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Servicing Earnings, Portfolio Up at PennyMac

Earnings from mortgage production were down at PennyMac Financial Services Inc. as originations fell. But servicing income strengthened as the portfolio grew.

The Westlake Village, California-based mortgage-banker disclosed in its first-quarter earnings report pre-tax income of
$73 million during the first-three months of this year.

Results improved from the same-three months last year, when profits came in at $62 million. But they were down from $122 million in final-three months of 2017.

While production profits were down 69 percent from the fourth-quarter 2017 to $17 million,
servicing income soared 71 percent to $55 million.

Residential loan originations came to $14.329 billion during the latest period. Production fell from $17.038 billion in the fourth-quarter 2017 and $14.947 billion in the first-quarter 2017.

Consumer-direct business accounted for $1.266 billion, wholesale lending made up $0.007 billion and correspondent acquisitions were $13.056 billion.

PennyMac claims a 10.5 percent correspondent market share.

A further decline in home lending is likely for the second quarter based on interest rate locks, which
fell to $15.3 billion in the first quarter from $18.1 billion in the fourth-quarter 2017.

PennyMac noted that as the market is transitioning from a low-rate environment, competition among originators is intense – with margins being cut to utilize operational capacity.

“Over time, we expect the market will normalize as capacity adjusts to the smaller market; we are beginning to see some originators reduce headcount and other firms exit the mortgage business,” the report said.

The servicing portfolio concluded March 2018 at 1.279 million loans with an aggregate unpaid principal balance of $173.487 billion, growing from 1.248 million loans for $166.249 billion three months earlier and 1.031 million mortgages for $135.349 billion one year earlier.

The company said its share of the loan servicing market is 2.4 percent.

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