PennyMac Mortgage Issues Notes

October 23, 2023

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PennyMac Mortgage Investment Trust, a subsidiary of the large Westlake Village mortgage lender PennyMac Financial Services Inc., released millions in senior notes last month.

The offering, which closed on Sept. 21, aggregated $50 million in a principal amount. Notes offered, bearing an interest rate of 8.5%, are due in 2028 and guaranteed by PennyMac Corp., another subsidiary of the broader PennyMac holding company.

The capital acquired from this offering will fuel a broad spectrum of PennyMac business and investment lines.

Among these are procuring mortgage-servicing rights, which is when mortgage originators sell the administration of a home payment to another financial institution; investing in securities from the U.S. Federal National Mortgage Association and U.S. Federal Home Loan Mortgage Corp.; and other mortgage assets.

On top of these, the company is eyeing the repayment of existing debts, which may buy back or pay PennyMac Corp.’s exchangeable debt due next year.

Any funds remaining after covering these plans will be allocated to other business needs.

As the country teeters on a possible recession and 30-year fixed rate mortgages hit a 23-year high of 7.57% on Oct. 12, investments in entities surrounding the residential loan market could be a safe haven for risk-averse investors.

Mortgage-servicing rights, in particular, provide stable income, trading in a separate market from original underlying mortgages.

According to a 2020 report by the Congressional Research Service, facilitators of interest payments and borrowers’ escrow accounts can reap an average 25 basis points of outstanding mortgage balances per month.

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James Brock has worked in newsrooms around the world, including in New York, Paris, Abu Dhabi, Dubai, Houston, and Los Angeles. He began his career with a Newhouse News daily, where he served on the news desk and the editorial page. He was the copy chief for The New York Sun, and founded and edited the personal finance section for Abu Dhabi-based The National, among other positions. He has interviewed Anthony Bourdain, Tom Ford, Mark Cuban, and many other individuals, and has written and edited thousands of stories and articles.

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