Operator: Good afternoon, and welcome to PennyMac Mortgage Investment Trust's Q4 2025 earnings call. Additional materials, including the presentation slides that will be referred to in the call, are available on PennyMac Mortgage Investment Trust website at pmt.pennymac.com. Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on slide 2 of the earnings presentation, that could cause the company's actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings materials. I'd like now to introduce David Spector, PennyMac Mortgage Investment Trust's Chairman and Chief Executive Officer, and Dan Perotti, PennyMac Mortgage Investment Trust's Chief Financial Officer. Please go ahead.
Operator: Good afternoon, and welcome to PennyMac Mortgage Investment Trust's Q4 2025 earnings call. Additional materials, including the presentation slides that will be referred to in the call, are available on PennyMac Mortgage Investment Trust website at pmt.pennymac.com. Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on slide 2 of the earnings presentation, that could cause the company's actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings materials. I'd like now to introduce David Spector, PennyMac Mortgage Investment Trust's Chairman and Chief Executive Officer, and Dan Perotti, PennyMac Mortgage Investment Trust's Chief Financial Officer. Please go ahead.
Speaker #1: Good afternoon, and welcome to PennyMac Mortgage Investment Trust's fourth-quarter 2025 earnings call. Additional materials, including the presentation slides that will be referred to during the call, are available on PennyMac Mortgage Investment Trust's website at pmt.pennymac.com.
Speaker #1: Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on Slide 2 of the earnings presentation.
Speaker #1: That could cause the company's actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings materials.
Speaker #1: I'd like now to introduce David Spector, PennyMac Mortgage Investment Trust's Chairman and Chief Executive Officer, and Dan Perotti, PennyMac Mortgage Investment Trust's Chief Financial Officer.
Speaker #1: Please go ahead.
Speaker #2: Thank you, Operator.
David Spector: Thank you, operator. Good afternoon, and thank you to everyone for participating in our Q4 and full year 2025 earnings call. Starting on slide 3, PMT generated strong financial results in the fourth quarter, with net income to common shareholders of $42 million or a 13% annualized return on common equity. Diluted earnings per share was $0.48 in excess of PMT's $0.40 per share quarterly dividend, increasing book value per share to $15.25 at year-end from $15.16 on 30 September. Dan will talk about PMT's fourth quarter financial results in more detail later on in the presentation. Turning to slide 4, I'd like to highlight the significant progress we made in 2025, accelerating our organic investment creation activities resulting from private label securitizations.
David Spector: Thank you, operator. Good afternoon, and thank you to everyone for participating in our Q4 and full year 2025 earnings call. Starting on slide 3, PMT generated strong financial results in the fourth quarter, with net income to common shareholders of $42 million or a 13% annualized return on common equity. Diluted earnings per share was $0.48 in excess of PMT's $0.40 per share quarterly dividend, increasing book value per share to $15.25 at year-end from $15.16 on 30 September. Dan will talk about PMT's fourth quarter financial results in more detail later on in the presentation. Turning to slide 4, I'd like to highlight the significant progress we made in 2025, accelerating our organic investment creation activities resulting from private label securitizations.
Speaker #3: Good afternoon, and thank you to everyone for participating in our fourth-quarter and full-year 2025 earnings call. Starting on slide 3, PMT generated strong financial results in the fourth quarter.
Speaker #3: Net income to common shareholders was $42 million, or a 13% annualized return on common equity. Diluted earnings per share were $0.48, in excess of PMT's $0.40 per share quarterly dividend.
Speaker #3: Increasing book value per share to $15.25 at year-end from $15.16 on September 30th. Dan will talk about PMT's fourth-quarter financial results in more detail later on in the presentation.
Speaker #3: Turning to slide 4, I'd like to highlight the significant progress we made in 2025, accelerating our organic investment creation activities resulting from private label securitizations.
Speaker #3: As you can see, over the course of the year, we successfully completed 19 securitizations, totaling $6.7 billion in UPB—a substantial increase from just two securitizations in 2024.
David Spector: As you can see, over the course of the year, we successfully completed 19 securitizations, totaling $6.7 billion in UPB, a substantial increase from just 2 securitizations in 2024. Retained investments from these securitizations grew to $528 million, up nearly tenfold from just $54 million in 2024. This consistent cadence of securitization activity firmly established PMT as a top three issuer of prime non-agency MBS in 2025. At the same time, we rotated capital to better optimize PMT's return profile. This included the purchase of $876 million of agency floating rate MBS and the sale of $195 million of opportunistic GSE-issued CRT investments, where we had realized significant gains.
As you can see, over the course of the year, we successfully completed 19 securitizations, totaling $6.7 billion in UPB, a substantial increase from just 2 securitizations in 2024. Retained investments from these securitizations grew to $528 million, up nearly tenfold from just $54 million in 2024. This consistent cadence of securitization activity firmly established PMT as a top three issuer of prime non-agency MBS in 2025. At the same time, we rotated capital to better optimize PMT's return profile. This included the purchase of $876 million of agency floating rate MBS and the sale of $195 million of opportunistic GSE-issued CRT investments, where we had realized significant gains.
Speaker #3: Retained investments from these securitizations grew to $528 million, up nearly tenfold from just $54 million in 2024. This consistent cadence of securitization activity firmly established PMT as a top three issuer of prime non-agency MBS in 2025.
Speaker #3: At the same time, we rotated capital to better optimize PMT's return profile. This included the purchase of $876 million of agency floating-rate MBS and the sale of $195 million of opportunistic GSE-issued CRT investments.
Speaker #3: Where we had realized significant gains, we decided to sell these GSE-issued CRT investments, as their forward-looking expected returns fell below our targeted return requirements.
David Spector: We decided to sell these GSE-issued CRT investments as their forward-looking expected returns fell below our targeted return requirements and to free up capital for PMT to invest in newly created assets with higher expected returns from our ongoing private label securitization activity. Turning to slide 6, our synergistic relationship with PFSI remains a unique and proven competitive advantage. First, PMT leverages PFSI's best-in-class operating platform, including its deep and experienced management team, scaled servicing operations, and its large and agile multi-channel origination business, which provides PMT with a consistent and high-quality pipeline of loans for investment. Second, PMT is able to efficiently deploy capital into long-term mortgage assets without the operational burdens associated with origination and servicing.
We decided to sell these GSE-issued CRT investments as their forward-looking expected returns fell below our targeted return requirements and to free up capital for PMT to invest in newly created assets with higher expected returns from our ongoing private label securitization activity. Turning to slide 6, our synergistic relationship with PFSI remains a unique and proven competitive advantage. First, PMT leverages PFSI's best-in-class operating platform, including its deep and experienced management team, scaled servicing operations, and its large and agile multi-channel origination business, which provides PMT with a consistent and high-quality pipeline of loans for investment. Second, PMT is able to efficiently deploy capital into long-term mortgage assets without the operational burdens associated with origination and servicing.
Speaker #3: And to free up capital for PMT to invest in newly created assets with higher expected returns from our ongoing private label securitization activity. Turning to slide 6, our synergistic relationship with PFSI remains a unique and proven competitive advantage.
Speaker #3: First, PMT leverages PFSI's best-in-class operating platform, including its deep and experienced management team, scaled servicing operations, and its large and agile multi-channel origination business, which provides PMT with a consistent and high-quality pipeline of loans for investment.
Speaker #3: Second, PMT is able to efficiently deploy capital into long-term mortgage assets, without the operational burdens associated with origination and servicing. And third, PFSI's deep access to the origination market, coupled with PMT's ability to execute private label securitizations, provides PMT with the unique opportunity to invest in organically created investments with attractive risk-adjusted returns.
David Spector: And third, PFSI's deep access to the origination market, coupled with PMT's ability to execute private label securitizations, provides PMT with the unique opportunity to invest in organically created investments with attractive risk-adjusted returns. And as PFSI further grows its overall share of loan production, PMT is expected to have even more opportunities to organically grow its portfolio. Turning to slide seven, approximately 60% of PMT shareholders' equity is deployed to seasoned investments in MSRs and our unique GSE credit risk transfer investments. Mortgage servicing rights account for 46% of shareholders' equity, providing stable cash flows as the loans underlying this investment have a weighted average coupon of 3.9%, far out of the money. Our GSE credit risk transfer investments represent 13% of shareholders' equity and consist of seasoned loans originated from 2015 to 2020.
And third, PFSI's deep access to the origination market, coupled with PMT's ability to execute private label securitizations, provides PMT with the unique opportunity to invest in organically created investments with attractive risk-adjusted returns. And as PFSI further grows its overall share of loan production, PMT is expected to have even more opportunities to organically grow its portfolio. Turning to slide seven, approximately 60% of PMT shareholders' equity is deployed to seasoned investments in MSRs and our unique GSE credit risk transfer investments. Mortgage servicing rights account for 46% of shareholders' equity, providing stable cash flows as the loans underlying this investment have a weighted average coupon of 3.9%, far out of the money. Our GSE credit risk transfer investments represent 13% of shareholders' equity and consist of seasoned loans originated from 2015 to 2020.
Speaker #3: And as PFSI further grows its overall share of loan production, PMT is expected to have even more opportunities to organically grow its portfolio. Turning to slide 7, approximately 60% of PMT's shareholders' equity is deployed to seasoned investments in MSRs and our unique GSE credit risk transfer investments.
Speaker #3: Mortgage servicing rights account for 46% of shareholders' equity, providing stable cash flows as the loan's underlying risk investment, with a weighted average coupon of 3.9%.
Speaker #3: Far out of the money. Our GSE credit risk transfer investments represent 13% of shareholders' equity and consist of seasoned loans originated from 2015 to 2020.
Speaker #3: With a weighted average current LTV of 46%, we continue to expect realized lifetime losses on this portfolio to be limited. Slide 8 highlights our robust securitization activity in the fourth quarter and our ability to rapidly grow this business.
David Spector: With a weighted average current LTV of 46%, we continue to expect realized lifetime losses on this portfolio to be limited. Slide eight highlights our robust securitization activity in the fourth quarter and our ability to rapidly grow this business. We completed eight securitizations, totaling $2.8 billion in UPB and retained $184 million of new investments. Our fourth quarter activity included three non-owner-occupied deals, three jumbo deals, and two agency-eligible owner-occupied deals. Our momentum has continued after quarter end, with three additional securitizations completed, totaling $1.1 billion in UPB. Looking ahead and at this pace, we currently expect to complete approximately 30 securitizations in 2026, with targeted returns on equity for these retained investments in the low to mid-teens. The pie charts on slide nine highlight our active management of the portfolio to maximize risk-adjusted returns.
With a weighted average current LTV of 46%, we continue to expect realized lifetime losses on this portfolio to be limited. Slide eight highlights our robust securitization activity in the fourth quarter and our ability to rapidly grow this business. We completed eight securitizations, totaling $2.8 billion in UPB and retained $184 million of new investments. Our fourth quarter activity included three non-owner-occupied deals, three jumbo deals, and two agency-eligible owner-occupied deals. Our momentum has continued after quarter end, with three additional securitizations completed, totaling $1.1 billion in UPB. Looking ahead and at this pace, we currently expect to complete approximately 30 securitizations in 2026, with targeted returns on equity for these retained investments in the low to mid-teens. The pie charts on slide nine highlight our active management of the portfolio to maximize risk-adjusted returns.
Speaker #3: We completed eight securitizations, totaling $2.8 billion in UPB, and retained $184 million of new investments. Our fourth-quarter activity included three non-owner-occupied deals, three jumbo deals, and two agency-eligible owner-occupied deals.
Speaker #3: Our momentum has continued after quarter-end, with three additional securitizations completed, totaling $1.1 billion in UPB. Looking ahead, and at this pace, we currently expect to complete approximately 30 securitizations in 2026, with targeted returns on equity for these retained investments in the low to mid-teens.
Speaker #3: The pie charts on slide 9 highlight our active management of the portfolio to maximize risk-adjusted returns. As strong managers of capital, we expect to optimize returns by recycling capital into assets that maximize risk-adjusted returns.
David Spector: As strong managers of capital, we expect to optimize returns by recycling capital into assets that maximize risk-adjusted returns, transitioning from lower yielding assets into high quality investments with superior return profiles. We remain focused on optimizing our allocation towards investments with targeted ROEs in the 13 to 15% range. As we strategically redeploy capital into these higher returning assets, we are successfully driving the long-term return potential of our overall portfolio higher. Turning to slide 10, you can see the average quarterly run rate return potential expected from PMT's investment strategies over the next four quarters. PMT's current run rate reflects a quarterly average of $0.40 per share, down slightly from $0.42 per share in the prior quarter. As I noted earlier, we expect increased investments in accretive non-agency subordinate and senior bonds, primarily through organic securitization activity.
As strong managers of capital, we expect to optimize returns by recycling capital into assets that maximize risk-adjusted returns, transitioning from lower yielding assets into high quality investments with superior return profiles. We remain focused on optimizing our allocation towards investments with targeted ROEs in the 13 to 15% range. As we strategically redeploy capital into these higher returning assets, we are successfully driving the long-term return potential of our overall portfolio higher. Turning to slide 10, you can see the average quarterly run rate return potential expected from PMT's investment strategies over the next four quarters. PMT's current run rate reflects a quarterly average of $0.40 per share, down slightly from $0.42 per share in the prior quarter. As I noted earlier, we expect increased investments in accretive non-agency subordinate and senior bonds, primarily through organic securitization activity.
Speaker #3: Transitioning from lower-yielding assets into high-quality investments with superior return profiles. We remain focused on optimizing our allocation towards investments with targeted ROEs in the 13% to 15% range.
Speaker #3: And as we strategically redeploy capital into these higher-returning assets, we are successfully driving the long-term return potential of our overall portfolio higher. Turning to slide 10, you can see the average quarterly run-rate return potential expected from PMT's investment strategies over the next four quarters.
Speaker #3: PMT's current run-rate reflects a quarterly average of $0.40 per share, down slightly from $0.42 per share in the prior quarter. As I noted earlier, we expect increased investments in accretive non-agency subordinate and senior bonds.
Speaker #3: Primarily through organic securitization activity. Our expected returns from the interest-rate-sensitive strategies remain unchanged from the prior quarter, as lower return potential from MSRs due to higher prepayment expectations was offset by a decrease in projected hedge costs.
David Spector: Our expected returns from the interest rate sensitive strategies remains unchanged from the prior quarter, as lower return potential from MSRs due to higher prepayment expectations was offset by a decrease in projected hedge costs. In correspondent production, margins have declined, and our expectations for returns from the strategy are down from the prior quarter. Our legacy investments provide a stable foundation for continued strong performance, and we have succeeded in repositioning PMT as a leader in the private label securitization market, where we are organically creating new investments and driving our overall returns higher. As we look ahead, I am confident that this comprehensive and diversified investment platform will drive our ability to continue generating earnings that more than support our dividend and drive long-term value for our shareholders. Now, I'll turn it over to Dan to review the fourth quarter financial performance.
Our expected returns from the interest rate sensitive strategies remains unchanged from the prior quarter, as lower return potential from MSRs due to higher prepayment expectations was offset by a decrease in projected hedge costs. In correspondent production, margins have declined, and our expectations for returns from the strategy are down from the prior quarter. Our legacy investments provide a stable foundation for continued strong performance, and we have succeeded in repositioning PMT as a leader in the private label securitization market, where we are organically creating new investments and driving our overall returns higher. As we look ahead, I am confident that this comprehensive and diversified investment platform will drive our ability to continue generating earnings that more than support our dividend and drive long-term value for our shareholders. Now, I'll turn it over to Dan to review the fourth quarter financial performance.
Speaker #3: In correspondent production, margins have declined, and our expectations for returns from the strategy are down from the prior quarter. Our legacy investments provide a stable foundation for continued strong performance.
Speaker #3: And we have succeeded in repositioning PMT as a leader in the private-label securitization market, where we are organically creating new investments and driving our overall returns higher.
Speaker #3: As we look ahead, I am confident that this comprehensive and diversified investment platform will drive our ability to continue generating earnings that more than support our dividend.
Speaker #3: And drive long-term value for our shareholders. Now, I'll turn it over to Dan to review the fourth-quarter financials.
Speaker #3: performance. Thank you,
Dan Perotti: Thank you, David. Net income to common shareholders was $42 million, or $0.48 per diluted common share in Q4, for a 13% annualized return on equity to common shareholders. Our credit sensitive strategies contributed $24 million to pre-tax income, generating an annualized return on equity of 27%. Gains from organically created CRT investments were $12 million, which included $8 million of realized gains in carry and $4 million of market-driven value gains from credit spread tightening. Investments in subordinate MBS from our private label securitizations generated gains of $11 million, including $9 million of market-driven value gains. The interest rate sensitive strategies contributed pre-tax income of $28 million, generating an annualized ROE of 10%. The returns in this segment were impacted by increased prepayment speeds during the quarter, driving higher runoff of our MSR assets.
Daniel Perotti: Thank you, David. Net income to common shareholders was $42 million, or $0.48 per diluted common share in Q4, for a 13% annualized return on equity to common shareholders. Our credit sensitive strategies contributed $24 million to pre-tax income, generating an annualized return on equity of 27%. Gains from organically created CRT investments were $12 million, which included $8 million of realized gains in carry and $4 million of market-driven value gains from credit spread tightening. Investments in subordinate MBS from our private label securitizations generated gains of $11 million, including $9 million of market-driven value gains. The interest rate sensitive strategies contributed pre-tax income of $28 million, generating an annualized ROE of 10%. The returns in this segment were impacted by increased prepayment speeds during the quarter, driving higher runoff of our MSR assets.
Speaker #2: David: Net income to common shareholders was $42 million, or $0.48 per diluted common share, in the fourth quarter, for a 13% annualized return on equity to common shareholders.
Speaker #2: Our credit-sensitive strategies contributed $24 million to pre-tax income, generating an annualized return on equity of 27%. Gains from organically created CRT investments were $12 million.
Speaker #2: This included $8 million of realized gains and carry, and $4 million of market-driven value gains from credit spread tightening. Investments in subordinate MBS from our private label securitizations generated gains of $11 million.
Speaker #2: Including $9 million of market-driven value gains, the interest-rate-sensitive strategies contributed pre-tax income of $28 million, generating an annualized ROE of 10%. The returns in this segment were impacted by increased prepayment speeds during the quarter.
Speaker #2: Driving higher run-off of our MSR asset. Income, excluding market-driven value changes for this segment, was $21 million, down from $36 million in the prior quarter.
Dan Perotti: Income excluding market-driven value changes for this segment was $21 million, down from $36 million in the prior quarter. However, our hedging activities during the quarter yielded net favorable results, as the increase of $26 million in MSR fair value was partially offset by $7 million of net declines in fair value of MBS and interest rate hedges, including the related tax benefit. Our MSR asset at year-end was valued at $3.6 billion, down slightly from the prior quarter, as gains from changes in fair value inputs and new MSRs from production were offset by the higher levels of runoff. Overall mortgage delinquency rates for PMT's primarily conventional MSR portfolio remained steady. Servicing advances increased to $97 million from $63 million in the prior quarter due to seasonal property tax payments. No principal and interest advances are outstanding.
Income excluding market-driven value changes for this segment was $21 million, down from $36 million in the prior quarter. However, our hedging activities during the quarter yielded net favorable results, as the increase of $26 million in MSR fair value was partially offset by $7 million of net declines in fair value of MBS and interest rate hedges, including the related tax benefit. Our MSR asset at year-end was valued at $3.6 billion, down slightly from the prior quarter, as gains from changes in fair value inputs and new MSRs from production were offset by the higher levels of runoff. Overall mortgage delinquency rates for PMT's primarily conventional MSR portfolio remained steady. Servicing advances increased to $97 million from $63 million in the prior quarter due to seasonal property tax payments. No principal and interest advances are outstanding.
Speaker #2: However, our hedging activities during the quarter yielded net favorable results, as the increase of $26 million in MSR fair value was partially offset by $7 million of net declines in fair value of MBS and interest rate hedges.
Speaker #2: Including the related tax benefit, our MSR asset at year-end was valued at $3.6 billion, down slightly from the prior quarter as gains from changes in fair value inputs and new MSRs from production were offset by the higher levels of run-off.
Speaker #2: Overall mortgage delinquency rates for PMT's primarily conventional MSR portfolio remain steady. Servicing advances increased to $97 million from $63 million in the prior quarter due to seasonal property tax payments.
Speaker #2: No principal and interest advances are outstanding. The correspondent production segment reported a pre-tax loss of $1 million. The negative result was due primarily to spread widening on jumbo loans during the aggregation period, as well as lower overall channel margins as competition increased during the quarter.
Dan Perotti: The correspondent production segment reported a pre-tax loss of $1 million. The negative result was due primarily to spread widening on jumbo loans during the aggregation period, as well as lower overall channel margins as competition increased during the quarter. The UPB of loans acquired from PFSI's correspondent production through our fulfillment agreement totaled $3.7 billion. Of this, $2.9 billion in UPB was conventional conforming correspondent volume, and $800 million in UPB was non-agency eligible correspondent volume. PMT purchased 17% of total conventional conforming correspondent production and 100% of non-agency eligible correspondent production from PFSI in Q4. In Q1 2026, PMT expects to purchase 15% to 25% of conventional conforming correspondent production and 100% of correspondent non-agency eligible loan volume, consistent with levels reported in recent periods.
The correspondent production segment reported a pre-tax loss of $1 million. The negative result was due primarily to spread widening on jumbo loans during the aggregation period, as well as lower overall channel margins as competition increased during the quarter. The UPB of loans acquired from PFSI's correspondent production through our fulfillment agreement totaled $3.7 billion. Of this, $2.9 billion in UPB was conventional conforming correspondent volume, and $800 million in UPB was non-agency eligible correspondent volume. PMT purchased 17% of total conventional conforming correspondent production and 100% of non-agency eligible correspondent production from PFSI in Q4. In Q1 2026, PMT expects to purchase 15% to 25% of conventional conforming correspondent production and 100% of correspondent non-agency eligible loan volume, consistent with levels reported in recent periods.
Speaker #2: The UPB of loans acquired from CFSI's correspondent production through our fulfillment agreement totaled $3.7 billion. Of this, $2.9 billion in UPB was conventional conforming correspondent volume, and $800 million in UPB was non-agency eligible correspondent volume.
Speaker #2: PMT purchased 17% of total conventional conforming correspondent production and 100% of non-agency eligible correspondent production from PFSI in the fourth quarter. In the first quarter of 2026, PMT expects to purchase 15% to 25% of conventional conforming correspondent production and 100% of correspondent non-agency eligible loan volume.
Speaker #2: Consistent with levels reported in recent periods. PMT also acquired $1.8 billion in UPB of loans from PFSI's production outside of their fulfillment agreement for inclusion in private label securitizations.
Dan Perotti: PMT also acquired $1.8 billion in UPB of loans from PFSI's production outside of their fulfillment agreement for inclusion in private label securitizations. The weighted average fulfillment fee rate was unchanged from the prior quarter at 18 basis points.... In total, PMT reported $21 million of net income across its strategies, excluding market-driven value changes, down from the prior quarter, primarily due to a decreased contribution from the correspondent segment and increased runoff from MSRs, as discussed earlier. Turning to slide 15, we highlight the flexible and sophisticated financing structures PMT has in place to support its diversified portfolio of investments. During the quarter, we raised $150 million of new unsecured financing through opportunistic reopenings of our exchangeable senior notes due in 2029.
PMT also acquired $1.8 billion in UPB of loans from PFSI's production outside of their fulfillment agreement for inclusion in private label securitizations. The weighted average fulfillment fee rate was unchanged from the prior quarter at 18 basis points.... In total, PMT reported $21 million of net income across its strategies, excluding market-driven value changes, down from the prior quarter, primarily due to a decreased contribution from the correspondent segment and increased runoff from MSRs, as discussed earlier. Turning to slide 15, we highlight the flexible and sophisticated financing structures PMT has in place to support its diversified portfolio of investments. During the quarter, we raised $150 million of new unsecured financing through opportunistic reopenings of our exchangeable senior notes due in 2029.
Speaker #2: The weighted average fulfillment fee rate was unchanged from the prior quarter at 18 basis points. In total, PMT reported $21 million of net income across its strategies, excluding market-driven value changes.
Speaker #2: Down from the prior quarter primarily due to a decreased contribution from the Correspondent segment and increased run-off from MSRs, as discussed earlier. Turning to slide 15, we highlight the flexible and sophisticated financing structures PMT has in place to support its diversified portfolio of investments.
Speaker #2: During the quarter, we raised $150 million of new unsecured financing through opportunistic reopenings of our exchangeable senior notes due in 2029. We currently expect to retire the $345 million in exchangeable senior notes due in 2026 using capacity from existing financing lines.
Dan Perotti: We currently expect to retire the $345 million in exchangeable senior notes due in 2026, using capacity from existing financing lines. Finally, on slide 16, PMT's total debt-to-equity ratio increased to approximately 10 to 1 from 9 to 1 at 30 September, as we continue to retain investments from securitizations. The increase in our total debt-to-equity reflects growth in non-recourse debt associated with these transactions, where all securitized loans are required to be consolidated on our balance sheet for accounting purposes. As a reminder, the source of repayment for this debt is limited to the cash flows from the associated loans in each private label securitization, mitigating any additional exposure to PMT. We continue to believe that debt-to-equity, excluding non-recourse debt, is the best metric for measuring our core leverage, and that ratio remained within our expected range at 6 to 1.
We currently expect to retire the $345 million in exchangeable senior notes due in 2026, using capacity from existing financing lines. Finally, on slide 16, PMT's total debt-to-equity ratio increased to approximately 10 to 1 from 9 to 1 at 30 September, as we continue to retain investments from securitizations. The increase in our total debt-to-equity reflects growth in non-recourse debt associated with these transactions, where all securitized loans are required to be consolidated on our balance sheet for accounting purposes. As a reminder, the source of repayment for this debt is limited to the cash flows from the associated loans in each private label securitization, mitigating any additional exposure to PMT. We continue to believe that debt-to-equity, excluding non-recourse debt, is the best metric for measuring our core leverage, and that ratio remained within our expected range at 6 to 1.
Speaker #2: Finally, on slide 16, PMT's total debt-to-equity ratio increased to approximately 10-to-1 from 9-to-1 on September 30th, as we continue to retain investments from securitizations.
Speaker #2: The increase in our total debt-to-equity reflects growth in non-recourse debt associated with these transactions, where all securitized loans are required to be consolidated on our balance sheet for accounting purposes.
Speaker #2: As a reminder, the source of repayment for this debt is limited to the cash flows from the associated loans in each private label securitization.
Speaker #2: Mitigating any additional exposure to PMT, we continue to believe that debt-to-equity, excluding non-recourse debt, is the best metric for measuring our core leverage. That ratio remained within our expected range at 6-to-1.
Speaker #2: We expect the divergence between these two metrics to continue increasing as our securitization program grows. We'll now open it up for questions. Operator?
Dan Perotti: We expect the divergence between these two metrics to continue increasing as our securitization program grows. We'll now open it up for questions. Operator?
We expect the divergence between these two metrics to continue increasing as our securitization program grows. We'll now open it up for questions. Operator?
Speaker #3: We will now begin the question and answer session. I would like to remind everyone that we would like to only take questions related to PennyMac Mortgage Investment Trust or PMT.
Operator: We will now begin the question-and-answer session. I would like to remind everyone, we would like to only take questions related to PennyMac Mortgage Investment Trust or PMT. We also ask that you please keep your questions limited to one preliminary question and one follow-up question. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Doug Harter from UBS.
Operator: We will now begin the question-and-answer session. I would like to remind everyone, we would like to only take questions related to PennyMac Mortgage Investment Trust or PMT. We also ask that you please keep your questions limited to one preliminary question and one follow-up question. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Doug Harter from UBS.
Speaker #3: We also ask that you please keep your questions limited to one preliminary question and one follow-up question. If you would like to ask a question, please press star one on your telephone keypad.
Speaker #3: To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.
Speaker #3: Please stand by while we compile the Q&A roster. Your first question comes from Doug Harder from USB.
Doug Harter: Great, thanks. Just hoping you could talk about the regarding expectations for the interest rate strategy. I, I would expect that prepayments probably stay, stay elevated. You know, kind of how do you offset the decline in that profitability to kind of get back to the target range?
Speaker #4: Great, thanks. Hoping you could talk about the return expectations for the interest-rate strategy. I would expect that prepayments probably stay elevated—how do you offset the decline in that profitability to kind of get back to the target range?
Douglas Harter: Great, thanks. Just hoping you could talk about the regarding expectations for the interest rate strategy. I, I would expect that prepayments probably stay, stay elevated. You know, kind of how do you offset the decline in that profitability to kind of get back to the target range?
Speaker #5: So overall, in terms of the MSRs, there’s a limited portion of the MSRs that have that responsiveness to higher level interest rates. And so it’s really a combination of both— a combination of both additional recapture, which we expect to grow on those loans, which we expect to grow through the year from PMT’s recapture provider, which is PFSI, as well as we expect the impact of those prepayments to dilute a bit through the year as well.
Dan Perotti: So, overall, in terms of the MSRs, you know, there's a limited portion of, you know, the MSRs that have that responsiveness to change higher level interest rates. And so there's it's really a combination of both additional recapture, which we expect to grow on those loans, which we expect to grow through the year, from our, you know, from PMT's recapture provider, which is PFSI.
Daniel Perotti: So, overall, in terms of the MSRs, you know, there's a limited portion of, you know, the MSRs that have that responsiveness to change higher level interest rates. And so there's it's really a combination of both additional recapture, which we expect to grow on those loans, which we expect to grow through the year, from our, you know, from PMT's recapture provider, which is PFSI.
Dan Perotti: As well as, you know, we expect the impact of those prepayments to dilute a bit through the year as well, just based on the percentage of the portfolio that they represent and the fact that we are, you know, adding at a slower pace, and that overall portion of the portfolio is generally, you know, not expanding at a rapid pace. But, you know, I would note that overall, in terms of the... In some sense, those, you know, the MSRs need to be viewed in the context of the entire interest rate-sensitive strategy, which, if you look at our run rate on page 10 of the earnings presentation, it remained at that 12.5% annualized ROE overall.
As well as, you know, we expect the impact of those prepayments to dilute a bit through the year as well, just based on the percentage of the portfolio that they represent and the fact that we are, you know, adding at a slower pace, and that overall portion of the portfolio is generally, you know, not expanding at a rapid pace. But, you know, I would note that overall, in terms of the... In some sense, those, you know, the MSRs need to be viewed in the context of the entire interest rate-sensitive strategy, which, if you look at our run rate on page 10 of the earnings presentation, it remained at that 12.5% annualized ROE overall.
Speaker #5: Just based on the percentage of the portfolio that they represent, and the fact that we're adding at a slower pace and that overall portion of the portfolio is generally not expanding at a rapid pace.
Speaker #5: But I wouldn't note that overall in terms of the in some sense, those the MSRs need to be viewed in the context of the entire interest-rate-sensitive strategy, which if you look at our which if you look at our run-rate on page 10 of the page 10 of the earnings presentation, remained at that 12 and a half percent annualized ROE overall.
Speaker #5: And so there is some complementarity between those MSRs and the offsetting interest-rate exposure that they have versus the agency MBS, which, generally speaking, have had, over the past few quarters, elevating returns on—
Dan Perotti: And so there is some complementarity between those MSRs and the, you know, the offsetting interest rate exposure that they have versus the agency MBS, which, you know, generally speaking, have had over the past few quarters, elevating returns on equity.
And so there is some complementarity between those MSRs and the, you know, the offsetting interest rate exposure that they have versus the agency MBS, which, you know, generally speaking, have had over the past few quarters, elevating returns on equity.
Speaker #5: equity. Great.
Doug Harter: Great. Appreciate it. Thank you.
Douglas Harter: Great. Appreciate it. Thank you.
Speaker #4: Appreciate it. Thank
Speaker #4: you. Your next question is
Operator: Your next question is from Bose George with KBW. Please go ahead.
Operator: Your next question is from Bose George with KBW. Please go ahead.
Speaker #3: From Bose George with KBW. Please go ahead.
Speaker #3: ahead. Again,
Bose George: Hey, guys. Good afternoon. Can you talk about competition in the non-agency space on, on the production side?
Bose George: Hey, guys. Good afternoon. Can you talk about competition in the non-agency space on, on the production side?
Speaker #6: Good afternoon. Can you talk about competition in the non-agency space on the production side?
Speaker #5: Yeah, so I think it's what you'd expect. I think I'm not on the jumbo side. We're seeing very healthy activity from the likes of Rocket Mortgage on the retail side.
David Spector: Yeah. So, you know, I think it's, it's what you'd expect. I think on the, you know, on the, on the jumbo side, you know, we're seeing very healthy activity from the likes of, of Rocket Mortgage on the retail side and UWM on the broker side. You know, I think that, you know, we, we have been outperforming both as a percentage of our originations, which speaks to, you know, the, the dynamic nature to with how we manage our secondary marketing efforts. But I do think that, you know, for now, you know, we don't see a lot of bank competition. You know, we do see. You know, the third name I should mention is Redwood Trust.
David Spector: Yeah. So, you know, I think it's, it's what you'd expect. I think on the, you know, on the, on the jumbo side, you know, we're seeing very healthy activity from the likes of, of Rocket Mortgage on the retail side and UWM on the broker side. You know, I think that, you know, we, we have been outperforming both as a percentage of our originations, which speaks to, you know, the, the dynamic nature to with how we manage our secondary marketing efforts. But I do think that, you know, for now, you know, we don't see a lot of bank competition. You know, we do see. You know, the third name I should mention is Redwood Trust.
Speaker #5: And UWM on the broker side. I think that we have been outperforming both as a percentage of our originations, which speaks to the dynamic nature of how we manage our secondary marketing efforts.
Speaker #5: But I do think that, for now, we don't see a lot of bank competition. We do see—the third name I should mention is Regular Trust.
Speaker #5: I mean, they are active in the jumbo market from time to time. But by and large, it's really those are the shots that we're seeing as our—
David Spector: I mean, they are active in the jumbo market from time to time, but you know, by and large, it's really those are the shops that we're seeing as our competition.
I mean, they are active in the jumbo market from time to time, but you know, by and large, it's really those are the shops that we're seeing as our competition.
Speaker #5: competition. Okay.
Bose George: So, okay, great. That's helpful. Thanks. And then in terms of the equity allocation to the non-agency securitization, where do you see that trending, let's say, by year-end?
Bose George: So, okay, great. That's helpful. Thanks. And then in terms of the equity allocation to the non-agency securitization, where do you see that trending, let's say, by year-end?
Speaker #6: Great, that's helpful. Thanks. And then, in terms of the equity allocation to the non-agency securitizations, where do you see that trending, say, by year-end?
Dan Perotti: ... Overall, I mean, overall, if you again look at the run rate, our weighted average allocation reflects basically the average through the next 12 months. So we have it at 9%, you know, as an average through the next few months. As we get to the end of the year, it's a few percentage points higher than that. So, you know, pressing above, you know, to probably 11 or 12% by the end of the year.
Daniel Perotti: ... Overall, I mean, overall, if you again look at the run rate, our weighted average allocation reflects basically the average through the next 12 months. So we have it at 9%, you know, as an average through the next few months. As we get to the end of the year, it's a few percentage points higher than that. So, you know, pressing above, you know, to probably 11 or 12% by the end of the year.
Speaker #5: Overall, I mean, overall, if you again look at the run rate, our weighted average allocation reflects basically the average through the next 12 months.
Speaker #5: So we have it at 9% as an average through the next few months as we get to the end of the year. It's a few percentage points higher than that.
Speaker #5: So, pressing above to probably 11 or 12 percent by the end of the year.
Bose George: Okay, great. Thanks.
Speaker #6: Okay. Great.
Bose George: Okay, great. Thanks.
David Spector: You know, Bose, what I think, you know, in doing non-agency securitization, one of the things that we balance, of course, we like the returns on the investment, but there's an aggregation risk in terms of holding the loans until securitization. So, you know, we're trying to manage that risk, and keeping in mind, you know, especially on jumbo securitizations, you know, just kind of trying to dimension and monitoring what that risk is. So that's why we're, you know, we've grown our production in securitizations in a meaningful, meaningful way.
David Spector: You know, Bose, what I think, you know, in doing non-agency securitization, one of the things that we balance, of course, we like the returns on the investment, but there's an aggregation risk in terms of holding the loans until securitization. So, you know, we're trying to manage that risk, and keeping in mind, you know, especially on jumbo securitizations, you know, just kind of trying to dimension and monitoring what that risk is. So that's why we're, you know, we've grown our production in securitizations in a meaningful, meaningful way.
Speaker #5: Bose, what I think in doing non-agency securitizations, one of the things that we balance—of course, we like the returns on the investment—but there's an aggregation risk in terms of holding the loans until securitization.
Speaker #5: And so we're trying to manage that risk, and keeping in mind—especially on the jumbo securitizations—just kind of trying to dimension and monitor what that risk is.
Speaker #5: So that's why we've grown our production securitizations in a meaningful, meaningful way. But I do think that that's something we find exciting—alternative solutions that we're going to look to do more of, while not taking on the incremental risk of growing an aggregation pipeline to $2–3 billion.
David Spector: But I do, I do think that that's something that, you know, we're going to look to find exciting and alternative solutions to do more while not taking on the incremental risk of growing an aggregation pipeline, you know, to $2 to 3 billion.
But I do, I do think that that's something that, you know, we're going to look to find exciting and alternative solutions to do more while not taking on the incremental risk of growing an aggregation pipeline, you know, to $2 to 3 billion.
Speaker #5: dollars. Your next
Operator: Your next question is from Jason Weaver with Jones Research. Please go ahead.
Operator: Your next question is from Jason Weaver with Jones Research. Please go ahead.
Speaker #3: Question is from Jason Weaver with Jones Research. Please go ahead.
Jason Weaver: Hey, hey, good evening, guys. Thanks for taking the question. As it pertains to the securitization opportunity, can you comment on financing costs you've seen for investor jumbo and HC-eligible deals as of late? And also, is there any possible deals that, legacy deals that you might look at to call and re-securitize, you know, near term?
Jason Weaver: Hey, hey, good evening, guys. Thanks for taking the question. As it pertains to the securitization opportunity, can you comment on financing costs you've seen for investor jumbo and HC-eligible deals as of late? And also, is there any possible deals that, legacy deals that you might look at to call and re-securitize, you know, near term?
Speaker #7: Hey. Hey, good evening, guys. Thanks for taking the question. As it pertains to the securitization opportunity, can you comment on financing costs you've seen for investor jumbo and HC-eligible deals as of late?
Speaker #7: And also, is there any possible deals—any legacy deals—that you might look at to call and re-securitize near term?
Speaker #7: term? I think
David Spector: You know, I think that, you know, as it pertains, you know, the on the financing side, it's a robust, competitive market for financing. And so one of the things that we've been very, you know, we've been the beneficiaries of, is taking advantage of that. Having said that, in Q4, we implemented a facility that doesn't have a mark-to-market feature, and that's very important from a risk management standpoint. It's something, if you recall, during COVID, we had a similar type structure in place, but we didn't have mark-to-market, you know, we didn't have the mark-to-market risk. And so while this isn't, it doesn't take away all the mark-to-market risk, it would take a very dramatic event, and then the ability to work out of a major event is, you know, contemplated.
David Spector: You know, I think that, you know, as it pertains, you know, the on the financing side, it's a robust, competitive market for financing. And so one of the things that we've been very, you know, we've been the beneficiaries of, is taking advantage of that. Having said that, in Q4, we implemented a facility that doesn't have a mark-to-market feature, and that's very important from a risk management standpoint. It's something, if you recall, during COVID, we had a similar type structure in place, but we didn't have mark-to-market, you know, we didn't have the mark-to-market risk. And so while this isn't, it doesn't take away all the mark-to-market risk, it would take a very dramatic event, and then the ability to work out of a major event is, you know, contemplated.
Speaker #5: that as it pertains the on the financing side, it's a robust competitive market for financing. And so one of the things that we've been very we've been the beneficiaries of is taking advantage of that.
Speaker #5: Having said that, in Q4, we implemented a facility that doesn't have a mark-to-market feature. And that's very important from a risk management standpoint. It's something—if you recall during COVID, we had a similar type structure in place where we didn't have mark-to-market.
Speaker #5: We didn't have the mark-to-market risk. And so, while this doesn’t take away all the mark-to-market risk, it would take a very dramatic event, and then the ability to work out of a major event is contemplated.
Speaker #5: And so there's a bit of a trade-off in terms of the cost versus the risks. But suffice it to say—and the IR team could get back to me with absolute levels—but it's a pretty competitive market out there.
David Spector: So, you know, there's a bit of a trade-off in terms of, you know, the cost versus the risks. But suffice it to say, you know, the IR team could get back to on the absolute levels, but it's a pretty competitive market out there. There's a lot of capital flowing to finance these assets.
So, you know, there's a bit of a trade-off in terms of, you know, the cost versus the risks. But suffice it to say, you know, the IR team could get back to on the absolute levels, but it's a pretty competitive market out there. There's a lot of capital flowing to finance these assets.
Speaker #5: There's a lot of capital flowing to finance these assets.
Speaker #7: All right. Thank you. And then, so under some of these affordability-driven initiatives that the administration is floating, can you talk a bit about the origination capacity of the correspondent shuttle—which is PFSI Inclusive—and its ability to expand under what could be greater demand going forward?
Jason Weaver: All right, thank you. And then, so under some of these affordability-driven initiatives that the administration is floating, can you talk a bit about the origination capacity of the correspondent channel, which is PFSI inclusive, and its ability to expand under what could be greater demand going forward?
Jason Weaver: All right, thank you. And then, so under some of these affordability-driven initiatives that the administration is floating, can you talk a bit about the origination capacity of the correspondent channel, which is PFSI inclusive, and its ability to expand under what could be greater demand going forward?
Speaker #5: Yeah, look, I think that there is a good amount of capacity in the system to deal with any program that the GSEs put out.
David Spector: Yeah, look, I think that, you know, there is a good amount of capacity in the system to deal with any program that the GSEs put out. Obviously, if you put out something, you know, that's along the lines of a streamlined refi program in the conventional space, that's going to introduce a level of demand for refinances that's going to outstrip the capacity. But ultimately, that will take care of itself. And as I mentioned on the PFSI call, one of the issues that we're observing in the marketplace is there's actually more excess capacity in the sector than I thought there would be. And I think it's basically because there's been talk about rates coming down now for upwards of the last 12 months, that's given people the opportunity to grow their capacity.
David Spector: Yeah, look, I think that, you know, there is a good amount of capacity in the system to deal with any program that the GSEs put out. Obviously, if you put out something, you know, that's along the lines of a streamlined refi program in the conventional space, that's going to introduce a level of demand for refinances that's going to outstrip the capacity. But ultimately, that will take care of itself. And as I mentioned on the PFSI call, one of the issues that we're observing in the marketplace is there's actually more excess capacity in the sector than I thought there would be. And I think it's basically because there's been talk about rates coming down now for upwards of the last 12 months, that's given people the opportunity to grow their capacity.
Speaker #5: Obviously, if you put out something that's along the lines of a streamlined refi program in the conventional space, that's going to introduce a level of demand for refinances that's going to outstrip the capacity.
Speaker #5: But ultimately, that will take care of itself. And as I mentioned on the PFSI call, one of the issues that we're observing in the marketplace is there's actually more excess capacity in the sector than I thought there would be.
Speaker #5: And I think it's basically because there's been such—there's been talk about rates coming down now for upwards of the last 12 months that it's given people the opportunity to grow their capacity.
Speaker #5: Now, as I said, if something meaningful gets deployed, and all of a sudden you go from 20% of the market being refinancable to 50% of the market, that's going to change this dynamic.
David Spector: Now, as I said, if something meaningful gets deployed and all of a sudden you go from, you know, 20% of the market being refinanced over to 50% of the market, that's gonna change this dynamic. But I think that, you know, we as an industry and our correspondents, I know are in pretty good shape for, you know, call it a $2.4 to 2.5 trillion dollar market. Much beyond that, it would require bringing on more capacity.
Now, as I said, if something meaningful gets deployed and all of a sudden you go from, you know, 20% of the market being refinanced over to 50% of the market, that's gonna change this dynamic. But I think that, you know, we as an industry and our correspondents, I know are in pretty good shape for, you know, call it a $2.4 to 2.5 trillion dollar market. Much beyond that, it would require bringing on more capacity.
Speaker #5: But I think that we as an industry, and our correspondents, I know, are in pretty good shape for, call it, a Q4 $2.5 trillion market.
Speaker #5: Much beyond that, we would require bringing on more capacity.
Speaker #7: Understood. I appreciate the
Jason Weaver: Understood. I, I appreciate the insight. Thank you.
Jason Weaver: Understood. I, I appreciate the insight. Thank you.
Speaker #7: Thank you. Thanks,
David Spector: Thanks, Jason.
David Spector: Thanks, Jason.
Speaker #5: Jason. A
Operator: A reminder for the analysts that have dialed in to ask a question, to please press star one if you would like to be queued up to be the next question. Our next question comes from Eric Hagen with BTIG. Please go ahead.
Operator: A reminder for the analysts that have dialed in to ask a question, to please press star one if you would like to be queued up to be the next question. Our next question comes from Eric Hagen with BTIG. Please go ahead.
Speaker #3: A reminder for the analysts who have dialed in: to ask a question, please press star one (*1) if you would like to be queued up to be the next question.
Speaker #3: Our next question comes from Eric Hagin with BTIG. Please go ahead.
Speaker #3: ahead. Hi.
Dan Perotti: Hi, hi again. I think I just have one. You know, I can't recall if PMT has ever sold any MSRs, but would you ever consider that as an option, you know, either opportunistically or for risk management purposes to delever the balance sheet?
Eric Hagen: Hi, hi again. I think I just have one. You know, I can't recall if PMT has ever sold any MSRs, but would you ever consider that as an option, you know, either opportunistically or for risk management purposes to delever the balance sheet?
Speaker #8: Hi again. I think I just have one. I can't recall if PMT has ever sold any MSRs. But would you ever consider that as an option?
Speaker #8: Are there opportunities, either opportunistically or for risk management purposes, to deliver the balance sheet?
Speaker #5: We would consider it. I think that one of the things that I'm really pleased about in 2025—and this is a theme throughout the years—is we've been much more agile and dynamic in terms of managing the portfolio.
David Spector: We would consider it. I think that, you know, one of the things that I'm really pleased about in 2025, and this is a theme throughout the years, we've been much more agile and dynamic in terms of managing the portfolio. So, you know, as we've been fortunate enough to raise capital, to focus on, you know, being able to, to pay off the convert and do other things as we find ourselves in a position where we can see higher returning assets versus MSRs, of course, we would look at it. And as evidenced by the MSR trade that we did out of PFSI, this management team knows how to sell and close and transfer servicing. So that's something that we would clearly contemplate.
David Spector: We would consider it. I think that, you know, one of the things that I'm really pleased about in 2025, and this is a theme throughout the years, we've been much more agile and dynamic in terms of managing the portfolio. So, you know, as we've been fortunate enough to raise capital, to focus on, you know, being able to, to pay off the convert and do other things as we find ourselves in a position where we can see higher returning assets versus MSRs, of course, we would look at it. And as evidenced by the MSR trade that we did out of PFSI, this management team knows how to sell and close and transfer servicing. So that's something that we would clearly contemplate.
Speaker #5: And so, as we've been fortunate enough to raise capital to focus on being able to pay off the convert and do other things, as we find ourselves in a position where we can see higher-returning assets versus MSRs, of course we would look at it.
Speaker #5: And, as evidenced by the MSR trade that we did out of PFSI, this management team knows how to sell and close, and transfer servicing in.
Speaker #5: And so that's something that we would clearly contemplate.
Eric Hagen: Great. That's helpful color. Thank you.
Speaker #5: Thanks, Eric.
David Spector: Thanks, Eric.
David Spector: Thanks, Eric.
Speaker #3: Our next question comes from Trevor Cranston with Citizens JMP. Go ahead.
Operator: Our next question comes from Trevor Cranston with Citizens JMP. Go ahead.
Operator: Our next question comes from Trevor Cranston with Citizens JMP. Go ahead.
Speaker #3: ahead. Can you guys talk
Trevor Cranston: Can you guys talk about what you've seen in terms of spread behavior in the non-agency market in January, you know, given the significant amount of tightening that's happened within the agency space, and if that's, you know, flowed through to any meaningful change in securitization execution? Thanks.
Trevor Cranston: Can you guys talk about what you've seen in terms of spread behavior in the non-agency market in January, you know, given the significant amount of tightening that's happened within the agency space, and if that's, you know, flowed through to any meaningful change in securitization execution? Thanks.
Speaker #2: About what you've seen in terms of spread behavior in the non-agency market in January? Given the significant amount of tightening that's happened within the agency space, has that flowed through to any meaningful change in securitization execution?
Speaker #5: Yeah. Overall, I think in the non-agency space, spreads have been stable, tightening in sympathy. With the agency spreads, overall, we've continued to see fairly robust demand for securitizations in January.
Dan Perotti: Yeah, overall, I think in the non-agency space, you know, spreads have been stable to, you know, to tightening in sympathy, with the, you know, with the agency spreads. Overall, you know, we've continued to see fairly robust, demand for securitizations in January. And so overall, it's, you know, it's been supportive of, of our continued securitization activity. We noted our securitization activity in January. We completed one of each of the, you know, types of deals that we or the-- one deal under each collateral type that we've been, issuing under thus far, non-owner-occupied jumbo and agency-eligible owner-occupied. So as I said, saw, you know, robust demand, for each of those. And so overall, we continue to see the market as being, as being supportive of the securitization activity.
Daniel Perotti: Yeah, overall, I think in the non-agency space, you know, spreads have been stable to, you know, to tightening in sympathy, with the, you know, with the agency spreads. Overall, you know, we've continued to see fairly robust, demand for securitizations in January. And so overall, it's, you know, it's been supportive of, of our continued securitization activity. We noted our securitization activity in January. We completed one of each of the, you know, types of deals that we or the-- one deal under each collateral type that we've been, issuing under thus far, non-owner-occupied jumbo and agency-eligible owner-occupied. So as I said, saw, you know, robust demand, for each of those. And so overall, we continue to see the market as being, as being supportive of the securitization activity.
Speaker #5: And so overall, it's been supportive of our continued securitization activity. We noted our securitization activity in January we completed one of each of the types of deals that we or the one deal under each collateral type that we've been issuing under thus far, non-owner-occupied jumbo and agency-eligible owner-occupied.
Speaker #5: As I said, we saw robust demand for each of those. And so, overall, we continue to see the market as being supportive of the securitization activity.
Speaker #2: Got it. Okay. And then looking at the prospective return slide, the returns on the CRT position look like they're pretty competitive with what you guys are expecting on the new subordinate retentions.
Trevor Cranston: Got it. Okay. And then looking at the prospective return slide, you know, the returns on the CRT position look like they're pretty competitive with what you guys are expecting on the new subordinate retention. You know, would you expect to find more opportunities to opportunistically sell within the CRT book? Or do you think that's kind of reached a point where it's likely to be kind of in more of a stable run-off mode at this point?
Trevor Cranston: Got it. Okay. And then looking at the prospective return slide, you know, the returns on the CRT position look like they're pretty competitive with what you guys are expecting on the new subordinate retention. You know, would you expect to find more opportunities to opportunistically sell within the CRT book? Or do you think that's kind of reached a point where it's likely to be kind of in more of a stable run-off mode at this point?
Speaker #2: Would you expect to find more opportunities to opportunistically sell within the CRT book, or do you think that's kind of reached a point where it's likely to be more in a stable runoff mode at this point?
Dan Perotti: So, what we had sold from the CRT book was actually CRTs that were not specific to PMC collateral that we had acquired opportunistically when spreads were wider. Basically, spreads tightened in significantly, and the returns on those had fallen below our threshold, and so we sold entirely out of that third-party CRT opportunistic position. We have, you know, retained all of the credit risk transfer that's based on our lender credit risk share that came directly from our production, from PMC's production. We would expect to continue to retain that. Some of that, it has been on our books for, you know, quite a long period at this point.
Speaker #5: So, what we had sold from the CRT book was actually CRTs that were not specific to PMT collateral, that we had acquired opportunistically when spreads were wider.
Daniel Perotti: So, what we had sold from the CRT book was actually CRTs that were not specific to PMC collateral that we had acquired opportunistically when spreads were wider. Basically, spreads tightened in significantly, and the returns on those had fallen below our threshold, and so we sold entirely out of that third-party CRT opportunistic position. We have, you know, retained all of the credit risk transfer that's based on our lender credit risk share that came directly from our production, from PMC's production. We would expect to continue to retain that. Some of that, it has been on our books for, you know, quite a long period at this point.
Speaker #5: Basically, spreads tightened in significantly, and the returns on those had fallen below our threshold. And so we sold entirely out of that third-party CRT opportunistic position.
Speaker #5: We have retained all of our all of the credit risk transfer that was based that's based on our lender credit risk share that came directly from our production from PMT's production.
Speaker #5: We would expect to continue to retain that. Some of that has been on our books for quite a long period at this point. We actually had one of our deals, which had a 10-year maturity, mature late last year.
Dan Perotti: We actually had one of our deals, you know, which had a 10-year maturity, mature, late last year. We have a few of the smaller deals maturing as we move forward. Given the return profile and the really high-quality nature of the underlying loans that have really significant home price appreciation, low mark-to-market LTVs, high FICOs, you know, low expected future credit losses, you know, we'd expect to maintain that position as we go forward.
We actually had one of our deals, you know, which had a 10-year maturity, mature, late last year. We have a few of the smaller deals maturing as we move forward. Given the return profile and the really high-quality nature of the underlying loans that have really significant home price appreciation, low mark-to-market LTVs, high FICOs, you know, low expected future credit losses, you know, we'd expect to maintain that position as we go forward.
Speaker #5: We have a few of the smaller deals maturing as we move forward. Given the return profile, and the really high-quality nature of the underlying loans that have really significant home price appreciation, low mark-to-market LTVs, high FICOs, and low expected future credit losses, we'd expect to maintain that position as we go.
Speaker #5: forward. Got it.
Trevor Cranston: Got it. Okay, that makes sense. Thank you.
Trevor Cranston: Got it. Okay, that makes sense. Thank you.
Speaker #2: Okay, that makes sense. Thank you.
Speaker #3: We have no further questions at this time, so I'll now turn it back to David Spector for closing remarks.
Operator: We have no further questions at this time, so I'll now turn it back to David Spector for closing remarks.
Operator: We have no further questions at this time, so I'll now turn it back to David Spector for closing remarks.
Speaker #5: Thank you all for joining us. We are very proud of the transformation PMT has undergone this year. I look forward to all the opportunities ahead in 2026.
David Spector: Thank you all for joining us. We are very proud of the transformation PMT has undergone this year and look forward to all the opportunities ahead in 2026. If you have any additional questions, please reach out to our investor relations team, and thank you very much for the time and thoughtful questions.
David Spector: Thank you all for joining us. We are very proud of the transformation PMT has undergone this year and look forward to all the opportunities ahead in 2026. If you have any additional questions, please reach out to our investor relations team, and thank you very much for the time and thoughtful questions.
Speaker #5: If you have any additional questions, please reach out to our Investor Relations team. And thank you very much for the time and thoughtful questions.
Operator: The call has now ended. You may now disconnect.
Operator: The call has now ended. You may now disconnect.
