Regulatory Capital and Liquidity Requirements

3 Months Ended

Mar. 31, 2023

Regulatory Capital and Liquidity Requirements

Regulatory Capital and Liquidity Requirements

Note 22—Regulatory Capital and Liquidity Requirements

The Company, through PLS, 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 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 levels and requirements, the calculations of which are specified by each Agency, are summarized below:

	March 31, 2023						December 31, 2022
Requirement/Agency	Actual (1)			Requirement (1)			Actual (1)			Requirement (1)
	(dollars in thousands)
Capital
Fannie Mae & Freddie Mac	$	6,643,680		$	822,461		$	6,632,627		$	797,748
Ginnie Mae	$	5,800,487		$	930,046		$	5,899,892		$	923,202
HUD	$	5,800,487		$	2,500		$	5,899,892		$	2,500
Liquidity
Fannie Mae & Freddie Mac	$	1,467,833		$	110,397		$	1,265,569		$	107,768
Ginnie Mae	$	1,467,833		$	251,654		$	1,265,569		$	246,953
Adjusted net worth / Total assets ratio
Ginnie Mae		28	%		6	%		35	%		6	%
Tangible net worth / Total assets ratio
Fannie Mae & Freddie Mac		32	%		6	%		39	%		6	%

(1) Calculated in compliance with the respective Agency’s requirements.

In August 2022, the Agencies issued revised capital and liquidity requirements. The requirements will be effective at various dates beginning September 30, 2023, for issuers of securities guaranteed by Ginnie Mae and seller/servicers of mortgage loans to Fannie Mae and Freddie Mac. The Company believes it is in compliance with Agencies’ revised requirements as of March 31, 2023.

Noncompliance with an Agency’s requirements can result in such Agency taking various remedial actions up to and including terminating the Company’s ability to sell loans to and service loans on behalf of the respective Agency.