Fair Value (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value

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

	June 30, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investments	$	3,720	$	—	$	—	$	3,720
Loans held for sale at fair value		—		7,066,245		3,818,261		10,884,506
Derivative assets:
Interest rate lock commitments		—		—		344,128		344,128
Forward purchase contracts		—		55,765		—		55,765
Forward sales contracts		—		39,597		—		39,597
MBS put options		—		13,106		—		13,106
MBS call options		—		687		—		687
Swaption purchase contracts		—		11,041		—		11,041
Put options on interest rate futures purchase contracts		2,664		—		—		2,664
Call options on interest rate futures purchase contracts		2,297		—		—		2,297
Total derivative assets before netting		4,961		120,196		344,128		469,285
Netting		—		—		—		(98,016)
Total derivative assets		4,961		120,196		344,128		371,269
Mortgage servicing rights at fair value		—		—		3,412,648		3,412,648
Investment in PennyMac Mortgage Investment Trust		1,580		—		—		1,580
	$	10,261	$	7,186,441	$	7,575,037	$	14,673,723
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	518	$	518
Forward purchase contracts		—		23,274		—		23,274
Forward sales contracts		—		68,347		—		68,347
Total derivative liabilities before netting		—		91,621		518		92,139
Netting		—		—		—		(48,229)
Total derivative liabilities		—		91,621		518		43,910
Mortgage servicing liabilities at fair value		—		—		100,091		100,091
	$	—	$	91,621	$	100,609	$	144,001

	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 June 30, 2021
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, March 31, 2021	$	5,202,065	$	337,940	$	3,268,910	$	8,808,915
Purchases and issuances, net		6,828,094		351,934		—		7,180,028
Capitalization of interest and advances		60,439		—		—		60,439
Sales and repayments		(3,866,340)		—		—		(3,866,340)
Mortgage servicing rights resulting from loan sales		—		—		483,362		483,362
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		179,792		—		—		179,792
Other factors		—		332,435		(339,624)		(7,189)
		179,792		332,435		(339,624)		172,603
Transfers from Level 3 to Level 2		(4,585,789)		—		—		(4,585,789)
Transfers to loans held for sale		—		(678,699)		—		(678,699)
Balance, June 30, 2021	$	3,818,261	$	343,610	$	3,412,648	$	7,574,519
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2021	$	74,184	$	343,610	$	(339,624)	$	78,170

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

	Quarter ended
Liabilities	June 30, 2021
	(in thousands)
Mortgage servicing liabilities:
Balance, March 31, 2021	$	46,026
Mortgage servicing liabilities resulting from loan sales		57,421
Changes in fair value included in income		(3,356)
Balance, June 30, 2021	$	100,091
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2021	$	(3,356)

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

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

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

	Six months ended June 30, 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		11,056,535		829,867		—		11,886,402
Capitalization of interest and advances		78,844		—		—		78,844
Sales and repayments		(4,795,241)		—		—		(4,795,241)
Mortgage servicing rights resulting from loan sales		—		—		953,895		953,895
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		227,946		—		—		227,946
Other factors		—		152,822		(122,421)		30,401
		227,946		152,822		(122,421)		258,347
Transfers from Level 3 to Level 2		(7,424,910)		—		—		(7,424,910)
Transfers to real estate acquired in settlement of loans		(82)		—		—		(82)
Transfers to loans held for sale		—		(1,316,105)		—		(1,316,105)
Balance, June 30, 2021	$	3,818,261	$	343,610	$	3,412,648	$	7,574,519
Changes in fair value recognized during the period relating to assets still held at June 30, 2021	$	135,823	$	343,610	$	(122,421)	$	357,012

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

	Six months ended June 30, 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		—		64,383		64,383
Changes in fair value included in income		1,037		(9,616)		(8,579)
Balance, June 30, 2021	$	—	$	100,091	$	100,091
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2021	$	—	$	(9,616)	$	(9,616)

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

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

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

Summary of changes in fair value relating to financial statement items

	Quarter ended June 30,
	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
	(in thousands)
Assets:
Loans held for sale	$	761,841	$	—	$	761,841	$	739,797	$	—	$	739,797
Mortgage servicing rights		—		(339,624)		(339,624)		—		(205,692)		(205,692)
	$	761,841	$	(339,624)	$	422,217	$	739,797	$	(205,692)	$	534,105
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	—	$	—	$	636	$	636
Mortgage servicing liabilities		—		3,356		3,356		—		(97)		(97)
	$	—	$	3,356	$	3,356	$	—	$	539	$	539

	Six months ended June 30,
	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
	(in thousands)
Assets:
Loans held for sale	$	1,411,960	$	—	$	1,411,960	$	1,138,515	$	—	$	1,138,515
Mortgage servicing rights		—		(122,421)		(122,421)		—		(1,246,860)		(1,246,860)
	$	1,411,960	$	(122,421)	$	1,289,539	$	1,138,515	$	(1,246,860)	$	(108,345)
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	(1,037)	$	(1,037)	$	—	$	15,158	$	15,158
Mortgage servicing liabilities		—		9,616		9,616		—		5,858		5,858
	$	—	$	8,579	$	8,579	$	—	$	21,016	$	21,016

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

	June 30, 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	$	10,526,148	$	10,079,813	$	446,335	$	11,304,308	$	10,743,814	$	560,494
90 days or more delinquent:
Not in foreclosure		330,472		327,869		2,603		275,419		280,595		(5,176)
In foreclosure		27,886		31,253		(3,367)		36,673		39,529		(2,856)
	$	10,884,506	$	10,438,935	$	445,571	$	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)
June 30, 2021	$	—	$	—	$	2,863	$	2,863
December 31, 2020	$	—	$	—	$	1,450	$	1,450

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

	Quarter ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Real estate acquired in settlement of loans	$	(434)	$	(1,001)	$	(743)	$	(2,283)

Summary of carrying value and fair value of debt

	June 30, 2021				December 31, 2020
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,298,603	$	1,296,731	$	1,268,304	$	1,295,840
Unsecured senior notes	$	1,309,750	$	1,288,769	$	685,750	$	645,820

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

	Quarter ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	483,362	$	225,534	$	953,895	$	507,849
Unpaid principal balance of underlying loans	$	36,830,098	$	20,066,302	$	71,773,352	$	38,396,686
Weighted average servicing fee rate (in basis points)		33		36		33		38
Key inputs (1):
Pricing spread (2):
Range		6.0% – 16.9%		8.1% – 18.1%		6.0% – 16.9%		6.8% – 18.1%
Weighted average		8.9%		9.9%		9.2%		9.1%
Annual total prepayment speed (3):
Range		6.7% – 17.7%		8.8% – 29.1%		6.2% – 16.7%		8.8% – 49.8%
Weighted average		8.5%		13.0%		8.1%		13.7%
Equivalent average life (in years):
Range		4.0 – 8.8		2.9 – 8.1		4.1 – 9.0		1.5 – 8.1
Weighted average		8.1		6.3		8.3		6.1
Per-loan annual cost of servicing:
Range		$80 – $117		$79 – $110		$81 – $117		$77 – $110
Weighted average		$104		$101		$104		$99

(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:

	June 30, 2021	December 31, 2020
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 3,412,648	$ 2,581,174
Pool characteristics:
Unpaid principal balance of underlying loans	$ 252,475,400	$ 238,410,809
Weighted average note interest rate	3.3%	3.6%
Weighted average servicing fee rate (in basis points)	34	35
Key inputs (1):
Pricing spread (2):
Range	6.3% – 16.1%	8.0% – 17.6%
Weighted average	8.4%	10.1%
Effect on fair value of:
5% adverse change	($56,330)	($46,356)
10% adverse change	($110,804)	($90,936)
20% adverse change	($214,519)	($175,137)
Annual total prepayment speed (3):
Range	7.9% – 29.1%	10.1% – 32.9%
Weighted average	10.5%	13.7%
Equivalent average life (in years):
Range	3.0 – 7.8	2.3 – 7.7
Weighted average	6.9	6.0
Effect on fair value of:
5% adverse change	($72,028)	($66,536)
10% adverse change	($141,434)	($130,253)
20% adverse change	($272,904)	($249,843)
Annual per-loan cost of servicing:
Range	$79 – $117	$79 – $117
Weighted average	$107	$107
Effect on fair value of:
5% adverse change	($31,198)	($25,482)
10% adverse change	($62,395)	($50,964)
20% adverse change	($124,790)	($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

		June 30,		December 31,
		2021		2020
Fair value (in thousands)	$	100,091	$	45,324
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	6,135,249	$	2,857,492
Servicing fee rate (in basis points)		25		25
Key inputs:
Pricing spread (1)		7.7%		7.6%
Annual total prepayment speed (2)		31.8%		33.3%
Equivalent average life (in years)		3.5		3.2
Annual per-loan cost of servicing	$	278	$	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

	June 30, 2021		December 31, 2020
Fair value (in thousands) (1)	$	343,610	$	677,026
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.1% – 100%
Weighted average		82.7%		82.7%
Mortgage servicing rights value expressed as:
Servicing fee multiple:
Range		(14.7) – 6.5		0.7 – 5.3
Weighted average		3.6		3.6
Percentage of loan commitment amount
Range		(2.1)% – 3.1%		0.1% – 2.6%
Weighted average		1.2%		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

	June 30, 2021		December 31, 2020
Fair value (in thousands)	$	3,818,261	$	4,675,169
Key inputs (1):
Discount rate:
Range		2.0% – 9.2%		2.8% – 9.2%
Weighted average		2.0%		2.8%
Twelve-month projected housing price index change:
Range		4.8% – 5.3%		2.7% – 3.5%
Weighted average		5.1%		3.0%
Voluntary prepayment/resale speed (2):
Range		0.4% – 26.8%		0.4% – 31.3%
Weighted average		22.0%		21.9%
Total prepayment speed (3):
Range		0.4% – 37.6%		0.5% – 42.9%
Weighted average		28.8%		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 prepayment and resale rates.