Fair Value (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value

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

	June 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investment	$	4,961	$	—	$	—	$	4,961
Loans held for sale at fair value		—		3,083,257		503,553		3,586,810
Derivative assets:
Interest rate lock commitments		—		—		70,685		70,685
Forward purchase contracts		—		61,855		—		61,855
Forward sales contracts		—		24,499		—		24,499
MBS put options		—		7,868		—		7,868
Put options on interest rate futures purchase contracts		11,844		—		—		11,844
Call options on interest rate futures purchase contracts		13,709		—		—		13,709
Total derivative assets before netting		25,553		94,222		70,685		190,460
Netting		—		—		—		(86,559)
Total derivative assets		25,553		94,222		70,685		103,901
Mortgage servicing rights at fair value		—		—		5,217,167		5,217,167
Investment in PennyMac Mortgage Investment Trust		1,037		—		—		1,037
	$	31,551	$	3,177,479	$	5,791,405	$	8,913,876
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	5,534	$	5,534
Forward purchase contracts		—		13,005		—		13,005
Forward sales contracts		—		89,488		—		89,488
Total derivative liabilities before netting		—		102,493		5,534		108,027
Netting		—		—		—		(65,325)
Total derivative liabilities		—		102,493		5,534		42,702
Mortgage servicing liabilities at fair value		—		—		2,337		2,337
	$	—	$	102,493	$	7,871	$	45,039

	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 June 30, 2022
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, March 31, 2022	$	776,590	$	37,899	$	4,707,039	$	5,521,528
Purchases and issuances, net		598,948		145,980		—		744,928
Capitalization of interest and advances		15,608		—		—		15,608
Sales and repayments		(129,896)		—		—		(129,896)
Mortgage servicing rights resulting from loan sales		—		—		398,253		398,253
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(24,394)		—		—		(24,394)
Other factors		(8,922)		(167,106)		111,875		(64,153)
		(33,316)		(167,106)		111,875		(88,547)
Transfers from Level 3 to Level 2		(723,995)		—		—		(723,995)
Transfers to real estate acquired in settlement of loans		(386)		—		—		(386)
Transfers to loans held for sale		—		48,378		—		48,378
Balance, June 30, 2022	$	503,553	$	65,151	$	5,217,167	$	5,785,871
Changes in fair value recognized during the quarter relating to assets still held at June 30, 2022	$	(18,079)	$	65,151	$	111,875	$	158,947

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

	Quarter ended
Liabilities	June 30, 2022
	(in thousands)
Mortgage servicing liabilities:
Balance, March 31, 2022	$	2,564
Changes in fair value included in income		(227)
Balance, June 30, 2022	$	2,337
Changes in fair value recognized during the quarter relating to liabilities still outstanding at June 30, 2022	$	(227)

	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)

	Six months ended June 30, 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		2,733,726		307,289		—		3,041,015
Capitalization of interest and advances		47,719		—		—		47,719
Sales and repayments		(1,264,888)		—		—		(1,264,888)
Mortgage servicing rights resulting from loan sales		—		—		1,014,555		1,014,555
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		(30,210)		—		—		(30,210)
Other factors		(21,318)		(566,483)		324,534		(263,267)
		(51,528)		(566,483)		324,534		(293,477)
Transfers from Level 3 to Level 2		(2,089,966)		—		—		(2,089,966)
Transfers to real estate acquired in settlement of loans		(386)		—		—		(386)
Transfers to loans held for sale		—		2,152		—		2,152
Balance, June 30, 2022	$	503,553	$	65,151	$	5,217,167	$	5,785,871
Changes in fair value recognized during the period relating to assets still held at June 30, 2022	$	(28,700)	$	65,151	$	324,534	$	360,985

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

	Six months ended
Liabilities	June 30, 2022
	(in thousands)
Mortgage servicing liabilities:
Balance, December 31, 2021	$	2,816
Changes in fair value included in income		(479)
Balance, June 30, 2022	$	2,337
Changes in fair value recognized during the period relating to liabilities still outstanding at June 30, 2022	$	(479)

	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 of interest rate lock commitments 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
Mortgage servicing liabilities resulting from loan sales		—		64,383		64,383
Changes in fair value included in income		1,037		(9,616)		(8,579)
Repayments		(134,624)		—		(134,624)
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)

Summary of changes in fair value relating to financial statement items

	Quarter ended June 30,
	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	$	(96,365)	$	—	$	(96,365)	$	761,841	$	—	$	761,841
Mortgage servicing rights		—		111,875		111,875		—		(339,624)		(339,624)
	$	(96,365)	$	111,875	$	15,510	$	761,841	$	(339,624)	$	422,217
Liabilities:
Mortgage servicing liabilities	$	—	$	227	$	227	$	—	$	3,356	$	3,356

	Six months ended June 30,
	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	$	(204,343)	$	—	$	(204,343)	$	1,411,960	$	—	$	1,411,960
Mortgage servicing rights		—		324,534		324,534		—		(122,421)		(122,421)
	$	(204,343)	$	324,534	$	120,191	$	1,411,960	$	(122,421)	$	1,289,539
Liabilities:
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust	$	—	$	—	$	—	$	—	$	(1,037)	$	(1,037)
Mortgage servicing liabilities		—		479		479		—		9,616		9,616
	$	—	$	479	$	479	$	—	$	8,579	$	8,579

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

	June 30, 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	$	3,513,307	$	3,494,822	$	18,485	$	9,577,398	$	9,263,242	$	314,156
90 days or more delinquent:
Not in foreclosure		63,177		65,812		(2,635)		153,162		153,875		(713)
In foreclosure		10,326		15,078		(4,752)		11,923		13,649		(1,726)
	$	3,586,810	$	3,575,712	$	11,098	$	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)
June 30, 2022	$	—	$	—	$	1,666	$	1,666
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 June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Real estate acquired in settlement of loans	$	(326)	$	(434)	$	(740)	$	(743)

Summary of carrying value and fair value of debt

	June 30, 2022				December 31, 2021
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Notes payable secured by mortgage servicing assets	$	1,746,784	$	1,793,260	$	1,302,640	$	1,297,622
Unsecured senior notes	$	1,416,500	$	1,778,055	$	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 June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	398,253	$	483,362	$	1,014,555	$	953,895
Unpaid principal balance of underlying loans	$	19,377,222	$	36,830,098	$	49,953,192	$	71,773,352
Weighted average servicing fee rate (in basis points)		42		33		43		33
Key inputs (1):
Annual total prepayment speed (2):
Range		5.7% – 19.3%		6.7% – 17.7%		5.7% – 23.4%		6.2% – 16.7%
Weighted average		8.4%		8.5%		8.3%		8.1%
Equivalent average life (in years):
Range		4.3 – 9.2		4.0 – 8.8		3.7 – 9.2		4.1 – 9.0
Weighted average		8.5		8.1		8.4		8.3
Pricing spread (3):
Range		5.7% – 11.7%		6.0% – 16.9%		5.7% – 16.1%		6.0% – 16.9%
Weighted average		8.2%		8.9%		7.7%		9.2%
Per-loan annual cost of servicing:
Range		$80 – $146		$80 – $117		$80 – $176		$81 – $117
Weighted average		$103		$104		$104		$104

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

(2) 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.

(3) 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 the LIBOR/swap to the Treasury did not have a significant effect on the Company’s fair value measurement of MSRs.

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, 2022	December 31, 2021
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 5,217,167	$ 3,878,078
Pool characteristics:
Unpaid principal balance of underlying loans	$ 297,269,682	$ 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):
Annual total prepayment speed (2):
Range	5.5% – 19.0%	7.9% – 26.7%
Weighted average	8.2%	10.7%
Equivalent average life (in years):
Range	2.0 – 9.2	3.1 – 7.7
Weighted average	8.0	6.8
Effect on fair value of (3):
5% adverse change	($79,424)	($80,109)
10% adverse change	($156,226)	($157,252)
20% adverse change	($302,462)	($303,259)
Pricing spread (4):
Range	4.9% – 14.8%	5.3% – 15.5%
Weighted average	6.9%	7.7%
Effect on fair value of (3):
5% adverse change	($76,013)	($59,577)
10% adverse change	($149,848)	($117,352)
20% adverse change	($291,326)	($227,791)
Per-loan annual cost of servicing:
Range	$79 – $156	$79 – $197
Weighted average	$106	$108
Effect on fair value of (3):
5% adverse change	($37,615)	($32,979)
10% adverse change	($75,231)	($65,958)
20% adverse change	($150,461)	($131,916)

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

(2) 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.

(3) These 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 to account for changing circumstances. For these reasons, the estimates should not be viewed as earnings forecasts.

(4) 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 the LIBOR/swap to the Treasury did not have a significant effect on the Company’s fair value measurement of MSRs.

Mortgage servicing liabilities

Fair Value

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

		June 30,		December 31,
		2022		2021
Fair value (in thousands)	$	2,337	$	2,816
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	41,481	$	60,593
Servicing fee rate (in basis points)		25		25
Key inputs (1):
Annual total prepayment speed (2)		18.0%		19.8%
Pricing spread (3)		7.5%		6.9%
Equivalent average life (in years)		4.7		4.1
Per-loan annual cost of servicing	$	1,253	$	1,406

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

(2) 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.

(3) 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 the LIBOR/swap to the Treasury did not have a significant effect on the Company’s fair value measurement of MSLs.

Interest rate lock commitments

Fair Value

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

	June 30, 2022		December 31, 2021
Fair value (in thousands) (1)	$	65,151	$	322,193
Key inputs (2):
Pull-through rate:
Range		7.9% – 100%		8.0% – 100%
Weighted average		84.3%		78.4%
Mortgage servicing rights fair value expressed as:
Servicing fee multiple:
Range		(3.2) – 7.0		(8.5) – 6.7
Weighted average		4.1		3.8
Percentage of loan commitment amount
Range		(0.6)% – 3.8%		(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

	June 30, 2022		December 31, 2021
Fair value (in thousands)	$	503,553	$	1,128,876
Key inputs (1):
Discount rate:
Range		3.3% – 10.2%		2.2% – 9.2%
Weighted average		3.6%		2.3%
Twelve-month projected housing price index change:
Range		2.2% – 2.6%		6.1% – 6.5%
Weighted average		2.4%		6.2%
Voluntary prepayment/resale speed (2):
Range		4.7% – 28.6%		0.4% – 30.3%
Weighted average		24.6%		22.0%
Total prepayment speed (3):
Range		4.8% – 37.4%		0.4% – 39.3%
Weighted average		31.2%		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.