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Earnings, Originations Sink at PennyMac

A significant quarter-over-quarter decline in home lending at PennyMac Financial Services Inc. contributed to a sharp drop in earnings. Staffing also contracted.

Pre-tax income during the first-three months of 2017 was $62 million at the Westlake Village, California-based firm, sinking from $129 million the prior quarter.

PennyMac
presented the results, in addition to other financial and operational metrics, as part of its earnings report for the first quarter of this year.

Earnings more than doubled, however, from $30 million in the first-quarter 2016.

Production income tumbled 49 percent from the fourth-quarter 2016 to $48 million, while
servicing income sank 62 percent to $13 million.

“PennyMac Financial’s first quarter results reflect the combination of an abrupt rise in mortgage rates at the end of last year and the typical seasonal slowdown in origination volumes,” PennyMac President and Chief Executive Officer David Spector said in the report. “With respect to mortgage rates, we have recently seen a decline in rates that is expected to improve the second quarter’s mortgage origination outlook.”

From Jan. 1, 2017, through March 31, residential loan originations totaled $14.947 billion, sinking from $22.076 billion in the fourth-quarter 2016. Business was better, however, than $10.890 billion in the first-quarter 2016.

First-quarter 2017 business included $13.912 billion in correspondent acquisitions and $1.035 billion in consumer-direct originations.

Second-quarter 2017 production is poised for a further decline based on rate locks, which tumbled to $16.3 billion in the first quarter of this year from $21.6 billion the previous period.

PennyMac claims an 11.3 percent correspondent market share.
Correspondent seller relationships numbered 557 as of the most-recent period.

PennyMac serviced 1.031 million loans with an aggregate unpaid principal balance of $135.349 billion as of March 31, 2017. That was more than 995,000 loans for $129.177 billion three months earlier and $112.837 billion one year earlier.

The report indicated that a bulk portfolio of mortgage-servicing rights on $4.3 billion in Ginnie Mae loans was acquired after the close of the first-quarter 2017.

Sixty-day delinquency was 2.7 percent at the conclusion of this year’s first quarter, improving from 3.1 percent at the end of last year.
But delinquency deteriorated from 2.6 percent at the same point last year.

Staffing at PennyMac closed out the first-quarter 2017 at 2,918 people, fewer than 3,099 at the close of 2016.
But headcount expanded from 2,523 people as of March 31, 2016.

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