PennyMac Financial Services, Inc. PFSI
New risk paragraphs, branching off last year
Each branch is a paragraph in Risk Factors with nothing like it in the 10-K filed Feb 19, 2025. A box jumps to the paragraph as filed, below.
Paragraphs with nothing like them in last year's 10-K
18 paragraphs in Risk Factors of the 10-K filed Feb 20, 2026 with nothing like them in the 10-K filed Feb 19, 2025. Quoted exactly. Paragraphs that were only edited are under 10-K change.
Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults and foreclosures.
A significant deterioration in macroeconomic conditions could reduce the amount of disposable income consumers have and negatively impact consumers’ ability to take out new loans and repay existing loans. A
Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults and foreclosures.
Housing affordability has been negatively impacted by rising housing costs and tax payments. The average share of borrowers' mortgage payments allocated to property taxes and insurance premiums has been steadily rising in recent years due to inflation, natural disasters and other factors. For example, due to wildfires in Northern and Southern California and in other areas of the west coast, many private insurance carriers will no longer offer homeowner insurance policies in certain high risk areas to new or existing homeowners. The decrease in available private insurers increases insurance premiums and a borrower's monthly expenses and creates a higher likelihood that loan payments in respect of the mortgaged property may become delinquent or default, which could materially and adversely affect our business, financial condition, liquidity and results of operations.
The unsecured senior note indentures contain additional restrictive covenants that may limit our and our restricted subsidiaries’ ability to engage in specified types of transactions, including our ability and/or the ability of our restricted subsidiaries to:
We may refinance and extend loans to borrowers who have successfully repaid their previous mortgage loans. Borrowers have no obligation to refinance their mortgage loans with us and may choose to refinance with a competitor. If borrowers choose to refinance mortgage loans underlying our MSRs with a competitor, then our cash flows from our
MSRs may decrease since the original mortgage loans underlying the MSRs will be repaid and we will not have an opportunity to earn further servicing fees from those new loans. If we are not successful in obtaining the refinanced loan for our serviced borrowers who pay off their existing mortgage loans, our MSRs may become increasingly subject to run-off that would impact our servicing revenue and financial performance.
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Failure to expand our subservicing business with third parties could impact our business and increase our subservicing compliance risks.
We have a number of counterparties and vendors who provide us with financial, technology and other services that are critical to support our businesses. If our current counterparties and vendors were to stop providing services to us on acceptable terms or if we had a disruption in service, we may be unable to procure alternative services from other
Attempts to disrupt or gain unauthorized access to our and our third-party service providers’ information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by artificial intelligence. We cannot guarantee that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, or cybersecurity incidents or breaches in or compromises of our systems or those of third-party, vendors, contractors, consultants and/or third parties with whom we do business. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our privacy and data security obligations. Further, although we maintain cyber liability insurance, this insurance may not provide adequate coverage against potential liabilities related to any experienced cybersecurity incident or breach.
our ability to provide fast responses, process applications online, accept electronic signatures, provide process status updates instantly and other borrower or counterparty conveniences.
We currently use and integrate artificial intelligence technologies into our business processes and services. Development, use, and deployment of these technologies could pose cybersecurity, data privacy, IT, intellectual property, regulatory, legal, operational, competitive, reputational, and other risks and challenges that could affect our business. Specifically, risks related to bias, artificial intelligence hallucinations, discrimination, harmful content, misinformation, fraud, scams, targeted attacks such as model poisoning or data poisoning, surveillance, data leakage, loss of consensus reality, inequality, environmental harms, and other harms may flow from our development, use, or deployment of artificial intelligence technologies. Artificial intelligence-related issues, including potential government regulation of artificial intelligence, deficiencies or failures could give rise to legal and regulatory actions, damage our reputation or otherwise materially impact our business, financial condition, and liquidity.
on our future operating results. Catastrophic events may also be uninsurable or not economically insurable and might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed.
Our servicing business, our unsecured senior notes and other financing arrangements may be rated by national rating agencies and any downgrade of our ratings could impair our business or restrict our access to sources of capital on terms satisfactory to us or at all, increase the cost of our debt or equity financing and be detrimental to our business. In addition, any third-party rating agency downgrade of our servicing business could adversely affect our ability to maintain our status as an approved Agency servicer, could negatively impact the value of our MSRs, may impair our ability to consummate future servicing transactions and may result in an event of default under certain financings.
We are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which we conduct our businesses. These regulations directly impact our business and
The publication and adoption of new and amended laws, regulations and informal guidance could have a substantial impact on our business operations. The CFPB has historically supervised, investigated and, where it deemed appropriate, brought aggressive enforcement actions against lenders and servicers the CFPB determined were engaged in activities that violated federal laws and regulations. In January 2025, the new U.S. presidential administration issued an executive order to halt all activity on the CFPB’s pending and proposed rules, and in May 2025, the CFPB rescinded many guidance documents, including interpretive rules, policy statements and advisory opinions. Due to the changing nature of the regulatory environment and uncertainty about the priorities and direction of the CFPB under the current federal administration, we cannot be certain how the regulatory environment may impact our business. Even if the activities of the CFPB remain suspended or significantly restrained, state and local regulators or other agencies with authority to administer and enforce laws that apply to us may increase or enhance their regulatory, supervisory or enforcement activities with respect to us and other providers of financial services. This may increase our operational and regulatory compliance costs. In addition, a decrease in federal regulations could negatively impact the quality of loans we originate or acquire from our correspondent and other mortgage partners if our partners fail to maintain effective risk management, credit quality and production programs.
We have contractual agreements to provide PMT with certain mortgage banking services, including fulfillment and disposition-related services, for which we receive a monthly fulfillment fee. PMT historically acquired loans from correspondent sellers that we subsequently purchased; however, beginning July 1, 2025, we became the initial purchaser of loans from correspondent sellers and began selling agreed-upon volumes to PMT. PMT retains the right to purchase up to 100% of the non-government insured or guaranteed loans purchased by us from our correspondent sellers.
Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new risks, regulatory compliance requirements and costs. For example, the development and expansion of our proprietary technology to manage loan servicing operations may increase our exposure to compliance and litigation risks from third parties and significantly increase our capital expenditures at our operational subsidiaries. In addition, our closed-end second lien mortgage loan products may result in a higher risk of loss than other loans since our second lien is subordinated to more senior secured loan claims. Also, non-Agency loan products such as jumbo mortgage loans and non-qualified mortgage loans may create additional compliance and liquidity risks as compared to Agency loans.
Paragraphs in the 10-Q filed Nov 3, 2026 that were not in the one before
New in the latest 10-Q
12 paragraphs in the 10-Q filed Nov 3, 2026 with nothing like them in the 10-Q filed Aug 4, 2026 (at least half the words must differ; new numbers alone do not count). Quoted exactly, grouped by the item heading above them. This is text that changed, not a judgement of how serious it is.
10-Q
our organizational structure and certain requirements in our charter documents; and
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uncertainties surrounding the integration and realization of anticipated benefits of acquisitions including our ability to successfully complete the acquisition of Cenlar and to integrate Cenlar into our business.
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Financial statements and notes
The Company estimates the fair value of the term notes and term loans included in Notes payable secured by mortgage servicing assets and the Unsecured senior notes using indications of fair value provided by non-affiliate brokers, pricing services and internal estimates of fair value. The fair value and carrying value of these liabilities are summarized below: September 30, 2026 December 31, 2025 Fair value Carrying value Fair value Carrying value (in thousands) ─────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Term notes and term loans $ 1,329,206 $1,325,951 $1,334,248 $1,326,021 Unsecured senior notes $ 4,482,025 $4,839,843 $5,075,675 $4,831,742 Valuation Governance Most of the Company’s financial assets, and all of its derivatives, MSRs, and MSLs are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and derivatives and all of its MSRs and MSLs are “Level 3” fair value assets and liabilities which require use of unobservable inputs that are significant to the estimation of the items’ fair values. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances. Due to the difficulty in estimating the fair values of “Level 3” fair value assets and liabilities, the Company has assigned responsibility for estimating the fair values of these assets and liabilities to specialized staff within its capital markets group and subjects the valuation process to significant senior management oversight. With respect to “Level 3” valuations other than IRLCs, the capital markets valuation staff reports to the Company’s senior management valuation committee, which oversees the valuations. The capital markets valuation staff monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities, including the models’ performance versus actual results, and reports those results as well as changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuations and any changes in model methods and inputs, to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes the Company’s chief financial and investment officers as well as other senior members of the Company’s finance, risk management and capital markets staffs. To assess the reasonableness of its valuations, the capital markets valuation staff presents an analysis of the effect on the valuations of changes to the significant inputs to the models and, for MSRs, comparisons of its estimates of fair value and key inputs to those procured from non-affiliate brokers and published surveys. The fair value of the Company’s IRLCs is developed by its capital markets risk management staff and is reviewed by its capital markets operations staff. Valuation Techniques and Inputs Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities: Principal-Only Stripped Mortgage-Backed Securities The Company categorizes principal-only stripped MBS as “Level 2” fair value financial instruments. Fair values of these securities are established based on quoted market prices for these or similar securities. Loans Held for Sale Most of the Company’s loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value assets. The fair values of “Level 2” fair value loans are determined using their contracted selling prices or quoted market prices or market price equivalents.
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(1) Weighted average inputs are based on the fair values of the “Level 3” fair value loans.
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(2) Voluntary prepayment/resale speed is measured using life voluntary Conditional Prepayment Rate (“CPR”).
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Show the other 7
On April 9, 2025, Clayton Bradley Williams, III filed a putative class action complaint (the “Williams Complaint”) against PLS, a wholly-owned indirect subsidiary of the Company, in the United States District Court for the Middle District of North Carolina (the “North Carolina Federal Court”), captioned Clayton Bradley Williams, III v. PennyMac Loan Services, LLC, Civil Action No. 1:24-cv-00276. The Williams Complaint alleges that PLS or its agents improperly charged borrowers fees of up to $6.75 for mortgage payments made through an automated clearing house system (“Pay-to-Pay Fees”). The Williams Complaint further alleges that these fees were not authorized by the borrowers’ mortgage agreements and therefore violate the North Carolina Debt Collection Act (“NCDCA”) and the North Carolina Unfair and Deceptive Trade Practices Act (“NCUDTPA”).
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The plaintiff seeks to represent a class of all persons who have a residential mortgage loan secured by property in North Carolina, serviced or subserviced by PLS, and who paid a Pay-to-Pay Fee to PLS or its agents when making a mortgage payment by debit card during the applicable statute of limitations period. The plaintiff seeks actual damages, statutory civil penalties under the NCDCA of between $500 and $4,000 per violation, treble damages under the NCUDTPA, and attorneys’ fees and costs. On December 1, 2025, the North Carolina Federal Court denied PLS’s motion to dismiss, and the matter is currently in discovery.
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No assurance can be given as to the ultimate outcome of this matter or the amount of any loss PLS may incur, and any such amount could be material. PLS believes it has meritorious defenses to the plaintiff’s claims and intends to defend this matter vigorously. PLS cannot reasonably estimate the possible loss or range of loss primarily because the matter involves complex factual and legal issues, damages are uncertain, and the proceeding is at a preliminary stage, with no class certified and discovery ongoing.
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On October 20, 2026, the Company entered into an agreement to sell a portfolio of conventional MSRs with an aggregate UPB of approximately $28.9 billion. The transaction is expected to close in the fourth quarter 2026.
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On October 20, 2026, we entered into an agreement to sell a portfolio of conventional MSRs with an aggregate UPB of approximately $28.9 billion. The transaction is expected to close in the fourth quarter 2026 and we may sell additional MSR portfolios in future periods.
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Legal proceedings
From time to time, the Company may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. See Note 18 - Commitments and Contingencies, to the consolidated financial statements included in this Report for a discussion of legal actions, claims and proceedings that are incorporated by reference into this Item 1.
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Item 6
2026 ─────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── 10.1 Amendment No. 2 to Fifth Amended and Restated Flow Servicing Agreement, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC, dated as of September 9, 2026. * 10.2 Amendment No. 2 to Amended and Restated Flow Servicing Agreement, between PennyMac Corp. and PennyMac Loan Services, LLC, dated as of September 9, 2026. * 10.3 Amendment No. 1 to Fourth Amended and Restated Mortgage Banking Services Agreement, between PennyMac Loan Services, LLC and PennyMac Corp., dated as of September 9, 2026. * 10.4 Amendment No. 1 to Amended and Restated Mortgage Loan Purchase Agreement, between PennyMac Loan Services, LLC and PennyMac Corp., dated as of September 9, 2026. * 31.1 Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 32.2 Certification of Daniel S. Perotti pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
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The 10-Q's risk factors against the 10-K
Item 1A of the 10-Q filed Nov 3, 2026 against Item 1A of the 10-K filed Feb 20, 2026.
A 10-Q repeats only the risks that changed, so a 10-K paragraph that is missing from it is not counted as removed.
Added is a paragraph with nothing like it in the 10-K, Reworded a sentence that is in both with several words changed,
Quiet changes a sentence in both where one to four words changed and one is a hedge or a modal
(cut words struck through, new words highlighted).
Text on the page, not a score; each links to the filing at sec.gov.
What the 10-Q itself says about its risk factors:There have been no material changes from the risk factors set forth under Item 1A. For a discussion of our risk factors refer to our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 20, 2026.
Read in the 10-Q
1 paragraph in the 10-Q's Item 1A, and none of them adds, rewords or quietly edits a paragraph of the 10-K's.
Phrases used for the first time
Two-word phrases in Risk Factors of the 10-K filed Feb 20, 2026 that are in none of the 1 earlier 10-Ks stored, back to Feb 19, 2025
Where each one is used
- litigation risks: Developing new products, updating our operational processes and initiating or expanding our business activities may expose us to new regulatory compliance and litigation risks and require additional capital expenditures.
- institutional investors: Our ability to finance our business operations and repay maturing obligations rests in large part on our ability to borrow money. Unlike some of our competitors who fund mortgage loans through bank deposits, we generally fund our mortgage loans through borrowings under warehouse facilities and other financing...
- msr transactions: Our ability to realize the anticipated benefits of potential future acquisitions and sales of servicing portfolios will depend, in part, on our ability to appropriately execute these transactions and service the related MSR assets. The risks associated with these MSR transactions include, among others,...
- banks private: Our ability to finance our business operations and repay maturing obligations rests in large part on our ability to borrow money. Unlike some of our competitors who fund mortgage loans through bank deposits, we generally fund our mortgage loans through borrowings under warehouse facilities and other financing...
- loans underlying: We may refinance and extend loans to borrowers who have successfully repaid their previous mortgage loans. Borrowers have no obligation to refinance their mortgage loans with us and may choose to refinance with a competitor. If borrowers choose to refinance mortgage loans underlying our MSRs with a competitor, then...
- macroeconomic real: Our business is highly dependent on macroeconomic, real estate, mortgage and financial market conditions that could materially and adversely affect our business, financial condition and results of operations.
- rising homeownership: Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults and foreclosures.
- homeownership costs: Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults and foreclosures.
Used at least twice, small words left out. Counted, not picked: a phrase can be new because the company renamed something.
What was taken out
7 paragraphs of last year's Risk Factors with nothing like them now. The longest are quoted.
Sources
Item 1A of each 10-K and 10-Q on EDGAR, quoted exactly. Each paragraph links to the filing at sec.gov.
Also
10-K change: what was reworded or cut, section by section.
Work with it
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