983		68,557
Mortgage servicing liabilities at fair value		—		—		46,026		46,026
	$	16,942	$	260,395	$	71,009	$	114,583


	December 31, 2020
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets:
Short-term investments	$	15,217	$	—	$	—	$	15,217
Loans held for sale at fair value		—		6,941,231		4,675,169		11,616,400
Derivative assets:
Interest rate lock commitments		—		—		679,961		679,961
Forward purchase contracts		—		133,267		—		133,267
Forward sales contracts		—		1,451		—		1,451
MBS put options		—		14,302		—		14,302
Swaption purchase contracts		—		11,939		—		11,939
Put options on interest rate futures purchase contracts		5,520		—		—		5,520
Call options on interest rate futures purchase contracts		1,391		—		—		1,391
Total derivative assets before netting		6,911		160,959		679,961		847,831
Netting		—		—		—		(136,593)
Total derivative assets		6,911		160,959		679,961		711,238
Mortgage servicing rights at fair value		—		—		2,581,174		2,581,174
Investment in PennyMac Mortgage Investment Trust		1,105		—		—		1,105
	$	23,233	$	7,102,190	$	7,936,304	$	14,925,134
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	$	—	$	—	$	131,750	$	131,750
Derivative liabilities:
Interest rate lock commitments		—		—		2,935		2,935
Forward purchase contracts		—		1,276		—		1,276
Forward sales contracts		—		251,149		—		251,149
Total derivative liabilities before netting		—		252,425		2,935		255,360
Netting		—		—		—		(212,722)
Total derivative liabilities		—		252,425		2,935		42,638
Mortgage servicing liabilities at fair value		—		—		45,324		45,324
	$	—	$	252,425	$	180,009	$	219,712

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


	Quarter ended March 31, 2021
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total

	(in thousands)
Balance, December 31, 2020	$	4,675,169	$	677,026	$	2,581,174	$	7,933,369
Purchases and issuances, net		4,156,681		477,933		—		4,634,614
Capitalization of interest and advances		90,165		—		—		90,165
Sales and repayments		(928,901)		—		—		(928,901)
Mortgage servicing rights resulting from loan sales		—		—		470,533		470,533
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		48,154		—		—		48,154
Other factors		—		(179,613)		217,203		37,590
		48,154		(179,613)		217,203		85,744
Transfers from Level 3 to Level 2		(2,839,121)		—		—		(2,839,121)
Transfers to real estate acquired in settlement of loans		(82)		—		—		(82)
Transfers to loans held for sale		—		(637,406)		—		(637,406)
Balance, March 31, 2021	$	5,202,065	$	337,940	$	3,268,910	$	8,808,915
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2021	$	104,132	$	337,940	$	217,203	$	659,275

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


	Quarter ended March 31, 2021
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total

	(in thousands)
Balance, December 31, 2020	$	131,750	$	45,324	$	177,074
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		557		—		557
Accrual of interest		1,280		—		1,280
Repayments		(134,624)		—		(134,624)
Mortgage servicing liabilities resulting from loan sales		—		6,962		6,962
Changes in fair value included in income		1,037		(6,260)		(5,223)
Balance, March 31, 2021	$	—	$	46,026	$	46,026
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2021	$	—	$	(6,260)	$	(6,260)


	Quarter ended March 31, 2020
			Net interest		Repurchase		Mortgage
	Loans held		rate lock		agreement		servicing
Assets	for sale		commitments (1)		derivatives		rights			Total

	(in thousands)
Balance, March 31, 2019	$	383,878	$	136,650	$	8,187	$	2,926,790	$	3,455,505
Purchases and issuances, net		1,641,231		341,980		—		25,760		2,008,971
Capitalization of interest and advances		18,027		—		—		—		18,027
Sales and repayments		(738,928)		—		—		—		(738,928)
Mortgage servicing rights resulting from loan sales		—		—		—		282,315		282,315
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(7,523)		—		—		—		(7,523)
Other factors		—		199,918		—		(1,041,168)		(841,250)
		(7,523)		199,918		—		(1,041,168)		(848,773)
Transfers from Level 3 to Level 2		(489,407)		—		—		—		(489,407)
Transfers to real estate acquired in settlement of loans		(691)		—		—		—		(691)
Transfers to loans held for sale		—		(363,354)		—		—		(363,354)
Balance, March 31, 2020	$	806,587	$	315,194	$	8,187	$	2,193,697	$	3,323,665
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2020	$	(11,856)	$	315,194	$	—	$	(1,041,168)	$	(737,830)

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


	Quarter ended March 31, 2020
	Excess
	servicing		Mortgage
	spread		servicing
Liabilities	financing		liabilities		Total

	(in thousands)
Balance, March 31, 2019	$	178,586	$	29,140	$	207,726
Issuance of excess servicing spread financing pursuant to a recapture agreement with PennyMac Mortgage Investment Trust		379		—		379
Accrual of interest		1,974		—		1,974
Repayments		(9,308)		—		(9,308)
Mortgage servicing liabilities resulting from loan sales		—		6,576		6,576
Changes in fair value included in income		(14,522)		(5,955)		(20,477)
Balance, March 31, 2020	$	157,109	$	29,761	$	186,870
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2020	$	(14,522)	$	(5,955)	$	(20,477)

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


	Quarter ended March 31,
	2021						2020
	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	$	650,119	$	—	$	650,119	$	398,718	$	—	$	398,718
Mortgage servicing rights		—		217,203		217,203		—		(1,041,168)		(1,041,168)
	$	650,119	$	217,203	$	867,322	$	398,718	$	(1,041,168)	$	(642,450)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	(1,037)	$	(1,037)	$	—	$	14,522	$	14,522
Mortgage servicing liabilities		—		6,260		6,260		—		5,955		5,955
	$	—	$	5,223	$	5,223	$	—	$	20,477	$	20,477

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


	March 31, 2021						December 31, 2020
			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	$	13,013,597	$	12,580,255	$	433,342	$	11,304,308	$	10,743,814	$	560,494
90 days or more delinquent:
Not in foreclosure		340,185		344,853		(4,668)		275,419		280,595		(5,176)
In foreclosure		32,007		33,908		(1,901)		36,673		39,529		(2,856)
	$	13,385,789	$	12,959,016	$	426,773	$	11,616,400	$	11,063,938	$	552,462

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)
March 31, 2021	$	—	$	—	$	2,568	$	2,568
December 31, 2020	$	—	$	—	$	1,450	$	1,450

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

Summary of carrying value and fair value of debt


	March 31, 2021				December 31, 2020
	Fair value		Carrying value		Fair value		Carrying value

	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,296,344	$	1,296,285	$	1,268,304	$	1,295,840
Unsecured senior notes	$	1,290,250	$	1,288,198	$	685,750	$	645,820

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


	Quarter ended March 31,
	2021		2020

	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	470,533	$	282,315
Unpaid principal balance of underlying loans	$	34,943,254	$	18,330,384
Weighted average servicing fee rate (in basis points)		34		40
Key inputs (1):
Pricing spread (2):
Range		8.0% – 16.9%		6.8% – 15.6%
Weighted average		9.6%		8.2%
Annual total prepayment speed (3):
Range		6.2% – 12.9%		9.1% – 49.8%
Weighted average		7.8%		14.5%
Equivalent average life (in years):
Range		4.1 – 9.0		1.5 – 7.8
Weighted average		8.5		5.9
Per-loan annual cost of servicing:
Range		$81 – $117		$77 – $100
Weighted average		$104		$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 provided 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:


	March 31, 2021	December 31, 2020

	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 3,268,910	$ 2,581,174
Pool characteristics:
Unpaid principal balance of underlying loans	$ 244,367,930	$ 238,410,809
Weighted average note interest rate	3.5%	3.6%
Weighted average servicing fee rate (in basis points)	34	35
Key inputs (1):
Pricing spread (2):
Range	6.8% – 16.8%	8.0% – 17.6%
Weighted average	9.2%	10.1%
Effect on fair value of:
5% adverse change	($58,358)	($46,356)
10% adverse change	($114,643)	($90,936)
20% adverse change	($221,392)	($175,137)
Annual total prepayment speed (3):
Range	7.2% – 31.1%	10.1% – 32.9%
Weighted average	9.8%	13.7%
Equivalent average life (in years):
Range	2.9 – 8.4	2.3 – 7.7
Weighted average	7.2	6.0
Effect on fair value of:
5% adverse change	($64,416)	($66,536)
10% adverse change	($126,698)	($130,253)
20% adverse change	($245,247)	($249,843)
Annual per-loan cost of servicing:
Range	$79 – $118	$79 – $117
Weighted average	$108	$107
Effect on fair value of:
5% adverse change	($30,559)	($25,482)
10% adverse change	($61,117)	($50,964)
20% adverse change	($122,235)	($101,929)

(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 provided for informational purposes.

Mortgage servicing liabilities

Fair Value

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


		March 31,		December 31,
		2021		2020
Fair value (in thousands)	$	46,026	$	45,324
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	3,173,793	$	2,857,492
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.9%		7.6%
Annual total prepayment speed (2)		30.5%		33.3%
Equivalent average life (in years)		3.8		3.2
Annual per-loan cost of servicing	$	293	$	305

(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 provided for informational purposes.

Excess servicing spread financing

Fair Value

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


		December 31,
		2020
Fair value (in thousands)		$ 131,750
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)		$ 15,833,050
Average servicing fee rate (in basis points)		34
Average excess servicing spread (in basis points)		19
Key inputs (1):
Pricing spread (2):
Range		4.9% – 5.3%
Weighted average		5.1%
Annual total prepayment speed (3):
Range		9.6% – 18.3%
Weighted average		11.7%
Equivalent average life (in years):
Range		2.3 – 6.6
Weighted average		5.8

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

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

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

Interest rate lock commitments

Fair Value

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



	March 31, 2021		December 31, 2020
Fair value (in thousands) (1)	$	337,940	$	677,026
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.1% – 100%
Weighted average		85.5%		82.7%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		(10.0) – 6.4		0.7 – 5.3
Weighted average		4.1		3.6
Percentage of loan commitment amount
Range		(2.1)% – 3.2%		0.1% – 2.6%
Weighted average		1.3%		1.2%

(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



	March 31, 2021		December 31, 2020
Fair value (in thousands)	$	5,202,065	$	4,675,169
Key inputs (1):
Discount rate:
Range		2.6% – 9.2%		2.8% – 9.2%
Weighted average		2.6%		2.8%
Twelve-month projected housing price index change:
Range		3.9% – 4.9%		2.7% – 3.5%
Weighted average		4.4%		3.0%
Voluntary prepayment/resale speed (2):
Range		0.3% – 29.5%		0.4% – 31.3%
Weighted average		21.2%		21.9%
Total prepayment speed (3):
Range		0.3% – 40.2%		0.5% – 42.9%
Weighted average		28.1%		29.2%

(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 default rates.

Quarter ended March 31,

(in thousands)

Real estate acquired in settlement of loans