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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported): October 25, 2023
PennyMac
Financial Services, Inc.
(Exact name of registrant as specified in
its charter)
Delaware |
001-35916 |
83-1098934 |
(State or other jurisdiction
of incorporation) |
(Commission
File Number) |
(IRS Employer
Identification No.) |
3043 Townsgate Road, Westlake Village, California |
91361 |
(Address of principal executive offices) |
(Zip Code) |
(818) 224-7442
(Registrant’s telephone number, including
area code)
Not Applicable
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $0.0001 par value |
PFSI |
New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01 Entry into a Material Definitive Agreement.
On October 25, 2023, PennyMac Financial Services, Inc. (“Company”), through its direct wholly owned subsidiary, Private National
Mortgage Acceptance Company, LLC (“PNMAC”) and two of its indirect, wholly owned subsidiaries, PNMAC GMSR ISSUER TRUST (“Issuer
Trust”) and PennyMac Loan Services, LLC (“PLS”), entered into a syndicated series of term loans (the “Series 2023-GTL2
Loan”), as part of the structured finance transaction that PLS uses to finance Ginnie Mae mortgage servicing rights and related
excess servicing spread and servicing advance receivables. The Company entered into a Series 2023-GTL2 Indenture Supplement and Loan Agreement
by and among Issuer Trust, as issuer, PLS, as administrator and servicer, Atlas Securitized Products, L.P., as administrative agent (“Atlas”),
and the syndicated lenders party thereto (the “Series 2023-GTL2 Loan Agreement”), related to the servicing spread. The initial
5-year term of the Series 2023-GTL2 Loan is set to expire on October 25, 2028.
The Series 2023-GTL2 Loan provides more financing for Ginnie Mae mortgage
servicing rights and related excess servicing spread in addition to (i) the previously issued term notes, (ii) the Series 2023-GTL1 Loan,
(iii) that certain Amended and Restated Series 2016-MSRVF1 Master Repurchase Agreement by and among PLS, as seller, Atlas, as administrative
agent to the buyers, Nexera Holdings LLC, as a buyer, Citibank, N.A. (“Citibank”), as a buyer, and PNMAC, as a guarantor,
dated July 30, 2021 (the “Syndicated GMSR Servicing Spread Agreement”), (iv) a Series 2023-MSRVF1 Master Repurchase Agreement
by and among PLS, as seller, Goldman Sachs Bank USA, as administrative agent and buyer, and PNMAC, as a guarantor (the “GS Servicing
Spread Agreement”), and (v) a Series 2023-MSRVF1 Master Repurchase Agreement by and among PLS, as seller, Nomura Corporate Funding
Americas, LLC, as administrative agent and buyer, and PNMAC, as a guarantor (the “Nomura Servicing Spread Agreement”).
The initial note balance of the Series 2023-GTL2 Loan is $125 million.
During the term of the loan, PLS is required to repay the syndicated lenders monthly for accrued interest (at a rate reflective of the
current market based on a spread above the Secured Overnight Financing Rate).
The Series 2023-GTL2 Loan Agreement requires that PLS and the Issuer
Trust make certain representations, warranties and covenants customary for this type of transaction.
The Series 2023-GTL2 Loan Agreement contains certain advance rate reduction
events, early amortization events, and scheduled principal payment events (subject to certain thresholds) that would require the Issuer
Trust to make early payments of principal on the Series 2023-GTL2 Loan. In addition, the Third Amended and Restated Base Indenture, dated
as of April 1, 2020, by and among Issuer Trust, Citibank, PLS, Atlas and Pentalpha Surveillance LLC (the “Third Amended and Restated
Base Indenture”) contains margin call provisions and events of default (subject to certain materiality thresholds and grace periods),
including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, bankruptcy
or insolvency proceedings and other events of default customary for this type of transaction, that apply to the Series 2023-GTL2 Loan.
The remedies for such events of default include the acceleration of the principal amount outstanding under the Series 2023-GTL2 Loan Agreement.
The foregoing descriptions do not purport
to be complete and are qualified in their entirety by reference to the other descriptions and the full text of the agreements and amendments
in the following: (i) Series 2023-GTL2 Loan Agreement, which has been filed with this Current Report on Form 8-K as Exhibit 10.1, (ii)
the Series 2023-GTL1 Loan Agreement, which was filed on March 3, 2023 with the Company’s Report on Form 8-K as Exhibit 10.1, (iii)
the Nomura Servicing Spread Agreement, which was filed on August 10, 2023 with the Company’s Report on Form 8-K as Exhibit 10.1,
(iv) the GS Servicing Spread Agreement, which was filed on February 13, 2023 with the Company’s Report on Form 8-K as Exhibit 10.1,
(v) the Syndicated GMSR Servicing Spread Agreement, which was filed on August 5, 2021 with the Company’s Current Report on Form
8-K as Exhibit 10.1, (vi) the Third Amended and Restated Base Indenture, which was filed on April 7, 2020 with the Company’s Current
Report on Form 8-K as Exhibit 10.5, and (vii) the full text of all other amendments to the foregoing filed thereafter with the
SEC.
Item 2.02 Results of Operations and Financial
Condition.
On October 26, 2023, the Company
issued a press release and a slide presentation announcing its financial results for the fiscal quarter ended September 30, 2023. A copy
of the press release and slide presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively.
In addition, the Company has made available other supplemental financial information for the fiscal
quarter ended September 30, 2023 on its website at pfsi.pennymac.com.
The information in Item 2.02 of this report, including the exhibits
hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject
to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company,
except to the extent, if any, expressly set forth by specific reference in such filing.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this report is incorporated
herein by reference.
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description |
|
|
10.1^ |
Series 2023-GTL2 Indenture Supplement and Loan Agreement, dated as of October 25, 2023, by and among PNMAC GMSR ISSUER TRUST, as issuer, PennyMac Loan Services, LLC, as administrator and servicer, Atlas Securitized Products, L.P., as administrative agent, and the syndicated lenders party thereto. |
99.1 |
Press Release, dated October 26, 2023, issued by PennyMac Financial Services, Inc. pertaining to its financial results for the fiscal quarter ended September 30, 2023. |
99.2 |
Slide Presentation for use beginning on October 26, 2023 in connection with a recorded presentation of financial results for the fiscal quarter ended September 30, 2023. |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
^ Portions of the exhibit have been redacted.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
PENNYMAC FINANCIAL SERVICES, INC. |
|
|
Dated: October 26, 2023 |
/s/ Daniel S. Perotti |
|
Daniel S. Perotti
Senior Managing Director and Chief Financial Officer |
EXHIBIT 10.1
[Information indicated
with brackets has been excluded from this exhibit because it is
not material and
would be competitively harmful if publicly disclosed]
PNMAC GMSR ISSUER TRUST,
as Issuer
and
CITIBANK, N.A.,
as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary
and
PENNYMAC LOAN SERVICES, LLC,
as Administrator and Servicer
and
ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent
and
CAPITAL ONE, NATIONAL ASSOCIATION,
as Lead Arranger and a Lender
and
OTHER LENDERS FROM TIME TO TIME PARTY HERETO
as Noteholders
SERIES 2023-GTL2 INDENTURE SUPPLEMENT AND LOAN
AGREEMENT
Dated as of October 25, 2023
To
THIRD AMENDED AND RESTATED BASE INDENTURE
Dated as of April 1, 2020
MSR COLLATERALIZED PROMISSORY NOTES,
SERIES 2023-GTL2
Table
of Contents
Page
Section
1. | |
The
Series 2023-GTL2 Loan and Creation of the Series 2023-GTL2 Promissory Term Notes | |
2 |
| |
| |
|
Section
2. | |
Defined Terms | |
2 |
| |
| |
|
Section
3. | |
Form of the
Series 2023-GTL2 Promissory Term Notes; Transfer Restrictions | |
11 |
| |
| |
|
Section
4. | |
Payments
and Allocation of Funds on Payment Dates; No Series Reserve Account | |
11 |
| |
| |
|
Section
5. | |
Optional
Redemption and Refinancing | |
12 |
| |
| |
|
Section
6. | |
Reserved | |
12 |
| |
| |
|
Section
7. | |
Assignment | |
12 |
| |
| |
|
Section
8. | |
Conditions
Precedent Satisfied | |
15 |
| |
| |
|
Section
9. | |
Representations
and Warranties | |
15 |
| |
| |
|
Section
10. | |
Determination
of Note Interest Rate and Benchmark | |
15 |
| |
| |
|
Section
11. | |
Amendments | |
17 |
| |
| |
|
Section
12. | |
Counterparts | |
19 |
| |
| |
|
Section
13. | |
Entire Agreement | |
20 |
| |
| |
|
Section
14. | |
Limited Recourse | |
20 |
| |
| |
|
Section
15. | |
Owner Trustee
Limitation of Liability | |
20 |
| |
| |
|
Section
16. | |
No Note Rating | |
21 |
| |
| |
|
Section
17. | |
No Compliance
with EU Securitization Regulation and UK Securitization Regulation Due Diligence Requirements | |
21 |
| |
| |
|
Section
18. | |
Administrative
Fee | |
21 |
| |
| |
|
Section
19. | |
Return of
Payments and Erroneous Payments | |
21 |
| |
| |
|
Section
20. | |
Resignation
of Administrative Agent | |
23 |
| |
| |
|
Section
21. | |
Limited Liability
and Indemnification | |
23 |
| |
| |
|
Section
22. | |
Term Loan
Reports and Confidentiality | |
24 |
This SERIES 2023-GTL2 INDENTURE
SUPPLEMENT AND LOAN AGREEMENT (this “Indenture Supplement”), dated as of October 25, 2023, is made by and among PNMAC
GMSR ISSUER TRUST, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”),
CITIBANK, N.A., a national banking association, as indenture trustee (in such capacity, the “Indenture Trustee”),
as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying
Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PENNYMAC LOAN
SERVICES, LLC, a limited liability company organized under the laws of the State of Delaware (“PLS”), as administrator
(in such capacity, the “Administrator”) and servicer (in such capacity, the “Servicer”), ATLAS
SECURITIZED PRODUCTS, L.P. (“ASP”), a Delaware limited partnership, as administrative agent (the “Administrative
Agent”), CAPITAL ONE, NATIONAL ASSOCIATION, as lead arranger (the “Lead Arranger”) and a Lender, and other
Lenders (as defined herein) from time to time. This Indenture Supplement relates to and is executed pursuant to that certain Third Amended
and Restated Base Indenture, dated as of April 1, 2020, including the schedules and exhibits thereto (as amended by Amendment No. 1,
dated as of June 8, 2022, Amendment No. 2, dated as of June 9, 2022, and Amendment No. 3, dated as of February 7, 2023, and as may be
further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture” and together
with this Indenture Supplement, the “Indenture”), among the Issuer, the Administrator, the Servicer, the Indenture
Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, Pentalpha Surveillance LLC, a Delaware limited liability
company, as credit manager, ASP, as Administrative Agent, and the “Administrative Agents” from time to time parties thereto,
all the provisions of which are incorporated herein as modified hereby and shall be a part of this Indenture Supplement as if set forth
herein in full.
Capitalized terms used and
not otherwise defined herein shall have the respective meanings given them in the Base Indenture, and the rules of interpretation set
forth in Section 1.2 of the Base Indenture shall apply equally herein.
PRELIMINARY STATEMENT
WHEREAS, the Lenders
desire to loan funds to the Issuer pursuant to the terms of this Indenture Supplement;
WHEREAS, the Issuer
desires to borrow funds from the Lenders on the terms and conditions set forth in this Indenture Supplement and the Base Indenture;
WHEREAS, to evidence
each aforementioned lending arrangement (the “Series 2023-GTL2 Loan”) in the form of a promissory note, the Lenders
have requested and the Issuer has duly authorized the issuance of a Series of Term Notes, the Series 2023-GTL2 Promissory Term Notes
(as defined below). The parties are entering into this Indenture Supplement to document the terms of the issuance of the Series 2023-GTL2
Promissory Term Notes pursuant to the Base Indenture, which provides for the issuance of Notes in multiple series from time to time;
and
WHEREAS, the Lenders
are also Noteholders and the Series 2023-GTL2 Promissory Term Notes are also Notes, and more specifically, a Series of Term Notes, as
such terms are defined in the Base Indenture and shall be afforded the rights as set forth in the Base Indenture, including as such rights
relate to the other Noteholders as described therein.
NOW, THEREFORE, in
consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the
Administrator, the Servicer, the Administrative Agent and the Lenders hereby agree as follows:
Section 1.
The Series 2023-GTL2 Loan and Creation of the Series 2023-GTL2 Promissory Term Notes.
To evidence the Series 2023-GTL2
Loan being provided by Lenders to Issuer hereunder on the Issuance Date, there are hereby created the Series 2023-GTL2 Promissory Term
Notes, to be issued as a Series of Term Notes pursuant to the Base Indenture and this Indenture Supplement, to be known as “PNMAC
GMSR Issuer Trust MSR Collateralized Promissory Notes, Series 2023-GTL2” (the “Series 2023-GTL2 Promissory Term Notes”).
The Series 2023-GTL2 Promissory Term Notes will not be rated and shall be subordinated to the Series 2016-MBSADV1 Notes, the Series 2021-MBSADV1
Notes, Series 2023-MBSADV1 Notes, Series 2023-MBSADV2 Notes and other MBS Advance VFNs issued from time to time. The Series 2023-GTL2
Promissory Term Notes will represent a single loan tranche, and the terms of the Series 2023-GTL2 Loan shall be represented by the Initial
Note Balance (and each Lender’s Pro Rata Share thereof), Stated Maturity Date, Note Interest Rate and other terms as specified
in this Indenture Supplement. The Series 2023-GTL2 Loan shall be secured by the Trust Estate Granted to the Indenture Trustee pursuant
to the Base Indenture. The Indenture Trustee shall hold the Trust Estate as collateral security for the benefit of the Noteholders of
all Series of Notes issued under the Base Indenture as described therein, including the Lenders, as Noteholders of the Series 2023-GTL2
Promissory Term Notes. In the event that any term or provision contained in this Indenture Supplement shall conflict with or be inconsistent
with any term or provision contained in the Base Indenture, with respect to the Series 2023-GTL2 Promissory Term Notes, the terms and
provisions of this Indenture Supplement shall govern to the extent of such conflict.
Section 2.
Defined Terms.
With respect to the Series
2023-GTL2 Loan and in addition to or in replacement of the definitions set forth in Section 1.1 of the Base Indenture, the following
definitions shall be assigned to the defined terms set forth below:
“Administrative
Agent” means, (i) with respect to the provisions of this Indenture Supplement, ASP, or an Affiliate or successor thereto, and
(ii) with respect to the provisions of the Base Indenture, together ASP and such other parties as set forth in any other Indenture Supplement,
or a respective Affiliate or any respective successor thereto, and recognized as an Administrative Agent pursuant to the Base Indenture.
For the avoidance of doubt, reference to “it” or “its” with respect to the Administrative Agent in this Indenture
Supplement or in the Base Indenture shall mean “them” and “their,” and reference to the singular herein and therein
in relation to the Administrative Agent will be construed as if plural.
“Advance Rate”
means [**]%; provided, that, upon the occurrence of an Advance Rate Reduction Event, the Advance Rate will decrease by [****]%
per month until the Advance Rate Reduction Event is cured in all respects subject to the satisfaction of the Administrative Agent, at
which point the Advance Rate will revert to the value it had prior to the occurrence of such Advance Rate Reduction Event.
“Assignment Agreement”
means an Assignment and Assumption Agreement substantially in the form of Exhibit A, with such amendments or modifications
as may be approved by the Administrative Agent.
“Base Indenture”
has the meaning assigned to such term in the Preamble.
“Benchmark”
means, with respect to any Interest Accrual Period, initially Term SOFR; provided, that, if the Designated Transaction
Representatives determine that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to
Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement as of the related Benchmark
Reference Time on the Benchmark Determination Date.
“Benchmark Determination
Date” means (i) for the first Payment Date and the related Interest Accrual Period following the Issuance Date, October 20,
2023, and (ii) for each Payment Date and the related Interest Accrual Period following the first Payment Date, means (1) if the Benchmark
is Term SOFR, the SOFR Determination Date and (2) if the Benchmark is not Term SOFR, the date determined by the Designated Transaction
Representatives in accordance with the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual
Period.
“Benchmark Reference
Time” means, with respect to any determination of the Benchmark, (i) if the Benchmark is Term SOFR, the SOFR Determination
Time and (ii) if the Benchmark is not Term SOFR, the time determined by the Designated Transaction Representatives in accordance with
the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual Period.
“Benchmark Replacement”
means, the first applicable alternative set forth in the order below that can be determined by the Calculation Agent as of the applicable
Benchmark Replacement Date:
(1) the
sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement
for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;
(2) the
sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment; or
(3) the
sum of: (a) the alternate rate of interest that has been selected in the sole and good faith discretion of the Designated Transaction
Representatives as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to
any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated syndicated credit
facilities at such time and (b) the Benchmark Replacement Adjustment.
“Benchmark Replacement
Adjustment” means the first alternative set forth in the order below that can be determined by the Designated Transaction Representatives
as of the applicable Benchmark Replacement Date:
(1) the
spread adjustment (which may be a positive or negative value or zero), or method for calculating or determining such spread adjustment,
that has been selected, endorsed or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
(2) if
the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; or
(3) the
spread adjustment (which may be a positive or negative value or zero) that has been selected by the Designated Transaction Representatives
giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment,
for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated syndicated
credit facilities at such time.
“Benchmark Replacement
Conforming Changes” means, in connection with the determination of any Benchmark Transition Event or Benchmark Replacement
Date or the adoption of any Benchmark Replacement, Unadjusted Benchmark Replacement or Benchmark Replacement Adjustment, any technical,
administrative or operational changes (including changes to timing and frequency of determining rates and making payments of interest,
changes to the definition of “Corresponding Tenor” and other administrative matters) that the Designated Transaction Representatives,
in their sole and good faith discretion, decide may be appropriate to reflect such determination or adoption in a manner substantially
consistent with the market practice (or, if the Designated Transaction Representatives decide that adoption of any portion of such market
practice is not administratively feasible or if the Designated Transaction Representatives determine that no such market practice exists,
in such other manner as the Designated Transaction Representatives determine is reasonably necessary), in each case as notified to the
Indenture Trustee, the Calculation Agent and the Administrative Agent at least twenty (20) calendar days prior to the posting of such
Benchmark Replacement Conforming Changes with the Payment Date Report notifying the other Lenders of such changes and such Benchmark
Replacement Conforming Changes taking effect, which such changes shall automatically become effective without further action on behalf
of any party (upon being provided with such Payment Date Report). The Benchmark Replacement Conforming Changes will be prepared by the
Designated Transaction Representatives and delivered to the Indenture Trustee and Calculation Agent for posting with the Payment Date
Report.
“Benchmark Replacement
Date” means the earliest to occur of the following events with respect to then current Benchmark (including the daily published
component used in the calculation thereof):
(1) in
the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date
of the public statement or publication of information referenced therein and (b) the date on which the administrator of the relevant
Benchmark permanently or indefinitely ceases to provide the Benchmark (or such component); or
(2) in
the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication
of information referenced therein.
If the Designated Transaction
Representatives determine that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Benchmark
Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement shall replace the then-current
Benchmark for all purposes with respect to the Series 2023-GTL2 Loan in respect of such determination on such date and all determinations
on all subsequent dates.
For the avoidance of doubt,
if the event that gives rise to the applicable Benchmark Replacement Date occurs on the same day as, but earlier than, the Benchmark
Reference Time in respect of any determination, the Benchmark Replacement Date shall be deemed to have occurred prior to the Benchmark
Reference Time for such determination.
“Benchmark Transition
Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark (including the
daily published component used in the calculation thereof):
(1) a
public statement or publication of information by or on behalf of the administrator of the Benchmark (or such component) announcing that
such administrator has ceased or will cease to provide the Benchmark (or such component), permanently or indefinitely, provided that,
at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such
component);
(2) a
public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark (or such component),
the central bank for the currency of the Benchmark (or such component), an insolvency official with jurisdiction over the administrator
for the Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the Benchmark (or such component)
or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark (or such component),
which states that the administrator of the Benchmark (or such component) has ceased or will cease to provide the Benchmark (or such component)
permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will
continue to provide the Benchmark (or such component); or
(3) a
public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the
Benchmark is no longer representative.
“Corporate Trust
Office” means the corporate trust offices of the Indenture Trustee at which at any particular time its corporate trust business
with respect to the Issuer shall be administered, which offices at the Issuance Date are located at Citibank, N.A., Agency & Trust,
388 Greenwich Street, Trading, New York, NY 10013, Attention: PNMAC GMSR Issuer Trust MSR Collateralized Notes, and, with respect to
Note transfer, exchange or surrender purposes, Citibank, N.A., 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey
07310, Attention: Agency & Trust – PNMAC GMSR Issuer Trust MSR Collateralized Notes.
“Corresponding Tenor”
means a tenor (including overnight) having the length (disregarding any business day adjustment) of 30 days or one month, and with respect
to a Benchmark Replacement, a tenor (including overnight) having approximately the same length (disregarding any business day adjustment)
as the applicable tenor for the then-current Benchmark.
“Cumulative Interest
Shortfall Amount Rate” means [****]% per annum.
“Default Supplemental
Fee” means, under this Indenture Supplement and each Payment Date during the Full Amortization Period and on the date of final
payment of the Series 2023-GTL2 Loan (if the Full Amortization Period is continuing on such final payment date), a fee equal to (1) the
related Cumulative Default Supplemental Fee Shortfall Amount, plus (2) the product of:
(i) the Default Supplemental Fee Rate;
(ii) the average daily loan amount
represented by the average daily Note Balance since the prior Payment Date of the Series 2023-GTL2 Promissory Term Notes; and
(iii) a fraction, the numerator of
which is the number of days elapsed from and including the prior Payment Date (or, if later, the commencement of the Full Amortization
Period) to but excluding such Payment Date and the denominator of which equals 360.
“Default Supplemental
Fee Rate” means [****]% per annum.
“Designated Transaction
Representatives” means the Series Required Noteholders.
“Early Amortization
Event” occurs with respect to the Series 2023-GTL2 Promissory Term Notes when:
(i) the
amount currently funded with respect to all Series of VFNs, measured individually, by a Noteholder of an MBS Advance VFN is less than
$50,000,000;
(ii) an
Advance Rate Reduction Event has occurred and has been continuing for six (6) consecutive months; or
(iii) the
unpaid principal balance of the Portfolio is less than $35 billion.
“Early Amortization
Event Payment Amount” means, with respect to the Series 2023-GTL2 Promissory Term Notes, the sum of (i) one-thirty-sixth (1/36)
of the outstanding loan amount represented by the Note Balance of the Series 2023-GTL2 Promissory Term Notes as of the date on which
an Early Amortization Event occurs and (ii) the product of (a) the Series Allocation Percentage of the Series 2023-GTL2 Promissory Term
Notes and (b) the amounts in the Collection and Funding Account that are designated as “Advance Rate Reduction Event Reserve Amounts”
on such Payment Date, if applicable.
“Early Termination
Event” means, with respect to the Series 2023-GTL2 Loan, not applicable.
“Early Termination
Event Payment Amount” means, with respect to the Series 2023-GTL2 Loan, not applicable.
“Eligible Assignee”
means (i) any Affiliate of a Lender, (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is a
“qualified institutional buyer” (as defined under Rule 144A), that extends credit or buys loans as one of its businesses
and that has total assets in excess of $100,000,000, and (iii) any other Person (other than a natural Person) approved by the Administrator
that has total assets in excess of $100,000,000.
“Federal Reserve
Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or
any successor source.
“Fee Letter”
means, a Fee Letter, dated as of October 25, 2023, by the Administrative Agent and accepted and agreed to by the Issuer and Company.
“Indenture”
has the meaning assigned to such term in the Preamble.
“Indenture Supplement”
has the meaning assigned to such term in the Preamble, which such Indenture Supplement, for the avoidance of doubt, constitutes a Transaction
Document.
“Initial Note Balance”
means, with respect to the Series 2023-GTL2 Promissory Term Notes representing the Series 2023-GTL2 Loan, $125,000,000. The Initial Note
Balance and any subsequent Note Balance may be increased from time to time as set forth in Section 11(a). Each Lender’s
Pro Rata Share of the Note Balance shall be reflected in Exhibit B hereto, as such Exhibit may be updated from time to time by
the Administrator with the consent of the Administrative Agent. To the extent Exhibit B is updated, PLS shall promptly deliver
the updated Exhibit B to the Paying Agent and the Lenders.
“Interest Accrual
Period” means, for the Series 2023-GTL2 Promissory Term Notes, (i) with respect to the first Payment Date, the period that
will commence on the Issuance Date and will end on the day immediately preceding the Payment Date in November 2023, and (ii) with respect
to any subsequent Payment Dates, the period that will commence on the immediately preceding Payment Date and end on the day immediately
preceding the current Payment Date. The Interest Payment Amount for the Series 2023-GTL2 Promissory Term Notes for each Payment Date
will be calculated based on the Interest Day Count Convention. The first Payment Date with respect to the Series 2023-GTL2 Promissory
Term Notes will be November 27, 2023.
“Interest Day Count
Convention” means the actual number of days in the related Interest Accrual Period divided by 360.
“ISDA Definitions”
means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended
or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
“ISDA Fallback Adjustment”
means the spread adjustment, (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing
the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable
tenor.
“ISDA Fallback Rate”
means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of
an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
“Issuance Date”
means October 25, 2023.
“Lender”
means the Lead Arranger and each other Person listed on the signature pages to this Indenture Supplement as a Noteholder and other Lenders
added from time to time, together with their successors, and any “Assignee” who becomes a lender hereunder pursuant to an
Assignment Agreement as set forth in Section 7(c) hereof, other than any such Person that ceases to be a Lender pursuant to this
Indenture Supplement.
“Margin”
means, for the Series 2023-GTL2 Promissory Term Notes representing the Series 2023-GTL2 Loan, [****]% per annum.
“Note Interest Rate”
means, for the Series 2023-GTL2 Promissory Term Notes representing the Series 2023-GTL2 Loan, with respect to any Interest Accrual Period,
the sum of (a) the Benchmark plus (b) the applicable Margin.
“PLS”
has the meaning assigned to such term in the Preamble.
“Pro Rata Share”
means, with respect to a Lender's right to receive payments of interest, fees and principal with respect to the Series 2023-GTL2 Loan
and all other rights, obligations and matters concerning the Lenders, the percentage obtained by dividing (i) the sum of the unpaid principal
amount of such Lender’s portion of the Series 2023-GTL2 Loan by (ii) the sum of the aggregate unpaid principal amount of the Series
2023-GTL2 Loan.
“Relevant Governmental
Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened
by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“Scheduled Principal
Payment Amount” means, with respect to any Payment Date following a Scheduled Principal Payment Event, an amount equal to the
sum of the Series Principal Payment Amounts due and payable on each Series of Term Notes then outstanding, including the Series 2023-GTL2
Loan represented by the Series 2023-GTL2 Promissory Term Notes.
“Scheduled Principal
Payment Events” means, for any Payment Date with respect to the Series 2023-GTL2 Promissory Term Notes, a Series Principal
Payment Amount will be due on a one-time basis on any Payment Date following the occurrence of any of the following events (each, a “Scheduled
Principal Payment Event”):
(i)
the unpaid principal balance of the Portfolio is less than $85 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(ii)
the unpaid principal balance of the Portfolio is less than $80 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(iii)
the unpaid principal balance of the Portfolio is less than $75 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(iv)
the unpaid principal balance of the Portfolio is less than $70 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(v)
the unpaid principal balance of the Portfolio is less than $65 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(vi)
the unpaid principal balance of the Portfolio is less than $60 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(vii)
the unpaid principal balance of the Portfolio is less than $55 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(viii)
the unpaid principal balance of the Portfolio is less than $50 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date;
(ix)
the unpaid principal balance of the Portfolio is less than $45 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date; or
(x)
the unpaid principal balance of the Portfolio is less than $40 billion and a Borrowing Base Deficiency exists as of the close
of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class
of VFNs from the preceding Payment Date.
“Series 2023-GTL2
Loan” has the meaning assigned to such term in Preliminary Statement of this Indenture Supplement.
“Series 2023-GTL2
Promissory Term Notes” has the meaning assigned to such term in Section 1 of this Indenture Supplement.
“Series Principal
Payment Amount” means, upon the occurrence of a Scheduled Principal Payment Event, an amount equal to the product of (i) the
Series Allocation Percentage of the Series 2023-GTL2 Promissory Term Notes and (ii) the product of (a) $5,000,000,000, (b) the Market
Value Percentage (as calculated using clause (b)(ii) of the definition thereof) and (c) the related Advance Rate in respect of the Series
2023-GTL2 Loan.
“Series Required
Noteholders” means, for so long as the Series 2023-GTL2 Promissory Term Notes are Outstanding, Noteholders of the Series 2023-GTL2
Promissory Term Notes constituting the Majority Noteholders of such Series, which, for the avoidance of doubt will be the Lenders whose
Pro Rata Share of the Series 2023-GTL2 Loan is greater than 50% of the outstanding aggregate Series 2023-GTL2 Loan amount.
“SOFR”
means, with respect to any day, the greater of (i) the secured overnight financing rate published for such day by the Federal Reserve
Bank of New York (or a successor administrator), as the administrator of the benchmark on the Federal Reserve Bank of New York’s
Website (or such successor administrator’s website) and (ii) 0%.
“SOFR Determination
Date” means the second U.S. Government Securities Business Day before each Interest Accrual Period begins.
“SOFR Determination
Time” means 3:00 p.m. (New York time) on a U.S. Government Securities Business Day, at which time Term SOFR is published on
the Federal Reserve Bank of New York’s Website.
“Specified Call
Premium Amount” means, as of any date of determination, the greater of (i) $0 and (ii) the product of (a) the quotient
of (1) the product of (x) the Note Interest Rate multiplied by (y) the outstanding Note Balance of the Series 2023-GTL2
Loan being prepaid divided by (2) 360 multiplied by (b) the difference between (1) 180 and (2) the number of days
from and including the date the Series 2023-GTL2 Promissory Term Notes were issued through and including the date on which the Series
2023-GTL2 Loan is prepaid and the Series 2023-GTL2 Promissory Term Notes are redeemed.
“Stated Maturity
Date” means the Payment Date in October 2028.
“Term SOFR”
means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the
Relevant Governmental Body as may initially be increased or decreased by a spread adjustment value that is either (i) set or recommended
by the Relevant Governmental Body for such term rate or (ii) determined in accordance with the methodology endorsed by the Relevant Governmental
Body for such term rate.
“Unadjusted Benchmark
Replacement” means the Benchmark Replacement excluding the applicable Benchmark Replacement Adjustment.
“U.S. Government
Securities Business Day” means any day except for a Saturday, a Sunday or a day on which the Securities Industry and Financial
Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading
in U.S. government securities.
“WSFS”
has the meaning assigned to such term in Section 15 hereof.
Section 3.
Form of the Series 2023-GTL2 Promissory Term Notes; Transfer Restrictions.
(a)
The form of Definitive Rule 144A Note that may be used to evidence the Series 2023-GTL2 Loan in the circumstances described in
Section 5.2(c) of the Base Indenture is attached to the Base Indenture as Exhibit A-2.
(b)
The Series 2023-GTL2 Promissory Term Notes shall not have a CUSIP or other identifying number and any assignment thereof or any
interest therein shall be subject to the restrictions described in Section 7 and shall bear a legend referring to such transfer
restrictions.
(c)
The Series 2023-GTL2 Promissory Term Notes will be issued in an aggregate amount equal to the Initial Note Balance, and each Series
2023-GTL2 Promissory Term Note will reflect the related Lender’s Pro Rata Share of such amount. The Series 2023-GTL2 Promissory
Term Notes will be issued in minimum denominations of $30,000,000 and integral multiples of $1 in excess thereof.
Section 4.
Payments and Allocation of Funds on Payment Dates; No Series Reserve Account.
(a)
Except as otherwise expressly set forth herein, all payments made on the Series 2023-GTL2 Promissory Term Notes, including those
made on each Payment Date in accordance with Section 4.5 of the Base Indenture, shall be made by the Paying Agent to the Administrative
Agent on behalf of the Lenders. Upon receipt of any such amounts from the Paying Agent, the Administrative Agent shall allocate each
Lender’s Pro Rata Share of such amounts to the related Lender in accordance with the related wire instructions set forth on Exhibit
B. Each Lender confirms the Paying Agent will make such payments to the Administrative Agent described in this Section 4(a)
in accordance with the wire instructions set forth in Schedule 5 of the Base Indenture.
(b)
There will be no Series Reserve Account for the Series 2023-GTL2 Promissory Term Notes.
(c)
The Administrative Agent and the Issuer further confirm that the Series 2023-GTL2 Loan shall be certificated at the request of
the Lenders and the Series 2023-GTL2 Promissory Term Notes issued on the Issuance Date pursuant to this Indenture Supplement shall represent
such Series 2023-GTL2 Loan and shall be issued in the name of the related Lender set forth on Exhibit B with respect to the Pro
Rata Share of the Series 2023-GTL2 Loan as set forth therein.
(d)
The Issuer and the Administrative Agent hereby direct the Indenture Trustee to issue the Series 2023-GTL2 Promissory Term Notes
in the name of each Lender set forth in Exhibit B hereto in the amount of the Pro Rata Share set forth therein.
Section 5.
Optional Redemption and Refinancing.
(a) The
Issuer may, at any time, subject to Section 13.1 of the Base Indenture, upon at least five (5) Business Days’ prior written notice
to the Administrative Agent, the Indenture Trustee and the Lenders, prepay the Series 2023-GTL2 Loan and redeem in whole or in part and/or
terminate and cause retirement of the Series 2023-GTL2 Promissory Term Notes (so long as, in the case of any partial prepayment and redemption,
such prepayment and redemption is funded using the proceeds of the issuance and sale of one or more new Classes of Notes or from any
other cash or funds of PLS and not Collections on the MSRs). In anticipation of a prepayment of the Series 2023-GTL2 Loan and a redemption
of the Series 2023-GTL2 Promissory Term Notes at the end of their Revolving Period, the Issuer may issue a new Series or one or more
Classes of Notes within the ninety (90) day period prior to the end of such Revolving Period and reserve all or a portion of the cash
proceeds of the issuance for the sole purpose of paying the principal balance and all accrued and unpaid interest on the Series 2023-GTL2
Loan, on the last day of their Revolving Period.
(b) If
the Issuer prepays the Series 2023-GTL2 Loan and redeems the Series 2023-GTL2 Promissory Term Notes within 6 months from and including
the Issuance Date (the “Early Redemption Date”), the Issuer shall pay to the Lenders as part of the Redemption Amount
an amount equal to the Specified Call Premium Amount on the Early Redemption Date for such Series.
Section 6.
Reserved.
Section 7.
Assignment.
(a)
Each Series 2023-GTL2 Promissory Term Note is a promissory note evidencing an interest in a loan, and is not registered under
the 1933 Act, or the securities laws of any other jurisdiction, and any transfer or assignment of an interest in the Series 2023-GTL2
Loan represented by the Series 2023-GTL2 Promissory Term Notes will not require registration or qualification. A Lender may sell, assign,
pledge or transfer its beneficial interest in the Series 2023-GTL2 Loan under this Indenture Supplement to any person that such Lender
reasonably believes is, and who has certified that it is an, Eligible Assignee, who also satisfies the provisions set forth in Section
6.5 of the Base Indenture, with the prior written consent of the Administrator; provided, that, any Lender may sell, assign,
pledge or transfer its beneficial interest in the Series 2023-GTL2 Loan under this Indenture Supplement to any Person meeting the criteria
of clause (i) of the definition of the term “Eligible Assignee,” who also satisfies the provisions set forth in Section 6.5
of the Base Indenture, upon providing fourteen (14) calendar days prior written notice to the Issuer, the Administrator, the Indenture
Trustee and the Administrative Agent and satisfaction of the other transfer provisions set forth in the Base Indenture with respect to
such Series 2023-GTL2 Promissory Term Note. An assigning Lender and the assignee lender shall execute and deliver to the Issuer, the
Administrator, the Indenture Trustee and the Administrative Agent an Assignment Agreement, together with such other documentation required
for transfers of Notes or required by any Noteholder pursuant to the Base Indenture.
(b)
A Lender, upon execution and delivery hereof or, upon executing and delivering an Assignment Agreement, any assignee Lender, as
the case may be, represents and warrants as of such date that (i) in the case of an assignee Lender, it is an Eligible Assignee; (ii)
it has experience and expertise in the making of or investing in commitments or loans such as the Series 2023-GTL2 Loan; (iii) it will
make or invest in, as the case may be, the Series 2023-GTL2 Loan for its own account in the ordinary course of its business and without
a view to distribution of such loans within the meaning of the 1933 Act or the 1934 Act or other federal securities laws (it being understood
that, subject to the provisions of this Section 7, the disposition of the Series 2023-GTL2 Loan or any interests therein shall
at all times remain within its exclusive control); and (iv) such Lender is in compliance with all U.S. economic sanctions laws, executive
orders and implementing regulations as promulgated by the Office of Foreign Assets Control of the U.S. Department of the Treasury, including
with regard to the source of funds used to make the Series 2023-GTL2 Loan.
(c)
Subject to the terms and conditions of this Section 7 and the provisions of the Base Indenture, as of the effective date
of the applicable Assignment Agreement:
(i)
the assignee thereunder shall have the rights and obligations of the “Lender” hereunder to the extent such rights
and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto, a Noteholder
and the “Lender” for all purposes hereof;
(ii)
the assigning Lender thereunder shall relinquish its rights and be released from its obligations hereunder and such Lender shall
cease to be a party hereto;
(iii)
the assigning Lender shall surrender the Series 2023-GTL2 Promissory Term Note to the Indenture Trustee for cancellation and exchange
in accordance with the provisions of the Base Indenture; and
(iv)
to the extent the Administrative Agent is informed of an assignment and such relevant information necessary to update Exhibit
B is provided to the Administrative Agent, the Administrative Agent shall provide an updated Exhibit B.
(d)
A Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Indenture Supplement
to secure obligations of such Lender; provided that no such pledge or assignment of a security interest shall release Lender from any
of its obligations hereunder or substitute any such pledgee or assignee for Lender as a party hereto and such pledge or assignment of
a security interest is subject to the Acknowledgment Agreement.
(e)
Participations.
(i)
A Lender may, in the ordinary course of its business and in accordance with requirements of law, at any time (and from time to
time) sell to one or more banks or other entities (each a “Participant”), participating interests in the Series 2023-GTL2
Loan. In the event of any such sale by a Lender of a participating interest to a Participant: (i) such Lender’s obligations hereunder
and under the other Transaction Documents shall remain unchanged; (ii) such Lender shall remain solely responsible hereunder for the
performance of such obligations; and (iii) such Lender shall remain the owner of its Pro Rata Share of the Series 2023-GTL2 Loan and
the Noteholder of the Series 2023-GTL2 Promissory Term Note issued to it in evidence thereof for all purposes under the Transaction Documents.
All amounts payable under this Indenture Supplement and the Transaction Documents shall be determined as if such Lender had not sold
such participating interests. The parties hereto and Lenders shall continue to deal solely and directly with each other in connection
with Lenders’ rights and obligations under this Indenture Supplement and the Transaction Documents. Each Lender shall, acting solely
for this purpose as agent of the Issuer, maintain a register in the United States on which it enters the name and address of each Participant
and the principal amounts (and stated interest) of each Participant’s interest in the Series 2023-GTL2 Loan, the Series 2023-GTL2
Promissory Term Notes or other obligations under the Transaction Documents (the “Participant Register”); provided
that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant
or any other information relating to a Participant’s interest in any commitments, the Series 2023-GTL2 Loan, the Series 2023-GTL2
Promissory Term Notes, letters of credit or other obligations under any Transaction Document) to any Person except to the extent that
such disclosure is necessary to establish that such commitment, the Series 2023-GTL2 Loan, the Series 2023-GTL2 Promissory Term Notes,
letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries
in the Participant Register shall be conclusive absent manifest error, and each Lender shall treat each Person whose name is recorded
in the Participant Register as the owner of such participation for all purposes of this Indenture Supplement notwithstanding any notice
to the contrary. For avoidance of doubt, neither the Administrative Agent (in its capacity as Administrative Agent) nor the Indenture
Trustee (in any of its capacities) shall have any responsibility for maintaining a Participant Register.
(ii)
Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver
of any provision of the Transaction Documents to the extent Lender approval is required under a Transaction Document for such amendment,
modification or waiver; provided, that any amendment, modification, or waiver with respect the Series 2023-GTL2 Loan in which such Participant
has an interest which (i) forgives principal, interest, or fees or reduces the interest rate, principal amount or fees payable with respect
to the Series 2023-GTL2 Loan, (ii) extends the Stated Maturity Date, (iii) increases the Note Balance, (iv) postpones any date fixed
for any regularly scheduled payment of principal of, or interest or fees on, the Series 2023-GTL2 Loan or (v) releases all or substantially
all of the Collateral (other than as expressly permitted pursuant to the Transaction Documents), may, in each such case, require the
consent of the Participants. The Indenture Trustee (in any of its capacities) has no obligation to verify that any required Participant
consent has been obtained and is entitled to rely on a certification from a Lender that the required Participant consents, if applicable,
have been obtained.
(f)
Pursuant to Section 6.5 of the Base Indenture, the Indenture Trustee shall serve as the Note Registrar and maintain a Note Register
in which it enters the name and address of each Lender as a Noteholder of the Series 2023-GTL2 Promissory Term Notes and the principal
amounts (and stated interest) of each Noteholder’s interest in the Series 2023-GTL2 Promissory Term Notes. It is intended that
the Series 2023-GTL2 Promissory Term Notes will be in registered form for purposes of Section 5f.103-1(c) of the United States Treasury
Regulations.
Section 8.
Conditions Precedent Satisfied.
The Issuer hereby represents
and warrants to each Lender and the Indenture Trustee that, as of the Issuance Date each of the conditions precedent set forth in the
Base Indenture, including those conditions precedent set forth in Section 6.10(b) of the Base Indenture and Article XII thereof, as applicable,
to the issuance of the Series 2023-GTL2 Promissory Term Notes and each of the conditions precedent set forth in Schedule I hereto
have been satisfied or waived in accordance with the terms thereof.
Section 9.
Representations and Warranties.
(a)
The Issuer, the Administrator, the Servicer and the Indenture Trustee hereby restate as of the related Issuance Date, or as of
such other date as is specifically referenced in the body of such representation and warranty, all of the representations and warranties
set forth in Sections 9.1, 10.1 and 11.14, respectively, of the Base Indenture.
(b)
PLS hereby represents and warrants that it is not in default with respect to any material contract under which a default should
reasonably be expected to have a material adverse effect on the ability of PLS to perform its duties under any Transaction Document to
which it is a party, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have
a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or
both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental
body.
Section 10.
Determination of Note Interest Rate and Benchmark.
(a)
At least one (1) Business Day prior to each Determination Date, the Calculation Agent shall calculate the Note Interest Rate for
the related Interest Accrual Period and the Interest Payment Amount for the Series 2023-GTL2 Loan for the upcoming Payment Date, and
include a report of such amount in the related Payment Date Report.
(b)
On each Benchmark Determination Date, the Calculation Agent will calculate the Benchmark for a one-month period for the succeeding
Interest Accrual Period for the related Series 2023-GTL2 Loan on the basis of the procedures specified in the definition of “Benchmark.”
(c)
In connection with the implementation of a Benchmark Replacement, the Designated Transaction Representatives will have the right
from time to time to make Benchmark Replacement Conforming Changes as described in the definition thereof.
(d)
Written notice or materials relating to the occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date,
the determination of a Benchmark Replacement and the making of any Benchmark Replacement Conforming Changes received by the Paying Agent
in a format suitable for posting shall be posted with the relevant Payment Date Report. Notwithstanding anything in the Base Indenture,
any Indenture Supplement or any other Transaction Document to the contrary, upon such information being provided with the Payment Date
Report, the Base Indenture, any Indenture Supplement or any other relevant Transaction Document, as applicable, shall be deemed to have
been amended to reflect the new Unadjusted Benchmark Replacement, Benchmark Replacement Adjustment, Benchmark Replacement Conforming
Changes without further compliance with the amendment provisions of the Base Indenture, any Indenture Supplement or any other relevant
Transaction Document.
(e)
Any determination, decision or election that may be made by the Designated Transaction Representatives in connection with a Benchmark
Transition Event or a Benchmark Replacement as described above, including any determination with respect to a tenor, rate or adjustment
or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or
any selection, shall be conclusive and binding absent manifest error, may be made in the Designated Transaction Representatives’
sole and good faith discretion, and, notwithstanding anything to the contrary in the Transaction Documents, shall become effective without
consent from any other party. The Designated Transaction Representatives shall provide notice of any determination, decision or election
made by the Designated Transaction Representatives in connection with a Benchmark Transition Event or a Benchmark Replacement as described
above at least twenty (20) days prior to the proposed posting of such changes with the related Payment Date Report. None of the Issuer,
Owner Trustee, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Designated
Transaction Representatives, the Administrative Agent, the Servicer or any other transaction party will have any liability for any determination
made by or on behalf of the Issuer by any party, including the Designated Transaction Representatives or any action or inaction by the
Administrative Agent, in connection with a Benchmark Transition Event, any Benchmark Replacement Date, the determination of or a Benchmark
Replacement and the making of any Benchmark Replacement Conforming Changes as described above, and each Lender as Noteholder of the Series
2023-GTL2 Promissory Term Notes, by its acceptance of a Note or a beneficial interest in a Note, shall be deemed to waive and release
any and all claims against any of the Issuer, Owner Trustee, the Indenture Trustee, the Calculation Agent, the Securities Intermediary,
the Administrator, the Designated Transaction Representatives, the Administrative Agent or the Servicer relating to any such determinations.
(f)
The establishment of the Benchmark by the Calculation Agent and the Designated Transaction Representatives, as applicable, and
the Calculation Agent’s subsequent calculation of the Benchmark, the Note Interest Rate and the Interest Payment Amount on the
Series 2023-GTL2 Loan for the relevant Interest Accrual Period based on the determination made by the Designated Transaction Representatives,
in the absence of manifest error, will be final and binding.
(g)
No Designated Transaction Representative or any of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it under or in connection with this Indenture Supplement or the other Transaction Documents in their
capacity as Designated Transaction Representatives, other than action or inaction undertaken with gross negligence, willful misconduct
or bad faith. Without limiting the foregoing and notwithstanding any understanding to the contrary, no other Lender shall have any right
of action whatsoever against a Designated Transaction Representative as a result of such Designated Transaction Representative acting
or refraining from acting under this Indenture Supplement, the Series 2023-GTL2 Loan or any of the other Transaction Documents in its
own interests or otherwise, other than as a result of gross negligence, willful misconduct or bad faith by such Designated Transaction
Representative.
Section 11.
Amendments.
(a)
Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in
Sections 12.1, 12.2 and 12.3 of the Base Indenture, without the consent of the Lenders, as Noteholders of the Series 2023-GTL2 Promissory
Term Notes, or the Noteholders of any Notes but with the consent of the Issuer (evidenced by its execution of such amendment), the Indenture
Trustee, the Administrator, the Servicer (solely in the case of any amendment that adversely affects the rights or obligations of the
Servicer or adds new obligations or increases existing obligations of the Servicer), and the Administrative Agent, at any time and from
time to time, upon delivery of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate
to the effect that the Issuer reasonably believes that such amendment will not have a material Adverse Effect, may amend any Transaction
Document for any of the following purposes: (i) to correct any mistake or typographical error or cure any ambiguity, or to cure, correct
or supplement any defective or inconsistent provision therein or in any other Transaction Document; (ii) to amend any other provision
of this Indenture Supplement; or (iii) with prior notice to each Note Rating Agency that is then rating any Outstanding Notes, to increase
the Note Balance from time to time to add additional Lenders or increase the Note Balance of the Notes held by existing Lenders with
respect to the Series 2023-GTL2 Loan funded by such Lender. Further, the Lenders are deemed to consent to any amendments made to the
Transaction Documents as a result of amendments to the Acknowledgment Agreement that Ginnie Mae and the Servicer agree to effect from
time to time or changes that Ginnie Mae may make to the Ginnie Mae Guide from time to time.
(b)
Notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base Indenture except for amendments otherwise
permitted as described in Sections 12.1 and 12.2 of the Base Indenture and in the immediately preceding paragraph, no supplement, amendment
or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of
Section 12.2 of the Base Indenture may, without the consent of the Series Required Noteholders, supplement, amend or revise any term
or provision of this Indenture Supplement; provided, that, with respect to the following amendments, the consent of each Lender
of each Outstanding Series 2023-GTL2 Promissory Term Note materially and adversely affected thereby shall be required:
| (i) | any change to the scheduled payment date
of any payment of interest on the Series 2023-GTL2 Loan funded by such Lender, or change
a Payment Date or Stated Maturity Date of the related Note held by such Lender; |
| (ii) | any reduction of the Note Balance of,
or the Note Interest Rate or the Default Supplemental Fee Rate on any Notes held by such
Lender, or change the method of computing the Note Balance or Note Interest Rate in a manner
that is adverse to such Lender; |
| (iii) | any impairment of the right to institute
suit for the enforcement of any payment on any Note held by such Lender; |
| (iv) | any reduction of the percentage of Noteholders
of the Outstanding Notes (or of the Outstanding Notes of any Series or Class), for which
consent is required for any such amendment, or the consent of whose Noteholders is required
for any waiver of compliance with the provisions of the Indenture or any Indenture Supplement
or of defaults thereunder and their consequences, provided for in the Base Indenture or any
Indenture Supplement; |
| (v) | any modification or any amendment of the
Indenture, except to increase any percentage of Noteholders required to consent to any such
amendment or to provide that other provisions of the Indenture or any Indenture Supplement
cannot be modified or waived without the consent of the Noteholders adversely affected thereby; |
| (vi) | any modification to permit the creation
of any lien or other encumbrance on the collateral that is prior to the lien in favor of
the Indenture Trustee for the benefit of the Noteholders; |
| (vii) | any modification to change the method
of computing the amount of principal of, or interest on, any Note held by such Lender on
any date; |
| (viii) | any modification to increase any Advance
Rates in respect of Notes held by such Lender or eliminate or decrease any collateral value
exclusions in respect of Notes held by such Lender; |
| (ix) | any change, modification or waiver of
any Scheduled Principal Payment Amount; or |
| (x) | any change or modification of the definition
of Scheduled Principal Payment Event; |
provided, that, written notice
of the occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date, the determination of a Benchmark Replacement
and the making of any Benchmark Replacement Conforming Changes received by the Paying Agent in a format suitable for posting shall be
posted with the relevant Payment Date Report, and notwithstanding anything in the Base Indenture, any Indenture Supplement or any other
Transaction Document to the contrary, upon such information being provided with such Payment Date Report, the Base Indenture, any Indenture
Supplement or any other relevant Transaction Document, as applicable, shall be deemed to have been amended to reflect the new Unadjusted
Benchmark Replacement, Benchmark Replacement Adjustment, Benchmark Replacement Conforming Changes without further compliance with the
amendment provisions of the Base Indenture, any Indenture Supplement or any other relevant Transaction Document.
(c)
For the avoidance of doubt, the consent of the Servicer is not required for (i) the waiver of any Event of Default or (ii) any
other modification or amendment to any Event of Default except those related to the actions and omissions of the Servicer.
(d)
For the avoidance of doubt, the Issuer and the Administrator hereby covenant that the Issuer shall not issue any future Series
of Notes without designating an entity to act as “Administrative Agent” under the related Indenture Supplement with respect
to such Series of Notes.
(e)
Any amendment of this Indenture Supplement which affects the rights, duties, immunities, obligations or liabilities of the Owner
Trustee in its capacity as owner trustee under the Trust Agreement shall require the written consent of the Owner Trustee.
(f)
If, in connection with any proposed amendment, waiver or consent requiring the consent of each Noteholder or each Noteholder materially
and adversely affected thereby, the consent of the Series Required Noteholders is obtained, but the consent of other necessary Noteholders
is not obtained (any such Noteholder whose consent is necessary but not obtained being referred to herein as a “Non-Consenting
Lender”), then PLS may direct the Issuer to (x) redeem such Non-Consenting Lender’s Series 2023-GTL2 Promissory Term
Note(s) at par value and pay to such Non-Consenting Lender in same day funds on the day of such redemption all interest, fees and other
amounts then accrued but unpaid to such Non-Consenting Lender by the Issuer hereunder to and including the date of termination and, upon
such payment, such Non-Consenting Lender shall be immediately terminated without further action from any Person or (y) replace any Non-Consenting
Lender as a Lender to this Indenture Supplement; provided, that, concurrently with such replacement described in clause (y) above
(i) another bank or other entity which is reasonably satisfactory to the Issuer shall agree, as of such date, to purchase at par value
as set forth in and subject to an Assignment Agreement and to become a Lender for all purposes under this Indenture Supplement and to
assume all obligations of the Non-Consenting Lender and to comply with Section 3 and (ii) the Issuer shall cause to be paid to
such Non-Consenting Lender in same day funds on the day of such replacement all interest, fees and other amounts then accrued but unpaid
to such Non-Consenting Lender by the Issuer hereunder to and including the date of termination and, upon such payment, such Non-Consenting
Lender shall be immediately terminated without further action from any Person.
Section 12.
Counterparts.
This Indenture Supplement
may be executed in any number of counterparts and all of such counterparts shall together constitute one and the same instrument. The
parties agree that this Indenture Supplement, any addendum or amendment hereto or any other document necessary for the consummation of
the transactions contemplated by this Indenture Supplement may be accepted, executed or agreed to through the use of an electronic signature
in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the
Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference
on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding
on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third
party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.
Section 13.
Entire Agreement.
This Indenture Supplement,
together with the Base Indenture incorporated herein by reference and the related Transaction Documents, constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating
to such subject matter.
Section 14.
Limited Recourse.
Notwithstanding any other
terms of this Indenture Supplement, the Series 2023-GTL2 Loan, the Series 2023-GTL2 Promissory Term Notes, any other Transaction Documents
or otherwise, the obligations of the Issuer under the Series 2023-GTL2 Promissory Term Notes, this Indenture Supplement and each other
Transaction Document to which it is a party are limited recourse obligations of the Issuer, payable solely from the Trust Estate, and
following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of this Indenture Supplement,
none of the Lenders, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further
steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall
not thereafter revive. No recourse shall be had for the payment of any amount owing in respect of this Indenture Supplement or for any
action or inaction of the Issuer against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer or any
of their successors or assigns for any amounts payable under the Series 2023-GTL2 Loan or this Indenture Supplement. It is understood
that the foregoing provisions of this Section 14 shall not (a) prevent recourse to the Trust Estate for the sums due or to become
due under any security, instrument or agreement which is part of the Trust Estate, including without limitation, the PC Guaranty and
the PMT Guaranty or (b) save as specifically provided therein, constitute a waiver, release or discharge of the Series 2023-GTL2 Loan
or any indebtedness or obligation evidenced by the Series 2023-GTL2 Promissory Term Notes or secured by this Indenture Supplement. It
is further understood that the foregoing provisions of this Section 14 shall not limit the right of any Person to name the Issuer
as a party defendant in any proceeding or in the exercise of any other remedy under this Indenture Supplement, so long as no judgment
in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person
or entity.
Section 15.
Owner Trustee Limitation of Liability.
It is expressly understood
and agreed by the parties hereto that (a) each of this Indenture Supplement and the Series 2023-GTL2 Promissory Term Notes is executed
and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally, but solely in its
capacity as Owner Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it thereunder,
(b) each of the representations, warranties, undertakings, obligations and agreements herein or in the Series 2023-GTL2 Promissory Term
Notes made on the part of the Issuer is made and intended not as personal representations, warranties, undertakings, obligations and
agreements by WSFS, but is made and intended for the purpose of binding only, and is binding only on, the Issuer, (c) nothing contained
herein or in the Series 2023-GTL2 Promissory Term Notes shall be construed as creating any liability on WSFS, individually or personally,
to perform any covenant or obligation of the Issuer, either expressed or implied, contained herein or therein, all such liability, if
any, being expressly waived by the parties hereto or thereto and by any Person claiming by, through or under the parties hereto or thereto,
(d) WSFS has not made and will not make any investigation as to the accuracy or completeness of any representations or warranties made
by the Issuer in this Indenture Supplement, the Series 2023-GTL2 Promissory Term Notes or any related document delivered pursuant hereto
and (e) under no circumstances shall WSFS, be personally liable for the payment of any indebtedness, indemnities or expenses of the Issuer
or be liable for the performance, breach or failure of any obligation, representation, warranty or covenant made or undertaken by the
Issuer or by WSFS, as Owner Trustee on behalf of the Issuer under this Indenture Supplement, the Series 2023-GTL2 Promissory Term Notes
or any other related documents, as to all of which recourse shall be had solely to the assets of the Issuer.
Section 16.
No Note Rating.
Neither the Series 2023-GTL2
Loan nor the Series 2023-GTL2 Promissory Term Notes are rated by any Note Rating Agency.
Section 17.
No Compliance with EU Securitization Regulation and UK Securitization Regulation Due Diligence Requirements.
None of the Issuer, the Administrator,
the Servicer, nor any other party to the transaction described in this Indenture Supplement, nor any other party to the transaction described
in this Indenture Supplement will take any action that may be required by any prospective Lender or Noteholder for the purposes of its
compliance with any requirement of (A) European Union Regulation 2017/2402 (the “EU Securitization Regulation”) or
(B) Regulation (EU) 2017/2402, as it forms part of UK domestic law by virtue of the UK European Union (Withdrawal) Act 2018, and as amended
by the Securitisation (Amendment) (EU Exit) Regulations 2019 (the “UK Securitization Regulation”). In particular,
no such person will take any action that may be required by any prospective Lender or Noteholder for the purposes of its compliance with
any of the reporting or investor diligence requirements that apply in the EU (the “EU Due Diligence Requirements”)
under the EU Securitization Regulation, and in the UK (the “UK Due Diligence Requirements”) under the UK Securitization
Regulation and no such person assumes any liability whatsoever in connection with any Lender’s or Noteholder’s non-compliance
with the EU Due Diligence Requirements or UK Due Diligence Requirements.
Consequently, the Series
2023-GTL2 Loan and the Series 2023-GTL2 Promissory Term Notes may not be suitable for any person that is now or may in the future be
subject to any requirement of the EU Securitization Regulation or the UK Securitization Regulation.
Section 18.
Administrative Fee.
The Issuer shall pay the
Administrative Agent a fee as set forth (the “Administrative Agent Fee”) in the Fee Letter. For avoidance of doubt,
the Administrative Agent Fee is an Administrative Expense for purposes of Section 4.5 of the Base Indenture.
Section 19.
Return of Payments and Erroneous Payments.
(a)
Return of Payments. If the Administrative Agent is legally obligated at any time to return to the Issuer, the Paying Agent
or to a trustee, receiver, liquidator, custodian or other similar official or other person, any portion of the payments made to the Administrative
Agent in respect of any transaction contemplated herein, then each Lender shall, on demand of the Administrative Agent, forthwith return
to the Administrative Agent the corresponding amount of any payments transferred to such Lender hereunder, but without interest on such
payments unless the Administrative Agent has been required to pay interest on such amounts to the person recovering such payments and
in such event such Lender shall pay the Administrative Agent interest on such payment at such rate required to be paid thereon by the
Administrative Agent. The Lenders’ obligations under this Section 19 shall survive payment of all amounts due under the
Indenture and the termination of this Indenture Supplement.
(b)
Erroneous Payments.
(i)
If the Administrative Agent notifies a Lender or any Person who has received funds on behalf of a Lender (any such Lender or other
recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion that any funds
received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise
erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender or other Payment Recipient on its
behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise,
individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion
thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment
Recipient and held in trust for the benefit of the Administrative Agent, and such Lender shall (or, with respect to any Payment Recipient
who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than two (2) Business Days
thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand
was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the
date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative
Agent in same day funds at the greater of the overnight federal funds rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation from time to time in effect. A notice of the Administrative Agent to any Payment
Recipient under this Section 19(b)(i) shall be conclusive, absent manifest error. If a Payment Recipient receives any payment,
prepayment or repayment of principal, interest, fees, distribution or otherwise and does not receive a corresponding payment notice or
payment advice, such payment, prepayment or repayment shall be presumed to be in error absent written confirmation from the Administrative
Agent to the contrary.
(ii)
Each Lender hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such
Lender under the Indenture, or otherwise payable or distributable by the Administrative Agent to such Lender from any source, against
any amount due from such Lender to the Administrative Agent under the Indenture.
(iii)
For so long as an Erroneous Payment (or portion thereof) has not been returned by any Payment Recipient who received such Erroneous
Payment (or portion thereof) (such unrecovered amount, an “Erroneous Payment Return Deficiency”) to the Administrative
Agent after demand therefor in accordance with Section 19(b)(i), (i) the Administrative Agent may elect, in its sole discretion
on written notice to such Lender, that all rights and claims of such Lender with respect to any payments owed to such Lender pursuant
to the Indenture up to the amount of the corresponding Erroneous Payment Return Deficiency in respect of such Erroneous Payment shall
immediately vest in the Administrative Agent upon such election; and (ii) each party hereto agrees that, except to the extent that the
Administrative Agent has received notice of an assignment and transfer of such Lender’s interest pursuant to Section 7,
and irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually subrogated
to all the rights and interests of such Lender with respect to the Erroneous Payment Return Deficiency.
(iv)
No Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim,
counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent
for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value”
or any similar doctrine.
(v)
Each party’s obligations, agreements and waivers under this Section 19(b) shall survive the resignation or replacement
of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, each Lender, and/or the termination of
this Indenture Supplement.
Section 20.
Resignation of Administrative Agent.
The Administrative Agent
shall have the right to resign as the Administrative Agent (or delegate its responsibilities) under this Indenture Supplement upon fifteen
(15) Business Days prior written notice to the Indenture Trustee (or as otherwise agreed upon by the Administrative Agent and the Indenture
Trustee). No resignation (or delegation of responsibilities) of the Administrative Agent and no replacement of the Administrative Agent
with a successor Administrative Agent shall be effective until the acceptance of the duties and responsibilities of the Administrative
Agent by a successor.
Section 21.
Limited Liability and Indemnification.
(a)
The parties hereto agree that the Administrative Agent shall not be liable for any costs, expenses, damages, liabilities or claims,
including reasonable attorneys’ fees (“Losses”) incurred by or asserted against any party hereto in connection
with any action taken or omitted to be taken by Administrative Agent pursuant to this Indenture Supplement, except those Losses arising
out of the gross negligence or willful misconduct of the Administrative Agent. In no event shall the Administrative Agent be liable for
special, indirect or consequential damages, or lost profits or loss of business, arising in connection with this Indenture Supplement.
(b)
PLS and the Issuer agree to indemnify and hold harmless the Administrative Agent and its affiliates and its and their respective
officers, directors, employees, agents and controlling persons (each, an “Indemnified Person”) from and against any
and all Losses to which any such Indemnified Person may become subject arising out of or in connection with any action taken or omitted
to be taken by Administrative Agent pursuant to this Indenture Supplement, or any claim, litigation, investigation or proceedings relating
to the foregoing regardless of whether any of such Indemnified Persons is a party thereto, and to reimburse such Indemnified Persons
for any reasonable legal or other expenses as and when they are incurred in connection with investigating, responding to or defending
any of the foregoing; provided, that, neither PLS nor the Issuer shall indemnify any Indemnified Person for those Losses arising out
of the gross negligence or willful misconduct of any Indemnified Person. The provisions of this Section 21 shall survive the termination
of this Indenture Supplement
(c)
Any indemnification paid by the Issuer under this Section 21 shall be considered an Administrative Expense (as defined
in the Base Indenture).
Section 22.
Term Loan Reports and Confidentiality.
The
Administrator shall make available to each Lender (i) the Determination Date Report (not including the VFN Note Balance Adjustment Request),
(ii) the MSR Trust & Credit Report, (iii) the information relating to the Portfolio Mortgage Loans on a monthly basis and (iv) the
Market Value Report on a calendar quarterly basis (collectively, the “Term Loan Reports”). The Administrator shall
make such Term Loan Reports available to each Lender via a third party data site, which site may require registration and the acceptance
of a disclaimer. Each Lender agrees that the Term Loan Reports are subject to the same confidentiality provisions under its nondisclosure
agreement with the Administrator.
[Signature Pages follow]
IN WITNESS WHEREOF,
the undersigned have caused this Indenture Supplement to be duly executed by their respective signatories thereunto all as of the day
and year first above written.
|
PNMAC GMSR ISSUER TRUST, as Issuer |
|
|
|
By: Wilmington Savings Fund Society,
FSB, not in its individual capacity but solely as Owner Trustee |
|
|
|
By: |
/s/
Mark H. Brzoska |
|
|
Name: |
Mark
H. Brzoska |
|
|
Title: |
Vice President |
[PNMAC Issuer Trust –
Series 2023-GTL2 Indenture Supplement and Loan Agreement]
|
CITIBANK, N.A., as Indenture Trustee, Calculation Agent,
Paying Agent and Securities Intermediary, and not in its individual capacity |
|
|
|
By: |
/s/ Valerie Delgado |
|
|
Name: |
Valerie Delgado |
|
|
Title: |
Senior Trust Officer |
[PNMAC Issuer Trust –
Series 2023-GTL2 Indenture Supplement and Loan Agreement]
|
PENNYMAC LOAN SERVICES, LLC, as Administrator and Servicer |
|
|
|
By: |
/s/ Pamela Marsh |
|
|
Name: |
Pamela Marsh |
|
|
Title: |
Senior Managing Director and Treasurer
|
[PNMAC Issuer Trust –
Series 2023-GTL2 Indenture Supplement and Loan Agreement]
|
ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent |
|
|
|
By: Atlas Securitized Products GP,
LLC, its general partner |
|
|
|
By: |
/s/
Dominic Obaditch |
|
|
Name: |
Dominic
Obaditch |
|
|
Title: |
Managing Director |
[PNMAC Issuer Trust –
Series 2023-GTL2 Indenture Supplement and Loan Agreement]
|
CAPITAL ONE, NATIONAL ASSOCIATION,
as Lead Arranger, a Lender and a Noteholder |
|
|
|
By: |
/s/
Paul Spiridigliozzi |
|
|
Name: |
Paul
Spiridigliozzi |
|
|
Title: |
Managing Director |
[PNMAC Issuer Trust –
Series 2023-GTL2 Indenture Supplement and Loan Agreement]
SCHEDULE I
CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF
THIS INDENTURE SUPPLEMENT
| 1. | The execution of this Indenture Supplement
by all parties hereto; |
| 2. | The execution of the Series 2023-GTL2
Promissory Term Note; |
| 3. | The execution of the Acknowledgment Agreement; |
| 4. | The execution of the Fee Letter; |
| 5. | The satisfaction of the conditions set
forth in Sections 1.3, 5.2(b) and 6.10 of the Base Indenture; and |
| a. | certificates of PLS, the Guarantor, PFSI
and the Issuer, to effect that (i) there has been no such Adverse Effect in the condition
(financial or otherwise) of PLS, the Guarantor, PFSI or the Issuer from any information previously
provided to the Lenders, except as described in such certificate or certificates, (ii) the
representations and warranties in each Transaction Document to which it is a party and herein
are true and correct in all material respects and are made with the same force and effect
as though expressly made at and as of the Issuance Date and (iii) it has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied at or prior
to the Issuance Date in the Transaction Documents; |
| b. | certificates of PLS, the Guarantor, the
Issuer, the Owner Trustee and the Indenture Trustee including (i) the certificate of incorporation
or formation, as the case may be, and other organizational documents, including all amendments
thereto, certified as of a recent date by the Secretary of State or other appropriate authority
of the state of incorporation or organization, as the case may be, together with a copy of
the by-laws or other equivalent document, if any, duly certified by its secretary or an assistant
secretary; (ii) a copy of the resolutions of its board of directors or managers, as appropriate,
certified by a Responsible Officer as of the Issuance Date, duly authorizing (A) in the case
of the Issuer, the execution and delivery of this Indenture Supplement and the Series 2023-GTL2
Promissory Term Notes by the Issuer and (B) in the case of PLS, the Guarantor, the Issuer
and the Owner Trustee, the execution, delivery and performance of each Transaction Document
to which it is a party and any other documents executed in connection with the transactions
contemplated thereby; and an incumbency certificate as to the person or persons executing
or delivering each such document; and (iii) such other documents and evidence as the Lenders
may reasonably request in order to establish the corporate existence and good standing of
such party, the proper taking of all appropriate corporate proceedings in connection with
the transactions contemplated hereby and the compliance with the conditions set forth herein; |
| c. | the Opinion of Counsel required pursuant
to Section 11.1 of the Trust Agreement; |
| d. | that certain corporate, enforceability,
Investment Company Act, UCC and tax opinion from Winston & Strawn LLP, PLS’s counsel; |
| e. | the bring-down of the bankruptcy and
non-consolidation opinions from Winston & Strawn LLP, PLS’s counsel; |
| f. | the opinion of internal legal counsel
of PLS; |
| g. | the opinion of Richards, Layton &
Finger, P.A., the Indenture Trustee’s counsel; and |
| h. | the opinion of Nixon Peabody LLP, Delaware
counsel to the Issuer. |
EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption
(this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between
the Assignor identified in item 1 below (the “Assignor”) and the Assignee identified in item 2 below (the “Assignee”).
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture identified below (as amended, restated,
supplemented or otherwise modified in writing from time to time, the “Indenture”), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration,
the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions and the Indenture, as of the Effective Date inserted by
the Assignor as contemplated below, with respect to such Lender’s Pro Rata Share of the Series 2023-GTL2 Loan as set forth in item
7 below, (i) all of the Assignor’s rights and obligations in its capacity as a Noteholder under the Indenture and any other
documents or instruments delivered pursuant thereto and (ii) to the extent permitted to be assigned under applicable law, all claims,
suits, causes of action and any other right of the Assignor (in its capacity as a Noteholder) against any Person, whether known or unknown,
arising under or in connection with the Indenture, any other documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above (the rights and obligations sold and assigned by the Assignor to the Assignee pursuant to clauses
(i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Each such sale and
assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation
or warranty by the Assignor.
[for the Assignee, indicate Affiliate
of Lender or Eligible Assignee
3.
Administrator: PennyMac Loan Services, LLC
4.
Administrative Agent: Atlas Securitized Products, L.P.
5.
Indenture: The Series 2023-GTL2 Indenture Supplement and Loan Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the “Indenture Supplement”), dated as of October 25, 2023, by and among PNMAC GMSR Issuer
Trust, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”), Citibank, N.A.,
a national banking association, as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent
(in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”)
and as securities intermediary (in such capacity, the “Securities Intermediary”), PennyMac Loan Services, LLC, a limited
liability company organized under the laws of the State of Delaware (“PLS”), as administrator (in such capacity, the
“Administrator”) and servicer (in such capacity, the “Servicer”), the Administrative Agent, and
the Assignor, as noteholder, as supplemented by the Third Amended and Restated Base Indenture, dated as of April 1, 2020, including the
schedules and exhibits thereto (as amended by Amendment No. 1, dated as of June 8, 2022, Amendment No. 2, dated as of June 9, 2022, and
Amendment No. 3, dated as of February 7, 2023, and as may be further amended, restated, supplemented or otherwise modified from time
to time, the “Base Indenture” and as so supplemented by the Indenture Supplement, collectively referred to as the
“Indenture”), among the Issuer, the Administrator, the Servicer, the Indenture Trustee, the Calculation Agent, the
Paying Agent, the Securities Intermediary, Pentalpha Surveillance LLC, a Delaware limited liability company, as credit manager, the Administrative
Agent, and the “Administrative Agents” from time to time parties thereto.
6. Outstanding
amount of the Series 2023-GTL2 Loan represented by the Series 2023-GTL2 Promissory Term Note: $________________________
7.
Pro Rata Share: ________________________%
8. Outstanding
amount of Series 2023-GTL2 Loan represented by the Pro Rata Share being assigned hereunder: $________________________
Effective Date: _____________________,
202_ [TO BE INSERTED BY ASSIGNOR AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER.]
This Assignment and Assumption
shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and
Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart
of a signature page of this Assignment and Assumption by telecopy or other electronic means shall be effective as delivery of a manually
executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York.
[Remainder of Page Intentionally Blank]
The terms set forth in this Assignment and Assumption
are hereby agreed to:
| ASSIGNOR |
| [NAME OF ASSIGNOR] |
| | |
| By: | |
| Name: |
| Title: |
| ASSIGNEE |
| [NAME OF ASSIGNOR] |
| | |
| By: | |
| Name: |
| Title: |
[Consented to and Accepted: 1 |
|
|
|
[PENNYMAC LOAN SERVICES, LLC,]
as Administrator |
|
|
|
[By: |
|
|
|
Name: |
|
|
Title: |
|
1 To the extent such consent is required
by the Indenture Supplement
ANNEX
1 TO ASSIGNMENT AND ASSUMPTION
STANDARD
TERMS AND CONDITIONS FOR
ASSIGNMENT
AND ASSUMPTION
1.
Representations and Warranties.
1.1
Assignor. Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest,
(ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority,
and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated
hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection
with the Indenture Supplement or any other Transaction Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Transaction Documents or any collateral thereunder, (iii) the financial condition of the Issuer, any of its
Affiliates or any other Person obligated in respect of any Transaction Document or (iv) the performance or observance by the Issuer,
any of its Affiliates or any other Person of any of their respective obligations under any Transaction Document.
1.2
Assignee. Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become
a Noteholder under the Indenture, (ii) it meets all the requirements to be an assignee under Section 7 of the Indenture Supplement (subject
to such consents, if any, as may be required under Section 7 of the Indenture Supplement), (iii) from and after the Effective Date, it
shall be bound by the provisions of the Indenture as a Noteholder thereunder and shall have the obligations of such Noteholder thereunder,
(iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it,
or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such
type, (v) it has received a copy of the Indenture, and has received or has been accorded the opportunity to receive copies of the such
documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption
and to purchase the Assigned Interest and (vi) it has, independently and without reliance upon the Administrative Agent or Assignor and
based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment
and Assumption and to purchase the Assigned Interest.
2.
Payments. From and after the Effective Date, all payments in respect of the Assigned Interest (including payments of principal,
interest, fees and other amounts) shall be made to the Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective Date.
EXHIBIT B
LIST OF LENDERS
Note
Number |
Lender |
Wire
Instructions |
Note
Balance |
Pro
Rata Share |
1 |
Capital
One, National Association |
Bank Name: Capital One N.A.
Account Name: Member Portfolio Clearing ACBS
ABA: 065000090
Address: 1680 Capital One Drive, McLean, VA
22102
Account #: [******************] |
$125,000,000 |
100% |
Aggregate
Note Balance as of October 25, 2023 |
$125,000,000 |
100% |
Exhibit 99.1
PennyMac Financial Services, Inc. Reports
Third Quarter 2023 Results
WESTLAKE VILLAGE, Calif. – October 26, 2023 –
PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $92.9 million for the third quarter of 2023, or $1.77
per share on a diluted basis, on revenue of $400.3 million. Book value per share increased to $71.56 from $69.77 at June 30, 2023.
PFSI’s Board of Directors declared a third quarter cash dividend
of $0.20 per share, payable on November 22, 2023, to common stockholders of record as of November 13, 2023.
Third Quarter 2023 Highlights
| · | Pretax income was $126.8 million, up 74 percent from the prior quarter and
down 32 percent from the third quarter of 2022 |
| · | Production segment pretax income was $25.2 million, up slightly from $24.4
million in the prior quarter and down from $38.6 million in the third quarter of 2022 |
| o | Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $25.1
billion in unpaid principal balance (UPB), up slightly from the prior quarter and down 4 percent from the third quarter of 2022 |
| o | Broker direct interest rate lock commitments (IRLCs) were $3.0 billion in UPB, up 6 percent from the prior quarter and 60 percent
from the third quarter of 2022 |
| o | Consumer direct IRLCs were $1.7 billion in UPB, down 21 percent from the prior quarter and 55 percent from the third quarter of 2022 |
| o | Government correspondent IRLCs totaled $10.1 billion in UPB, down 6 percent from the prior quarter and 19 percent from the
third quarter of 2022 |
| o | Conventional correspondent IRLCs for PFSI’s account totaled $10.3 billion in UPB, up 37 percent from the prior quarter |
| o | Correspondent acquisitions of conventional conforming loans fulfilled for PMT were $2.8 billion in UPB, down 9 percent from the prior
quarter and 73 percent from the third quarter of 2022 |
| · | Servicing segment pretax income was $101.2 million, up from $46.5 million
in the prior quarter and down from $145.3 million in the third quarter of 2022 |
| o | Pretax income excluding valuation-related items was $120.0 million, up 59 percent from the prior quarter, primarily driven by higher
servicing fee revenue, net interest income and early buyout (EBO) income |
| o | Valuation items included: |
| – | $398.9 million in mortgage servicing rights (MSR) fair value gains, before recognition of realization of cash flows, more than offset
by $423.7 million in hedging losses |
| · | Net impact on pretax income related to these items was $(24.8) million, or
$(0.34) in diluted earnings per share |
| – | $6.0 million of reversals related to provisions for losses on active loans |
| o | Servicing portfolio grew to $589.4 billion in UPB, up 2 percent from June 30, 2023, driven by production volumes which more than offset
prepayment activity |
| · | Investment Management segment pretax income was $0.4 million, down from $2.0
million in the prior quarter and $1.6 million in the third quarter of 2022 |
| o | Net assets under management (AUM) were $1.9 billion, up slightly from June 30, 2023, and down 3 percent from September 30, 2022 |
| · | PFSI exercised its option to extend the maturity for $650 million in term
notes secured by Ginnie Mae MSRs originally due in August 2023 for two years |
Notable activity after quarter end
| · | Issued new, 5-year $125 million term loan secured by Ginnie Mae MSR and servicing
advances |
"PennyMac Financial produced outstanding results in the third
quarter, returning to a double-digit annualized return on equity," said Chairman and CEO David Spector. "While average mortgage
rates were up 50 basis points from the prior quarter, we demonstrated the earnings power of our balanced business model with exceptionally
strong operating income from our large and growing servicing business combined with continued profitability in production. As a result,
book value per share grew 3 percent from the prior quarter."
Mr. Spector continued, “PennyMac Financial’s strong
financial and operational performance allowed us to continue gaining market share in recent periods, driven by continued superior
execution in our correspondent channel and growth in broker-direct lending. Our strength in production has allowed us to
meaningfully and organically grow our servicing portfolio, which is now approaching $600 billion in unpaid principal balance. In
this environment, with interest rates expected to stay higher for longer, our servicing portfolio provides strong profitability with
the operational efficiency and scale we have achieved. Our results this quarter highlight our management team’s ability to
successfully navigate this challenging mortgage landscape while also positioning PennyMac Financial to generate increasingly
stronger returns over time.”
The following table presents the contributions
of PennyMac Financial’s segments to pretax income:
| |
Quarter ended September 30, 2023 | |
| |
Mortgage Banking | | |
Investment | | |
| |
| |
Production | | |
Servicing | | |
Total | | |
Management | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
| |
(in thousands) | |
Revenue | |
| | | |
| | | |
| | | |
| | | |
| | |
Net gains on loans held for sale at fair value | |
$ | 127,821 | | |
$ | 23,553 | | |
$ | 151,374 | | |
$ | - | | |
$ | 151,374 | |
Loan origination fees | |
| 37,701 | | |
| - | | |
| 37,701 | | |
| - | | |
| 37,701 | |
Fulfillment fees from PMT | |
| 5,531 | | |
| - | | |
| 5,531 | | |
| - | | |
| 5,531 | |
Net loan servicing fees | |
| - | | |
| 185,374 | | |
| 185,374 | | |
| - | | |
| 185,374 | |
Management fees | |
| - | | |
| - | | |
| - | | |
| 7,175 | | |
| 7,175 | |
Net interest income: | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 62,150 | | |
| 104,402 | | |
| 166,552 | | |
| - | | |
| 166,552 | |
Interest expense | |
| 59,614 | | |
| 97,249 | | |
| 156,863 | | |
| - | | |
| 156,863 | |
| |
| 2,536 | | |
| 7,153 | | |
| 9,689 | | |
| - | | |
| 9,689 | |
Other | |
| 823 | | |
| 1,037 | | |
| 1,860 | | |
| 1,604 | | |
| 3,464 | |
Total net revenue | |
| 174,412 | | |
| 217,117 | | |
| 391,529 | | |
| 8,779 | | |
| 400,308 | |
Expenses | |
| 149,219 | | |
| 115,913 | | |
| 265,132 | | |
| 8,379 | | |
| 273,511 | |
Income before provision for income taxes | |
$ | 25,193 | | |
$ | 101,204 | | |
$ | 126,397 | | |
$ | 400 | | |
$ | 126,797 | |
Production Segment
The Production segment includes the correspondent acquisition of newly
originated government-insured and certain conventional conforming loans for PennyMac Financial’s own account, fulfillment services
on behalf of PMT and direct lending through the consumer direct and broker direct channels, including the underwriting and acquisition
of loans from correspondent sellers on a non-delegated basis.
PennyMac Financial’s loan production activity for the
quarter totaled $25.1 billion in UPB, $22.3 billion of which was for its own account and $2.8 billion of which was fee-based
fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $25.1 billion in UPB, up 8 percent from
the prior quarter and 39 percent from the third quarter of 2022.
Production segment pretax income was $25.2 million, compared to $24.4
million in the prior quarter and $38.6 million in the third quarter of 2022. Production segment revenue totaled $174.4 million, up
2 percent from the prior quarter and down 13 percent from the third quarter of 2022.
The components of net gains on loans held for sale are detailed in
the following table:
|
|
Quarter ended |
|
|
|
September 30,
2023 |
|
|
June 30,
2023 |
|
|
September 30,
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Receipt of MSRs |
|
$ |
450,936 |
|
|
$ |
562,523 |
|
|
$ |
345,077 |
|
Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust |
|
|
(500 |
) |
|
|
(509 |
) |
|
|
(1,648 |
) |
(Provision for) reversal of liability for representations and warranties, net |
|
|
(1,459 |
) |
|
|
(1,131 |
) |
|
|
118 |
|
Cash loss, including cash hedging results |
|
|
(251,245 |
) |
|
|
(308,199 |
) |
|
|
(16,795 |
) |
Fair value changes of pipeline, inventory and hedges |
|
|
(46,358 |
) |
|
|
(111,265 |
) |
|
|
(158,058 |
) |
Net gains on mortgage loans held for sale |
|
$ |
151,374 |
|
|
$ |
141,419 |
|
|
$ |
168,694 |
|
Net gains on mortgage loans held for sale by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
$ |
127,821 |
|
|
$ |
126,249 |
|
|
$ |
140,683 |
|
Servicing |
|
$ |
23,553 |
|
|
$ |
15,170 |
|
|
$ |
28,011 |
|
PennyMac Financial performs fulfillment services for certain conventional
conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are
not limited to, marketing, relationship management, correspondent seller approval and monitoring, loan file review, underwriting, pricing,
hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.
Fees earned from the fulfillment of correspondent loans on behalf of
PMT totaled $5.5 million in the third quarter, up 2 percent from the prior quarter and down 70 percent from the third quarter
of 2022. The year-over-year decrease in fulfillment fee revenue was driven by lower conventional acquisition volumes for PMT’s account.
PFSI began acquiring certain conventional loans sourced through PMT’s correspondent production business in the fourth quarter of
2022.
Net interest income totaled $2.5 million, compared to net interest
expense of $0.6 million in the prior quarter. Interest income in the third quarter totaled $62.2 million, down from $75.4 million in the
prior quarter, and interest expense totaled $59.6 million, down from $76.0 million in the prior quarter, both primarily due to lower average
financing balances for loans held for sale at fair value.
Production segment expenses were $149.2 million, up 2 percent
from the prior quarter and down 7 percent from the third quarter of 2022. The increase from the prior quarter was due to higher overall
loan volumes while the decrease from the third quarter of 2022 was driven primarily by lower volumes in the direct lending channels and
expense management activities in 2022.
Servicing Segment
The Servicing segment includes income from owned MSRs, subservicing
and special servicing activities. The total servicing portfolio grew to $589.4 billion in UPB at September 30, 2023, an increase of 2 percent
from June 30, 2023, and 9 percent from September 30, 2022. PennyMac Financial subservices and conducts special servicing for PMT,
whose servicing portfolio totaled $232.9 billion in UPB at quarter end, down 1 percent from June 30, 2023, and up 1 percent
from September 30, 2022. PennyMac Financial’s owned MSR portfolio grew to $356.5 billion in UPB, up 4 percent from June 30,
2023, and 16 percent from September 30, 2022.
The table below details PennyMac Financial’s servicing portfolio
UPB:
| |
September 30,
2023 | | |
June 30,
2023 | | |
September 30,
2022 | |
| |
| | |
| | |
| |
| |
(in thousands) | |
Prime servicing: | |
| | | |
| | | |
| | |
Owned | |
| | | |
| | | |
| | |
Mortgage servicing rights and liabilities | |
| | | |
| | | |
| | |
Originated | |
$ | 333,372,910 | | |
$ | 319,257,805 | | |
$ | 283,653,037 | |
Purchased | |
| 17,924,005 | | |
| 18,474,265 | | |
| 20,182,332 | |
| |
| 351,296,915 | | |
| 337,732,070 | | |
| 303,835,369 | |
Loans held for sale | |
| 5,181,866 | | |
| 4,250,706 | | |
| 4,287,585 | |
| |
| 356,478,781 | | |
| 341,982,776 | | |
| 308,122,954 | |
Subserviced for PMT | |
| 232,903,327 | | |
| 234,463,739 | | |
| 230,959,804 | |
Total prime servicing | |
| 589,382,108 | | |
| 576,446,515 | | |
| 539,082,758 | |
Special servicing - subserviced for PMT | |
| 10,780 | | |
| 12,780 | | |
| 19,015 | |
Total loans serviced | |
$ | 589,392,888 | | |
$ | 576,459,295 | | |
$ | 539,101,773 | |
Servicing segment pretax income was $101.2 million, compared to
$46.5 million in the prior quarter and $145.3 million in the third quarter of 2022. Servicing segment net revenues totaled $217.1
million, up from $156.4 million in the prior quarter and down from $266.5 million in the third quarter of 2022. The quarter-over-quarter
increase was driven by higher net loan servicing fees, net interest income and net gains on loans held for sale at fair value related
to EBO activity.
Revenue from net loan servicing fees totaled $185.4 million, up from
$146.1 million in the prior quarter. Loan servicing fees were $387.9 million, up from $356.5 million in the prior quarter primarily
due to growth in PFSI’s owned portfolio, reduced by $177.8 million in realization of MSR cash flows, which was up slightly from
the prior quarter due to larger average MSR fair values. Net valuation related declines totaled $24.8 million, compared to $36.2 million
of such declines in the prior quarter. MSR fair value gains, before realization of cash flows, were $398.9 million in the quarter, and
hedging losses were $423.7 million, both primarily due to higher market interest rates.
The following table presents a breakdown of net loan servicing fees:
| |
Quarter ended | |
| |
September 30,
2023 | | |
June 30,
2023 | | |
September 30,
2022 | |
| |
| | |
| | |
| |
| |
(in thousands) | |
Loan servicing fees | |
$ | 387,934 | | |
$ | 356,471 | | |
$ | 313,080 | |
Changes in fair value of MSRs and MSLs resulting from: | |
| | | |
| | | |
| | |
Realization of cash flows | |
| (177,775 | ) | |
| (174,162 | ) | |
| (141,781 | ) |
Change in fair value inputs | |
| 398,871 | | |
| 118,905 | | |
| 237,192 | |
Hedging losses | |
| (423,656 | ) | |
| (155,136 | ) | |
| (164,749 | ) |
Net change in fair value of MSRs and MSLs | |
| (202,560 | ) | |
| (210,393 | ) | |
| (69,338 | ) |
Net loan servicing fees | |
$ | 185,374 | | |
$ | 146,078 | | |
$ | 243,742 | |
Servicing segment revenue included $23.6 million in net gains on loans
held for sale related to EBOs, up from $15.2 million in the prior quarter and down from $28.0 million in the third quarter of
2022. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful
servicing efforts.
Net interest income totaled $7.2 million, versus net interest
expense of $5.1 million in the prior quarter and net interest expense of $5.8 million in the third quarter of 2022. Interest income
was $104.4 million, up from $97.5 million in the prior quarter driven primarily by increased placement fees on custodial balances
due to higher short-term interest rates. Interest expense was $97.2 million, down from $102.6 million in the prior quarter due to
lower average balances of secured debt outstanding.
Servicing segment expenses totaled $115.9 million, up 5 percent from
the prior quarter primarily due to performance-based compensation accruals and down 4 percent from the third quarter of 2022 due to expense
management activities and lower provisions for losses on servicing advances.
Investment Management Segment
PennyMac Financial manages PMT for which it earns base management fees
and may earn incentive compensation. Net AUM were $1.9 billion as of September 30, 2023, up 1 percent from June 30, 2023, and down
3 percent from September 30, 2022.
Pretax income for the Investment Management segment was $0.4 million,
down from $2.0 million in the prior quarter and $1.6 million in the third quarter of 2022. Base management fees from PMT were $7.2
million, up 1 percent from the prior quarter and down 7 percent from the third quarter of 2022 due to the decline in AUM. No performance
incentive fees were earned in the third quarter.
The following table presents a breakdown of management fees:
| |
Quarter ended | |
| |
September 30,
2023 | | |
June 30,
2023 | | |
September 30,
2022 | |
| |
| | |
| | |
| |
| |
(in thousands) | |
Management fees: | |
| | | |
| | | |
| | |
Base | |
$ | 7,175 | | |
$ | 7,078 | | |
$ | 7,731 | |
Performance incentive | |
| - | | |
| - | | |
| - | |
Total management fees | |
$ | 7,175 | | |
$ | 7,078 | | |
$ | 7,731 | |
| |
| | | |
| | | |
| | |
Net assets of PennyMac Mortgage Investment Trust | |
$ | 1,949,078 | | |
$ | 1,931,496 | | |
$ | 2,017,331 | |
Investment Management segment expenses totaled $8.4 million, up 11
percent from the prior quarter and down 4 percent from the third quarter of 2022.
Consolidated Expenses
Total expenses were $273.5 million, up 4 percent from the
prior quarter and down 6 percent from the third quarter of 2022. The increase from the prior quarter was primarily due to
higher production and servicing expenses as mentioned above, and the decrease from the prior year was primarily due to lower direct
lending volumes and expense management activities in 2022.
Taxes
PFSI recorded a provision for tax expense of $33.9 million, resulting
in an effective tax rate of 26.8 percent during the quarter.
***
Management’s slide presentation and accompanying material will
be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on
Thursday, October 26, 2023. Management will also host a conference call and live audio webcast at 5:00 p.m. Eastern Time to review the
Company’s financial results. The webcast can be accessed at pfsi.pennymac.com, and a replay will be available shortly after
its conclusion.
***
About PennyMac Financial Services, Inc.
PennyMac Financial Services, Inc. is a specialty financial services
firm focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market.
Founded in 2008, the company is recognized as a leader in the U.S. residential mortgage industry and employs over 4,000 people across
the country. For the twelve months ended September 30, 2023, PennyMac Financial’s production of newly originated loans totaled
$96 billion in unpaid principal balance, making it the second largest mortgage lender in the nation. As of September 30, 2023, PennyMac
Financial serviced loans totaling $589 billion in unpaid principal balance, making it a top five mortgage servicer in the nation. Additional
information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.
Media |
Investors |
Kristyn Clark |
Kevin Chamberlain |
kristyn.clark@pennymac.com |
Isaac Garden |
805.395.9943 |
PFSI_IR@pennymac.com |
|
818.224.7028 |
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s
beliefs, estimates, projections, and assumptions with respect to, among other things, the Company’s financial results, future
operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change.
Words like “believe,” “expect,” “anticipate,” “promise,” “project,”
“plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as
“will,” “would,” “should,” “could,” or “may” are generally intended to
identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected
herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results
or those anticipated include, but are not limited to: interest rate changes; changes in real estate values, housing prices and
housing sales; the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in
which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable
to our business; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and
its enforcement of these regulations; our dependence on U.S. government-sponsored entities and changes in their current roles or
their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of
states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and
changes in foreclosure practices; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in
adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and
our success in winning bids; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our
reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business;
maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify third-party
purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain
criteria or characteristics or under other circumstances; our obligation to indemnify PMT if our services fail to meet certain
criteria or characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in
allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our
reputation; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or
natural disasters, climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate,
prepayment, liquidity and climate risks; our initiation or expansion of new business activities or strategies; our ability to detect
misconduct and fraud; our ability to mitigate cybersecurity risks and cyber incidents; our ability to pay dividends to our
stockholders; and our organizational structure and certain requirements in our charter documents. You should not place undue
reliance on any forward- looking statement and should consider all of the uncertainties and risks described above, as well as those
more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to
time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information
contained herein, and the statements made in this press release are current as of the date of this release only.
The Company’s earnings materials contain financial information
calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding
valuation-related items that provide a meaningful perspective on the Company’s business results since the Company utilizes this
information to evaluate and manage the business. Non-GAAP disclosure has limitations as an analytical tool and should not be viewed as
a substitute for financial information determined in accordance with GAAP.
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| |
September 30,
2023 | | |
June 30,
2023 | | |
September 30,
2022 | |
| |
| | |
| | |
| |
| |
(in thousands, except share amounts) | |
ASSETS | |
| | | |
| | | |
| | |
Cash | |
$ | 1,177,304 | | |
$ | 1,532,399 | | |
$ | 1,558,679 | |
Short-term investment at fair value | |
| 5,553 | | |
| 8,088 | | |
| 36,098 | |
Loans held for sale at fair value | |
| 5,186,656 | | |
| 4,270,494 | | |
| 4,149,726 | |
Derivative assets | |
| 103,366 | | |
| 85,517 | | |
| 164,160 | |
Servicing advances, net | |
| 399,281 | | |
| 500,122 | | |
| 455,083 | |
Mortgage servicing rights at fair value | |
| 7,084,356 | | |
| 6,510,585 | | |
| 5,661,672 | |
Operating lease right-of-use assets | |
| 53,419 | | |
| 56,410 | | |
| 72,138 | |
Investment in PennyMac Mortgage Investment Trust at fair value | |
| 930 | | |
| 1,011 | | |
| 884 | |
Receivable from PennyMac Mortgage Investment Trust | |
| 27,613 | | |
| 25,046 | | |
| 32,306 | |
Loans eligible for repurchase | |
| 4,445,814 | | |
| 4,401,098 | | |
| 3,757,538 | |
Other | |
| 465,022 | | |
| 593,698 | | |
| 473,527 | |
Total assets | |
$ | 18,949,314 | | |
$ | 17,984,468 | | |
$ | 16,361,811 | |
| |
| | | |
| | | |
| | |
LIABILITIES | |
| | | |
| | | |
| | |
Assets sold under agreements to repurchase | |
$ | 4,411,747 | | |
$ | 3,780,524 | | |
$ | 3,487,335 | |
Mortgage loan participation purchase and sale agreements | |
| 498,392 | | |
| 505,712 | | |
| 367,473 | |
Notes payable secured by mortgage servicing assets | |
| 2,673,402 | | |
| 2,472,726 | | |
| 1,793,972 | |
Unsecured senior notes | |
| 1,782,689 | | |
| 1,781,756 | | |
| 1,778,988 | |
Derivative liabilities | |
| 41,200 | | |
| 22,039 | | |
| 125,487 | |
Mortgage servicing liabilities at fair value | |
| 1,818 | | |
| 1,940 | | |
| 2,214 | |
Accounts payable and accrued expenses | |
| 236,611 | | |
| 258,278 | | |
| 358,187 | |
Operating lease liabilities | |
| 70,210 | | |
| 75,956 | | |
| 92,380 | |
Payable to PennyMac Mortgage Investment Trust | |
| 97,975 | | |
| 123,287 | | |
| 87,978 | |
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | |
| 26,099 | | |
| 26,099 | | |
| 26,675 | |
Income taxes payable | |
| 1,059,993 | | |
| 1,026,147 | | |
| 964,307 | |
Liability for loans eligible for repurchase | |
| 4,445,814 | | |
| 4,401,098 | | |
| 3,757,538 | |
Liability for losses under representations and warranties | |
| 30,491 | | |
| 30,146 | | |
| 37,187 | |
Total liabilities | |
| 15,376,441 | | |
| 14,505,708 | | |
| 12,879,721 | |
| |
| | | |
| | | |
| | |
STOCKHOLDERS' EQUITY | |
| | | |
| | | |
| | |
Common stock¾authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 49,925,752, 49,857,588, and 51,011,021 shares, respectively | |
| 5 | | |
| 5 | | |
| 5 | |
Additional paid-in capital | |
| 11,475 | | |
| - | | |
| - | |
Retained earnings | |
| 3,561,393 | | |
| 3,478,755 | | |
| 3,482,085 | |
Total stockholders' equity | |
| 3,572,873 | | |
| 3,478,760 | | |
| 3,482,090 | |
Total liabilities and stockholders’ equity | |
$ | 18,949,314 | | |
$ | 17,984,468 | | |
$ | 16,361,811 | |
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| |
Quarter ended | |
| |
September 30,
2023 | | |
June 30,
2023 | | |
September 30,
2022 | |
| |
| | |
| | |
| |
| |
(in thousands, except per share amounts) | |
Revenues | |
| | | |
| | | |
| | |
Net gains on loans held for sale at fair value | |
$ | 151,374 | | |
$ | 141,419 | | |
$ | 168,694 | |
Loan origination fees | |
| 37,701 | | |
| 38,968 | | |
| 34,037 | |
Fulfillment fees from PennyMac Mortgage Investment Trust | |
| 5,531 | | |
| 5,441 | | |
| 18,407 | |
Net loan servicing fees: | |
| | | |
| | | |
| | |
Loan servicing fees | |
| 387,934 | | |
| 356,471 | | |
| 313,080 | |
Change in fair value of mortgage servicing rights and mortgage servicing liabilities | |
| 221,096 | | |
| (55,257 | ) | |
| 95,411 | |
Mortgage servicing rights hedging results | |
| (423,656 | ) | |
| (155,136 | ) | |
| (164,749 | ) |
Net loan servicing fees | |
| 185,374 | | |
| 146,078 | | |
| 243,742 | |
Net interest income (expense): | |
| | | |
| | | |
| | |
Interest income | |
| 166,552 | | |
| 172,952 | | |
| 82,994 | |
Interest expense | |
| 156,863 | | |
| 178,642 | | |
| 82,965 | |
| |
| 9,689 | | |
| (5,690 | ) | |
| 29 | |
Management fees from PennyMac Mortgage Investment Trust | |
| 7,175 | | |
| 7,078 | | |
| 7,731 | |
Other | |
| 3,464 | | |
| 3,253 | | |
| 3,650 | |
Total net revenues | |
| 400,308 | | |
| 336,547 | | |
| 476,290 | |
Expenses | |
| | | |
| | | |
| | |
Compensation | |
| 156,909 | | |
| 136,982 | | |
| 157,793 | |
Technology | |
| 39,000 | | |
| 35,244 | | |
| 35,647 | |
Loan origination | |
| 28,889 | | |
| 31,646 | | |
| 28,356 | |
Professional services | |
| 11,942 | | |
| 17,888 | | |
| 16,230 | |
Servicing | |
| 13,242 | | |
| 14,652 | | |
| 20,399 | |
Occupancy and equipment | |
| 8,900 | | |
| 10,066 | | |
| 11,299 | |
Marketing and advertising | |
| 4,632 | | |
| 5,578 | | |
| 7,601 | |
Other | |
| 9,997 | | |
| 11,574 | | |
| 13,493 | |
Total expenses | |
| 273,511 | | |
| 263,630 | | |
| 290,818 | |
Income before provision for income taxes | |
| 126,797 | | |
| 72,917 | | |
| 185,472 | |
Provision for income taxes | |
| 33,927 | | |
| 14,667 | | |
| 50,338 | |
Net income | |
$ | 92,870 | | |
$ | 58,250 | | |
$ | 135,134 | |
Earnings per share | |
| | | |
| | | |
| | |
Basic | |
$ | 1.86 | | |
$ | 1.17 | | |
$ | 2.59 | |
Diluted | |
$ | 1.77 | | |
$ | 1.11 | | |
$ | 2.46 | |
Weighted-average common shares outstanding | |
| | | |
| | | |
| | |
Basic | |
| 49,902 | | |
| 49,874 | | |
| 52,170 | |
Diluted | |
| 52,561 | | |
| 52,264 | | |
| 54,968 | |
Dividend declared per share | |
$ | 0.20 | | |
$ | 0.20 | | |
$ | 0.20 | |
Exhibit 99.2
3Q23 EARNINGS REPORT PennyMac Financial Services, Inc. October 2023
2 This presentation contains forward - looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and in vestment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “project,” “plan,” and other expression s o r words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward - looking statements. Actual results and o perations for any future period may vary materially from those projected herein and from past results discussed herein. These forward - looking statements include, but are not limited to, statements rega rding future changes in interest rates, prepayment rates and the housing market; future loan origination, servicing and production, including future production, operating and hedge expenses; fu ture loan delinquencies and forbearances; future earnings and return on equity as well as other business and financial expectations. Factors which could cause actual results to differ materially fr om historical results or those anticipated include, but are not limited to: interest rate changes; changes in real estate values, housing prices and housing sales; the continually changing federal, sta te and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations ap pli cable to our business; the mortgage lending and servicing - related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government - sponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational req uirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; changes in mac roeconomic and U.S. real estate market conditions; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage s erv icing rights and our success in winning bids; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our reliance on PennyMac Mortgage Investment Trust (NY SE: PMT) as a significant contributor to our mortgage banking business; maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify t hir d - party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstanc es; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in allocating o ur services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulti ng from adverse weather conditions, man - made or natural disasters, climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks; our initiation or expansion of new business activities or strategies; our ability to detect misconduct and fraud; our ability to mitigate cybersecurity risks and cyber incidents; our abi lity to pay dividends to our stockholders; and our organizational structure and certain requirements in our charter documents. You should not place undue reliance on any forward - looking statement and shou ld consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commi ssi on from time to time. The Company undertakes no obligation to publicly update or revise any forward - looking statements or any other information contained herein, and the statements made in t his presentation are current as of the date of this presentation only. This presentation contains financial information calculated other than in accordance with U.S. generally accepted accounting pri nciples (“GAAP”), such as pretax income excluding valuation - related items that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to eva luate and manage the business. Non - GAAP disclosure has limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance wi th GAAP. FORWARD - LOOKING STATEMENTS
3 3 THIRD QUARTER HIGHLIGHTS PRODUCTION INVESTMENT MANAGEMENT Net income $93mm 3Q23 Results Diluted EPS ( $1.77 Return on equity 11% Book value per share $71.56 Dividend per common share $0.20 Pretax income $25mm $1.7bn PFSI correspondent lock volume $20.4bn Broker direct lock volume $3.0bn $25.1bn Pretax income $0.4mm Net AUM ( $1.9bn Revenue $8.8mm Note: All figures are for 3Q23 or as of 9/30/23 (1) EPS = earnings per share; MSR = mortgage servicing rights; UPB = unpaid principal balance, includes loans held for sale at fa ir value; AUM = assets under management (2) Includes volume fulfilled or subserviced for PennyMac Mortgage Investment Trust (NYSE: PMT) (3) Excludes $399 million in MSR fair value gains, $424 million in hedging losses and a $6 million reversal related to provisions f or losses on active loans; see slide 14 for additional details SERVICING Pretax income $101mm MSR ( fair value changes and hedging results $(25)mm Pretax income excluding valuation related items ( $120mm MSR fair value changes and hedging impact to diluted EPS $(0.34) Total servicing portfolio UPB (1)( $589bn Total loan acquisitions and originations ( Consumer direct lock volume
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Average 30-year fixed rate mortgage Primary/secondary spread ORIGINATION MARKET HAS DECLINED MEANINGFULLY 4 U.S. Mortgage Origination Market (1) ($ in trillions) Mortgage Rates Remain High • Third party forecasts for 2023 originations are approximately $1.6 trillion in UPB, well below normalized levels ‒ Higher mortgage rates are driving borrowers to remain in their homes, leading to low inventory levels and continued home price appreciation ‒ Unit origination volume in 2023 is projected to be at the lowest level since 1990 (4) , driving expectations for industry consolidation if market conditions persist • Mortgage banking companies with large servicing portfolios and diversified business models are better positioned to offset the decline in profitability that has resulted from decreased origination volumes and margins Note: Figures may not sum due to rounding (1) Actual originations: Inside Mortgage Finance. F orecast originations: Average of Mortgage Bankers Association (10/15/23) and Fannie Mae (10/10/23) forecasts. (2) Freddie Mac Primary Mortgage Market Survey 7.63% as of 10/19/23 (3) Bloomberg: Difference between Freddie Mac Primary Mortgage Market Survey and the 30 - Year Fannie Mae or Freddie Mac Par Coupon ( MTGEFNCL) Index. (4) Zelman & Associates 9/29/23 (2) (3) $1.8 $1.6 $1.3 $1.5 $2.6 $0.7 $0.3 $0.5 $4.4 $2.3 $1.6 $1.9 2021 2022 2023E 2024E Purchase Refinance
BALANCED BUSINESS MODEL DRIVES PROFITABILITY THROUGH MARKET CYCLES 5 Industry - leading positions and proprietary technology in both businesses provide the scale and tools required for success over the long term • Top 5 servicer • Drives earnings in higher interest rate environments • Significant cash earnings • 2.4 million active customers • Organi c growth via production LOAN SERVICING LOAN PRODUCTION • Top 2 producer • Drives earnings as interest rates decline • Multi - channel approach for purchase and refinance opportunities • Significant opportunity for growth in direct lending
10.5 9.5 9.0 9.2 8.3 7.4 2018 2019 2020 2021 2022 3Q23LTM 6 Operating Expenses (bps of average servicing portfolio UPB) Revenue From Servicing Placement Fees ($ in millions) SERVICING PROVIDES GROWING CASH FLOW AND SCALE BENEFITS o Increasing revenue contribution due to portfolio growth over time o Higher proportion of owned servicing in more recent periods drives increased servicing fees o Increasing contribution from placement fees driven by higher short term rates in the current market environment o Increased scale and efficiency as the portfolio grows o Lower variable costs due to the implementation of our proprietary servicing system in 2019 o Delinquencies remain low in the current market environment, further reducing operating expenses (1) LTM = l ast twelve months (1) (1)
$34 $43 $51 $55 $13 $24 $38 $57 $47 $67 $89 $111 4Q22 1Q23 2Q23 3Q23 Note Rate of 5.00% up to 6.00% Note Rate of 6.00% or Greater Total Servicing Portfolio With Note Rates of 5.00% or Greater (1) (UPB in bill ions) FUTURE RECAPTURE OPPORTUNITIES ENHANCED BY RECENT PRODUCTION 7 • Pennymac, through its multi - channel production platform, has been one of the largest producers of mortgage loans over the last twelve months as interest rates increased (1) ‒ Pennymac retains MSRs on nearly all mortgage loan production, driving continued organic servicing portfolio growth ‒ Quarterly production adds approximately $20 - 25 billion in UPB of loans at prevailing mortgage rates to the servicing portfolio e ach quarter • The continued addition of higher interest rate loans to the servicing portfolio provides significant refinance opportunities for Consumer Direct when mortgage rates decline Note: Figures may not sum due to rounding (1) Includes loans acquired or subserviced for PMT and includes loans held for sale at fair value 19% of total servicing portfolio
$19.7 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 1% 1% 5% 18% 20% 16% 12% 8% 5% 4% 3% 2% 4% 1 - 1.5% 1.5 - 2% 2 - 2.5% 2.5 - 3% 3 - 3.5% 3.5 - 4% 4 - 4.5% 4.5 - 5% 5 - 5.5% 5.5 - 6% 6 - 6.5% 6.5 - 7% >7% Mortgage Rate (%) OPPORTUNITY FOR SECOND - LIEN EXPANSION 8 Distribution of Rates on Outstanding U.S. Mortgages (2) (as a % of properties) (1) TransUnion Consumer Credit Database: in order to be considered to have tappable equity, the homeowner must have VantageScore ® 4.0 credit score of at least 620, and equity of at least $10,000 and at least 20% in the home. (2) TransUnion Consumer Credit Database, as of 2Q23 Total Tappable (1) Home Equity ($ in trillions) • Estimated “tappable” home equity for U.S. homeowners totaled $19.7 trillion in 2Q23 (1) , driven by significant home price appreciation in recent years − More than 60% of borrowers in the U.S. have a mortgage loan with a note rate of 4% or lower (2) with potential to benefit from lower overall borrowing costs with a closed - end second lien versus a cash - out refinance • PFSI launched closed - end second lien product to its servicing portfolio customers in 3Q22 − Originated approximately $450 million in UPB since program inception, including $199 million in 3Q23 − Launching marketing campaign to non - portfolio customers in 4Q23
PENNYMAC’S MARKET SHARE OVER TIME ACROSS ITS BUSINESSES 9 Loan Servicing Market Share (1) Correspondent Production Market Share (1) Broker Direct Market Share (1) Consumer Direct Market Share (1) Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT (1) Historical market share estimates based on Inside Mortgage Finance. Inside Mortgage Finance estimates $1.4 trillion in total ori gination volume for 3Q23 LTM. For 3Q23 LTM, we estimate the correspondent channel represented 28% of the overall origination market, retail represented 56%, and broker represented 16%. Loan servicing market share is based on PFSI’s servicing portfol io UPB of $589 billion divided by an estimated $13.9 trillion in mortgage debt outstanding 15.3% 17.7% 16.7% 15.0% 21.2% 2019 2020 2021 2022 3Q23LTM 3.3% 3.7% 4.1% 4.1% 4.2% 12/31/19 12/31/20 12/31/21 12/31/22 9/30/23 0.7% 0.9% 1.6% 1.1% 0.6% 2019 2020 2021 2022 3Q23LTM 1.2% 2.1% 2.4% 2.0% 3.1% 2019 2020 2021 2022 3Q23LTM
$12.2 $18.2 $18.8 $10.2 $3.0 $2.8 $22.4 $21.2 $21.5 $23.0 $21.6 $23.9 3Q22 2Q23 3Q23 PFSI fundings PMT fundings Total locks 10 PRODUCTION SEGMENT HIGHLIGHTS – VOLUME BY CHANNEL Broker Direct (UPB in billions) Consumer Direct (UPB in billions) October 2023 (Estimated) October 2023 (Estimated) October 2023 (Estimated) Note: Figures may not sum due to rounding (1) Includes all government - insured or guaranteed loans and certain conventional loans PMT acquires through its correspondent produ ction business; PFSI earns income from holding and selling or securitizing the loans (2) Loans fulfilled for PMT; for these loans, PFSI earns a fulfillment fee from PMT rather than income from holding and selling o r securitizing the loans (3) Includes locks related to both PFSI and PMT loan acquisitions (4) Commitments to originate mortgage loans at specified terms at period end (1) (2) (3) Correspondent (UPB in billions) $1.3 $2.1 $2.2 $1.9 $2.8 $3.0 3Q22 2Q23 3Q23 Fundings Locks $2.3 $1.6 $1.3 $3.8 $2.2 $1.7 3Q22 2Q23 3Q23 Fundings Locks Locks: (UPB in billions) $9.4 Locks: (UPB in billions) $1.0 Locks: (UPB in billions) $0.5 Acquisitions: (UPB in billions) $8.9 Originations: (UPB in billions) $0.8 Originations: (UPB in billions) $0.3 Committed pipeline (4) : (UPB in billions) $1.1 Committed pipeline (4) : (UPB in billions) $0.5
11 DRIVERS OF PRODUCTION SEGMENT RESULTS (1) Expected revenue net of direct origination costs at time of lock (2) Includes government - insured or guaranteed loans, as well as certain conventional loans for PFSI’s own account in 2Q23 & 3Q23 (3) Reflects timing of revenue and loan origination expense recognition, hedging, pricing & execution changes, and other items • Production revenue margins in PFSI Correspondent were unchanged from the prior quarter, while margins in Broker Direct and Consumer Direct were higher – Higher margins in Consumer Direct were primarily due to a greater percentage of closed - end second liens, which have lower average balances • Revenue per fallout adjusted lock for PFSI’s own account was 60 basis points in 3Q23, down slightly from 63 bps in 2Q23 • Production expenses (net of loan origination expense) were slightly higher than the prior quarter due to higher overall volum es Fallout Adjusted Locks Margin / Fulfillment Fee (bps) (1) Revenue Contribution (net of Loan origination expense) % of Production Revenue Fallout Adjusted Locks Margin / Fulfillment Fee (bps) (1) Revenue Contribution (net of Loan origination expense) % of Production Revenue Fallout Adjusted Locks Margin / Fulfillment Fee (bps) (1) Revenue Contribution (net of Loan origination expense) % of Production Revenue PFSI Correspondent (2) 12,014$ 24 29.4$ 17% 17,803$ 33 59.2$ 43% 20,060$ 33 66.6$ 46% Broker Direct 1,319 70 9.3 5% 2,038 84 17.1 12% 2,267 97 22.0 15% Consumer Direct 2,140 366 78.3 46% 1,369 366 50.1 36% 1,065 474 50.4 35% Other (3) n/a n/a 35.7 21% n/a n/a 7.2 5% n/a n/a 1.0 1% Total PFSI account revenues (net of Loan origination expense) 15,473$ 99 152.7$ 89% 21,210$ 63 133.6$ 96% 23,392$ 60 140.0$ 96% PMT Conventional Correspondent 10,232 18 18.4 11% 2,501 22 5.4 4% 2,667 21 5.5 4% Total Production revenues (net of Loan origination expense) 67 171.1$ 100% 59 139.0$ 100% 56 145.6$ 100% Production expenses (less Loan origination expense) 25,705$ 52 132.5$ 77% 23,711$ 48 114.6$ 82% 26,059$ 46 120.4$ 83% Production segment pretax income 15 38.6$ 23% 10 24.4$ 18% 10 25.2$ 17% 3Q232Q233Q22
PRODUCTION SEGMENT HIGHLIGHTS – BUSINESS TRENDS BY CHANNEL 12 • Pennymac remains the largest correspondent aggregator in the U.S. • Acquisitions for PFSI’s account were up 3% and lock volumes were up 12% from 2Q23 ‒ PFSI is expected to continue purchasing conventional loans acquired through PMT’s correspondent channel in 4Q23 • 829 correspondent sellers at September 30, 2023, up from 800 at June 30, 2023, primarily driven by additional relationships with community banks and credit unions • Purchase volume in 3Q23 was 92% of acquisitions • Potential for U.S. bank regulators to increase capital requirements for residential mortgages provides additional opportunities for Pennymac • Funding volumes were up 4% and lock volumes were up 6% from 2Q23 • While the channel remains competitive, margins are improving • Approved brokers totaled 3,539 at September 30, 2023, up from 3,262 at June 30, 2023 and representing approximately a quarter of the total population of brokers ‒ Top brokers see Pennymac as a strong alternative to the top two channel lenders • Purchase loans were 91% of total originations • Funding volumes were down 15% from 2Q23 • Margins were significantly higher than in the prior quarter due to a higher percentage of closed - end second liens • Focused on meeting the changing needs of the 2.4 million customers in our servicing portfolio in a higher interest rate environment ‒ Purchase lock volume in 3Q23 was $504 million, or 30% of total locks, compared to $490 million, or 23% of total locks in 2Q23 ‒ $418 million or approximately 83% of total purchase locks sourced from our large and growing servicing portfolio ‒ $199 million of closed - end second lien mortgage loans funded in 3Q23, up from $122 million in 2Q23 C orrespondent Broker Direct C onsumer Direct Multi - channel approach provides flexibility and has proven to be a competitive advantage, supporting profitability and pricing discipline while driving growth of the servicing portfolio
$539.1 $576.5 $589.4 9/30/22 6/30/23 9/30/23 Prime owned Prime subserviced and other $576.5 $589.4 ($12.2) $25.1 At 6/30/20 Runoff Additions from loan production At 9/30/23 SERVICING SEGMENT HIGHLIGHTS 13 • Servicing portfolio totaled $589.4 billion in UPB at September 30, 2023, up 2% Q/Q and 9% Y/Y • Production volumes more than offset prepayment activity, leading to continued portfolio growth • 60+ day delinquency rates remain low • Modification volume increased from the prior quarter while EBO loan volume was essentially unchanged Loan Servicing Portfolio Composition (UPB in billions) Net Portfolio Growth (UPB in billions) (1) Owned portfolio is predominantly government - insured and guaranteed loans – see Appendix slide 30 for additional details; delinqu ency data based on loan count (i.e., not UPB); CPR = Conditional Prepayment Rate (2) Represents PMT’s MSRs that we service and excludes distressed loan investments (3) UPB of completed modifications includes loss mitigation efforts associated with partial claims programs (4) Early buyouts of delinquent loans from Ginnie Mae pools during the period (5) Also includes loans sold with servicing released in connection with any asset sales by PMT (6) Includes consumer and broker direct production, government and conventional correspondent acquisitions, and conventional conf or ming and jumbo loan acquisitions subserviced for PMT (5) (6) 2Q23 3Q23 Loans serviced (in thousands) 2,340 2,376 60+ day delinquency rate - owned portfolio (1) 3.2% 3.2% 60+ day delinquency rate - sub-serviced portfolio (2) 0.5% 0.6% Actual CPR - owned portfolio (1) 6.8% 6.1% Actual CPR - sub-serviced (2) 5.5% 5.0% UPB of completed modifications ($ in millions) (3) $2,670 $3,321 EBO loan volume ($ in millions) (4) $481 $476 Selected Operational Metrics
SERVICING PROFITABILITY EXCLUDING VALUATION - RELATED CHANGES 14 • Loan servicing fees increased from the prior quarter due to growth in the owned portfolio; operating expenses increased sligh tly • Earnings on custodial balances and deposits increased $7 million from the prior quarter due to higher average short term rate s – Custodial funds managed for PFSI’s owned servicing portfolio totaled $5.3 billion at September 30, 2023 – Earnings rate generally fluctuates with changes in the Federal Funds rate • Realization of MSR cash flows increased $4 million from the prior quarter due to larger average MSR fair values in the quarte r • EBO loan - related revenue increased $9 million from the prior quarter driven by redeliveries of reperforming loans for certain EB O investors, but is expected to remain low for the next few quarters • Interest expense decreased $6 million from the prior quarter due to lower average balances of secured debt outstanding (1) Of average portfolio UPB, annualized (2) Comprised of net gains on mortgage loans held for sale at fair value and interest income related to EBO loans (3) Consists of interest shortfall and recording and release fees (4) Changes in fair value do not include realization of MSR cash flows (5) Considered in the assessment of MSR fair value changes $ in millions basis points (1) $ in millions basis points (1) $ in millions basis points (1) Loan servicing fees 313.1$ 23.5 356.5$ 25.0 387.9$ 26.7 Earnings on custodial balances and deposits and other income 43.9 3.3 92.8 6.5 99.4 6.8 Realization of MSR cash flows (141.8) (10.6) (174.2) (12.2) (177.8) (12.2) EBO loan-related revenue (2) 36.3 2.7 20.0 1.4 29.0 2.0 Servicing expenses: Operating expenses (108.7) (8.2) (103.4) (7.2) (111.2) (7.6) Payoff-related expense (3) (10.0) (0.7) (9.0) (0.6) (9.4) (0.6) Losses and provisions for defaulted loans (12.8) (1.0) (13.3) (0.9) (10.3) (0.7) EBO loan transaction-related expense (0.2) (0.0) (0.4) (0.0) (0.2) (0.0) Interest expense (50.2) (3.8) (93.7) (6.6) (87.5) (6.0) Pretax income excluding valuation-related changes 69.6$ 5.2 75.3$ 5.3 120.0$ 8.2 Valuation-related changes MSR fair value (4) 237.2 118.9 398.9 Hedging derivatives gains (losses) (164.7) (155.1) (423.7) Provision for losses on active loans (5) 3.2 7.5 6.0 Servicing segment pretax income 145.3$ 46.5$ 101.2$ Average servicing portfolio UPB 532,861$ 570,619$ 582,262$ 3Q233Q22 2Q23
15 HEDGING APPROACH MODERATES THE VOLATILITY OF PFSI’S RESULTS MSR Valuation Changes and Offsets ($ in millions) • PFSI seeks to moderate the impact of interest rate changes on the fair value of its MSR asset through a comprehensive hedging strategy that also considers production - related income • In 3Q23, MSR fair value increased – Interest rates increased during the quarter, decreasing prepayment projections and increasing projections of future earnings on custodial balances • Hedging losses were primarily due to higher interest rates – Hedging costs decreased meaningfully from the prior quarter $237 $119 $399 ($165) ($155) ($424) $39 $24 $25 3Q22 2Q23 3Q23 MSR fair value change before realization of cash flows Hedging and related losses Production pretax income
INVESTMENT MANAGEMENT SEGMENT HIGHLIGHTS 16 • Net AUM as of September 30, 2023 were $ 1.9 billion, up 1% from June 30, 2023 and down 3 % from September 30, 2022 • Investment Management segment revenues were $8.8 million, down 8% from 2Q23 and 15% from 3Q22 Investment Management AUM ($ in billions) Investment Management Revenues ($ in millions) $10.4 $9.5 $8.8 3Q22 2Q23 3Q23 $2.0 $1.9 $1.9 9/30/22 6/30/23 9/30/23
APPENDIX
6% 27% 40% Requirement PLS RBCR PLS Leverage Ratio In August 2022, the Federal Housing Finance Agency (FHFA) and Ginnie Mae (GNMA) released updated eligibility standards for non bank seller/servicers; most requirements were effective September 30, 2023 o PennyMac Loan Services, LLC (PLS), the entity at which these standards are applicable, is a wholly owned subsidiary of PFSI and is approved as a seller/servicer of mortgage loans by Fannie Mae and Freddie Mac and as an issuer of securities guaranteed by Gi nni e Mae PFSI IS WELL IN EXCESS OF REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS 18 New GNMA Eligibility Requirements New FHFA Eligibility Requirements Capital Liquidity Capital Ratios (1) Pro forma to include FHFA's GNMA's origination liquidity requirement effective December 31, 2023 (2) Risk based Capital Ratio; GNMA has extended the mandatory implementation date of the RBC requirement to December 31, 2024 As of September 30, 2023 (in millions) (2) $1,158 $6,227 Requirement PLS 6% 32% Requirement PLS $1,252 $5,969 Requirement PLS $532 $1,384 Requirement PLS (1) (1) $384 $1,584 Requirement PLS
19 ESTABLISHED LEADER WITH SUBSTANTIAL LONG - TERM GROWTH POTENTIAL $589 billion outstanding IN SER VIC ING (2) YEARS FOR PFSI AS A PUBLIC COMPANY 16 YEARS OF OPERATIONS PMT # 2 • CORRESPONDENT PRODUCTION • BROKER DIRECT • CONSUMER DIRECT IN PRODUCTION (1) IS A LEADING RESIDENTIAL MORTGAGE REIT # 5 Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 9/30/23 unless othe rwi se noted (1) Inside Mortgage Finance for the 12 months ended 9/30/23 (2) Inside Mortgage Finance as of 6/30/23 $1.9 billion in assets under management 14 - year track record 2.4 million customers $96 billion in LTM 3Q23 10
OVERVIEW OF PENNYMAC FINANCIAL’S BUSINESSES 20 LOAN PRODUCTION Correspondent aggregation of newly originated loans from third - party sellers Fulfillment fees for PMT’s delegated conventional loans PFSI earns gains on all loan production with the exception of loans fulfilled for PMT Broker direct and consumer direct origination of conventional and government - insured loans LOAN SERVICING Servicing for owned MSRs and subservicing for MSRs owned by PMT Major loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae Industry - leading capabilities in special servicing Organic growth results from loan production, supplemented by MSR acquisitions and PMT investment activity INVESTMENT MANAGEMENT External manager of PMT, which invests in mortgage - related assets: GSE credit risk transfer investments MSR investments Investments in agency MBS, senior non - agency MBS and asset - backed securities Synergistic partnership with PMT Complex and highly regulated mortgage industry requires effective governance, compliance and operating systems Operating platform has been developed organically and is highly scalable Commitment to strong corporate governance, compliance and risk management since inception PFSI is well - positioned to navigate the current market and regulatory environment
21 PFSI'S BALANCED BUSINESS MODEL IS A FLYWHEEL o Diversified business through correspondent, broker direct and consumer direct channels o Correspondent and broker direct channels in particular allow PFSI to access purchase money volume o Lacks the fixed overhead of the traditional, retail origination model o Recurring fee income business captured over the life of the loan o With higher interest rates, expected life of the loan increases resulting in a more valuable MSR asset o Creates a natural hedge to production income Customer base of 2.4 million drives leads for consumer direct Large volumes of production grow servicing portfolio Loan Production 2 nd largest in the U.S. S.( Loan Servicing 5 th largest in the U.S. S.( In both businesses, scale and efficiency are critical for success Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT (1) Inside Mortgage Finance for the 12 months ended 9/30/23 (2) Inside Mortgage Finance as of 6/30/23
TOP LENDER WITH COMPREHENSIVE AND EFFICIENT MULTI - CHANNEL PLATFORM 22 Centralized, cost - efficient fulfillment division supports all channels Multiple access points to the origination market with a proven ability to allocate resources towards channels with opportunity in the current environment Significant and ongoing investments in mortgage - banking technology provide an exceptional loan o rigination experience for our customers and business partners Scalable technology platform providing our consumers , brokers and correspondent partners with the liquidity, tools and products they need to succeed 2 producer of residential mortgage loans in 1H23 (1) (1) Inside Mortgage Finance; includes volumes fulfilled for PMT # Strong access to purchase market Drives organic servicing portfolio growth Strong access to purchase market Positive and consistent execution for brokers Internet and call - center based Cost - efficient leads from our large servicing portfolio Correspondent Broker Direct Consumer Direct 22
• Offering homeowners and title insurance to customers through joint ventures • Evaluating additional partnerships and revenue opportunities 23 • $ 1.4 b illion in revenue from servicing and sub - servicing fees in 3Q23 LTM • Large deposit balances drive placement fee income in higher rate environment • Cloud - based servicing system built for Pennymac’s unique needs • Operational and cost efficiencies, as well as increased flexibility • Drives efficient lead generation for consumer direct • Refinances, purchase originations, second liens, new products • Loss mitigation expertise to assist consumers and minimize losses • Enhanced by flexible and proprietary servicing technology BENEFITS AND VALUE OF LARGE AND GROWING SERVICING PORTFOLIO SERVICING PORTFOLIO Recurring Cash Flows Proprietary Technology Consumer Direct Opportunities Loss Mitigation Ancillary Products and Services 2.4M customers $589B unpaid principal balance
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 10-Year Treasury Yield 9M23 $1.8 $1.3 $1.7 $2.1 $1.8 $1.6 $2.3 $4.1 $4.4 $2.3 $1.6 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E U.S. Origination Market (in trillions) 48% 75% 64% 61% 73% 80% 63% 40% 45% 73% 89% 40% 58% 53% 49% 63% 71% 54% 36% 42% 69% 85% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 9M23 PFSI Purchase Mix Industry Purchase Mix Proven ability to generate attractive ROEs… 24 TRACK RECORD OF STRONG PERFORMANCE ACROSS MARKET ENVIRONMENTS …across different market environments… …with a strong orientation towards purchase money mortgages. (1) Represents partial year ; in itial public o ffering was May 8, 2013 (2) Inside Mortgage Finance for historical data; forecasts for 2023 represents the average of Mortgage Bankers Association (10/15/23) and Fannie Mae (10/10/23) forecasts (3) Bloomberg (4) Inside Mortgage Finance for historical data; industry purchase mix for 3 Q23 represents the average of Mortgage Bankers Association (10/15/23) and Fannie Mae (10/10/23) forecasts (1) (2) (3) (4) Average: 24% 11% 19% 20% 22% 26% 13% 22% 61% 29% 14% 7% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 9M23 PFSI's Annualized Return on Average Common Stockholders' Equity (ROE)
$1,800mm $2,480mm $3,175mm Unsecured Senior Notes Secured Term Notes and Loans Secured Revolving Bank Financing Lines 20% 10% 18% 20% 18% 22% 19% 21% 27% 24% 12/31/19 12/31/20 12/31/21 12/31/22 9/30/23 Tangible Net Worth / Assets Tangible Net Worth / Assets ex. Loans eligible for repurchase PFSI’S STRONG BALANCE SHEET AND DIVERSE CAPITAL STRUCTURES 25 Low Debt - to - Equity Ratio Diverse Financing Sources High TNW (1) /Assets • Tangible net worth (TNW) / assets excluding loans eligible for repurchase has de creased driven by an increase in balances of loans held for sale at fair value $650mm 5.375% due October 2025 • Targeted debt - to - equity ratio near or below 3.5x with fluctuations largely driven by the origination environment or other market opportunities • Low non - funding debt - to - equity ratio • U nsecured senior notes provide low, fixed interest rates; more than two years until first maturity • Secured term notes due in August 2023 were extended for two years • In October, issued new, 5 - year $125 million term loan secured by Ginnie Mae MSR and servicing advances • Secured revolving bank financing lines provide flexibility to finance fluctuating MSR and advance balances MSR & Servicing Advance Financing Note: All figures are as of September 30, 2023 (1) Tangible net worth excludes capitalized software $500mm 5.750% due September 2031 $650mm 4.250% due February 2029 $500mm GNMA MSR Term Notes due May 2027 $650mm GNMA MSR Term Notes due February 2025 $650mm GNMA MSR Term Notes due August 2025 $ 680 mm GNMA MSR Term Loan due February 2028 Financing capacity across multiple banks $ 400 mm drawn 0.7x 0.6x 0.9x 1.1x 1.2x 3.0x 3.6x 3.2x 2.0x 2.6x 12/31/19 12/31/20 12/31/21 12/31/22 9/30/23 Non-funding debt-to-equity Total debt-to-equity
DEVELOPED IN A SUSTAINABLE MANNER FOR LONG - TERM SUCCESS 26 • Operations launched • PMT initial public offering • Launched correspondent group • PFSI initial public offering • Significant growth in servicing portfolio and consumer direct channel • Launched broker - direct lending channel • Launched proprietary servicing system • Elevated volumes and profitability in low interest rate environment • Significant growth in stockholders’ equity • A leader in mortgage production and servicing • Continued profitability through market challenges • Rapidly increasing mortgage rates • PFSI produces double - digit ROE despite adverse market conditions 2008 - 2012 2013 - 2016 2017 - 2019 2020 - 2021 2022 2023
2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Average 30 - year fixed rate mortgage (1) 6.71% 3.84% CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS 27 Macroeconomic Metrics (3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 7.63% as of 10/19/23 (2) U.S. Department of the Treasury. 4.91% as of 10/19/23 (3) 10 - year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg Average 30 - year fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey Average secondary mortgage rate: 30 - Year FNCL Par Coupon Index (MTGEFNCL), Bloomberg U.S. home price appreciation: S&P CoreLogic Case - Shiller U.S. National Home Price NSA Index (SPCSUSA); data is as of 7/31/23 Residential mortgage originations are for the quarterly period ended; source: Inside Mortgage Finance 10 - year Treasury Bond Yield (2) 4.57% 7.31% 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 10-year Treasury bond yield 3.8% 3.9% 3.5% 3.8% 4.6% 2/10 year Treasury yield spread -0.5% -0.6% -0.6% -1.1% -0.5% 30-year fixed rate mortgage 6.7% 6.4% 6.3% 6.7% 7.3% Secondary mortgage rate 5.7% 5.4% 5.0% 5.6% 6.4% U.S. home price appreciation (Y/Y % change) 10.7% 5.7% 0.8% 0.0% 1.0% Residential mortgage originations (in billions) $530 $350 $295 $400 $385
28 MSR ASSET VALUATION (1) Excludes loans held for sale at fair value Mortgage Servicing Rights Pool UPB (1) $351,270 Weighted average coupon 3.9% Weighted average servicing fee/spread 0.38% Weighted average prepayment speed assumption (CPR) 6.7% Fair value $7,084 As a multiple of servicing fee 5.35 September 30, 2023 Unaudited ($ in millions)
• Overall mortgage delinquency rates increased slightly from the prior quarter but remain low • Servicing advances outstanding for PFSI’s MSR portfolio decreased to approximately $321 million at September 30, 2023 from $4 07 million at June 30, 2023 – No P&I advances are outstanding, as prepayment activity continues to sufficiently cover remittance obligations DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING 29 Historical Trends in Delinquency and Foreclosure Rates (1) (1) Owned MSR portfolio and includes loans held for sale at fair value; delinquency and foreclosure rates based on UPB; as of 9/3 0/2 3, the UPB of mortgage servicing rights owned and loans held for sale at fair value totaled $356 billion 6.7% 15.4% 14.0% 12.0% 9.5% 8.0% 7.2% 5.8% 5.0% 5.0% 5.5% 6.1% 5.4% 5.6% 5.7% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 30-60 Days 60-90 Days 90+ Days In Foreclosure
30 PFSI’S OWNED MSR PORTFOLIO CHARACTERISTICS Note: Figures may not sum due to rounding (1) Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors (2) Other represents MSRs collateralized by conventional loans sold to private investors (3) Excludes loans held for sale at fair value As of September 30, 2023 Segment UPB ($ in billions) (3) % of Total UPB Loan count (in thousands) Note rate Seasoning (months) Remaining maturity (months) Loan size ($ in thousands) FICO credit score at origination Original LTV Current LTV 60+ Delinquency (by UPB) Government (1) FHA $126.9 36.1% 641 4.0% 44 319 $198 675 93% 67% 4.9% VA $120.6 34.3% 442 3.5% 31 328 $273 726 90% 71% 2.0% USDA $21.0 6.0% 142 3.7% 49 314 $148 698 98% 66% 4.8% GSE FNMA $38.7 11.0% 131 4.2% 24 314 $295 760 72% 59% 0.4% FHLMC $42.2 12.0% 141 4.3% 19 320 $298 755 73% 63% 0.5% Other (2) Other $1.7 0.5% 5 5.8% 10 346 $343 767 71% 66% 0.1% Closed-End Seconds Closed-End Seconds $0.2 0.1% 3 10.1% 5 261 $73 748 17% 16% 0.1% Grand Total $351.3 100.0% 1,505 3.9% 34 321 $233 714 87% 67% 2.9%
ACQUISITIONS AND ORIGINATIONS BY PRODUCT 31 Acquisitions/Originations Note: Figures may not sum due to rounding Unaudited ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Correspondent Acquisitions Conventional Conforming - for PMT 10,225$ 6,771$ 6,629$ 3,029$ 2,759$ Conventional Conforming - for PFSI - 3,912 4,063 7,018 9,933 Government - for PFSI 12,161 10,081 9,461 11,139 8,848 Jumbo - for PMT 2 - - - 1 Total 22,387$ 20,764$ 20,153$ 21,186$ 21,541$ Broker Direct Originations - for PFSI Conventional Conforming 909 758$ 1,097$ 1,436$ 1,591$ Government 384 362 441 685 621 Jumbo 5 7 28 19 10 Total 1,298$ 1,126$ 1,565$ 2,140$ 2,223$ Consumer Direct Originations - for PFSI Conventional Conforming 1,198 489$ 365$ 400$ 378$ Government 1,130 572 611 1,028 741 Jumbo 2 4 - 4 3 Closed-end second liens 1 45 81 122 199 Total 2,330$ 1,110$ 1,057$ 1,553$ 1,322$ Total acquisitions/originations 26,016$ 23,000$ 22,775$ 24,879$ 25,085$ UPB of loans fulfilled for PMT (included in correspondent acquisitions) 10,227$ 6,771$ 6,629$ 3,029$ 2,760$
INTEREST RATE LOCKS BY PRODUCT 32 Note: Figures may not sum due to rounding Interest Rate Lock Commitments Unaudited ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Correspondent Locks Conventional Conforming - for PMT 10,647$ 7,507$ 7,588$ 3,322$ 3,493$ Conventional Conforming - for PFSI - 4,747 3,781 7,523 10,333 Government - for PFSI 12,351 10,681 10,341 10,735 10,063 Jumbo - for PMT 2 7 - - 2 Total 22,999$ 22,941$ 21,709$ 21,581$ 23,891$ Broker Direct Locks - for PFSI Conventional Conforming 1,236$ 1,338$ 1,716$ 1,869$ 2,146$ Government 622 656 777 921 828 Jumbo 6 20 59 32 15 Total 1,865$ 2,014$ 2,552$ 2,822$ 2,989$ Consumer Direct Locks - for PFSI Conventional Conforming 1,892$ 700$ 628$ 575$ 559$ Government 1,889 885 1,410 1,383 817 Jumbo 14 6 9 2 5 Closed-end second liens 10 93 152 205 326 Total 3,804$ 1,684$ 2,199$ 2,166$ 1,707$ Total locks 28,668$ 26,639$ 26,459$ 26,568$ 28,586$
CREDIT CHARACTERISTICS BY ACQUISITION/ORIGINATION PERIOD 33 Correspondent Broker Direct Consumer Direct 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Government-insured 680 690 709 715 712 Government-insured 45 46 45 45 45 Conventional 758 756 757 762 762 Conventional 38 39 39 38 38 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Government-insured 679 676 701 712 711 Government-insured 45 46 46 45 46 Conventional 759 756 757 761 761 Conventional 37 38 38 38 39 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Government-insured 680 680 663 661 683 Government-insured 43 44 44 44 45 Conventional 724 728 734 744 743 Conventional 37 38 38 37 38 Weighted Average FICO Weighted Average DTI Weighted Average FICO Weighted Average DTI Weighted Average FICO Weighted Average DTI
ADJUSTED EBITDA RECONCILED TO NET INCOME 34 Note: Figures may not sum due to rounding ($ in millions) 3Q22 2Q23 3Q23 Net income 135.1$ 58.3$ 92.9$ Provision for income taxes 50.3 14.7 33.9 Income before provisions for income taxes 185.5 72.9 126.8 Depreciation and amortization 9.4 13.2 13.2 (Increase) decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model (237.2) (118.9) (398.9) Hedging losses (gains) associated with MSRs 164.7 155.1 423.7 Stock-based compensation 6.5 0.4 8.8 Interest expense on corporate debt and capital base 23.9 23.7 23.9 Adjusted EBITDA 152.9$ 146.4$ 197.5$
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