KBRA Affirms Rating for Private National Mortgage Acceptance Company, LLC
16 Aug 2024 | New York
KBRA affirms the issuer rating of BBB- for Private National Mortgage Acceptance Company, LLC (PNMAC or "PennyMac"). The Outlook for the rating is Stable. PNMAC is a principal subsidiary of publicly traded PennyMac Financial Services, Inc. (NYSE: PFSI).
Management’s successful track record over time, including the demonstrated ability to hedge the large and growing interest rate sensitive MSR asset, as well as its successful efforts to reduce the reliance on short-term and MTM debt (excluding warehouse loan financings) remain the key rating components for PennyMac.
Revenue generation and profitability tied to the core loan servicing business ($633 billion in UPB at a weighted average servicing fee in the range of 0.45%) anchors the solid earnings profile of PennyMac, recognizing that the servicing operation has benefitted from relatively benign credit conditions (e.g., moderate delinquencies) in recent periods.
Financial leverage remains modest overall and is expected to remain in the range of 1.5x on an adjusted basis at consolidated PFSI.
Liquidity continues to be well managed, with relatively high cash balances (aided by robust loan servicing cash flow) compared to total debt (excluding LHS warehouse debt). Term debt maturities, MSR and senior unsecured, are well laddered. Reliance on short-term debt (excluding warehouse debt) has been limited, historically.
KBRA continues to anticipate good MSR interest rate hedge effectiveness, notwithstanding the elevated interest rate volatility, should mortgage rates decline further; PennyMac is well positioned to increase its mortgage refinance recapture penetration rate, given its operational focus in this area the past several years.
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