KBRA Affirms Rating for PennyMac Mortgage Investment Trust

KBRA affirms the issuer rating of BB+ with a Stable Outlook for PennyMac Mortgage Investment Trust (NYSE: PMT or “the trust”), a real estate investment trust (REIT) that invests primarily in residential mortgage loans and mortgage related assets. Management of the company’s businesses, including its investment activities, is performed by PennyMac Financial Services, Inc. (NYSE: PFSI), based in Westlake Village, CA.

Key Credit Considerations

PMT’s rating remains anchored by its association with PFSI, a leading residential mortgage originator and servicer that has demonstrated the ability to manage the cyclical nature of residential mortgage finance.

PMT’s earnings performance is tied to the contours of the U.S. economy, and especially interest rate levels (and the shape of the term curve), and credit spread levels, which collectively affect its loan origination activity, loan servicing profitability, and the performance of its investment verticals. Because virtually all PMT’s assets are recorded at FMV, earnings can be volatile on a MTM basis even though PMT strategically seeks to minimize the impact of unexpected market fluctuations, including using financial derivatives to hedge interest rate risk.

PMT’s large, albeit somewhat declining, loan servicing portfolio continues to generate substantial net profit margins, perennially, and underpins the consolidated earnings profile. Accounting for associated MSR amortization and valuation adjustments – net of hedging effects – can nonetheless contribute to sizeable quarterly earnings volatility and dampen profitability, as was the case in 2025.

Consolidated financial leverage (excluding LHS warehouse and VIE debt) remains on an upward trend, driven by modestly higher debt levels and a steady decline in shareholders’ equity owing to the combination of modest earnings in recent years and the relatively high common and preferred stock dividend payout rate. Higher debt, coupled with subdued 2025 earnings performance, continues to result in a relatively low interest coverage ratio.

Rating Sensitivities

PMT’s rating is unlikely to be upgraded over the intermediate term. Conversely, PMT’s rating would likely be revisited if the increase in consolidated adjusted leverage interest does not stabilize in the 4x range or if management’s commitment to interest rate hedging were to change.

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