Pennymac’s profits shrink, but its servicing portfolio now stands at a massive $680B

PennyMac Financial Services Inc. (PFSI) on Tuesday reported net income of $76.3 million for the first quarter of 2025 after it posted revenue of $430.9 million.

These numbers were down from the previous quarter’s figures of $104.5 million and $470.1 million, respectively.

The California-based lender’s pretax income was $104.2 million, which was down from $129.4 million in Q4 2024 but up from $43.9 million in Q1 2024.

“PennyMac Financial delivered solid first quarter financial results, demonstrating our ability to consistently generate strong returns in a volatile market,” Pennymac chairman and CEO David Spector said in a statement.

“In our production segment, we acquired or originated nearly $30 billion in unpaid principal balance (UPB) of loans at higher note rates, which strategically positions our consumer direct division for significant growth when interest rates decline. This production led to continued growth of our servicing portfolio, which ended the quarter at $680 billion in unpaid principal balance.”

Loan acquisitions and originations — including those fulfilled for PMT, the company’s mortgage investment trust — totaled $28.9 billion in unpaid principal balance, down 19% from the prior quarter and up 33% from Q1 2024.

“[That’s] consistent with the decline in the overall market of total acquisitions and origination volumes,” Daniel Perotti, PennyMac’s senior managing director and chief financial officer, said during Tuesday’s earnings call.

Spector added that the company produced annualized operating return on equity of 15% that was “driven by continued strength in our servicing business and a solid contribution from our production segments despite elevated mortgage rates.”

Fees from fulfilling correspondent loans for PMT totaled $5.3 million in Q1 2025, down 17% from Q4 2024 but up 32% year over year. PennyMac attributed the decline to lower conventional acquisition volumes. In Q2 2025, PMT is expected to retain all jumbo production.

“In the second quarter, we expect PMT to retain approximately 15% to 25% of total conventional/conforming correspondent production, consistent with first quarter loans of note,” Perotti said. “Pursuant to our renewed mortgage banking agreement with PMT, beginning in the third quarter of 2025, all correspondent loans will initially be acquired by PFSI.”

The company’s servicing segment operating revenues saw pretax income of $76 million from January through March, down from $87.3 million in Q4 2024 and up from $23.7 million in Q1 2024.

But PennyMac’s servicing portfolio also grew to $680.2 billion in UPB, up 2% from the end of 2024 and 10% higher compared to March 2024. The company said this was driven by production volumes that more than offset prepayment activity.

PennyMac had a pretax loss of $33.7 million from corporate activities not directly attributable to its production and servicing segments. This was comparable to losses of $35.9 million in the prior quarter and $28.4 million in the same period last year.

“We ended the quarter with $4 billion of total liquidity, which includes cash and amounts available to draw on facilities where we have collateral,” Perotti said.

Despite the lower-performing numbers compared to last quarter, Spector spoke positively about the company’s future and touted its four-year partnership with the U.S Olympic and Paralympic teams.

“This phased approach allows us to strategically build brand relevance, awareness and engagement without significant upfront costs,” he said.

Above all, Spector expressed promise about PennyMac’s future performances.

“We are uniquely positioned in the industry. Our large and growing portfolio of borrowers who recently entered into mortgages at higher rates stands to benefit from a refinance in the future when interest rates decline,” he said.

“We expect further market penetration, aiming to capture a broader share of MSR owners who are seeking a best-in-class, low-cost sub-servicer. This strategic focus on sub-servicing is a testament to our commitment to diversify our revenue streams while maximizing the value of our servicing platform.”