The company's diluted earnings per share was $2.54, also missing an S&P estimate but improving on EPS results of $1.42 and $1.85 in the quarter and year ago periods. 

Tuesday's earnings showed mostly positive trends for the firm, which claims it's the industry's second-largest producer and sixth-largest servicer. It posted a $93 million negative charge from $109.1 million in hedging losses, offset by $15.9 million in mortgage-servicing rights fair value gains.

Executives attributed the ill effects to mortgage rates swinging significantly in April. They said the firm adjusted its staffing to respond quicker to recapture and origination opportunities, so Pennymac can better offset reductions in MSR values when rates dip. 

"In doing that, we expect that we will have lower costs as we go forward," said Daniel Perotti, senior managing director and chief financial officer. 

Pennymac sees more volume, and larger production expenses

The lender reported production expenses rising 8% from the first quarter partially because of the hiring strategy. Production income of $57.8 million was down from last quarter's $61.9 million, but a $2.6 million improvement from the second quarter of last year. 

Pennymac's $28.7 billion in correspondent lock volume was also up 29% and 36% compared to the first quarter and second quarter last year, respectively. The company accounts for a fifth of the correspondent space, and said it nearly doubled the volume of the second-largest correspondent player, Freedom Mortgage, over the prior 12 months. 

CEO David Spector said he anticipates correspondent aggregators to be active in the "higher-for-longer" environment, as among other factors sellers don't have the margins to retain servicing. 

"Given the volatility in the markets, aggregating servicing is not for the faint of heart, and I think if you're not hedging servicing, it could backfire pretty quickly on you," he said. 

The lender isn't shy about its wholesale ambitions, and saw its broker-direct production rise to $7.2 billion in the second quarter. That's up from $5.5 billion to start the year and $4.3 billion a year ago. 

Pennymac reported a 5% wholesale share in the first half of 2025, and is aiming for a 10% share by the end of next year, which would place it closer to Rocket Cos. and slightly nearer to United Wholesale Mortgage, which holds almost a third of the market. 

At the end of June, the company reported a servicing book of $699.7 billion in unpaid balance. Executives are bullish on their recapture opportunity, with 26% of that portfolio holding note rates above 6%. Including closed-end second lien originations, Pennymac touts a conventional recapture rate of 40% and government-sponsored mortgage recapture rate of 61%. 

That momentum could be aided by Pennymac's artificial intelligence investments, where it claims 35 AI-powered tools either implemented or in development. According to its earnings report, Pennymac is projecting a $25 million economic benefit annually from those investments.  

"While this is far more than a strong start, this is just the beginning of what's possible and we are incredibly excited about what the future holds," said Spector.