Fair Value (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value

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

	March 31, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investment	$	78,006	$	—	$	—	$	78,006
Loans held for sale at fair value		—		4,342,644		776,590		5,119,234
Derivative assets:
Interest rate lock commitments		—		—		79,717		79,717
Forward purchase contracts		—		21,152		—		21,152
Forward sales contracts		—		316,856		—		316,856
MBS put options		—		43,543		—		43,543
Put options on interest rate futures purchase contracts		93,220		—		—		93,220
Call options on interest rate futures purchase contracts		1,684		—		—		1,684
Total derivative assets before netting		94,904		381,551		79,717		556,172
Netting		—		—		—		(331,101)
Total derivative assets		94,904		381,551		79,717		225,071
Mortgage servicing rights at fair value		—		—		4,707,039		4,707,039
Investment in PennyMac Mortgage Investment Trust		1,267		—		—		1,267
	$	174,177	$	4,724,195	$	5,563,346	$	10,130,617
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	41,818	$	41,818
Forward purchase contracts		—		162,584		—		162,584
Forward sales contracts		—		35,283		—		35,283
Put options on interest rate futures sales contracts		6,703		—		—		6,703
Total derivative liabilities before netting		6,703		197,867		41,818		246,388
Netting		—		—		—		(155,551)
Total derivative liabilities		6,703		197,867		41,818		90,837
Mortgage servicing liabilities at fair value		—		—		2,564		2,564
	$	6,703	$	197,867	$	44,382	$	93,401

	December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investment	$	6,873	$	—	$	—	$	6,873
Loans held for sale at fair value		—		8,613,607		1,128,876		9,742,483
Derivative assets:
Interest rate lock commitments		—		—		323,473		323,473
Forward purchase contracts		—		20,485		—		20,485
Forward sales contracts		—		40,215		—		40,215
MBS put options		—		7,655		—		7,655
Swaption purchase contracts		—		1,625		—		1,625
Put options on interest rate futures purchase contracts		3,141		—		—		3,141
Call options on interest rate futures purchase contracts		2,078		—		—		2,078
Total derivative assets before netting		5,219		69,980		323,473		398,672
Netting		—		—		—		(64,977)
Total derivative assets		5,219		69,980		323,473		333,695
Mortgage servicing rights at fair value		—		—		3,878,078		3,878,078
Investment in PennyMac Mortgage Investment Trust		1,300		—		—		1,300
	$	13,392	$	8,683,587	$	5,330,427	$	13,962,429
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	1,280	$	1,280
Forward purchase contracts		—		18,007		—		18,007
Forward sales contracts		—		35,415		—		35,415
Total derivative liabilities before netting		—		53,422		1,280		54,702
Netting		—		—		—		(32,096)
Total derivative liabilities		—		53,422		1,280		22,606
Mortgage servicing liabilities at fair value		—		—		2,816		2,816
	$	—	$	53,422	$	4,096	$	25,422

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

	Quarter ended March 31, 2022
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, December 31, 2021	$	1,128,876	$	322,193	$	3,878,078	$	5,329,147
Purchases and issuances, net		2,134,778		161,309		—		2,296,087
Capitalization of interest and advances		32,111		—		—		32,111
Sales and repayments		(1,134,992)		—		—		(1,134,992)
Mortgage servicing rights resulting from loan sales		—		—		616,302		616,302
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(5,816)		—		—		(5,816)
Other factors		(12,396)		(399,377)		212,659		(199,114)
		(18,212)		(399,377)		212,659		(204,930)
Transfers from Level 3 to Level 2		(1,365,971)		—		—		(1,365,971)
Transfers to loans held for sale		—		(46,226)		—		(46,226)
Balance, March 31, 2022	$	776,590	$	37,899	$	4,707,039	$	5,521,528
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2022	$	(17,092)	$	37,899	$	212,659	$	233,466

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

	Quarter ended
Liabilities	March 31, 2022
	(in thousands)
Mortgage servicing liabilities:
Balance, December 31, 2021	$	2,816
Mortgage servicing liabilities resulting from loan sales		—
Changes in fair value included in income		(252)
Balance, March 31, 2022	$	2,564
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2022	$	(252)

	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)
Transfer 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 year 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
Mortgage servicing liabilities resulting from loan sales		—		6,962		6,962
Changes in fair value included in income		1,037		(6,260)		(5,223)
Repayments		(134,624)		—		(134,624)
Balance, March 31, 2021	$	—	$	46,026	$	46,026
Changes in fair value recognized during the year relating to liabilities still outstanding at March 31, 2021	$	—	$	(6,260)	$	(6,260)

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

Summary of changes in fair value relating to financial statement items

	Quarter ended March 31,
	2022						2021
	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	$	(107,978)	$	—	$	(107,978)	$	650,119	$	—	$	650,119
Mortgage servicing rights		—		212,659		212,659		—		217,203		217,203
	$	(107,978)	$	212,659	$	104,681	$	650,119	$	217,203	$	867,322
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	—	$	—	$	(1,037)	$	(1,037)
Mortgage servicing liabilities		—		252		252		—		6,260		6,260
	$	—	$	252	$	252	$	—	$	5,223	$	5,223

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

	March 31, 2022						December 31, 2021
			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	$	5,017,595	$	5,019,771	$	(2,176)	$	9,577,398	$	9,263,242	$	314,156
90 days or more delinquent:
Not in foreclosure		94,097		95,626		(1,529)		153,162		153,875		(713)
In foreclosure		7,542		9,901		(2,359)		11,923		13,649		(1,726)
	$	5,119,234	$	5,125,298	$	(6,064)	$	9,742,483	$	9,430,766	$	311,717

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, 2022	$	—	$	—	$	796	$	796
December 31, 2021	$	—	$	—	$	2,588	$	2,588

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

	Quarter ended March 31,
	2022		2021
	(in thousands)
Real estate acquired in settlement of loans	$	(514)	$	(412)

Summary of carrying value and fair value of debt

	March 31, 2022				December 31, 2021
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,300,813	$	1,298,067	$	1,302,640	$	1,297,622
Unsecured senior notes	$	1,641,000	$	1,777,132	$	1,790,375	$	1,776,219

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

	Quarter ended March 31,
	2022		2021
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	616,302	$	470,533
Unpaid principal balance of underlying loans	$	30,575,969	$	34,943,254
Weighted average servicing fee rate (in basis points)		43		34
Key inputs (1):
Pricing spread (2):
Range		5.8% – 16.1%		8.0% – 16.9%
Weighted average		7.5%		9.6%
Annual total prepayment speed (3):
Range		6.0% – 23.4%		6.2% – 12.9%
Weighted average		8.3%		7.8%
Equivalent average life (in years):
Range		3.7 – 8.8		4.1 – 9.0
Weighted average		8.3		8.5
Per-loan annual cost of servicing:
Range		$80 – $177		$81 – $117
Weighted average		$104		$104

(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. Effective January 1, 2022, the Company applies a pricing spread to the United State Treasury Securities (the “Treasury”) yield curve for purposes of discounting cash flows relating to MSRs. Through December 31, 2021, the Company applied its pricing spread to the United States Dollar London Interbank Offered Rate (“LIBOR”)/swap curve. The change in reference interest rate from LIBOR/swap to Treasury did not have a significant effect on the Company’s fair value measurement of MSRs.

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

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, 2022	December 31, 2021
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 4,707,039	$ 3,878,078
Pool characteristics:
Unpaid principal balance of underlying mortgage loans	$ 290,760,440	$ 278,324,780
Weighted average note interest rate	3.2%	3.2%
Weighted average servicing fee rate (in basis points)	35	34
Key inputs (1):
Pricing spread (2):
Range	4.9% – 15.2%	5.3% – 15.5%
Weighted average	7.3%	7.7%
Effect on fair value of:
5% adverse change	($70,056)	($59,577)
10% adverse change	($138,059)	($117,352)
20% adverse change	($268,237)	($227,791)
Annual total prepayment speed (3):
Range	6.4% – 24.4%	7.9% – 26.7%
Weighted average	8.9%	10.7%
Equivalent average life (in years):
Range	3.4 – 8.7	3.1 – 7.7
Weighted average	7.6	6.8
Effect on fair value of:
5% adverse change	($77,642)	($80,109)
10% adverse change	($152,624)	($157,252)
20% adverse change	($295,139)	($303,259)
Per-loan annual cost of servicing:
Range	$79 – $175	$79 – $197
Weighted average	$107	$108
Effect on fair value of:
5% adverse change	($36,427)	($32,979)
10% adverse change	($72,853)	($65,958)
20% adverse change	($145,706)	($131,916)

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

(2) Effective January 1, 2022, the Company applies a pricing spread to the Treasury yield curve for purposes of discounting cash flows relating to MSRs. Through December 31, 2021, the Company applied its pricing spread to the United States Dollar LIBOR/swap curve. The change in reference interest rate from LIBOR/swap to Treasury did not have a significant effect on the Company’s fair value measurement of MSRs.

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

Mortgage servicing liabilities

Fair Value

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

		March 31,		December 31,
		2022		2021
Fair value (in thousands)	$	2,564	$	2,816
Pool characteristics:
Unpaid principal balance of underlying mortgage loans (in thousands)	$	37,450	$	60,593
Servicing fee rate (in basis points)		25		25
Key inputs (1):
Pricing spread (2)		7.1%		6.9%
Annual total prepayment speed (3)		19.0%		19.8%
Equivalent average life (in years)		4.4		4.1
Per-loan annual cost of servicing	$	1,352	$	1,406

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

(2) Effective January 1, 2022, the Company applies a pricing spread to the Treasury yield curve for purposes of discounting cash flows relating to MSLs. Through December 31, 2021, the Company applied its pricing spread to the United States Dollar London LIBOR/swap curve. The change in reference interest rate from LIBOR/swap to Treasury did not have a significant effect on the Company’s fair value measurement of MSLs.

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

Interest rate lock commitments

Fair Value

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

	March 31, 2022		December 31, 2021
Fair value (in thousands) (1)	$	37,899	$	322,193
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		8.0% – 100%
Weighted average		81.4%		78.4%
Mortgage servicing rights fair value expressed as:
Servicing fee multiple:
Range		(5.5) – 6.8		(8.5) – 6.7
Weighted average		4.3		3.8
Percentage of loan commitment amount
Range		(1.1)% – 3.9%		(1.6)% – 3.6%
Weighted average		1.8%		1.5%

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

(2) Weighted average inputs are based on the committed amounts.

Mortgage loans held for sale

Fair Value

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

	March 31, 2022		December 31, 2021
Fair value (in thousands)	$	776,590	$	1,128,876
Key inputs (1):
Discount rate:
Range		2.2% – 9.2%		2.2% – 9.2%
Weighted average		2.4%		2.3%
Twelve-month projected housing price index change:
Range		5.9% – 6.4%		6.1% – 6.5%
Weighted average		6.0%		6.2%
Voluntary prepayment/resale speed (2):
Range		0.3% – 31.6%		0.4% – 30.3%
Weighted average		24.7%		22.0%
Total prepayment speed (3):
Range		0.3% – 41.0%		0.4% – 39.3%
Weighted average		31.3%		28.2%

(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.