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PennyMac Financial Services reported a sharp decline in third-quarter profit Thursday as weaker mortgage production and margin pressure outweighed stronger results from its servicing business.
The Westlake Village, California-based lender and servicer earned $29 million, or $0.54 per diluted share, during the quarter ended September 30, down from $182 million a year earlier. Revenue fell to $469 million from $633 million, a 26% decline.
The company released its results after the market closed on October 29. Adjusted net income, which excludes certain items under the company’s non-GAAP methodology, was $56 million, or $1.05 per diluted share.
Mortgage production contracts
Total loan acquisitions and originations were $24.4 billion in unpaid principal balance, a 30% decline from the second quarter. PennyMac’s production segment recorded a $7 million pretax loss, compared with $49 million in pretax income in the prior quarter.
Chairman and CEO David Spector attributed the production weakness to an industrywide contraction in origination activity and margin pressure late in the quarter. He said the company expects mortgage demand to remain subdued because of elevated interest rates.
The servicing segment generated $99 million in pretax income, compared with $22 million in the second quarter. PennyMac’s owned mortgage servicing portfolio reached approximately $496 billion in unpaid principal balance at September 30, up 6% from a year earlier.
Management targets $160 million in annualized savings
Management outlined actions designed to lower annualized operating expenses by approximately $160 million by the first quarter of 2027, measured against the second-quarter 2026 expense base. That figure is a cost-reduction target, not savings already realized.
After the quarter ended, PennyMac agreed to sell servicing rights associated with approximately $29 billion in unpaid principal balance of low-rate conventional mortgages for expected proceeds of roughly $490 million. The transaction remains subject to closing.
Leadership changes announced
PennyMac said President and Chief Mortgage Banking Officer Doug Jones plans to retire on June 30, 2027. Chief Strategy Officer Kevin Ryan will become chief financial officer effective January 1, 2027, succeeding Daniel Perotti in that role. These are announced future transitions.
The company’s board declared a quarterly cash dividend of $0.30 per share, payable November 27 to shareholders of record November 16.
What it means for mortgage lending
PennyMac’s results show the strain that lower origination volumes and pricing competition can place on large mortgage platforms, even when servicing generates substantial income. The planned expense reductions and servicing-rights transaction could reshape the company’s cost base and capital allocation, but their full financial impact will depend on execution.
Source: PennyMac Financial Services’ third-quarter 2026 earnings release, October 29, 2026.
