PennyMac Financial Services, Inc.
For the period ended Dec 31, 2025. Filed Feb 20, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 20, 2026
PFSI$65.59-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-19.
0001558370-25-001148
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-20.
0001104659-26-018142
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 157 current paragraphs.
97 unchanged; 40 reworded; 19 added; 13 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 70 previous and 72 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
We estimate fair value of MSRs and MSLs using a discounted cash flow approach. Beginning in the third quarter of 2025, we enhanced our discounted cash flow approach to estimate the period-end fair value of our MSRs with the adoption of an Option-Adjusted Spread (“OAS”) discounted cash flow model. The OAS model allows us to account for the likelihood of interest rates moving along different paths as economic conditions change in our assessment of the fair value of MSRs as opposed to a single assumed rate path.
Current report
Recent macroeconomic trends and U.S. federal government actions with respect to trade, tariffs, government cost reduction initiatives, inflation and interest rates have led to significant volatility in financial markets and uncertainty regarding the economic outlook. Elevated interest rates in recent years have constrained growth in the size of the mortgage origination market, which is currently projected to increase from $1.9 trillion in 2025 to $2.3 trillion in 2026 according to mortgage industry economists.
Current report
The opportunity for refinancing has increased recently, driven by interest rate volatility and a greater proportion of outstanding mortgages with note rates near current market rates. If such interest rate volatility continues, it may drive greater mortgage production activity and higher prepayment speeds. Towards the end of the fourth quarter of 2025, we experienced higher prepayment speeds and increased runoff of MSRs that outpaced the growth of our production-related income. The current economic uncertainty and market volatility may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increased losses relating to the representations and warranties we provide in our loan sale transactions.
Current report
We expect to sell a portion of our conventional conforming correspondent loan production and all of our non-agency loans to PMT in the first quarter of 2026.
Current report
Net interest expense increased $10.3 million in the year ended December 31, 2025 compared to 2024. The increase was primarily due to:
Current report
Compensation expense increased $150.2 million in the year ended December 31, 2025 compared to 2024. The increase was primarily due to an increase in head count and increased incentive compensation reflecting higher loan production volume and higher company profitability, which resulted in increased bonus accruals.
Current report
Marketing and advertising
Current report
Marketing and advertising expenses increased $24.2 million and $4.3 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, primarily due to additional marketing expenses incurred as an Official Supporter of Team USA and increased marketing expenses for consumer direct lending.
Current report
Technology
Current report
Technology expenses increased $13.1 million and $6.4 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively. The increases were primarily due to increases in virtual desktop and cloud-related expenses and a $4.6 million impairment of capitalized software recorded during the year ended December 31, 2025.
Current report
For the years ended December 31, 2025, 2024 and 2023, our effective income tax rates were 9.1%, 22.3%, and 21.2%, respectively. The effective income tax rate for 2025 is lower compared to 2024 and 2023 due to the enactment of California Senate Bill 132, signed into law June 27, 2025 and effective January 1, 2025. The law requires financial institutions to apportion their California income using a single sales factor instead of a factor equally weighted with property, payroll and sales. Our effective income tax rate for 2025 includes a repricing of the net deferred tax liabilities resulting from this apportionment rule change along with a reduction in the booking tax rate.
Current report
Net cash provided by investing activities was $552.5 million in the year ended December 31, 2025, primarily comprised of a $615.2 million sale of MSRs, $193.1 million from the repayment of principal-only stripped mortgage-backed securities and $154.4 million in net settlement of derivative financial instruments used to hedge our investment in MSRs, partially offset by a $369.6 million increase in margin deposits.
Current report
Net cash provided by financing activities was $1.2 billion in the year ended December 31, 2025, primarily due to a $309.9 million increase in short-term borrowings and a $944.8 million increase in long-term borrowings. The increase in borrowings reflects the increase in inventory of loans held for sale and our investment in MSRs.
Current report
On February 6, 2025, PFSI issued $850 million in 6.875% unsecured senior notes due in 2033 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
Current report
On May 8, 2025, PFSI issued $850 million in 6.875% unsecured senior notes due in 2032 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
Current report
On May 12, 2025, PFSI redeemed $650 million in 5.375% unsecured senior notes due in October 2025.
Current report
On June 20, 2025, PFSI, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, redeemed $500 million of secured term notes due in May 2027 in a private placement.
Current report
On August 14, 2025, PFSI, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, issued $300 million of secured term notes due in August 2030 in a private placement.
Current report
On August 25, 2025, PFSI, through its wholly-owned subsidiaries PNMAC, PLS and the Issuer Trust, partially redeemed $200 million of secured term loans due in February 2028.
Removed paragraphs (13)
Previous report
Our right to purchase such loans arises as the result of the loan being at least three months delinquent when we buy the loan. Our ability to purchase delinquent loans provides us with an alternative to our obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. Such repurchased loans are referred to as EBO loans and may be resold to investors and thereafter may be repurchased to the extent eligible for resale into a new Ginnie Mae guaranteed security. Such eligibility occurs when a repurchased loan either becomes current through completion of a modification of its terms or otherwise after three months of timely payments and when the issuance date of the new security into which the loan is placed is at least 120 days after the date the loan was last delinquent. At December 31, 2024, we held $145.0 million at fair value of such loans.
Previous report
The U.S. Federal Reserve has reduced the federal funds rate somewhat from its highest level since 2007 as inflationary pressures have abated, and longer-term interest rates remain near their most elevated levels in recent years. Elevated interest rates have constrained growth in the size of the mortgage origination market, which grew slightly from $1.5 trillion in 2023 to an estimated $1.7 trillion in 2024, and is expected to grow modestly to $2.0 trillion in 2025 according to mortgage industry economists.
Previous report
Fluctuating interest rates and an increasing number of mortgage loans outstanding with interest rates near current levels have led to an increasing opportunity for refinancing, which has driven increased mortgage production activity in the most recent year and also led to increasing prepayment speeds on our mortgage servicing portfolio from the historically slow prepayment speeds experienced in 2023. Higher interest rate levels have increased the costs of floating rate borrowings as well as interest income from placement fees we receive relating to custodial funds that we manage on deposits and loans held for sale as compared to the prior year. However, these items will be impacted in future periods by the reductions to the federal funds rate that the Federal Reserve has recently put into place. We continued our acquisition of conventional loans from PMT and expect to purchase more such loans from PMT through the second quarter of 2025.
Previous report
In the year ended December 31, 2023, we recorded income before provision for income taxes of $183.6 million, a decrease of $481.6 million or 72% from 2022. The decrease was due to a $309.6 million decrease in production revenues primarily due to lower production volume and a shift in the mix of production to lower margin channels and a $308.7 million decrease inNet loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results, partially offset by a $102.5 million decrease in total expenses. The decrease in the total expense was primarily due to a $246.5 million reduction in compensation, loan origination and marketing and advertising expenses, partially offset by a $158.1 million increase in legal settlements. The increase in legal settlements expense reflects an arbitrator’s finding in a claim made against us by Black Knight Servicing Technologies, LLC. This claim, which is discussed in detail in Note 19–Commitments and Contingencies to the consolidated financial statements included in this Report, resulted in a charge to our results of operations of $115.8 million net of income taxes or a reduction to earnings per diluted share of common stock of $2.20.
Previous report
Net interest expense decreased $36.5 million in the year ended December 31, 2023 compared to 2022. The decrease was primarily due to:
Previous report
Compensation expense decreased $158.3 million in the year ended December 31, 2023, compared to 2022 primarily due to work force reductions necessitated by reductions in loan production and decreased incentive compensation accruals due to reduced staffing levels and lower achievement of profitability targets.
Previous report
For the years ended December 31, 2024, 2023 and 2022, our effective income tax rates were 22.3%, 21.2%, and 28.5%, respectively. The effective income tax rate for 2024 is lower than our booking tax rate primarily due to the effect of the repricing of the net deferred tax liability resulting from a decrease in the booking tax rate. The lower effective income tax rate for 2023 is primarily due to the permanent differences impact of an increase in deductible compensation along with the reduction in the future tax rate for some states. The decrease in the 2023 effective income tax rate is further emphasized by the decrease in income before income taxes.
Previous report
Net cash used in investing activities was $721.6 million in the year ended December 31, 2022, primarily comprised of $871.9 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and $71.9 million used in acquisition of capitalized software, partially offset by a $238.7 million decrease in margin deposits.
Previous report
Net cash used in financing activities was $4.3 billion in the year ended December 31, 2022, primarily due to a $4.5 billion decrease in short-term borrowings, which reflects decreased borrowing requirements relating to our reduced inventory of loans held for sale, and $406.1 million in repurchases of common stock, partially offset by issuance of a $650 million note payable secured by mortgage servicing rights.
Previous report
On February 29, 2024, the Company through its indirect subsidiary, PNMAC GMSR ISSUER TRUST (the “Issuer Trust”), issued an aggregate principal amount of $425 million in secured term notes (the “2024-GT1 Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The 2024-GT1 Notes will mature on March 26, 2029 or, if extended, either March 25, 2030 or March, 25, 2031. The 2024-GT1 Notes rank pari passu with other secured term notes issued by the Issuer Trust and are secured by certain participation certificates relating to Ginnie Mae mortgage servicing rights and excess servicing spread relating to such mortgage servicing rights that are financed by PLS.
Previous report
On July 25, 2024, the Company, the Issuer Trust and PLS entered into two VFN repurchase agreements, 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 Series 2024-MSRVF1 Master Repurchase Agreement by and between PLS, as seller, and Mizuho Bank, Ltd. (“Mizuho”), as administrative agent and as a buyer, is related to the excess servicing spread. The Series 2020-SPIADVF1 Master Repurchase Agreement by and between PLS, as seller, and Mizuho, as administrative agent and buyer, is related to the servicing advance receivables. The maximum amount outstanding under both repurchase agreements is $350 million and each agreement is set to expire on July 25, 2026.
Previous report
On October 28 2024, the Company, PFSI ISSUER TRUST - FMSR and PLS, entered into a new VFN repurchase agreement, as part of the structured finance transaction that PLS uses to finance Fannie Mae mortgage servicing rights and related excess servicing spread and servicing advance receivables with Goldman Sachs Bank, USA, as administrative agent and as buyer. The maximum purchase price available from Goldman Sachs Bank, USA under the repurchase agreement is $225 million and the initial term is set to expire on October 28, 2026 with the outstanding purchase price amortized over the following 12 months.
Previous report
All debt financing arrangements that matured between December 31, 2024 and the date of this Annual Report have been renewed or extended and are described in Note 15—Short-Term Debt to the accompanying consolidated financial statements.
Reworded paragraphs (40)
Previous wording
At December 31, 2024, $18.3 billion or 70% of our total assets were carried at fair value on a recurring basis and $15.0 million (real estate acquired in settlement of loans (“REO”)), were carried based on fair value on a non-recurring basis when fair value indicates evidence of impairment of individual properties.
Current wording
At December 31, 2025, $20.0 billion or 68% of our total assets were carried at fair value on a recurring basis and $37.7 million (real estate acquired in settlement of loans (“REO”)), were carried based on fair value on a non-recurring basis when fair value indicates evidence of impairment of individual properties.
Previous wording
Changes in fair value of our holdings of assets carried at fair value have significant effects on our financial position and income. As summarized above, changes in fair values of “Level 1” and “Level 2” fair value assets are determinable with reference to direct quotes in active markets on the measurement date in the case of “Level 1” fair value assets, or reference to publicly available pricing inputs (such as reference interest rates and credit spreads and prices of similar assets) in the case of “Level 2” fair value assets.
Current wording
Changes in fair value of our holdings of assets carried at or based on fair value have significant effects on our financial position and income. As summarized above, changes in fair values of “Level 1” and “Level 2” fair value assets are determinable with reference to direct quotes in active markets on the measurement date in the case of “Level 1” fair value assets, or reference to publicly available pricing inputs (such as reference interest rates and credit spreads and prices of similar assets) in the case of “Level 2” fair value assets.
Previous wording
$9.3 billion or 35% of our total assets are measured using “Level 3” fair value inputs – significant inputs where there is difficulty observing the inputs used by market participants to establish fair value. Different approaches to valuing those assets or changes in inputs to measurement of these assets can have a significant effect on the amounts reported for these items including their reported balances and their effects on our income.
Current wording
$10.1 billion or 34% of our total assets are measured using “Level 3” fair value inputs – significant inputs where there is difficulty observing the inputs used by market participants to establish fair value. Different approaches to valuing those assets or changes in inputs to measurement of these assets can have a significant effect on the amounts reported for these items including their reported balances and their effects on our income.
Previous wording
During the three years ended December 31, 2024, we recognized significant changes in the fair value of our holdings of “Level 3” fair value assets and liabilities as shown below:
Current wording
During the three years ended December 31, 2025, we recognized changes in the fair value of our holdings of “Level 3” fair value assets and liabilities as shown below:
Previous wording
Because the fair value of “Level 3” fair value assets and liabilities are difficult to estimate, our valuation process includes performance of these items’ fair value estimation by specialized staff with significant senior management oversight. We have assigned the responsibility for estimating the fair values of non-interest rate lock commitment (“IRLC”) “Level 3” fair value assets and liabilities to our capital markets valuation staff, which is responsible for valuing and monitoring these items and maintenance of our valuation policies and procedures for non- IRLC assets and liabilities. The capital markets valuation staff submits the results of its valuations to our senior management valuation subcommittee, which oversees the valuations. Our senior management valuation subcommittee includes the Company’s chief financial, credit, and capital markets officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.
Current wording
Because the fair value of “Level 3” fair value assets and liabilities are difficult to estimate, our valuation process includes performance of these items’ fair value estimation by specialized staff with significant senior management oversight. We have assigned the responsibility for estimating the fair values of non-interest rate lock commitment (“IRLC”) “Level 3” fair value assets and liabilities to our capital markets valuation staff, which is responsible for valuing and monitoring these items and maintenance of our valuation policies and procedures for non- IRLC assets and liabilities. The capital markets valuation staff reports valuations to our management valuation subcommittee responsible for monitoring and overseeing valuations. Our management valuation subcommittee includes the Company’s chief financial, credit, investment and capital markets officers as well as other members of the Company’s finance, capital markets and risk management staffs.
Previous wording
Pull-through rates and MSR fair values are based on our estimates as these inputs are difficult to observe in the marketplace. Market interest rates and our estimate of the probability that a loan will be funded are updated as the loans move through the funding or purchase process and as market interest rates change and these updates may result in significant changes in our estimates of the fair value of the IRLCs. Such changes are reflected in the change in fair value of IRLCs which is a component of ourNet gains on loans held for sale at fair value in the period of the change. The financial effects of changes in these inputs are generally inversely correlated. Increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value but increase the pull-through rate for the loan principal and interest payment cash flow component, which decreases in fair value.
Current wording
Pull-through rates and MSR fair values are based on our estimates as these inputs are difficult to observe in the marketplace. Market interest rates and our estimate of the probability that a loan will be funded are updated as the loans move through the funding or purchase process and as market interest rates change and these updates may result in significant changes to our estimates of the fair value of the IRLCs. Such changes are reflected in the change in fair value of IRLCs which is a component of ourNet gains on loans held for sale at fair value in the period of the change. The financial effects of changes in these inputs are generally inversely correlated. Increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value but increase the pull-through rate for the loan principal and interest payment cash flow component, which decreases in fair value.
Previous wording
A shift in our assessment of an input to the valuation of IRLCs can have a significant effect on the amount of* Net gains on loans held for sale at fair value*for the period. We believe that the most significant “Level 3” fair value input to the measurement of IRLCs is the pull-through rate. At December 31, 2024, we held $33.6 million of net IRLC assets at fair value. Following is a quantitative summary of the effect of changes in the pull-through rate input on the fair value of IRLCs at December 31, 2024:
Current wording
A shift in our assessment of an input to the valuation of IRLCs can have a significant effect on the amount of* Net gains on loans held for sale at fair value*for the period. We believe that the most significant “Level 3” fair value input to the measurement of IRLCs is the pull-through rate. At December 31, 2025, we held $124.9 million of net IRLC assets at fair value. Following is a quantitative summary of the effect of changes in the pull-through rate input on the fair value of IRLCs at December 31, 2025:
Previous wording
We include changes in fair value of MSRs and MSLs in current period income as a component of* Net loan servicing fees*—*Change in fair value of mortgage servicing rights and mortgage servicing liabilities.*Both our estimate of the change in fair value attributable to realization of cash flows and of other changes in fair value are affected by changes in fair value inputs. In the year ended December 31, 2024, we recognized a $433.3 million net decrease in fair value of MSRs and MSLs: $840.7 million of decrease due to realization of cash flows underlying the fair value of MSRs and MSLs, partially offset by $407.4 million of increase due to changes in fair value inputs.
Current wording
We include changes in the fair value of MSRs and MSLs in current period income as a component of* Net loan servicing fees*—*Change in fair value of mortgage servicing rights and mortgage servicing liabilities.*Both our estimate of the change in fair value attributable to realization of cash flows and of other changes in fair value are affected by changes in fair value inputs. In the year ended December 31, 2025, we recognized a $1.4 billion net decrease in fair value of MSRs and MSLs: $1.2 billion of decrease due to realization of cash flows underlying the fair value of MSRs and MSLs and $251.7 million of decrease due to changes in fair value inputs.
Previous wording
A shift in the market for MSRs and MSLs or a change in our assessment of an input to the valuation of MSRs and MSLs can have a significant effect on their fair value and in our income for the period. The net fair value of MSRs and MSLs that we held at December 31, 2024 was $8.7 billion.
Current wording
We believe the most significant “Level 3” fair value inputs to the valuation of MSRs and MSLs are the prepayment speed, OAS or pricing spread (the OAS and pricing spread are components of the discount rate) and annual per-loan cost of servicing. A shift in the market for MSRs and MSLs or a change in our assessment of an input to the valuation of MSRs and MSLs can have a significant effect on their fair value and in our income for the period. The net fair value of MSRs and MSLs that we held at December 31, 2025 was $9.6 billion.
Previous wording
consolidated financial statements for a discussion of recent accounting developments and the expected effect on the Company.
Current wording
Refer to Note 3–Significant Accounting Policies ‒ Recently Issued Accounting Pronouncement Adopted in 2025 to our consolidated financial statements for a discussion of recent accounting developments and the expected effect on the Company.
Previous wording
In the year ended December 31, 2024, we recorded income before provision for income taxes of $401.0 million, an increase of $217.4 million, or 118% from 2023. The increase was due to a $309.5 million increase in production revenues (net gains on sales of loans, loan origination fees and fulfillment fees) primarily due to higher production volumes and gain on sale margins and a $25.3 million decrease in total expenses, partially offset by a $108.9 million decrease inNet loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results primarily due to higher hedging costs. The decrease in the total expense was primarily due to decreases in legal settlements and professional services relating to a claim against us by Black Knight Servicing Technologies, LLC, partially offset by increases in compensation, loan origination and servicing expenses.
Current wording
In the year ended December 31, 2024, we recorded income before provision for income taxes of $401.0 million, an increase of $217.4 million, or 118%, from 2023. The increase was due to a $309.5 million increase in production revenues primarily due to higher production volumes and gain on sale margins and a $25.3 million decrease in total expenses, partially offset by a $108.9 million decrease inNet loan servicing fees reflecting decreased valuation of our MSRs, net of hedging results primarily due to higher hedging costs. The decrease in the total expense was primarily due to decreases in legal settlements and professional services relating to a claim against us by Black Knight Servicing Technologies, LLC, partially offset by increases in compensation, loan origination and servicing expenses.
Previous wording
In the year ended December 31, 2024, we recognizedNet gains on loans held for sale at fair value totaling $817.4 million, as compared to $545.9 million and $791.6 million in 2023 and 2022, respectively. The increase inNet gains on loans held for sale at fair value for the year ended December 31, 2024 compared to 2023 was primarily due to increased volumes and gain on sale margins across all production channels. The decrease inNet gains on loans held for sale at fair value for the year ended December 31, 2023 compared to 2022 was primarily due to decreased production volumes and gain on sale margins and lower EBO loan redelivery gains due to reduced reperformance and modifications and diminished redelivery margins.
Current wording
In the year ended December 31, 2025, we recognizedNet gains on loans held for sale at fair value totaling $1.1 billion, as compared to $817.4 million and $545.9 million in 2024 and 2023, respectively. The increase inNet gains on loans held for sale at fair value for the year ended December 31, 2025 compared to 2024 was primarily due to increased volumes across all production channels. The increase inNet gains on loans held for sale at fair value for the year ended December 31, 2024 compared to 2023 was primarily due to increased volumes and gain on sale margins across all production channels.
Previous wording
The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 279% of our gain on sale of loans at fair value for the year ended December 31, 2024, as compared to 338% and 217% in 2023 and 2022, respectively. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods.
Current wording
The MSRs, MSLs, and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates represented approximately 273% of our gain on sale of loans at fair value for the year ended December 31, 2025, as compared to 279% and 338% in 2024 and 2023, respectively. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods.
Previous wording
In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent originators that sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent seller.
Current wording
In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the purchaser or insurer against future credit losses. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent originators that sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent seller.
Previous wording
In the years ended December 31, 2024, 2023, and 2022 we recorded provisions for losses under representations and warranties relating to current loan sales as a component ofNet gains on loans held for sale at fair value totaling $16.5 million, $13.0 million, and $9.6 million, respectively. The increase in provision relating to current loan sales from the year ended December 31, 2024 compared to the year ended December 31, 2023 reflects the increase in our loan production in 2024. The increase in the provision relating to current loan sales in the year ended December 31, 2023 compared to 2022 was primarily attributable to an increase in loans sold and a change in the mix between government guaranteed or insured loans and conventional loans during 2023.
Current wording
In the years ended December 31, 2025, 2024, and 2023 we recorded provisions for losses under representations and warranties relating to current loan sales as a component ofNet gains on loans held for sale at fair value totaling $17.2 million, $16.5 million, and $13.0 million, respectively. The increase in provision relating to current loan sales from the year ended December 31, 2025 compared to the years ended December 31, 2024 and 2023 reflects the increase in our loan production volume in 2025.
Previous wording
We also recorded reductions in the liability relating to previously sold loans of $13.6 million, $9.1 million, and $8.5 million, for the years ended December 31, 2024, 2023 and 2022, respectively. The reductions in the liability relating to previously sold loans resulted from those loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims.
Current wording
We also recorded reductions in the liability relating to previously sold loans of $7.9 million, $13.6 million, and $9.1 million, for the years ended December 31, 2025, 2024 and 2023, respectively. The reductions in the liability relating to previously sold loans resulted from those loans meeting performance criteria established by the Agencies which significantly limits the likelihood of certain repurchase or indemnification claims.
Previous wording
Following is a summary of mortgage loan repurchase activity and the unpaid balance of mortgage loans subject to representations and warranties:
Current wording
Following is a summary of mortgage loan indemnification and repurchase activity and the unpaid balance of mortgage loans subject to representations and warranties:
Previous wording
In the year ended December 31, 2024, we repurchased loans with unpaid principal balances totaling $89.7 million and charged $4.6 million in net incurred losses relating to repurchases against our liability for representations and warranties. Our losses arising from representations and warranties have historically been reduced by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Current wording
In the year ended December 31, 2025, we repurchased loans with unpaid principal balances totaling $113.8 million and charged $3.5 million in net incurred losses relating to repurchases against our liability for representations and warranties. Our losses arising from representations and warranties have historically been reduced by our ability to either recover most of the losses from our correspondent sellers or from our ability to profitably refinance and resell repurchased loans.
Previous wording
If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase. Furthermore, as economic conditions, such as interest rates, home values and borrower default rates change, our realized loss rates may increase. Such increases may require us to adjust our estimate of future losses relating to loans previously sold. Such increased loss estimates would be recognized inNet gains on loans held for sale at fair value in the period we recognize the change.
Current wording
If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies change, the level of repurchase and loss activity may increase. Furthermore, as economic conditions, such as interest rates, home values and borrower default rates change, our realized loss rates may increase. Such increases may require us to adjust our estimate of future losses relating to loans previously sold. Such increased loss estimates would be recognized inNet gains on loans held for sale at fair value in the period we recognize the change.
Previous wording
The increases in market interest rates in recent years have affected certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans. Though the U.S. Federal Reserve has cut the federal funds rate in recent months, interest rates remain elevated. Increasing interest rates may also increase the level of borrower defaults, increasing the level of repurchases we are required to make, and may make it more difficult to minimize losses on repurchased loans due to decreasing fair values for resales of loans and reduced opportunities to refinance loans. We expect that this development will increase the losses we incur in relation to our representations and warranties compared to our historical experience. However, we believe our recorded liability is presently adequate to absorb the losses we currently expect to incur.
Current wording
Elevated interest rate levels may affect certain of our correspondent sellers’ ability to honor their obligations to repurchase defective loans, may increase the level of borrower defaults and may increase the level of repurchases we are required to make. We expect these developments may increase the losses we incur in relation to our recorded liability for representations and warranties compared to our historical experience. However, we believe our recorded liability is presently adequate to absorb such losses.
Previous wording
Loan origination fees increased $39.6 million in the year ended December 31, 2024 compared to 2023, primarily due to increases in volume across all production channels. Loan origination fees decreased $23.7 million in the year ended December 31, 2023 compared to 2022, primarily due to a decrease in the volume of consumer direct loans we produced.
Current wording
Loan origination fees increased $50.1 million and $39.6 million in the year ended December 31, 2025 and 2024, respectively, compared to 2024 and 2023, respectively, primarily due to increases in volume across all production channels.
Previous wording
Fulfillment fees decreased $1.5 million and $40.2 million in the years ended December 31, 2024 and 2023, respectively, compared to 2023 and 2022, respectively, primarily due to decreases in correspondent loan production volumes for PMT’s account that reflect our increased purchases of conventional correspondent loans from PMT.
Current wording
Fulfillment fees decreased $2.5 million and $1.5 million in the years ended December 31, 2025 and 2024, respectively, compared to 2024 and 2023, respectively, primarily due to decreases in correspondent loan production volumes for PMT’s account.
Previous wording
Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the unpaid principal balance of the loan serviced and we collect these fees from borrower payments. Loan servicing fees from PMT are primarily related to PMT’s MSRs and are established at monthly per-loan amounts based on whether the loan is a fixed-rate or adjustable-rate loan and the loan’s delinquency or foreclosure status as detailed in Note 4 –Transactions with Related Parties to the consolidated financial statements included in this Annual Report. Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees and fees charged to correspondent lenders relating to loans that are repaid shortly after we purchase them.
Current wording
Loan servicing fees from non-affiliates generally relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the unpaid principal balance of the loan serviced and we collect these fees from borrower payments. Loan servicing fees from PMT are primarily related to PMT’s MSRs and are established at monthly per-loan amounts based on whether the loan is a fixed-rate or adjustable-rate loan and the loan’s delinquency or foreclosure status as detailed in Note 4 –Transactions with Related Parties to the consolidated financial statements included in this Annual Report. Subservicing fees from non-affiliates are based upon rates negotiated between the Company and the owner of the servicing rights at the time a subservicing agreement is entered into. Other loan servicing fees are comprised primarily of borrower-contracted fees such as late charges and reconveyance fees and fees charged to correspondent lenders relating to loans that are repaid shortly after we purchase them.
Previous wording
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs.
Current wording
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value by entering into derivative transactions and holding principal-only stripped mortgage-backed securities.
Previous wording
Changes in fair value of MSRs and MSLs attributable to changes in fair value inputs increased in the year ended December 31, 2024 compared to 2023 primarily due to the effect on fair value of a significant increase in interest rates during 2024 as compared to 2023. Changes in fair value of MSRs and MSLs attributable to changes in fair value inputs decreased in the year ended December 31, 2023 compared to 2022 primarily due to the smaller increase in interest rates in 2023 as compared to 2022. Increasing interest rates reduce the rate of prepayments of the underlying loans associated with the servicing rights, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Current wording
Changes in the fair value of MSRs and MSLs attributable to changes in fair value inputs decreased in the year ended December 31, 2025 compared to 2024 and 2023 primarily due to the effect on fair value of a decrease in interest rates during 2025 compared to the higher rate environments in 2024 and 2023. Decreasing interest rates increase the rate of prepayments of the underlying loans associated with the servicing rights, which decreases the cash flows expected from the servicing rights, while increasing interest rates have the opposite effect.
Previous wording
Hedging results reflect valuation losses attributable to the effects of interest rate increases on the fair value of the hedging instruments, as well as the embedded costs of maintaining the hedge positions in the years ended December 31, 2024, 2023 and 2022.
Current wording
Hedging results reflect valuation losses attributable to the effects of interest rate decreases on the fair value of the hedging instruments, as well as the embedded costs of maintaining the hedge positions in the years ended December 31, 2025, 2024 and 2023.
Previous wording
Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. Realization of cash flows increased in the year ended December 31, 2024 compared to 2023 and 2022 primarily due to the growth in our investment in MSRs.
Current wording
Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. Realization of cash flows increased in the year ended December 31, 2025 compared to 2024 and 2023 due to both the growth in our investment in MSRs and the effect of increased expected and realized prepayment speeds that increases the projected rate of realization of future cash flows on the MSR asset.
Previous wording
Management fees decreased $139,000 and $2.3 million in the year ended December 31, 2024 and 2023 compared to 2023 and 2022, respectively, reflecting the decrease in PMT’s average shareholders’ equity upon which its base management fees are based.
Current wording
Management fees decreased $1.0 million and $139,000 in the year ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, reflecting the decrease in PMT’s average shareholders’ equity upon which its base management fees are based.
Previous wording
Loan origination expense increased $49.6 million in the year ended December 31, 2024 compared to 2023 due to increased lending activities and decreased $59.1 million in the year ended December 31, 2023, compared to 2022 due to decreased lending activities.
Current wording
Loan origination expense increased $87.9 million and $49.6 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, due to increased lending activities.
Previous wording
Servicing expense increased $36.6 million in the year ended December 31, 2024 compared to 2023 primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the year ended December 31, 2024 compared to 2023. Servicing expense increased $9.8 million in the year ended December 31, 2023 compared to 2022 primarily due to the non-recurrence in 2023 of the reversal of the provision for estimated servicing advance losses that was recognized during 2022 as COVID-19 related delinquencies decreased significantly.
Current wording
Servicing expense increased $16.6 million and $36.6 million in the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively, primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the years ended December 31, 2025 and 2024 compared to 2024 and 2023, respectively.
Previous wording
Total assets increased $7.2 billion from $18.8 billion at December 31, 2023 to $26.1 billion at December 31, 2024. The increase was primarily due to a $3.8 billion increase in loans held for sale at fair value, a $1.6 billion increase in MSRs, a $1.3 billion increase in loans eligible for repurchase and a $825.9 million increase in principal-only stripped MBS at fair value, partially offset by a $289.6 million decrease in cash and short-term investments.
Current wording
Total assets increased $3.3 billion from $26.1 billion at December 31, 2024 to $29.4 billion at December 31, 2025. The increase was primarily due to a $1.3 billion increase in loans eligible for repurchase, a $905.9 million increase in loans held for sale at fair value and a $854.4 million increase in MSRs.
Previous wording
Total liabilities increased by $7.0 billion from $15.3 billion as of December 31, 2023 to $22.3 billion at December 31, 2024. The increase was primarily due to a $5.8 billion increase in borrowings to fund our inventory of loans held for sale and MSRs and a $1.3 billion increase in liability for loans eligible for repurchase.
Current wording
Total liabilities increased by $2.8 billion from $22.3 billion as of December 31, 2024 to $25.1 billion at December 31, 2025. The increase was primarily due to a $945 million increase in long-term debt, along with increased short-term debt used to fund our inventory of loans held for sale and a $1.3 billion increase in liability for loans eligible for repurchase.
Previous wording
Net cash (used in) provided by operating activities totaled $(4.5) billion, $(1.6) billion, and $6.0 billion in the years ended December 31, 2024, 2023, and 2022, respectively. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of loans held for sale as shown below:
Current wording
Net cash used in operating activities totaled $1.7 billion, $4.5 billion and $1.6 billion in the years ended December 31, 2025, 2024, and 2023, respectively. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of loans held for sale as shown below:
Previous wording
Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings, proceeds from and issuance of equity or debt offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.
Current wording
Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans and on our MSR investments), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from bank borrowings, proceeds from and issuance of equity or debt offerings. We believe that our liquidity and capital resources are sufficient.
Previous wording
Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable, a capital lease and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days. Because a significant portion of our current debt facilities consist of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Current wording
Our current borrowing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of assets under agreements to repurchase, sales of mortgage loan participation purchase and sale certificates, notes payable, and unsecured senior notes. A significant amount of our borrowings have short-term maturities and provide for advances with terms ranging from 30 days to 364 days. Because a significant portion of our current debt facilities consist of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Previous wording
On May 23, 2024, the Company, together with its subsidiaries, issued $650 million in 7.125% unsecured senior notes due in 2030 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
Current wording
On August 12, 2025, PFSI issued $650 million in 6.75% unsecured senior notes due in 2034 in a private placement to “qualified institutional buyers” under Rule 144A of the Securities Act.
Previous wording
Although these financial covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.
Current wording
Although financial and other covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.
Previous wording
We are also subject to liquidity and net worth requirements established by FHFA for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity requirements and revised their net worth requirements for their approved non-depository single-family sellers/servicers or issuers, and Ginnie Mae has also issued risk-based capital requirements. We believe that we are in compliance with the FHFA and Ginnie Mae requirements as of December 31, 2024.
Current wording
We are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency seller/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae, Freddie Mac, and Ginnie Mae for their approved single-family issuers, and Ginnie Mae has issued risk-based capital requirements. We believe that we are in compliance with the Agency’s requirements as of December 31, 2025.
Previous wording
On August 4, 2021, our Board of Directors increased our common stock repurchase program from $1 billion to $2 billion. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through December 31, 2024, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program.
Current wording
We have a common stock repurchase program which allows us to repurchase common shares as further disclosed in Part II, Item 5 – Stock Repurchase Program. Share repurchases may be effected through open market purchases or privately negotiated transactions in accordance with applicable rules and regulations. The stock repurchase program does not have an expiration date and the authorization does not obligate us to acquire any particular amount of common stock. From inception through December 31, 2025, we have repurchased approximately $1.8 billion of common shares under our stock repurchase program.
Previous wording
PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of December 31, 2024, we believe we were in compliance in all material respects with these covenants.
Current wording
PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of December 31, 2025, we believe PLS was in compliance in all material respects with these covenants.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In the year ended December 31, 2025, we recorded income before provision for income taxes of $551.4 million, an increase of $150.4 million, or 38%, from 2024. The increase was due to a $302.0 million increase in production revenues (net gains on sales of loans, loan origination fees and fulfillment fees) primarily due to higher production volumes and a $172.0 million increase inNet loan servicing fees resulting from growth in servicing fees, partially offset by a $302.4 million increase in total expenses. The increase in the total expense was primarily due to increases in compensation and loan origination expenses.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
We estimate fair value of MSRs and MSLs using a discounted cash flow approach. We believe the most significant “Level 3” fair value inputs to the valuation of MSRs and MSLs are the prepayment speed, pricing spread (a component of discount rate) and annual per-loan cost of servicing.
Previous report — wording carried elsewhere
Refer to Note 3–Significant Accounting Policies ‒ Recently Issued Accounting Pronouncementsto our