- 2 days ago
This week on Power House, Diego Sanchez interviews David Spector, CEO of Pennymac, for an inside look at the company’s growth strategy and expansion in the wholesale space.
David shares how Pennymac is investing over $250 million annually in tech, backing broker partners without competing, and targeting a 10% market share by 2026. They also discuss Pennymac’s $700 billion servicing portfolio, non-QM market plans, and their involvement in the 2028 Olympics.
Here’s what you’ll learn:
Why TPO and correspondent lending are central to Pennymac’s 2026 goals
How Pennymac is building tech that empowers brokers, not competes with them
Why a balanced model helps them thrive in fluctuating rate environments
What’s ahead in the non-QM market for Pennymac
How Olympic sponsorship fits into their brand evolution strategy
Related to this episode:
Pennymac
https://www.pennymac.com/
David Spector | LinkedIn
https://www.linkedin.com/in/david-spector-6404355
Pennymac | HousingWire
https://www.housingwire.com/company/pennymac/
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
David shares how Pennymac is investing over $250 million annually in tech, backing broker partners without competing, and targeting a 10% market share by 2026. They also discuss Pennymac’s $700 billion servicing portfolio, non-QM market plans, and their involvement in the 2028 Olympics.
Here’s what you’ll learn:
Why TPO and correspondent lending are central to Pennymac’s 2026 goals
How Pennymac is building tech that empowers brokers, not competes with them
Why a balanced model helps them thrive in fluctuating rate environments
What’s ahead in the non-QM market for Pennymac
How Olympic sponsorship fits into their brand evolution strategy
Related to this episode:
Pennymac
https://www.pennymac.com/
David Spector | LinkedIn
https://www.linkedin.com/in/david-spector-6404355
Pennymac | HousingWire
https://www.housingwire.com/company/pennymac/
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00There is a lot of profitability available in that channel for our brokers and some for us.
00:07And, you know, I think for us, we want to just continue to bring scale onto our platform.
00:13Because I think, as you know, all aspects of mortgage banking revolve around scale.
00:18Welcome to Powerhouse, where we interview the biggest names in housing and ask them about their strategy for growth.
00:33I'm Diego Sanchez, president of Housing Wire, and my guest today is a special one.
00:38It's David Spector, CEO of PennyMac.
00:41David, it's so great to have you on the show.
00:44Diego, thank you so much for having me on the show.
00:46It's very nice to meet you, and I'm looking forward to a really interesting conversation.
00:53Yeah, I am too.
00:54So, PennyMac is a top five servicer and correspondent lender.
01:00I'm getting the sense that TPO is your next big focus.
01:04Could you talk more about that?
01:06Sure, sure.
01:07So, we are, you're right on, we are a top five servicer.
01:12We're a top two loan producer.
01:13And I think even with the pending merger of Mr. Cooper and Rocket, we will either continue to be number two, or on day one, we may not be number two, but we will be number two shortly thereafter.
01:26But, you know, our business model is one that, from day one, we've set out to be a mortgage bank that's involved in all aspects of mortgage banking.
01:38It was always our intent when we started the company in 2008 to be NTPO, as well as correspondent, as well as consumer direct lending, as well as being a servicer.
01:50It's through, you know, the nimbleness of the company, that correspondent was first up, because when, back in 2012, we had a lot of banks getting out of the correspondent business.
02:05And we had a team of former colleagues who worked at Bank of America who came over, and that's how we really started that business.
02:15And given the opportunity that presented itself, we were able to grow to be the largest correspondent aggregator.
02:22And, you know, out of that, we really focused on building that business.
02:28But about 2017, the former founder, my good friend, Stan Kerlin, and I decided it was time to get into TPO.
02:39And so we began the work to get into TPO.
02:42And it's been a little bit slower than we would have liked.
02:46It's, you know, we're a very well-capitalized company.
02:52So capital has never been an issue for us.
02:55We have a lot of great mortgage professionals here who understand mortgage banking and understand the mortgage industry.
03:02It's just through, really, I would say because of COVID and what happened in 2020 with, you know, the CARES Act and being focused on servicing and our own people being sent home to work.
03:14And just, you know, the refinance environment and what was going on there, it was really hard to accelerate our entrance into the TPO market.
03:24And that's why we sort of, you know, kind of, you could see, you know, we were stuck in that kind of 500 million to a billion of originations, you know, up and down for quite some time.
03:36But I would say over the last year, it's really been my belief that we have a really great opportunity here to move into TPO.
03:47And it's for reasons I'm sure we'll be discussing today.
03:50But it's a great time for us to be jettisoning our TPO business and highlighting what we built here.
03:58And you can see in our share growth, we're doing a really nice job.
04:01Yeah, let's let's dig in there a little bit.
04:04What's attractive to you about the Wholesale Channel?
04:08I think the Wholesale Channel right now is really in an interesting position.
04:14The fact you have two market participants who are very, first of all, I know the leaders of these two companies.
04:24I consider them friends of mine.
04:25They're really good people.
04:26But they're both they both have their challenges at the moment.
04:31And I think that, you know, in particular, we have the case of Rocket Mortgage that has not just undertaken a change in strategy to basically replicate, try to replicate what we built in a balanced business model by combining a retail origination platform with a servicing platform.
04:51But they're they're going to be very distracted and very busy over the next two years at a minimum, trying to integrate these to these two companies.
05:02And then you learn the fact that they bought Redfin.
05:05And I kind of look at the landscape and I say, OK, those guys are going to be pretty distracted.
05:09Furthermore, I think I think that the brokers need a strong number two alternative to UWM.
05:17I think that, you know, Rocket is clearly going all in on being a retail originator, putting aside the day to day, you know, machinations of what we hear.
05:28And I try not to react to the day to day to day, but, you know, they've spent, you know, upwards of twelve billion dollars between these two acquisitions.
05:36They have a huge they have a huge brand and a huge investment in that brand and they have to support that brand through their retail channel.
05:43And so the brokers need an alternative.
05:46And we understand that in the company.
05:48And that's how we're trying to position ourselves to the broker community.
05:53One of the things that both of those organizations have invested heavily in is tech.
06:01They have giant tech teams and that helps with their speed to close.
06:06That helps with their appearance to brokers of really supporting them with with a lot of good tech.
06:14How are you thinking about those giant tech teams that both those companies have and how PennyMac can compete with that?
06:21Well, we have a tech budget in the company that's about two hundred fifty million dollars a year.
06:27So that's we we invest a lot of tech.
06:30And that's that that's been, I think, one of the reasons why from 2017 up until 23, 24, we were a little slow in getting out of the gates is the fact that we were trying to create technology.
06:43You know, that's built by mortgage professionals for mortgage professionals, you know, our you know, we've got a great platform for, you know, straight down the fairway of broker business.
06:58We have a great system for a non-del and non-del plus business.
07:03And I think by and large, if you speak to brokers there, they're very pleased with the technology we have out there.
07:10We've only just begun.
07:11There's a lot of great technology initiatives in place for broker and, you know, our TPO business is one that we're highly, highly committed to.
07:24And, you know, the broker community, you know, has they really have to make a decision.
07:29Do they want to deliver all their business to UWM and rocket to a lesser extent or do they want to diversify?
07:38And it's very important that brokers not put all their eggs in one basket.
07:43They have they became brokers for a reason.
07:46If they want to be distributed retail, they could go that route.
07:49And so I think they're going to find that, number one, and looking at us as a strong number two, I have no doubt that we're going to see our 5 percent market share get to the 10 percent market share goal.
08:02I put a market share goal out there of 10 percent by the end of 26.
08:05If we're not there before, I'll be pretty disappointed.
08:09Yeah, big goal.
08:10I love to hear it and agree with you that competition is important in wholesale.
08:16As a servicer that has also been building tech to originate from your book, how do you avoid that appearance of competing with your broker partners?
08:29Look, it's a great it's a great question, but I can tell you the way I think about our servicing portfolios.
08:37Number one, we built this really special flywheel to correspondent consumer direct where we buy, you know, currently about 10 billion dollars a month of closed loans to correspondent.
08:49We board them onto our servicing portfolio and those are the leads that we primarily use when rates decline to refinance borrowers.
09:00If borrowers want to move and they want to purchase a new home, then that is, in fact, you know, our lead source generation to support our consumer direct channel.
09:09And you can see our consumer direct production kind of mirrors the interest rate environment we're in during COVID.
09:16We did a little over four billion a month of consumer direct originations.
09:20And right now we're doing about, you know, one point five billion TPO for me is a unique channel.
09:28It's a channel that we're partners with the brokers.
09:33OK, and in doing so, we build technology, you know, really leveraging our experience in in the broker channel in working with brokers.
09:45We don't sell our servicing.
09:47So the brokers customers are not getting disrupted trying to figure out where to mail their payments.
09:53We then really we don't solicit borrowers, OK, for at least the first 18 to 24 months.
10:03In fact, we drive leads back to brokers during that period of time.
10:07And quite frankly, you know, we haven't been in a position of a high refinance, high refinance environment.
10:14But I'll tell you, we have we have about 25 percent of our portfolios and mortgages greater than six percent of which 90 percent of them came from correspondent.
10:25If rates decline, those are the loans we're really going to be going after.
10:29And so I don't you know, you know, we are we're very institutional in the way we operate.
10:37And each of our broker each of our broker groups are ones that we think of as business partners.
10:45And so I'm not looking I'm not looking to be necessarily competitors with our brokers.
10:51It's a very important channel for us.
10:53There is a lot of profitability available in that channel for our brokers and some for us.
11:01And, you know, I think for us, we want to just continue to bring scale onto our platform, because I think, as you know, all aspects of mortgage banking revolve around scale.
11:12So we talked about tech another way that wholesale lenders can differentiate is on rates, but rates are less in our control than than the third variable that people differentiate on, which is service.
11:29You know, what kind of education and white glove service am I providing to my broker partners?
11:37How do you think about that that service angle and differentiating from the offerings that, you know, Rocket is putting out there, UWM?
11:45And there's a bunch of other folks who are finding wholesale channel pretty enticing right now.
11:51Look, we we've always been about focusing on the customer.
11:56And I think if you if you look at our success in mortgage banking, it's because, you know, it starts with me.
12:03And I I always tell people here, everybody has a customer, even even our non even our non fit or non mortgage banking areas in the company of customers, our tech department as a customer, our finance department as a customer.
12:17And so the focus on the customer is something that's vitally important in this company's ethos.
12:25And so it always it, you know, it really always starts there.
12:29We we believe that there's nothing out there that we can't offer that UWM and Rocket is not offering.
12:38And we also believe that we're we're very much offering what they offer.
12:44What differentiates us is, number one, we have a tremendous capability to raise capital, to invest in servicing and not disrupt customers.
12:56We also have, I think, a really, really unique advantage in the market in the fact that if you look at our product offering and our pricing, it's very consistent every day.
13:10And it's it's it's it's up there with UWM and Rocket and Rhythm and other major players in the TPO space.
13:18And I think that, you know, what's going to happen over time is you're going to continue to see products coming out that may not be going to the GSEs.
13:27And the fact we have a unique structure with or having a REIT to be able to invest in mortgages is vitally important.
13:36You know, I think that there's I look at other secondary marketing groups out there and under other pricing groups out there.
13:43And I think we have the best ones out there, the best one out there.
13:46And so it's it's that's how we're going to continue to differentiate ourselves in addition to the service that we provide.
13:53You know, Matt and the team and Varun and the team provide great service and it's a great it lights the competitive fire under everybody.
14:02But I have no doubt that they're looking at what we do and they feel the same way.
14:08So looking at rates, they've been higher for way longer than I think any of us would like.
14:16Where do you see mortgage rates heading in the second half of this year?
14:23So obviously, the administration wants to get them down.
14:27You can see the jawboning by the president in his administration.
14:32My my sense, you know, if you look at the markets today, they're there.
14:37They're they're they're saying that they're not going to really come down until there's a change at the top of the Fed.
14:43And my general sense is, you know, right now, rates are in the mid to high sixes.
14:49I believe in the second half of this year, you'll see that come down, you know, six and a half, maybe maybe below that.
14:56I don't think you're going to, you know, absent a major event in the economy or in the global geopolitical landscape.
15:04I don't think you're going to see rates really come down until 2026.
15:10And I think that that's what a lot of people are waiting for.
15:14And look, I think that's where if I can give a plug to our business model, that's where we from day one have set ourselves up.
15:23We're quite frankly, in a high rate environment.
15:25And, you know, we're doing great.
15:27We're you know, we deliver double digit ROEs because we run this balanced business model because we have the servicing and the production.
15:35When rates come down, we do great on production.
15:37And when rates are up, we do really great on servicing.
15:40And, you know, we've been very fortunate to have a, you know, a seven hundred billion dollar servicing portfolio that's allowed us to continue to produce financial results that are really unsurpassed in the mortgage banking industry.
15:55Yeah, I've spoken to some of your peers at other big servicers and they think about it like rates are high.
16:03Great. My servicing business is awesome.
16:06Rates go down. Great. I can originate from my book.
16:09Is that kind of how you structure the business as well?
16:11From day one, from day one.
16:13I think that's and we've done it organically.
16:16OK, this is this is an organically built company where we we run on the mantra.
16:25We're going to do we're going to be the best operators in the industry.
16:29And it's it's not just words.
16:32Mortgage banking is a very, very intricate business where, you know, you have to do in many cases the same thing every day for a thousand straight days.
16:43And that's what makes it really difficult. And there are things that pop up and there are things that take place.
16:48And, you know, the management team we have here has been in this business for 10, 20, 30 years.
16:55I've been at this for 35 years now.
16:57There's very little we see in this in this business that we haven't seen before.
17:02And that gives us the ability to be able to react and meet our customers needs.
17:09So in my prep for this conversation, I've noted that you've said a couple of times recently that PennyMac is studying the non QM space.
17:19Should we anticipate any moves in the second half of this year?
17:24You should. You should.
17:25But I think we are, you know, we are looking at non QM through through kind of a few different lenses.
17:37I think that you should know that we're a company that is very focused on being a prime originator.
17:45And so anything that even has a hint of some of what we used to call subprime is something that we're typically not going to gravitate to.
17:55But when I look at the non QM market, there's a lot of great opportunity out there for, you know, borrowers with FICO is greater than seven hundred, seven twenty.
18:05Right now, from our forecast, it's running at about a 70 billion dollar market a year.
18:11And given our pricing capabilities, our origination capabilities, our distribution capabilities, there's no reason we shouldn't be offering that as a product to our brokers.
18:24It's my goal and desire to be able to offer all products to our business partners because I don't want to be known as a unique, bespoke originator.
18:36And so being in being in non QM and, you know, specifically, you know, what I like about non QM is the bank statement underwriting, the agency turndown loans, you know, business purpose loans, DSCR loans.
18:50Those are those are products that for us are very, very interesting.
18:56And to use your words that we've been studying.
18:59But now I've got to get the team to stop studying and get it into get into motion.
19:03I love that. Great answer.
19:08Look forward to innovations there from Penny Mac.
19:12So two of your biggest servicing competitors are combining with Rockets acquisition of Mr. Cooper.
19:21Several other servicers are scaling up and adding to their book.
19:26Does Penny Mac need to scale to compete with all of these other servicers that are scaling up?
19:32Absolutely not.
19:34If we don't have scale on our servicing platform with seven hundred billion dollars of servicing, there's we've got we've got other issues.
19:43And I think, as you can see, every quarter we release earnings.
19:47We expose to the markets what we've been able to do with our cost of service, which has been brought down over 30 percent over the last five years.
19:57And that is because we created servicing technology that is very unique in the marketplace.
20:04And so we don't need to scale.
20:08We're going to continue to grow the company organically.
20:12And look, over the next, you know, three, four years, we will be a trillion dollar servicer and we're going to do so in a way where we don't have to deal with the distractions of M&A.
20:25I don't disagree that being a two trillion dollar servicer gives you scale and, you know, the economies that come with that scale.
20:35We have those economies on our platform.
20:37And what I want to do is focus on servicing or serving our customers.
20:43And, you know, M&A, in my in my way of thinking, is a is a huge distraction for a management team and for the rest of an organization.
20:53And we have built something really special and unique in the culture of this company where we can focus on our customers.
21:00And I don't want to do anything to take us away from that.
21:03So I'm hearing you saying that M&A is not a part of your growth strategy for the foreseeable future.
21:09And that's a that's a that's a pretty that's a pretty wise conclusion to come at, given the fact that we have not engaged in M&A in this company's 18 year history.
21:21Personally, I've not been a part of an M&A transaction in my career.
21:25I'm an operator to my core.
21:29And, you know, that's the management team here kind of runs in the same way.
21:34And, you know, I think it's it's something that we we take a lot of pride in.
21:39And if you're hitting your benchmarks for organic growth, yeah, to your point, why have the distraction?
21:47Listen, we've we've we've delivered historically 15 percent ROEs to our investors.
21:54And that's really what I remind the team we're here for is to provide is to produce return to our investors while providing unsurpassed service to our customers.
22:06And where those customers are individuals, you know, in our TPO channel or brokers in our TPO channel or correspondents who are selling us loans or customers who are servicing their loans on the customer is is the most important is the most the most important part of what we of what we do here.
22:25And so there's no need. There's no reason to be distracted, to be able to say we're the number one at anything.
22:36Obviously, being number one gives you more scale.
22:38Number one gives you the ability to, you know, present yourself to future customers.
22:44And, you know, with the credibility that comes with being number one.
22:48But I'll tell you, in the mortgage banking world, I think I think everyone pretty much knows who PennyMac is.
22:54And, you know, being profitable and being the best at what we do is what's most important to me.
23:00So switching gears for our final question, PennyMac is very involved in the 2028 Olympics, which I'm personally extremely excited about.
23:14Can you tell us more about that involvement?
23:17Sure. And I'm really excited about it myself.
23:20But being being a part of the Olympic movement is something really special.
23:25And, you know, what in addition, you know, you know, we just talked about M&A.
23:31We have not been historically been big investors in brand marketing.
23:38But we're at the point in our history as a company that we need to start investing in the brand.
23:45We have two point eight million customers in our servicing portfolio.
23:50We have close to 4000 broker partners on our way to 10,000, 15,000.
23:55We have over 700 correspondent business partners.
24:00And to me, it was really important that we begin to market the company.
24:05And, you know, you know, prior to this increase in rates, we had done some, you know, direct marketing.
24:12And the name recognition of the company was up there with everybody.
24:17And so I was generally impressed and pleased with what I was seeing.
24:20But obviously, with rates going up, we really couldn't engage in the marketing.
24:24And so, you know, when this opportunity came along to work with L.A. 28, to me, it was the perfect fit.
24:32I've been pretty public.
24:34You're not going to see our name on a stadium.
24:36We're not. I'm not owning a sports team.
24:38We're not sponsoring, you know, anything of that nature.
24:41But, you know, what the Olympic movement and Paralympic movement stands for are very much aligned with what we are here at PennyMac.
24:52And so the ability to be able to market with the rings, with L.A. 28, with the U.S. flag, you know, being a top V.A. servicer and originator was something that really excited me.
25:06And, of course, being in our backyard here in L.A., it, to me, it made it so much of a logical extension of what we've done at the company.
25:18And as we activate this partnership, I think it's going to be great, you know, for, of course, our teammates and our business partners and our banks and our investors, but also really great for the mortgage banking community.
25:33You know, we're, you know, we're, you know, I think having mortgage affiliated with the Olympics and having a bespoke Olympic partnership, I think is really, is really exciting.
25:43And so I'm really, I'm really excited to see, you know, what the team's going to be doing over the next, you know, three plus years as we activate this partnership.
25:52I love that. And what, what a great place to end. Love hearing that PennyMac's going to be more active from a marketing perspective.
26:01David, it was so great to talk with you today. I thought this was a really fascinating conversation.
26:07David, thank you so much for the time. I really appreciate the invitation and looking forward to doing it again soon.
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