Related Party Transactions

6 Months Ended

Jun. 30, 2025

Related Party Transactions

Related Party Transactions

Note 5—Related Party Transactions

PennyMac Mortgage Investment Trust

Operating Activities

Mortgage Loan Production Activities and MSR Recapture

Mortgage Loan Purchase Agreement

The Company sells newly originated loans to PMT under a mortgage loan purchase agreement. The Company has typically utilized the mortgage loan purchase agreement for the purpose of selling to PMT conforming balance non-government insured or guaranteed loans, as well as prime jumbo residential mortgage loans.

MSR Recapture Agreement

Pursuant to the terms of an MSR recapture agreement by and between the Company and PMT, if the Company refinances (recaptures) mortgage loans for which PMT holds the MSRs, the Company is generally required to transfer and convey to PMT cash in an amount equal to:

● 70% of the fair market value of the MSRs relating to the recaptured loans subject to the first 30% of the “recapture rate”;

● 50% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 30% and up to 50%;

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 50%; and

● a recapture fee of $900 per loan if PLS originates a mortgage loan for the purpose of purchasing a property where the customer has or had a mortgage loan for which PMT holds or held the MSR.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all refinance mortgage loans originated in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” relating to closed end second lien loans originated in such month, to (ii) the aggregate unpaid principal balance of all mortgage loans from the portfolio that PLS has determined in good faith were refinanced in such month, plus the aggregate unpaid principal balance of all “preserved mortgage loans” in such month. For purposes of such calculation, “preserved mortgage loan” means a mortgage loan in PMT’s portfolio as to which PLS or its affiliates originated a new closed end second lien loan in a subordinate position to such mortgage loan. The company has further agreed to allocate resources sufficient to target a recapture rate of at least 30%.

Through 2024, the MSR recapture agreement required the Company to transfer cash to PMT in an amount equal to:

● 40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;

● 35% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 15% and up to 30%; and

● 30% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 30%.

The “recapture rate” meant, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured mortgage loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month.

The MSR recapture agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.

Mortgage Banking Services Agreement

Fulfillment Fees

The Company provides PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which it receives a monthly fulfillment fee. Pursuant to the terms of a mortgage banking services agreement, the fulfillment fees shall not exceed the following:

● the number of non-Ginnie Mae loan commitments issued during the quarter after applying a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, and then multiplied by a ratio of (i) the number of loan commitments relating to loans intended to be purchased by PMT during the quarter and thereafter retained by PMT prior to sale or securitization, to (ii) the total number of non-Ginnie Mae loan commitments issued during the quarter (as determined after applying the applicable pull-through factor to each such non-Ginnie Mae loan commitment), plus

● $315 multiplied by the number of purchased loans up to and including 16,500 per quarter and $195 multiplied by the number of purchased loans in excess of 16,500 per quarter, multiplied by a ratio of (i) the number of loans purchased by PMT during the quarter and thereafter retained by PMT prior to sale or securitization, to (ii) the total number of non-Ginnie Mae loans purchased during the quarter, plus

● $500 multiplied by the number of all purchased loans that are securitized or sold to parties other than Fannie Mae or Freddie Mac; provided however, that no fulfillment fee shall be due or payable to the Company with respect to any Ginnie Mae mortgage loans, any Fannie Mae mortgage loan or Freddie Mac mortgage loan acquired from PMT by the Company on a discretionary basis, or any mortgage loan acquired by PMT from the Company on or before June 30, 2025, provided that supplemental fees may still be charged in connection with the securitization or sale of any such mortgage loans.

Through 2024, the mortgage banking services agreement provided for a quarterly fulfillment fee not to exceed the following:

● the number of loan commitments issued multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments were subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 loan commitments per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus

● $315 multiplied by the number of purchased loans that were sold to Fannie Mae or Freddie Mac up to and including 16,500 loans per quarter and $195 multiplied by the number of such purchased loans in excess of 16,500 per quarter, plus

● $750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae or Freddie Mac; provided, however, that no fulfillment fee was due or payable to PLS with respect to any Ginnie Mae loans and certain Fannie Mae or Freddie Mac loans acquired by PLS.

Sourcing Fees

PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae mortgage-backed securities (“MBS”) and act as a servicer. Accordingly, under the agreement, the Company purchases mortgage loans underwritten in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from PMT at PMT’s cost less an administrative fee plus accrued interest and sourcing fee ranging from one to two basis points of the unpaid principal balance (“UPB”) of the loan, generally based on the average number of calendar days the loans are held by PMT before purchase by the Company. The Company may also acquire conventional loans from PMT on the same terms upon mutual agreement between PMT and the Company.

While the Company purchases these mortgage loans “as is” and without recourse of any kind from PMT, where the Company has a claim for repurchase, indemnity or otherwise against a correspondent seller, it is entitled, at its sole expense, to pursue any such claim through or in the name of PMT.

In December 2024, the mortgage banking services agreement was renewed and amended to provide for the Company to assume the role of initial correspondent loan purchaser in place of PMT effective July 1, 2025. Under this agreement, PMT retains the right to purchase up to 100% of the non-government insured or guaranteed loans purchased by the Company through its correspondent operations at the Company’s cost plus accrued interest, less any loan administrative fees paid to the Company by the correspondent sellers and subject to quarterly fulfillment fee charges as previously described. The Company may hold or otherwise sell correspondent lending loans to other investors if PMT chooses not to purchase such loans. Accordingly, the sourcing fee arrangement will no longer have any effect for correspondent loans locked on July 1, 2025 and after.

The mortgage banking services agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.

Following is a summary of loan production and MSR recapture activities, between the Company and PMT:

	Quarter ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
	(in thousands)
Net gains (losses) on loans held for sale at fair value:
Net gains on loans sold to PMT (primarily cash)	$	8,549	$	—	$	14,595	$	—
Mortgage servicing rights recapture incurred		(1,474)		(473)		(2,682)		(826)
	$	7,075	$	(473)	$	11,913	$	(826)
Sale of loans held for sale to PMT	$	1,034,884	$	—	$	1,689,692	$	—
UPB of loans recaptured	$	183,051	$	74,208	$	342,523	$	136,281
Tax service fees earned from PMT included in Loan origination fees	$	502	$	431	$	979	$	790
Fulfillment fee revenue	$	5,814	$	4,427	$	11,104	$	8,443
Unpaid principal balance of loans fulfilled for PMT subject to fulfillment fees	$	3,085,840	$	2,229,397	$	5,867,562	$	4,001,078
Sourcing fees included in cost of loans purchased from PMT	$	2,658	$	2,050	$	4,673	$	3,655
Unpaid principal balance of loans purchased from PMT:
Government guaranteed or insured	$	12,966,563	$	10,500,415	$	24,158,443	$	18,357,340
Conventional conforming		13,520,693		10,006,706		22,481,489		18,196,636
	$	26,487,256	$	20,507,121	$	46,639,932	$	36,553,976

Servicing Agreement

The Company and PMT have entered into a loan servicing agreement (the “Servicing Agreement”), pursuant to which the Company provides subservicing for PMT’s MSRs and servicing for its portfolio of residential mortgage loans.

● The base servicing fees for mortgage loans are calculated through a monthly per-loan dollar amount. The base servicing fee rates are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that mortgage loans become delinquent, the Company is entitled to an additional servicing fee per loan ranging from $18 to $80 per month based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes real estate acquired in settlement of loans (“REO”). The Company is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Following is a summary of loan servicing fees earned from PMT:

	Quarter ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
	(in thousands)
Base fees	$	19,151	$	19,181	$	38,354	$	38,378
Other fees		2,494		1,083		5,020		2,148
	$	21,645	$	20,264	$	43,374	$	40,526

Through 2024, the loan servicing fees were established based on whether the serviced loans were “prime” loans (loans included in PMT’s MSRs, private label securitization portfolios and its inventory of loans held for sale) or “special servicing” loans (loans purchased by PMT with credit deterioration) as follows:

Prime Servicing

● The base servicing fees for prime loans were calculated through a monthly per-loan dollar amount, with the actual dollar amount for each loan based on whether the loan was a fixed-rate or adjustable-rate loan. The base servicing fee rates were $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

● To the extent that prime loans became delinquent, the Company was entitled to an additional servicing fee per loan ranging from $10 to $55 per month based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property became REO. The Company was also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and a percentage of late charges.

Special Servicing

● The base servicing fee rates for special servicing loans ranged from $30 per month for current loans up to $95 per month for loans in foreclosure proceedings. The base servicing fee rate for REO was $75 per month. The Company also received a supplemental servicing fee of $25 per month for each special servicing loan.

● The Company received activity-based fees for modifications, foreclosures and liquidations that it facilitated with respect to special servicing loans, as well as other market-based refinancing and loan disposition fees.

The Servicing Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.

Management Agreement

The Company has a management agreement with PMT (the “Management Agreement”), pursuant to which the Company oversees PMT’s business affairs in conformity with PMT’s investment policies for which the Company collects a base management fee and may collect a performance incentive fee. The Management Agreement provides that:

● The base management fee is calculated and collected quarterly in arrears and is equal to the sum of (i) 1.5% per year of PMT’s average shareholders’ equity up to $2 billion, (ii) 1.375% per year of PMT’s average “shareholders’ equity” in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of PMT’s average “shareholders’ equity” in excess of $5 billion. “Shareholders’ equity” is defined as the sum of net proceeds from issuance and repurchases of equity securities since inception, plus retained earnings or reduced by accumulated deficit.

● The performance incentive fee is calculated and collected annually in arrears and is a specified percentage of the amount by which PMT’s “net income,” over the fiscal year and before deducting the incentive fee, exceeds certain levels of return on “common shareholders’ equity.”

● The performance incentive fee is equal to the sum of:

● 10% of the amount by which PMT’s “net income” for the year exceeds (i) an 8% return on the average “common shareholders’ equity” during the period plus the “high watermark,” up to (ii) a 12% return on PMT’s “common shareholders’ equity”; plus

● 15% of the amount by which PMT’s “net income” for the year exceeds (i) a 12% return on the average PMT’s “common shareholders’ equity” during the period plus the “high watermark,” up to (ii) a 16% return on PMT’s “common shareholders’ equity”; plus

● 20% of the amount by which PMT’s “net income” for the year exceeds a 16% return on the average PMT’s “common shareholders’ equity” during the period plus the “high watermark.”

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to PMT’s common shares of beneficial interest computed in accordance with GAAP adjusted for certain other non-cash charges determined after discussions between the Company and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.

“Common shareholders’ equity” is defined as “shareholder’s equity” less the average GAAP accounting value of the Company’s preferred equity.

“High watermark” is the annual adjustment that reflects the amount by which the “net income” (stated as a percentage of return on “equity”) in that year exceeds or falls short of the lesser of 8% and the average Fannie Mae 30-year MBS Yield (the “Target Yield”) for the year then ended. If the “net income” is lower than the Target Yield, the high watermark is increased by the difference. If the “net income” is higher than the Target Yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result, the threshold amount required for the Company to earn a performance incentive fee is adjusted cumulatively based on the performance of PMT’s net income over (or under) the Target Yield, until the net income in excess of the Target Yield exceeds the then-current cumulative high watermark amount, and a performance incentive fee is earned. The high watermark is calculated based on the two years preceding the fiscal year for which the incentive fee is calculated, and will never be less than zero after including all high watermark increases and high watermark decreases over any such rolling two fiscal year period.

The performance incentive fee may be paid in cash or a combination of cash and PMT’s common shares of beneficial interest (subject to a limit of no more than 50% paid in common shares of beneficial interest), at PMT’s option.

In the event of termination of the Management Agreement between PMT and the Company, the Company may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by the Company, in each case during the 24-month period immediately preceding the date of termination.

Following is a summary of the base management and performance incentive fees earned from PMT:

	Quarter ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
	(in thousands)
Base management fees	$	6,869	$	7,133	$	13,881	$	14,321
Performance incentive fees		—		—		—		—
	$	6,869	$	7,133	$	13,881	$	14,321
Average PMT's shareholders' equity used to calculate base management and performance incentive fees	$	1,836,690	$	1,912,522	$	1,866,238	$	1,919,962

Through 2024, under the Management Agreement, both base management and performance incentive fees were paid quarterly and the high watermark was measured on a cumulative basis since inception.

The Management Agreement expires on December 31, 2029, subject to automatic renewal for an additional 18-month period unless terminated in accordance with the terms of the agreement.

Expense Reimbursement

Under the Management Agreement, PMT reimburses the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax, accounting, internal audit and investor relations services for the direct benefit of PMT. PMT is also required to pay its pro rata portion of the rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Company and its affiliates required for PMT’s and its subsidiaries’ operations. These expenses are based on the resources the Company dedicates to investment management activities for PMT, as determined by the Company in its sole discretion.

Through 2024, PMT reimbursed the Company for its organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf, it being understood that the Company and its affiliates would allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of PMT. With respect to the allocation of the Company’s and its affiliates’ personnel compensation, the Company was reimbursed $165,000 per fiscal quarter. Overhead expenses were previously allocated based on the ratio of PMT’s proportion of gross assets compared to all remaining gross assets owned or managed by the Company, as calculated at each fiscal quarter end.

The Company received reimbursements from PMT for expenses as follows:

	Quarter ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
	(in thousands)
Reimbursement of:
Expenses incurred on PMT's behalf, net	$	4,963	$	2,779	$	9,564	$	9,193
Compensation		1,628		165		3,257		330
Common overhead incurred by the Company		982		2,000		1,963		3,944
	$	7,573	$	4,944	$	14,784	$	13,467
Payments and settlements during the period (1)	$	32,628	$	29,263	$	60,676	$	59,348

(1) Payments and settlements include payments for the operating, investing and financing activities itemized in this Note.

Investing Activities

Following is a summary of investing activities between the Company and PMT:

	Quarter ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
	(in thousands)
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust shares	$	(105)	$	(40)	$	80	$	(30)

	June 30,		December 31,
	2025		2024
	(in thousands)
Common shares of beneficial interest of PennyMac Mortgage Investment Trust:
Fair value	$	965	$	944
Number of shares		75		75

Receivable from and Payable to PMT

Amounts receivable from and payable to PMT are summarized below:

	June 30,		December 31,
	2025		2024
	(in thousands)
Receivable from PMT:
Correspondent production fees	$	10,528	$	11,122
Servicing fees		7,213		6,822
Management fees		6,869		7,149
Allocated expenses and expenses incurred on PMT's behalf		5,994		3,508
Fulfillment fees		—		1,605
	$	30,604	$	30,206
Payable to PMT:
Amounts advanced by PMT to fund its servicing advances	$	71,280	$	106,302
Other		14,894		16,015
	$	86,174	$	122,317

Exchanged Private National Mortgage Acceptance Company, LLC Unitholders

The Company entered into a tax receivable agreement with certain former owners of PNMAC that provides for the payment from time to time by the Company to PNMAC’s exchanged unitholders of an amount equal to 85% of the amount of the net tax benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis of PNMAC’s assets resulting from exchanges of ownership interests in PNMAC and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. The Company has recorded a $24.8 million and $25.9 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of June 30, 2025 and December 31, 2024, respectively. During the quarter ended June 30, 2025, the Company recorded a $1.1 million reduction to its estimate of the liability relating to a change in the tax rate applicable to its deferred income tax liability. The Company did not make payments under the tax receivable agreement during the quarter and six-month periods ended June 30, 2025 and 2024.