Pennymac reported steady origination volume to begin the year but its profits took a hit with yet another negative one-time charge.
The correspondent giant reported Tuesday $76.3 million net income in the first quarter and diluted earnings per share of $1.42. Those numbers were down from Standard & Poor's Capital IQ consensus estimates of $139 million net income and $2.64 diluted EPS, respectively.
The earnings were marred by a $98.7 million negative charge stemming from a mortgage servicing rights fair-value decline of $205.5 million, offset by $106.8 million in hedging gains, the company reported.
In the fourth quarter, Pennymac reported
Chairman and CEO David Spector in an earnings call Tuesday afternoon touted Pennymac's gains in wholesale originations and a growing recapture rate. Responding to an investor question, Spector said the company's correspondent and servicing prowess would be undeterred in a landscape altered by the major
"We don't have any distractions here at the company," he said. "I don't know if others in the industry can say the same thing. We're going to continue to be the number one correspondent aggregator and we're going to continue our dominance there."
Pennymac reported $22.1 billion in correspondent lock volume in the first quarter, a step back from the end of 2024 but ahead of the $17.1 billion at the beginning of last year. It laid claim to an industry-leading 19.4% market share and 787 correspondent sellers in the first quarter.
The Southern California-based lender also reported $5.5 in broker-direct locks, and a slight gain in market share to 4.3%. The company had a roster of 4,853 approved brokers. Its consumer direct volume also trickled up to $3.9 billion, marking a 77% increase from the year ago period.
The company recorded increased recapture rates for both government and conventional loans in the first quarter compared to the entirety of 2024. Including closed-end second liens, Pennymac is recapturing 66% of its government-backed loan borrowers and 42% of its conventional borrowers, according to Tuesday's report.
"Most of the loans are coming from rate-and-term (transactions)," said Spector. "It just speaks to the lead gen technology and processes that we've put in place to give us better capability to categorize the mark-to-market, the end-of-money customers to be able to recapture the loans."
The CEO spoke at length about Pennymac's technology upgrades, including an around-the-clock customer chat that saved the firm 45,000 hours a year, or $2 million. Another servicing documentation automation process is saving the company an additional 130,000 hours, or another $2 million a year.
For the first quarter, Pennymac reported $61.9 million in pretax production income, a 20% quarterly decrease but 27% annual gain. Servicing income of $76 million was also down from the fourth quarter's $87.3 million mark, but significantly up from $23.7 million the same time a year ago.
Pennymac in February also issued $850 million of 8-year unsecured senior notes due in 2033; it has $650 million in bonds due this October. The company counts total liquidity including cash and amounts available to draw of $4 billion.
Spector also briefly opined on the Trump administration's
"I believe it'll improve redefault rates as well as wring out the bad actors in the industry," he said.
