Core Viewpoint - The housing market is expected to face prolonged elevated mortgage rates, potentially remaining above 6% through 2028, despite anticipated rate cuts by the Federal Reserve [1][4]. Mortgage Rate Outlook - The Federal Reserve is expected to implement three to four rate cuts over the next six months in response to a weakening job market and slowing economy [3]. - Mortgage rates are projected to remain in the 6% to 6.5% range, with recent rates at approximately 6.25%, the lowest seen this year [5][4]. Housing Market Trends - 2023 marked a low point for the housing and mortgage market, with mortgage rates more than doubling to around 8% at one point due to significant rate hikes by the Fed [6][7]. - An increase in home sales is anticipated in 2026, projected to rise by about 5% as inventory levels improve [7]. - The inventory of homes has increased significantly, with new construction and existing homeowners listing more properties, leading to a more favorable environment for buyers [8][11]. Buyer Behavior - First-time buyers have adjusted to the current mortgage rates, budgeting for rates between 6% and 6.12% [10]. - Move-up buyers, who may have locked in lower rates around 3%, are hesitant to sell in the current market [10]. Builder Strategies - Builders are actively buying down mortgage rates to around 5% to stimulate sales, particularly for move-in-ready properties [12][14]. - The current market has about nine months of supply at the current sales pace, prompting builders to continue offering buy-downs until inventory levels normalize [13][14].

Core Insights - The average 30-year fixed mortgage rate has decreased to 6.19%, down from 6.54% a year ago, providing some relief for homebuyers, but short-term relief is believed to be limited [2][3] - Fannie Mae forecasts a slight decline to 5.9% by Q4 2026, while the MBA predicts a slight increase to 6.4% by late 2026, indicating a consensus that significant changes in mortgage rates are unlikely in the near term [3][4] - Both organizations expect a mild softening in the labor market, with projected unemployment rates of 4.4% and 4.6% by the end of 2026, respectively, suggesting a gradual economic shift rather than a severe downturn [4] Economic Factors - A potential economic slowdown could lead to lower mortgage rates if joblessness rises faster than expected or if the economy deteriorates significantly, which would exert downward pressure on Treasury yields and mortgage rates [5] - The current mortgage spread is 218 basis points, and if it normalizes towards the long-term average of 176 basis points, it could further lower mortgage rates even if Treasury yields remain stable [5] Forecasting Challenges - Mortgage rate forecasts are inherently uncertain, as they depend on accurately predicting inflation, Federal Reserve policy, and the overall trajectory of the U.S. and global economies, which are difficult to forecast [6]

Core Insights - The Federal Reserve is expected to cut interest rates, but this may not significantly impact the housing market due to persistently high mortgage rates projected to remain elevated through 2026 [2][4] - The Mortgage Bankers Association forecasts mortgage rates could reach 6.5% by the end of 2026, while Fannie Mae anticipates rates at or above 6% until late 2026 [3][8] - High mortgage rates have contributed to a slowdown in real estate activity, affecting GDP and limiting buyer mobility [4][7] Economic Impact - Elevated mortgage rates are a critical factor in the sluggish housing market, which has seen the slowest home sales in decades due to high borrowing costs and rising housing prices [4][7] - The influence of the 10-year Treasury note yields, projected to remain around 4.2%, is expected to have a stronger effect on mortgage rates than the federal funds rate [5][6] Historical Context - Mortgage rates have been above 6% for over three years, marking the longest period since 2005-2007, with historical data indicating that such rates were more common prior to that period [9]

Core Insights - NVR, Inc. is a prominent player in the homebuilding and mortgage banking industry, focusing on single-family homes, townhomes, and condominiums in the United States [1] Financial Performance - For Q3 2025, NVR reported earnings per share (EPS) of $112.33, exceeding the estimated $104.27 and the consensus estimate of $107.88, although this represents a decline from $130.50 in the same quarter last year [2] - NVR's revenue for Q3 2025 was approximately $2.61 billion, surpassing the estimated $2.43 billion, but down from $2.73 billion in the same period of the previous year [3] - The company's net income for Q3 2025 was $342.7 million, translating to $112.33 per diluted share, marking a 20% decline in net income and a 14% decrease in diluted EPS compared to Q3 2024 [4] - For the first nine months of 2025, NVR's consolidated revenues totaled $7.61 billion, reflecting a 1% decrease from the previous year [3][4] Financial Ratios - NVR maintains a price-to-earnings (P/E) ratio of approximately 14.93, indicating the market's valuation of the company's earnings [5] - The company's debt-to-equity ratio is low at 0.27, reflecting a conservative approach to leveraging [5] - NVR's current ratio is approximately 3.79, highlighting its strong liquidity position to meet short-term obligations [5]

Core Insights - NVR, Inc. reported a net income of $342.7 million for Q3 2025, a decrease of 20% from $429.3 million in Q3 2024, with diluted earnings per share down 14% to $112.33 from $130.50 [1] - Consolidated revenues for Q3 2025 were $2.61 billion, down from $2.73 billion in Q3 2024, while revenues for the nine months ended September 30, 2025, totaled $7.61 billion, a 1% decrease from $7.68 billion in the same period of 2024 [1][3] Homebuilding Segment - New orders in Q3 2025 decreased by 16% to 4,735 units compared to 5,650 units in Q3 2024, while the average sales price of new orders increased by 3% to $464,800 [2] - The cancellation rate rose to 19% in Q3 2025 from 15% in Q3 2024, and settlements decreased by 5% to 5,639 units [2] - Homebuilding revenues for Q3 2025 were $2.56 billion, a 4% decrease from $2.68 billion in Q3 2024, with gross profit margin declining to 21.0% from 23.4% [3] Mortgage Banking Segment - Mortgage closed loan production in Q3 2025 totaled $1.54 billion, a decrease of 7% from $1.66 billion in Q3 2024, with income before tax from the mortgage banking segment down 6% to $32.7 million [4] - The effective tax rate for the three and nine months ended September 30, 2025, was 22.8% and 24.5%, respectively, compared to 20.3% and 20.6% for the same periods in 2024 [4] Financial Performance - For the nine months ended September 30, 2025, net income was $976.0 million, a decrease of 20% from $1.22 billion in the same period of 2024, with diluted earnings per share down 14% to $315.33 [1][4] - The backlog of homes sold but not settled as of September 30, 2025, decreased by 19% to 9,165 units, with a dollar value decrease of 17% to $4.39 billion compared to the same date in 2024 [2]

Financial Data and Key Metrics Changes - PennyMac Financial Services, Inc. reported net income of $182 million for Q3 2025, translating to earnings per share of $3.37 and an annualized return on equity (ROE) of 18% [12] - The operating ROE for the quarter was 18%, with a significant contribution from the servicing business, which provided the majority of mortgage banking operating pre-tax income [2][3] - The company declared a third-quarter common share dividend of $0.30 per share [12] Business Line Data and Key Metrics Changes - The production segment reported pre-tax income of $123 million, more than double the $58 million from the previous quarter, with total acquisition and origination volumes at $36 billion, down 4% from the prior quarter [12][13] - The correspondent lending channel maintained a dominant position with total acquisitions of $28 billion, down 7% from the prior quarter, while correspondent channel margins increased to 30 basis points from 25 basis points [13] - The broker direct channel saw a 6% increase in originations and an 11% increase in locks from the prior quarter, with nearly 5,200 approved brokers, up 17% year-over-year [14][15] Market Data and Key Metrics Changes - As of September 30, $291 billion in unpaid principal balance (UPB), or 41% of the servicing portfolio, had a note rate above 5%, with $201 billion, or 28%, above 6% [10] - The company generated over $100 billion in UPB of correspondent production over the last 12 months, achieving an estimated market share of approximately 20% in the first nine months of 2025 [7] Company Strategy and Development Direction - The company completed a strategic transaction selling mortgage servicing rights (MSRs) with an unpaid principal balance of $12 billion to Annaly Capital Management, which is expected to accelerate the growth of its capital-light subservicing business [4][5] - The focus remains on optimizing the balance sheet and enhancing long-term value for customers and stockholders, with a goal to grow capital-light revenue streams leveraging servicing expertise and technology [6][7] Management's Comments on Operating Environment and Future Outlook - Management expects annualized operating returns on equity to average in the high teens to low 20s through 2026, contingent on stable mortgage rates and delinquency rates [4] - The company is confident in its ability to address refinance demand and anticipates continued improvement in recapture rates as market rates decline [11][10] Other Important Information - The servicing portfolio grew to $717 billion in UPB, with pre-tax income from servicing recorded at $158 million, nearly three times that of the prior quarter [16] - The company ended the quarter with nearly $5 billion in total liquidity, providing significant resources for opportunistic deployment [22] Q&A Session Summary Question: Expectations for fourth quarter ROEs given recent mortgage rate changes - Management indicated that if current rates persist, fourth quarter ROEs could trend towards the low 20s, but seasonality may impact results [23] Question: Implications of government shutdown on FHA business - Management is prepared for various outcomes and has sufficient commitment authority to continue operations, though some borrowers are in forbearance due to the shutdown [24][25] Question: Trends in the broker direct channel post-consolidation - Management noted that their growth in the broker direct channel is due to technology and a clear alternative to top competitors, with expectations to reach 10% market share by the end of 2026 [63] Question: Opportunities for share repurchases and MSR sale impact - Management expressed a willingness to repurchase shares if attractive opportunities arise, while also focusing on deploying capital into higher rate MSRs with better recapture potential [39][40] Question: Sustainability of the lower tax rate observed this quarter - Management indicated that the current tax rate is lower than expected going forward, with a slight increase anticipated [42][43] Question: Responsiveness of borrowers to refinancing opportunities - Management observed a quicker response from borrowers looking to refinance compared to historical trends, with recapture rates improving [48][49]

Financial Data and Key Metrics Changes - PennyMac Financial Services, Inc. (PFSI) reported net income of $182 million for Q3 2025, translating to earnings per share of $3.37 and an annualized return on equity (ROE) of 18% [12] - The operating ROE for the quarter was 18%, a decrease from 20% in Q3 2024 when mortgage rates were approximately 6% [2][3] - The company declared a common share dividend of $0.30 per share for Q3 [12] Business Line Data and Key Metrics Changes - The production segment generated pre-tax income of $123 million, more than double the $58 million reported in the previous quarter [12] - Total acquisition and origination volumes were $36 billion in unpaid principal balance (UPB), down 4% from the prior quarter [12] - The servicing segment recorded pre-tax income of $158 million, nearly three times that of the prior quarter [16] Market Data and Key Metrics Changes - PFSI maintained a market share of approximately 20% in correspondent lending, generating over $100 billion in UPB of correspondent production over the last 12 months [7] - The broker direct market share has expanded to just under 6%, with a goal to exceed 10% by the end of 2026 [8] - As of September 30, $291 billion in UPB, or 41% of the loans in the servicing portfolio, have a note rate above 5% [10] Company Strategy and Development Direction - The company completed a strategic transaction selling mortgage servicing rights (MSRs) with an unpaid principal balance of $12 billion, which is expected to enhance its capital-light subservicing business [4][5] - PFSI aims to optimize its balance sheet and enhance long-term value for customers and stockholders through disciplined capital management [7] - The company is focused on leveraging technology and operational scale to grow capital-light revenue streams [6] Management's Comments on Operating Environment and Future Outlook - Management expects annualized operating returns on equity to average in the high teens to low twenties through 2026 if mortgage rates remain stable [4] - The company is confident in its ability to address refinance demand and improve recapture rates as mortgage rates decline [11] - Management highlighted the importance of technology investments in driving efficiency and improving recapture rates [10] Other Important Information - The fair value of PFSI's MSR decreased by $102 million during the quarter, with $94 million attributed to changes in market interest rates [19][20] - The company ended the quarter with nearly $5 billion in total liquidity, providing significant resources for opportunistic deployment [22] Q&A Session Summary Question: Expectations for fourth quarter ROEs given recent mortgage rate changes - Management indicated that if current rates persist, fourth quarter ROEs could trend towards the low twenties range, but seasonality may impact results [23] Question: Impact of government shutdown on FHA business - Management expressed preparedness for various outcomes and noted an increase in borrower inquiries due to the shutdown, but did not expect significant impacts [24][25] Question: Trends in refinancing responsiveness - Management observed that borrowers are responding more quickly to refinancing opportunities compared to historical trends [49] Question: Share repurchase strategy and MSR sale implications - Management stated that share repurchases are considered based on attractive pricing relative to other capital deployment opportunities, particularly in higher rate MSRs [39][40] Question: Opportunities to reduce servicing expenses - Management expects unit servicing costs to decline through technology and AI initiatives, with potential for additional cost savings as the portfolio grows [54][55]

Financial Data and Key Metrics Changes - PennyMac Financial Services reported net income of $182 million for Q3 2025, translating to earnings per share of $3.37 and an annualized return on equity (ROE) of 18% [12] - The operating ROE for the quarter was also 18%, with a significant contribution from the servicing business, which provided the majority of pre-tax income [2][3] - The company declared a third-quarter common share dividend of $0.30 per share [12] Business Line Data and Key Metrics Changes - The production segment achieved pre-tax income of $123 million, more than double the $58 million reported in the previous quarter [12] - Total acquisition and origination volumes were $36 billion in unpaid principal balance (UPB), down 4% from the prior quarter, with $33 billion for PFSI's own account [12] - The servicing portfolio grew to $717 billion in UPB, with the servicing segment recording pre-tax income of $158 million, nearly three times that of the prior quarter [17][18] Market Data and Key Metrics Changes - PennyMac maintained a market share of approximately 20% in correspondent lending, generating over $100 billion in UPB of correspondent production over the last 12 months [6] - The broker direct business saw a market share increase to just under 6%, with a goal to exceed 10% by the end of 2026 [8] - Consumer direct origination volumes increased by 12% and lock volumes rose by 57% from the prior quarter, driven by declining mortgage rates [16] Company Strategy and Development Direction - The company completed a strategic transaction selling mortgage servicing rights (MSRs) with an unpaid principal balance of $12 billion, which is part of its capital management strategy [4][5] - PennyMac aims to grow its capital-light revenue streams and enhance its position as a dominant subservicer in the market [5] - The company is focused on deploying AI throughout its operations to drive growth and efficiency [11] Management's Comments on Operating Environment and Future Outlook - Management expects annualized operating returns on equity to average in the high teens to low twenties through 2026, contingent on stable mortgage rates and delinquency rates [4] - The management team expressed confidence in the company's ability to address refinance demand and improve recapture rates as mortgage rates decline [11][42] - The company is prepared for various outcomes, including potential impacts from a government shutdown, and has sufficient commitment authority with Ginnie Mae [26] Other Important Information - The fair value of PFSI's MSR decreased by $102 million during the quarter, primarily due to changes in market interest rates [20] - The company ended the quarter with nearly $5 billion in total liquidity, providing significant resources for opportunistic deployment [23] Q&A Session Summary Question: Expectations for fourth quarter ROEs given recent mortgage rate changes - Management indicated that if mortgage rates remain stable, fourth quarter ROEs could trend towards the low twenties range, but typical seasonal effects may apply [24][25] Question: Implications of government shutdown on FHA business - Management noted preparedness for various outcomes and highlighted an increase in borrower inquiries due to the shutdown, but did not expect significant impacts [26] Question: Trends in rate hikes and their impact on volumes - Management reported an uptick in volumes across all channels, particularly in consumer direct lending due to lower rates [28][29] Question: Share repurchase strategy and MSR sale impact - Management discussed a balanced approach to capital allocation, indicating a willingness to repurchase shares when attractive opportunities arise [34][35] Question: Changes in servicing portfolio responsiveness to rate rallies - Management observed increased borrower responsiveness to refinancing opportunities compared to historical trends, with recapture rates improving [40][42] Question: Opportunities to reduce servicing expenses - Management expects continued reductions in servicing costs through technology and AI initiatives, with guidance reflecting potential cost savings [47]

Financial Data and Key Metrics Changes - PennyMac Financial Services reported net income of $182 million for Q3 2025, translating to earnings per share of $3.37 and an annualized return on equity (ROE) of 18% [13] - The company experienced a fair value decline of $4 million on mortgage servicing rights (MSRs) net of hedges and costs, impacting diluted earnings per share negatively by $0.06 [13] - Operating income for the production segment was $123 million, more than double the $58 million reported in the previous quarter [13] Business Line Data and Key Metrics Changes - Total acquisition and origination volumes were $36 billion, down 4% from the prior quarter, with $33 billion for PennyMac's own account and $3 billion from fee-based fulfillment activity [14] - The correspondent lending channel maintained a dominant position with total acquisitions of $28 billion, down 7% from the prior quarter, while correspondent channel margins increased to 30 basis points from 25 basis points [14][40] - The broker direct channel saw a 6% increase in originations and an 11% increase in locks from the prior quarter, with the number of approved brokers rising to nearly 5,200, up 17% year-over-year [16][19] - Consumer direct origination volumes increased by 12% and lock volumes surged by 57% from the prior quarter, primarily driven by increased refinance activity [17] Market Data and Key Metrics Changes - The servicing portfolio grew to $717 billion in unpaid principal balance, with servicing segment pretax income reaching $158 million, nearly three times that of the prior quarter [19] - The fair value of PFSI's MSR decreased by $102 million, with $94 million attributed to changes in market interest rates [21] - The company ended the quarter with nearly $5 billion in total liquidity, providing significant resources for opportunistic deployment [24] Company Strategy and Development Direction - The company completed a strategic transaction selling MSRs with an unpaid principal balance of $12 billion to Annaly Capital Management, which is expected to enhance its capital light subservicing business [5][6] - PennyMac aims to grow its broker direct market share to over 10% by 2026, leveraging its technology-enabled platform and strong partnerships with brokers [9][10] - The management team is focused on deploying AI throughout the organization to drive growth and efficiency [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high teens to low 20s operating ROEs through 2026, contingent on stable mortgage rates and delinquency rates [5][4] - The company is prepared for potential impacts from a government shutdown, emphasizing its robust technology and risk management practices [29][30] - Management noted that the responsiveness of borrowers to refinancing opportunities has improved compared to historical trends [55] Other Important Information - The company declared a third-quarter common share dividend of $0.30 per share [13] - Corporate and other items contributed a pretax loss of $44 million, primarily due to technology initiative expenses and increased performance-based compensation [22] Q&A Session Summary Question: Expectations for fourth quarter ROEs given recent mortgage rate changes - Management indicated that if current rates persist, fourth quarter ROEs could trend towards the low 20s, but seasonal factors may temper this [27][28] Question: Impact of government shutdown on FHA business - Management stated they are prepared for various outcomes and have sufficient commitment authority to continue issuing Ginnie Mae securities [29][30] Question: Trends in rate box for the fourth quarter - An uptick in volumes across all channels has been observed, particularly in direct lending and consumer direct lending due to lower rates [35][36] Question: Share repurchase appetite and MSR sale implications - Management indicated a willingness to repurchase shares if attractive opportunities arise, while focusing on deploying capital into higher rate MSRs [43][44] Question: Changes in servicing portfolio responsiveness to rate rallies - Management noted improved borrower responsiveness to refinancing opportunities and indicated that recapture rates have been increasing [52][55]

3Q25 EARNINGS REPORT PennyMac Financial Services, Inc. October 2025 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words ...