PennyMac Financial Services, Inc.
For the period ended Mar 31, 2025. Filed Apr 29, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 29, 2025
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-Q
Period ended 2024-09-30; filed 2024-10-29.
0001558370-24-013853
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-29.
0001558370-25-005840
Item 2. 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 126 previous paragraphs and 121 current paragraphs.
75 unchanged; 36 reworded; 10 added; 11 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 43 previous and 44 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 (10)
Current report
Recent actions by the U.S. government administration with respect to trade, tariffs and government cost reduction initiatives have led to significant volatility in financial markets and uncertainty regarding the economic outlook, including inflation and interest rates. Elevated interest rates in recent years have constrained growth in the size of the mortgage origination market, which is currently projected to rise from $1.7 trillion in 2024 to $2.0 trillion in 2025 according to mortgage industry economists.
Current report
The opportunity for refinancing has increased in recent periods, 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 than we have experienced in recent years. Additionally, recent reductions to the federal funds rate put into place by the Federal Reserve have led to a decline in the costs of floating rate borrowings and a reduction of placement fees we receive relating to custodial funds that we manage as compared to the same quarter in the prior year. The current period of 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 increase losses from our representations and warranties.
Current report
We continued our acquisition of conventional loans from PMT in the first quarter of 2025 and expect to purchase more of such loans from PMT through the second quarter of 2025.
Current report
Net Interest Expense
Current report
Net interest expense increased $8.9 million during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to an increase in interest expense on borrowings due to the Company financing a larger inventory of loans held for sale and principal-only stripped MBS during 2025 as compared to 2024 and a decrease in interest income from cash and short-term investment due to a decrease in average cash balances, partially offset by increases in interest income from principal-only stripped MBS and loans held for sale.
Current report
Technology
Current report
Technology expenses increased $4.2 million during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to increases in virtual desktop and cloud-related expenses.
Current report
Marketing and advertising
Current report
Marketing and advertising expenses increased $5.8 million during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to additional marketing expenses incurred as an Official Supporter of Team USA and increased marketing expenses for consumer direct lending.
Current report
Total assets decreased $2.2 billion from $26.1 billion at December 31, 2024 to $23.9 billion at March 31, 2025. The decrease was primarily due to a decrease of $1.1 billion in loans held for sale at fair value and a decrease of $1.2 billion of loans eligible for repurchase.
Removed paragraphs (11)
Previous report
The U.S. Federal Reserve has begun to reduce the federal funds rate from its highest level since 2007 as inflationary pressures have abated, and longer term interest rates have declined slightly from their most elevated levels in recent years. Elevated interest rates have constrained growth in the size of the mortgage origination market from $1.5 trillion in 2023 to an estimated $1.7 trillion in 2024, but declining interest rates and increased refinancing activity are projected to drive growth in the origination market to $2.3 trillion in 2025 according to mortgage origination economists.
Previous report
Declining interest rates and increasing opportunity for refinancing have driven increased mortgage production activity in the most recent quarter and also led to increasing prepayment speeds on our mortgage servicing portfolio from the historically slow prepayment speeds experienced earlier in the year. Higher interest rate levels have increased the costs of floating rate borrowings and 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 same period in the prior year, although we would expect these to begin declining as well as if the Federal Reserve continues to reduce the federal funds rate as expected. We continued our acquisition of conventional loans from PMT during the nine months ended September 30, 2024 and expect to purchase conventional loans from PMT during the remainder of 2024.
Previous report
For the nine months ended September 30, 2024, income before provision for income taxes increased $33.8 million compared to the same period in 2023. The increase was primarily due to a $215.0 million increase in loan production revenues due to higher volume across all production channels, partially offset by a $135.9 million decrease inNet loan servicing fees resulting from increases in net MSR valuation losses in excess of growth in servicing fees and a $50.1 million increase in total expenses.
Previous report
During the nine months ended September 30, 2024, we recognized* Net gains on loans held for sale at fair value* totaling $595.3 million, an increase of $198.1 million compared to the same period in 2023. The increase was primarily due to higher margins and increases in loan production volumes across all production channels during the nine months ended September 30, 2024 compared to the same period in 2023.
Previous report
Net Interest Income (Expense)
Previous report
Net interest income decreased $1.8 million and $9.2 million during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decreases were primarily due to an increase in interest expense on borrowings due to the higher interest rate environment and to growth in our balance sheet, partially offset by an increase in placement fees we receive relating to custodial funds that we manage primarily due to increased average custodial deposit balances.
Previous report
Professional Services
Previous report
Professional expenses decreased $2.6 million and $22.8 million during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decrease was primarily due to decreased legal expenses related to the Black Knight litigation discussed in Note 18 –Commitments and Contingencies to the consolidated financial statements included in this Quarterly Report.
Previous report
Total assets increased $4.0 billion from $18.8 billion at December 31, 2023 to $22.9 billion at September 30, 2024. The increase was primarily due to an increase of $2.1 billion in loans held for sale at fair value, an increase of $960.3 million in principal-only stripped mortgage-backed securities at fair value, an increase of $652.9 million in MSRs, and an increase of $622.4 million of loans eligible for repurchase, partially offset by a decrease in cash and short-term investments of $134.9 million and a decrease in servicing advances of $293.3 million.
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.
Reworded paragraphs (36)
Previous wording
Our primary assets are equity interests in Private National Mortgage Acceptance Company, LLC (“PNMAC”). We are the managing member of PNMAC, and we operate and control all of the businesses and affairs of PNMAC, and consolidate the financial results of PNMAC and its subsidiaries. We conduct our business in three segments: production, servicing (together, production and servicing comprise our mortgage banking activities) and investment management:
Current wording
Our primary assets are equity interests in Private National Mortgage Acceptance Company, LLC (“PNMAC”). We are the managing member of PNMAC, and we operate and control all of the businesses and affairs of PNMAC, and consolidate the financial results of PNMAC and its subsidiaries. We conduct our business in two segments: production and servicing:
Previous wording
The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:
Current wording
The following table presents a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the quarters indicated:
Previous wording
For the quarter ended September 30, 2024, income before provision for income taxes decreased $32.9 million compared to the same period in 2023. The decrease was primarily due to a $109.5 million decrease inNet loan servicing fees resulting from increases in net MSR valuation losses in excess of growth in servicing fees and a $44.4 million increase in total expenses, partially offset by a $123.1 million increase in loan production revenue due to higher volume across all production channels.
Current wording
For the quarter ended March 31, 2025, income before provision for income taxes increased $60.3 million compared to the same quarter in 2024. The increase was primarily due to a $70.1 million increase in loan production revenue due to higher volume across all production channels and a $63.3 million increase inNet loan servicing fees primarily due to growth in our servicing portfolio, partially offset by an $8.9 million increase inNet interest expense and a $64.9 million increase in total expenses.
Previous wording
During the quarter ended September 30, 2024, we recognizedNet gains on loans held for sale at fair value totaling $256.8 million, an increase of $105.4 million compared to the same period in 2023. The increase was due to an increase in loan production volume across all production channels due to a reduction in interest rates during the quarter ended September 30, 2024 compared to the same period in 2023.
Current wording
In our production segment, revenues reflect the effects of a reduction in market interest rates and mortgage rates during the quarter ended March 31, 2025 compared to an increase in market interest rates in the same quarter in 2024. During the quarter ended March 31, 2025, we recognizedNet gains on loans held for sale at fair value totaling $221.0 million, an increase of $58.6 million compared to the same quarter in 2024.
Previous wording
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive for delinquent loans we have bought out of Ginnie Mae guaranteed securities we service and have resold to third party investors) and for the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions.
Current wording
We also receive non-cash proceeds on sale that include our estimate of the fair value of MSRs and we incur MSLs (which represent the fair value of the costs we expect to incur in excess of the fees we receive for delinquent loans we have bought out of Ginnie Mae guaranteed securities and have resold to and service for investors) and we recognize the fair value of our estimate of the losses we expect to incur relating to the representations and warranties we provide in our loan sale transactions.
Previous wording
The MSRs, MSLs, and liabilities 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 225% and 257% of our gains on sales of loans held for sale at fair value for the quarter and nine months ended September 30, 2024, respectively, as compared to 297% and 327% for the same periods in 2023. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Current wording
The MSRs, MSLs, and liabilities 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 293% of our gains on sales of loans held for sale at fair value for the quarter ended March 31, 2025, as compared to 254% for the same quarter in 2024. These estimates change as circumstances change and changes in these estimates are recognized in income in subsequent periods. Subsequent changes in the fair value of our MSRs may significantly affect our income.
Previous wording
Our agreements with the purchasers and insurers of our loans include representations and warranties related to the loans. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
Current wording
Our agreements with purchasers and insurers include representations and warranties related to the loans we sell. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
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 losses on the loans. Our credit losses 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. 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
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current unpaid principal balance (“UPB”) of loans sold by us and subject to representation and warranty liability to date represents our maximum representations and warranties exposure.
Current wording
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current unpaid principal balance (“UPB”) of loans sold by us and subject to representation and warranty liability to date represents the maximum exposure to repurchases related to representations and warranties.
Previous wording
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, purchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying loans. Our estimate of the liability for representations and warranties is developed by our credit administration staff and approved by our senior management credit committee which includes senior management in our loan production, loan servicing and credit risk management areas.
Current wording
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, purchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying loans. Our estimate of the liability for representations and warranties is developed by our credit risk administration staff and reviewed by our Management Risk Committee that includes our senior executives and senior management in our loan production, loan servicing, and credit risk management areas.
Previous wording
The method we use to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent loan seller. We establish a liability at our estimate of its fair value at the time loans are sold and review the adequacy of our recorded liability on a periodic basis.
Current wording
The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, loan repurchase rates, the severity of loss in the event of default, if applicable, and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and periodically assess the adequacy of our recorded liability.
Previous wording
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 $4.1 million and $12.2 million for the quarter and nine months ended September 30, 2024, respectively, compared to $4.0 million and $8.9 million for the same periods in 2023. The increases in the provision relating to current loan sales were primarily attributable to an increase in production volume for the quarter and nine months ended September 30, 2024 compared to the same periods in 2023.
Current wording
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 $3.5 million for the quarter ended March 31, 2025 compared to $4.0 million for the same quarter in 2024. The decrease in the provision relating to current loan sales was primarily attributable to a lower expectation of repurchase risk due to improved collateral quality for the quarter ended March 31, 2025 compared to the same quarter in 2024.
Previous wording
We also recorded reductions in the liability of $3.5 million and $10.9 million for the quarter and nine months ended September 30, 2024, respectively, compared to $2.6 million and $6.0 million for the same periods in 2023. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Current wording
We also recorded reductions in the liability of $1.4 million for the quarter ended March 31, 2025 compared to $3.3 million for the same quarter in 2024. The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
Previous wording
During the quarter and nine months ended September 30, 2024, we repurchased loans totaling $25.8 million and $70.0 million, respectively. We charged losses of $1.0 million and $3.8 million to the liability during the quarter and nine months ended September 30, 2024, respectively. Our losses arising from representations and warranties have historically been minimized 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
During the quarter ended March 31, 2025, we repurchased loans totaling $19.9 million. We charged losses of $487,000 against the liability during the quarter ended March 31, 2025. Our losses arising from representations and warranties have historically been minimized 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
Loan origination fees increased $11.7 million and $19.8 million during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to an increase in production volume.
Current wording
Loan origination fees increased $10.2 million during the quarter ended March 31, 2025, compared to the same quarter in 2024 primarily due to an increase in production volume.
Previous wording
Fulfillment fees increased $6.0 million during the quarter ended September 30, 2024, compared to the same period in 2023; the increase was primarily due to an increase in the number of loans we fulfilled for PMT during the quarter ended September 30, 2024 compared to the same period in 2023. Fulfillment fees decreased $3.0 million during the nine months ended September 30, 2024, compared to the same period in 2023; the decrease was primarily due to PMT’s sale of a greater proportion of conventional correspondent loans to us during the nine months ended September 30, 2024 compared to the same period in 2023.
Current wording
Fulfillment fees increased $1.3 million during the quarter ended March 31, 2025, compared to the same quarter in 2024; the increase was primarily due to an increase in the number of loans we fulfilled for PMT during the quarter ended March 31, 2025 compared to the same quarter in 2024.
Previous wording
Loan servicing fees from non-affiliates and other fees increased during the quarter and nine months ended September 30, 2024 compared to the same periods in 2023. The increase was primarily due to growth of our loan servicing portfolio. Other servicing fees increased due to growth in our MSR portfolio combined with increased incentives received for loss mitigation activities and recovery of servicing premiums from correspondent sellers for loans that paid off within a short period after origination.
Current wording
Loan servicing fees from non-affiliates and other fees increased during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to growth of our loan servicing portfolio. Other servicing fees increased due to growth in our MSR portfolio combined with increased incentives received for loss mitigation activities and recovery of servicing premiums from correspondent sellers for loans that paid off within a short period after origination.
Previous wording
Changes in fair value of MSRs attributable to changes in fair value inputs decreased during the quarter and nine months ended September 30, 2024 compared to the same periods in 2023. The decreases were due to decreases in interest rates during the quarter and nine months ended September 30, 2024 compared to increasing interest rates during the same periods in 2023. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Current wording
Changes in fair value of MSRs attributable to changes in fair value inputs decreased during the quarter ended March 31, 2025 compared to the same quarter in 2024 due to decreases in interest rates during the quarter ended March 31, 2025 compared to increasing interest rates during the same quarter in 2024. Increasing interest rates reduce the rate of prepayments of the underlying loans, which increases the cash flows expected from the servicing rights, while decreasing interest rates have the opposite effect.
Previous 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 increased net exposure to interest rate volatility to limit elevated hedge costs during the quarter and nine months ended September 30, 2024 and in the same periods in 2023.
Current wording
Hedging results reflect valuation gains attributable to the effects of interest rate decreases on the fair value of the hedging instruments during the quarter ended March 31, 2025 compared to the opposite circumstances and effects in the same quarter in 2024.
Previous wording
Changes in fair value attributable to 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. During the quarter and nine months ended September 30, 2024, realization of cash flows increased compared to the same periods in 2023, primarily due to the growth in our investment in MSRs.
Current wording
Changes in fair value attributable to 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. During the quarter ended March 31, 2025, realization of cash flows increased compared to the same quarter in 2024, primarily due to the growth in our investment in MSRs.
Previous wording
Following is a summary of net interest income (expense):
Current wording
Following is a summary of net interest expense:
Previous wording
Management fees decreased $22,000 and $36,000 during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, due to decreases in average PMT’s shareholders’ equity which is the basis for the base management fees.
Current wording
Management fees decreased $176,000 during the quarter ended March 31, 2025 compared to the same quarter in 2024, due to decreases in PMT’s average shareholders’ equity which is the basis for the base management fees.
Previous wording
Compensation expenses increased $14.4 million and $17.8 million during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increases were primarily due to an increase in stock and unit-based compensation during the quarter ended September 30, 2024, primarily reflecting increased performance attainment expectations, and increased incentive compensation during the nine months ended September 30, 2024, reflecting higher loan production volume.
Current wording
Compensation expenses increased $35.6 million during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to an increase in head count and increased incentive compensation during the quarter ended March 31, 2025, reflecting higher loan production volume.
Previous wording
Loan origination expenses increased $16.3 million and $28.4 million for the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increases were primarily due to higher origination volumes.
Current wording
Loan origination expenses increased $13.5 million for the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to higher origination volumes.
Previous wording
Servicing expenses increased $15.6 million and $27.3 million during the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increases were primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the quarter and nine months ended September 30, 2024 compared to the same periods in 2023.
Current wording
Servicing expenses increased $5.8 million during the quarter ended March 31, 2025 compared to the same quarter in 2024. The increase was primarily due to an increase in provision for losses on servicing advances resulting from higher delinquent loan balances during the quarter ended March 31, 2025 compared to the same quarter in 2024.
Previous wording
Our effective income tax rates were 26.1% and 23.8% during the quarter and nine months ended September 30, 2024, respectively, compared to 26.8% and 23.7% during the same periods in 2023. The decrease in the effective tax rate for the quarter ended September 30, 2024 compared to the same period in 2023 is attributable to an increase in tax deductions realized for stock options exercised in the quarter ended September 30, 2024.
Current wording
Our effective income tax rate was 26.8% during the quarter ended March 31, 2025 compared to 10.4% during the same quarter in 2024. The increase in the effective income tax rate for the quarter ended March 31, 2025 compared to the same quarter in 2024 is attributable to a reduction in the tax deduction related to equity compensation and an increased amount of pre-tax income in the quarter ended March 31, 2025.
Previous wording
Total liabilities increased $3.8 billion from $15.3 billion at December 31, 2023 to $19.1 billion at September 30, 2024. The increase was primarily due to an increase of $3.4 billion in borrowings to fund our inventory of loans held for sale, MBS and MSRs and an increase of $622.4 million in liability for loans eligible for repurchase, partially offset by a decrease of $127.2 million in payable to PMT and a decrease of $118.4 million in accounts payable and accrued expenses. As a result of our increased inventory financing requirements, our leverage ratios increased during the quarter ended September 30, 2024 from December 31, 2023.
Current wording
Total liabilities decreased $2.3 billion from $22.3 billion at December 31, 2024 to $20.0 billion at March 31, 2025. The decrease was primarily due to a decrease of $1.1 billion in borrowings and a decrease of $1.2 billion in liability for loans eligible for repurchase. As a result of our decreased inventory financing requirements, our leverage ratios decreased during the quarter ended March 31, 2025 from December 31, 2024.
Previous wording
The net decrease in cash of $792.6 million during the nine months ended September 30, 2024 is discussed below.
Current wording
The net decrease in cash of $27.4 million during the quarter ended March 31, 2025 is discussed below.
Previous wording
Net cash used in operating activities totaled $2.4 billion during the nine months ended September 30, 2024 compared with net cash used in operating activities of $2.0 billion during the same period in 2023. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
Current wording
Net cash provided by operating activities totaled $1.1 billion during quarter ended March 31, 2025 compared with net cash used in operating activities of $897.9 million during the same quarter in 2024. Our cash flows from operating activities are primarily influenced by changes in the levels of our inventory of mortgage loans held for sale as shown below:
Previous wording
Net cash used in investing activities during the nine months ended September 30, 2024 totaled $1.8 billion, primarily due to $935.4 million in purchases of principal-only stripped mortgage-backed securities, a $657.7 million increase in short-term investment and $210.2 million in net settlement of derivative financial instruments used to hedge our investment in MSRs. Net cash used in investing activities during the nine months ended September 30, 2023 totaled $378.0 million, primarily due to $450.2 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and $27.7 million used in acquisition of capitalized software, partially offset by $98.1 million received from the sale of interest-only stripped securities.
Current wording
Net cash provided by investing activities during the quarter ended March 31, 2025 totaled $30.4 million, primarily due to $74.6 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and $37.8 million in repayment of principal-only stripped mortgage-backed securities, partially offset by increases in $22.8 million in short-term investment and $51.6 million in margin deposits. Net cash used in investing activities during the quarter ended March 31, 2024 totaled $782.6 million, primarily due to $524.7 million in purchase of principal-only stripped MBS, $224.8 million in net settlement of derivative financial instruments used to hedge our investment in MSRs and a $38.7 million increase in margin deposits.
Previous wording
Net cash provided by financing activities totaled $3.4 billion during the nine months ended September 30, 2024, primarily due to an increase of $3.4 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale, principal-only stripped mortgage-backed securities and our investment in MSRs. Net cash provided by financing activities totaled $2.2 billion during the nine months ended September 30, 2023, primarily due to an increase of $2.4 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale and our investment in MSRs.
Current wording
Net cash used in financing activities totaled $1.1 billion during the quarter ended March 31, 2025, primarily due to a decrease of $1.1 billion in borrowings. The decrease in borrowings primarily reflects the decrease in inventory of loans held for sale. Net cash provided by financing activities totaled $1.7 billion during the quarter ended March 31, 2024, primarily due to an increase of $1.7 billion in borrowings. The increase in borrowings primarily reflects the increase in inventory of loans held for sale and our investment in MSRs.
Previous wording
Secured debt facilities for MSRs and servicing advances take various forms. Fannie Mae MSRs, Ginnie Mae MSRs and servicing advances are pledged to special purpose entities, each of which may issue variable funding notes (“VFNs”) and term notes and term loans that are secured by such Ginnie Mae or Fannie Mae assets. Term notes are issued to qualified institutional buyers under Rule 144A of Securities Act and term loans are syndicated to banking entities, while the VFNs are sold to bank partners under agreements to repurchase. Freddie Mac MSR’s are pledged to a single lender under a bi-lateral loan and security agreement.
Current wording
Secured debt facilities for MSRs and servicing advances take various forms. Fannie Mae MSRs, Ginnie Mae MSRs and servicing advances are pledged to special purpose entities, each of which may issue variable funding notes (“VFNs”) and term notes and term loans that are secured by such Ginnie Mae or Fannie Mae assets. Term notes are issued to qualified institutional buyers under Rule 144A of Securities Act and term loans are syndicated to banking entities, while the VFNs are sold to bank partners under agreements to repurchase. Freddie Mac MSRs are pledged to lenders under a bi-lateral loan and security agreement.
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 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.
Previous wording
The differences between the average and maximum daily balances on our repurchase agreements reflect both the effect of increasing loan inventory levels during the quarter and nine months ended September 30, 2024 and the
Current wording
The differences between the average and maximum daily balances on our repurchase agreements reflect both the effect of increasing loan inventory levels during the quarter ended March 31, 2025 and the fluctuations throughout the periods of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.
Previous wording
PFSI issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indentures under which the Unsecured Notes were issued).
Current wording
PFSI has issued unsecured senior notes (the “Unsecured Notes”) to qualified institutional buyers under Rule 144A of the Securities Act. The Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company’s existing and future wholly-owned domestic subsidiaries (other than certain excluded subsidiaries defined in the indentures under which the Unsecured Notes were issued).
Previous 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
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 its approved single-family issuers, and Ginnie Mae has issued risk-based capital requirements. We believe that we are in compliance with the Agency’s pending requirements as of March 31, 2025.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
In our production segment, revenues reflect the effects of a reduction in market interest rates and mortgage rates from elevated levels during the quarter and nine months ended September 30, 2024 compared to the same periods in 2023.
Previous report — wording carried elsewhere
fluctuations throughout the periods of our inventory as we fund and pool mortgage loans for sale in guaranteed mortgage securitizations.
Previous report — wording carried elsewhere
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 its approved single-family issuers.
Previous report — wording carried elsewhere
Ginnie Mae has issued risk-based capital requirements that will become effective December 31, 2024. We believe that we are in compliance with the Agency’s pending requirements as of September 30, 2024.