The layoffs come as Pennymac ups its investment in technology and marketing to help it do more business directly with consumers and mortgage brokers.

The nation’s second biggest mortgage lender, Pennymac, is laying off 236 workers from six locations in California, citing falling demand for home loans.

The layoffs — which include 16 employees at Pennymac’s Westlake Village headquarters — are concentrated in loan production and loan processing, but also affect consumer direct lending, information technology and loan servicing facilities.

“With U.S. mortgage applications falling to their lowest level in more than two years, Pennymac is reducing its workforce in its mortgage loan origination business and supporting units in response to decreasing demand for products and services,” the company said in a statement provided to Inman. “All former employees are being offered severance and access to health insurance as a bridge to new employment.”

The layoffs come as Pennymac — the nation’s largest purchaser of mortgages originated by correspondent lenders — has been boosting its investment in technology and marketing to help it do more business directly with consumers and mortgage brokers.

As rising mortgage rates have cut into lenders’ highly profitable refinancing, many have scrambled to boost business with homebuyers seeking purchase loans. Some, like Better, Guaranteed Rate and Keller Mortgage, have also laid off employees in an effort to “right size.”

According to Worker Adjustment and Retraining Notification (WARN) Act notices filed with the California Employment Development Department, Pennymac will part ways with more than 200 affected workers on May 6.

Although most of the layoffs will affect workers at offices in Southern California, a Pennymac loan production center in Roseville, northeast of Sacramento, is also letting more than six dozen workers go.

According to Pennymac’s WARN Act notices, the layoffs are distributed across the following locations:

  • 96 employees who work at Pennymac’s corporate headquarters in Westlake Village, and in an 81,000-square-foot loan processing facility located about a mile away. The layoffs at Pennymac headquarters include a number of executives, with titles including senior vice president capital markets controller, vice president portfolio risk management and vice president project management.
  • 81 employees who work at a loan production center in Roseville, including 46 home loan specialists, 22 refinance specialists, nine mortgage fulfillment managers and a vice president of mortgage fulfillment. Pennymac also has loan production centers in Franklin, Tennessee; Edina, Minnesota; Honolulu, Hawaii; and Summerlin, Nevada.
  • 24 employees who work out of a 36,000-square-foot facility in Pasadena, where Pennymac’s consumer direct lending business is located. Most of those employees specialize in refinancing.
  • 19 workers employed by Pennymac’s information technology division, which occupies a 50,000-square-foot facility in Agoura Hills. Those workers include six vice presidents, with titles including app development, IT, project management and tech ops.
  • 16 employees working out of a 142,000-square-foot facility in Moorpark, where Pennymac conducts most of its loan servicing.

Although Pennymac employed 7,208 workers worldwide at the end of last year, the company is not yet on the radar of many consumers. That’s because most of its loans are generated by correspondent lenders who originate, underwrite and fund home loans with the intention of selling them to larger lenders who also want to collect payment, or “service” those loans.

In recent years, however, Pennymac has been working to originate more loans through its consumer direct and broker direct channels, which can be more profitable than its correspondent channel.

Pennymac loan production channels

Source: Pennymac 2021 annual report to investors.

In its most recent annual report to investors, PennyMac Financial Services Inc. said that including the loans that it buys from other lenders through its correspondent channels, Pennymac is the nation’s second biggest mortgage lender, with $234 billion in 2021 loan production.

That includes $65 billion in mortgages purchased from non-affiliated correspondent lenders, and $110 billion in loans acquired from affiliate PennyMac Mortgage Investment Trust, which buys conforming loans from correspondent lenders. (PennyMac Financial Services Inc. and PennyMac Mortgage Investment Trust refer to themselves collectively as Pennymac).

Pennymac acquired loans from 768 correspondent sellers in 2021, retaining its title as the nation’s largest aggregator of correspondent loans and growing its correspondent channel by nearly 9 percent.

But Pennymac’s broker direct and consumer direct channels are growing even faster, posting 38 percent and 83 percent annual growth, respectively, in 2021.

To make loans directly to consumers, Pennymac relies on the internet and call center-based staff to acquire and interact with customers across the country. It doesn’t have brick-and-mortar branches.

As the nation’s sixth-largest loan servicer, collecting payments on $510 billion in outstanding mortgage debt from more than 2.1 million homeowners, Pennymac is in a good position to refinance existing homeowners’ mortgages when rates fall.

But with mortgage rates rising, the company says it’s making “significant investments in technology, personnel and marketing” to continue making more loans directly to consumers.

“We believe that our national call center model and our technology will enable us to drive origination process efficiencies and best-in-class customer service,” the company said in its most recent annual report.

Pennymac thinks it can also do more business by building relationships with independent mortgage brokers, and providing them with access to the company’s technology through a dedicated portal.

Lenders like Rocket Mortgage and loanDepot are also trying to strengthen their connection to mortgage brokers, whose ties with real estate agents and homebuyers give them an advantage in originating purchase loans.

As of Dec. 31, Pennymac had ties with 2,148 mortgage brokers who were approved to offer its loans to consumers. Since that only represents about 15 percent of the total population of mortgage brokers, Pennymac is optimistic about the potential for further growth in the broker channel.

According to the company’s most recent annual report to investors, Pennymac upped spending on technology by 26 percent in 2021, to $141.4 million.

“We believe we are still in the early stages of our development, with new technology rollouts in our direct lending channels expected throughout the year,” Pennymac Chairman and CEO David Spector said on a February conference call with investment analysts. “These enhancements will provide meaningful benefits to the brokers and customers we work with every day, as well as our fulfillment staff and loan officers.”

As Pennymac seeks to do more business directly with consumers and mortgage brokers, it’s also working to raise its profile, boosting spending on marketing and advertising by 417 percent in 2021, to $44.8 million.

One of the ads created for in Pennymac’s “Greatness Lives Here” ad campaign.

In January, the company rebranded its broker direct division as Pennymac TPO, and launched a new brand identity across all platforms, including a refreshed website, social media channels, advertising campaigns and consumer communications aimed at portraying the company as “accountable, reliable and ethical.” Last month, Pennymac launched a “Greatness Lives Here” national television, digital audio, social media and online ad campaign to “present homeownership as an achievable goal.”

The company expects its investments in technology and marketing will produce meaningful returns, as profit margins through direct lending channels are higher than correspondent business. Although the consumer direct channel still represents less than 20 percent of Pennymac’s loan production, Spector said it’s already generating more than 80 percent of the company’s production pretax income, compared to under 50 percent just two years ago.

But that doesn’t necessarily mean Pennymac is ready to go out and buy a Super Bowl ad.

“Throughout our history, we have managed the growth of the company in a disciplined fashion and with business lines across all channels of residential mortgage we’re uniquely positioned to represent trust, stability, and long-term partnership,” Spector told investment analysts. “So while I’m tremendously excited about our new brand and some of you may see some Pennymac TV commercials, content via social platforms, or other forms of communication, our targeted approach will remain a continued and ongoing focus.”

Get Inman’s Extra Credit Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

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