Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q3 2011 Earnings Presentation
87 slides from Pennymac Mortgage Investment Trust's earnings presentation, Oct 31, 2011
Slide 1: Overview of the Company & Strategy
Overview of the Company & Strategy October 27, 2011
Slide 2: Forward-Looking Statements
Forward-Looking Statements 1 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial
Slide 3: Investment Opportunity Overview
Investment Opportunity Overview 2 PennyMac Mortgage Investment Trust (NYSE: PMT) Key Investment Highlights Unique externally-managed specialty finance firm that is dedicated to U.S. residential mortgage opportunities Only public mortgage REIT with current focus on distressed residential whole loans
Slide 4: The U.S. Residential Mortgage Industry Is in the Midst of a Transformation
The U.S. Residential Mortgage Industry Is in the Midst of a Transformation 3 Vibrant mortgage market that had been built effectively for over 20 years Many market participants including numerous banks, mortgage banks, community and independent banks Many outlets for loans including the GSEs and non-
Slide 5: Industry Forces Are Creating the Need for New Mortgage Entities
Bank legacy issues, including foreclosures, repurchases, and litigation, causing them to reduce their mortgage exposure Need for a new non-bank mortgage firm such as PMT 4 New capital requirements for banks including Basel III making it unattractive for them to hold mortgage servicing rights (MSRs)
Slide 6: There Are Substantial Opportunities in the U.S. Residential Mortgage Market
There Are Substantial Opportunities in the U.S. Residential Mortgage Market 5 Distressed Mortgage Assets New Mortgage Market $3+ trillion in non-agency whole loans outstanding, of which an estimated $420 billion are delinquent or in foreclosure Mostly held by large banks, which are reducing their ex
Slide 7: PennyMac Has All the Capabilities to Capitalize on the Upcoming Opportunities
PennyMac Has All the Capabilities to Capitalize on the Upcoming Opportunities 6 PNMAC Capital Management (PCM) – Investment Manager Sourcing investment opportunities and building institutional relationships with banks, investment banks and government entities Best-in-class valuation methodology and
Slide 8: Uniquely Seasoned Management Team
Uniquely Seasoned Management Team* (Years of Industry Experience in Parentheses) 7 Speaking today More than 350 full-time staff across PennyMac today Management, processes, and infrastructure in place for sustainable growth Ready to adapt rapidly in a changing market *Titles reflect Private National
Slide 9: PMT's Strategy Will Continue to Evolve With the Mortgage Market
PMT’s Strategy Will Continue to Evolve With the Mortgage Market 8 As the mortgage market converges to a more normalized market, PMT will have the ability to quickly and efficiently scale its operations to capitalize on the growing need for a mortgage intermediary Current Focus Longer-Term Strategy R
Slide 10: Example: Illustrative Returns Based on PMT's Assumptions
Example: Illustrative Returns Based on PMT’s Assumptions* 9 Gross returns, net of estimated servicing and new loan fulfillment expenses (Calculated using mid-point of targeted unlevered return and mid-point of target cost of funds, at each targeted leverage point) Illustrative gross returns before c
Slide 11: PMT Has Experienced Tremendous Growth Over the Past Year
PMT Has Experienced Tremendous Growth Over the Past Year 10 Correspondent Volume Fair Value of Distressed Mortgage Assets $403 $1,025 $514 $788 $721 $18 $10 $19 $220 $53 Earnings per Share & Dividends Earnings $12.7 $30.2 $17.3 $13.6 $41.7 ($ in millions)
Slide 12: We Have Multiple Lending Facilities to Facilitate Our Future Growth
We Have Multiple Lending Facilities to Facilitate Our Future Growth 11 Non-performing Loan Repo Financing Facilities Correspondent Lending Facilities MBS Repo Agreements Lender Committed Amount Utilization (9/30) % Utilized Citi $250,000,000 $200,820,877 80% Wells Fargo $40,000,000 $33,385,986 83% W
Slide 13: PMT's Manager and Servicer Have Capacity for Significant Growth
PMT’s Manager and Servicer Have Capacity for Significant Growth 12 Management, processes, and infrastructure in place to support growth to many times the current volumes of business Correspondent Lending can ramp up to $1 billion in monthly originations by the end of 2012 PLS’s high-touch servicing
Slide 14: Highlights of Investing in PMT
Highlights of Investing in PMT Best positioned to capitalize on current and long-term opportunities in residential mortgage finance with the capital, bank relationships, operations, and management across all the critical areas for success 13 Unique mortgage REIT able to capitalize on opportunities i
Slide 15: Third Quarter 2011 Earnings Report
Third Quarter 2011 Earnings Report October 27, 2011
Slide 16: Four Consecutive Quarters of Net Income Increases
Four Consecutive Quarters of Net Income Increases 15 Consolidated quarterly net income of $20.5 million, or $0.73 per diluted share Net Investment Income increased 39% from previous quarter to $42 million Cash generated from whole loan, REO, and MBS investments: $67 million Valuation gains for the q
Slide 17: PMT Specializes in Various Mortgage Investment Opportunities
PMT Specializes in Various Mortgage Investment Opportunities 16 Distressed Mortgage Investments PCM, our investment manager, reviewed over $3 billion in whole loans during the third quarter Volume of whole loans available for sale has remained fairly steady over the year and we expect that to contin
Slide 18: Distressed Mortgage Investment Opportunities
Distressed Mortgage Investment Opportunities
Slide 19: Consistent and Disciplined Growth of Assets
$403 $1,025 $514 $788 $721 Consistent and Disciplined Growth of Assets 18 Distressed Mortgage Asset Growth Distressed Mortgage Portfolio Composition As of 9/30/11 Mortgage assets grew over 30% in the third quarter, with whole loans growing over 32% Opportunistically made purchases of $5.0 million in
Slide 20: Liquidation Activity for the Quarter Was Strong
Liquidation Activity for the Quarter Was Strong 19 Current Pipeline of Nonperforming Loans(1) Q3 Liquidation Activity (UPB)(1) Liquidation activity was strong for Q3, led by short sales and REO sales Liquidations of almost $53 million in UPB were attributable to short sales, compared to $45 million
Slide 21: Acquisitions Are Progressing Through the Resolution Process
Acquisitions Are Progressing Through the Resolution Process 20 *Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition Loans are progressing through the liquidation process with an average life of approximately 18 months – nearly 40% of the loans acquired 12 months ag
Slide 22: Acquisitions Are Progressing Through the Resolution Process (cont.)
Acquisitions Are Progressing Through the Resolution Process (cont.) 21 *Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition PLS is efficiently progressing loans through the resolution process and executing foreclosures as evidenced by the decrease in 90+ and increa
Slide 23: Continue to Progress REO Inventory Through to Liquidation
Continue to Progress REO Inventory Through to Liquidation 22 $13.8 million in carrying value of REO was liquidated in Q3, compared to $13.0 million in Q2 Increased REO inventory by $21 million over the quarter $5.1 million of 3Q’11 liquidations had been in REO inventory for 120+ days As of 9/30/11,
Slide 24: Correspondent Lending
Correspondent Lending (nnymac’
Slide 25: Correspondent Lending Group Continues Its Accelerated Growth
Correspondent Lending Group Continues Its Accelerated Growth 24 Correspondent Funding Volume 3Q’11 Correspondent Funding Mix ($ in millions) $220 million of loans were funded in 3Q’11 by the Correspondent Lending Group FHA / VA: $143 million Conventional: $64 million Jumbo: $13 million Volume contin
Slide 26: Financials
Financials C&nnymac’
Slide 27: Income Statement
Income Statement 26 PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) Quarter Ended September 30, 2011 June 30, 2011 Investment Income Net gain (loss) on investments: Mortgage-backed securities $(791) $(873) Mortga
Slide 28: Valuation Changes for the Third Quarter
Valuation Changes for the Third Quarter 27 For the three months ended September 30, 2011 Changes reflected in loans’ carrying values: Valuation Changes $23,767 Payoffs 8,544 Sales -- $32,311
Slide 29: Illustrative Example of Valuation Gains on a Completed Short Sale
Illustrative Example of Valuation Gains on a Completed Short Sale 28 $25 $75 $50 $100 $50 Q1 Q2 Q3 Q4 EXAMPLE: FOR ILLUSTRATIVE PURPOSES ONLY $8 $12 $5 Accounting: Q1 – Increase Mortgage Loans at Fair Value by $50, decrease Cash by $50 Q2 – Valuation gain of $8 results in increased income of $8, Mor
Slide 30: Expenses Increased in Line with Increased Portfolio Activity and Increased Leverage
Expenses Increased in Line with Increased Portfolio Activity and Increased Leverage 29 Expenses Servicing Fees Interest Expense Expenses are normalizing as the portfolio grows and PMT has become fully invested Expenses rose in the third quarter in line with expectations Interest expense rose in the
Slide 31: Balance Sheet
Balance Sheet 30 PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) September 30, 2011 June 30, 2011 ASSETS Cash $11,975 $2,344 Short-term investments 30,743 38,633 Mortgage-backed securities at fair value 86,702 82,421 Mortg
Slide 32: Distressed Whole Loan Investing
Distressed Whole Loan Investing October 27, 2011
Slide 33: Substantial Opportunity in Legacy Residential Mortgage Loans
32 Substantial Opportunity in Legacy Residential Mortgage Loans U.S. Residential Mortgages Outstanding (in billions) $3.3 Trillion 100% = $10.5 Trillion (1) The opportunity to acquire legacy whole loans is large given: The amount of delinquent and non-performing loans remaining on banks’ balance she
Slide 34: U.S. Banks Are Selling NPLs for Various Reasons
U.S. Banks Are Selling NPLs for Various Reasons Banks can free up capital tied to non-performing loans (NPLs) and generate higher returns by investing in other assets NPLs carry a 100% “risk weight” in regulatory capital calculations, whereas less risky performing assets can carry a 20% risk weight
Slide 35: PCM Has Seen a Steady Supply of Whole Loan Opportunities
PCM Has Seen a Steady Supply of Whole Loan Opportunities On average PCM reviews and analyzes over $1 billion in whole loan UPB every month Predominantly non-performing whole loans Reperforming loans are beginning to be offered by sellers Pricing yields have remained relatively stable throughout 2011
Slide 36: Example NPL Investment – Opportunity Summary
Example NPL Investment – Opportunity Summary Amounts shown in thousands 35% property value decline based on broker quick-sale values (QSV) (1) 39% purchase price discount to current QSV 60% purchase price discount to original property value (1) Determined based on broker price opinions (BPOs) for ea
Slide 37: Example NPL Investment – Cash Flow Profile
Example NPL Investment – Cash Flow Profile Expected Cash Flows from PennyMac Mortgage Model (1) (1) Cash flows are net of base and activity-based servicing fees, liquidation-related expenses and advances, but before management fees and other PMT expenses. Purchase price expected to be returned by th
Slide 38: Only Manager With the Essential End-to-End Processes for Distressed Whole Loans
37 Only Manager With the Essential End-to-End Processes for Distressed Whole Loans Secondary Marketing PennyMac Loan Services Portfolio Strategy Due Diligence Capital Markets Loan Acquisition Portfolio Management Source investment opportunities leveraging the deep relationships of management, BlackR
Slide 39: Loan Acquisition Process Is Operationally Intensive and Detailed
Loan Acquisition Process Is Operationally Intensive and Detailed Secondary Marketing PennyMac Loan Services Portfolio Strategy Due Diligence Capital Markets Review offering memorandum Obtain market color “Crack” data tape Standardize data format Obtain missing data Check consistency and reliability
Slide 40: Summary Pool Information Is Gathered at the Bid Process
Foreclosure 35% Delinquency Status Current LTV 100 – 120 24% 80 – 100 18% <80 6% >120 52% Percentages based on unpaid principal balance Loan Count 445 UPB $106,690,624 Avg. Loan Balance $239,754 WA Mortgage Rate 6.385% % First Lien 100% WA Age 48 months WA Original LTV 79.7% WA Current LTV 131.8% Po
Slide 41: NPL Pool Characteristics Are Broken Down Into Multiple Categories
Doc Type Months Delinquent Geography Occupancy Original FICO Low 25% No Doc 2% Other 43% FL 5% IL 4% NV 3% Owner 81% Investor 19% >750 14% 701-750 25% 651-700 28% <=600 15% CA 38% 7-9 41% 4-6 54% Full 73% AZ 7% Loan Purpose Refi Cash-Out 23% Purchase 26% Refi - No Cash-Out 51% SFR 73% Property Type
Slide 42: Losses, Prepays and Price Given Yield Scenarios
Losses Prepays HPI Scenario Cum. Losses Cum. Default Severity HPI Scenario Voluntary CPR Total CPR Average Life Deeper 2nd Recession 48.472% 94.46% 51.31% Deeper 2nd Recession 1.806% 33.956% 2.40 Baseline 40.519% 93.03% 43.55% Baseline 2.066% 32.433% 2.53 Strong Near Recovery 38.660% 92.22% 41.92% S
Slide 43: Macroeconomic Scenario Assumptions
Baseline Scenario: Real GDP grows at 1.6% for 2011, 2.7% in 2012 and 3.5% for 2013 Unemployment hovers near 9% through 2012, dropping to near 8% in 2013 Federal Reserve does not begin increasing rates until 2013 with the Fed Funds rate remaining stagnant at 0.2% through 2012 Peak-to-trough home pric
Slide 44: Due Diligence: Property Value, Compliance and Collateral Review
43 Property Value Review Broker Price Opinions are ordered or obtained from the seller on all loans All loans are reviewed to confirm property value A sample of the BPOs selected on both a random and adverse basis are subject to further review by a licensed appraiser Appraisers are required to valid
Slide 45: Servicing, Credit and Fraud Review
44 Servicing Record Review Payment history, contact log and any other provided information is reviewed Review results include a reason for default, a summary of the past servicing relationship and a re-performance grade Grades are “likely to re-perform,” “somewhat likely to re-perform,” “unlikely to
Slide 46: Scope of Review
Scope of Review Population Sample Size Count Due Diligence Activity Purpose Pay History Review Servicing Comment Data Integrity Compliance 504 100% 504 Review pay history, collection comments, ensure data accuracy, and compliance review in order to determine accuracy Ensure accuracy of data and comp
Slide 47: Portfolio Strategy and PennyMac Loan Services
46 Secondary Marketing PennyMac Loan Services Portfolio Strategy Due Diligence Capital Markets Portfolio Strategy PennyMac Loan Services Develops and implements: Programs Models Incentives Marketing programs Provides a quantitative & investor-centric perspective Monitors performance through monthly
Slide 48: Each Pool Is Analyzed Prior to Boarding to Assign an Initial Path
These paths drive early collection, loss mitigation and marketing activities 47 Once the pool is boarded and initial contact is made with the borrower, PNMAC employees utilize the MovR rules engine to provide automated loan decisions using updated borrower profiles Portfolio Pre-boarding Strategy Ea
Slide 49: Portfolio Strategy Utilizes Its Proprietary Technology to Path Each Loan
48 LENE Borrower Financials Loan Attributes Property Value Credit History Home Price Forecast Foreclosure Timelines Modification PNMAC & FNMA NPV Model HAMP Activity Loan Origination Collections & Borrower Contact Short-Sale & Deed-in-Lieu Foreclosure REO RCR LPM RCR LPM LPM Modification Rules NPV R
Slide 50: All PennyMac Programs Add Value Relative to Foreclosure Alternatives
Secondary Marketing PennyMac Loan Services Portfolio Strategy Due Diligence Capital Markets Program options are valued based on current servicing information and updated financials from the borrower Options that allow borrowers to remain in their homes are prioritized in the waterfall sequence All P
Slide 51: Recently Implemented Programs: HAMP PRA, FHA Refinance, Realtor Assistance
HAMP’s principal reduction modification, the FHA Negative Equity Refinance, and Broker Contact are all recently implemented programs that have provided incremental value in the management of PMT’s loan portfolio 50 Realtor Assistance Program: PennyMac has engaged a national broker network to have re
Slide 52: Once Boarded PLS Utilizes Its Unique Approach to Troubled Loans
Secondary Marketing PennyMac Loan Services Portfolio Strategy Due Diligence Capital Markets Once Boarded PLS Utilizes Its Unique Approach to Troubled Loans Unique Capabilities Dedicated high touch operation with experienced management and support team designed to maximize the value of loans to inves
Slide 53: PLS Conducts the Full Complement of Primary and Special Servicing Activities
PLS Conducts the Full Complement of Primary and Special Servicing Activities Loan Resolution Non-Default Default and REO Call Center Acquisitions/Originations MERS Document Control Monthly Statements Taxes and Insurance ARM Office of the President Correspondence Payment Processing Payoffs Property R
Slide 54: Each Function in PLS Is Led by Deeply Experienced Management
Each Function in PLS Is Led by Deeply Experienced Management Steve Bailey Chief Servicing Officer 26 Years Taxes Insurance Escrow Administration Special Loans Office of the President Research Customer Service Collections Calling Strategy Loss Mitigation Prequalification Customer Escalations Loan Acq
Slide 55: Each Function in PLS Is Led by Deeply Experienced Management (cont.)
Each Function in PLS Is Led by Deeply Experienced Management (cont.) Steve Bailey Chief Servicing Officer 26 Years Short Sales Deed-in-Lieu of Foreclosure Interim Servicing Management Sub-Servicing Operational Management Relocation Assistance Foreclosure Bankruptcy Operational Litigation Foreclosure
Slide 56: Each Function in PLS Is Led by Deeply Experienced Management (cont.)
Each Function in PLS Is Led by Deeply Experienced Management (cont.) Steve Bailey Chief Servicing Officer 26 Years Foreclosure Review Claims Management Second Lien Recovery Property Preservation Legal Notices Cash Processing and Balancing Lockbox Management Disbursement Processing and Balancing Perf
Slide 57: Organization Team Structure / Staffing
Organization Team Structure / Staffing 56
Slide 58: Retail Origination and Integration With Servicing
Retail Origination and Integration With Servicing The recent organizational alignment of retail origination into Servicing will drive incremental benefit due to the portfolio focus of production and the interdependencies between sales and servicing in the three channels below: MSR Portfolio Refi Cap
Slide 59: PennyMac Has Been Successful in Executing HAMP
Loan modifications, under HAMP and proprietary programs, are an important tool in PennyMac’s Portfolio Strategy for troubled borrowers PennyMac’s HAMP success rates are well above average, due to strong underwriting practices and requirement of income verification prior to trial. Our efficient conve
Slide 60: Home Retention (Modification) Process
Lead Sources Home Retention (Modification) Process Customer Contact Previous Lender Mail Campaigns Call Center Lead Management Modification Processing Closing Exception Reporting Encompass Pipeline Reporting Keys to converting to Short Sale and Deed-in-Lieu Active solicitation of modification fallou
Slide 61: Property Resolution (Short Sale and Deed-in-Lieu) Process
Lead Sources Property Resolution (Short Sale and Deed-in-Lieu) Inspections Campaigns Outbound Calling Inbound Calls Lead Management Short Sale Processing Closing Offers responded to within 48 hours upon receipt of package Property Resolution Specialists average 15 closed deals per month Sales Price
Slide 62: PLS Achieves Alternatives to Foreclosures In Over Two Thirds of Defaults
PLS Achieves Alternatives to Foreclosures In Over Two Thirds of Defaults Recent trends show that we resolve troubled loans without foreclosing in 70% of cases More than half of the foreclosure avoidance solutions keep borrowers in their homes (1) Based on aggregate default activities from April,2011
Slide 63: Valuation Process and Governance
Process Loan data is compiled by Investor Accounting in PLS, and reviewed by the valuation team for quality and consistency, and economic input data (such as interest rates) are gathered from vendors or market information sources Realized cashflows from the loans are analyzed to determine returns fr
Slide 64: Pool-Level Cashflow & Runoff Surveillance
63 EXAMPLE: NPL INVESTMENT OPPORTUNITY Pool-Level Cashflow & Runoff Surveillance
Slide 65: Pool-Level Performance Metric Surveillance
64 EXAMPLE: NPL INVESTMENT OPPORTUNITY Pool-Level Performance Metric Surveillance
Slide 66: Pool-Level Roll Rate Surveillance
65 EXAMPLE: NPL INVESTMENT OPPORTUNITY Pool-Level Roll Rate Surveillance
Slide 67: Cashflow & Return Time Series
66 EXAMPLE: NPL INVESTMENT OPPORTUNITY Cashflow & Return Time Series ($ in thousands) *This is an example for illustrative purposes only. Actual results may differ materially. Please refer to the disclaimer on slide 1. 106,691 55,872 2011 Initial Balance 2011 Initial Full Value Date Total P/L Price
Slide 68: Correspondent Lending
Correspondent Lending October 27, 2011
Slide 69: PMT Has the Requirements Necessary to Be A Successful Correspondent Lender
PMT Has the Requirements Necessary to Be A Successful Correspondent Lender 68 Experienced elite management team Full-scale technology platform (not available off-the-shelf) Excellent product administration Top credit and quality controls in place Outstanding Secondary Marketing capabilities GSE / in
Slide 70: Role of Different Institutions in Mortgage Lending
Role of Different Institutions in Mortgage Lending 69 Mortgage Lenders and Smaller Banks Acquire loans from correspondent customers Perform underwriting/QC Pool loans and deliver to investors/securitization Issue securitizations Retain ongoing servicing rights and responsibilities Non-Agency Investo
Slide 71: The Correspondent Market Is Dominated by Major Banks
The Correspondent Market Is Dominated by Major Banks 70 There is a significant opportunity to purchase newly originated mortgage loans from originators and monetize these assets in sale and securitization transactions Correspondent Volume 1H 2011(1) 8% 15% Projected Correspondent Volume 2012(2) $278
Slide 72: Deep Leadership Team With Extensive Industry Knowledge
Deep Leadership Team With Extensive Industry Knowledge 71 System architecture Infrastructure development and maintenance Process, product and policy development Loan level auditing Loan boarding Compliance Develop warehouse lending platform Administration of counterparty management New client approv
Slide 73: CLG's Business Model Is Relationship-Based
PMT’s Correspondent Lending Group’s (CLG) Business Model Is Relationship-Based Experienced Management Team Relationship Driven Model Client Selection Risk Management Strong technical knowledge of the mortgage business and the correspondent lending acquisition process Proven track record of building
Slide 74: CLG's Purchase Process Is Efficient and Employs the Appropriate Controls
CLG’s Purchase Process Is Efficient and Employs the Appropriate Controls 73 Quality Control Post Purchase Wiring and Accounting Loan Purchase and Compliance Credit Risk Review Loan Auditing Prior to Submission Loan Submission, Receiving, and Indexing Assess quality of the loan from Investor, Complia
Slide 75: CLG Provides Lenders With a Full Service Correspondent Partner
Non-agency (jumbo) Government (FHA) Conventional CLG Provides Lenders With a Full Service Correspondent Partner 74 PMT is a Fannie Mae Seller / Servicer PMT retains an investment in the MSR PMT currently sells as whole loans to third-party buyers As the securitization market returns, PMT has opportu
Slide 76: We Are Currently Developing a Warehouse Lending Business for PMT
We Are Currently Developing a Warehouse Lending Business for PMT Warehouse Lending is a valuable and important piece of the overall correspondent lending relationship Provides liquidity to correspondent‘s clients to fund and close loans Maintains stable, reliable, and consistent liquidity that clien
Slide 77: PMT's Core Lending Principles Follow the Relationship Model of CLG
PMT’s Core Lending Principles Follow the Relationship Model of CLG Client Selection Asset-Based Lending Cash Control Systematic Controls Covenant Compliance Partner with our correspondent lenders Market differentiation, early funding products Know the client’s production quality Repayment from colla
Slide 78: Correspondent – Key Credit Controls: Seller Approval
Correspondent – Key Credit Controls Seller Approval Process: Controlled by Chief Credit Officer and administered by MD Warehouse Lending Activities monitored by a committee comprised of the Chief Executive Officer, Chief Investment Officer and Chief Credit Officer, among others Summary of seller’s a
Slide 79: Correspondent – Key Credit Controls: Product Offering
Correspondent – Key Credit Controls Product Offering: Agency Fixed with terms of 10, 15, 20 and 30 years, 5/1 ARMs, FHA 203b and Jumbo. Underwriting Guidelines All loans require a DU Accept / Eligible decision. No manual underwriting The minimum FICO score is 620 for Agency and 640 for FHA Maximum D
Slide 80: Correspondent – Key Credit Controls: Loan Sampling
Correspondent – Key Credit Controls 20 Loan Initial Sample: A seller’s first 20 loans receive a full credit, appraisal and compliance review On completion of the sample, the Chief Credit Officer, the Chief Underwriter, the Correspondent Underwriting Manager, the MD Correspondent Production and the M
Slide 81: CLG Relies on PCM's Secondary Marketing Expertise & Experience
CLG Relies on PCM’s Secondary Marketing Expertise & Experience 80 Secondary Marketing is responsible for: Providing loan pricing for CLG Bidding and purchase of mortgage loans Hedging the mortgage pipeline Optimizing execution on trades, deliveries and pricing Managing relationships with broker/deal
Slide 82: Deep and Experienced Capital Markets Team
Deep and Experienced Capital Markets Team 81 Vandy Fartaj Chief Capital Markets Officer 15 years Tim Wang MD, Mortgage Trading 13 Years Maurice Watkins MD, Capital Markets Operations 20 Years Tom Rettinger MD, Risk Management 20 Years Ceasar Martinez Secondary Marketing Analyst Rob Mason Director, M
Slide 83: Consistent Loan Pricing Disseminated Daily
Consistent Loan Pricing Disseminated Daily PennyMac uses a formulaic and disciplined approach to developing its pricing Pricing includes all values and costs to meet a targeted return Pricing is disseminated at the beginning of every day based on live market prices Price changes are made when mortga
Slide 84: Pricing Drivers
Pricing Drivers 83 Revenues Expenses Loan Pricing & Best Execution MBS Execution Fannie Mae Cash Pricing Retain Excess Servicing Net Interest Income LIBOR Underlying Margins and Costs Mortgage Servicing Value Interest Rate Loan Size Geography LTV & FICO Score Cost to Service Operating Expenses Opera
Slide 85: PCM Has Deep Experience in Executing Trades
PCM Has Deep Experience in Executing Trades 84 Secondary Marketing executes trades with Wall Street Primary Dealers and the GSEs Management Oversight Hedging decisions are made through senior managements review of the net hedge position Since hedging strategies are based on market movements, traders
Slide 86: Valuation and Hedging of the Secondary Marketing Position
Valuation and Hedging of the Secondary Marketing Position 85 Committed Pipeline (Best Efforts) Interest rate exposure is due to the variability of closings which is driven primarily by the direction of mortgage rates Closed loans Interest rate exposure is due to the direction of mortgage rates as it
Slide 87: PMT Utilizes Whole Loan Repurchase Agreements to Finance CLG's Activities
PMT Utilizes Whole Loan Repurchase Agreements to Finance CLG’s Activities 86 Secondary Marketing coordinates with the Treasury department in operating these facilities Executed agreements with investment banks to lend money to PennyMac with loans pledged to the facility as collateral Typically are a
PennyMac Mortgage Investment Trust — Q3 2011 Earnings Presentation on 6ix