May 27, 2022
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Mortgage slowdown leads to income decline at PennyMac

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NOTE: This article was posted May 9 and revised May 10 to correct an error in the headline and first sentence. PennyMac Financial Services reported net profits for the quarter, not a loss as we initially reported, while PennyMac Mortgage Investment Trust reported a loss.

Amid a “challenging mortgage market,” Westlake Village-based mortgage lender PennyMac Financial Services saw its income decline in the first fiscal quarter of 2022, while the publicly traded mortgage investment trust managed by PennyMac reported a net loss.

PennyMac Financial Services reported net income of $173.6 million, or $2.94 per share on a diluted basis. That was down from income of $376.9 million, or $5.15 per diluted share, in the same quarter a year before.

The company’s board of directors declared a first quarter cash dividend of 20 cents per share, payable on May 27 to common stockholders of record as of May 17.

In a news release announcing the first quarter results, CEO David Spector said the “unprecedented increase in mortgage rates resulted in lower overall industry origination volumes and left originators and aggregators who still hold excess operational capacity competing for a much smaller population of loans.”

The “transitioning mortgage origination market contributed to the reduced financial performance in our production business,” Spector said

PennyMac saw pretax income of $234.5 million in the first quarter, down 54% from the first quarter of 2021.

PennyMac Mortgage Investment Trust, a mortgage real estate investment trust managed by PennyMac Financial Services, reported a net loss of $29.6 million, or 32 cents per common share on a diluted basis, in the first quarter of 2022.

The company previously announced a cash dividend of 47 cents per common share of beneficial interest, which was declared on March 4 and paid on April 28 to common shareholders of record as of April 15.

During the first quarter, PennyMac repurchased 2 million common shares at a cost of $31.8 million. It also repurchased an additional 990,000 shares in April at a cost of $15.4 million

In a news release, Spector said the first quarter net loss at the mortgage investment trust “was primarily driven by fair value declines in its credit sensitive strategies due to spread widening that resulted from economic uncertainty across financial markets and a provision for tax expense driven by fair value increases in its taxable REIT (real estate investment trust) subsidiary.”

Additionally, Spector said “competitive pressure in the conventional correspondent production channel continued as mortgage rates increased to levels not seen in more than a decade.”