Fair Value (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value

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

	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investment	$	3,584	$	—	$	—	$	3,584
Loans held for sale at fair value		—		6,459,634		312,789		6,772,423
Derivative assets:
Interest rate lock commitments		—		—		62,641		62,641
Forward purchase contracts		—		78,507		—		78,507
Forward sales contracts		—		19,232		—		19,232
MBS put options		—		6,604		—		6,604
MBS call options		—		7,218		—		7,218
Put options on interest rate futures purchase contracts		11,129		—		—		11,129
Call options on interest rate futures purchase contracts		20,949		—		—		20,949
Total derivative assets before netting		32,078		111,561		62,641		206,280
Netting		—		—		—		(95,616)
Total derivative assets		32,078		111,561		62,641		110,664
Mortgage servicing rights at fair value		—		—		6,003,390		6,003,390
Investment in PennyMac Mortgage Investment Trust		925		—		—		925
	$	36,587	$	6,571,195	$	6,378,820	$	12,890,986
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	3,795	$	3,795
Forward purchase contracts		—		17,064		—		17,064
Forward sales contracts		—		135,827		—		135,827
MBS call options		—		7,830		—		7,830
Call options on interest rate futures sales contracts		2,250		—		—		2,250
Total derivative liabilities before netting		2,250		160,721		3,795		166,766
Netting		—		—		—		(117,679)
Total derivative liabilities		2,250		160,721		3,795		49,087
Mortgage servicing liabilities at fair value		—		—		2,011		2,011
	$	2,250	$	160,721	$	5,806	$	51,098

	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term investment	$	12,194	$	—	$	—	$	12,194
Loans held for sale at fair value		—		3,163,528		345,772		3,509,300
Derivative assets:
Interest rate lock commitments		—		—		36,728		36,728
Forward purchase contracts		—		2,433		—		2,433
Forward sales contracts		—		80,754		—		80,754
MBS put options		—		6,057		—		6,057
Put options on interest rate futures purchase contracts		29,203		—		—		29,203
Call options on interest rate futures purchase contracts		2,820		—		—		2,820
Total derivative assets before netting		32,023		89,244		36,728		157,995
Netting		—		—		—		(58,992)
Total derivative assets		32,023		89,244		36,728		99,003
Mortgage servicing rights at fair value		—		—		5,953,621		5,953,621
Investment in PennyMac Mortgage Investment Trust		929		—		—		929
	$	45,146	$	3,252,772	$	6,336,121	$	9,575,047
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	10,884	$	10,884
Forward purchase contracts		—		48,670		—		48,670
Forward sales contracts		—		20,684		—		20,684
Put options on interest rate futures sales contracts		3,008		—		—		3,008
Total derivative liabilities before netting		3,008		69,354		10,884		83,246
Netting		—		—		—		(61,534)
Total derivative liabilities		3,008		69,354		10,884		21,712
Mortgage servicing liabilities at fair value		—		—		2,096		2,096
	$	3,008	$	69,354	$	12,980	$	23,808

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

	Quarter ended March 31, 2023
			Net interest		Mortgage
	Loans held		rate lock		servicing
Assets	for sale		commitments (1)		rights		Total
	(in thousands)
Balance, December 31, 2022	$	345,772	$	25,844	$	5,953,621	$	6,325,237
Purchases and issuances, net		437,650		62,508		—		500,158
Capitalization of interest and advances		7,655		—		—		7,655
Sales and repayments		(122,858)		—		(232)		(123,090)
Mortgage servicing rights resulting from loan sales		—		—		286,533		286,533
Changes in fair value included in income arising from:
Changes in instrument-specific credit risk		9,543		—		—		9,543
Other factors		793		72,412		(236,532)		(163,327)
		10,336		72,412		(236,532)		(153,784)
Transfers from Level 3 to Level 2		(365,714)		—		—		(365,714)
Transfers to real estate acquired in settlement of loans		(52)		—		—		(52)
Transfers to loans held for sale		—		(101,918)		—		(101,918)

Balance, March 31, 2023	$	312,789	$	58,846	$	6,003,390	$	6,375,025
Changes in fair value recognized during the quarter relating to assets still held at March 31, 2023	$	8,413	$	58,846	$	(236,532)	$	(169,273)

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

	Quarter ended
Liabilities	March 31, 2023
	(in thousands)
Mortgage servicing liabilities:
Balance, December 31, 2022	$	2,096
Changes in fair value included in income		(85)
Balance, March 31, 2023	$	2,011
Changes in fair value recognized during the quarter relating to liabilities still outstanding at March 31, 2023	$	(85)

	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.

Liabilities	Quarter ended March 31, 2022
	(in thousands)
Mortgage servicing liabilities
Balance, December 31, 2021	$	2,816
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)

Summary of changes in fair value relating to financial statement items

	Quarter ended March 31,
	2023						2022
	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	$	165,947	$	—	$	165,947	$	(107,978)	$	—	$	(107,978)
Mortgage servicing rights		—		(236,532)		(236,532)		—		212,659		212,659
	$	165,947	$	(236,532)	$	(70,585)	$	(107,978)	$	212,659	$	104,681
Liabilities:
Mortgage servicing liabilities	$	—	$	85	$	85	$	—	$	252	$	252

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

	March 31, 2023						December 31, 2022
			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	$	6,721,454	$	6,628,953	$	92,501	$	3,450,578	$	3,428,052	$	22,526
90 days or more delinquent:
Not in foreclosure		40,384		45,002		(4,618)		47,252		53,351		(6,099)
In foreclosure		10,585		18,200		(7,615)		11,470		16,811		(5,341)
	$	6,772,423	$	6,692,155	$	80,268	$	3,509,300	$	3,498,214	$	11,086

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, 2023	$	—	$	—	$	2,324	$	2,324
December 31, 2022	$	—	$	—	$	1,850	$	1,850

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

	Quarter ended March 31,
	2023		2022
	(in thousands)
Real estate acquired in settlement of loans	$	(558)	$	(514)

Summary of carrying value and fair value of debt

	March 31, 2023				December 31, 2022
	Fair value		Carrying value		Fair value		Carrying value
	(in thousands)
Term notes and term loans	$	2,466,450	$	2,471,930	$	1,677,476	$	1,794,475
Unsecured senior notes	$	1,490,375	$	1,780,833	$	1,550,750	$	1,779,920

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

	Quarter ended March 31,
	2023		2022
	(Amount recognized and unpaid principal balance of underlying loans in thousands)
MSR and pool characteristics:
Amount recognized	$	286,533	$	616,302
Unpaid principal balance of underlying loans	$	13,695,364	$	30,575,969
Weighted average servicing fee rate (in basis points)		50		43
Key inputs (1):
Annual total prepayment speed (2):
Range		9.2% – 23.2%		6.0% – 23.4%
Weighted average		11.7%		8.3%
Equivalent average life (in years):
Range		3.0 – 8.4		3.7 – 8.8
Weighted average		7.3		8.3
Pricing spread (3):
Range		5.5% – 11.7%		5.8% – 16.1%
Weighted average		7.7%		7.5%
Per-loan annual cost of servicing:
Range		$68 – $125		$80 – $177
Weighted average		$103		$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. 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.

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, 2023	December 31, 2022
	(Fair value, unpaid principal balance of underlying
	loans and effect on fair value amounts in thousands)
Fair value	$ 6,003,390	$ 5,953,621
Pool characteristics:
Unpaid principal balance of underlying loans	$ 321,263,982	$ 314,567,639
Weighted average note interest rate	3.5%	3.4%
Weighted average servicing fee rate (in basis points)	37	36
Key inputs (1):
Annual total prepayment speed (2):
Range	5.2% – 18.0%	5.0% – 17.7%
Weighted average	8.2%	7.5%
Equivalent average life (in years):
Range	3.7 – 9.0	3.7 – 9.3
Weighted average	8.1	8.4
Effect on fair value of (3):
5% adverse change	($85,106)	($77,346)
10% adverse change	($167,216)	($152,192)
20% adverse change	($323,085)	($294,872)
Pricing spread (4):
Range	4.9% – 14.2%	4.9% – 14.3%
Weighted average	6.5%	6.5%
Effect on fair value of (3):
5% adverse change	($80,273)	($81,021)
10% adverse change	($158,416)	($159,863)
20% adverse change	($308,614)	($311,329)
Per-loan annual cost of servicing:
Range	$68 – $144	$68 – $144
Weighted average	$108	$109
Effect on fair value of (3):
5% adverse change	($41,653)	($41,263)
10% adverse change	($83,305)	($82,527)
20% adverse change	($166,610)	($165,053)

(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) The Company applies a pricing spread to the Treasury yield curve for purposes of discounting cash flows relating to MSRs.

Mortgage servicing liabilities

Fair Value

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

		March 31,		December 31,
		2023		2022
Fair value (in thousands)	$	2,011	$	2,096
Pool characteristics:
Unpaid principal balance of underlying loans (in thousands)	$	28,380	$	33,157
Servicing fee rate (in basis points)		25		25
Key inputs (1):
Pricing spread (2)		8.0%		7.8%
Annual total prepayment speed (3)		17.0%		17.2%
Equivalent average life (in years)		4.9		4.9
Per-loan annual cost of servicing	$	1,136	$	1,177

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

(2) The Company applies a pricing spread to the Treasury yield curve for purposes of discounting cash flows relating to 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, 2023		December 31, 2022
Fair value (in thousands) (1)	$	58,846	$	25,844
Key inputs (2):
Pull-through rate:
Range		8.0% – 100%		10.3% – 100%
Weighted average		81.1%		82.8%
Mortgage servicing rights fair value expressed as:
Servicing fee multiple:
Range		1.7 – 7.8		(1.3) – 7.7
Weighted average		4.2		4.3
Percentage of loan commitment amount:
Range		0.4% – 4.1%		(0.2)% – 3.8%
Weighted average		2.1%		2.0%

(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, 2023		December 31, 2022
Fair value (in thousands)	$	312,789	$	345,772
Key inputs (1):
Discount rate:
Range		5.1% – 10.2%		5.5% – 10.2%
Weighted average		5.3%		5.7%
Twelve-month projected housing price index change:
Range		(1.8)% – (1.7)%		(1.9)% – (1.7)%
Weighted average		(1.8)%		(1.8)%
Voluntary prepayment/resale speed (2):
Range		4.7% – 25.0%		4.7% – 25.6%
Weighted average		21.7%		21.6%
Total prepayment/resale speed (3):
Range		4.8% – 35.5%		4.8% – 36.1%
Weighted average		30.0%		29.4%

(1) Weighted average inputs are based on the fair values of the “Level 3” loans.

(2) Voluntary prepayment/resale speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).

(3) Total prepayment/resale speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayment/resale speeds.