Spector stated that starting January 1, 2027, chief strategy officer Kevin Ryan will step into the role of chief financial officer. Current CFO Dan Perotti, who has been with the company since 2008 and has served as CFO since 2021, will continue in his role through the end of this year and will provide advisory support through the first quarter of 2027.

Additionally, Pennymac announced that Doug Jones, president and chief mortgage banking officer, will retire effective June 30, 2027. Jones has been with the company in various roles since 2011, serving as chief mortgage banking officer since March 2021.

“I have complete confidence in our management team’s capability to execute our strategy effectively while generating long-term value for our stockholders. We have a strong pool of talent ready to lead PennyMac,” Spector remarked during Thursday’s call.

Cost Cuts, Including Layoffs

The company revealed approximately $160 million in annualized expense reductions anticipated between Q2 2026 and Q1 2027. They also confirmed an agreement to sell $29 billion in unpaid principal balance (UPB) of low-coupon mortgage servicing rights (MSRs), with the transaction expected to close in the fourth quarter and generate estimated net proceeds of $490 million, primarily aimed at reducing debt.

This MSR sale aligns with a broader effort to reduce leverage. Perotti indicated that after a recent spike in rates, Pennymac’s non-funding leverage increased to 1.9x but is expected to trend down towards the company’s target of around 1.5x, aided by debt reduction and a potential future rate rally.

A company representative confirmed to HousingWire this week that the cost-cutting measures include layoffs.

“Ongoing market volatility has continued to reshape loan volumes industry-wide, prompting us to realign our operations accordingly. As part of this process, Pennymac has reluctantly decided to eliminate certain positions within its mortgage fulfillment operations,” the representative stated.

“We are extremely grateful to these team members for their contributions and remain committed to supporting them through this transition, including providing severance assistance. Pennymac is focused on delivering excellent service to our customers while ensuring we build an organization poised for growth as conditions improve.”

Spector remarked that a swift increase in 30-year fixed mortgage rates—averaging 7.4% at the end of Q3 2026, a rise of roughly 90 basis points—has resulted in “one of the most constrained origination environments our industry has encountered since 2023.”

Pretax Loss in Originations

Pennymac’s production segment experienced a shift to a loss due to declining origination volumes and squeezed margins. The total loan acquisitions and originations in the third quarter amounted to $24.4 billion in UPB, showing a 30% decrease from $34.9 billion in the second quarter and a 33% decrease from $36.5 billion a year ago.

The total fallout-adjusted loan locks reached $23.1 billion, reflecting a 27% decrease quarter-over-quarter and a 37% drop year-over-year. In the consumer direct channel, fallout-adjusted locks declined to $2.8 billion from $4.5 billion in the previous quarter and $3.9 billion from a year earlier, driven by a reduction in refinance interest.

The broker channel saw fallout-adjusted locks decrease to $4.7 billion from $6.5 billion in the second quarter and $5.9 billion in Q3 2025. In the correspondent channel, locks slipped to $15.6 billion, a decrease from $20.5 billion in the previous quarter and $27.2 billion a year ago.

Production revenue margins amounted to 76 basis points of total fallout-adjusted lock volume, a slight decline from 77 bps in the second quarter and 79 bps a year prior.

Pennymac’s production segment recorded $175 million in revenues, down 28% from $243 million in Q2 2026 and down 40% from $292 million in Q3 2025. Total expenses were $182 million, declining 11% sequentially but increasing 7% year-over-year. The production channel faced a pretax loss of $7 million, compared to pretax income of $38 million in the previous quarter and $123 million in the same period last year.

“By automating labor-intensive fulfillment processes, we aim to permanently reduce our production costs and decouple platform capacity from staffing essentials. This will enable us to maintain a lean operation in the current constrained environment while assuring substantial operating leverage,” Spector mentioned to analysts and investors.

Cenlar Deal Set to Grow Servicing Portfolio

Although the originations segment is struggling with rising rates and diminished volumes, Pennymac’s servicing business continues to excel. The servicing portfolio stood at $737 billion in UPB at the end of the third quarter, with expectations to exceed $1 trillion once the acquisition of Cenlar Capital Corp. closes.

The $257.5 million acquisition, first announced in February, was initially projected to close by the end of this year but has now been pushed to the first quarter of 2027. This transaction will incorporate the nation’s second-largest subservicer into its operations, marking the first merger-and-acquisition deal in PennyMac’s history.

Pennymac’s pretax income from servicing for Q3 was $99 million, up from $22 million in Q2. Excluding fair value changes of MSRs net of hedge results, servicing pretax income reached $132 million, a sequential increase from $99 million.

The owned servicing portfolio grew to $496 billion in UPB as of September 30, representing a 6% increase from the previous year. Decreased prepayment speeds—dropping to 8.1% from 11.6% in the prior quarter—reduced amortization and enhanced servicing profitability, confirming Spector’s perspective on the natural hedge within the company’s balanced business model.

This dynamic underpins management’s optimism that servicing will bolster return on equity as they approach 2027. The annualized ROE for Pennymac stood at 3% in Q3, an improvement from 2% in the second quarter but significantly lower than the 15% reported a year earlier.

Executives provided additional insights on the MSR sale and its anticipated influence, with Perotti mentioning that Pennymac will not maintain subservicing rights for this particular transaction.

Spector indicated that Pennymac plans to utilize the cash primarily to reduce higher-cost debt and buy back common shares while the company’s stock is currently trading “at a significant discount to book value.” The intention is to redirect capital from low-recapture MSRs to shareholder returns and liability management while sustaining scale in servicing.

“We continue to assess potential MSR sales; however, we currently don’t have any transactions in the pipeline, as this remains a topic we are evaluating in terms of our capital options,” Perotti said. “A sharp rise in interest rates, as witnessed throughout Q3, boosts the fair value of our MSR, expanding our borrowing capacity with banking partners.”

Editor’s note: Reporting for this story was contributed by Flávia Furlan Nunes.