v3.25.2
Derivative and Credit Risk Transfer Strip Assets and Liabilities
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and Credit Risk Transfer Strip Assets and Liabilities

Note 11—Derivative and Credit Risk Transfer Strip Assets and Liabilities

Derivative and credit risk transfer assets and liabilities are summarized below:

 

 

June 30, 2025

 

 

December 31, 2024

 

 

 

(in thousands)

 

Derivative assets

 

$

51,926

 

 

$

56,840

 

Derivative assets with PennyMac Financial Services, Inc.

 

$

1,038

 

 

$

—

 

 

 

 

 

 

 

Derivative liabilities

 

$

2,995

 

 

$

3,291

 

Credit risk transfer strip liabilities

 

 

10,479

 

 

 

4,060

 

 

$

13,474

 

 

$

7,351

 

 

The Company records all derivative and CRT strip assets and liabilities at fair value and records changes in fair value in current period results of operations.

Derivative Activities

The Company holds and issues derivative financial instruments in connection with its operating, investing and financing activities. Derivative financial instruments are created as a result of certain of the Company’s operations and the Company also enters into derivative transactions as part of its interest rate risk management activities.

Derivative financial instruments created as a result of the Company’s operations include:

•
IRLCs that are created when the Company commits to purchase loans acquired for sale; and
•
CRT Agreements whereby the Company retained recourse obligations relating to loans sold into Fannie Mae guaranteed securitizations as part of the retention of IO ownership interests in such loans.

The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by the effects of changes in interest rates on the fair values of certain of its assets and liabilities. The Company bears price risk related to its mortgage production, servicing assets and MBS financing activities due to changes in market interest rates as discussed below:

•
The Company is exposed to losses if market mortgage interest rates increase, because market interest rate increases generally cause the fair values of MBS, IRLCs and loans acquired for sale to decrease.
•
The Company is exposed to losses if market mortgage interest rates decrease, because market interest rate decreases generally encourage increased mortgage refinancing activities, which causes the fair values of MSRs to decrease.

To manage the price risk resulting from these interest rate risks, the Company uses derivative financial instruments with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair values of the Company’s MBS, inventory of loans acquired for sale, IRLCs and MSRs. The Company does not designate and qualify any of its derivative financial instruments for hedge accounting.

Cash flows from derivative financial instruments relating to hedging of IRLCs and loans acquired for sale are included in Cash flows from operating activities in Sale to nonaffiliates and repayment of loans acquired for sale at fair value. Cash flows from derivative financial instruments relating to hedging of MSRs are included in Cash flows from investing activities.

Derivative Notional Amounts and Fair Value of Derivatives

The Company had the following derivative assets and liabilities recorded within Derivative assets and Derivative and credit risk transfer strip liabilities and related margin deposits on the consolidated balance sheets:

 

 

June 30, 2025

 

 

December 31, 2024

 

 

 

 

 

 

Fair value

 

 

 

 

 

Fair value

 

 

 

Notional

 

 

Derivative

 

 

Derivative

 

 

Notional

 

 

Derivative

 

 

Derivative

 

Instrument

 

amount (1)

 

 

assets

 

 

liabilities

 

 

amount (1)

 

 

assets

 

 

liabilities

 

 

(in thousands)

 

Hedging derivatives subject to master netting
  arrangements (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase
   contracts

 

 

2,395,000

 

 

$

8,638

 

 

$

—

 

 

 

500,000

 

 

$

156

 

 

$

—

 

Put options on interest rate futures purchase
   contracts

 

 

775,000

 

 

 

59

 

 

 

—

 

 

 

1,690,000

 

 

 

6,372

 

 

 

—

 

Forward purchase contracts

 

 

2,977,196

 

 

 

21,510

 

 

 

16

 

 

 

1,154,515

 

 

 

614

 

 

 

6,336

 

Forward sale contracts

 

 

6,799,629

 

 

 

227

 

 

 

75,443

 

 

 

7,080,982

 

 

 

54,056

 

 

 

1,753

 

MBS put options

 

 

—

 

 

 

—

 

 

 

—

 

 

 

450,000

 

 

 

2,114

 

 

 

—

 

Bond futures

 

 

1,962,000

 

 

 

—

 

 

 

—

 

 

 

1,713,000

 

 

 

—

 

 

 

—

 

Swap futures

 

 

951,200

 

 

 

—

 

 

 

—

 

 

 

951,200

 

 

 

—

 

 

 

—

 

Other derivatives not subject to master netting
  arrangements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRT derivatives

 

 

4,731,905

 

 

 

31,147

 

 

 

—

 

 

 

4,961,644

 

 

 

29,377

 

 

 

—

 

Interest rate lock commitments

 

 

936,725

 

 

 

6,666

 

 

 

181

 

 

 

1,166,566

 

 

 

3,562

 

 

 

3,118

 

Total derivative instruments before netting

 

 

 

 

 

68,247

 

 

 

75,640

 

 

 

 

 

 

96,251

 

 

 

11,207

 

Netting

 

 

 

 

 

(16,321

)

 

 

(72,645

)

 

 

 

 

 

(39,411

)

 

 

(7,916

)

 

 

 

 

$

51,926

 

 

$

2,995

 

 

 

 

 

$

56,840

 

 

$

3,291

 

Forward purchase contract with PennyMac
  Financial Services, Inc.

 

 

84,070

 

 

$

1,038

 

 

$

—

 

 

 

—

 

 

$

—

 

 

$

—

 

Margin deposits placed with (received from)
   derivative counterparties included
   in derivative balances above, net

 

 

 

 

$

56,325

 

 

 

 

 

 

 

 

$

(31,497

)

 

 

 

Derivative assets pledged to secure:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Sold Under Agreements to Repurchase
   and Notes payable secured by credit risk
   transfer and mortgage servicing assets

 

 

 

 

$

31,147

 

 

 

 

 

 

 

 

$

29,377

 

 

 

 

 

(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2) All hedging derivatives are interest rate derivatives that are used as economic hedges.

Netting of Financial Instruments

The Company has elected to net derivative asset and liability positions, and cash collateral placed with or received from its counterparties when such positions are subject to legally enforceable master netting arrangements and the Company intends to set off. The derivative financial instruments that are not subject to master netting arrangements are CRT derivatives and IRLCs. As of June 30, 2025 and December 31, 2024, the Company was not a party to any reverse repurchase agreements or securities lending transactions that are required to be disclosed in the following tables.

Derivative Assets, Financial Instruments and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amounts of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for setoff accounting:

 

 

June 30, 2025

 

 

December 31, 2024

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

 

of assets

 

 

not offset in the

 

 

 

 

 

of assets

 

 

not offset in the

 

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

 

consolidated

 

 

 

 

 

Cash

 

 

 

 

 

consolidated

 

 

 

 

 

Cash

 

 

 

 

 

 

balance

 

 

Financial

 

 

collateral

 

 

Net

 

 

balance

 

 

Financial

 

 

collateral

 

 

Net

 

Counterparty

 

sheet

 

 

instruments

 

 

received

 

 

amount

 

 

sheet

 

 

instruments

 

 

received

 

 

amount

 

 

 

(in thousands)

 

CRT derivatives

 

$

31,147

 

 

$

—

 

 

$

—

 

 

$

31,147

 

 

$

29,377

 

 

$

—

 

 

$

—

 

 

$

29,377

 

Interest rate lock commitments

 

 

6,666

 

 

 

—

 

 

 

—

 

 

 

6,666

 

 

 

3,562

 

 

 

—

 

 

 

—

 

 

 

3,562

 

RJ O’Brien & Associates, LLC

 

 

8,696

 

 

 

—

 

 

 

—

 

 

 

8,696

 

 

 

6,528

 

 

 

—

 

 

 

—

 

 

 

6,528

 

Mizuho Financial Group

 

 

1,819

 

 

 

—

 

 

 

—

 

 

 

1,819

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Bank of America, N.A.

 

 

1,352

 

 

 

—

 

 

 

—

 

 

 

1,352

 

 

 

3,150

 

 

 

—

 

 

 

—

 

 

 

3,150

 

PennyMac Financial Services, Inc.

 

 

1,038

 

 

 

—

 

 

 

—

 

 

 

1,038

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

J.P. Morgan Securities LLC

 

 

565

 

 

 

—

 

 

 

—

 

 

 

565

 

 

 

1,237

 

 

 

—

 

 

 

—

 

 

 

1,237

 

Morgan Stanley & Co. LLC

 

 

486

 

 

 

—

 

 

 

—

 

 

 

486

 

 

 

9,303

 

 

 

—

 

 

 

—

 

 

 

9,303

 

Citigroup Global Markets Inc.

 

 

277

 

 

 

—

 

 

 

—

 

 

 

277

 

 

 

712

 

 

 

—

 

 

 

—

 

 

 

712

 

Wells Fargo Securities, LLC

 

 

246

 

 

 

—

 

 

 

—

 

 

 

246

 

 

 

895

 

 

 

—

 

 

 

—

 

 

 

895

 

Goldman Sachs & Co. LLC

 

 

159

 

 

 

—

 

 

 

—

 

 

 

159

 

 

 

251

 

 

 

—

 

 

 

—

 

 

 

251

 

Other

 

 

513

 

 

 

—

 

 

 

—

 

 

 

513

 

 

 

1,825

 

 

 

—

 

 

 

—

 

 

 

1,825

 

 

$

52,964

 

 

$

—

 

 

$

—

 

 

$

52,964

 

 

$

56,840

 

 

$

—

 

 

$

—

 

 

$

56,840

 

 

Derivative Liabilities, Financial Liabilities and Collateral Pledged by Counterparty

The following table summarizes by significant counterparty the amounts of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance to qualify for setoff accounting. All assets sold under agreements to repurchase are secured by sufficient collateral with fair values that exceed the liability amounts recorded on the consolidated balance sheets.

 

 

June 30, 2025

 

 

December 31, 2024

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

 

of liabilities

 

 

not offset in the

 

 

 

 

 

of liabilities

 

 

not offset in the

 

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

 

consolidated

 

 

Financial

 

 

Cash

 

 

 

 

 

consolidated

 

 

Financial

 

 

Cash

 

 

 

 

 

 

balance

 

 

instruments

 

 

collateral

 

 

Net

 

 

balance

 

 

instruments

 

 

collateral

 

 

Net

 

Counterparty

 

sheet

 

 

(1)

 

 

pledged

 

 

amount

 

 

sheet

 

 

(1)

 

 

pledged

 

 

amount

 

 

 

(in thousands)

 

Interest rate lock commitments

 

$

181

 

 

$

—

 

 

$

—

 

 

$

181

 

 

$

3,118

 

 

$

—

 

 

$

—

 

 

$

3,118

 

J.P. Morgan Securities LLC

 

 

1,523,520

 

 

 

(1,523,520

)

 

 

—

 

 

 

—

 

 

 

1,695,007

 

 

 

(1,695,007

)

 

 

—

 

 

 

—

 

Bank of America, N.A.

 

 

791,070

 

 

 

(791,070

)

 

 

—

 

 

 

—

 

 

 

787,883

 

 

 

(787,883

)

 

 

—

 

 

 

—

 

Wells Fargo Securities, LLC

 

 

702,271

 

 

 

(702,271

)

 

 

—

 

 

 

—

 

 

 

670,605

 

 

 

(670,605

)

 

 

—

 

 

 

—

 

Barclays Capital Inc.

 

 

691,210

 

 

 

(690,578

)

 

 

—

 

 

 

632

 

 

 

545,678

 

 

 

(545,678

)

 

 

—

 

 

 

—

 

Goldman Sachs & Co. LLC

 

 

605,240

 

 

 

(605,240

)

 

 

—

 

 

 

—

 

 

 

311,997

 

 

 

(311,997

)

 

 

—

 

 

 

—

 

Atlas Securitized Products, L.P.

 

 

592,090

 

 

 

(592,090

)

 

 

—

 

 

 

—

 

 

 

609,780

 

 

 

(609,780

)

 

 

—

 

 

 

—

 

Citigroup Global Markets Inc.

 

 

454,057

 

 

 

(454,057

)

 

 

—

 

 

 

—

 

 

 

431,201

 

 

 

(431,201

)

 

 

—

 

 

 

—

 

RBC Capital Markets, L.P.

 

 

362,033

 

 

 

(362,033

)

 

 

—

 

 

 

—

 

 

 

353,765

 

 

 

(353,765

)

 

 

—

 

 

 

—

 

Santander US Capital

 

 

356,698

 

 

 

(356,698

)

 

 

—

 

 

 

—

 

 

 

362,196

 

 

 

(362,196

)

 

 

—

 

 

 

—

 

Morgan Stanley & Co. LLC

 

 

244,469

 

 

 

(244,469

)

 

 

—

 

 

 

—

 

 

 

280,561

 

 

 

(280,561

)

 

 

—

 

 

 

—

 

Daiwa Capital Markets

 

 

206,910

 

 

 

(206,910

)

 

 

—

 

 

 

—

 

 

 

230,033

 

 

 

(230,033

)

 

 

—

 

 

 

—

 

BNP Paribas

 

 

113,354

 

 

 

(112,939

)

 

 

—

 

 

 

415

 

 

 

59,729

 

 

 

(59,729

)

 

 

—

 

 

 

—

 

Mizuho Financial Group

 

 

87,675

 

 

 

(87,675

)

 

 

—

 

 

 

—

 

 

 

98,196

 

 

 

(98,121

)

 

 

—

 

 

 

75

 

Bank of Montreal

 

 

67,368

 

 

 

(67,187

)

 

 

—

 

 

 

181

 

 

 

72,859

 

 

 

(72,859

)

 

 

—

 

 

 

—

 

Nomura Holdings America, Inc

 

 

36,349

 

 

 

(36,349

)

 

 

—

 

 

 

—

 

 

 

36

 

 

 

—

 

 

 

—

 

 

 

36

 

Other

 

 

1,586

 

 

 

—

 

 

 

—

 

 

 

1,586

 

 

 

62

 

 

 

—

 

 

 

—

 

 

 

62

 

 

$

6,836,081

 

 

$

(6,833,086

)

 

$

—

 

 

$

2,995

 

 

$

6,512,706

 

 

$

(6,509,415

)

 

$

—

 

 

$

3,291

 

 

(1)
Amounts represent the UPB of Assets sold under agreements to repurchase.

Following are the net gains (losses) recognized by the Company on derivative financial instruments and the consolidated statements of operations line items where such gains and losses are included:

 

 

 

 

Quarter ended June 30,

 

 

Six months ended June 30,

 

Derivative activity

 

Consolidated statements of operations line

 

2025

 

 

2024

 

 

2025

 

 

2024

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Interest rate lock commitments

 

Net gains on loans acquired for sale (1)

 

$

2,904

 

 

$

(3,292

)

 

$

7,078

 

 

$

(5,980

)

CRT derivatives

 

Net gains (losses) on investments and
  financings

 

$

5,375

 

 

$

5,039

 

 

$

7,355

 

 

$

15,229

 

Hedged item:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock
  commitments and loans
  acquired for sale

 

Net gains on loans acquired for sale

 

$

(12,338

)

 

$

7,163

 

 

$

(38,697

)

 

$

9,773

 

Mortgage servicing rights

 

Net loan servicing fees

 

$

(60,637

)

 

$

(18,365

)

 

$

(100,581

)

 

$

(108,179

)

Assets sold under agreements
   to repurchase

 

Net gains (losses) on investments and
  financings

 

$

—

 

 

$

—

 

 

$

—

 

 

$

20,098

 

 

(1)
Represents net change in fair value of IRLCs from the beginning to the end of the period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loan or cancellation of the commitment are shown in the rollforwards of IRLCs for the period in Note 7 – Fair Value – Financial Statement Items Measured at Fair Value on a Recurring Basis.