Regulatory Capital and Liquidity Requirements

6 Months Ended

Jun. 30, 2021

Regulatory Capital and Liquidity Requirements

Regulatory Capital and Liquidity Requirements

Note 23—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;

● 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.

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:

	June 30, 2021						December 31, 2020
Agency–company subject to requirement	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac – PLS	$	5,243,429		$	658,510		$	4,454,680		$	633,331
Ginnie Mae – PLS	$	4,785,193		$	977,600		$	3,794,112		$	1,058,641
HUD – PLS	$	4,785,193		$	2,500		$	3,794,112		$	2,500
Liquidity
Fannie Mae & Freddie Mac – PLS	$	317,877		$	88,189		$	506,096		$	84,444
Ginnie Mae – PLS	$	317,877		$	217,186		$	506,096		$	215,722
Adjusted net worth / Total assets ratio
Ginnie Mae – PLS		20	%		6	%		12	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac – PLS		22	%		6	%		14	%		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.