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What changed in PennyMac Financial Services, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PennyMac Financial Services, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+339 added−344 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-19)

Top changes in PennyMac Financial Services, Inc.'s 2025 10-K

339 paragraphs added · 344 removed · 290 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+3 added−6 removed30 unchanged
Biggest changeOur recapture fee arrangement is detailed in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Annual Report. 8 Table of Contents Our loan production activities are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) UPB of loans purchased and originated for sale through our: ​ ​ ​ ​ ​ ​ Correspondent lending channel, from PennyMac Mortgage Investment Trust ​ $ 80,694,536 ​ $ 71,618,697 ​ $ 49,680,267 Broker direct channel ​ ​ 12,969,248 ​ ​ 8,122,495 ​ ​ 6,939,834 Consumer direct channel ​ ​ 8,709,395 ​ ​ 4,795,548 ​ ​ 15,405,697 ​ ​ ​ 102,373,179 ​ ​ 84,536,740 ​ ​ 72,025,798 UPB of conventional loans fulfilled for PennyMac Mortgage Investment Trust ​ ​ 13,446,484 ​ ​ 14,898,301 ​ ​ 37,090,031 Total loan production ​ $ 115,819,663 ​ $ 99,435,041 ​ $ 109,115,829 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effect of our loan production transactions with PMT on our financial statements are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 2023 2022 ​ ​ (in thousands) Net gains (losses) on loans held for sale at fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net gains (losses) on loans held for sale to PMT ​ $ 6,260 ​ $ — ​ $ (2,820) Mortgage servicing rights and excess servicing spread recapture incurred ​ ​ (2,193) ​ ​ (1,784) ​ ​ (13,744) ​ ​ ​ 4,067 ​ ​ (1,784) ​ ​ (16,564) Fulfillment fee revenue ​ ​ 26,291 ​ ​ 27,826 ​ ​ 67,991 Tax service fees earned from PMT included in Loan origination fees ​ ​ 2,503 ​ ​ 3,216 ​ ​ 8,418 ​ ​ $ 32,861 ​ $ 29,258 ​ $ 59,845 Sourcing fees paid to PMT included in cost of loans purchased ​ $ 8,069 ​ $ 7,162 ​ $ 4,968 ​ 9 Table of Contents Servicing Segment ​ Our loan servicing segment performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; responding to customer inquiries; providing accounting for principal and interest; holding custodial (impounded) funds for the payment of property taxes and insurance premiums; counseling delinquent borrowers; administering loss mitigation activities, including modification and forbearance programs; and supervising foreclosures and property dispositions. ​ We service loans both as the owner of MSRs and mortgage servicing liabilities (“MSLs”) and as the subservicer on behalf of PMT. ​ The UPB of our loan servicing portfolio is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ (in thousands) Mortgage servicing rights and mortgage servicing liabilities: ​ ​ ​ ​ ​ ​ Originated ​ $ 410,393,342 ​ $ 352,790,614 Purchased and assumed ​ ​ 15,681,406 ​ ​ 17,478,397 ​ ​ ​ 426,074,748 ​ ​ 370,269,011 Loans held for sale ​ ​ 8,128,914 ​ ​ 4,294,689 Total owned servicing ​ ​ 434,203,662 ​ ​ 374,563,700 Subserviced for: ​ ​ ​ ​ ​ ​ PennyMac Mortgage Investment Trust ​ ​ 230,753,581 ​ ​ 232,653,069 U.S.
Biggest changeOur loan production activities are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) UPB of loans purchased and originated for sale through our: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Correspondent lending channel and from PennyMac Mortgage Investment Trust ​ $ 104,945,164 ​ $ 80,694,536 ​ $ 71,618,697 Broker direct channel ​ ​ 14,596,551 ​ ​ 12,969,248 ​ ​ 8,122,495 Consumer direct channel ​ ​ 13,668,049 ​ ​ 8,709,395 ​ ​ 4,795,548 ​ ​ ​ 133,209,764 ​ ​ 102,373,179 ​ ​ 84,536,740 UPB of loans directly sold to PMT and fulfilled for PMT subject to fulfillment fees ​ ​ 12,893,224 ​ ​ 13,446,484 ​ ​ 14,898,301 Total loan production ​ $ 146,102,988 ​ $ 115,819,663 ​ $ 99,435,041 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effect of our loan production transactions with PMT on our financial statements are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ 2024 ​ ​ 2023 ​ ​ (in thousands) Net gains on loans held for sale at fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net gains on loans held for sale to PMT ​ $ 55,825 ​ $ 6,260 ​ $ — Mortgage servicing rights recapture fees ​ ​ (10,117) ​ ​ (2,193) ​ ​ (1,784) ​ ​ ​ 45,708 ​ ​ 4,067 ​ ​ (1,784) Fulfillment fee revenue ​ ​ ​ ​ 23,804 ​ ​ ​ ​ 26,291 ​ ​ 27,826 Tax service fees earned from PMT included in Loan origination fees ​ ​ 1,537 ​ ​ 2,503 ​ ​ 3,216 ​ ​ $ 71,049 ​ $ 32,861 ​ $ 29,258 Sourcing fees paid to PMT included in cost of loans purchased ​ $ 5,164 ​ $ 8,069 ​ $ 7,162 ​ 8 Table of Contents Servicing Segment ​ Our loan servicing segment performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; responding to customer inquiries; accounting for principal and interest; holding custodial (impounded) funds for the payment of property taxes and insurance premiums; counseling delinquent borrowers; administering loss mitigation activities, including modification and forbearance programs; and supervising foreclosures and property dispositions. ​ We service loans both as the owner of MSRs and mortgage servicing liabilities (“MSLs”) and as the subservicer on behalf of PMT and non-affiliates. ​ The UPB of our loan servicing portfolio is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ (in thousands) Mortgage servicing rights and mortgage servicing liabilities: ​ ​ ​ ​ ​ ​ Originated ​ $ 448,035,447 ​ $ 410,393,342 Purchased and assumed ​ ​ 13,999,998 ​ ​ 15,681,406 ​ ​ ​ 462,035,445 ​ ​ 426,074,748 Loans held for sale ​ ​ 8,930,477 ​ ​ 8,128,914 Total owned servicing ​ ​ 470,965,922 ​ ​ 434,203,662 Subserviced for: ​ ​ ​ ​ ​ ​ PennyMac Mortgage Investment Trust ​ ​ 226,774,067 ​ ​ 230,745,995 Other non-affiliates ​ ​ 11,616,738 ​ ​ — Interim servicing ​ ​ 24,257,095 ​ ​ 806,584 Total subservicing ​ ​ 262,647,900 ​ ​ 231,552,579 ​ ​ $ 733,613,822 ​ $ 665,763,827 ​ Our responsibilities and risks relating to loans we service in arrangements where we own the MSRs or MSLs differ from those where we act as subservicer for the owner of the servicing rights.
We carry these assets and liabilities at fair value and as such they are subject to subsequent changes in fair value owing to the anticipated realization of the cash flows from the asset or liability or to changes in the market for such MSRs and MSLs; ​ ● Because our investment in MSRs can be significant and the fair value of this asset is sensitive to changes in prepayment activity and expectations, marketplace return requirements and the cost to service the loans, we incur costs to hedge this investment – primarily the risk of changes in fair value arising from changes in prepayment activity and expectations in response to changes in interest rates; ​ ● We are responsible for advancing our corporate funds to protect the loan owners’ interest in the collateral securing such loans for such items as hazard insurance, property taxes and foreclosure-related costs, subject to future reimbursement, as well as advancing delinquent principal and interest payments to MBS holders; and ​ 10 Table of Contents ● As the owner of Ginnie Mae MSRs, we have the option to purchase loans that are at least three months delinquent out of the underlying Ginnie Mae securities as an alternative to continuing to advance principal and interest payments to the holders of the Ginnie Mae securities, or we may be required to purchase loans out of Ginnie Mae securities if there has been a modification of the loans’ terms.
We carry these assets and liabilities at fair value and as such they are subject to subsequent changes in fair value owing to the anticipated realization of the cash flows from the asset or liability or to changes in the market for such MSRs and MSLs; ​ ● Because our investment in MSRs can be significant and the fair value of this asset is sensitive to changes in prepayment activity and expectations, marketplace return requirements and the cost to service the loans, we incur costs to hedge this investment – primarily the risk of changes in fair value arising from changes in prepayment activity and expectations in response to changes in interest rates; ​ ● We are responsible for advancing our corporate funds to protect the loan owners’ interest in the collateral securing such loans for such items as hazard insurance, property taxes and foreclosure-related costs, subject to future reimbursement, as well as advancing delinquent principal and interest payments to MBS holders; and ​ 9 Table of Contents ● As the owner of Ginnie Mae MSRs, we have the option to purchase loans that are at least three months delinquent out of the underlying Ginnie Mae securities as an alternative to continuing to advance principal and interest payments to the holders of the Ginnie Mae securities, or we may be required to purchase loans out of Ginnie Mae securities if there has been a modification of the loans’ terms.
We plan on growing our mortgage loan volume in this channel through the addition of new broker and non-delegated partner relationships, as well as expansion of existing relationships enabled by our leading broker technology platform. ​ Mortgage Loan Servicing ​ We expect to grow our servicing portfolio through loan production activities, as our correspondent production for our own account and consumer and broker direct lending add new servicing for owned MSRs, and correspondent conventional production for PMT’s account adds new subservicing.
We plan on growing our mortgage loan volume in this channel through the addition of new broker and non-delegated partner relationships, as well as expansion of existing relationships enabled by our leading broker technology platform. ​ Mortgage Loan Servicing ​ We expect to grow our servicing portfolio through loan production activities, as our correspondent production for our own account and consumer and broker direct lending add new servicing for owned servicing, and correspondent conventional production for PMT’s account adds new subservicing.
Our other intellectual property includes proprietary know-how and technological innovations, such as our proprietary workflow-driven cloud-based servicing system, as well as proprietary pricing engines, loan-level analytics systems and other trade secrets that we have developed to maintain our competitive position. ​ Available Information ​ Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, proxy statements and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through the investor relations section of our website at www.pennymacfinancial.com as soon as reasonably practicable after electronically filing such material with the SEC.
Our other intellectual property includes proprietary know-how and technological innovations, such as our proprietary workflow-driven cloud-based servicing system, as well as proprietary pricing engines, loan-level analytics systems and other trade secrets that we have developed to maintain our competitive position. ​ 15 Table of Contents Available Information ​ Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, proxy statements and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through the investor relations section of our website at www.pennymacfinancial.com as soon as reasonably practicable after electronically filing such material with the SEC.
We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the United States Virgin Islands, and originate loans in all 50 states and the District of Columbia, either because it is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction. ​ ● Our investment management subsidiary is PNMAC Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended.
We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the United States Virgin Islands, and originate loans in all 50 states and the District of Columbia, either because it is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction. ​ ● Our investment management subsidiary is Pennymac Capital Management, LLC (“PCM”), a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended.
Demand for home loans generally comes from the demand for loans made to finance the purchase of homes and the demand for loans made to refinance existing loans. ​ The demand for loans made to finance the purchase of homes is most significantly influenced by the overall strength of the economy, housing prices and availability and societal factors such as household formation and government support for homeownership. ​ The demand for loans made to refinance existing loans is most significantly influenced by movements in interest rates and, to a lesser extent, to changes in property values and employment. ​ Human Capital Resources Our long-term growth and success are highly dependent upon our employees and our ability to maintain a workplace representing a broad spectrum of backgrounds, ideas and perspectives.
Demand for home loans generally comes from the demand for loans made to finance the purchase of homes and the demand for loans made to refinance existing loans. ​ The demand for loans made to finance the purchase of homes is most significantly influenced by the overall strength of the economy, housing prices and availability and societal factors such as household formation and government support for homeownership. ​ The demand for loans made to refinance existing loans is most significantly influenced by movements in interest rates and, to a lesser extent, to changes in property values and employment. ​ 12 Table of Contents Human Capital Resources Our long-term growth and success are highly dependent upon our employees and our ability to maintain a workplace representing a broad spectrum of backgrounds, ideas and perspectives.
We incur significant ongoing costs to comply with these licensing and examination requirements. ​ The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “SAFE Act”) requires all states to enact laws that require all individuals acting in the United States as mortgage loan originators to be individually licensed or registered if they intend to offer mortgage loan products.
We incur significant ongoing costs to comply with these licensing and examination requirements. ​ The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 requires all states to enact laws that require all individuals acting in the United States as mortgage loan originators to be individually licensed or registered if they intend to offer mortgage loan products.
These licensing requirements include enrollment in the Nationwide Mortgage Licensing System, application to state regulators for individual licenses and the completion of pre-licensing education, annual education and the successful completion of both national and state exams. ​ We must comply with a number of federal consumer protection laws, including, among others: ​ ● the Real Estate Settlement Procedures Act, and Regulation X thereunder, which require certain disclosures to mortgagors regarding the costs of mortgage loans, the administration of tax and insurance escrows, the transferring of servicing of mortgage loans, the management of mortgage loans in default, loss mitigation and foreclosure events, the response to consumer complaints, and payments between lenders and vendors of certain settlement services; ​ ● the Truth in Lending Act, and Regulation Z thereunder, which require certain disclosures to mortgagors regarding the terms of their mortgage loans, notices of sale, assignments or transfers of ownership of mortgage loans, new servicing rules involving payment processing, and adjustable rate mortgage change notices and periodic statements; ​ ● the Equal Credit Opportunity Act and Regulation B thereunder, which prohibit discrimination on the basis of age, race and certain other characteristics, in the extension of credit; ​ ● the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; ​ ● the Home Mortgage Disclosure Act and Regulation C thereunder, which require financial institutions to report certain public loan data; ​ ● the Homeowners Protection Act, which requires the cancellation of private mortgage insurance once certain equity levels are reached, sets disclosure and notification requirements, and requires the return of unearned premiums; ​ ● the Servicemembers Civil Relief Act, which provides, among other things, interest and foreclosure protections for service members on active duty; ​ ● the Gramm-Leach-Bliley Act and Regulation P thereunder, which require us to maintain privacy with respect to certain consumer data in our possession and to periodically communicate with consumers on privacy matters; ​ ● the Fair Debt Collection Practices Act, which regulates the timing and content of debt collection communications; ​ ● the Fair Credit Reporting Act and Regulation V thereunder, which regulate the use and reporting of information related to the credit history of consumers; and ​ 15 Table of Contents ● the National Flood Insurance Reform Act of 1994, which provides for lenders to require from borrowers or to purchase flood insurance on behalf of borrower/owners of properties in special flood hazard areas. ​ Many of these laws are further impacted by the SAFE Act and implementation of new rules by the CFPB. ​ Our senior management team has established a comprehensive compliance management system (“CMS”) that is designed to ensure compliance with applicable mortgage origination and servicing laws and regulations.
These licensing requirements include enrollment in the Nationwide Mortgage Licensing System, application to state regulators for individual licenses and the completion of pre-licensing education, annual education and the successful completion of both national and state exams. ​ We must comply with a number of federal consumer protection laws, including, among others: ​ ● the Real Estate Settlement Procedures Act, and Regulation X thereunder, which require certain disclosures to mortgagors regarding the costs of mortgage loans, the administration of tax and insurance escrows, the transferring of servicing of mortgage loans, the management of mortgage loans in default, loss mitigation and foreclosure events, the response to consumer complaints, and payments between lenders and vendors of certain settlement services; ​ ● the Truth in Lending Act, and Regulation Z thereunder, which require certain disclosures to mortgagors regarding the terms of their mortgage loans, notices of sale, assignments or transfers of ownership of mortgage loans, new servicing rules involving payment processing, and adjustable rate mortgage change notices and periodic statements; ​ ● the Equal Credit Opportunity Act and Regulation B thereunder, which prohibit discrimination on the basis of age, race and certain other characteristics, in the extension of credit; ​ ● the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; ​ 14 Table of Contents ● the Home Mortgage Disclosure Act and Regulation C thereunder, which require financial institutions to report certain public loan data; ​ ● the Homeowners Protection Act, which requires the cancellation of private mortgage insurance once certain equity levels are reached, sets disclosure and notification requirements, and requires the return of unearned premiums; ​ ● the Servicemembers Civil Relief Act, which provides, among other things, interest and foreclosure protections for service members on active duty; ​ ● the Gramm-Leach-Bliley Act and Regulation P thereunder, which require us to maintain privacy with respect to certain consumer data in our possession and to periodically communicate with consumers on privacy matters; ​ ● the Fair Debt Collection Practices Act, which regulates the timing and content of debt collection communications; ​ ● the Fair Credit Reporting Act and Regulation V thereunder, which regulate the use and reporting of information related to the credit history of consumers; and ​ ● the National Flood Insurance Reform Act of 1994, which provides for lenders to require from borrowers or to purchase flood insurance on behalf of borrower/owners of properties in special flood hazard areas. ​ Our senior management team has established a comprehensive compliance management system (“CMS”) that is designed to ensure compliance with applicable mortgage origination and servicing laws and regulations.
Such advantages include the ability to obtain lower-cost financing, such as deposits, and operational efficiencies arising from their larger size. ​ Cyclicality and Seasonality ​ The demand for loan originations is affected by consumer demand for home loans.
Such advantages include the ability to obtain lower-cost financing and operational efficiencies arising from their larger size. ​ Cyclicality and Seasonality ​ The demand for loan originations is affected by consumer demand for home loans.
These state licensing requirements typically require an application process, the payment of fees, background checks and administrative review. ​ 14 Table of Contents Our servicing operations are licensed (or exempt or otherwise not required to be licensed) to service mortgage loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the United States Virgin Islands.
These state licensing requirements typically require an application process, the payment of fees, background checks and administrative review. ​ Our servicing operations are licensed (or exempt or otherwise not required to be licensed) to service mortgage loans in all 50 states, the District of Columbia, Puerto Rico, Guam and the United States Virgin Islands.
The components of our CMS include: (a) oversight by senior management and our Board of Directors to ensure that our compliance culture, guidance, and resources are appropriate; (b) a compliance program to ensure that our policies, training and monitoring activities are complete and comprehensive; (c) a complaint management program to ensure that consumer complaints are appropriately addressed and that any required actions are implemented on a timely basis; and (d) independent oversight to ensure that our CMS is functioning as designed. ​ An important component of the CMS is our governance oversight structure, including our Management Risk Committee (“MRC”).
The components of our CMS include: (a) oversight by senior management and our board of directors to ensure that our compliance culture, guidance, and resources are appropriate; (b) a compliance program to ensure that our policies, training and monitoring activities are complete and comprehensive; (c) a complaint management program to ensure that consumer complaints are appropriately addressed and that any required actions are implemented on a timely basis; and (d) independent oversight to ensure that our CMS is functioning as designed. ​ An important component of the CMS is our governance oversight structure.
We also actively manage enterprise-wide and divisional mentoring programs and have partnered with an external vendor to establish a comprehensive, fully integrated wellness program designed to enhance employee productivity. 13 Table of Contents Compensation and Succession Planning Our compensation programs are designed to motivate and reward employees who possess the necessary skills to support our business strategy and create long-term value for our stockholders.
We also actively manage enterprise-wide and divisional mentoring programs and have partnered with an external vendor to establish a comprehensive, fully integrated wellness program designed to enhance employee productivity. ​ Compensation and Succession Planning Our compensation programs are designed to motivate and reward employees who possess the necessary skills to support our business strategy and create long-term value for our stockholders.
Many of our competitors are significantly larger than we are and have stronger financial positions and greater access to capital and other resources than we have and may have other advantages over us.
Some of our competitors are significantly larger than we are, may have stronger financial positions and greater access to capital and other resources than we have, and may have other advantages over us.
We continue to develop new products to satisfy demand from customers in each of our production and servicing channels and respond to changing circumstances in the market, by, for example, expanding our non-affiliate subservicing. ​ U.S.
We continue to develop new products to satisfy demand from customers in each of our production and servicing channels and respond to changing circumstances in the market, by, for example, expanding our non-affiliate subservicing. ​ 11 Table of Contents U.S.
We may also serve as a correspondent seller of newly originated loans from our consumer direct and broker direct lending channels or purchased through our correspondent channel for our own account to PMT under a mortgage loan purchase agreement. When we sell loans to PMT, PMT obtains the MSRs relating to such loans.
We may also sell newly originated loans from our consumer direct and broker direct lending channels or purchased through our correspondent channel for our own account to PMT under a mortgage loan purchase agreement. When we sell loans to PMT, PMT obtains the MSRs relating to such loans.
In 2024, 2023 and 2022, we funded $13.0 billion, $8.1 billion and $6.9 billion of mortgage loans, respectively, through our broker direct channel, which is comprised of loans from both the broker direct lending operations as well as loans purchased through our non-delegated correspondent lending operations.
In 2025, 2024 and 2023, we funded $14.6 billion, $13.0 billion and $8.1 billion of mortgage loans, respectively, through our broker direct channel, which is comprised of loans from both the broker direct lending operations as well as loans purchased through our non-delegated correspondent lending operations.
As our servicing portfolio grows, we will have a greater number of leads to pursue, which we believe will lead to greater origination activity through our consumer direct business. As of December 31, 2024, we serviced 2.6 million loans.
As our servicing portfolio grows, we will have a greater number of leads to pursue, which we believe will lead to greater origination activity through our consumer direct business. As of December 31, 2025, we serviced 2.8 million loans.
In 2024, 2023 and 2022, we funded $8.7 billion, $4.8 billion and $15.4 billion of mortgage loans, respectively, through our consumer direct lending channel as market interest rates increased and market refinance volumes decreased.
In 2025, 2024 and 2023, we funded $13.7 billion, $8.7 billion and $4.8 billion of mortgage loans, respectively, through our consumer direct lending channel as market interest rates increased and market refinance volumes decreased.
We believe that our national call center model and our technology will enable us to drive origination process efficiencies and best-in-class customer service. ​ Broker Direct Lending ​ According to Inside Mortgage Finance, the broker lending channel represented approximately 18.6% of U.S. residential mortgage originations in 2024.
We believe that our national call center model and our technology will enable us to drive origination process efficiencies and best-in-class customer service. ​ Broker Direct Lending ​ According to Inside Mortgage Finance, the broker lending channel represented approximately one-fifth of U.S. residential mortgage originations in 2025.
As of December 31, 2024, our MSRs were backed by loans with UPBs totaling $426.1 billion. ​ New Markets and Products ​ We regularly evaluate opportunities to grow our business, including expansion into new markets and providing additional services to our customers directly or through external partnerships.
As of December 31, 2025, our MSRs were backed by loans with UPBs totaling $462.0 billion. ​ New Markets and Products ​ We regularly evaluate opportunities to grow our business, including expansion into new markets and providing additional services to our customers directly or through external partnerships.
The CFPB is responsible for ensuring consumers are provided with timely and understandable information to make responsible decisions about financial transactions, federal consumer financial laws are enforced and consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination.
These regulations are responsible for ensuring consumers are provided with timely and understandable information to make responsible decisions about financial transactions, federal consumer financial laws are enforced and consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination.
These servicing contracts are referred to as mortgage servicing rights (“MSRs”). In our loan fulfillment activities in support of PMT’s correspondent production activities and only for loans purchased for PMT’s account, we earn fulfillment fees and tax service fees.
These servicing contracts are referred to as mortgage servicing rights or MSRs. 7 Table of Contents In our loan fulfillment activities in support of PMT’s correspondent production activities and only for loans purchased for PMT’s account, we earn fulfillment fees and tax service fees.
Mortgage Market ​ The U.S. residential mortgage market is one of the largest financial markets in the world, with approximately $16.5 trillion of outstanding debt as of September 30, 2024. According to mortgage industry economists, first lien mortgage loan origination volume was approximately $1.7 trillion in 2024 and is expected to increase to $2.0 trillion in 2025.
Mortgage Market ​ The U.S. residential mortgage market is one of the largest financial markets in the world, with approximately $14.7 trillion of debt outstanding as of December 31, 2025. According to mortgage industry economists, first lien mortgage loan origination volume was approximately $1.9 trillion in 2025 and is expected to increase to $2.3 trillion in 2026.
Many of the largest financial institutions, primarily banks which had historically held the majority of the market share in mortgage origination and servicing, have reduced their participation in the mortgage market, creating opportunities for non-bank participants. ​ Competition ​ The residential mortgage industry is characterized by high barriers to entry, including the necessity for approvals required to sell loans to and service loans for the Agencies, state licensing requirements for non-federally chartered banks, sophisticated infrastructure, technology, risk management, and processes required for successful operations, and financial capital requirements. ​ Given the diverse and specialized nature of our businesses, we do not believe we have a direct competitor for the totality of our business.
Many of the largest participants in the mortgage market in recent years have been non-bank specialty finance companies. ​ Competition ​ The residential mortgage industry is characterized by high barriers to entry, including the necessity for approvals required to sell loans to and service loans for the Agencies, state licensing requirements for non-federally chartered banks, sophisticated infrastructure, technology, risk management, processes required for successful operations, and financial capital requirements. ​ Given the diverse and specialized nature of our businesses, we do not believe we have a direct competitor for the totality of our business.
We also expect to add subservicing for new non-affiliate clients. We or PMT may also grow our servicing portfolio through acquisitions. In 2024, our loan production totaled $115.8 billion in UPB.
We also expect to add subservicing for new non-affiliate clients. We or PMT may also grow our servicing portfolio through acquisitions or adjust the composition of our servicing portfolio through servicing sales. In 2025, our loan production totaled $152.4 billion in UPB.
MRC membership includes senior management from all areas of the Company impacted by mortgage compliance laws and regulations. The MRC meets on a regular basis throughout the year. ​ Intellectual Property ​ We rely on a combination of trademarks, copyrights, and trade secrets, as well as confidentiality and contractual provisions to protect our intellectual property and proprietary technologies.
The MRC meets on a regular basis throughout the year. ​ Intellectual Property ​ We rely on a combination of trademarks, copyrights, and trade secrets, as well as confidentiality and contractual provisions to protect our intellectual property and proprietary technologies.
We have established a separate donor advised fund to facilitate donations to various local and national charitable organizations and have provided funding to several charitable organizations located near our office sites and national organizations that support missions such as sustainable homeownership, mortgage and rental assistance, food insecurity, disaster relief, family and child advocacy, and community empowerment.
Our five philanthropic focus areas are: community development and affordable housing, financial literacy and economic inclusion, human and social services, health and medical research, and environmental sustainability. 13 Table of Contents We have established a separate donor advised fund to facilitate donations to various local and national charitable organizations and have provided funding to several charitable organizations located near our office sites and national organizations that support missions such as sustainable homeownership, mortgage and rental assistance, food insecurity, disaster relief, family and child advocacy, and community empowerment.
As a result, the fees we earn from such arrangements are generally less on a per-loan basis than those we earn from holding MSRs and MSLs. ​ Following is a summary of our net loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Net loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ From non-affiliates: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractually specified ​ $ 1,529,452 ​ $ 1,268,650 ​ $ 1,054,828 Other ​ ​ 186,776 ​ ​ 134,949 ​ ​ 91,894 ​ ​ ​ 1,716,228 ​ ​ 1,403,599 ​ ​ 1,146,722 Effect of MSRs and MSLs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Realization of cash flows ​ ​ (840,730) ​ ​ (662,375) ​ ​ (523,495) Other changes in fair value of MSRs and MSLs ​ ​ 407,388 ​ ​ 56,807 ​ ​ 877,671 Hedging results ​ ​ (832,483) ​ ​ (236,778) ​ ​ (631,484) ​ ​ ​ (1,265,825) ​ ​ (842,346) ​ ​ (277,308) Net loan servicing fees from non-affiliates ​ ​ 450,403 ​ ​ 561,253 ​ ​ 869,414 Loan servicing fees from PennyMac Mortgage Investment Trust ​ ​ 83,252 ​ ​ 81,347 ​ ​ 81,915 Net loan servicing fees ​ $ 533,655 ​ $ 642,600 ​ $ 951,329 Average UPB of loans serviced: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights and mortgage servicing liabilities ​ $ 396,588,047 ​ $ 338,373,762 ​ $ 297,207,950 Subservicing ​ $ 231,303,048 ​ $ 234,303,254 ​ $ 226,817,005 ​ Our Business Strategies ​ Our business strategies include: ​ Correspondent Lending ​ We expect to grow our correspondent production business as we continue to expand the loan products and services we offer.
As a result, the fees we earn from such arrangements are generally less on a per-loan basis than those we earn from holding MSRs and MSLs. ​ Following is a summary of our net loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Net loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned servicing: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractually specified ​ $ 1,776,557 ​ $ 1,529,452 ​ $ 1,268,650 Other ​ ​ 200,288 ​ ​ 186,776 ​ ​ 134,949 ​ ​ ​ 1,976,845 ​ ​ 1,716,228 ​ ​ 1,403,599 Effect of MSRs and MSLs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Realization of cash flows ​ ​ (1,161,608) ​ ​ (840,730) ​ ​ (662,375) Other changes in fair value of MSRs and MSLs ​ ​ (251,672) ​ ​ 407,388 ​ ​ 56,807 Hedging results ​ ​ 56,546 ​ ​ (832,483) ​ ​ (236,778) ​ ​ ​ (1,356,734) ​ ​ (1,265,825) ​ ​ (842,346) Net loan servicing fees from owned servicing ​ ​ 620,111 ​ ​ 450,403 ​ ​ 561,253 Subservicing: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan servicing fees from PennyMac Mortgage Investment Trust ​ ​ 84,432 ​ ​ 83,252 ​ ​ 81,347 From non-affiliates ​ ​ 1,156 ​ ​ — ​ ​ — ​ ​ ​ 85,588 ​ ​ 83,252 ​ ​ 81,347 Net loan servicing fees ​ $ 705,699 ​ $ 533,655 ​ $ 642,600 Average UPB of loans serviced: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights and mortgage servicing liabilities ​ $ 455,045,525 ​ $ 396,588,047 ​ $ 338,373,762 Subservicing ​ $ 236,486,530 ​ $ 231,303,048 ​ $ 234,303,254 10 Table of Contents Our Business Strategies ​ Our business strategies include: ​ Correspondent Lending ​ According to Inside Mortgage Finance, the correspondent channel represented approximately one-third of U.S. residential mortgage originations in 2025.
Cooper, Rithm Capital, Freedom Mortgage and United Wholesale Mortgage. ​ In our loan production segment, we compete primarily on the basis of customer service, marketing penetration, customer network, product offerings, technical knowledge, manufacturing quality, speed of execution, and rates and fees. ​ In our servicing segment, we compete primarily on the basis of experience in the residential loan servicing business, quality and efficiency of execution and servicing performance. ​ We also compete for capital with both traditional and alternative investment managers.
In our servicing segment, we compete primarily on the basis of experience in the residential loan servicing business, quality and efficiency of execution and servicing performance. ​ We also compete for capital with both traditional and alternative investment managers.
In 2024, 2023, and 2022, we also fulfilled $13.4 billion, $14.9 billion and $37.1 billion of mortgage loans subject to fulfillment fees, respectively, for PMT. 11 Table of Contents Consumer Direct Lending ​ We expect to grow our consumer direct lending business over time by leveraging our servicing portfolio through the recapture of existing customers for refinance and purchase-money loans as well as by acquiring new customers.
We expect to grow our consumer direct lending business over time by leveraging our servicing portfolio through the recapture of existing customers for refinance and purchase-money loans as well as by acquiring new customers.
We compete with a number of nationally-focused companies in each of our businesses. 12 Table of Contents In our loan production and servicing segments, we compete with large global banks and financial institutions, including the cash windows of the GSEs, as well as with other independent non-bank mortgage loan producers and servicers, such as Rocket Mortgage, Mr.
We compete with a number of nationally-focused companies in each of our businesses. ​ In our loan production and servicing segments, we compete with large global banks and financial institutions, including the cash windows of the GSEs, as well as with other independent non-bank mortgage loan producers and servicers, such as Rocket Mortgage, Rithm Capital, Freedom Mortgage and United Wholesale Mortgage. ​ In our loan production segment, we compete primarily on the basis of customer service, marketing penetration, customer network, product offerings, technical knowledge, manufacturing quality, speed of execution, and rates and fees.
PMT will retain the right to purchase 100% of non-government correspondent loans from us. This revised arrangement is discussed in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Annual Report.
This arrangement is discussed in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Annual Report.
We conduct our business in two reportable operating segments: production and servicing. ​ ● The production segment performs loan origination, acquisition and sale activities for our account as well as for PMT. ● The servicing segment performs loan servicing for both newly originated loans we are holding for sale and loans we service for others, including for PMT. ​ 6 Table of Contents Following is a summary of our segments’ results (1): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Net revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 941,702 ​ $ 644,674 ​ $ 864,320 Servicing ​ ​ 595,364 ​ ​ 714,503 ​ ​ 1,077,785 Corporate and other ​ ​ 56,665 ​ ​ 42,479 ​ ​ 43,650 ​ ​ $ 1,593,731 ​ $ 1,401,656 ​ $ 1,985,755 Income (loss) before income taxes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 311,231 ​ $ 116,078 ​ $ 130,799 Servicing ​ ​ 205,002 ​ ​ 368,392 ​ ​ 731,213 Corporate and other ​ ​ (115,207) ​ ​ (300,839) ​ ​ (196,765) ​ ​ $ 401,026 ​ $ 183,631 ​ $ 665,247 Total assets at year end: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 8,431,612 ​ $ 4,560,323 ​ $ 3,617,627 Servicing ​ ​ 17,588,018 ​ ​ 14,036,203 ​ ​ 13,056,461 Corporate and other ​ ​ 67,257 ​ ​ 248,037 ​ ​ 148,496 ​ ​ $ 26,086,887 ​ $ 18,844,563 ​ $ 16,822,584 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid principal balance ("UPB") of loans purchased and originated for our account and for PMT ​ $ 115,819,663 ​ $ 99,435,041 ​ $ 109,115,829 UPB of loans serviced for PMT and non-affiliates at end of year ​ $ 665,763,827 ​ $ 607,216,769 ​ $ 551,674,682 (1) During the year ended December 31, 2024, management reassessed and changed its segment definitions.
We conduct our business in two reportable operating segments: production and servicing. ​ ● The production segment performs loan origination, acquisition and sale activities for our account as well as for PMT. ● The servicing segment performs servicing and subservicing of loans we are holding for sale and for non-affiliate investors, execution and management of early buyout transactions, and servicing of loans sourced and managed for PMT. ​ 6 Table of Contents Following is a summary of our segments’ results: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Net revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 1,260,280 ​ $ 941,702 ​ $ 644,674 Servicing ​ ​ 737,383 ​ ​ 595,364 ​ ​ 714,503 Corporate and other ​ ​ 48,873 ​ ​ 56,665 ​ ​ 42,479 ​ ​ $ 2,046,536 ​ $ 1,593,731 ​ $ 1,401,656 Income (loss) before income taxes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 369,920 ​ $ 311,231 ​ $ 116,078 Servicing ​ ​ 324,893 ​ ​ 205,002 ​ ​ 368,392 Corporate and other ​ ​ (143,396) ​ ​ (115,207) ​ ​ (300,839) ​ ​ $ 551,417 ​ $ 401,026 ​ $ 183,631 Total assets at end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 9,756,783 ​ $ 8,431,612 ​ $ 4,560,323 Servicing ​ ​ 19,564,252 ​ ​ 17,588,018 ​ ​ 14,036,203 Corporate and other ​ ​ 67,654 ​ ​ 67,257 ​ ​ 248,037 ​ ​ $ 29,388,689 ​ $ 26,086,887 ​ $ 18,844,563 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid principal balance ("UPB") of loans purchased and originated for our account and for PMT ​ $ 152,419,382 ​ $ 115,819,663 ​ $ 99,435,041 UPB of loans serviced for PMT and non-affiliates at end of year ​ $ 733,613,822 ​ $ 665,763,827 ​ $ 607,216,769 ​ Mortgage Banking ​ Production Segment ​ Our loan production segment sources new prime credit quality residential conventional and government-insured or guaranteed mortgage loans through three channels: correspondent production, broker direct lending and consumer direct lending as described below.
The MRC monitors changes in the internal and external environment, approves compliance and risk management policies, monitors compliance with those policies and ensures any required remediation is implemented on a timely basis. The MRC has identified individuals throughout the organization to oversee specific areas of risk.
The CMS is integrated into our enterprise risk management framework and overseen by our Management Risk Committee (“MRC”). The MRC monitors changes in the internal and external environment, approves compliance and risk management policies, monitors compliance with those policies and ensures any required remediation is implemented on a timely basis.
Our correspondent loans historically have been directed to each entity based on the guarantor of the mortgage-backed securities (“MBS”) created from the loans: our production focus has historically been on loans insured or guaranteed by the FHA, VA or USDA for sale into MBS guaranteed by Ginnie Mae, whereas PMT’s production focus has been on loans that can be sold into MBS guaranteed by Fannie Mae or Freddie Mac.
Correspondent loans insured or guaranteed by the FHA, VA or USDA are directed to our account for sale into the mortgage-backed securities (“MBS”) guaranteed by Ginnie Mae and other loans, primarily comprised of loans that can be sold into MBS guaranteed by Fannie Mae or Freddie Mac, are allocated between PFSI and PMT.
Although the CFPB’s actions may improve consumer protection, such actions have also resulted in a meaningful increase in costs to consumers and financial services companies including mortgage originators and servicers. ​ Our loan production and loan servicing operations are subject to federal requirements and are regulated at the state level by state licensing authorities and administrative agencies.
These regulations may also increase mortgage production and servicing costs. ​ Our loan production and loan servicing operations are subject to federal requirements and are regulated at the state level by state licensing authorities and administrative agencies.
To the extent we refinance loans that we subservice for PMT where PMT owns the related MSRs, we are generally required to pay PMT a recapture fee.
To the extent we refinance loans that we subservice for PMT where PMT owns the related MSRs, we are generally required to pay PMT a recapture fee. Our recapture fee arrangement is detailed in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Annual Report.
We believe that we are well positioned to continue generating significant business in this channel based on our management expertise in the correspondent production business, our relationships with correspondent sellers, and our supporting systems and processes. In 2024, 2023 and 2022, we purchased $80.7 billion, $71.6 billion and $49.7 billion of mortgage loans, respectively, through our correspondent lending channel.
We expect to grow our correspondent production business as we continue to expand the loan products and services we offer. We believe that we are well positioned to continue generating significant business in this channel based on our management expertise in the correspondent production business, our relationships with correspondent sellers, and our supporting systems and processes.
Employee Retention and Development We believe in attracting, developing and retaining highly skilled talent, while providing a supportive work environment that prioritizes the safety and wellness of our employees. Talent development is a critical component of the employee experience and ensures that all employees have career growth opportunities, including establishing development networks and relationships and fostering continued growth and learning.
We had approximately 4,900 domestic employees as of the end of fiscal year 2025. ​ Employee Retention and Development We believe in attracting, developing and retaining highly skilled talent, while providing a supportive work environment that prioritizes the safety and wellness of our employees.
Our philanthropy program consists of a number of key components: an employee matching gifts program, a volunteer grants program, a charitable grants program and a corporate sponsorship program. Our five philanthropic focus areas are: community development and affordable housing, financial literacy and economic inclusion, human and social services, health and medical research, and environmental sustainability.
Our philanthropy program consists of a number of key components: an employee matching gifts program, a volunteer grants program, a charitable grants program and a corporate sponsorship program.
We generally pool the government-insured or guaranteed loans into Ginnie Mae guaranteed MBS and then sell such MBS to institutional investors. We also purchase certain conventional loans from PMT under the same agreement. Beginning July 1, 2025, we will become the initial purchaser of all loans from correspondent sellers and begin transferring agreed upon volumes of conventional loans to PMT.
Beginning July 1, 2025, we became the initial purchaser of all loans from correspondent sellers and now transfer agreed upon volumes of conventional loans to PMT. PMT retains the right to purchase 100% of non-government correspondent loans from us.
Employees receive regular business and compliance training to help further enhance their career development objectives.
Talent development is a critical component of the employee experience and ensures that all employees have career growth opportunities, including establishing development networks and relationships and fostering continued growth and learning. Employees receive regular business and compliance training to help further enhance their career development objectives.
Removed
Prior year amounts have been recast to conform those years’ presentation to current year presentation. ​ Mortgage Banking ​ Production Segment ​ Our loan production segment sources new prime credit quality residential conventional and government-insured or guaranteed mortgage loans through three channels: correspondent production, broker direct lending and consumer direct lending as described below.
Added
In 2025, 2024 and 2023, we purchased $111.3 billion, $80.7 billion and $71.6 billion of mortgage loans, respectively, through our correspondent lending channel.
Removed
In 2022, we began to acquire certain loans for our own account that can be sold into MBS guaranteed by Fannie Mae and Freddie Mac. 7 Table of Contents The mortgage loan production arrangement between us and PMT exists, in part, because PMT is not approved as an issuer of Ginnie Mae guaranteed MBS.
Added
In 2025, 2024, and 2023, we also fulfilled $12.9 billion, $13.4 billion and $14.9 billion of mortgage loans subject to fulfillment fees, respectively, for PMT. ​ Consumer Direct Lending ​ According to Inside Mortgage Finance, the consumer direct lending channel represented approximately half of U.S. residential mortgage originations in 2025.
Removed
As a result, PMT sells the government-insured or guaranteed loans that it purchases from correspondent sellers to us and we pay PMT a sourcing fee ranging from one to two basis points, based on the average number of calendar days that PMT holds the loans before our purchase.
Added
The MRC has identified individuals throughout the organization to oversee specific areas of risk. MRC membership includes senior management from all areas of the Company impacted by mortgage compliance laws and regulations.
Removed
Department of Veterans Affairs ​ ​ 806,584 ​ ​ — Total subservicing ​ ​ 231,560,165 ​ ​ 232,653,069 ​ ​ $ 665,763,827 ​ $ 607,216,769 ​ Our responsibilities and risks relating to loans we service in arrangements where we own the MSRs or MSLs differ from those where we act as subservicer for the owner of the servicing rights.
Removed
We had approximately 4,100 domestic employees as of the end of fiscal year 2024.
Removed
As of the end of fiscal year 2024, our workforce was 51.3% female and 48.7% male, and the ethnicity of our workforce was 43.8% White, 23.4% Hispanic or Latino, 13.9% Black or African American, 14.5% Asian and 4.4% other (which includes American Indian or Alaska Native, Native Hawaiian or Other Pacific Islander, Two or More Races, or Not Specified as defined in our EE0-1 Report filed with the Department of Labor).

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

161 edited+32 added−25 removed157 unchanged
Biggest changeIf our estimates prove to be inaccurate, we may be required to write down the fair values of our investments or suffer a loss that could adversely affect our business, financial condition, liquidity and results of operations. ● Our ownership of mortgage servicing rights exposes us to prepayment, delinquency, interest rate and regulatory risks. 17 Table of Contents ● A disruption in the MBS market could materially and adversely affect our business, financial condition, liquidity and results of operations. ● We may be required to indemnify the purchasers of loans that we originate, acquire or assist in the fulfillment of, or repurchase those loans, if those loans fail to meet certain criteria or characteristics or under other circumstances and we may be unable to seek indemnity or require our counterparties to repurchase loans if they breach representations and warranties they make to us. ● We depend on counterparties and vendors to provide services that are critical to our business, which subjects us to a variety of risks. ● Our failure to appropriately address various issues that may give rise to reputational risk could cause harm to our business and adversely affect our earnings. ● Cybersecurity risks, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information or the personal information of our customers, and/or damage to our business relationships, all of which could negatively impact our financial results. ● Technology disruptions or failures, including a failure in our information systems or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm and adversely impact our results of operations and financial condition. ● The development, implementation, maintenance and protection of our proprietary technologies require significant capital and legal expenditures for us to remain competitive. ● Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks, and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service. ● We operate in a highly regulated industry and the continually changing federal, state and local laws and regulations could materially and adversely affect our business, financial condition, liquidity and results of operations. ● Enforcement of existing or new rules and regulations by the CFPB and state regulators could result in enforcement actions, fines, penalties and reputational harm. ● We are highly dependent on U.S. government-sponsored entities and government agencies, and any organizational or pricing changes at such entities or their regulators could materially and adversely affect our business, liquidity, financial condition and results of operations. ● We are required to have various Agency approvals and state licenses to conduct our business and failure to maintain our licenses could materially and adversely impact our business, financial condition, liquidity, and results of operations. ● PennyMac Mortgage Investment Trust (“PMT”) is a significant source of financing for, and revenue related to, our mortgage banking business, and the termination of, or material adverse change in, the terms of this relationship, or a material adverse change to PMT or its operations, could adversely affect our business, financial condition, liquidity and results of operations. ● A significant portion of our loan servicing operations are conducted pursuant to subservicing contracts with PMT, and any termination by PMT of these contracts, or a material change in the terms thereof that is adverse to us, would adversely affect our business, financial condition, liquidity and results of operations. ● We may encounter conflicts of interest in trying to appropriately allocate our time and services between activities for our own account and for PMT, or in trying to appropriately allocate investment opportunities among ourselves and for PMT. ● Our risk management efforts may not be effective in identifying our significant risks and designing and implementing adequate internal controls to mitigate those risks. ● Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new risks, regulatory compliance requirements and costs. ● We operate in a highly competitive market and decreased margins resulting from increased competition or our inability to compete successfully could adversely affect our business, financial condition, liquidity and results of operations. ​ 18 Table of Contents Risk Factors ​ In addition to the other information set forth in this Report, you should carefully consider the following factors, which could materially adversely affect our business, financial condition, liquidity and results of operations in future periods.
Biggest changeIf our estimates prove to be inaccurate, we may be required to write down the fair values of our investments or suffer a loss that could adversely affect our business, financial condition, liquidity and results of operations. ● Our ownership of mortgage servicing rights exposes us to prepayment, delinquency, interest rate and regulatory risks. ● We may not realize all of the anticipated benefits of potential future acquisitions and sales of MSRs, which could adversely affect our business, financial condition, liquidity and results of operations. ● A disruption in the MBS market could materially and adversely affect our business, financial condition, liquidity and results of operations. ● We may be required to indemnify the purchasers of loans that we originate, acquire or assist in the fulfillment of, or repurchase those loans, if those loans fail to meet certain criteria or characteristics or under other circumstances and we may be unable to seek indemnity or require our counterparties to repurchase loans if they breach representations and warranties they make to us. ● We depend on counterparties and vendors to provide services that are critical to our business, which subjects us to a variety of risks. ● Our failure to appropriately address various issues that may give rise to reputational risk could cause harm to our business and adversely affect our earnings. 17 Table of Contents ● Cybersecurity risks, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information or the personal information of our customers, and/or damage to our business relationships, all of which could negatively impact our financial results. ● Technology disruptions or failures, including a failure in our information systems or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm and adversely impact our results of operations and financial condition. ● The development, implementation, maintenance and protection of our proprietary technologies require significant capital and legal expenditures for us to remain competitive. ● The development, proliferation and use of artificial intelligence could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business. ● Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks, and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service. ● We operate in a highly regulated industry and the continually changing federal, state and local laws and regulations could materially and adversely affect our business, financial condition, liquidity and results of operations. ● Existing and new rules and regulations by federal and state regulators could result in enforcement actions, fines, penalties and reputational harm. ● We are highly dependent on U.S. government-sponsored entities and government agencies, and any organizational or pricing changes at such entities or their regulators could materially and adversely affect our business, liquidity, financial condition and results of operations. ● We are required to have various Agency approvals and state licenses to conduct our business and failure to maintain our licenses could materially and adversely impact our business, financial condition, liquidity, and results of operations. ● PennyMac Mortgage Investment Trust (“PMT”) is a significant source of business for our mortgage banking activities, and the termination of, or material adverse change in, the terms of this relationship, or a material adverse change to PMT or its operations, could adversely affect our business, financial condition, liquidity and results of operations. ● A significant portion of our loan servicing operations are conducted pursuant to subservicing contracts with PMT, and any termination by PMT of these contracts, or a material change in the terms thereof that is adverse to us, would adversely affect our business, financial condition, liquidity and results of operations. ● We may encounter conflicts of interest in trying to appropriately allocate our time and services between activities for our own account and for PMT, or in trying to appropriately allocate investment opportunities among ourselves and for PMT and any other entities or accounts that we may manage in the future. ● Our risk management efforts may not be effective in identifying our significant risks and designing and implementing adequate internal controls to mitigate those risks. ● Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new regulatory compliance and litigation risks and require additional capital expenditures. ● We operate in a highly competitive market and decreased margins resulting from increased competition or our inability to compete successfully could adversely affect our business, financial condition, liquidity and results of operations. ​ Risk Factors ​ In addition to the other information set forth in this Report, you should carefully consider the following factors, which could materially adversely affect our business, financial condition, liquidity and results of operations in future periods.
We may also encounter analytical results that may be inaccurate or inconsistent inaccurate with other market observations as we update our valuation model. ​ Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our inputs and the results of the models.
We may also encounter analytical results that may be inaccurate or inconsistent with other market observations as we update our valuation model. ​ Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our inputs and the results of the models.
If we are required to indemnify PMT or other purchasers against losses, or repurchase loans from PMT or other purchasers, that result in losses that exceed the recorded liability, this could have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ 29 Table of Contents We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition, liquidity and results of operations. ​ In deciding whether to approve loans or to enter into other transactions across our businesses with counterparties, including borrowers, brokers and correspondent lenders, we may rely on information furnished to us by or on behalf of borrowers and such counterparties, including financial statements and other financial information.
If we are required to indemnify PMT or other purchasers against losses, or repurchase loans from PMT or other purchasers, that result in losses that exceed the recorded liability, this could have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition, liquidity and results of operations. ​ In deciding whether to approve loans or to enter into other transactions across our businesses with counterparties, including borrowers, brokers and correspondent lenders, we may rely on information furnished to us by 29 Table of Contents or on behalf of borrowers and such counterparties, including financial statements and other financial information.
These complexities could lead to a delay in preparation of financial information and the delivery of this information to our stockholders and also increase the risk of errors and restatements, as well as the cost of compliance.
These complexities could lead to a delay in the preparation of financial information and the delivery of this information to our stockholders and also increase the risk of errors and restatements, as well as the cost of compliance.
If our credit models contain programming or other errors, are ineffective or the data provided by borrowers or third parties is incorrect or stale, or if we are unable to obtain accurate data from borrowers or third parties, our loan process could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans, resulting in loan losses. ​ The geographic concentration of our servicing portfolio may be affected by weaker economic conditions or adverse events specific to certain regions which could decrease the fair value of our MSRs and adversely affect our business, financial condition, liquidity and results of operations. ​ A decline in the economy or other negative macroeconomic events in certain real estate markets may cause a decline in the fair value of residential properties.
If our credit models contain programming or other errors, are ineffective or the data provided by borrowers or third parties is incorrect or stale, or if we are unable to obtain accurate data from borrowers or third parties, our loan process could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans, resulting in loan losses. ​ Our servicing portfolio may be affected by weaker economic conditions or adverse events specific to certain geographic regions which could decrease the fair value of our MSRs and adversely affect our business, financial condition, liquidity and results of operations. ​ A decline in the economy or other negative macroeconomic events in certain real estate markets may cause a decline in the fair value of residential properties.
Adverse consequences of these risks related to artificial intelligence could undermine the decisions, predictions or analyses such technologies produce and subject us to competitive harm, legal liability, heightened regulatory scrutiny and brand or reputational harm. ​ We may face significant competition in the market and may be unable to develop and implement artificial intelligence at the same rate to keep pace with our competitors. ​ The loss of access to credit, employment, financial and other data from external sources could harm our ability to provide our products and services.
Adverse consequences of these risks related to artificial intelligence could undermine the decisions, predictions or analyses such technologies produce and subject us to competitive harm, legal liability, heightened regulatory scrutiny and brand or reputational harm. ​ We may face significant competition in the market and may be unable to develop, implement and scale artificial intelligence at the same rate to keep pace with our competitors. ​ The loss of access to credit, employment, financial and other data from external sources could harm our ability to provide our products and services.
As these technologies advance and investor and compliance requirements increase in the future, we will need to further develop these technological capabilities to remain competitive, and we will need to implement, execute and maintain them in an operating and regulatory environment that exposes us to significant risk. ​ There is no assurance that we will be able to successfully adopt new technologies as critical systems and applications become obsolete and better ones become available.
As these technologies advance and investor and compliance requirements increase in the future, we will need to further develop these technological capabilities to remain competitive, and we will need to implement, execute and maintain them in an operating and regulatory environment that exposes us to significant risk. ​ There is no assurance that we will be able to successfully adopt new technologies as critical systems and applications become obsolete or better ones become available.
Any of the foregoing could negatively impact the customer experience of our platform, and the volume and degree of automation in our mortgage loan production and servicing businesses. ​ The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulations and conflicting legal requirements. ​ We receive, transmit and store a large volume of personally identifiable information and other user data.
Any of the foregoing could negatively impact the customer experience of our platform, and the volume and degree of automation in our mortgage loan production and servicing businesses. ​ The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulations and conflicting legal requirements. ​ We receive, transmit and store a large volume of personally identifiable information and other user and consumer data.
Moreover, there are various federal and state laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information that could give rise to liabilities. Federal privacy requirements such as those under the Gramm-Leach-Bliley Act and Fair Credit Reporting Act are within the regulatory and enforcement authority of the CFPB and Federal Trade Commission.
There are various federal and state laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information that could give rise to liabilities. Federal privacy requirements such as those under the Gramm-Leach-Bliley Act and Fair Credit Reporting Act are within the regulatory and enforcement authority of the CFPB and Federal Trade Commission.
We use internal financial models that utilize our understanding of inputs used by market participants to value our MSRs to determine the price that we pay for portfolios of MSRs and to acquire loans for which we will retain MSRs. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates.
We use financial models that utilize our understanding of inputs used by market participants to value our MSRs to determine the price that we pay for portfolios of MSRs and to acquire loans for which we will retain MSRs. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates.
Failure to comply with any of these privacy laws could result in enforcement action against us, including fines and public censure that could result in serious harm to our reputation, business and have a material adverse effect on our business, financial condition and results of operations. ​ Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks, and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service. ​ Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service.
Failure to comply with any of these privacy laws, or a perceived failure to comply, could result in enforcement action against us, including fines and public censure, or litigation and could result in serious harm to our reputation or business and have a material adverse effect on our business, financial condition and results of operations. ​ Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks, and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service. ​ Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service.
A decrease in home prices may result in higher loan-to-value ratios (“LTVs”), lower recoveries in foreclosure and an increase in loss severities above those that would have been realized had property values not decreased.
A decrease in home prices may result in higher loan-to-value ratios, lower recoveries in foreclosure and an increase in loss severities above those that would have been realized had property values not decreased.
Accordingly, the termination of this relationship with PMT, or a material change in the terms thereof that is adverse to us, would likely have a material adverse effect our business, financial condition, liquidity and results of operations.
Accordingly, the termination of this relationship with PMT, or a material change in the terms thereof that is adverse to us, would likely have a material adverse effect on our business, financial condition, liquidity and results of operations.
Such actions may increase our cost of capital and limit or otherwise eliminate our access to capital, in which case our business, financial condition, liquidity and results of operations would be materially and adversely affected. ​ In the event that any of our financial arrangements is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business. ​ 23 Table of Contents We finance our loans, MSRs and other assets under secured financing agreements and utilize various other sources of borrowings, which exposes us to significant risk and may materially and adversely affect our business, financial condition, liquidity and results of operations. ​ We finance and, to the extent available, we intend to continue to leverage the loans produced through our loan production businesses with borrowings under repurchase agreements.
Such actions may increase our cost of capital and limit or otherwise eliminate our access to capital, in which case our business, financial condition, liquidity and results of operations would be materially and adversely affected. ​ In the event that any of our financial arrangements is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business. ​ We finance our loans, MSRs and other assets under secured financing agreements and utilize various other sources of borrowings, which exposes us to significant risk and may materially and adversely affect our business, financial condition, liquidity and results of operations. ​ We finance and, to the extent available, we intend to continue to leverage the loans produced through our loan production businesses with borrowings under repurchase agreements.
Therefore, while we may enter into such transactions seeking to reduce interest rate risk, unanticipated changes in interest rates may result in worse overall investment performance than if we had not engaged in any such hedging transactions.
While we may enter into such transactions seeking to reduce interest rate risk, unanticipated changes in interest rates may result in worse overall investment performance than if we had not engaged in any such hedging transactions.
Any failure to develop, implement or maintain our proprietary technological capabilities and any legal costs associated with the protection of our proprietary technologies could have a material adverse effect on our business, financial condition and results of operation. ​ The development, proliferation and use of artificial intelligence could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business. ​ We believe the development and proliferation of artificial intelligence will have a significant impact in our industry; however, the incipient nature of artificial intelligence presents risks, challenges, and unintended consequences, including potential defects in the design and development of the technologies used to automate processes, misapplication of technologies, the reliance on data, rules or assumptions that may prove inadequate, information security vulnerabilities and failure to meet customer expectations, among others.
Any failure to develop, implement or maintain our proprietary technological capabilities and any legal costs associated with the protection of our proprietary technologies could have a material adverse effect on our business, financial condition and results of operation. ​ The development, proliferation and use of artificial intelligence could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business. ​ We believe the development and proliferation of artificial intelligence will have a significant impact in our industry; however, the recent development of artificial intelligence presents risks, challenges, and unintended consequences, including potential defects in the design and development of the technologies used to automate processes, misapplication of technologies, the reliance on data, rules or assumptions that may prove inadequate, information security vulnerabilities and failure to meet customer expectations, among others.
An increase in required advances also may cause an increase in our interest expense and affect our liquidity as a result of increased borrowings under our financing agreements to fund any such increase in the advances. ​ We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable due to delinquencies, defaults and foreclosures that could adversely affect our business, financial condition, liquidity and results of operations. ​ During any period in which a borrower is not making payments, we may be required under our servicing agreements in respect of our MSRs to advance our own funds to pay property taxes and insurance premiums, legal expenses and other protective advances, and may be required to advance scheduled principal and interest payments to security holders of the MBS into which the loans are sold.
An increase in required advances also may cause an increase in our interest expense and affect our liquidity as a result of increased borrowings under our financing agreements to fund any such increase in the advances. ​ We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable due to delinquencies, defaults and foreclosures that could adversely affect our business, financial condition, liquidity and results of operations. ​ 20 Table of Contents During any period in which a borrower is not making payments, we may be required under our servicing agreements in respect of our MSRs to advance our own funds to pay property taxes and insurance premiums, legal expenses and other protective advances, and may be required to advance scheduled principal and interest payments to security holders of the MBS into which the loans are sold.
The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, which, in turn, may lead to increased costs to protect our network and systems. ​ Despite our efforts to ensure the integrity of our systems and our investment in significant physical and technological security measures, employee training, contractual precautions, policies and procedures, board oversight and business continuity plans, there can be no assurance that any such cyber intrusions will not occur or, if they do occur, that they will be adequately addressed.
The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber threat actors, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, which, in turn, may lead to increased costs to protect our network and systems. ​ Despite our efforts to ensure the integrity of our systems and our investment in significant physical and technological security measures, employee training, contractual precautions, policies and procedures, board oversight and business continuity plans, there can be no assurance that any such cyber intrusions will not occur or, if they do occur, that they will be adequately addressed.
To the extent any new minimum net worth, capital ratio and liquidity standards and requirements are overly burdensome, complying with such standards and requirements may have a material adverse effect on our business, financial condition and results of operations. ​ In order to meet these minimum financial requirements, we are required to maintain rather than spend or invest, cash and cash equivalents in amounts that may adversely affect our business, financial condition, liquidity, results of operations and ability to make distributions to our stockholders, and this could significantly impede us, as a non-bank mortgage lender, from growing our respective businesses and place us at a competitive disadvantage in relation to federally chartered banks and certain other financial institutions.
To the extent any new minimum net worth, capital ratio and liquidity standards and requirements are overly burdensome, complying with such standards and requirements may have a material adverse effect on our business, financial condition and results of operations. ​ In order to meet these minimum financial requirements, we are required to maintain rather than spend or invest, cash and cash equivalents in amounts that may adversely affect our business, results of operations and ability to make distributions to our stockholders, and this could significantly impede us, as a non-bank mortgage lender, from growing our respective businesses and place us at a competitive disadvantage in relation to federally chartered banks and certain 39 Table of Contents other financial institutions.
General Risks ​ Our risk management efforts may not be effective in identifying our significant risks and designing and implementing adequate internal controls to mitigate those risks. ​ We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, climate risk and other market-related risks, as well as operational and legal risks related to our business, assets, and liabilities.
General Risks ​ Our risk management efforts may not be effective in identifying our significant risks and designing and implementing adequate internal controls to mitigate those risks. ​ We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, climate risk, compliance risk, valuation risk and other market-related risks, as well as operational and legal risks related to our business, assets, and liabilities.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of and take other corporate actions. ​ Our bylaws include an exclusive forum provision that could limit our stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or other employees. ​ Our bylaws provide that the state or federal court located within the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of and take other corporate actions. ​ Our bylaws include an exclusive forum provision that could limit our stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or other employees. ​ Our bylaws provide that the state or federal court located within the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of 43 Table of Contents incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Inflation and future expectations of inflation could also increase our operating expenses and may affect our profitability if the additional operating costs are not recoverable through increased revenues or profit margins.
Inflation and future expectations of inflation could also increase our operating expenses and may affect our profitability if the additional operating expenses are not recoverable through increased revenues or profit margins.
Some borrowers do not have sufficient equity in their homes to permit them to refinance their existing loans, which may reduce the volume of our loan production business.
Some borrowers may not have sufficient equity in their homes to permit them to refinance their existing loans, which may reduce the volume of our loan production business.
If prepayment speed expectations increase significantly, the fair value of the MSRs could decline and we may be required to record a non-cash charge that would have a negative impact on our financial results. ​ Furthermore, a significant increase in prepayment speeds could materially reduce the cash flows we receive from MSRs, and we could ultimately receive substantially less than what we paid for such assets.
If prepayment speed expectations increase significantly, the fair value of the MSRs could decrease and we may be required to record a non-cash charge that would have a negative impact on our financial results. ​ Furthermore, a significant increase in prepayment speeds could materially reduce the cash flows we receive from MSRs, and we could ultimately receive substantially less than what we paid for such assets.
In addition, under certain Agency capital rules, loans sourced from loan aggregators such as ourselves or PMT have higher capital requirements and may incur higher Agency fees for third party originated loans aggregated and delivered to the Agencies as compared to individual loans delivered by third party mortgage lenders directly to the Agencies’ cash windows without the assistance of a loan aggregator.
In addition, under certain Agency capital rules, loans sourced from loan aggregators such as ourselves have higher capital requirements and may incur higher Agency fees for third party originated loans aggregated and delivered to the Agencies as compared to individual loans delivered by third party mortgage lenders directly to the Agencies’ cash windows without the assistance of a loan aggregator.
Although we are generally indemnified by PMT, our rights to indemnification may be challenged, and if we are required to incur all or a portion of 30 Table of Contents the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification, our business, financial condition, liquidity and results of operations could be materially and adversely affected. ​ We depend on counterparties and vendors to provide services that are critical to our business, which subjects us to a variety of risks. ​ We have a number of counterparties and vendors who provide us with financial, technology and other services that are critical to support our businesses.
Although we are generally indemnified by PMT, our rights to indemnification may be challenged, and if we are required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification, our business, financial condition, liquidity and results of operations could be materially and adversely affected. ​ We depend on counterparties and vendors to provide services that are critical to our business, which subjects us to a variety of risks. ​ We have a number of counterparties and vendors who provide us with financial, technology and other services that are critical to support our businesses.
Alternatively, if a court were to find the exclusive forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition, liquidity and results of operations. ​ 43 Table of Contents Ownership of Our Common Stock ​ The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders. ​ The market price and trading volume of our common stock has fluctuated significantly in the past and may be highly volatile in the future and could be subject to wide fluctuations.
Alternatively, if a court were to find the exclusive forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition, liquidity and results of operations. ​ Ownership of Our Common Stock ​ The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders. ​ The market price and trading volume of our common stock has fluctuated significantly in the past and may be highly volatile in the future and could be subject to wide fluctuations.
Any unfavorable corporate sustainability rating or decision may lead to reputational damage and negative sentiment among our investors and other stakeholders. ​ These factors could impair our working relationships with government agencies and investors, expose us to litigation and regulatory action, negatively affect our ability to attract and retain customers, trading counterparties and employees, significantly harm our stock price and ability to raise capital, and adversely affect our results of operations. 31 Table of Contents ​ Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions.
Any unfavorable corporate sustainability rating or decision may lead to reputational damage and negative sentiment among our investors and other stakeholders. ​ These factors could impair our working relationships with government agencies and investors, expose us to litigation and regulatory action, negatively affect our ability to attract and retain customers, trading counterparties and employees, significantly harm our stock price and ability to raise capital, and adversely affect our results of operations. ​ Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions.
Significant differences in performance could increase the chance that we do not adequately estimate the effect of these factors on our valuations which could result in misstatements of our financial results, restatements of our financial 26 Table of Contents statements, or otherwise materially and adversely affect our business, financial condition, liquidity and results of operations. ​ Our credit models are based on numerous estimates and algorithms that evaluate a multitude of factors, including behavioral data, transactional data and employment information, which may not effectively predict whether a mortgage loan defaults or realizes a profit or loss.
Significant differences in performance could increase the chance that we do not adequately estimate the effect of these factors on our valuations which could result in misstatements of our financial results, restatements of our financial statements, or otherwise materially and adversely affect our business, financial condition, liquidity and results of operations. ​ Our credit models are based on numerous estimates and algorithms that evaluate a multitude of factors, including behavioral data, transactional data and employment information, which may not effectively predict whether a mortgage loan defaults or realizes a profit or loss.
For example, we rely on third-party vendors for cloud-based systems and for certain mortgage production and servicing applications. Third party software applications, products, and services are constantly evolving, and we may not be able to maintain or modify our mortgage loan production and servicing offerings to ensure its compatibility with third party offerings following development changes.
For example, we rely on third-party vendors for cloud-based and artificial intelligence systems and for certain mortgage production and servicing applications. Third party software applications, products, and services are constantly evolving, and we may not be able to maintain or modify our mortgage loan production and servicing offerings to ensure its compatibility with third party offerings following development changes.
Various federal regulatory agencies and departments take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a 36 Table of Contents disproportionately negative effect on a protected class of individuals). ​ The failure of our correspondent sellers to comply with any applicable laws, regulations and rules may also result in these adverse consequences.
Various federal regulatory agencies and departments take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionately negative effect on a protected class of individuals). ​ The failure of our correspondent sellers to comply with any applicable laws, regulations and rules may also result in these adverse consequences.
Future reductions of the Federal Reserve’s balance sheet or its MBS portfolio may result in higher interest rate volatility and wider mortgage-backed security spreads that could negatively impact our investments. ​ Our financial performance and profitability are directly affected by changes in prevailing interest rates.
Future reductions of the Federal Reserve’s balance sheet or its MBS portfolio may result in higher interest rate volatility and wider mortgage-backed security spreads that could negatively affect our investments. ​ Our financial performance and profitability are directly affected by changes in prevailing interest rates.
We are also held accountable for the actions and inactions of our third party vendors and service providers regarding cybersecurity and other consumer-related matters. ​ Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, additional regulatory scrutiny, significant litigation exposure and harm to our reputation, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ 32 Table of Contents Technology disruptions or failures, including a failure in our information systems or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm and adversely impact our results of operations and financial condition. ​ Many of our services are dependent on the secure, efficient, and uninterrupted operation of our technology infrastructure, including our computer systems, related software applications and cloud-based systems, as well as those of certain third parties and affiliates.
We are also held accountable for the actions and inactions of our third party vendors and service providers regarding cybersecurity and other consumer-related matters. ​ Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, additional regulatory scrutiny, significant litigation exposure and harm to our reputation, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ Technology disruptions or failures, including a failure in our information systems or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm and adversely impact our results of operations and financial condition. ​ Many of our services are dependent on the secure, efficient, and uninterrupted operation of our technology infrastructure, including our computer systems, related software applications and cloud-based and artificial intelligence systems, as well as those of certain third parties and affiliates.
Although we paid, and anticipate continuing to pay, quarterly dividends to our stockholders, our board of directors has the sole discretion to determine the timing, form and amount of any future dividends to our stockholders, and such 42 Table of Contents determination will depend upon, among other factors, our historical and projected results of operations, financial condition, cash flows and liquidity, capital requirements and other expense obligations, debt covenants, contractual legal, tax, regulatory and other restrictions and such other factors as our board of directors may deem relevant from time to time.
Although we paid, and anticipate continuing to pay, quarterly dividends to our stockholders, our board of directors has the sole discretion to determine the timing, form and amount of any future dividends to our stockholders, and such determination will depend upon, among other factors, our historical and projected results of operations, financial condition, cash flows and liquidity, capital requirements and other expense obligations, debt covenants, contractual legal, tax, regulatory and other restrictions and such other factors as our board of directors may deem relevant from time to time.
Changes in consumer preferences and additional legislation and 35 Table of Contents regulatory requirements, including those associated with a transition to a low-carbon economy, could increase expenses or otherwise adversely impact our operations and business. ​ Failures at financial institutions at which we deposit funds or maintain investments could adversely affect us. ​ We deposit substantial funds in financial institutions and may, from time to time, maintain cash balances at such financial institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured amounts.
Changes in consumer preferences and additional legislation and regulatory requirements, including those associated with a transition to a low-carbon economy, could increase expenses or otherwise adversely impact our operations and business. ​ Failures at financial institutions at which we deposit funds or maintain investments could adversely affect us. ​ We deposit substantial funds in financial institutions and may, from time to time, maintain cash balances at such financial institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured amounts.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our investor relationships. ​ As our reliance on rapidly changing technology has increased, so have the risks posed to our information systems, both proprietary and those provided to us by third party service providers including cloud-based computing service providers.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our investor relationships. ​ As our reliance on rapidly changing technology has increased, so have the risks posed to our information systems, both proprietary and those provided to us by third party service providers including cloud-based and artificial intelligence service providers.
Furthermore, our efforts may not succeed, and any revenues we earn from any new or expanded business initiative may not be sufficient to offset the initial and ongoing costs of that initiative, which would result in a loss with respect to that initiative. ​ We could be harmed by misconduct or fraud that is difficult to detect. ​ We are exposed to risks relating to misconduct by our employees, contractors we use, or other third parties with whom we have relationships.
Furthermore, our efforts may not succeed, and any revenues we earn from any new or expanded business initiative may not be sufficient to offset the initial and ongoing costs of that initiative, which would result in a loss with respect to that initiative. ​ 45 Table of Contents We could be harmed by misconduct or fraud that is difficult to detect. ​ We are exposed to risks relating to misconduct by our employees, contractors we use, or other third parties with whom we have relationships.
Our ability to refinance our existing financial obligations and borrow additional funds is affected by a variety of factors beyond our control including: ​ ● limitations imposed on us under our financing agreements that contain restrictive covenants and borrowing conditions, which may limit our ability to raise additional debt; ​ ● restrictions imposed upon us by regulatory agencies that mandate certain minimum capital and liquidity requirements; ​ ● liquidity in the credit markets; ​ ● prevailing interest rates; ​ ● the strength of the lenders from which we borrow, and the regulatory environment in which they operate, including changing capital requirements; ​ ● limitations on borrowings from financing arrangements imposed by the amount of eligible collateral pledged, which may be less than the borrowing capacity of the credit facility; and ​ ● accounting changes that may impact calculations of covenants in our financing arrangements. ​ We are also dependent on a limited number of banking institutions and private equity firms to extend us credit on terms that we have determined to be commercially reasonable.
Our ability to refinance our existing financial obligations and borrow additional funds is affected by a variety of factors beyond our control including: ​ ● limitations imposed on us under our financing agreements that contain restrictive covenants and borrowing conditions, which may limit our ability to raise additional debt; ​ ● restrictions imposed upon us by regulatory agencies that mandate certain minimum capital and liquidity requirements; ​ ● liquidity in the credit markets; ​ ● prevailing interest rates; ​ ● the strength of the lenders from which we borrow, and the regulatory environment in which they operate, including changing capital requirements; ​ ● limitations on borrowings from financing arrangements imposed by the amount of eligible collateral pledged, which may be less than the borrowing capacity of the credit facility; and ​ ● accounting changes that may impact calculations of covenants in our financing arrangements. ​ We are also dependent on a limited number of banks, private equity firms and institutional investors to extend us credit on terms that we have determined to be commercially reasonable.
Accordingly, the management and incentive fees that we have earned in the past should not be considered indicative of the management or incentive fees that we may earn in the future from managing those same assets or from managing other assets for PMT. ​ Changes in regulations applicable to our investment manager could materially and adversely affect our business, financial condition, liquidity and results of operations. ​ The legislative and regulatory environment in which we operate is constantly evolving.
Accordingly, the management and incentive fees that we have earned in the past should not be considered indicative of the management or incentive fees that we may earn in the future from managing those same assets or from managing other assets for PMT. ​ Changes in regulations applicable to our investment manager could materially and adversely affect our business, financial condition, liquidity and results of operations. ​ 41 Table of Contents The legislative and regulatory environment in which we operate is constantly evolving.
Fannie Mae and Ginnie Mae MSRs are pledged to special purpose entities, each of which issues variable funding notes, term loans and term notes that are secured by such Fannie Mae or Ginnie Mae assets, as applicable, and repaid through the servicing cash flows .
Fannie Mae and Ginnie Mae MSRs may be pledged to special purpose entities, each of which issues variable funding notes, term loans and term notes that are secured by such Fannie Mae or Ginnie Mae assets, as applicable, and repaid through the servicing cash flows .
In addition, the servicer is only reimbursed for any interest accrued and unpaid from a date 60 days after the borrower’s first uncorrected failure to perform, and the interest is reimbursed at the HUD debenture interest rate that may be lower than the actual loan rate. 21 Table of Contents ● VA and USDA Guarantees - VA and USDA loans are only partially guaranteed by the government and if such loan defaults or goes into foreclosure, the VA or USDA guarantees may not fully cover all principal, interest and other fees and advances we may have incurred on the outstanding VA or USDA loan, and we may suffer a loss.
In addition, the servicer is only reimbursed for any interest accrued and unpaid from a date 60 days after the borrower’s first uncorrected failure to perform, and the interest is reimbursed at the HUD debenture interest rate that may be lower than the actual loan rate. ● VA and USDA Guarantees - VA and USDA loans are only partially guaranteed by the government and if such loan defaults or goes into foreclosure, the VA or USDA guarantees may not fully cover all principal, interest and other fees and advances we may have incurred on the outstanding VA or USDA loan, and we may suffer a loss.
Changes in prevailing interest rates, rising inflation rates, U.S. monetary policies or other macroeconomic conditions that affect interest rates may have a detrimental effect on our business and earnings. ● Our revenues are highly dependent on macroeconomic factors and real estate, mortgage and financial market conditions that could materially and adversely affect our business, financial condition, liquidity and results of operations. ● We may not be able to effectively manage significant increases or decreases in our loan production volume, which could negatively affect our business, financial condition, liquidity and results of operations. ● Increases in delinquencies and defaults may adversely affect our business, financial condition, liquidity and results of operations. ● We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable due to delinquencies, defaults and foreclosures that could adversely affect our business, financial condition, liquidity and results of operations. ● We have a substantial amount of indebtedness, which may limit our financial and operating activities, expose us to substantial increases in costs due to interest rate fluctuations, expose us to the risk of default under our debt obligations and may adversely affect our ability to incur additional debt to fund future needs. ● We rely on external financial arrangements to fund mortgage loans and operate our business and our inability to refinance or enter new financial arrangements could be detrimental to our business. ● We finance our loans, MSRs and other assets under secured financing agreements and utilize various other sources of borrowings, which exposes us to significant risk and may materially and adversely affect our business, financial condition, liquidity and results of operations. ● Our financing agreements contain financial and restrictive covenants that could adversely affect our business, financial condition, liquidity and results of operations. ● Hedging against interest rate exposure may materially and adversely affect our business, financial condition, liquidity, results of operations and cash flows. ● We use estimates in determining the fair value of our investments and for credit decisions.
Changes in prevailing interest rates, rising inflation rates, U.S. monetary policies or other macroeconomic conditions that affect interest rates may have a detrimental effect on our business and earnings. ● Our business is highly dependent on macroeconomic, real estate, mortgage and financial market conditions that could materially and adversely affect our business, financial condition and results of operations. ● Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults and foreclosures. ● Increases in delinquencies and defaults may adversely affect our business, financial condition, liquidity and results of operations. ● We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable due to delinquencies, defaults and foreclosures that could adversely affect our business, financial condition, liquidity and results of operations. ● We may not be able to effectively manage significant increases or decreases in our loan production volume, which could negatively affect our business, financial condition, liquidity and results of operations. ● We have a substantial amount of indebtedness, which may limit our financial and operating activities, expose us to substantial increases in costs due to interest rate fluctuations, expose us to the risk of default under our debt obligations and may adversely affect our ability to incur additional debt to fund future needs. ● We rely on external financial arrangements to fund mortgage loans and operate our business and our inability to refinance or enter new financial arrangements could be detrimental to our business. ● We finance our loans, MSRs and other assets under secured financing agreements and utilize various other sources of borrowings, which exposes us to significant risk and may materially and adversely affect our business, financial condition, liquidity and results of operations. ● Our financing agreements contain financial and restrictive covenants that could adversely affect our business, financial condition, liquidity and results of operations. ● Hedging against interest rate exposure may materially and adversely affect our business, financial condition, liquidity, results of operations and cash flows. ● We use estimates in determining the fair value of our investments and for credit decisions.
Our inability to raise such capital or obtain financing on favorable terms could materially and adversely impact our business, financial condition, liquidity and results of operations. ​ 24 Table of Contents Our financing agreements contain financial and restrictive covenants that could adversely affect our business, financial condition, liquidity and results of operations. ​ Our various financing agreements require us and/or our subsidiaries to comply with various restrictive covenants and conditions precedent to funding, including those relating to tangible net worth, profitability and our ratio of total liabilities to tangible net worth.
Our inability to raise such capital or obtain financing on favorable terms could materially and adversely impact our business, financial condition, liquidity and results of operations. ​ Our financing agreements contain financial and restrictive covenants that could adversely affect our business, financial condition, liquidity and results of operations. ​ Our various financing agreements require us and/or our subsidiaries to comply with various restrictive covenants and conditions precedent to funding, including those relating to tangible net worth, profitability and our ratio of total liabilities to tangible net worth.
If we are unable to attract and retain qualified personnel, we may not be able to take advantage of future business opportunities and this could materially affect our business, financial condition and results of operations. ​ 46 Table of Contents The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services, including cloud computing and artificial intelligence.
If we are unable to attract and retain qualified personnel, we may not be able to take advantage of future business opportunities and this could materially affect our business, financial condition and results of operations. ​ The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services, including cloud computing and artificial intelligence.
Similarly, market rumors and actual or perceived association with counterparties whose own reputations are under question could harm our business. ​ Certain of our officers also serve as officers of PMT, a real estate investment trust we manage that invests in residential mortgage-related assets and is separately listed on the New York Stock Exchange.
Similarly, market rumors and actual or perceived association with counterparties whose own reputations are under question could harm our business. ​ Certain of our senior officers also serve as senior officers of PMT, a real estate investment trust that invests in residential mortgage-related assets and is separately listed on the New York Stock Exchange.
Upon the occurrence of a catastrophic event, we may be unable to continue our operations and may endure significant business interruptions, reputational harm, delays in servicing our customers and working with our partners, interruptions in the availability of our technology and systems, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.
Upon the occurrence of a catastrophic event, we may be unable to continue our operations and may endure significant business interruptions, reputational harm, delays in servicing our customers and working with our partners, interruptions in the availability of our technology and systems, breaches of data security, and loss of critical data, all of which could have an adverse effect 35 Table of Contents on our future operating results.
Compliance with any new laws or regulations could add to our compliance burden and costs and adversely affect the manner in which we conduct business, as well as our financial condition, liquidity and results of operations. ​ 41 Table of Contents The failure of our investment manager to comply with financial regulations could materially and adversely affect our business, financial condition, liquidity and results of operations. ​ Our investment manager is required to comply with financial regulations designed to ensure the integrity of the financial markets and to protect investors in any entity that we advise.
Compliance with any new laws or regulations could add to our compliance burden and costs and adversely affect the manner in which we conduct business, as well as our financial condition, liquidity and results of operations. ​ The failure of our investment manager to comply with financial regulations could materially and adversely affect our business, financial condition, liquidity and results of operations. ​ Our investment manager is required to comply with financial regulations designed to ensure the integrity of the financial markets and to protect investors in any entity that we advise.
The investment performance that is achieved for the assets that we manage varies over time, and the nature and mix of assets we manage has changed significantly over the past several years. As a result, the change and variance in investment performance can be significant.
The investment performance that is achieved for the assets that we manage varies over time, and the nature and mix of assets we manage have changed significantly over the past several years. As a result, the change and variance in investment performance can be significant.
Accordingly, the exercise by any of Fannie Mae, Freddie Mac or Ginnie Mae of its rights under the applicable acknowledgment agreement could result in the extinguishment of our and the secured parties’ rights in the related collateral and result in significant losses to us. ​ We may in the future utilize other sources of borrowings, including bank credit facilities and structured financing arrangements, among others.
Accordingly, the exercise by any of Fannie Mae, Freddie Mac or Ginnie Mae of its rights under the applicable acknowledgment agreement could result in the extinguishment of our and the secured parties’ rights in the related collateral and result in significant losses to us. ​ We may in the future utilize other sources of borrowings, including bank or private credit financing facilities and other structured financing arrangements.
We may also be subject to additional curtailments to servicing and advance reimbursements if we have not satisfied VA, USDA or FHA timing, service and other regulatory or investor requirements during the foreclosure and conveyance process.
We may also be subject to additional curtailments to servicing and advance reimbursements if we have not satisfied VA, USDA or FHA timing, service and other regulatory or investor requirements during the foreclosure and conveyance processes.
Subsidiaries that are not guarantors will not have any obligation to pay amounts due on the unsecured senior notes or to make funds available 22 Table of Contents for that purpose. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from them.
Subsidiaries that are not guarantors will not have any obligation to pay amounts due on the unsecured senior notes or to make funds available for that purpose. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from them.
Some of our more significant challenges and risks include, but are not limited to, the following, which are described in greater detail below: ● Our business is significantly impacted by changes in interest rates.
Some of our more significant challenges and risks include, but are not limited to, the following, which are described in greater detail below: ​ ● Our business is significantly affected by changes in interest rates.
Any of the foregoing could materially and adversely affect our business, financial condition, liquidity and results of operations. ​ We may not be able to effectively manage significant increases or decreases in our loan production volume, which could negatively affect our business, financial condition, liquidity and results of operations. ​ If we do not effectively manage loan production volumes and are unable to consistently maintain quality of execution, our reputation and existing relationships with mortgage lenders and brokers could be damaged, we may not be able to maintain PMT’s existing relationships or develop new relationships with mortgage lenders and brokers, our new mortgage products may not gain widespread acceptance and the quality of our correspondent production, consumer direct lending and broker lending operations could suffer, all of which could negatively affect our brand and operating results. ​ Our loan production business is subject to market factors that could adversely impact our loan production volumes.
We may not be able to effectively manage significant increases or decreases in our loan production volume, which could negatively affect our business, financial condition, liquidity and results of operations. ​ If we do not effectively manage loan production volumes and are unable to consistently maintain quality of execution, our reputation and existing relationships with mortgage lenders, brokers and consumers could be damaged, we may not be able to develop new relationships with mortgage lenders and brokers, our new mortgage products may not gain widespread acceptance and the quality of our correspondent production, consumer direct lending and broker lending operations could suffer, all of which could negatively affect our brand and operating results. ​ Our loan production business is subject to market factors that could adversely impact our loan production volumes.
Even if an investigation or proceeding did not result in a fine or sanction or the fine or sanction imposed against us or our employees by a regulator were small in monetary amount, the adverse publicity relating to an investigation, proceeding or imposition of these fines or sanctions could harm our reputation. ​ We may encounter conflicts of interest in trying to appropriately allocate our time and services between activities for our own account and for PMT, or in trying to appropriately allocate investment opportunities among ourselves and for PMT. ​ Pursuant to our management agreement with PMT, we are obligated to provide PMT with the services of our senior management team, and the members of that team are required to devote such time as is necessary and appropriate, commensurate with the level of activity of PMT.
Even if an investigation or proceeding did not result in a fine or sanction or the fine or sanction imposed against us or our employees by a regulator were small in monetary amount, the adverse publicity relating to an investigation, proceeding or imposition of these fines or sanctions could harm our reputation. ​ We may encounter conflicts of interest in trying to appropriately allocate our time and services between activities for our own account and for PMT, or in trying to appropriately allocate investment opportunities among ourselves and for PMT and any other entities or accounts that we may manage in the future. ​ Pursuant to our management agreement with PMT, we are obligated to provide PMT with the services of our senior management team, and the members of that team are required to devote such time as is necessary and appropriate, commensurate with the level of activity of PMT.
A destabilization of the real estate market, mortgage market and financial markets or deterioration in these markets also could reduce our loan production volume, reduce the profitability of servicing mortgages or adversely affect our ability to sell mortgage loans that we originate or acquire, either at a profit or at all.
A 19 Table of Contents destabilization of the real estate market, mortgage market and financial markets or deterioration in these markets also could reduce our loan production volume, reduce the profitability of servicing mortgages or adversely affect our ability to sell mortgage loans that we originate or acquire, either at a profit or at all.
Catastrophic events may also be uninsurable or not economically insurable and might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. ​ There is an increasing global concern over the risks of climate change and related environmental sustainability matters.
Catastrophic events may also be uninsurable or not economically insurable and might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. ​ There continues to be global concern over the risks of climate change and related environmental sustainability matters.
To the extent that the new government administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
To the extent that the federal administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
As a result, the revenue that we earn with respect to these loans will be limited to the fulfillment fees that we earn in connection with the production of these loans, which may be less than the revenues that we might otherwise be able to realize by acquiring these loans ourselves and selling them in the secondary loan market.
As a result, the revenue that we earn with respect to these loans will generally be limited to the fulfillment fees that we earn in connection with the production of these loans, which may be less than the revenues that we might otherwise be able to realize by selling them in the secondary loan market ourselves.
Any talent acquisition and retention challenges could reduce our operating efficiency, increase our costs of operations and harm our overall financial condition. We could face these additional challenges if competition for qualified personnel intensifies or the pool of qualified candidates becomes more limited.
Any talent acquisition and retention challenges could reduce our operating efficiency, increase our costs of operations and harm our 46 Table of Contents overall financial condition. We could face these additional challenges if competition for qualified personnel intensifies or the pool of qualified candidates becomes more limited.
Changes in accounting interpretations or assumptions could impact our financial statements. ​ Accounting rules for mortgage loan sales and securitizations, valuations of financial instruments and MSRs, investment consolidations, income taxes and other aspects of our operations are highly complex and involve significant judgment and assumptions.
Changes in accounting interpretations or assumptions could impact our financial statements. ​ Accounting rules for mortgage loan sales, securitizations, variable interest entities, valuations of financial instruments and MSRs, investment consolidations, income taxes and other aspects of our operations are highly complex and involve significant judgment and assumptions.
In addition, the HC Partners’ stockholder agreement requires that we obtain their consent with respect to amendments to our certificate of incorporation or bylaws. As a result, HC Partners may be able to significantly influence our management and affairs.
In addition, the HC Partners’ stockholder agreement requires that we obtain their consent with respect to amendments to our certificate of incorporation or bylaws. As a result, HC Partners may be able to significantly influence 42 Table of Contents our management and affairs.
If we are unable 34 Table of Contents to access and use data collected from or on behalf of applicants and borrowers, or other third party data, or our access to such data is limited, our ability to provide our services and enable our customers to verify applicant data would be compromised.
If we are unable to access and use data collected from or on behalf of applicants and borrowers, or other third party data, or our access to such data is limited, our ability to provide our services and enable our customers to verify applicant data would be compromised.
Any common stock issued in connection with our equity incentive plans or future acquisitions would dilute the percentage ownership held by investors who purchase our common stock. ​ Future offerings of debt or equity securities by us may adversely affect the market price of our common stock.
Any common stock issued in connection with our equity incentive plans or future acquisitions would dilute the percentage ownership held by investors who purchase our common stock. ​ 44 Table of Contents Future offerings of debt or equity securities by us may adversely affect the market price of our common stock.
If a counterparty lender determines that the fair value of the collateral has decreased, it may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing.
If a counterparty lender determines that the fair value of the collateral has decreased, it may initiate a 23 Table of Contents margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing.
Our mortgage loan production businesses are dependent upon our ability to effectively interface with our borrowers, mortgage lenders and other third parties and to efficiently process loan applications and closings.
Our mortgage loan production businesses are dependent upon our ability to quickly interface with our borrowers, mortgage lenders and other third parties and to efficiently process loan applications and closings.
An increase in prevailing interest rates could: ​ ● adversely affect our loan production volume, as refinancing an existing loan would be less attractive and qualifying for a loan may be more difficult; ​ ● adversely affect our Ginnie Mae early buyout (“EBO”) loans because modifications would become less economically feasible; and ● increase the cost of servicing our outstanding debt, including debt related to servicing assets and loan production. ​ A decrease in prevailing interest rates could: ​ ● cause an increase in the expected volume of loan refinancing, which would require us to record decreases in fair value on our MSRs; and ​ ● reduce our earnings from our custodial deposit accounts. ​ Furthermore, borrowings under our warehouse lines of credit, and MSR and servicing advance facilities are generally at variable rates of interest, which exposes us to interest rate risk.
An increase in prevailing interest rates could: ​ ● adversely affect our loan production volume, as refinancing an existing loan would be less attractive and qualifying for a loan may be more difficult; ​ ● adversely affect our Ginnie Mae early buyout (“EBO”) loans because modifications would become less economically feasible; and ​ ● increase the cost of servicing our outstanding debt, including debt related to servicing assets and loan production. ​ A decrease in prevailing interest rates could: ​ ● cause an increase in the volume of loan refinancing, which would require us to record decreases in fair value on our MSRs; and ​ ● reduce our earnings from our custodial deposit accounts. ​ Furthermore, borrowings under our warehouse lines of credit and MSR and servicing advance facilities expose us to interest rate risk.
Factors such as inflation, deflation, unemployment, personal and business income taxes, healthcare, energy costs, government shutdowns, pandemics, wars and armed conflicts, climate change and the availability and cost of credit may contribute to increased volatility and unclear expectations for the economy in general and the real estate, mortgage market and financial markets in particular going forward.
Factors such as inflation, deflation, unemployment, personal and business income taxes, energy costs, government shutdowns, pandemics, wars and armed conflicts, climate change and the availability and cost of credit may contribute to increased volatility and unclear expectations for the economy in general and the real estate market, mortgage market and financial markets.
Additionally, reforming federal agencies and regulations could fragment federal regulatory oversight among local, state, and federal regulators resulting in additional compliance costs and heightened regulatory uncertainty for our industry. ​ While it is not possible to predict when and whether significant policy or regulatory changes will occur, any such changes on the federal, state or local level could significantly impact, among other things, our operating expenses, the availability of mortgage financing, interest rates, consumer spending, the economy and the geopolitical landscape.
Additionally, reforming federal agencies (such as the CFPB) and federal housing regulations could fragment regulatory oversight among local, state, and federal regulators resulting in additional compliance costs and heightened regulatory uncertainty for our industry. 37 Table of Contents ​ While it is not possible to predict when and whether significant policy or regulatory changes will occur, any such changes on the federal, state or local level could significantly impact, among other things, our operating expenses, the availability of mortgage financing, interest rates, consumer spending, the economy and the geopolitical landscape.
Expansion of our business activities may also result in our being exposed to risks to which we have not previously been exposed or may increase our exposure to certain types of risks, and we may not effectively identify, manage, monitor, and mitigate these risks as our business activities change or increase. ​ Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new risks, regulatory compliance requirements and costs. ​ Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new risks, regulatory compliance requirements and costs.
Expansion of our business activities may also result in our being exposed to risks to which we have not previously been exposed or may increase our exposure to certain types of risks, and we may not effectively identify, manage, monitor, and mitigate these risks as our business activities change or increase. ​ Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new regulatory compliance and litigation risks and require additional capital expenditures. ​ Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new risks, regulatory compliance requirements and costs.
We may be forced to accept lower margins in our respective businesses to continue to compete and keep our loan production volumes consistent with past or projected levels or be forced to reduce our levels of production activity.
We may be forced to accept lower margins in our respective businesses to continue to compete and keep our loan production 21 Table of Contents volumes consistent with past or projected levels or be forced to reduce our levels of production activity.
To the extent any new minimum net worth, capital ratio and liquidity standards and requirements are overly burdensome, complying with such standards and requirements may have a material adverse effect on our business, financial condition and results of operations. ​ Enforcement of existing or new rules and regulations by the CFPB and state regulators could result in enforcement actions, fines, penalties and reputational harm. ​ The CFPB and state regulators have authority over certain aspects of our business as a result of our residential mortgage banking activities, including, without limitation, the authority to conduct investigations, bring enforcement actions, impose monetary penalties, require remediation of practices, pursue administrative proceedings or litigation, and obtain cease and desist orders for violations of applicable federal consumer financial laws. 37 Table of Contents ​ The publication and adoption of new and amended laws, regulations and informal guidance by the CFPB could have a substantial impact on our business operations.
To the extent any such state regulator imposes minimum net worth, capital ratio, liquidity standards or other requirements that are overly burdensome, such actions may have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ Existing and new rules and regulations by federal and state regulators could result in enforcement actions, fines, penalties and reputational harm. ​ Federal and state regulators have authority over certain aspects of our business as a result of our residential mortgage banking activities, including, without limitation, the authority to conduct investigations, bring enforcement actions, impose monetary penalties, require remediation of practices, pursue administrative proceedings or litigation, and obtain cease and desist orders for violations of applicable federal consumer financial laws. ​ The publication and adoption of new and amended laws, regulations and informal guidance could have a substantial impact on our business operations.
Any failure by us to develop, implement, integrate, execute or maintain our technological capabilities and any litigation costs associated with protection of our technologies could have a material adverse effect on our business, financial condition and results of operations. ​ The development, implementation, maintenance and protection of our proprietary technologies require significant capital and legal expenditures for us to remain competitive. ​ The development, implementation, maintenance and protection of our proprietary technologies requires significant capital and legal expenditures and we must continuously invest in additional technological capabilities to remain competitive.
Any failure by us to develop, implement, integrate, execute or maintain our technological capabilities and any litigation costs associated with protection of our technologies or compliance with third party contractual rights could have a material adverse effect on our business, financial condition and results of operations. ​ The development, implementation, maintenance and protection of our proprietary technologies require significant capital and legal expenditures for us to remain competitive. ​ The development, implementation, maintenance and protection of our proprietary technologies require significant capital and legal expenditures and we must continuously invest in additional technological capabilities to remain competitive.
If our current counterparties and vendors were to stop providing services to us on acceptable terms or if we had a disruption in service, we may be unable to procure alternative services from other counterparties or vendors in a timely and efficient manner and on similarly acceptable terms, or at all.
If our current counterparties and vendors were to stop providing services to us on acceptable terms or if we had a disruption in service, we may be unable to procure alternative services from other 30 Table of Contents counterparties or vendors in a timely and efficient manner and on similarly acceptable terms, or at all.
If we were to have our subservicing terminated by PMT, or if there was a change in the terms under which we perform subservicing for PMT that was material and adverse to us, this would have a material adverse effect on our business, financial condition, liquidity and results of operations. 40 Table of Contents ​ PMT has an exclusive right to acquire conventional conforming loans that are produced through our correspondent production activities, which may limit the revenues that we could otherwise earn in respect of those loans. ​ Our mortgage banking services agreement with PMT requires PLS to provide fulfillment services for correspondent production activities exclusively to PMT as long as PMT has the legal and financial capacity to purchase correspondent loans.
If we were to have our subservicing terminated by PMT, or if there was a change in the terms under which we perform subservicing for PMT that was material and adverse to us, this would have a material adverse effect on our business, financial condition, liquidity and results of operations. ​ PMT has an exclusive right to acquire conventional conforming loans that are produced through our correspondent production activities, which may limit the revenues that we could otherwise earn in respect of those loans. ​ Our mortgage banking services agreement with PMT requires PLS to provide fulfillment services for correspondent production activities exclusively to PMT.
Artificial intelligence-related issues, including potential government regulation of artificial intelligence, deficiencies or failures could give rise to legal and regulatory actions, damage our reputation or otherwise materially impact our business, financial condition, and liquidity. ​ Laws and regulations related to artificial intelligence are evolving, and there is uncertainty as to potential adoption of new laws and regulations that may restrict or impose burdensome and costly requirements on our ability to use artificial intelligence.
Artificial intelligence-related issues, including potential government regulation of artificial intelligence, deficiencies or failures could give rise to legal and regulatory actions, damage our reputation or otherwise materially impact our business, financial condition, and liquidity. 34 Table of Contents ​ Laws and regulations related to artificial intelligence are evolving, and there is uncertainty as to potential adoption of new laws and regulations that may restrict or impose burdensome and costly requirements on our ability to use and scale the deployment of artificial intelligence.
For example, the repayment of our indebtedness, including the $3.2 billion of unsecured senior notes, will depend in part on our subsidiaries’ generation of cash flows and ability to make such cash available to us , by dividend, debt repayment or otherwise.
For example, the repayment of our indebtedness, including the $4.9 billion of unsecured senior notes, will depend in part on our subsidiaries’ generation of cash flows and ability to make such cash available to us , by dividend, debt repayment or otherwise.
For example, in fiscal years 2022, 2023 and 2024, we did not earn any performance incentive fees .
For example, in fiscal years 2023, 2024 and 2025, we did not earn any performance incentive fees .
Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of 44 Table of Contents equity securities issuable upon conversion.
Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion.
These state rules and regulations generally provide for, but are not limited to: originator, servicer and debt collector licensing requirements, requirements as to the form and content of loan agreements and other documentation, employee licensing and background check requirements, fee requirements, interest rate limits, and disclosure and record-keeping requirements. ​ Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting fair lending, fair housing and other claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.
These state rules and regulations generally provide for, but are not limited to: originator, servicer and debt collector licensing requirements, requirements as to the form and content of loan agreements and other documentation, employee licensing and background check requirements, fee requirements, interest rate limits, and disclosure and record-keeping requirements. ​ Regulatory agencies and consumer advocacy groups have brought fair lending, fair housing and other related claims that the practices of lenders and loan servicers can result in a disparate impact on protected classes.
Unlike some of our competitors who fund mortgage loans through bank deposits, we generally fund our mortgage loans through borrowings under warehouse facilities and other financing arrangements from banking institutions and private equity firms and with funds from our operations. Our borrowings are generally repaid with the proceeds we receive from mortgage loan sales.
Unlike some of our competitors who fund mortgage loans through bank deposits, we generally fund our mortgage loans through borrowings under warehouse facilities and other financing arrangements from banks, private equity firms and other institutional investors and with funds from our operations. Our borrowings are generally repaid with the proceeds we receive from mortgage loan sales.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe CISO served in a variety of cybersecurity operations, cybersecurity architecture, and critical infrastructure cybersecurity enhancement programs in the finance industry, the utility industry and in government and holds a Bachelor of Science in Management Information Systems and Decision Sciences. ​ 47 Table of Contents The Cybersecurity Program, which is integrated into our enterprise risk management framework, assesses, identifies and protects our enterprise information systems, data and business operations from various security threats and contains the following elements: ​ ● Information Security Risk Assessment - Conducting internal and external risk and control assessment, quality control and assurance testing. ​ ● I dentity and Access Management - Managing enterprise identity and access control systems. ​ ● Security Architecture - Managing security architecture, including secure code deployment standards, architecture security reviews, and cybersecurity advisory support. ​ ● Security Engineering - Designing, implementing and operating security technologies, including but not limited to malware protections, security event and incident management, data loss prevention, and phishing defenses. ​ ● Security Operations - Ensuring continuous operational coverage of security events and alerts, maintaining and executing processes for triage, containment, investigation and escalation/communication and threat intelligence. ​ ● Attack Surface Management - Managing vulnerability and patch management, network penetration testing, application security testing and exercises, including cybersecurity training, cyber-attack simulations and tabletop exercises with senior management to detect control gaps. ​ ● Third-Party Assessments - Coordinating, reviewing and analyzing third-party providers’ assessments of the Cybersecurity Program.
Biggest changeThe CISO served in a variety of cybersecurity operations, cybersecurity architecture, and critical infrastructure cybersecurity enhancement programs in the finance industry, the utility industry and in government and holds a Bachelor of Science in Management Information Systems and Decision Sciences. ​ The Cybersecurity Program, which is integrated into our enterprise risk management framework, assesses, identifies and protects our enterprise information systems, data and business operations from various security threats and contains the following elements: ​ ● Information Security Risk Assessment - Conducting internal and external risk and control assessment, quality control and assurance testing. ​ ● I dentity and Access Management - Managing enterprise identity and access control systems. ​ ● Security Architecture - Managing security architecture, including secure code deployment standards, architecture security reviews, and cybersecurity advisory support. ​ ● Security Engineering - Designing, implementing and operating security technologies, including but not limited to malware protections, security event and incident management, data loss prevention, and phishing defenses. ​ ● Security Operations - Ensuring continuous operational coverage of security events and alerts, maintaining and executing processes for triage, containment, investigation and escalation/communication and threat intelligence. ​ ● Attack Surface Management - Managing vulnerability and patch management, network penetration testing, application security testing and exercises, including cybersecurity training, cyber-attack simulations and tabletop exercises with senior management to detect control gaps. ​ ● Third-Party Assessments - Coordinating, reviewing and analyzing third-party providers’ assessments of the Cybersecurity Program.
The Cybersecurity Program is informed by the National Institute of Standards and Technology’s (“NIST”) cybersecurity framework standard and is integrated into our overall enterprise risk management framework, along with our compliance requirements under federal and state cybersecurity and related regulations. ​ We are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected, or are reasonably likely to materially affect, us, including our business strategy, results of operations or financial condition as of the end of fiscal year 2024.
The Cybersecurity Program is informed by the National Institute of Standards and Technology’s (“NIST”) cybersecurity framework standard and is integrated into our overall enterprise risk management framework, along with our compliance requirements under federal and state cybersecurity and related regulations. ​ We are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected, or are reasonably likely to materially affect, us, including our business strategy, results of operations or financial condition as of the end of fiscal year 2025.
The CISO and the internal incident team will also elevate any material cybersecurity incidents or unauthorized occurrences that jeopardize the confidentiality, integrity or availability of enterprise information to senior management and the board of directors. ​ Enterprise Risk Management Framework and Governance ​ The Cybersecurity Program is integrated with our enterprise risk management framework and is primarily managed by the CIO, the CISO, and other information security personnel and consultants, and is overseen by risk management, internal audit, senior management and the board of directors to ensure the confidentiality, integrity and the availability of the Company’s enterprise information systems, data and business operations.
The CISO and the internal incident team will also elevate any material cybersecurity incidents or unauthorized occurrences that jeopardize the confidentiality, integrity or availability of enterprise information to senior management and the board of directors. ​ 48 Table of Contents Enterprise Risk Management Framework and Governance ​ The Cybersecurity Program is integrated with our enterprise risk management framework and is primarily managed by the CIO, the CISO, and other information security personnel and consultants, and is overseen by risk management, internal audit, senior management and the board of directors to ensure the confidentiality, integrity and the availability of the Company’s enterprise information systems, data and business operations.
The Cybersecurity Program utilizes specialized third-party cybersecurity service providers to periodically perform penetration testing across certain internet-facing and business critical applications as well as external and internal network penetration tests. ​ Our Enterprise Risk Management unit separately provides independent oversight and monitoring of the 48 Table of Contents Cybersecurity Program through periodic quality control testing and regulatory compliance verification of the Cybersecurity Program’s controls.
The Cybersecurity Program utilizes specialized third-party cybersecurity service providers to periodically perform penetration testing across certain internet-facing and business critical applications as well as external and internal network penetration tests. ​ Our Enterprise Risk Management unit separately provides independent oversight and monitoring of the Cybersecurity Program through periodic quality control testing and regulatory compliance verification of the Cybersecurity Program’s controls.
Our Risk Factors include further detail about our material cybersecurity risks. ​ Our Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”) each have over 25 years of information system experience and are primarily responsible for implementing the Cybersecurity Program and managing our information security personnel and consultants.
Our Risk Factors include further detail about our material cybersecurity risks. ​ 47 Table of Contents Our Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”) each have over 25 years of information system experience and are primarily responsible for implementing the Cybersecurity Program and managing our information security personnel and consultants.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ​ As of December 31, 2024, we have approximately 15 leased facilities in various locations throughout the United States. Our principal executive offices are located at 3043 & 3059 Townsgate Road, Westlake Village, California 91361 and total approximately 66,000 of leased square feet.
Biggest changeItem 2. Properties ​ As of December 31, 2025, we have approximately 15 leased facilities in various locations throughout the United States. Our principal executive offices are located in Westlake Village, California and total approximately 66,000 of leased square feet.
We periodically review our space requirements and we look to expand into new facilities if necessary or consolidate and exit facilities we no longer need, as and when appropriate. ​ The financial commitments of our leases are disclosed in Note 13— Leases to our consolidated financial statements included in Item 8 of this Report. ​
We periodically review our space requirements and we look to expand into new facilities if necessary or consolidate and exit facilities we no longer need, as and when appropriate. ​ The financial commitments of our leases are disclosed in Note 13— Leases to our consolidated financial statements included in Item 8 of this Report. ​ 49 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 19 — Commitments and Contingencies , to the financial statements contained in this Report for a discussion of legal proceedings that are incorporated by reference into this Item 3. ​ 49 Table of Contents
Biggest changeSee Note 19 — Commitments and Contingencies , to the financial statements contained in this Report for a discussion of legal proceedings that are incorporated by reference into this Item 3. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur ability to pay dividends may be adversely affected for the reasons described in Item 1A of this Report in the section entitled Risk Factors . ​ Unregistered Sales of Equity Securities and Use of Proceeds ​ There were no sales of unregistered equity securities during the year ended December 31, 2024. ​ Stock Repurchase Program ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares purchased ​ ​ Average price paid per share ​ Total number of shares purchased as part of publicly announced plans or program (1) ​ Approximate dollar value of shares that may yet be purchased under the plans or program (1) October 1, 2024 – October 31, 2024 ​ ​ — ​ $ — ​ ​ — ​ $ 212,338,815 November 1, 2024 – November 30, 2024 ​ ​ — ​ $ — ​ ​ — ​ $ 212,338,815 December 1, 2024 – December 31, 2024 ​ ​ — ​ $ — ​ ​ — ​ $ 212,338,815 Total ​ ​ — ​ $ — ​ ​ — ​ $ 212,338,815 (1) In August 2021, our board of directors approved an increase to our common stock repurchase program from $1 billion to $2 billion.
Biggest changeOur ability to pay dividends may be adversely affected for the reasons described in Item 1A of this Report in the section entitled Risk Factors . ​ Unregistered Sales of Equity Securities and Use of Proceeds ​ There were no sales of unregistered equity securities during the year ended December 31, 2025. ​ Stock Repurchase Program ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares purchased ​ ​ ​ ​ Average price paid per share ​ ​ ​ Total number of shares purchased as part of publicly announced plans or program (1) ​ Approximate dollar value of shares that may yet be purchased under the plans or program (1) October 1, 2025 – October 31, 2025 ​ ​ — ​ $ — ​ ​ — ​ $ 207,600,930 November 1, 2025 – November 30, 2025 ​ ​ — ​ $ — ​ ​ — ​ $ 207,600,930 December 1, 2025 – December 31, 2025 ​ ​ — ​ $ — ​ ​ — ​ $ 207,600,930 Total ​ ​ — ​ $ — ​ ​ — ​ $ 207,600,930 (1) In August 2021, our board of directors approved an increase to our common stock repurchase program from $1 billion to $2 billion.
As of February 14, 2025, our shares of common stock were held by 28 holders of record. ​ Our dividend level is reviewed each quarter and determined based on a number of factors, including, among other things, our earnings, our financial condition, growth outlook, the capital required to support ongoing growth opportunities and compliance with other internal and external requirements.
As of February 17, 2026, our shares of common stock were held by 29 holders of record. ​ Our dividend level is reviewed each quarter and determined based on a number of factors, including, among other things, our earnings, our financial condition, growth outlook, the capital required to support ongoing growth opportunities and compliance with other internal and external requirements.
We did not repurchase our common stock during the quarter ended December 31, 2024. ​
We did not repurchase our common stock during the quarter ended December 31, 2025. ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+14 added−23 removed47 unchanged
Biggest changeDepartment of Veterans Affairs (1) ​ ​ 806,584 ​ ​ — ​ ​ ​ 231,552,579 ​ ​ 232,643,144 Total prime servicing ​ ​ 665,756,241 ​ ​ 607,206,844 Special servicing subserviced for PMT ​ ​ 7,586 ​ ​ 9,925 Total loans serviced ​ $ 665,763,827 ​ $ 607,216,769 Delinquencies: ​ ​ ​ ​ ​ ​ Owned servicing: ​ ​ ​ ​ ​ ​ 30-89 days ​ $ 17,933,800 ​ $ 14,414,423 90 days or more ​ ​ 9,023,217 ​ ​ 7,635,817 ​ ​ $ 26,957,017 ​ $ 22,050,240 Subservicing: ​ ​ ​ ​ ​ ​ 30-89 days ​ $ 2,673,329 ​ $ 2,208,302 90 days or more ​ ​ 1,319,190 ​ ​ 1,128,212 ​ ​ $ 3,992,519 ​ $ 3,336,514 (1) Represents previously delinquent loans that have been purchased by the VA pursuant to the Veterans Affairs Servicing Purchase program where servicing is expected to be transferred to the VA’s selected servicer for this program. ​ Following is a summary of characteristics of our MSR and MSL servicing portfolio as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ Loan type ​ Unpaid principal balance ​ Loan count ​ Note rate ​ Age (months) ​ Remaining maturity (months) ​ ​ Loan size ​ FICO credit score at origination ​ Original LTV (1) ​ Current LTV (1) ​ 60+ Delinquency (by UPB) ​ ​ (Dollars and loan count in thousands) Government insured or guaranteed (2): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHA ​ $ 149,364,086 ​ 713 ​ 4.5% ​ 46 ​ 317 ​ $ 209 ​ 681 ​ 93% ​ 69% ​ 6.0% VA ​ ​ 125,243,750 ​ 457 ​ 3.8% ​ 39 ​ 319 ​ $ 274 ​ 730 ​ 90% ​ 70% ​ 2.2% USDA ​ ​ 20,791,639 ​ 140 ​ 4.0% ​ 59 ​ 305 ​ $ 148 ​ 700 ​ 98% ​ 65% ​ 5.8% Government-sponsored entities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fannie Mae ​ ​ 53,615,110 ​ 170 ​ 5.0% ​ 27 ​ 318 ​ $ 316 ​ 763 ​ 74% ​ 63% ​ 0.6% Freddie Mac ​ ​ 68,644,789 ​ 210 ​ 5.3% ​ 21 ​ 325 ​ $ 327 ​ 759 ​ 75% ​ 66% ​ 0.7% Closed-end second lien mortgage loans ​ ​ 1,369,048 ​ 17 ​ 9.8% ​ 10 ​ 249 ​ $ 80 ​ 743 ​ 19% ​ 18% ​ 0.2% Other (3) ​ ​ 7,046,326 ​ 19 ​ 6.7% ​ 11 ​ 348 ​ $ 377 ​ 773 ​ 74% ​ 70% ​ 0.2% ​ ​ $ 426,074,748 ​ 1,726 ​ 4.5% ​ 38 ​ 319 ​ $ 247 ​ 721 ​ 87% ​ 67% ​ 3.2% (1) Loan-to-Value ​ (2) MSRs and MSLs on government insured and guaranteed loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors. ​ (3) Represents MSRs on conventional loans sold to private investors. 65 Table of Contents ​ Net Interest Expense ​ Net interest expense is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and short-term investment ​ $ 56,252 ​ $ 68,457 ​ $ 19,839 Principal-only stripped mortgage-backed securities ​ ​ 26,035 ​ ​ — ​ ​ — Loans held for sale at fair value ​ ​ 326,697 ​ ​ 279,506 ​ ​ 172,124 Placement fees relating to custodial funds ​ ​ 383,798 ​ ​ 284,877 ​ ​ 102,099 Other ​ ​ 784 ​ ​ 84 ​ ​ — ​ ​ ​ 793,566 ​ ​ 632,924 ​ ​ 294,062 Interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term debt ​ ​ 410,381 ​ ​ 295,418 ​ ​ 112,773 Long-term debt ​ ​ 348,465 ​ ​ 309,481 ​ ​ 174,847 Interest shortfall on repayments of mortgage loans serviced for Agency securitizations ​ ​ 46,385 ​ ​ 21,538 ​ ​ 40,741 Interest on mortgage loan impound deposits ​ ​ 11,298 ​ ​ 9,795 ​ ​ 7,066 Other ​ ​ 2,819 ​ ​ 1,545 ​ ​ — ​ ​ ​ 819,348 ​ ​ 637,777 ​ ​ 335,427 ​ ​ $ (25,782) ​ $ (4,853) ​ $ (41,365) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest expense increased $20.9 million in the year ended December 31, 2024 compared to 2023.
Biggest changeRealization of cash flows increased in the year ended December 31, 2025 compared to 2024 and 2023 due to both the growth in our investment in MSRs and the effect of increased expected and realized prepayment speeds that increases the projected rate of realization of future cash flows on the MSR asset. ​ ​ 64 Table of Contents Following is a summary of our loan servicing portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ (in thousands) Owned: ​ ​ ​ ​ ​ ​ Mortgage servicing rights and liabilities ​ ​ ​ ​ ​ ​ Originated ​ $ 448,035,447 ​ $ 410,393,342 Purchased and assumed ​ ​ 13,999,998 ​ ​ 15,681,406 ​ ​ ​ 462,035,445 ​ ​ 426,074,748 Loans held for sale ​ ​ 8,930,477 ​ ​ 8,128,914 ​ ​ ​ 470,965,922 ​ ​ 434,203,662 Subserviced for: ​ ​ ​ ​ ​ ​ PennyMac Mortgage Investment Trust ​ ​ 226,774,067 ​ ​ 230,745,995 Interim servicing ​ ​ 24,257,095 ​ ​ 806,584 Other non-affiliates ​ ​ 11,616,738 ​ ​ — ​ ​ ​ 262,647,900 ​ ​ 231,552,579 Total loans serviced ​ $ 733,613,822 ​ $ 665,763,827 Delinquencies: ​ ​ ​ ​ ​ ​ Owned servicing: ​ ​ ​ ​ ​ ​ 30-89 days ​ $ 18,562,892 ​ $ 17,933,800 90 days or more ​ ​ 11,364,962 ​ ​ 9,023,217 ​ ​ $ 29,927,854 ​ $ 26,957,017 Subservicing: ​ ​ ​ ​ ​ ​ 30-89 days ​ $ 4,018,484 ​ $ 2,673,329 90 days or more ​ ​ 1,922,015 ​ ​ 1,319,190 ​ ​ $ 5,940,499 ​ $ 3,992,519 ​ Following is a summary of characteristics of our MSR and MSL servicing portfolio as of December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ Loan type ​ Unpaid principal balance ​ Loan count ​ Note rate ​ Age (months) ​ Remaining maturity (months) ​ ​ Loan size ​ FICO credit score at origination ​ Original LTV (1) ​ Current LTV (1) ​ 60+ Delinquency (by UPB) ​ ​ (Dollars and loan count in thousands) Government insured or guaranteed (2): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHA ​ $ 161,035,931 ​ 741 ​ 4.9% ​ 46 ​ 317 ​ $ 217 ​ 685 ​ 92% ​ 72% ​ 7.5% VA ​ ​ 117,520,483 ​ 418 ​ 4.3% ​ 42 ​ 317 ​ $ 281 ​ 732 ​ 91% ​ 73% ​ 2.1% USDA ​ ​ 20,254,590 ​ 136 ​ 4.3% ​ 64 ​ 300 ​ $ 149 ​ 701 ​ 98% ​ 66% ​ 5.9% Government-sponsored entities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Freddie Mac ​ ​ 81,456,332 ​ 227 ​ 6.0% ​ 19 ​ 332 ​ $ 359 ​ 762 ​ 77% ​ 71% ​ 0.7% Fannie Mae ​ ​ 64,875,535 ​ 197 ​ 5.3% ​ 30 ​ 318 ​ $ 329 ​ 763 ​ 76% ​ 65% ​ 0.6% Closed-end second lien mortgage loans ​ ​ 2,811,513 ​ 36 ​ 9.2% ​ 12 ​ 250 ​ $ 78 ​ 745 ​ 19% ​ 19% ​ 0.3% Other (3) ​ ​ 14,081,061 ​ 33 ​ 6.7% ​ 13 ​ 346 ​ $ 425 ​ 775 ​ 75% ​ 71% ​ 0.3% ​ ​ $ 462,035,445 ​ 1,788 ​ 5.0% ​ 37 ​ 320 ​ $ 258 ​ 726 ​ 86% ​ 71% ​ 3.6% (1) Loan-to-Value ​ (2) Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors. ​ (3) Represents conventional loans sold to private investors. ​ 65 Table of Contents Net Interest Expense ​ Net interest expense is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and short-term investment ​ $ 43,366 ​ $ 56,252 ​ $ 68,457 Principal-only stripped mortgage-backed securities ​ ​ 47,009 ​ ​ 26,035 ​ ​ — Loans held for sale ​ ​ 435,335 ​ ​ 326,697 ​ ​ 279,506 Placement fees relating to custodial funds ​ ​ 396,645 ​ ​ 383,798 ​ ​ 284,877 Other ​ ​ 2,092 ​ ​ 784 ​ ​ 84 ​ ​ ​ 924,447 ​ ​ 793,566 ​ ​ 632,924 Interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term debt ​ ​ 466,814 ​ ​ 410,381 ​ ​ 295,418 Long-term debt ​ ​ 414,369 ​ ​ 348,465 ​ ​ 309,481 Interest shortfall on repayments of mortgage loans serviced for Agency securitizations ​ ​ 63,825 ​ ​ 46,385 ​ ​ 21,538 Interest on mortgage loan impound deposits ​ ​ 12,201 ​ ​ 11,298 ​ ​ 9,795 Other ​ ​ 3,346 ​ ​ 2,819 ​ ​ 1,545 ​ ​ ​ 960,555 ​ ​ 819,348 ​ ​ 637,777 ​ ​ $ (36,108) ​ $ (25,782) ​ $ (4,853) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest expense increased $10.3 million in the year ended December 31, 2025 compared to 2024.
We recognize MSRs and MSLs at our estimate of the fair value of the contract to service the loans. ​ We include changes in fair value of MSRs and MSLs in current period income as a component of Net loan servicing fees — Change in fair value of mortgage servicing rights and mortgage servicing liabilities.
We recognize MSRs and MSLs at our estimate of the fair value of the contract to service the loans. ​ We include changes in the fair value of MSRs and MSLs in current period income as a component of Net loan servicing fees — Change in fair value of mortgage servicing rights and mortgage servicing liabilities.
We expect that in a market shock event, multiple inputs would be affected and the effects of these changes may compound or counteract each other.
We expect that in a market shock event, multiple inputs would be affected and the effects of these changes may compound or counteract each other.
The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indentures under which the Unsecured Notes were issued). ​ 72 Table of Contents Our Unsecured Notes contain covenants that limit our and our restricted subsidiaries’ ability to engage in specified types of transactions, including, but not limited to, the following: ● pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments; ● incur, assume or guarantee additional debt or issue preferred stock; ● incur liens on assets; ● merge or consolidate with another person or sell all or substantially all of our assets to another person; ● transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries; ● enter into transactions with affiliates; and ● allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us.
The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indentures under which the Unsecured Notes were issued). ​ Our Unsecured Notes contain covenants that limit our and our restricted subsidiaries’ ability to engage in specified types of transactions, including, but not limited to, the following: ● pay dividends or distributions, redeem or repurchase equity, prepay subordinated debt and make certain loans or investments; ● incur, assume or guarantee additional debt or issue preferred stock; ● incur liens on assets; ● merge or consolidate with another person or sell all or substantially all of our assets to another person; ● transfer, sell or otherwise dispose of certain assets including capital stock of subsidiaries; ● enter into transactions with affiliates; and 72 Table of Contents ● allow to exist certain restrictions on the ability of our non-guarantor restricted subsidiaries to pay dividends or make other payments to us.
Market interest rates and our estimate of the probability that a loan will be funded are updated as the loans move through the funding or purchase process and as market interest rates change and these updates may result in significant changes in our estimates of the fair value of the IRLCs.
Market interest rates and our estimate of the probability that a loan will be funded are updated as the loans move through the funding or purchase process and as market interest rates change and these updates may result in significant changes to our estimates of the fair value of the IRLCs.
Our losses arising from representations and warranties have historically been reduced by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans. ​ If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase.
Our losses arising from representations and warranties have historically been reduced by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans. ​ If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies change, the level of repurchase and loss activity may increase.
Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees and fees charged to correspondent lenders relating to loans that are repaid shortly after we purchase them. ​ The increases in loan servicing fees from non-affiliates for the year ended December 31, 2024, compared to 2023 and 2022, were primarily due to growth of our loan servicing portfolio.
Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees and fees charged to correspondent lenders relating to loans that are repaid shortly after we purchase them. ​ The increases in loan servicing fees from non-affiliates for the year ended December 31, 2025, compared to 2024 and 2023, were primarily due to growth of our loan servicing portfolio.
Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable, a capital lease and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days.
Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable, and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days.
These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. ​ 50 Table of Contents Critical Accounting Policies ​ Preparation of financial statements in compliance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period.
These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. ​ Critical Accounting Policies ​ Preparation of financial statements in compliance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period.
From inception through December 31, 2024, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program. ​ We continue to explore a variety of means of financing our business, including debt financing through bank warehouse lines of credit, bank loans, repurchase agreements, securitization transactions and corporate debt.
From inception through December 31, 2025, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program. ​ We continue to explore a variety of means of financing our business, including debt financing through bank warehouse lines of credit, bank loans, repurchase agreements, securitization transactions and corporate debt.
The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. ​ In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer.
The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. ​ In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer against future credit losses.
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur liabilities for MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive to service the EBO loans we have resold) and for the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions. ​ 59 Table of Contents The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future.
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur liabilities for MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive to service the EBO loans we have resold) and for the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions. ​ The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future.
Our senior management valuation subcommittee includes the Company’s chief financial, credit, and capital markets officers as well as other senior members of the Company’s finance, capital markets and risk management staffs. ​ The fair value of our IRLCs is developed by our capital markets risk management staff and is reviewed by our capital markets operations group. ​ Following is a discussion of our approach to measuring the balance sheet items that are most affected by “Level 3” fair value estimates. ​ Interest Rate Lock Commitments ​ Our net gains on loans held for sale include our estimates of the gains or losses we expect to realize upon the sale of loans we have contractually committed to fund or purchase but have not yet funded, purchased or sold.
Our management valuation subcommittee includes the Company’s chief financial, credit, investment and capital markets officers as well as other members of the Company’s finance, capital markets and risk management staffs. ​ The fair value of our IRLCs is developed by our capital markets risk management staff and is reviewed by our capital markets operations group. ​ Following is a discussion of our approach to measuring the balance sheet items that are most affected by “Level 3” fair value estimates. ​ 52 Table of Contents Interest Rate Lock Commitments ​ Our net gains on loans held for sale include our estimates of the gains or losses we expect to realize upon the sale of loans we have contractually committed to fund or purchase but have not yet funded, purchased or sold.
We estimate the fair value of IRLCs based on observable Agency MBS prices, our estimates of the fair value of the MSRs we expect to receive in the sale of the loans and the probability that we will fund or purchase the loans (the “pull-through rate”). 52 Table of Contents ​ Pull-through rates and MSR fair values are based on our estimates as these inputs are difficult to observe in the marketplace.
We estimate the fair value of IRLCs based on observable Agency MBS prices, our estimates of the fair value of the MSRs we expect to receive in the sale of the loans and the probability that we will fund or purchase the loans (the “pull-through rate”). ​ Pull-through rates and MSR fair values are based on our estimates as these inputs are difficult to observe in the marketplace.
The increase in borrowings reflects the increase in inventory of loans held for sale and our investment in MSRs. ​ Net cash provided by financing activities was $1.5 billion in the year ended December 31, 2023, primarily due to a $923.3 million increase in short-term borrowings and a $680 million increase in long-term borrowings.
The increase in borrowings reflects the increase in inventory of loans held for sale and our investment in MSRs. ​ 70 Table of Contents Net cash provided by financing activities was $1.5 billion in the year ended December 31, 2023, primarily due to a $923.3 million increase in short-term borrowings and a $680 million increase in long-term borrowings.
Therefore, this analysis is not a projection of the effects of a shock event or a change in our estimate of an input and should not be relied upon as an earnings projection. ​ Loans Held for Sale ​ We carry loans at their fair values.
Therefore, this analysis is not a projection of the effects of a shock event or a change in our estimate of an input and should not be relied upon as an earnings projection. 53 Table of Contents ​ Loans Held for Sale ​ We carry loans at their fair values.
We may purchase certain delinquent government guaranteed or insured loans from Ginnie Mae guaranteed securitizations included in our loan servicing portfolio. 53 Table of Contents Our right to purchase such loans arises as the result of the loan being at least three months delinquent when we buy the loan.
We may purchase certain delinquent government guaranteed or insured loans from Ginnie Mae guaranteed securitizations included in our loan servicing portfolio. Our right to purchase such loans arises as the result of the loan being at least three months delinquent when we buy the loan.
Increasing interest rates reduce the rate of prepayments of the underlying loans associated with the servicing rights, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect. ​ Hedging results reflect valuation losses attributable to the effects of interest rate increases on the fair value of the hedging instruments, as well as the embedded costs of maintaining the hedge positions in the years ended December 31, 2024, 2023 and 2022. ​ Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized.
Decreasing interest rates increase the rate of prepayments of the underlying loans associated with the servicing rights, which decreases the cash flows expected from the servicing rights, while increasing interest rates have the opposite effect. ​ Hedging results reflect valuation losses attributable to the effects of interest rate decreases on the fair value of the hedging instruments, as well as the embedded costs of maintaining the hedge positions in the years ended December 31, 2025, 2024 and 2023. ​ Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized.
At December 31, 2024, we held $7.8 billion of such loans. ​ ● We categorize loans that are not saleable into active markets as “Level 3” fair value assets. “Level 3” fair value loans are comprised of: ​ - Closed-end second lien mortgage loans.
At December 31, 2025, we held $8.8 billion of such loans. ​ ● We categorize loans that are not saleable into active markets as “Level 3” fair value assets. “Level 3” fair value loans are comprised of: ​ - Closed-end second lien mortgage loans.
As summarized above, changes in fair values of “Level 1” and “Level 2” fair value assets are determinable with reference to direct quotes in active markets on the measurement date in the case of “Level 1” fair value assets, or reference to publicly available pricing inputs (such as reference interest rates and credit spreads and prices of similar assets) in the case of “Level 2” fair value assets. ​ $9.3 billion or 35% of our total assets are measured using “Level 3” fair value inputs – significant inputs where there is difficulty observing the inputs used by market participants to establish fair value.
As summarized above, changes in fair values of “Level 1” and “Level 2” fair value assets are determinable with reference to direct quotes in active markets on the measurement date in the case of “Level 1” fair value assets, or reference to publicly available pricing inputs (such as reference interest rates and credit spreads and prices of similar assets) in the case of “Level 2” fair value assets. ​ $10.1 billion or 34% of our total assets are measured using “Level 3” fair value inputs – significant inputs where there is difficulty observing the inputs used by market participants to establish fair value.
The increase in other loan servicing fees for the year ended December 31, 2024 compared to 2023 and 2022 were primarily due to growth in late charges and in incentive fees we receive for effecting modifications of delinquent loans. ​ 63 Table of Contents Effects of Mortgage Servicing Rights and Mortgage Servicing Liabilities Net of Hedging Results ​ We have elected to carry our servicing assets and liabilities at fair value.
The increase in other loan servicing fees for the year ended December 31, 2025 compared to 2024 and 2023 were primarily due to growth in late charges and in incentive fees we receive for effecting modifications of delinquent loans. ​ Effects of Mortgage Servicing Rights and Mortgage Servicing Liabilities Net of Hedging Results ​ We have elected to carry our servicing assets and liabilities at fair value.
Although these financial covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose. ​ We are also subject to liquidity and net worth requirements established by FHFA for Agency seller/servicers and Ginnie Mae for single-family issuers.
Although financial and other covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose. ​ We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency seller/servicers and Ginnie Mae for single-family issuers.
The increase was due to a $309.5 million increase in production revenues (net gains on sales of loans, loan origination fees and fulfillment fees) primarily due to higher production volumes and gain on sale margins and a $25.3 million decrease in total expenses, partially offset by a $108.9 million decrease in Net loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results primarily due to higher hedging costs.
The increase was due to a $309.5 million increase in production revenues primarily due to higher production volumes and gain on sale margins and a $25.3 million decrease in total expenses, partially offset by a $108.9 million decrease in Net loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results primarily due to higher hedging costs.
These estimates represented approximately 279% of our gain on sale of loans at fair value for the year ended December 31, 2024, as compared to 338% and 217% in 2023 and 2022, respectively.
These estimates represented approximately 273% of our gain on sale of loans at fair value for the year ended December 31, 2025, as compared to 279% and 338% in 2024 and 2023, respectively.
FHLMC MSR Facility ​ $ 125,000 ​ $ 200,000 ​ $ 100,000 ​ June 11, 2026 Unsecured senior notes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unsecured Notes - 5.375% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ October 15, 2025 Unsecured Notes - 4.25% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ February 15, 2029 Unsecured Notes - 5.75% ​ $ 500,000 ​ ​ ​ ​ ​ ​ ​ September 15, 2031 Unsecured Notes - 7.875% ​ $ 750,000 ​ ​ ​ ​ ​ ​ ​ December 15, 2029 Unsecured Notes - 7.125% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ November 15, 2030 (1) Outstanding indebtedness as of December 31, 2024. ​ (2) Total facility size, committed facility and maturity date include contractual changes through the date of this Report. ​ 75 Table of Contents The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of December 31, 2024: ​ Loans held for sale and MSRs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average ​ ​ Counterparty ​ Amount at risk ​ maturity of advances ​ Facility maturity ​ ​ (in thousands) ​ ​ ​ ​ Atlas Securitized Products, L.P., Goldman Sachs Bank USA, Nomura Corporate Funding Americas and Mizuho Bank, Ltd.
FHLMC MSR Facility ​ $ — ​ $ 100,000 ​ $ — ​ August 21, 2026 Unsecured senior notes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unsecured Notes - 4.25% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ February 15, 2029 Unsecured Notes - 5.75% ​ $ 500,000 ​ ​ ​ ​ ​ ​ ​ September 15, 2031 Unsecured Notes - 7.875% ​ $ 750,000 ​ ​ ​ ​ ​ ​ ​ December 15, 2029 Unsecured Notes - 7.125% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ November 15, 2030 Unsecured Notes - 6.875% ​ $ 850,000 ​ ​ ​ ​ ​ ​ ​ February 15, 2033 Unsecured Notes - 6.875% ​ $ 850,000 ​ ​ ​ ​ ​ ​ ​ May 15, 2032 Unsecured Notes - 6.75% ​ $ 650,000 ​ ​ ​ ​ ​ ​ ​ February 15, 2034 (1) Outstanding indebtedness as of December 31, 2025. ​ (2) Total facility size, committed facility and maturity date include contractual changes through the date of this Report. ​ 74 Table of Contents The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of December 31, 2025: ​ Loans held for sale and MSRs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average ​ ​ Counterparty ​ ​ ​ Amount at risk ​ ​ ​ maturity of advances ​ ​ ​ Facility maturity ​ ​ (in thousands) ​ ​ ​ ​ Atlas Securitized Products, L.P., Goldman Sachs Bank USA, Nomura Corporate Funding Americas and Mizuho Bank, Ltd.
As of December 31, 2024, we believe we were in compliance in all material respects with these covenants. ​ 73 Table of Contents Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires PLS to maintain positive net income for at least one of the previous two consecutive quarters, or other similar measures.
As of December 31, 2025, we believe PLS was in compliance in all material respects with these covenants. ​ Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires PLS to maintain positive net income for at least one of the previous two consecutive quarters, or other similar measures.
We produce closed-end second lien mortgage loans that do not have an active market with observable inputs that are significant to the estimation of their fair value. At December 31, 2024, we held $272.3 million at fair value of such loans. ​ - Ginnie Mae early buyout (“EBO”) loans.
We produce closed-end second lien mortgage loans that do not have an active market with observable inputs that are significant to the estimation of their fair value. At December 31, 2025, we held $156.0 million at fair value of such loans. ​ - Ginnie Mae early buyout (“EBO”) loans.
The increase in Net gains on loans held for sale at fair value for the year ended December 31, 2024 compared to 2023 was primarily due to increased volumes and gain on sale margins across all production channels.
The increase in Net gains on loans held for sale at fair value for the year ended December 31, 2025 compared to 2024 was primarily due to increased volumes across all production channels.
At December 31, 2024, we held $145.0 million at fair value of such loans. ​ - Loans with defects. Certain of our loans may become non-saleable into active markets due to our identification of one or more defects or we may repurchase defective loans subject to representations and warranties.
At December 31, 2025, we held $127.9 million at fair value of such loans. ​ - Loans with defects. Certain of our loans may become non-saleable into active markets due to our identification of one or more defects or we may repurchase defective loans subject to representations and warranties.
We establish a liability at the time loans are sold and periodically assess the adequacy of our recorded liability. ​ In the years ended December 31, 2024, 2023, and 2022 we recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $16.5 million, $13.0 million, and $9.6 million, respectively.
We establish a liability at the time loans are sold and periodically assess the adequacy of our recorded liability. ​ 60 Table of Contents In the years ended December 31, 2025, 2024, and 2023 we recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling $17.2 million, $16.5 million, and $13.0 million, respectively.
The table below presents the average outstanding, maximum and ending balances: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ ​ (in thousands) ​ Average balance ​ $ 5,474,998 ​ $ 3,701,448 ​ $ 2,580,513 ​ Maximum daily balance ​ $ 8,591,735 ​ $ 6,358,007 ​ $ 7,289,147 ​ Balance at year end ​ $ 8,692,756 ​ $ 3,769,449 ​ $ 3,004,690 ​ ​ The differences between the average and maximum daily balances on our repurchase agreements reflect the fluctuations throughout the years of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations. ​ Our debt repurchase agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit.
The table below presents the average outstanding, maximum and ending balances: ​ 71 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ ​ (in thousands) ​ Average balance ​ $ 7,336,946 ​ $ 5,474,998 ​ $ 3,701,448 ​ Maximum daily balance ​ $ 10,557,165 ​ $ 8,591,735 ​ $ 6,358,007 ​ Balance at year end ​ $ 8,801,215 ​ $ 8,692,756 ​ $ 3,769,449 ​ ​ The differences between the average and maximum daily balances on our repurchase agreements reflect the fluctuations throughout the years of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations. ​ Our debt repurchase agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit.
Different approaches to valuing those assets or changes in inputs to measurement of these assets can have a significant effect on the amounts reported for these items including their reported balances and their effects on our income. ​ 51 Table of Contents During the three years ended December 31, 2024, we recognized significant changes in the fair value of our holdings of “Level 3” fair value assets and liabilities as shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ Mortgage ​ Mortgage ​ ​ ​ ​ ​ ​ Year ended ​ rate lock ​ Loans held ​ servicing ​ servicing ​ ​ ​ ​ Pre-tax December 31, ​ commitments ​ for sale ​ rights (1) ​ liabilities (1) ​ Total ​ Income ​ ​ (positive (negative) effects on net revenues in thousands) ​ ​ ​ 2024 ​ $ 38,645 ​ ​ 105,508 ​ ​ 407,423 ​ ​ (35) ​ $ 551,541 ​ $ 401,026 2023 ​ $ 130,424 ​ ​ 68,773 ​ ​ 56,757 ​ ​ 50 ​ $ 256,004 ​ $ 183,631 2022 ​ $ (624,905) ​ ​ (66,639) ​ ​ 877,324 ​ ​ 347 ​ $ 186,127 ​ $ 665,247 (1) Excludes changes in fair value attributable to realization of cash flows. ​ The changes above primarily reflect changes attributable to our observations of changes in the markets for those assets and liabilities as opposed to changes in accounting policies or approaches to the valuation of those instruments. ​ As a result of the difficulty in observing certain significant valuation inputs affecting our “Level 3” fair value assets and liabilities, we are required to make judgments regarding these items’ fair values.
Different approaches to valuing those assets or changes in inputs to measurement of these assets can have a significant effect on the amounts reported for these items including their reported balances and their effects on our income. ​ During the three years ended December 31, 2025, we recognized changes in the fair value of our holdings of “Level 3” fair value assets and liabilities as shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ Mortgage ​ Mortgage ​ ​ ​ ​ ​ ​ Year ended ​ rate lock ​ Loans held ​ servicing ​ servicing ​ ​ ​ ​ Pre-tax December 31, ​ commitments ​ for sale ​ rights (1) ​ liabilities (1) ​ Total ​ Income ​ ​ (positive (negative) effects on net revenues in thousands) ​ ​ ​ 2025 ​ $ 453,802 ​ ​ 160,278 ​ ​ (251,669) ​ ​ (3) ​ $ 362,408 ​ $ 551,417 2024 ​ $ 38,645 ​ ​ 105,508 ​ ​ 407,423 ​ ​ (35) ​ $ 551,541 ​ $ 401,026 2023 ​ $ 130,424 ​ ​ 68,773 ​ ​ 56,757 ​ ​ 50 ​ $ 256,004 ​ $ 183,631 (1) Excludes changes in fair value attributable to realization of cash flows. ​ The changes above primarily reflect changes attributable to our observations of changes in the markets for those assets and liabilities as opposed to changes in accounting policies or approaches to the valuation of those instruments. ​ As a result of the difficulty in observing certain significant valuation inputs affecting our “Level 3” fair value assets and liabilities, we are required to make judgments regarding these items’ fair values.
We believe that the most significant “Level 3” fair value input to the measurement of IRLCs is the pull-through rate. At December 31, 2024, we held $33.6 million of net IRLC assets at fair value.
We believe that the most significant “Level 3” fair value input to the measurement of IRLCs is the pull-through rate. At December 31, 2025, we held $124.9 million of net IRLC assets at fair value.
These levels are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ ​ ​ ​ ​ Percentage of total ​ Level/Description ​ Carrying value of assets ​ Assets ​ Stockholders' equity ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ 1: Prices determined using quoted prices in active markets for identical assets or liabilities. ​ $ 437,339 ​ 2% ​ 11% ​ 2: Prices determined using other significant observable inputs.
These levels are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ ​ ​ ​ ​ Percentage of total ​ Level/Description ​ Carrying value of assets ​ Assets ​ Stockholders' equity ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ 1: Prices determined using quoted prices in active markets for identical assets or liabilities. ​ $ 435,833 ​ 1% ​ 10% ​ 2: Prices determined using other significant observable inputs.
Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of us. ​ ​ 8,649,568 ​ 33% ​ 226% ​ 3: Prices determined using significant unobservable inputs.
Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of us. ​ ​ 9,567,496 ​ 33% ​ 222% ​ 3: Prices determined using significant unobservable inputs.
Some of these limitations are: ​ ● they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments; ​ ● they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt; and ​ ● they are not adjusted for all non-cash income or expense items that are reflected in our consolidated statements of cash flows. ​ Because of these limitations, Adjusted EBITDA measures are not intended as alternatives to net income as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. ​ The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Net income ​ $ 311,423 ​ $ 144,656 ​ $ 475,507 Provision for income taxes ​ ​ 89,603 ​ ​ 38,975 ​ ​ 189,740 Income before provision for income taxes ​ ​ 401,026 ​ ​ 183,631 ​ ​ 665,247 Depreciation and amortization ​ ​ 55,984 ​ ​ 53,214 ​ ​ 34,409 Increase in fair value of MSRs net of MSLs due to changes in valuation inputs used in valuation models ​ ​ (407,388) ​ ​ (56,807) ​ ​ (877,671) Hedging losses associated with MSRs ​ ​ 832,483 ​ ​ 236,778 ​ ​ 631,484 Stock‑based compensation ​ ​ 20,868 ​ ​ 27,582 ​ ​ 42,552 Interest expense on corporate debt or corporate revolving credit facilities and capital lease ​ ​ 184,304 ​ ​ 98,396 ​ ​ 95,034 Effect of non-recurring gain from joint venture and arbitration accrual ​ ​ (10,884) ​ ​ 158,368 ​ ​ — Adjusted EBITDA ​ $ 1,076,393 ​ $ 701,162 ​ $ 591,055 ​ 57 Table of Contents Comparison of the years ended December 31, 2024, 2023 and 2022 ​ Income Before Provisions for Income Taxes ​ In the year ended December 31, 2024, we recorded income before provision for income taxes of $401.0 million, an increase of $217.4 million, or 118% from 2023.
Some of these limitations are: ​ ● they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments; ​ ● they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt; and ​ ● they are not adjusted for all non-cash income or expense items that are reflected in our consolidated statements of cash flows. ​ Because of these limitations, Adjusted EBITDA measures are not intended as alternatives to net income as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. ​ The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Net income ​ $ 501,077 ​ $ 311,423 ​ $ 144,656 Provision for income taxes ​ ​ 50,340 ​ ​ 89,603 ​ ​ 38,975 Income before provision for income taxes ​ ​ 551,417 ​ ​ 401,026 ​ ​ 183,631 Depreciation and amortization ​ ​ 54,392 ​ ​ 55,984 ​ ​ 53,214 Decrease (increase) in fair value of MSRs net of MSLs due to changes in valuation inputs used in valuation models ​ ​ 251,672 ​ ​ (407,388) ​ ​ (56,807) Hedging (gains) losses associated with MSRs ​ ​ (56,546) ​ ​ 832,483 ​ ​ 236,778 Stock‑based compensation ​ ​ 36,229 ​ ​ 20,868 ​ ​ 27,582 Interest expense on corporate debt ​ ​ 291,562 ​ ​ 184,304 ​ ​ 98,396 Effect of non-recurring gain from joint venture and arbitration accrual ​ ​ — ​ ​ (10,884) ​ ​ 158,368 Adjusted EBITDA ​ $ 1,128,726 ​ $ 1,076,393 ​ $ 701,162 ​ 57 Table of Contents Comparison of the years ended December 31, 2025, 2024 and 2023 ​ Income Before Provisions for Income Taxes ​ In the year ended December 31, 2025, we recorded income before provision for income taxes of $551.4 million, an increase of $150.4 million, or 38%, from 2024.
The increase was primarily due to: ​ ● an increase of $153.9 million in interest expense on borrowings due to the growth in our balance sheet and an increase in the leverage of our balance sheet; ​ ● an increase of $24.8 million in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of increased borrower refinancing activity due to decreased interest rates during part of 2024 (when a borrower repays a loan, we are frequently responsible for paying the full month’s interest to the holders of the Agency securities that are backed by the loan regardless of the date the borrower repays the loan); and ​ ● a decrease of $ 12.2 million in interest income from cash balances reflecting lower average balances; partially offset by ​ ● an increase of $98.9 million in placement fees we receive relating to custodial funds that we manage due to increased average outstanding balances and higher average placement fee rates; ​ ● an increase of $47.2 million in interest income from loans held for sale reflecting higher average levels of inventory; and ​ ● an increase of $26.0 million in interest income from principal-only stripped mortgage-backed securities purchased in 2024. ​ 66 Table of Contents Net interest expense decreased $36.5 million in the year ended December 31, 2023 compared to 2022.
The increase was primarily due to: ​ ● an increase of $122.3 million in interest expense on borrowings due to the growth in our balance sheet; ​ ● an increase of $17.4 million in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting increased loan payoffs as a result of increased borrower refinancing activity due to decreased interest rates during 2025 (when a borrower repays a loan, we are frequently responsible for paying the full month’s interest to the holders of the Agency securities that are backed by the loan regardless of the date the borrower repays the loan); and ​ ● a decrease of $ 12.9 million in interest income from cash balances primarily due to lower average balances; partially offset by ​ ● an increase of $108.6 million in interest income from loans held for sale reflecting higher average levels of inventory; ​ ● an increase of $21.0 million in interest income from principal-only stripped mortgage-backed securities; and ​ ● an increase of $12.8 million in placement fees we receive relating to custodial funds that we manage due to increased average outstanding balances. ​ Net interest expense increased $20.9 million in the year ended December 31, 2024 compared to 2023.
At December 31 2024, we held $16.7 million at fair value of such loans. ​ We use a discounted cash flow model to estimate the fair value of “Level 3” fair value loans.
At December 31 2025, we held $23.8 million at fair value of such loans. ​ We use a discounted cash flow model to estimate the fair value of “Level 3” fair value loans.
Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of loans held for sale as shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Cash flows from: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ $ (5,273,630) ​ $ (2,190,009) ​ $ 5,676,655 Other operating sources ​ ​ 740,360 ​ ​ 607,790 ​ 356,580 ​ ​ $ (4,533,270) ​ $ (1,582,219) ​ $ 6,033,235 ​ Investing activities ​ Net cash used in investing activities was $1.9 billion in the year ended December 31, 2024, primarily comprised of $935.4 million in purchases of principal-only stripped mortgage-backed securities, $702.6 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $410.3 million increase in short-term investment and a $116.3 million increase in margin deposits, partially offset by $298.7 million received from the sale and repayment of mortgage-backed securities. ​ Net cash used in investing activities was $273.3 million in the year ended December 31, 2023, primarily comprised of $242.0 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $96.5 million increase in margin deposits and $31.2 million used in acquisition of capitalized software, partially offset by $98.1 million received from the sale of interest-only stripped securities. ​ Net cash used in investing activities was $721.6 million in the year ended December 31, 2022, primarily comprised of $871.9 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and $71.9 million used in acquisition of capitalized software, partially offset by a $238.7 million decrease in margin deposits. ​ Financing activities ​ Net cash provided by financing activities was $5.7 billion in the year ended December 31, 2024, primarily due to a $5.0 billion increase in short-term borrowings and an $825.0 million increase in long-term borrowings.
Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of loans held for sale as shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Cash flows from: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ $ (2,648,202) ​ $ (5,273,630) ​ $ (2,190,009) Other operating sources ​ ​ 996,218 ​ ​ 740,360 ​ ​ 607,790 ​ ​ $ (1,651,984) ​ $ (4,533,270) ​ $ (1,582,219) ​ Investing activities ​ Net cash provided by investing activities was $552.5 million in the year ended December 31, 2025, primarily comprised of a $615.2 million sale of MSRs, $193.1 million from the repayment of principal-only stripped mortgage-backed securities and $154.4 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, partially offset by a $369.6 million increase in margin deposits. ​ Net cash used in investing activities was $1.9 billion in the year ended December 31, 2024, primarily comprised of $935.4 million in purchases of principal-only stripped mortgage-backed securities, $702.6 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $410.3 million increase in short-term investment and a $116.3 million increase in margin deposits, partially offset by $298.7 million received from the sale and repayment of mortgage-backed securities. ​ Net cash used in investing activities was $273.3 million in the year ended December 31, 2023, primarily comprised of $242.0 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, a $96.5 million increase in margin deposits and $31.2 million used in acquisition of capitalized software, partially offset by $98.1 million received from the sale of interest-only stripped securities. ​ Financing activities ​ Net cash provided by financing activities was $1.2 billion in the year ended December 31, 2025, primarily due to a $309.9 million increase in short-term borrowings and a $944.8 million increase in long-term borrowings.
The reductions in the liability relating to previously sold loans resulted from those loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims. ​ 60 Table of Contents Following is a summary of mortgage loan repurchase activity and the unpaid balance of mortgage loans subject to representations and warranties: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) During the year: ​ ​ ​ ​ ​ ​ Indemnification activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans indemnified at beginning of year ​ $ 75,724 ​ $ 35,961 ​ $ 15,079 New indemnifications ​ ​ 32,559 ​ ​ 43,469 ​ ​ 24,016 Less indemnified loans sold, repaid or refinanced ​ ​ 6,416 ​ ​ 3,706 ​ ​ 3,134 Loans indemnified at end of year ​ $ 101,867 ​ $ 75,724 ​ $ 35,961 Repurchase activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans repurchased ​ $ 89,749 ​ $ 50,327 ​ $ 93,011 Less: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans repurchased by correspondent lenders ​ ​ 58,855 ​ ​ 23,327 ​ ​ 32,660 Loans repaid by borrowers or resold ​ ​ 24,335 ​ ​ 72,511 ​ ​ 54,044 Net loans repurchased (resolved) with losses chargeable to liability for representations and warranties ​ $ 6,559 ​ $ (45,511) ​ $ 6,307 Losses charged to liability for representations and warranties ​ $ 4,566 ​ $ 5,515 ​ $ 12,266 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid principal balance of loans subject to representations and warranties ​ $ 413,382,503 ​ $ 354,423,684 ​ $ 296,774,121 Liability for representations and warranties ​ $ 29,129 ​ $ 30,788 ​ $ 32,421 ​ In the year ended December 31, 2024, we repurchased loans with unpaid principal balances totaling $89.7 million and charged $4.6 million in net incurred losses relating to repurchases against our liability for representations and warranties.
The reductions in the liability relating to previously sold loans resulted from those loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims. ​ Following is a summary of mortgage loan indemnification and repurchase activity and the unpaid balance of mortgage loans subject to representations and warranties: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) During the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indemnification activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans indemnified at beginning of year ​ $ 101,867 ​ $ 75,724 ​ $ 35,961 New indemnifications ​ ​ 27,302 ​ ​ 32,559 ​ ​ 43,469 Less indemnified loans sold, repaid or refinanced ​ ​ 9,039 ​ ​ 6,416 ​ ​ 3,706 Loans indemnified at end of year ​ $ 120,130 ​ $ 101,867 ​ $ 75,724 Repurchase activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans repurchased ​ $ 113,824 ​ $ 89,749 ​ $ 50,327 Less: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans repurchased by correspondent lenders ​ ​ 70,905 ​ ​ 58,855 ​ ​ 23,327 Loans repaid by borrowers or resold ​ ​ 34,568 ​ ​ 24,335 ​ ​ 72,511 Net loans repurchased (resolved) with losses chargeable to liability for representations and warranties ​ $ 8,351 ​ $ 6,559 ​ $ (45,511) Losses charged to liability for representations and warranties ​ $ 3,479 ​ $ 4,566 ​ $ 5,515 At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid principal balance of loans subject to representations and warranties ​ $ 490,792,523 ​ $ 413,382,503 ​ $ 354,423,684 Liability for representations and warranties ​ $ 34,894 ​ $ 29,129 ​ $ 30,788 ​ In the year ended December 31, 2025, we repurchased loans with unpaid principal balances totaling $113.8 million and charged $3.5 million in net incurred losses relating to repurchases against our liability for representations and warranties.
FHFA and Ginnie Mae have established minimum liquidity requirements and revised their net worth requirements for their approved non-depository single-family sellers/servicers or issuers, and Ginnie Mae has also issued risk-based capital requirements.
FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for their approved single-family issuers, and Ginnie Mae has issued risk-based capital requirements.
We charge fulfillment fees based on the number of loans we lock and fulfill for PMT. ​ Fulfillment fees decreased $1.5 million and $40.2 million in the years ended December 31, 2024 and 2023, respectively, compared to 2023 and 2022, respectively, primarily due to decreases in correspondent loan production volumes for PMT’s account that reflect our increased purchases of conventional correspondent loans from PMT. ​ Net loan servicing fees ​ Our net loan servicing fee income has two primary components: fees earned for servicing the loans and the effects of MSR and MSL valuation changes, net of hedging results as summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Loan servicing fees ​ $ 1,799,480 ​ $ 1,484,946 ​ $ 1,228,637 Effects of MSRs and MSLs net of hedging results ​ ​ (1,265,825) ​ ​ (842,346) ​ ​ (277,308) Net loan servicing fees ​ $ 533,655 ​ $ 642,600 ​ $ 951,329 62 Table of Contents Loan Servicing Fees ​ Following is a summary of our loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) From non-affiliates ​ $ 1,529,452 ​ $ 1,268,650 ​ $ 1,054,828 From PennyMac Mortgage Investment Trust ​ ​ 83,252 ​ ​ 81,347 ​ ​ 81,915 Other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Late charges ​ ​ 85,390 ​ ​ 65,781 ​ ​ 48,166 Other ​ ​ 101,386 ​ ​ 69,168 ​ ​ 43,728 ​ ​ ​ 186,776 ​ ​ 134,949 ​ ​ 91,894 ​ ​ $ 1,799,480 ​ $ 1,484,946 ​ $ 1,228,637 Average UPB of loans serviced: ​ ​ ​ ​ ​ ​ ​ ​ ​ MSRs and MSLs ​ $ 396,588,047 ​ $ 338,373,762 ​ $ 297,207,950 Subservicing ​ $ 231,303,048 ​ $ 234,303,254 ​ $ 226,817,005 ​ Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations.
We charge fulfillment fees based on the number of loans we lock and fulfill for PMT. ​ Fulfillment fees decreased $2.5 million and $1.5 million in the years ended December 31, 2025 and 2024, respectively, compared to 2024 and 2023, respectively, primarily due to decreases in correspondent loan production volumes for PMT’s account. ​ Net loan servicing fees ​ Our net loan servicing fee income has two primary components: fees earned for servicing the loans and the effects of MSR and MSL valuation changes, net of hedging results as summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) Loan servicing fees ​ $ 1,976,845 ​ $ 1,716,228 ​ $ 1,403,599 Subservicing fees ​ ​ 85,588 ​ ​ 83,252 ​ ​ 81,347 Effects of MSRs and MSLs net of hedging results ​ ​ (1,356,734) ​ ​ (1,265,825) ​ ​ (842,346) Net loan servicing fees ​ $ 705,699 ​ $ 533,655 ​ $ 642,600 62 Table of Contents Loan Servicing Fees ​ Following is a summary of our loan servicing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) From owned servicing ​ $ 1,776,557 ​ $ 1,529,452 ​ $ 1,268,650 Subservicing: ​ ​ ​ ​ ​ ​ ​ ​ ​ From PennyMac Mortgage Investment Trust ​ ​ 84,432 ​ ​ 83,252 ​ ​ 81,347 From non-affiliates ​ ​ 1,156 ​ ​ — ​ ​ — ​ ​ ​ 85,588 ​ ​ 83,252 ​ ​ 81,347 Other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Late charges ​ ​ 95,514 ​ ​ 85,390 ​ ​ 65,781 Other ​ ​ 104,774 ​ ​ 101,386 ​ ​ 69,168 ​ ​ ​ 200,288 ​ ​ 186,776 ​ ​ 134,949 ​ ​ $ 2,062,433 ​ $ 1,799,480 ​ $ 1,484,946 Average UPB of loans serviced: ​ ​ ​ ​ ​ ​ ​ ​ ​ MSRs and MSLs ​ $ 455,045,525 ​ $ 396,588,047 ​ $ 338,373,762 Subservicing ​ $ 236,486,530 ​ $ 231,303,048 ​ $ 234,303,254 ​ Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations.
Following is a quantitative summary of the effect of changes in the pull-through rate input on the fair value of IRLCs at December 31, 2024: ​ ​ ​ ​ ​ ​ Change in input (1) ​ Effect on fair value of IRLC of a change in pull-through rate (2) ​ ​ ​ (in thousands) (20) % ​ $ (8,522) (10) % ​ $ (4,255) (5) % ​ $ (2,122) 5 % ​ $ 2,473 10 % ​ $ 4,784 20 % ​ $ 9,133 (1) The upward shift in input amount on a per-loan basis is limited to the amount of shift required to reach a 100% pull-through rate. ​ (2) This analysis holds constant all of the other inputs to show an estimate of the effect on fair value of a change in the pull-through rate.
Following is a quantitative summary of the effect of changes in the pull-through rate input on the fair value of IRLCs at December 31, 2025: ​ ​ ​ ​ ​ ​ Change in input (1) ​ Effect on fair value of IRLC of a change in pull-through rate (2) ​ ​ ​ (in thousands) (20) % ​ $ (34,366) (10) % ​ $ (17,180) (5) % ​ $ (8,587) 5 % ​ $ 7,282 10 % ​ $ 13,753 20 % ​ $ 25,452 (1) The upward shift in input amount on a per-loan basis is limited to the amount of shift required to reach a 100% pull-through rate. ​ (2) This analysis holds constant all of the other inputs to show an estimate of the effect on fair value of a change in the pull-through rate.
The increase was primarily due to a $5.8 billion increase in borrowings to fund our inventory of loans held for sale and MSRs and a $1.3 billion increase in liability for loans eligible for repurchase. ​ 69 Table of Contents Cash Flows ​ Our cash flows for the three years ended December 31, 2024 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) ​ Operating ​ $ (4,533,270) ​ $ (1,582,219) ​ $ 6,033,235 ​ Investing ​ ​ (1,887,955) ​ (273,288) ​ (721,582) ​ Financing ​ ​ 5,721,336 ​ 1,465,339 ​ (4,323,207) ​ Net (decrease) increase in cash ​ $ (699,889) ​ $ (390,168) ​ $ 988,446 ​ ​ Operating activities ​ Net cash (used in) provided by operating activities totaled $(4.5) billion, $(1.6) billion, and $6.0 billion in the years ended December 31, 2024, 2023, and 2022, respectively.
The increase was primarily due to a $945 million increase in long-term debt, along with increased short-term debt used to fund our inventory of loans held for sale and a $1.3 billion increase in liability for loans eligible for repurchase. ​ 69 Table of Contents Cash Flows ​ Our cash flows for the three years ended December 31, 2025 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) ​ Operating ​ $ (1,651,984) ​ $ (4,533,270) ​ $ (1,582,219) ​ Investing ​ ​ 552,493 ​ (1,887,955) ​ (273,288) ​ Financing ​ ​ 1,162,689 ​ 5,721,336 ​ 1,465,339 ​ Net increase (decrease) in cash ​ $ 63,198 ​ $ (699,889) ​ $ (390,168) ​ ​ Operating activities ​ Net cash used in operating activities totaled $1.7 billion, $4.5 billion and $1.6 billion in the years ended December 31, 2025, 2024, and 2023, respectively.
Unobservable inputs reflect our judgements about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances. ​ ​ 9,250,503 ​ 35% ​ 242% ​ Total assets measured at or based on fair value (1) ​ $ 18,337,410 ​ 70% ​ 479% ​ Total assets ​ $ 26,086,887 ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 3,829,651 ​ ​ ​ ​ ​ (1) Includes assets measured on both a recurring and nonrecurring basis based on the accounting principles applicable to the specific asset and whether we have elected to carry the asset at its fair value. ​ At December 31, 2024, $18.3 billion or 70% of our total assets were carried at fair value on a recurring basis and $15.0 million (real estate acquired in settlement of loans (“REO”)), were carried based on fair value on a non-recurring basis when fair value indicates evidence of impairment of individual properties. ​ Changes in fair value of our holdings of assets carried at fair value have significant effects on our financial position and income.
Unobservable inputs reflect our judgements about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances. ​ ​ 10,078,120 ​ 34% ​ 234% ​ Total assets measured at or based on fair value (1) ​ $ 20,081,449 ​ 68% ​ 466% ​ Total assets ​ $ 29,388,689 ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 4,308,976 ​ ​ ​ ​ ​ (1) Includes assets measured on both a recurring and nonrecurring basis based on the accounting principles applicable to the specific asset and whether we have elected to carry the asset at its fair value. ​ At December 31, 2025, $20.0 billion or 68% of our total assets were carried at fair value on a recurring basis and $37.7 million (real estate acquired in settlement of loans (“REO”)), were carried based on fair value on a non-recurring basis when fair value indicates evidence of impairment of individual properties. ​ 51 Table of Contents Changes in fair value of our holdings of assets carried at or based on fair value have significant effects on our financial position and income.
In the year ended December 31, 2024, we recognized a $433.3 million net decrease in fair value of MSRs and MSLs: $840.7 million of decrease due to realization of cash flows underlying the fair value of MSRs and MSLs, partially offset by $407.4 million of increase due to changes in fair value inputs. ​ We estimate fair value of MSRs and MSLs using a discounted cash flow approach.
In the year ended December 31, 2025, we recognized a $1.4 billion net decrease in fair value of MSRs and MSLs: $1.2 billion of decrease due to realization of cash flows underlying the fair value of MSRs and MSLs and $251.7 million of decrease due to changes in fair value inputs. ​ 54 Table of Contents We estimate fair value of MSRs and MSLs using a discounted cash flow approach.
Therefore, these analyses are not projections of the effects of a shock event or a change in our estimate of an input and should not be relied upon as earnings projections. ​ Accounting Developments ​ Refer to Note 3 – Significant Accounting Policies ‒ Recently Issued Accounting Pronouncements to our consolidated financial statements for a discussion of recent accounting developments and the expected effect on the Company. ​ Business Trends ​ The U.S.
Therefore, these analyses are not projections of the effects of a shock event or a change in our estimate of an input and should not be relied upon as earnings projections. ​ Accounting Developments ​ Refer to Note 3 – Significant Accounting Policies ‒ Recently Issued Accounting Pronouncement Adopted in 2025 to our consolidated financial statements for a discussion of recent accounting developments and the expected effect on the Company. ​ Business Trends ​ Recent macroeconomic trends and U.S. federal government actions with respect to trade, tariffs, government cost reduction initiatives, inflation and interest rates have led to significant volatility in financial markets and uncertainty regarding the economic outlook.
The decrease was primarily due to: ​ ● an increase of $182.8 million in placement fees we receive relating to custodial funds that we manage due to increased placement fees; ​ ● an increase of $107.4 million in interest income from loans held for sale reflecting higher average levels of inventory and interest rates; ​ ● an increase of $48.6 million in interest income from cash and short-term investment balances reflecting increasing interest rates; and ​ ● a decrease of $19.2 million in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting decreased loan payoffs as a result of decreased borrower refinancing activity due to the higher interest rates; partially offset by ​ ● an increase of $317.3 million in interest expense on borrowings due to the higher interest rate environment, growth in our balance sheet and an increase in the leverage of our balance sheet. ​ Management fees are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) Base management ​ $ 28,623 ​ $ 28,762 ​ $ 31,065 Average net assets of PMT during the year ​ $ 1,908,287 ​ $ 1,917,642 ​ $ 2,079,851 ​ Management fees decreased $139,000 and $2.3 million in the year ended December 31, 2024 and 2023 compared to 2023 and 2022, respectively, reflecting the decrease in PMT’s average shareholders’ equity upon which its base management fees are based. ​ Expenses ​ Compensation ​ Our compensation expense is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (dollars in thousands) ​ Salaries and wages ​ $ 386,782 ​ $ 369,945 ​ $ 445,779 ​ Severance ​ ​ 890 ​ ​ 7,637 ​ ​ 18,797 ​ Incentive compensation ​ ​ 143,317 ​ ​ 95,790 ​ ​ 135,461 ​ Taxes and benefits ​ ​ 80,881 ​ ​ 76,010 ​ ​ 92,642 ​ Stock and unit-based compensation ​ ​ 20,868 ​ ​ 27,582 ​ ​ 42,552 ​ ​ ​ $ 632,738 ​ $ 576,964 ​ $ 735,231 ​ Head count: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ 4,107 ​ ​ 4,115 ​ ​ 5,508 ​ Year end ​ ​ 4,455 ​ ​ 3,914 ​ ​ 4,135 ​ ​ Compensation expense increased $55.8 million in the year ended December 31, 2024, compared to 2023.
The increase was primarily due to: ​ ● an increase of $153.9 million in interest expense on borrowings due to the growth in our balance sheet and an increase in the leverage of our balance sheet; ​ 66 Table of Contents ● an increase of $24.8 million in interest shortfall on repayments of loans serviced for Agency securitizations, reflecting higher loan payoffs as a result of increased borrower refinancing activity due to decreased interest rates during part of 2024; and ​ ● a decrease of $ 12.2 million in interest income from cash balances reflecting lower average balances; partially offset by ​ ● an increase of $98.9 million in placement fees we receive relating to custodial funds that we manage due to increased average outstanding balances and higher average placement fee rates; ​ ● an increase of $47.2 million in interest income from loans held for sale reflecting higher average levels of inventory; and ​ ● an increase of $26.0 million in interest income from principal-only stripped mortgage-backed securities purchased in 2024. ​ Management fees are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base management ​ ​ ​ $ 27,649 ​ ​ ​ $ 28,623 ​ ​ ​ $ 28,762 Average net assets of PMT during the year ​ $ 1,843,549 ​ $ 1,908,287 ​ $ 1,917,642 ​ Management fees decreased $1.0 million and $139,000 in the year ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, reflecting the decrease in PMT’s average shareholders’ equity upon which its base management fees are based. ​ Expenses ​ Compensation ​ Our compensation expense is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (dollars in thousands) ​ Salaries and wages ​ $ 465,860 ​ $ 387,672 ​ $ 377,582 ​ Incentive compensation ​ ​ 187,395 ​ ​ 143,317 ​ ​ 95,790 ​ Taxes and benefits ​ ​ 93,432 ​ ​ 80,881 ​ ​ 76,010 ​ Stock and unit-based compensation ​ ​ 36,229 ​ ​ 20,868 ​ ​ 27,582 ​ ​ ​ $ 782,916 ​ $ 632,738 ​ $ 576,964 ​ Head count: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ 4,759 ​ ​ 4,107 ​ ​ 4,115 ​ Year end ​ ​ 5,241 ​ ​ 4,455 ​ ​ 3,914 ​ ​ Compensation expense increased $150.2 million in the year ended December 31, 2025 compared to 2024.
The decrease in Net gains on loans held for sale at fair value for the year ended December 31, 2023 compared to 2022 was primarily due to decreased production volumes and gain on sale margins and lower EBO loan redelivery gains due to reduced reperformance and modifications and diminished redelivery margins. ​ 58 Table of Contents Our net gains on loans held for sale are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) ​ From non - affiliates: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash losses: ​ ​ ​ ​ ​ ​ ​ Loans ​ $ (1,731,125) ​ $ (1,337,613) ​ $ (2,128,195) ​ Hedging activities ​ ​ 495,429 ​ ​ (99,515) ​ ​ 1,347,843 ​ Total cash losses ​ ​ (1,235,696) ​ ​ (1,437,128) ​ ​ (780,352) ​ Non-cash gains: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in fair values of loans and derivative financial instruments outstanding at end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ ​ (56,028) ​ ​ 63,749 ​ ​ (296,349) ​ Loans ​ ​ 71,226 ​ ​ (71,425) ​ ​ 188,849 ​ Hedging derivatives ​ ​ (244,124) ​ ​ 146,456 ​ ​ (20,879) ​ ​ ​ ​ (228,926) ​ ​ 138,780 ​ ​ (128,379) ​ Mortgage servicing rights resulting from loan sales ​ ​ 2,280,830 ​ ​ 1,849,957 ​ ​ 1,718,094 ​ Provisions for losses relating to representations and warranties: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pursuant to loan sales ​ ​ (16,486) ​ ​ (12,997) ​ ​ (9,617) ​ Reductions in liability due to changes in estimate ​ ​ 13,579 ​ ​ 9,115 ​ ​ 8,451 ​ Total non-cash gains ​ ​ 2,048,997 ​ ​ 1,984,855 ​ ​ 1,588,549 ​ Total gains on sale from non-affiliates ​ ​ 813,301 ​ ​ 547,727 ​ ​ 808,197 ​ From PennyMac Mortgage Investment Trust ​ ​ 4,067 ​ ​ (1,784) ​ ​ (16,564) ​ ​ ​ $ 817,368 ​ $ 545,943 ​ $ 791,633 ​ During the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments issued: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ By loan type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government-insured or guaranteed loans ​ $ 58,134,977 ​ $ 50,202,197 ​ $ 57,882,469 ​ Conventional conforming loans ​ ​ 52,781,188 ​ ​ 41,388,408 ​ ​ 22,060,564 ​ Jumbo loans ​ ​ 2,190,238 ​ ​ 154,899 ​ ​ 98,158 ​ Closed-end second lien mortgage loans ​ ​ 1,706,713 ​ ​ 1,020,995 ​ ​ 102,215 ​ ​ ​ $ 114,813,116 ​ $ 92,766,499 ​ $ 80,143,406 ​ By production channel: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Correspondent ​ $ 83,669,855 ​ $ 73,949,658 ​ $ 51,592,641 ​ Broker direct ​ ​ 17,424,790 ​ ​ 11,149,351 ​ ​ 9,625,043 ​ Consumer direct ​ ​ 13,718,471 ​ ​ 7,667,490 ​ ​ 18,925,722 ​ ​ ​ $ 114,813,116 ​ $ 92,766,499 ​ $ 80,143,406 ​ At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale at fair value ​ $ 8,217,468 ​ $ 4,420,691 ​ $ 3,509,300 ​ Commitments to fund and purchase loans ​ $ 7,801,677 ​ $ 6,349,628 ​ $ 7,009,119 ​ ​ Non-Cash Elements of Gain on Sale of Loans Held for Sale ​ Our gains on loans held for sale include both cash and non-cash elements.
The increase in Net gains on loans held for sale at fair value for the year ended December 31, 2024 compared to 2023 was primarily due to increased volumes and gain on sale margins across all production channels. ​ Our net gains on loans held for sale are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) ​ From non - affiliates: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ (1,503,302) ​ $ (1,731,125) ​ $ (1,337,613) ​ Hedging activities ​ ​ (539,291) ​ ​ 495,429 ​ ​ (99,515) ​ Total cash losses ​ ​ (2,042,593) ​ ​ (1,235,696) ​ ​ (1,437,128) ​ Non-cash gains: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in fair values of loans and derivative financial instruments outstanding at end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ ​ 91,363 ​ ​ (56,028) ​ ​ 63,749 ​ Loans ​ ​ (91,558) ​ ​ 71,226 ​ ​ (71,425) ​ Hedging derivatives ​ ​ 137,623 ​ ​ (244,124) ​ ​ 146,456 ​ ​ ​ ​ 137,428 ​ ​ (228,926) ​ ​ 138,780 ​ Mortgage servicing rights resulting from loan sales ​ ​ 2,940,455 ​ ​ 2,280,830 ​ ​ 1,849,957 ​ Provisions for losses relating to representations and warranties: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pursuant to loan sales ​ ​ (17,189) ​ ​ (16,486) ​ ​ (12,997) ​ Reductions in liability due to changes in estimate ​ ​ 7,945 ​ ​ 13,579 ​ ​ 9,115 ​ Total non-cash gains ​ ​ 3,068,639 ​ ​ 2,048,997 ​ ​ 1,984,855 ​ Total gains on sale from non-affiliates ​ ​ 1,026,046 ​ ​ 813,301 ​ ​ 547,727 ​ From PennyMac Mortgage Investment Trust ​ ​ 45,708 ​ ​ 4,067 ​ ​ (1,784) ​ ​ ​ $ 1,071,754 ​ $ 817,368 ​ $ 545,943 ​ During the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments issued (1): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ By loan type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government-insured or guaranteed ​ $ 70,433,573 ​ $ 58,134,977 ​ $ 50,202,197 ​ Conventional conforming ​ ​ 74,090,145 ​ ​ 52,781,188 ​ ​ 41,388,408 ​ Jumbo ​ ​ 5,783,682 ​ ​ 2,190,238 ​ ​ 154,899 ​ Closed-end second lien mortgage ​ ​ 2,320,050 ​ ​ 1,706,713 ​ ​ 1,020,995 ​ ​ ​ $ 152,627,450 ​ $ 114,813,116 ​ $ 92,766,499 ​ By production channel: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Correspondent ​ $ 103,410,807 ​ $ 83,669,855 ​ $ 73,949,658 ​ Broker direct ​ ​ 28,149,824 ​ ​ 17,424,790 ​ ​ 11,149,351 ​ Consumer direct ​ ​ 21,066,819 ​ ​ 13,718,471 ​ ​ 7,667,490 ​ ​ ​ $ 152,627,450 ​ $ 114,813,116 ​ $ 92,766,499 ​ At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale at fair value ​ $ 9,123,410 ​ $ 8,217,468 ​ $ 4,420,691 ​ Commitments to fund and purchase loans ​ $ 13,474,638 ​ $ 7,801,677 ​ $ 6,349,628 ​ (1) Amounts exclude interest rate locks for loans to be fulfilled for PMT. ​ 59 Table of Contents Non-Cash Elements of Gain on Sale of Loans Held for Sale ​ Our gains on loans held for sale include both cash and non-cash elements.
The decrease in the 2023 effective income tax rate is further emphasized by the decrease in income before income taxes. ​ 68 Table of Contents Balance Sheet Analysis ​ Following is a summary of key balance sheet items as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ (in thousands) ASSETS ​ ​ ​ ​ ​ ​ Cash and short-term investment ​ $ 659,035 ​ $ 948,639 Principal-only stripped mortgage-backed securities ​ ​ 825,865 ​ ​ — Loans held for sale at fair value ​ ​ 8,217,468 ​ ​ 4,420,691 Derivative assets ​ ​ 113,076 ​ ​ 179,079 Servicing advances, net ​ ​ 568,512 ​ ​ 694,038 Investments in and advances to affiliates ​ ​ 31,150 ​ ​ 30,383 Mortgage servicing rights at fair value ​ ​ 8,744,528 ​ ​ 7,099,348 Loans eligible for repurchase ​ ​ 6,157,172 ​ ​ 4,889,925 Other ​ ​ 770,081 ​ ​ 582,460 Total assets ​ $ 26,086,887 ​ $ 18,844,563 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Short-term debt ​ $ 9,181,719 ​ $ 4,210,010 Long-term debt ​ ​ 5,213,004 ​ ​ 4,393,066 ​ ​ ​ 14,394,723 ​ ​ 8,603,076 Liability for loans eligible for repurchase ​ ​ 6,157,172 ​ ​ 4,889,925 Income taxes payable ​ ​ 1,131,000 ​ ​ 1,042,886 Other ​ ​ 574,341 ​ ​ 770,073 Total liabilities ​ ​ 22,257,236 ​ ​ 15,305,960 Stockholders' equity ​ ​ 3,829,651 ​ ​ 3,538,603 Total liabilities and stockholders' equity ​ $ 26,086,887 ​ $ 18,844,563 Leverage ratios: ​ ​ ​ ​ ​ ​ Total debt / Stockholders' equity ​ ​ 3.8 ​ ​ 2.4 Total debt / Tangible stockholders' equity (1) ​ ​ 3.9 ​ ​ 2.5 (1) Tangible stockholders’ equity represents total stockholders’ equity reduced by intangible assets, comprised of capitalized software, for the dates presented. ​ Total assets increased $7.2 billion from $18.8 billion at December 31, 2023 to $26.1 billion at December 31, 2024.
Our effective income tax rate for 2025 includes a repricing of the net deferred tax liabilities resulting from this apportionment rule change along with a reduction in the booking tax rate. ​ 68 Table of Contents Balance Sheet Analysis ​ Following is a summary of key balance sheet items as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ (in thousands) ASSETS ​ ​ ​ ​ ​ ​ Cash and short-term investment ​ $ 711,717 ​ $ 659,035 Principal-only stripped mortgage-backed securities ​ ​ 722,528 ​ ​ 825,865 Loans held for sale at fair value ​ ​ 9,123,410 ​ ​ 8,217,468 Derivative assets ​ ​ 187,775 ​ ​ 113,076 Servicing advances, net ​ ​ 589,542 ​ ​ 568,512 Mortgage servicing rights at fair value ​ ​ 9,598,941 ​ ​ 8,744,528 Investments in and advances to affiliates ​ ​ 18,063 ​ ​ 31,150 Loans eligible for repurchase ​ ​ 7,409,800 ​ ​ 6,157,172 Other ​ ​ 1,026,913 ​ ​ 770,081 Total assets ​ $ 29,388,689 ​ $ 26,086,887 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Short-term debt ​ $ 9,490,620 ​ $ 9,181,719 Long-term debt ​ ​ 6,157,763 ​ ​ 5,213,004 ​ ​ ​ 15,648,383 ​ ​ 14,394,723 Liability for loans eligible for repurchase ​ ​ 7,409,800 ​ ​ 6,157,172 Income taxes payable ​ ​ 1,184,020 ​ ​ 1,131,000 Other ​ ​ 837,510 ​ ​ 574,341 Total liabilities ​ ​ 25,079,713 ​ ​ 22,257,236 Stockholders' equity ​ ​ 4,308,976 ​ ​ 3,829,651 Total liabilities and stockholders' equity ​ $ 29,388,689 ​ $ 26,086,887 Leverage ratios: ​ ​ ​ ​ ​ ​ Total debt / Stockholders' equity ​ ​ 3.6 ​ ​ 3.8 Total debt / Tangible stockholders' equity (1) ​ ​ 3.7 ​ ​ 3.9 (1) Tangible stockholders’ equity represents total stockholders’ equity reduced by intangible assets, comprised of capitalized software, for the dates presented. ​ Total assets increased $3.3 billion from $26.1 billion at December 31, 2024 to $29.4 billion at December 31, 2025.
We expect that this development will increase the losses we incur in relation to our representations and warranties compared to our historical experience.
We expect these developments may increase the losses we incur in relation to our recorded liability for representations and warranties compared to our historical experience.
The increase was primarily due to a $3.8 billion increase in loans held for sale at fair value, a $1.6 billion increase in MSRs, a $1.3 billion increase in loans eligible for repurchase and a $825.9 million increase in principal-only stripped MBS at fair value, partially offset by a $289.6 million decrease in cash and short-term investments. ​ Total liabilities increased by $7.0 billion from $15.3 billion as of December 31, 2023 to $22.3 billion at December 31, 2024.
The increase was primarily due to a $1.3 billion increase in loans eligible for repurchase, a $905.9 million increase in loans held for sale at fair value and a $854.4 million increase in MSRs. ​ Total liabilities increased by $2.8 billion from $22.3 billion as of December 31, 2024 to $25.1 billion at December 31, 2025.
The increase was primarily due to an increase in performance-based incentives in our mortgage banking business resulting from higher loan origination volumes and higher achievement of profitability targets as well as increases in cost of salaries. 67 Table of Contents Compensation expense decreased $158.3 million in the year ended December 31, 2023, compared to 2022 primarily due to work force reductions necessitated by reductions in loan production and decreased incentive compensation accruals due to reduced staffing levels and lower achievement of profitability targets. ​ Loan origination ​ Loan origination expense increased $49.6 million in the year ended December 31, 2024 compared to 2023 due to increased lending activities and decreased $59.1 million in the year ended December 31, 2023, compared to 2022 due to decreased lending activities. ​ Servicing ​ Servicing expense increased $36.6 million in the year ended December 31, 2024 compared to 2023 primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the year ended December 31, 2024 compared to 2023.
The increase was primarily due to an increase in performance-based incentives in our mortgage banking business resulting from higher loan origination volumes and higher achievement of profitability targets as well as increases in cost of salaries. 67 Table of Contents ​ Loan origination ​ Loan origination expense increased $87.9 million and $49.6 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, due to increased lending activities. ​ Marketing and advertising ​ Marketing and advertising expenses increased $24.2 million and $4.3 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, primarily due to additional marketing expenses incurred as an Official Supporter of Team USA and increased marketing expenses for consumer direct lending. ​ Servicing ​ Servicing expense increased $16.6 million and $36.6 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively. ​ Technology ​ Technology expenses increased $13.1 million and $6.4 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively.
We believe the most significant “Level 3” fair value inputs to the valuation of MSRs and MSLs are the prepayment speed, pricing spread (a component of discount rate) and annual per-loan cost of servicing. ​ A shift in the market for MSRs and MSLs or a change in our assessment of an input to the valuation of MSRs and MSLs can have a significant effect on their fair value and in our income for the period.
A shift in the market for MSRs and MSLs or a change in our assessment of an input to the valuation of MSRs and MSLs can have a significant effect on their fair value and in our income for the period.
(EBO facility) ​ $ 24,672 ​ $ 500,000 ​ $ — ​ June 9, 2025 Servicing assets sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Atlas Securitized Products, L.P. ​ $ 175,000 ​ $ 1,236,244 ​ $ 200,000 ​ June 29, 2026 Nomura Corporate Funding Americas ​ $ 175,000 ​ $ 450,000 ​ $ 450,000 ​ August 4, 2025 Goldman Sachs Bank USA ​ $ 165,000 ​ $ 550,000 ​ $ 200,000 ​ October 25, 2026 Mizuho Bank, Ltd. ​ $ 125,000 ​ $ 350,000 ​ $ 350,000 ​ July 25, 2026 Mortgage-backed securities sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ JP Morgan Chase Bank, N.A. ​ $ 315,223 ​ ​ ​ ​ ​ ​ ​ ​ Santander US Capital Markets LLC ​ $ 282,077 ​ ​ ​ ​ ​ ​ ​ ​ Wells Fargo Bank, N.A. ​ $ 270,201 ​ ​ ​ ​ ​ ​ ​ ​ Bank of America, N.A. ​ $ 39,281 ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loan participation purchase and sale agreements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank of America, N.A. ​ $ 496,856 ​ $ 550,000 ​ $ — ​ June 11, 2025 Notes payable ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ GMSR 2022-GT1 Notes ​ $ 500,000 ​ $ 500,000 ​ ​ ​ ​ May 25, 2027 GMSR 2023-GTL1 Loans ​ $ 680,000 ​ $ 680,000 ​ ​ ​ ​ February 25, 2028 GMSR 2023-GTL2 Loans ​ $ 125,000 ​ $ 125,000 ​ ​ ​ ​ October 25, 2028 GMSR 2024-GT1 Notes ​ $ 425,000 ​ $ 425,000 ​ ​ ​ ​ March 26, 2029 Barclays FHLMC MSR Facility ​ $ 200,000 ​ $ 200,000 ​ $ 100,000 ​ March 6, 2026 Citibank, N.A.
(Early buy out facility) ​ $ 13,940 ​ $ 494,766 ​ $ 150,000 ​ June 25, 2027 Servicing assets sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Atlas Securitized Products, L.P. ​ $ 160,000 ​ $ 258,778 ​ $ 258,778 ​ December 10, 2027 Nomura Corporate Funding Americas ​ $ 150,000 ​ $ 550,000 ​ $ 550,000 ​ September 9, 2026 Goldman Sachs Bank USA ​ $ 50,000 ​ $ 550,000 ​ $ 200,000 ​ October 25, 2026 Mizuho Bank, Ltd. ​ $ 50,000 ​ $ 350,000 ​ $ 350,000 ​ July 25, 2026 Mortgage-backed securities sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ JP Morgan Chase Bank, N.A. ​ $ 248,729 ​ ​ ​ ​ ​ ​ ​ ​ Santander US Capital Markets LLC ​ $ 238,668 ​ ​ ​ ​ ​ ​ ​ ​ Wells Fargo Bank, N.A. ​ $ 210,023 ​ ​ ​ ​ ​ ​ ​ ​ Bank of America, N.A. ​ $ 32,897 ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loan participation purchase and sale agreements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank of America, N.A. ​ $ 697,087 ​ $ 750,000 ​ $ — ​ June 10, 2026 Notes payable ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ GMSR 2023-GTL1 Loans ​ $ 480,000 ​ $ 480,000 ​ ​ ​ ​ February 25, 2028 GMSR 2023-GTL2 Loans ​ $ 125,000 ​ $ 125,000 ​ ​ ​ ​ October 25, 2028 GMSR 2024-GT1 Notes ​ $ 425,000 ​ $ 425,000 ​ ​ ​ ​ March 26, 2029 GMSR 2025-GT1 Notes ​ $ 300,000 ​ $ 300,000 ​ ​ ​ ​ August 26, 2030 Barclays FHLMC MSR Facility ​ $ — ​ $ 200,000 ​ $ 100,000 ​ March 6, 2026 Citibank, N.A.
The increase in the provision relating to current loan sales in the year ended December 31, 2023 compared to 2022 was primarily attributable to an increase in loans sold and a change in the mix between government guaranteed or insured loans and conventional loans during 2023. ​ We also recorded reductions in the liability relating to previously sold loans of $13.6 million, $9.1 million, and $8.5 million, for the years ended December 31, 2024, 2023 and 2022, respectively.
The increase in provision relating to current loan sales from the year ended December 31, 2025 compared to the years ended December 31, 2024 and 2023 reflects the increase in our loan production volume in 2025. ​ We also recorded reductions in the liability relating to previously sold loans of $7.9 million, $13.6 million, and $9.1 million, for the years ended December 31, 2025, 2024 and 2023, respectively.
The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements. ​ 74 Table of Contents Our borrowings have maturities as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ Total ​ Committed ​ Facility Lender ​ indebtedness (1) ​ facility size (2) ​ facility (2) ​ Maturity date (2) ​ ​ (dollar amounts in thousands) ​ ​ Loans sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Atlas Securitized Products, L.P. ​ $ 1,763,756 ​ $ 1,763,756 ​ $ 300,000 ​ June 26, 2026 Bank of America, N.A. ​ $ 1,254,932 ​ $ 1,425,000 ​ $ 700,000 ​ June 10, 2026 JP Morgan Chase Bank, N.A. ​ $ 874,664 ​ $ 1,000,000 ​ $ 50,000 ​ June 28, 2026 Royal Bank of Canada ​ $ 785,597 ​ $ 1,000,000 ​ $ 325,000 ​ November 10, 2025 BNP Paribas ​ $ 568,790 ​ $ 600,000 ​ $ 250,000 ​ September 30, 2026 Wells Fargo Bank, N.A. ​ $ 519,104 ​ $ 600,000 ​ $ 300,000 ​ October 15, 2025 Morgan Stanley Bank, N.A. ​ $ 472,659 ​ $ 600,000 ​ $ 250,000 ​ May 22, 2026 Citibank, N.A. ​ $ 455,426 ​ $ 800,000 ​ $ 450,000 ​ June 11, 2026 Barclays Bank PLC ​ $ 254,750 ​ $ 300,000 ​ $ 250,000 ​ March 6, 2026 Goldman Sachs Bank USA ​ $ 171,624 ​ $ 200,000 ​ $ 100,000 ​ December 8, 2025 JP Morgan Chase Bank, N.A.
The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements. 73 Table of Contents ​ Our borrowings have maturities as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ Total ​ Committed ​ Facility Lender ​ ​ ​ indebtedness (1) ​ ​ ​ facility size (2) ​ ​ ​ facility (2) ​ ​ ​ Maturity date (2) ​ ​ (dollar amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans sold under agreements to repurchase ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Atlas Securitized Products, L.P. ​ $ 2,991,222 ​ $ 2,991,222 ​ $ 300,000 ​ December 10, 2027 Bank of America, N.A. ​ $ 1,087,560 ​ $ 1,525,000 ​ $ 800,000 ​ June 9, 2027 Royal Bank of Canada ​ $ 534,163 ​ $ 1,000,000 ​ $ 500,000 ​ November 10, 2026 JP Morgan Chase Bank, N.A. ​ $ 505,234 ​ $ 505,234 ​ $ — ​ June 28, 2026 Nomura Corporate Funding Americas ​ $ 446,608 ​ $ 700,000 ​ $ — ​ August 4, 2026 Citibank, N.A. ​ $ 444,851 ​ $ 1,050,000 ​ $ 700,000 ​ August 21, 2026 Wells Fargo Bank, N.A. ​ $ 440,071 ​ $ 600,000 ​ $ 300,000 ​ June 11, 2027 Morgan Stanley Bank, N.A. ​ $ 407,678 ​ $ 700,000 ​ $ 350,000 ​ October 22, 2027 BNP Paribas ​ $ 342,500 ​ $ 600,000 ​ $ 250,000 ​ September 30, 2026 Barclays Bank PLC ​ $ 229,055 ​ $ 300,000 ​ $ 250,000 ​ March 6, 2026 Goldman Sachs Bank USA ​ $ 118,428 ​ $ 200,000 ​ $ 100,000 ​ February 13, 2027 Mizuho Bank, Ltd. ​ $ 99,588 ​ $ 250,000 ​ $ 125,000 ​ October 14, 2026 JP Morgan Chase Bank, N.A.
We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings, proceeds from and issuance of equity or debt offerings.
We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings, proceeds from and issuance of equity or debt offerings. We believe that our liquidity and capital resources are sufficient. ​ Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available.
Such increased loss estimates would be recognized in Net gains on loans held for sale at fair value in the period we recognize the change. ​ The increases in market interest rates in recent years have affected certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans. Though the U.S.
Such increased loss estimates would be recognized in Net gains on loans held for sale at fair value in the period we recognize the change. ​ 61 Table of Contents Elevated interest rate levels may affect certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans, may increase the level of borrower defaults and may increase the level of repurchases we are required to make.
(1) ​ $ 5,770,912 ​ May 6, 2026 ​ May 6, 2026 Atlas Securitized Products, L.P. ​ $ 138,531 ​ May 21, 2025 ​ June 26, 2026 Bank of America, N.A. ​ $ 76,289 ​ February 2, 2025 ​ June 10, 2026 JP Morgan Chase Bank, N.A. ​ $ 55,833 ​ March 5, 2025 ​ June 28, 2026 Royal Bank of Canada ​ $ 41,459 ​ January 28, 2025 ​ November 10, 2025 Barclays Bank PLC ​ $ 37,068 ​ April 26, 2025 ​ March 6, 2026 Citibank, N.A. ​ $ 26,417 ​ March 8, 2025 ​ June 11, 2026 Morgan Stanley Bank, N.A. ​ $ 25,893 ​ March 18, 2025 ​ May 22, 2026 BNP Paribas ​ $ 24,468 ​ March 22, 2025 ​ September 30, 2026 Wells Fargo Bank, N.A. ​ $ 14,954 ​ March 16, 2025 ​ October 15, 2025 Goldman Sachs Bank USA ​ $ 7,475 ​ March 17, 2025 ​ December 8, 2025 (1) The borrowing facilities are in the form of a sale of a variable funding note under an agreement to repurchase.
(1) ​ $ 6,642,963 ​ March 6, 2027 ​ March 6, 2027 Atlas Securitized Products, L.P. ​ $ 267,343 ​ April 17, 2026 ​ December 10, 2027 Bank of America, N.A. ​ $ 89,902 ​ February 1, 2026 ​ June 9, 2027 Royal Bank of Canada ​ $ 33,291 ​ January 28, 2026 ​ November 10, 2026 JP Morgan Chase Bank, N.A. ​ $ 31,391 ​ April 9, 2026 ​ July 7, 2026 Nomura Corporate Funding Americas ​ $ 26,440 ​ March 19, 2026 ​ August 4, 2026 Citibank, N.A. ​ $ 23,075 ​ March 10, 2026 ​ ​ ​ August 21, 2026 Morgan Stanley Bank, N.A. ​ $ 24,184 ​ March 16, 2026 ​ October 22, 2027 Wells Fargo Bank, N.A. ​ $ 19,335 ​ March 14, 2026 ​ June 11, 2027 BNP Paribas ​ $ 17,721 ​ March 21, 2026 ​ September 30, 2026 Barclays Bank PLC ​ $ 16,492 ​ March 5, 2026 ​ March 6, 2026 Mizuho Bank, Ltd. ​ $ 9,213 ​ May 25, 2026 ​ October 14, 2026 Goldman Sachs Bank USA ​ $ 6,754 ​ March 18, 2026 ​ February 13, 2027 (1) The borrowing facilities are in the form of a sale of a variable funding note under an agreement to repurchase.
On May 23, 2024, the Company, together with its subsidiaries, issued $650 million in 7.125% unsecured senior notes due in 2030 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
On August 12, 2025, PFSI issued $650 million in 6.75% unsecured senior notes due in 2034 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
Loan origination fees decreased $23.7 million in the year ended December 31, 2023 compared to 2022, primarily due to a decrease in the volume of consumer direct loans we produced. ​ Fulfillment fees from PennyMac Mortgage Investment Trust ​ Following is a summary of our fulfillment fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) ​ Fulfillment fee revenue ​ $ 26,291 ​ $ 27,826 ​ $ 67,991 ​ Unpaid principal balance of loans fulfilled subject to fulfillment fees ​ $ 13,446,484 ​ $ 14,898,301 ​ $ 37,090,031 ​ Average fulfillment fee rate (in basis points) ​ ​ 20 ​ ​ 19 ​ ​ 18 ​ ​ Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans.
However, we believe our recorded liability is presently adequate to absorb such losses. ​ Loan origination fees ​ Following is a summary of our loan origination fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) ​ Loan origination fee revenue ​ $ 235,835 ​ $ 185,700 ​ $ 146,118 ​ Unpaid principal balance of loans purchased and originated for sale to non-affiliates ​ $ 139,526,158 ​ $ 102,373,179 ​ $ 84,536,740 ​ ​ Loan origination fees increased $50.1 million and $39.6 million in the year ended December 31, 2025 and 2024, respectively, compared to 2024 and 2023, respectively, primarily due to increases in volume across all production channels. ​ Fulfillment fees from PennyMac Mortgage Investment Trust ​ Following is a summary of our fulfillment fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ 2024 ​ 2023 ​ ​ (in thousands) ​ Fulfillment fee revenue ​ $ 23,804 ​ $ 26,291 ​ $ 27,826 ​ Unpaid principal balance of loans fulfilled subject to fulfillment fees ​ $ 12,893,224 ​ $ 13,446,484 ​ $ 14,898,301 ​ Average fulfillment fee rate (in basis points) ​ ​ 18 ​ ​ 20 ​ ​ 19 ​ ​ Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans.
Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. ​ Change in fair value of MSR, MSL and ESS and the related hedging results are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ ​ (in thousands) MSR and MSL valuation changes and hedging results: ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in fair value attributable to changes in fair value inputs ​ $ 407,388 ​ $ 56,807 ​ $ 877,671 Hedging results ​ ​ (832,483) ​ ​ (236,778) ​ ​ (631,484) ​ ​ ​ (425,095) ​ ​ (179,971) ​ ​ 246,187 Changes in fair value attributable to realization of cash flows ​ ​ (840,730) ​ ​ (662,375) ​ ​ (523,495) Total change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results ​ $ (1,265,825) ​ $ (842,346) ​ $ (277,308) Average balances: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights ​ $ 7,828,518 ​ $ 6,552,321 ​ $ 5,117,835 Mortgage servicing liabilities ​ $ 1,724 ​ $ 1,938 ​ $ 2,397 At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights ​ $ 8,744,528 ​ $ 7,099,348 ​ $ 5,953,621 Mortgage servicing liabilities ​ $ 1,683 ​ $ 1,805 ​ $ 2,096 ​ Changes in fair value of MSRs and MSLs attributable to changes in fair value inputs increased in the year ended December 31, 2024 compared to 2023 primarily due to the effect on fair value of a significant increase in interest rates during 2024 as compared to 2023.
We endeavor to moderate the effects of changes in fair value by entering into derivative transactions and holding principal-only stripped mortgage-backed securities. ​ 63 Table of Contents Change in fair value of MSR, MSL and ESS and the related hedging results are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (in thousands) MSR and MSL valuation changes and hedging results: ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in fair value attributable to changes in fair value inputs ​ $ (251,672) ​ $ 407,388 ​ $ 56,807 Hedging results ​ ​ 56,546 ​ ​ (832,483) ​ ​ (236,778) ​ ​ ​ (195,126) ​ ​ (425,095) ​ ​ (179,971) Changes in fair value attributable to realization of cash flows ​ ​ (1,161,608) ​ ​ (840,730) ​ ​ (662,375) Total change in fair value of mortgage servicing rights and mortgage servicing liabilities net of hedging results ​ $ (1,356,734) ​ $ (1,265,825) ​ $ (842,346) Average balances: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights ​ $ 9,337,003 ​ $ 7,828,518 ​ $ 6,552,321 Mortgage servicing liabilities ​ $ 1,626 ​ $ 1,724 ​ $ 1,938 At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights ​ $ 9,598,941 ​ $ 8,744,528 ​ $ 7,099,348 Mortgage servicing liabilities ​ $ 1,572 ​ $ 1,683 ​ $ 1,805 ​ Changes in the fair value of MSRs and MSLs attributable to changes in fair value inputs decreased in the year ended December 31, 2025 compared to 2024 and 2023 primarily due to the effect on fair value of a decrease in interest rates during 2025 compared to the higher rate environments in 2024 and 2023.
The decrease in the total expense was primarily due to decreases in legal settlements and professional services relating to a claim against us by Black Knight Servicing Technologies, LLC, partially offset by increases in compensation, loan origination and servicing expenses. ​ In the year ended December 31, 2023, we recorded income before provision for income taxes of $183.6 million, a decrease of $481.6 million or 72% from 2022.
The decrease in the total expense was primarily due to decreases in legal settlements and professional services relating to a claim against us by Black Knight Servicing Technologies, LLC, partially offset by increases in compensation, loan origination and servicing expenses. ​ 58 Table of Contents Net gains on loans held for sale at fair value ​ In the year ended December 31, 2025, we recognized Net gains on loans held for sale at fair value totaling $1.1 billion, as compared to $817.4 million and $545.9 million in 2024 and 2023, respectively.
The increase in borrowings reflects the increase in inventory of loans held for sale and our investment in MSRs. ​ 70 Table of Contents Net cash used in financing activities was $4.3 billion in the year ended December 31, 2022, primarily due to a $4.5 billion decrease in short-term borrowings, which reflects decreased borrowing requirements relating to our reduced inventory of loans held for sale, and $406.1 million in repurchases of common stock, partially offset by issuance of a $650 million note payable secured by mortgage servicing rights. ​ Liquidity and Capital Resources ​ Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them.
The increase in borrowings reflects the increase in inventory of loans held for sale and our investment in MSRs. ​ Liquidity and Capital Resources ​ Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them.
The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock.
Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock.
We continued our acquisition of conventional loans from PMT and expect to purchase more such loans from PMT through the second quarter of 2025. ​ 55 Table of Contents Results of Operations ​ ​ Our results of operations are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 2023 2022 ​ ​ (dollars in thousands except per share amounts) ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan production revenues (1) ​ $ 1,029,359 ​ $ 719,887 ​ $ 1,029,483 ​ Net loan servicing fees ​ ​ 533,655 ​ ​ 642,600 ​ ​ 951,329 ​ Management fees from PennyMac Mortgage Investment Trust ​ ​ 28,623 ​ ​ 28,762 ​ ​ 31,065 ​ Net interest expense ​ ​ (25,782) ​ ​ (4,853) ​ ​ (41,365) ​ Other ​ ​ 27,876 ​ ​ 15,260 ​ ​ 15,243 ​ Total net revenues ​ ​ 1,593,731 ​ ​ 1,401,656 ​ ​ 1,985,755 ​ Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation ​ ​ 632,738 ​ ​ 576,964 ​ ​ 735,231 ​ Loan origination ​ ​ 164,092 ​ ​ 114,500 ​ ​ 173,622 ​ Technology ​ ​ 149,547 ​ ​ 143,152 ​ ​ 139,950 ​ Servicing ​ ​ 105,997 ​ ​ 69,433 ​ ​ 59,628 ​ Professional services ​ ​ 37,992 ​ ​ 60,521 ​ ​ 73,270 ​ Legal settlements ​ ​ 1,591 ​ ​ 162,770 ​ ​ 4,649 ​ Other ​ ​ 100,748 ​ ​ 90,685 ​ ​ 134,158 ​ Total expenses ​ ​ 1,192,705 ​ ​ 1,218,025 ​ ​ 1,320,508 ​ Income before provision for income taxes ​ ​ 401,026 ​ ​ 183,631 ​ ​ 665,247 ​ Provision for income taxes ​ ​ 89,603 ​ ​ 38,975 ​ ​ 189,740 ​ Net income ​ $ 311,423 ​ $ 144,656 ​ $ 475,507 ​ Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 6.11 ​ $ 2.89 ​ $ 8.96 ​ Diluted ​ $ 5.84 ​ $ 2.74 ​ $ 8.50 ​ Return on average stockholders' equity ​ ​ 8.5% ​ ​ 4.1% ​ ​ 13.8% ​ Dividends declared per share ​ $ 1.00 ​ $ 0.80 ​ $ 0.80 ​ Income before provision for income taxes by segment and corporate and other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 311,231 ​ $ 116,078 ​ $ 130,799 ​ Servicing ​ ​ 205,002 ​ ​ 368,392 ​ ​ 731,213 ​ Corporate and other ​ ​ (115,207) ​ ​ (300,839) ​ ​ (196,765) ​ ​ ​ $ 401,026 ​ $ 183,631 ​ $ 665,247 ​ Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") (2) ​ $ 1,076,393 ​ $ 701,162 ​ $ 591,055 ​ During the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments issued ​ $ 114,813,116 ​ $ 92,766,499 ​ $ 80,143,406 ​ Unpaid principal balance of loans produced or fulfilled for PMT ​ $ 115,819,663 ​ $ 99,435,041 ​ $ 109,115,829 ​ Common stock closing per share prices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ High ​ $ 116.58 ​ $ 92.93 ​ $ 70.10 ​ Low ​ $ 83.31 ​ $ 55.82 ​ $ 39.73 ​ At end of year ​ $ 101.38 ​ $ 88.37 ​ $ 56.66 ​ At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments outstanding ​ $ 7,801,677 ​ $ 6,349,628 ​ $ 7,009,119 ​ Unpaid principal balance of loan servicing portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights and liabilities ​ $ 426,074,748 ​ $ 370,269,011 ​ $ 314,600,796 ​ Loans held for sale ​ ​ 8,128,914 ​ ​ 4,294,689 ​ ​ 3,498,214 ​ ​ ​ ​ 434,203,662 ​ ​ 374,563,700 ​ ​ 318,099,010 ​ Subserviced for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PMT ​ ​ 230,753,581 ​ ​ 232,653,069 ​ ​ 233,575,672 ​ U.S.
The current economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increased losses relating to the representations and warranties we provide in our loan sale transactions. ​ 55 Table of Contents We expect to sell a portion of our conventional conforming correspondent loan production and all of our non-agency loans to PMT in the first quarter of 2026. ​ Results of Operations ​ ​ Our results of operations are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ (dollars in thousands except per share amounts) ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan production revenues (1) ​ $ 1,331,393 ​ $ 1,029,359 ​ $ 719,887 ​ Net loan servicing fees ​ ​ 705,699 ​ ​ 533,655 ​ ​ 642,600 ​ Net interest expense ​ ​ (36,108) ​ ​ (25,782) ​ ​ (4,853) ​ Other ​ ​ 45,552 ​ ​ 56,499 ​ ​ 44,022 ​ Total net revenues ​ ​ 2,046,536 ​ ​ 1,593,731 ​ ​ 1,401,656 ​ Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation ​ ​ 782,916 ​ ​ 632,738 ​ ​ 576,964 ​ Loan origination ​ ​ 251,990 ​ ​ 164,092 ​ ​ 114,500 ​ Technology ​ ​ 162,604 ​ ​ 149,547 ​ ​ 143,152 ​ Servicing ​ ​ 122,626 ​ ​ 105,997 ​ ​ 69,433 ​ Marketing and advertising ​ ​ 46,140 ​ ​ 21,969 ​ ​ 17,631 ​ Legal settlements ​ ​ — ​ ​ 1,591 ​ ​ 162,770 ​ Other ​ ​ 128,843 ​ ​ 116,771 ​ ​ 133,575 ​ Total expenses ​ ​ 1,495,119 ​ ​ 1,192,705 ​ ​ 1,218,025 ​ Income before provision for income taxes ​ ​ 551,417 ​ ​ 401,026 ​ ​ 183,631 ​ Provision for income taxes ​ ​ 50,340 ​ ​ 89,603 ​ ​ 38,975 ​ Net income ​ $ 501,077 ​ $ 311,423 ​ $ 144,656 ​ Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 9.69 ​ $ 6.11 ​ $ 2.89 ​ Diluted ​ $ 9.30 ​ $ 5.84 ​ $ 2.74 ​ Return on average stockholders' equity ​ ​ 12.4% ​ ​ 8.5% ​ ​ 4.1% ​ Dividends declared per share ​ $ 1.20 ​ $ 1.00 ​ $ 0.80 ​ Income before provision for income taxes by reportable segment and corporate and other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production ​ $ 369,920 ​ $ 311,231 ​ $ 116,078 ​ Servicing ​ ​ 324,893 ​ ​ 205,002 ​ ​ 368,392 ​ Corporate and other ​ ​ (143,396) ​ ​ (115,207) ​ ​ (300,839) ​ ​ ​ $ 551,417 ​ $ 401,026 ​ $ 183,631 ​ Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") (3) ​ $ 1,128,726 ​ $ 1,076,393 ​ $ 701,162 ​ During the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments issued (2) ​ $ 152,627,450 ​ $ 114,813,116 ​ $ 92,766,499 ​ Unpaid principal balance of loans originated and purchased by PFSI and fulfilled for PMT ​ $ 146,102,988 ​ $ 115,819,663 ​ $ 99,435,041 ​ Common stock closing per share prices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ High ​ $ 136.06 ​ $ 116.58 ​ $ 92.93 ​ Low ​ $ 89.28 ​ $ 83.31 ​ $ 55.82 ​ At end of year ​ $ 133.26 ​ $ 101.38 ​ $ 88.37 ​ At end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments outstanding ​ $ 13,474,638 ​ $ 7,801,677 ​ $ 6,349,628 ​ Unpaid principal balance of loan servicing portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage servicing rights and liabilities ​ $ 462,035,445 ​ $ 426,074,748 ​ $ 370,269,011 ​ Loans held for sale ​ ​ 8,930,477 ​ ​ 8,128,914 ​ ​ 4,294,689 ​ ​ ​ ​ 470,965,922 ​ ​ 434,203,662 ​ ​ 374,563,700 ​ Subserviced for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PMT ​ ​ 226,774,067 ​ ​ 230,753,581 ​ ​ 232,653,069 ​ Interim servicing ​ ​ 24,257,095 ​ ​ 806,584 ​ ​ — ​ Other non-affiliates ​ ​ 11,616,738 ​ ​ — ​ ​ — ​ ​ ​ ​ 262,647,900 ​ ​ 231,560,165 ​ ​ 232,653,069 ​ ​ ​ $ 733,613,822 ​ $ 665,763,827 ​ $ 607,216,769 ​ Book value per share ​ $ 82.77 ​ $ 74.54 ​ $ 70.52 ​ (1) Includes Net gains on loans held for sale at fair value , Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust . 56 Table of Contents ​ (2) Amounts exclude interest rate locks for loans to be fulfilled for PMT. ​ (3) To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted EBITDA as a non-GAAP measure.
The facility maturity date represents a weighted average with maturity dates ranging from August 4, 2025 through October 28, 2026. ​ Principal-only stripped MBS ​ ​ ​ ​ ​ ​ ​ Counterparty ​ Amount at risk ​ Maturity ​ ​ (in thousands) ​ ​ Bank of America, N.A. ​ $ 1,788 ​ January 24, 2025 JP Morgan Chase Bank, N.A. ​ $ 21,739 ​ January 6, 2025 Wells Fargo Bank, N.A. ​ $ 18,238 ​ January 23, 2025 Santander US Capital Markets LLC ​ $ 13,226 ​ January 15, 2025 ​ All debt financing arrangements that matured between December 31, 2024 and the date of this Annual Report have been renewed or extended and are described in Note 15 — Short-Term Debt to the accompanying consolidated financial statements. ​
The facility maturity date represents a weighted average with maturity dates ranging from August 4, 2026 through December 10, 2027. ​ Principal-only stripped MBS ​ ​ ​ ​ ​ ​ ​ Counterparty ​ ​ ​ Amount at risk ​ ​ ​ Maturity ​ ​ (in thousands) ​ ​ Bank of America, N.A. ​ $ 3,179 ​ January 28, 2026 JP Morgan Chase Bank, N.A. ​ $ 20,591 ​ January 7, 2026 Wells Fargo Bank, N.A. ​ $ 17,918 ​ January 23, 2026 Santander US Capital Markets LLC ​ $ 13,956 ​ January 15, 2026 ​
Servicing expense increased $9.8 million in the year ended December 31, 2023 compared to 2022 primarily due to the non-recurrence in 2023 of the reversal of the provision for estimated servicing advance losses that was recognized during 2022 as COVID-19 related delinquencies decreased significantly. ​ Provision for income taxes ​ For the years ended December 31, 2024, 2023 and 2022, our effective income tax rates were 22.3%, 21.2%, and 28.5%, respectively.
The increases were primarily due to increases in virtual desktop and cloud-related expenses and a $4.6 million impairment of capitalized software recorded during the year ended December 31, 2025. ​ Provision for income taxes ​ For the years ended December 31, 2025, 2024 and 2023, our effective income tax rates were 9.1%, 22.3%, and 21.2%, respectively.
The net fair value of MSRs and MSLs that we held at December 31, 2024 was $8.7 billion. ​ 54 Table of Contents Following is a summary of the effect on fair value of MSRs of various changes to these key inputs at December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect on fair value of MSRs and MSLs of a change in input value (1) ​ Change in input Prepayment speed Pricing spread Servicing cost ​ ​ ​ (in thousands) ​ (20) % ​ $ 550,512 ​ $ 484,627 ​ $ 195,321 ​ (10) % ​ $ 265,635 ​ $ 235,896 ​ $ 97,661 ​ (5) % ​ $ 130,541 ​ $ 116,402 ​ $ 48,830 ​ 5 % ​ $ (126,224) ​ $ (113,419) ​ $ (48,830) ​ 10 % ​ $ (248,349) ​ $ (223,960) ​ $ (97,661) ​ 20 % ​ $ (481,100) ​ $ (436,805) ​ $ (195,321) ​ (1) This analysis holds constant all of the inputs other than the input that is being changed in order to show an estimate of the effect on fair value of a change in a specific input.
The net fair value of MSRs and MSLs that we held at December 31, 2025 was $9.6 billion. ​ Following is a summary of the effect on fair value of MSRs of various changes to these key inputs at December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect on fair value of MSRs and MSLs of a change in input value (1) ​ Change in input ​ ​ Prepayment speed ​ ​ Option-adjusted spread ​ ​ Servicing cost ​ ​ ​ (in thousands) ​ (20) % ​ $ 747,036 ​ $ 403,992 ​ $ 202,122 ​ (10) % ​ $ 358,322 ​ $ 197,480 ​ $ 101,061 ​ (5) % ​ $ 175,589 ​ $ 97,647 ​ $ 50,531 ​ 5 % ​ $ (168,856) ​ $ (95,530) ​ $ (50,531) ​ 10 % ​ $ (331,359) ​ $ (189,008) ​ $ (101,061) ​ 20 % ​ $ (638,689) ​ $ (370,059) ​ $ (202,122) ​ (1) This analysis holds constant all of the inputs other than the input that is being changed in order to show an estimate of the effect on fair value of a change in a specific input.
The capital markets valuation staff submits the results of its valuations to our senior management valuation subcommittee, which oversees the valuations.
The capital markets valuation staff reports valuations to our management valuation subcommittee responsible for monitoring and overseeing valuations.
Elevated interest rates have constrained growth in the size of the mortgage origination market, which grew slightly from $1.5 trillion in 2023 to an estimated $1.7 trillion in 2024, and is expected to grow modestly to $2.0 trillion in 2025 according to mortgage industry economists. ​ Fluctuating interest rates and an increasing number of mortgage loans outstanding with interest rates near current levels have led to an increasing opportunity for refinancing, which has driven increased mortgage production activity in the most recent year and also led to increasing prepayment speeds on our mortgage servicing portfolio from the historically slow prepayment speeds experienced in 2023.
Elevated interest rates in recent years have constrained growth in the size of the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.3 trillion in 2026 according to mortgage industry economists. ​ The opportunity for refinancing has increased recently, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates.
The decrease was due to a $309.6 million decrease in production revenues primarily due to lower production volume and a shift in the mix of production to lower margin channels and a $308.7 million decrease in Net loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results, partially offset by a $102.5 million decrease in total expenses.
The increase was due to a $302.0 million increase in production revenues (net gains on sales of loans, loan origination fees and fulfillment fees) primarily due to higher production volumes and a $172.0 million increase in Net loan servicing fees resulting from growth in servicing fees, partially offset by a $302.4 million increase in total expenses.
Removed
Federal Reserve has reduced the federal funds rate somewhat from its highest level since 2007 as inflationary pressures have abated, and longer-term interest rates remain near their most elevated levels in recent years.
Added
Beginning in the third quarter of 2025, we enhanced our discounted cash flow approach to estimate the period-end fair value of our MSRs with the adoption of an Option-Adjusted Spread (“OAS”) discounted cash flow model.
Removed
Higher interest rate levels have increased the costs of floating rate borrowings as well as interest income from placement fees we receive relating to custodial funds that we manage on deposits and loans held for sale as compared to the prior year.
Added
The OAS model allows us to account for the likelihood of interest rates moving along different paths as economic conditions change in our assessment of the fair value of MSRs as opposed to a single assumed rate path. ​ We believe the most significant “Level 3” fair value inputs to the valuation of MSRs and MSLs are the prepayment speed, OAS or pricing spread (the OAS and pricing spread are components of the discount rate) and annual per-loan cost of servicing.
Removed
However, these items will be impacted in future periods by the reductions to the federal funds rate that the Federal Reserve has recently put into place.
Added
If such interest rate volatility continues, it may drive greater mortgage production activity and higher prepayment speeds. Towards the end of the fourth quarter of 2025, we experienced higher prepayment speeds and increased runoff of MSRs that outpaced the growth of our production-related income.
Removed
Department of Veterans Affairs ​ ​ 806,584 ​ ​ — ​ ​ — ​ ​ ​ ​ 231,560,165 ​ ​ 232,653,069 ​ ​ 233,575,672 ​ ​ ​ $ 665,763,827 ​ $ 607,216,769 ​ $ 551,674,682 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net assets of PennyMac Mortgage Investment Trust ​ $ 1,938,500 ​ $ 1,957,090 ​ $ 1,962,815 ​ Book value per share ​ $ 74.54 ​ $ 70.52 ​ $ 69.44 ​ (1) Includes Net gains on loans held for sale at fair value , Loan origination fees and Fulfillment fees from PennyMac Mortgage Investment Trust . ​ 56 Table of Contents (2) To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted EBITDA as a non-GAAP measure.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed14 unchanged
Biggest changeFor these reasons, the following estimates should not be viewed as earnings forecasts. 77 Table of Contents Mortgage Servicing Rights ​ The following tables summarize the estimated change in fair value of MSRs as of December 31, 2024, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in fair value attributable to shift in: ​ -20% ​ -10% ​ -5% ​ +5% ​ +10% ​ +20% ​ ​ (in thousands) ​ Prepayment speed ​ $ 550,512 ​ $ 265,635 ​ $ 130,541 ​ $ (126,224) ​ $ (248,349) ​ $ (481,100) ​ Pricing spread ​ $ 484,627 ​ $ 235,896 ​ $ 116,402 ​ $ (113,419) ​ $ (223,960) ​ $ (436,805) ​ Annual per-loan cost of servicing ​ $ 195,321 ​ $ 97,661 ​ $ 48,830 ​ $ (48,830) ​ $ (97,661) ​ $ (195,321) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Biggest changeFor these reasons, the following estimates should not be viewed as earnings forecasts. 76 Table of Contents Mortgage Servicing Rights ​ The following tables summarize the estimated change in fair value of MSRs as of December 31, 2025, given several shifts in prepayment speed, option adjusted spread and annual per loan cost of servicing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in fair value attributable to shift in: ​ ​ ​ -20% ​ ​ ​ -10% ​ ​ ​ -5% ​ ​ ​ +5% ​ ​ ​ +10% ​ ​ ​ +20% ​ ​ (in thousands) ​ Prepayment speed ​ $ 747,036 ​ $ 358,322 ​ $ 175,589 ​ $ (168,856) ​ $ (331,359) ​ $ (638,689) ​ Option adjusted spread ​ $ 403,992 ​ $ 197,480 ​ $ 97,647 ​ $ (95,530) ​ $ (189,008) ​ $ (370,059) ​ Annual per-loan cost of servicing ​ $ 202,122 ​ $ 101,061 ​ $ 50,531 ​ $ (50,531) ​ $ (101,061) ​ $ (202,122) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Our objective is to minimize our hedging expense and maximize our loss coverage based on a given hedge expense target. We do not use derivative financial instruments other than IRLCs for purposes other than in support of our risk management activities. Our strategies are reviewed daily within a disciplined risk management framework.
Our objective is to minimize our hedging expense and maximize our loss coverage based on a given hedge expense target. We do not use derivative financial instruments other than IRLCs for purposes other than in support of our risk management activities. Our strategies are regularly reviewed within a disciplined risk management framework.
The fair value risk we face is primarily attributable to interest rate risk and prepayment risk. 76 Table of Contents Interest Rate Risk Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.
The fair value risk we face is primarily attributable to interest rate risk and prepayment risk. 75 Table of Contents Interest Rate Risk Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.

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