PENNYMAC FINANCIAL SERVICES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
Caution Regarding Forward-Looking Statements
The following discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements including the related notes ofPennyMac Financial Services, Inc. ("PFSI") included within this Quarterly Report on Form 10-Q. Statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the section entitled "Risk Factors" in Part II Item 1A and in our Annual Report on Form 10-K, as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with theSEC . The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date hereof and we assume no obligation to update or supplement any forward-looking statements.
Insight
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to the words "we," "us," "our" and the "Company" refer to PFSI.
Our company
We are a specialty financial services firm primarily focused on the production and servicing ofU.S. residential mortgage loans (activities which we refer to as mortgage banking) and the management of investments related to theU.S. mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and our management's experience across all aspects of the mortgage business will allow us to profitably engage in these activities and capitalize on other related opportunities as they arise in the future. Our primary assets are direct and indirect equity interests inPrivate National Mortgage Acceptance Company, LLC ("PNMAC"). We are the managing member ofPNMAC , and we operate and control all of the businesses and affairs ofPNMAC , and consolidate the financial results ofPNMAC and its subsidiaries. We conduct our business in three segments: production, servicing (together, production and servicing comprise our mortgage banking activities) and investment management.
? The Production segment originates, acquires and sells loans
Activities.
The Management segment provides loan management for new loans
? we hold for sale and loans we service for others, including PennyMac
The investment management sector represents our investment management
? activities, which include activities associated with the investment asset
acquisitions and divestitures such as sourcing, due diligence, negotiation and
regulation.
Our principal mortgage banking subsidiary,PennyMac Loan Services, LLC ("PLS"), is a non-bank producer and servicer of mortgage loans inthe United States . PLS is a seller/servicer for the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), each of which is a government-sponsored entity. PLS is also an approved issuer of securities guaranteed by theGovernment National Mortgage Association ("Ginnie Mae"), a lender of theFederal Housing Administration ("FHA"), and a lender/servicer of theVeterans Administration ("VA") and theU.S. Department of Agriculture ("USDA"). We refer to each of Fannie Mae, Freddie Mac,Ginnie Mae , FHA,VA andUSDA as an "Agency" and collectively as the "Agencies." PLS is able to service loans in all 50 states, theDistrict of Columbia ,Guam and theU.S. Virgin Islands , and originate loans in 49 states and theDistrict of Columbia , either because PLS is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction. 57
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Our investment management subsidiary isPNMAC Capital Management, LLC ("PCM"), aDelaware limited liability company registered with theSEC as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM has an investment management contract with PMT, a mortgage real estate investment trust listed on theNew York Stock Exchange under the ticker symbol "PMT".
Operating results
Our operating results are summarized below:
Quarter ended March 31,
2022 2021
(dollars in thousands, except per share amounts)
Revenues:
Net gains on loans held for sale at fair value $ 298,459 $ 754,341
Loan origination fees 67,858 104,037
Fulfillment fees from PennyMac Mortgage Investment
Trust 16,754 60,835
Net loan servicing fees 286,309 39,720
Net interest expense (23,425) (25,632)
Management fees 8,117 8,449
Other 3,432 2,936
Total net revenues 657,504 944,686
Expenses:
Compensation 245,547 258,829
Loan origination 75,333 87,392
Technology 34,786 33,672
Servicing (1,246) 19,183
Other 68,564 39,602
Total expenses 422,984 438,678
Income before provision for income taxes 234,520 506,008
Provision for income taxes 60,927 129,140
Net income $ 173,593 $ 376,868
Earnings per share
Basic $ 3.11 $ 5.45
Diluted $ 2.94 $ 5.15
Annualized return on average stockholders' equity 20.4% 43.4%
Dividend declared per share $ 0.20 $ 0.20
Income before provision for income taxes by
segment:
Mortgage banking:
Production $ 9,775 $ 362,895
Servicing 224,647 141,744
Total mortgage banking 234,422 504,639
Investment management 98 1,369
$ 234,520 $ 506,008
Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") (1) $ 168,043 $ 674,308
During the quarter:
Interest rate lock commitments issued $ 25,125,503 $ 36,118,713
At end of quarter:
Interest rate lock commitments outstanding $ 10,397,958 $ 17,668,145
Unpaid principal balance of loan servicing
portfolio:
Owned:
Mortgage servicing rights and liabilities $ 290,797,891 $ 247,541,723
Loans held for sale 5,125,298 12,959,016
295,923,189 260,500,739
Subserviced for PMT 222,887,371 188,324,162
$ 518,810,560 $ 448,824,901
Net assets of PennyMac Mortgage Investment Trust $ 2,221,938 $ 2,357,143
Book value per share $ 62.19 $ 51.78
Provide investors with information complementary to our results
determined by generally accepted accounting principles in
(“GAAP”), we disclose Adjusted EBITDA as a non-GAAP measure. Adjusted EBITDA(1) is a metric frequently used in our industry to measure performance
and we believe that this measurement provides additional information that is
useful to investors. Adjusted EBITDA is not a financial measure calculated by
in accordance with GAAP and should not be considered a substitute for net
revenue, or any other performance measure calculated in accordance with GAAP.
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We define "Adjusted EBITDA" as net income plus provision for income taxes,
depreciation and amortization, excluding decrease (increase) in fair value of
mortgage servicing rights ("MSRs") net of mortgage servicing liabilities
("MSLs"), due to changes in the valuation inputs we use in our valuation models,
increase (decrease) in fair value of excess servicing spread ("ESS") payable to
PMT, hedging losses (gains) associated with MSRs, stock-based compensation and
interest expense on corporate debt or corporate revolving credit facilities and
capital lease.
We believe that the presentation of Adjusted EBITDA provides useful information
to investors regarding our results of operations because each measure assists
both investors and management in analyzing and benchmarking the performance and
value of our business. However, other companies may define Adjusted EBITDA
differently, and as a result, our measures of Adjusted EBITDA may not be
directly comparable to those of other companies.
Adjusted EBITDA measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:
a) they do not reflect all cash expenditures, future capital requirements
expenses or contractual commitments;
b) they do not reflect significant interest charges or cash requirements
necessary to service interest or pay principal on our debt; and
c) they are not adjusted for any non-cash income or expense items that are
reflected in our consolidated statements of cash flows.
Due to these limitations, Adjusted EBITDA measures are not intended as an alternative to net income as an indicator of our operating performance and should not be viewed as measures of the discretionary cash we have available to invest in the growth of our business. or as measures of the cash that will be available to us to meet our obligations.
The following table provides a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:
Quarter ended March 31,
2022 2021
(in thousands)
Net income $ 173,593 $ 376,868
Provision for income taxes 60,927 129,140
Income before provisions for income taxes 234,520 506,008
Depreciation and amortization
7,011 7,632 Increase in fair value of net MSRs of MSLs due to changes in valuation inputs used in valuation models
(324,066) (306,126) Increase in fair value of ESS payable to PennyMac Mortgage Investment Trust
- 1,037 Hedging losses associated with MSRs 217,860 442,151 Stockbased compensation
9,275 10,877 Interest expense on corporate debt or revolving credit facilities and capital leases
23,443 12,729 Adjusted EBITDA$ 168,043 $ 674,308 59 Table of Contents Business Trends
Due to significant inflationary pressures, theU.S. Federal Reserve raised the Federal Funds rate in the first quarter of 2022 and is expected to continue to raise interest rates through the year as well as reduce the federal government's overall portfolio ofTreasury and mortgage-backed securities. These resulting mortgage interest rate increases are expected to drive a decline in the size of the mortgage origination market from an estimated$4.4 trillion in 2021 to a current forecast range from$2.6 trillion to$3.1 trillion for 2022 according to leading economists. These lower overall projected mortgage transaction volumes and higher interest rates are expected to drive a decrease in our mortgage production activities and increase competition in the mortgage production business year over year, while also leading to declines in prepayment speeds in our mortgage servicing portfolio from the elevated levels experienced in 2021. We expect to reduce business expenses to align with the lower projected mortgage production activities for the remainder of the year.
Earnings before provisions for income taxes
For the quarter endedMarch 31, 2022 , income before provision for income taxes decreased$271.5 million compared to the same period in 2021. The decrease was primarily due to a$455.9 million decrease in Net gains on loans held for sale at fair value, a$36.2 million decrease in Loan origination fees and a$44.1 million in fulfillment fees from PMT due to lower production volume and gain on sale margins during the quarter endedMarch 31, 2022 compared to the same period in 2021, partially offset by a$246.6 million increase in Net loan servicing fees reflecting improved hedging results.
In our production segment, revenues reflect effects of increasing interest rates on both demand for mortgage loans and gain on sale margins during the quarter endedMarch 31, 2022 compared to the strong demand due to the historically low interest rate environment that prevailed during the same period in 2021. During the quarter endedMarch 31, 2022 , we recognized Net gains on loans held for sale at fair value totaling$298.5 million , a decrease of$455.9 million compared to the same period in 2021. The decrease was primarily due to a lower production volume, lower gain on sale margins across all production channels and a decrease in redelivery gains as a result of lower EBO loan volume and modifications during the quarter endedMarch 31, 2022 compared to the same
period in 2021.
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Our net gains on loans held for sale are summarized below:
Quarter ended March 31,
2022 2021
(in thousands)
From non-affiliates:
Cash gains:
Loans $ (944,221) $ 82,712
Hedging activities 890,087 736,225
Total cash gains (54,134) 818,937
Non-cash gains:
Change in fair value of loans and derivative financial
instruments outstanding at end of quarter:
Interest rate lock commitments (284,294)
(339,086)
Loans 220,430 105,222
Hedging derivatives (189,308) (273,687)
(253,172) (507,551)
Mortgage servicing rights and mortgage servicing
liabilities resulting from loan sales 616,302
463 571
Provisions for losses related to representations and warranties: In the context of credit assignments
(4,054)
(10,053)
Reductions in liability due to change in estimate 3,169 3,685 Total non-cash gains 362,245
(50,348)
Total gains on sale from non-affiliates 308,111
768,589
From PennyMac Mortgage Investment Trust (primarily cash) (9,652)
(14,248)
$ 298,459 $ 754,341 During the quarter: Interest rate lock commitments issued: By loan type: Government-insured or guaranteed mortgage loans$ 17,133,215 $ 25,146,879 Conventional conforming mortgage loans 7,974,275
10,971,834
Jumbo mortgage loans 18,013 -
$ 25,125,503 $ 36,118,713
By production channel:
Consumer direct $ 9,111,513 $ 13,384,216
Broker direct 3,526,629 5,670,798
Correspondent 12,487,361 17,063,699
$ 25,125,503 $ 36,118,713
At end of quarter:
Loans held for sale at fair value$ 5,119,234 $ 13,385,789 Commitments to fund and purchase loans$ 10,397,958
$ 17,668,145 61 Table of Contents
Non-monetary elements of gain on sale of loans held for sale
Our gains on loans held for sale include both cash and non-cash elements. We
recognize a significant portion of our gains on loans held for sale when we make
commitments to purchase or fund mortgage loans. We recognize this gain in the
form of interest rate lock commitments ("IRLC"). We adjust our initial gain
amount as the loan purchase or origination process progresses until the loan is
either funded or cancelled. We also receive non-cash proceeds on sale that
include our estimate of the fair value of MSRs and we incur liabilities for
mortgage servicing liabilities (which represent the fair value of the costs we
expect to incur in excess of the fees we receive for the early buyout of
delinquent loans ("EBO loans") we have resold to third party investors) and for
the fair value of our estimate of the losses we expect to incur relating to the
representations and warranties we provide in our loan sale transactions.
The MSRs, MSLs, and liability for representations and warranties we recognize
represent our estimate of the fair value of future benefits and costs we will
realize for years in the future. These estimates represented approximately 206%
of our gain on sale of loans held for sale at fair value for the quarter ended
March 31, 2022 , as compared to 61% for the quarter ended March 31, 2021 . These
estimates change as circumstances change and changes in these estimates are
recognized in income in subsequent periods. Subsequent changes in the fair value
of our MSRs significantly affect our results of operations.
Interest rate lock-in commitments, mortgage servicing rights and mortgage servicing liabilities
The methods and key inputs we use to measure and update our measurements of IRLCs, MSRs and MSLs are detailed in Note 6 - Fair value - Valuation Techniques and Inputs to the consolidated financial statements included in this Quarterly Report.
Representations and Warranties
Our agreements with the purchasers and insurers include representations and
warranties related to the loans we sell. The representations and warranties
require adherence to purchaser and insurer origination and underwriting
guidelines, including but not limited to the validity of the lien securing the
loan, property eligibility, borrower credit, income and asset requirements, and
compliance with applicable federal, state and local law.
In the event of a breach of our representations and warranties, we may be
required to either repurchase the loans with the identified defects or indemnify
the purchaser or insurer. In such cases, we bear any subsequent credit losses on
the loans. Our credit losses may be reduced by any recourse we have to
correspondent originators that sold such loans to us and breached similar or
other representations and warranties. In such event, we have the right to seek a
recovery of related repurchase losses from that correspondent seller.
Our representations and warranties are generally not subject to stated limits of
exposure. However, we believe that the current unpaid principal balance ("UPB")
of loans sold by us and subject to representation and warranty liability to date
represents the maximum exposure to repurchases related to representations and
warranties.
The level of the liability for losses under representations and warranties is
difficult to estimate and requires considerable judgment. The level of loan
repurchase losses is dependent on economic factors, purchaser or insurer loss
mitigation strategies, and other external conditions that may change over the
lives of the underlying loans. Our estimate of the liability for representations
and warranties is developed by our credit administration staff and approved by
our senior management credit committee which includes our senior executives and
senior management in our loan production, loan servicing and credit risk
management areas.
The method used to estimate our losses on representations and warranties is a
function of our estimate of future defaults, loan repurchase rates, the severity
of loss in the event of default, if applicable, and the probability of
reimbursement by the correspondent loan seller. We establish a liability at the
time loans are sold and review our liability estimate on a periodic basis.
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We recorded provisions for losses under representations and warranties relating to current loan sales as a component of Net gains on loans held for sale at fair value totaling$4.1 million for the quarter endedMarch 31, 2022 compared to$10.1 million for the quarter endedMarch 31, 2021 . The decrease in the provision relating to current loan sales is primarily attributable to a reduction in loan sales. We also recorded reductions in the liability of$3.2 million during the quarter endedMarch 31, 2022 compared to$3.7 million during the quarter endedMarch 31, 2021 . The reductions in the liability resulted from previously sold loans meeting performance criteria established by the Agencies which significantly limit the likelihood of certain repurchase or indemnification claims.
The following is a summary of loan buyback activity and the UPB of loans subject to representations and warranties:
Quarter endedMarch 31, 2022 2021 (in thousands) During the quarter: Indemnification activity:
Loans indemnified at beginning of quarter$ 15,079 $ 13,788 New indemnifications 5,641
2,155
Less indemnified loans sold, repaid or refinanced 779
1,704
Loans indemnified at end of quarter$ 19,941
$ 14,239 Repurchase activity: Total loans repurchased$ 17,529 $ 17,986 Less:
Loans repurchased by correspondent lenders 7,458
8,689
Loans repaid by borrowers or resold with defects resolved 5,496
2,649
Net loans repurchased with losses chargeable to liability for representations and warranties$ 4,575
Losses charged to representations and warranties liabilities
$ 1,612
$628
At end of quarter: Unpaid principal balance of loans subject to representations and warranties$ 271,146,169 $ 220,865,034 Liability for representations and warranties$ 42,794
During the quarter endedMarch 31, 2022 , we repurchased loans totaling$17.5 million . We recorded losses of$1.6 million net of recoveries during the quarter endedMarch 31, 2022 . If the outstanding balance of loans we purchase and sell subject to representations and warranties increases, the loans sold continue to season, economic conditions change, correspondent lenders become unwilling or unable to repurchase defective loans, or investor and insurer loss mitigation strategies are adjusted, the level of repurchase and loss activity may increase.
Loan origination fees
Loan origination fees decreased$36.2 million during the quarter endedMarch 31, 2022 compared to the same period in 2021. The decreases were primarily due to a decrease in the volume of loans we produced.
PennyMac Mortgage Investment Trust Execution Fee
Fulfillment fees from PMT represent fees we collect for services we perform on behalf of PMT in connection with the acquisition, packaging and sale of loans. The fulfillment fees were calculated based on the number of loans we fulfill for PMT.
Processing fees have gone down
compared to the same period in 2021. The decrease is mainly due to a lower loan production volume.
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Net Loan Servicing Fees
Our net loan servicing fee income has two primary components: fees earned for
servicing the loans and the effects of MSR and MSL valuation changes, net of
hedging results as summarized below:
Quarter ended March 31,
2022 2021
(in thousands)
Loan servicing fees $ 291,258 $ 259,445
Effects of MSRs and MSLs (4,949) (219,725)
Net loan servicing fees $ 286,309 $ 39,720
Loan Servicing Fees
Here is a summary of our loan servicing fees:
Quarter ended March 31,
2022 2021
(in thousands)
Loan servicing fees:
From non-affiliates $ 244,809 $ 210,753
From PennyMac Mortgage Investment Trust 21,088 19,093
Other
Late charges 11,956 8,964
Other 13,405 20,635
25,361 29,599
$ 291,258 $ 259,445
Average loan servicing portfolio
MSRs and MSLs $ 285,217,528 $ 244,623,917
Subserviced for PMT $ 221,886,632 $ 181,228,135
Loan servicing fees from non-affiliates generally relate to our MSRs which are
primarily related to servicing we provide for loans included in Agency
securitizations. These fees are contractually established at an annualized
percentage of the unpaid principal balance of the loan serviced and we collect
these fees from borrower payments. Loan servicing fees from PMT are primarily
related to PMT's MSRs and are established at monthly per-loan amounts based on
whether the loan is a fixed-rate or adjustable-rate loan and the loan's
delinquency or foreclosure status as detailed in Note 4 - Transactions with
Related Parties to the consolidated financial statements included in this
Report. Other loan servicing fees are comprised primarily of borrower-contracted
fees such as late charges and reconveyance fees.
The increases in loan servicing fees from non-affiliates and from PMT for the
quarter ended March 31, 2022 was primarily due to growth of our loan servicing
portfolio as compared to the same period in 2021. The decreases in other loan
servicing fees for the quarter ended March 31, 2022 , was primarily due to
decreases in fees related to borrower early loan payoffs resulting from the
reduction in prepayment activity we experienced in the current rising interest
rate environment as compared to the same period in 2021.
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Mortgage servicing rights and mortgage servicing liabilities
We have elected to carry our servicing assets and liabilities at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in market inputs used to estimate the fair value of MSRs and MSLs. We endeavor to moderate the effects of changes in fair value by entering into derivatives transactions and, untilMarch 2021 , by financing certain of our purchases of MSRs with the sale of a portion of the MSR assets' cash flows to PMT in the form of ESS. Change in fair value of MSRs, MSLs and ESS and the related hedging results are summarized below: Quarter ended March 31, 2022 2021 (in thousands) MSR and MSL valuation changes: Realization of cash flows$ (111,155) $ (82,663) Other changes in fair value of mortgage servicing rights and mortgage servicing liabilities 324,066
306 126
212,911
223,463
Change in fair value of excess servicing spread -
(1,037)
Hedging results (217,860)
(442,151)
Total change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing net of hedging results$ (4,949) $ (219,725) Average balances: Mortgage servicing rights$ 4,311,413 $ 2,931,683 Mortgage servicing liabilities$ 2,679 $ 46,060 Excess servicing spread financing $ -$ 87,451 At end of quarter: Mortgage servicing rights$ 4,707,039 $ 3,268,910 Mortgage servicing liabilities$ 2,564
Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of the remaining cash flows to be realized. During the quarter endedMarch 31, 2022 , realization of cash flows increased primarily due to the growth in our investment in MSRs partially offset by a reduction in the rate at which the MSRs are expected to be realized as a result of slower prepayment expectations in 2022 as compared to 2021. Other changes in fair value of MSRs increased similarly during both the quarter endedMarch 31, 2022 and the quarter endedMarch 31, 2021 due to significant increases in interest rates and resulting decreases in expected future prepayment speeds in each period. Hedging results reflect valuation losses attributable to the effects of interest rate increases on the fair value of the hedging instruments during the quarters endedMarch 31, 2022 and 2021. The loss from hedging activities decreased during the quarter endedMarch 31, 2022 compared to the same period in 2021 primarily due to the higher hedging cost as a result of market volatility during the quarter endedMarch 31, 2021 . 65
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Here is a summary of our portfolio of loan services:
March 31, December 31,
2022 2021
(in thousands)
Loans serviced
Prime servicing:
Owned:
Mortgage servicing rights and liabilities
Originated $ 268,886,759 $ 254,524,015
Acquired 21,911,132 23,861,358
290,797,891 278,385,373
Loans held for sale 5,125,298 9,430,766
295,923,189 287,816,139
Subserviced for PMT 222,864,324 221,864,120
Total prime servicing 518,787,513 509,680,259
Special servicing subserviced for PMT 23,047
28,022 Total loans serviced$ 518,810,560 $ 509,708,281 Delinquencies: Owned servicing (1): 30-89 days$ 6,924,722 $ 6,943,327 90 days or more 7,811,438 9,838,648$ 14,736,160 $ 16,781,975 Delinquent loans in COVID-19 pandemic-related forbearance: 30-89 days$ 1,134,056 $ 1,111,151 90 days or more 2,337,820 2,732,089$ 3,471,876 $ 3,843,240 Subserviced for PMT (1): 30-89 days$ 1,213,755 $ 1,164,782 90 days or more 1,199,376 1,810,910$ 2,413,131 $ 2,975,692 Delinquent loans in COVID-19 pandemic-related forbearance: 30-89 days$ 219,981 $ 171,114 90 days or more 487,985 638,703$ 707,966 $ 809,817
Includes defaulted loans in COVID-19 pandemic-related forbearance plans that (1) were requested by borrowers requesting payment relief in accordance with the
CARES Act. Net Interest expense
Net interest expense decreased
a decrease in the placement fees we receive in relation to the custodial funds we
? manage due to lower average custodial fund balances held, partially offset
through increased rates of pay;
a decrease in the interest deficit on repayments of loans managed for the Agency
? securitizations, reflecting lower loan repayments due to lower
borrower refinancing activity due to the higher interest rate environment;
partially offset by
? an increase in interest on senior unsecured notes.
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PennyMac Mortgage Investment Trust management fees
Management fees have decreased
compared to the same period in 2021. The decrease is due to the decrease in PMT’s average shareholders’ equity, on which its base management fees are based. We did not earn any performance incentive awards during the quarters ended
Expenses Compensation
Remuneration expenses are summarized below:
Quarter ended March 31,
2022 2021
(in thousands)
Salaries and wages $ 147,144 $ 143,700
Incentive compensation 54,298 72,655
Taxes and benefits 34,830 31,597
Stock and unit-based compensation 9,275 10,877
$ 245,547 $ 258,829
Head count:
Average 6,924 6,882
Quarter end 6,308 7,075
Compensation expense decreased
Loan origination
Loan origination expense decreased$12.1 million during the quarter endedMarch 31, 2022 compared to the same period in 2021. The decrease was primarily due to decreased lending activities during the quarter endedMarch 31, 2022 compared to the same period during 2021. Servicing Servicing expenses decreased$20.4 million during the quarter endedMarch 31, 2022 compared to the same period in 2021. This decrease in servicing expenses was primarily due to a larger reversal of the provision for estimated servicing advance losses recorded in prior periods during the quarter endedMarch 31, 2022 . The reduction reflects the recent improvements in the performance of
our servicing portfolio. Marketing and advertising
Marketing and advertising spending increased
Professional services
Professional expenses have increased
Provision for income taxes
Our effective tax rate was 26.0% during the quarter ended
compared to 25.5% during the same period in 2021.
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