PennyMac Mortgage Investment Trust (PMT) Barclays 22nd Annual Global Financial Services Conference 2024 summary

Market environment and origination trends

• August saw increased production, especially in broker direct and consumer direct channels, with correspondent expected to rise in September and October.

• Consumer direct origination grew from $1.3B in July to $1.9B in August, reflecting efficiency improvements and added capacity.

• Broker direct market share is 4-5%, with expectations for continued growth as competitors exit.

• Margins in broker direct are stable and expected to rise as rates decline and capacity tightens.

• Correspondent originations are near $9B monthly, supporting servicing growth and future refinance opportunities.

Strategic outlook and capacity planning

• Strategic plans are based on a $2.1T origination market for 2025, with potential upside if rates fall post-election.

• A normalized mortgage market could reach 2.3-2.4 million units annually by 2025-2026.

• Capacity is being expanded with new loan officers and fulfillment staff to capture more refinance opportunities as rates decline.

• Recapture of refinancing economics is a key focus, leveraging a balanced business model and servicing investments.

• The cost of maintaining capacity is justified by the potential to recapture more loans versus hedging costs.

Portfolio construction and servicing strategy

• Portfolio strategy emphasizes adding higher-rate loans (6%+) through correspondent channel, now about 20% of the portfolio.

• Higher-rate loans generate current income and future recapture opportunities as rates fall.

• Servicing profitability has improved, with operational costs reduced from 10 to under 6 basis points per quarter.

• Further cost reductions are expected, especially if delinquencies remain stable.

• Early buyout and loan modification programs could further enhance servicing margins as rates decline.