ペニーマック・ファイナンシャル（PFSI）2026年第3四半期決算説明会：サービシング増益と1億6000万ドルのコスト削減

主要なポイント

• ペニーマック・ファイナンシャル・サービシズ（NYSE: PFSI）が発表した2026年第3四半期の純利益は2,900万ドル（希薄化後1株あたり0.54ドル）となった。調整後純利益は5,600万ドル（1株あたり1.05ドル）で、年換算の調整後自己資本利益率（ROE）は5%だった。
• 買い取りおよび組成の合計実行額が前四半期比30%減、前年同期比33%減の240億ドルに減少したため、オリジネーション部門は700万ドルの税引前損失を計上した。
• サービシング部門の税引前利益は9,900万ドルとなった。ヘッジ差引後のMSR（モーゲージ・サービシング権）公正価値変動を除く税引前利益は、繰上返済ペースの減速とサービシング手数料の増加に支えられ、第2四半期の9,900万ドルから1億3,200万ドルに増加した。
• 経営陣は、2026年第2四半期から2027年第1四半期の間に年換算で1億6,000万ドルの経費削減を見込んでいる。前四半期比で最も大幅なコスト削減は2027年第1四半期に達成される見通し。
• PFSIは、額面金利の低いモーゲージ・サービシング権（MSR）290億ドル分の売却に合意した。約4億9,000万ドルの純受取額は、主に負債返済に充てられる予定である。
• 経営陣は、2026年第4四半期の調整後ROEが足元の5%程度の水準にとどまると予想しており、現在の市場環境下では2027年第4四半期までに10%台前半のROE達成を目指している。

主要財務データ

事業および業績動向

30年固定モーゲージ金利は当四半期末時点で約7.4%となり、6月30日時点の水準を90ベーシスポイント（bp）以上上回った。金利上昇に伴い、すべてのオリジネーション・チャネルにおいて需要が低下し、特に金利・期間変更による借り換え需要が大幅に減少した。

コレスポンデント（買取組成）チャネルからの収益貢献は前四半期比で600万ドル減少した。経営陣は、積極的なリキャプチャー（借り換え捕捉）の前提に基づいて取引量を追うのではなく、規律ある価格設定を維持したと述べている。

ブローカー・ダイレクト（買収媒介）の収益貢献は2,300万ドル減少した。契約不成立調整後の金利ロック額は28%減少したほか、競争圧力の継続によりマージンは12ベーシスポイント縮小した。

コンシューマー・ダイレクト（直接販売）の収益貢献は、契約不成立調整後の金利ロック額が37%減少したことにより4,000万ドル減少した。ただし、組成額の中でクローズドエンド型第2順位抵当ローンの比率が高まったため、マージンは300ベーシスポイントから335ベーシスポイントに上昇した。コンシューマー・ダイレクトでの融資実行額は約33億ドルとなり、これには約7億ドルのクローズドエンド型第2順位抵当ローンが含まれる。また、PFSIは最近このチャネルでHELOC（ホーム・エクイティ・ローン）商品の提供を開始した。

ローン組成費用を除くオリジネーション経費は前四半期比で11%減少したものの、過去の低金利環境下で設定されたパイプラインの処理が続いていたため、コストの減少ペースは収益の減少ペースよりも緩やかとなった。

サービシング部門は、繰上返済の減速、MSRキャッシュフロー実現額の減少、および手数料収入の増加の恩恵を受けた。四半期末時点でPFSIが債権管理を行うローンのうち、約定金利5%超のローンは3,550億ドル、うち6%超のローンは約2,200億ドルに上った。第1順位抵当ローンの借り換えリキャプチャー率は44%となり、前年同期比で9ポイント上昇した。

PFSIは、実稼働環境において自社開発のAIエージェント22基を運用している。これらは20万5,000件以上の自動実行と20万件以上の書類レビューを完了した。同社のAI音声エージェントは、第3四半期中に1万5,000件以上の取次を支援し、1,600件以上の金利ロックに貢献した。

業績予想・ガイダンス

経営陣は、サービシング事業の採算改善が低迷するオリジネーション環境によって相殺されるため、2026年第4四半期の調整後ROEは足元の5%程度の水準にとどまると予想している。

同社は、2026年第2四半期から2027年第1四半期にかけて年換算で1億6,000万ドルの経費削減を見込んでいる。第4四半期のコストは前四半期比で緩やかな減少にとどまり、取り組みの効果がフルに寄与する2027年第1四半期に大幅な減少を見込んでいる。

現在の市場環境を前提とすると、経営陣は2027年第4四半期までにROEが10%台前半に達すると予想している。この改善見通しは、サービシング事業の採算性向上とセンラーの寄与、営業経費削減の全面的な実現、ならびにテクノロジー推進によるオリジネーションの効率化によるものとしている。

センラーのサブサービシング事業の買収は、2027年第1四半期に完了する見込みである。経営陣によると、買収完了後のPFSIのサービシング・ポートフォリオは1兆ドルを超える見通しである。なお、本取引にセンラーの銀行免許は含まれない。

290億ドル規模のMSR売却は2026年第4四半期に完了する予定である。売却価格がポートフォリオの帳簿価額と同等であったため、PFSIは本売却による特段の売却益の計上を見込んでいない。約4億9,000万ドルの純受取額の大部分は、債務削減に充てられる。

リスクおよび注視すべき分野

• モーゲージ金利の高止まりが借り換えを大幅に抑制し、PFSIのオリジネーション・チャネル全体で金利ロック額を減少させている。
• オリジネーションのコスト削減が収益減少ペースに追いついておらず、公表された経費削減策の十分な効果が現れるのは2027年初頭になる見通し。
• ブローカー・ダイレクトおよびコレスポンデントでの価格競争は続いており、政府支援機関（GSE）による即金買い取り（キャッシュ・ウィンドウ）の実行に伴う圧力も含まれる。
• 金利上昇に伴いMSRの担保価値が向上した一方で、デリバティブ・ヘッジによる追加証拠金（変動担保）の差し入れやリバランスが必要となり、ノンファンディング・レバレッジが上昇した。
• センラー買収の完了には、引き続き1州での承認手続きと、米通貨監督庁（OCC）との預金移管手続きの完了が必要である。
• 2027年第4四半期の経営陣のROE目標達成は、現在の市場環境、コスト削減の実行、センラーの統合、およびテクノロジー主導の効率化にかかっている。

アナリスト質疑応答の要点

経営陣は、時間をかけてノンファンディング・レバレッジを1.5倍近辺まで下げることを目指していると述べた。計画されているMSRの売却、利益剰余金、および想定される金利動向が段階的なデレバレッジを後押しすると期待されているが、追加のMSR売却は継続的な戦略として位置付けられてはいない。

PFSIは今回の290億ドルのMSR売却に伴うサブサービシングを受託しない。経営陣は、将来の取引については異なる構造を取る可能性があり、センラーの買収により規模が拡大することで、MSRポートフォリオの管理における柔軟性が高まると強調した。

オリジネーション能力について、経営陣は100ベーシスポイントの金利低下が起きた場合でも、コンシューマー・ダイレクト部門で必要となる追加人員は100人未満にとどまると試算しており、これは大幅な人員増強が必要だった従来と対照的である。同社はこのオペレーティング・レバレッジの向上を、自動化と手作業の削減によるものとしている。

経営陣によると、同社はセンラー案件について1州の承認を除き、実質的にすべての承認を取得したという。2027年第1四半期という完了スケジュールに自信を示している。

手元流動性に関して、PFSIは自社のストレス・シナリオ策定において金利上昇と延滞率上昇の同時ショックを想定していると述べた。また、経営陣は、必要に応じて融資枠の拡大を支援できる担保権未設定の追加MSRを保有していると指摘した。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good afternoon, and welcome to PennyMac Financial Services, Incorporated's Third Quarter 2026 Earnings Call.

Additional earnings materials, including presentation slides that will be referred to in this call as well as an Excel file with supplemental information are available on PennyMac Financial's website at pfsi.pennymac.com.

Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on Slide 2 of the earnings presentation that could cause the company's actual results to differ materially as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings materials.

Now I'd like to introduce David Spector, PennyMac Financial's Chairman and Chief Executive Officer. Please go ahead.

David Spector

Thank you, operator. Good afternoon. And thank you to everyone for participating in our third quarter 2026 earnings call.

Before discussing our financial results, I want to take a few moments to address the important leadership transitions we announced earlier today. First, after a historic career in the mortgage banking industry spanning several decades, including more than 15 years of exceptional leadership at PennyMac, Doug Jones, our President and Chief Mortgage Banking Officer, has made the decision to retire on June 30, 2027. Doug has been an integral partner to me and a cornerstone of PennyMac since its early days. Over the next several months, Doug's roles and responsibilities will transition smoothly to other senior leaders across our organization.

Second, effective January 1, 2027, Kevin Ryan, currently our Chief Strategy Officer, will assume the role of Chief Financial Officer. Dan Perotti, our current CFO, will remain in his current role through the end of this year and will continue supporting the company in an advisory role through the first quarter of 2027. Kevin will continue to lead our strategy and business development teams in addition to his financial leadership responsibilities.

I want to express my extraordinary gratitude to both Doug and Dan for their long service to PennyMac, their relentless dedication and their enduring passion for our business. Both served in critical leadership positions, guiding PennyMac through dynamic market cycles and helping transform our organization into the premier mortgage company it is today. Their countless contributions have shaped our foundation, and they will be greatly missed.

Having said that, we have an exceptional leadership team and a deep bench of talent that is fully prepared to lead PennyMac into its next chapter. I have absolute confidence in this management team's ability to carry our strategy forward seamlessly while driving long-term value for our stockholders.

Turning now to our third quarter results on Slide 3. PennyMac Financial generated $29 million of net income or $0.54 in diluted earnings per share, representing a 3% annualized return on equity. Adjusted net income was $56 million or $1.05 per share for a 5% adjusted return on equity, down slightly from the prior quarter.

Our production segment recorded a pretax loss in the third quarter, driven by 3 primary factors. First, revenues declined significantly as fallout adjusted lock volumes were down across each of our channels in response to higher mortgage rates.

Second, while production expenses came down, they declined at a slower rate than revenues. Production expenses are largely driven by funded unit volume rather than locks. And throughout the quarter, we were still processing and funding higher volume loan pipelines established under the prior more favorable interest rate environment.

And third, we have not yet fully realized the full impact of previously announced cost reductions.

Servicing segment pretax income in the third quarter was $99 million. Excluding MSR fair value changes net of hedging, Servicing segment pretax income was $132 million, up from $99 million in the prior quarter, primarily driven by lower realization of MSR cash flows and an increase in loan servicing fees, partially offset by lower interest income from custodial balances and EBO loan-related income.

Slide 4 illustrates the constrained origination environment we are currently operating in. The primary 30-year fixed rate mortgage rose more than 90 basis points from June 30, ending the quarter at approximately 7.4%. This sharp increase in mortgage rates has impacted the housing market and has driven significantly lower origination demand, particularly for borrowers looking to refinance into a lower rate.

According to secondary market data, industry-wide rate and term agency deliveries have declined approximately 80% from the first quarter of this year. And as you can see by the current distribution by agency mortgages by coupon, less than 1% of homeowners currently possess an incentive greater than 50 basis points to refinance. All of this has created one of the most constrained origination environments our industry has seen since 2023 when rates sharply increased in response to high inflation as we emerge from COVID.

Although the origination market remains challenging, higher rates have driven prepayment speeds down to very low levels. This has caused our servicing business to continue to produce strong operating profitability as amortization has declined and fee income has increased. This dynamic highlights the natural hedge embedded in our balanced business model and the power of our large servicing portfolio.

Turning now to Slide 5 for key business updates. First, we continue to make progress on the acquisition of Cenlar's subservicing business and now expect the transition to close in the first quarter of 2027.

Second, given a smaller projected origination market and the realization of efficiencies due to technology, we are completing additional aggressive and proactive expense reduction initiatives, which we project will result in $160 million of annualized expense reductions from the second quarter of 2026 to the first quarter of 2027. We expect a modest sequential reduction from the third to the fourth quarter of this year, followed by a much more pronounced step down in the first quarter of 2027 as these initiatives fully run rate.

While these actions reflect necessary staffing and operational reductions in response to the low to a smaller origination market, significant process improvements driven by our continued technology enhancements have given us confidence in our ability to address our customers' needs even if rates were to meaningfully decline.

And after quarter-end, we entered into an agreement to sell $29 billion in UPB of low-coupon MSRs with an expected close in the fourth quarter.

Net proceeds of approximately $490 million will primarily be used to pay down outstanding debt, lowering financing costs.

I would also note we maintain an active share repurchase authorization from our Board of Directors. Given where our common shares have traded relative to book value and as we've done historically, we will continue to opportunistically utilize our share repurchase authorization to create long-term value for our stockholders.

Turning to Slide 6 and looking ahead, while the near term presents cyclical origination market headwinds, we are aggressively executing on structural initiatives to permanently lower our cost structure and position PennyMac appropriately for the size of the market we're currently operating in. Given the smaller origination market and the ongoing execution of our expense adjustments through year-end, fourth quarter adjusted ROE is expected to remain near current levels.

Turning to Slide 7. We continue to rapidly accelerate AI automation across our origination business. Across our production workflows, process automation has progressed meaningfully with 37% live in production and the remaining 28% currently in development expected to be completed by year-end. Our automation efforts will continue into 2027, focused primarily on advancing our AI voice agent capabilities and deploying AI agents into our broker direct channel once live on our next-generation loan origination system.

We have already developed 22 proprietary AI agents that are live in production, which have completed more than 205,000 automated agent executions and over 200,000 automated document reviews with an additional 17 agents currently in the development pipeline. Our proprietary AI voice agent is already driving meaningful origination volume. In the third quarter alone, it supported more than 15,000 transfers and contributed to over 1,600 rate locks. Just as importantly, this voice agent provides us the ability to rapidly add capacity to meet the demand generated by a market rally, enabling borrower self-service and thereby reducing hold times and lost sales opportunities.

By automating labor-intensive fulfillment workflows, we are permanently lowering our cost to produce and uncoupling platform capacity from staffing requirements. This will allow us to maintain lean operation in today's constrained environment while ensuring substantial operating leverage when origination volumes normalize.

Turning to Slide 8. This highlights the opportunity in our consumer direct channel when interest rates decline as well as the meaningful improvement in our first lien refinance recapture rates in recent periods. As of September 30, we serviced a combined $355 billion in UPB of loans with note rates above 5%, of which more than 60% or approximately $220 billion in UPB had note rates above 6%.

As shown on the right, our first lien recapture rate remained near record highs at 44%, up 9 percentage points from the prior year. The slight decline from the prior quarter reflects a broader market shift towards more credit-sensitive cash outs versus rate and term refinances where we traditionally see our highest conversion rates. Given the size of our servicing portfolio, our technology foundation and our accelerating recapture trends, we are highly convinced in our ability to execute on this opportunity, driving towards our long-term ROE targets when interest rates do decline.

Now I'd like to introduce our current Chief Strategy Officer and incoming CFO, Kevin Ryan.

Kevin Ryan

Thank you, David. I am honored and excited to assume the CFO role here at PennyMac, and I want to thank David and the Board for their trust and confidence.

I also want to express my sincere gratitude to Dan. Over his years of leadership, Dan has built an exceptional, world-class finance organization and established a remarkably resilient balance sheet. He and I will be working closely together over the coming months to ensure continuity and a seamless operational handoff. Having spent the past year leading our corporate strategy and business development initiatives, I've had the privilege of working alongside our leaders in production, servicing and technology. Bringing finance, strategy and business development together under one umbrella allows us to tightly integrate our long-term vision with real-time capital allocation and financial execution.

In challenging environments like the one we are navigating today, our priorities are clear: maintain rigorous cost discipline across the enterprise, allocate capital dynamically to the highest risk-adjusted return opportunities and leverage our scale and proprietary technology to permanently drive down unit costs across our platform. I look forward to engaging directly with our stockholders and the broader investment community in the months ahead.

And with that, I will now turn the call over to Dan, who will review the drivers of PFSI's third quarter financial performance.

Daniel Perotti

Thank you, Kevin. PFSI reported net income of $29 million in the third quarter or $0.54 in earnings per share for an annualized ROE of 3%. Adjusted net income was $56 million or $1.05 in adjusted earnings per share for an annualized adjusted ROE of 5%. The $0.51 difference between our GAAP and adjusted EPS was driven by $34 million of fair value declines on MSRs net of hedges and costs and $2 million of expenses related to our pending acquisition of Cenlar's subservicing business.

PFSI's Board of Directors declared a third quarter common share dividend of $0.30 per share.

On Slides 10 and 11, beginning with our production segment, pretax loss was $7 million compared to pretax income of $38 million in the prior quarter and $123 million in the third quarter of 2025.

Total acquisition and origination volumes were $24 billion in unpaid principal balance, down 30% from the prior quarter and 33% from the third quarter of last year. The revenue contribution from the correspondent channel was down $6 million from the prior quarter. This decline was driven by lower production volume as the origination market was impacted by higher interest rates.

In addition, we have maintained our pricing discipline, not chasing loan volume priced around aggressive recapture assumptions that we don't feel comfortable underwriting.

Also, correspondent lending remains competitive with the GSEs remaining active through their cash window alongside other industry participants competing aggressively on price. Our priority remains allocating capital prudently and preserving margin discipline. In October, correspondent volumes are expected to be in line with average third quarter levels.

In broker direct, revenue contribution was down $23 million from the prior quarter. The channel remains competitive with fallout adjusted locks down 28% and margins down 12 basis points from the prior quarter.

Volumes in October are down slightly from the average third quarter levels as a result of higher mortgage rates.

The revenue contribution from our consumer direct channel declined $40 million from the prior quarter as higher interest rates resulted in lower refinance demand. Fallout adjusted lock volumes were down 37% from the prior quarter due to the sharp increase in mortgage rates.

Margins were up to 335 basis points from 300 basis points in the prior quarter, reflecting a higher proportion of closed-end second lien production versus first lien.

Secondary market impacts across the channels resulted in a $5 million pretax loss compared to $7 million of pretax loss in the prior quarter. Of note, on Slide 11, prior period amounts have been recast to conform to our current period presentation.

The line previously titled, post-lock impacts and other, has been changed to secondary market impacts to isolate pure pipeline hedging valuation changes and secondary execution items. As part of this presentation update, certain execution items previously captured in this line item have now been attributed directly to each respective channel. While this recast historical channel margins, our total production revenues, expenses and pretax income remain unchanged.

Production expenses net of loan origination expense decreased 11% from the prior quarter due to previously announced reductions in capacity and lower volumes.

Turning to the Servicing segment on Slides 12 and 13, our total servicing portfolio UPB ended the quarter at $737 billion, up slightly from the end of the prior quarter. The Servicing segment recorded pretax income of $99 million. Excluding MSR fair value changes net of hedging, pretax income was $132 million or 7.3 basis points of average servicing portfolio UPB, up from $99 million or 5.5 basis points in the prior quarter.

Servicing fees were up from the prior quarter, primarily due to growth in the MSR portfolio.

Realized prepayment fees were 8.1%, down from 11.6% in the prior quarter. This decline resulted in a 15% reduction in the realization of MSR cash flows and also drove lower average custodial balances and related earnings.

Income from EBO activities was down $20 million from the prior quarter due to higher rates and recent changes to FHA and VA loss mitigation programs, which changed the timing and volume of buyout and redelivery options.

Operating expenses in the quarter were 4.4 basis points of average servicing portfolio UPB, or $80 million, up slightly from the prior quarter.

On Slide 14, including the provision for losses on active loans, the fair value of PFSI's MSR increased by $930 million. An increase of $951 million was due to changes in market interest rates and $21 million of declines was due to other model and performance-related impacts.

Hedge fair value losses, including principal-only bond accretion changes were $964 million. Rate impact accounted for $946 million of losses, while hedge costs were $18 million, down from $52 million last quarter and more in line with our long-term targets.

Corporate and other items recorded a pretax loss of $49 million compared to $29 million in the prior quarter. The prior quarter included $9 million of valuation-related gains related to our minority interest in Vesta.

On Slide 15, total debt-to-equity at quarter-end was 3.5x, down slightly from the end of the prior quarter and non-funding debt-to-equity was 1.9x, up from 1.8x at the end of the prior quarter. The increase in non-funding leverage was driven by higher interest rates, which increased the utilization of our secured MSR facilities.

To provide some context on how this dynamic operates, our MSR portfolio is financed through secured bank facilities where our borrowing base is driven by the collateral value of the underlying asset. When interest rates rise sharply, as they did throughout the third quarter, the fair value of our MSR increases, which expands our available borrowing capacity with our banking partners. At the same time, because we maintain a disciplined near 100% hedge, our derivative hedge positions decline in value, requiring cash variation margin and rebalancing. We utilize the expanded collateral capacity on our MSR facilities to fund those hedge requirements.

This creates a self-funding mechanism that protects stockholder equity and book value while mechanically resulting in higher facility draws and non-funding leverage during periods of rising rates. Holding interest rates constant through a combination of earnings and utilizing the approximately $490 million in proceeds from our planned MSR sale to pay down outstanding debt, we expect non-funding leverage at year-end to be lower.

Finally, we ended the quarter with $3.5 billion of total liquidity, which includes cash and amounts available to draw on facilities where we have collateral pledge.

On a more personal note, I want to take a moment to express my sincere gratitude to David, our Board of Directors and my colleagues for their trust, partnership and shared dedication throughout my time at PennyMac. I'm extraordinarily proud of what we've accomplished in my 18 years with the company and my 6 years in the CFO role. And in particular, I'm proud of the world-class finance organization and the resilient balance sheet we have built.

Having worked alongside Kevin for the past year, I have the utmost confidence in his leadership and vision to steer our financial and strategic execution going forward as he assumes the CFO role.

And finally, to our shareholders and the investment community, thank you for your thoughtful engagement, rigorous questions and constructive partnership over the years. It's been a privilege working with you.

And now we'll open it up for questions. Operator?

Operator

We will now begin the Question-And-Answer Session. [Operator Instructions] Your first question comes from the line of Crispin Love with Piper Sandler.

Your next question comes from the line of Doug Harter with BTIG.

質疑応答

Douglas Harter

Hoping you could talk a little bit more about the MSR sale and kind of how you're thinking about what is the target level for leverage. And I guess, on that MSR sale, are you retaining subservicing on that?

Daniel Perotti

Sure, Doug. This is Dan. Thanks for the question. In terms of the MSR sale, as we mentioned, we're expecting to utilize the majority of the proceeds to pay down our outstanding MSR or some of our outstanding MSR debt. With respect to overall leverage, as we've talked about before, non-funding leverage generally have targeted being closer to 1.5x. We expect to move toward that level over time, not necessarily all in one chunk. The paydown of this debt will contribute to moving our leverage lower. And as we said on the call, we expect our leverage to move lower quarter-over-quarter.

The other factor, as we talked about on the call, is that our non-funding leverage will fluctuate up and down initially as we see interest rates move up and down due to the dynamic of our hedge and utilizing our funding facilities to fund any cash requirements that we have due to changes in interest rates. We saw interest rates increase really sharply at the end of Q4, and that helped to drive up our leverage ratio slightly. We've seen a rally since then, and that is moving our leverage ratio in the opposite direction.

So overall, over the next few quarters, we expect to bring down our leverage ratio from the levels that it is at today through a combination of the MSR sale and deploying some of that cash as well as we see interest rates decline somewhat and utilizing the earnings from our business to bring overall leverage down.

Douglas Harter

And then I guess just are you retaining subservicing on the sale? And how do you think about additional sales?

Daniel Perotti

We're not retaining subservicing on this sale. That is an opportunity that we see potentially in future sales, but not with this particular sale. As we are looking at the market overall and our capital position as well as opportunities, we'll continue to look at potential opportunities for MSR sales, but it's not necessarily something that is -- we expect to be a consistent strategy. It's our evaluation of our capital position versus opportunities that we see as well as our overall leverage level and our trajectory with respect to.

David Spector

And Doug, this is David. I just want to add, this is one of the benefits that we get from the Cenlar acquisition in the fact that we have obvious scale on the platform. And by adding the Cenlar portfolio, we'll be increasing that scale, which gives us flexibility to strategically sell MSRs when the opportunity presents itself and the market environment necessitates in my mind, an MSR sale.

So this is the flexibility that we're excited about, and we're going to continue to strategically look at the market in terms of looking at MSRs and perhaps these are low-rate MSRs. They don't exactly fit what we want in terms of the flywheel and the future opportunity, and there's an active market for these. So it was a good transaction all the way around.

Operator

Your next question comes from the line of Trevor Cranston with Citizens JMP.

Trevor Cranston

Congratulations to everyone on the career transitions. Looking at the consumer direct channel specifically, I was wondering if you could provide a little color on within 3Q numbers, kind of how much of the volume there came from second lien volume in 3Q and kind of where you expect overall volume within the consumer direct channel to kind of stabilize, assuming rates stay around the current level?

David Spector

So obviously, we had more of a proportion of our production coming in second lien volume. The fundings in Q3 in consumer direct were approximately $3.3 billion, of which approximately $700 million of it was closed-end seconds. And that number is staying pretty consistent in the market today.

Year-over-year, we were up in consumer direct. But right now, the focus on consumer direct is on cash outs and closed-end seconds, given the fact that rates are at the level where rate and term refinance is not really in the money.

In addition, we added the HELOC product into our consumer direct channel. We launched that over the past couple of weeks. And so that's something that we're looking forward to being able to offer to our consumers as well.

Trevor Cranston

And then in your commentary, it sounded like you guys were seeing some competitive pressure on margins in the broker direct channel. Can you maybe provide an update on what you're seeing in the early part of 4Q and how you expect that to evolve given the increased competition for loans?

David Spector

We maintain a really disciplined approach to pricing. And as it pertains to where we value MSRs in our pricing model, obviously, it involves the valuation process of looking loan level characteristics, looking at FICO, LTV, prepayment speeds, there's a recapture component to it. And we're just seeing some valuations in terms of competitors that don't meet our return targets.

And so we want to be market leaders. We want to stay disciplined in our pricing and how we price. And in particular, we want to be on the government side, really mindful of the fact that -- there's a lot of -- there's a few executions out there that require a very large servicing investment on strip sizes north of 50 basis points that, again, don't really pan out when you look at the recapture opportunity. So I think that's the story on the government side.

On the conventional side, we're seeing a little bit -- we're seeing more than a little bit, we're seeing a good amount of pressure from the GSE cash window, execution being offered to smaller broker originators.

And so we're staying very competitive with the top 2 in the industry, and they're in various ways, staying aggressive as well. But we're picking and choosing our spots, and while maintaining market share and not really getting too caught up in market share at levels that are just not sustainable or that one can rationalize.

Operator

Your next question comes from the line of Bose George with KBW.

Bose George

Dan, it's been a pleasure working with you over the years.

First question, just on the guidance that you guys gave. So just to clarify, so that's a 5% expectation for 4Q? And then where do you see that trending in 2027, assuming the market remains flat?

David Spector

I'll lead off with this, and I'm sure Dan and Kevin will comment afterwards. But look, we're in a very challenging origination market with higher interest rates. And I think right now we are rightsizing our production channel and trying to maintain a level of profitability in Q4. Obviously, we're able to offset that with the continued decline in amortization. And so many of the actions we're taking this quarter won't run rate until early next year.

And with respect to 2027, obviously, the origination market is expected to decline. We're seeing forecast from the MBA and Fannie Mae bringing it down to $1.9 trillion. Right now, we're running a little bit lighter than that in terms of the run rate.

We have taken aggressive actions to right-size the business appropriately from Q2 of '26 to January 1 of '27 will be $160 million of annualized reductions. And most of that is going to come through in Q4. The tech spend is coming off of peak levels, we're reducing our tech spend, and we're continuing to see further efficiency gains because of the investments we're making.

And so as I think about the bridge from Q4 '26 to Q4 '27, I'm expecting us to be at low double digits by Q4 '27. And if you start out the 5% level we're at today, there's about 3.5 points that are going to come out of servicing, primarily at these levels because of the reduction in speeds and the lower amortization, the increase in net interest income and then bringing on Cenlar in the back half of the year.

We're expecting another 2 points to come from the OpEx reductions that we've made in the second half of '26 and getting a full run rate of those. And then there's going to be another one to two points coming out of our production channels, primarily coming out of the implementation of Vesta in broker direct, the deployment of the AI agents in consumer direct that will be replicated in broker direct.

And just some increase in pricing strategies and executions that we have been identifying in this period of time as we're seeing a very healthy bid for conventional production away from the GSEs into the whole of market. So all that adds up when you bridge it to the low double digits. And that's at current market levels. Obviously, if rates decline, you'd see a different market where production volume increases would yield greater profitability and production offset to some extent to a little bit with an increase in amortization.

Kevin Ryan

Yes, Bose, it's Kevin. I'll add to that quickly, which is, as David said, we're assuming a mortgage market next year that's smaller than $1.9 trillion, certainly smaller than 2026 is likely to finish up. And we're focused on the things we can control. Most of what David went through was Cenlar, NII expense reductions, and we're already at $160 million, and we're not done yet on expense reductions.

And so we're not bullish on the market. We are bullish on self-help and what we can do to drive down costs and get ourselves back to those types of returns.

Operator

Your next question comes from the line of Don Fandetti with Wells Fargo.

Donald Fandetti

Look, it's a tough mortgage market. It's a scale business. I'm just curious as you look out over the landscape and all the tech investment, do you feel like you guys have the right scale? Or do you need to consider some strategic alternatives maybe that are a little more dramatic? Or do you feel like you can kind of compete with the likes of maybe some of the larger players in the business?

David Spector

Look, I feel really good about what we have here in the organization. We're about to complete our 19th year. I think our track record is well known and our ability to adapt in the cyclical market that you rightfully talk about today is something that is a trademark of the organization. I think what I'm really excited about is the fact that as rates do come down, and they will come down, I feel really good about the position we're in being able to attack the demand that's going to come about without having to scurry about to add people or other infrastructure.

And so we're really taking advantage of this period of time where rates are at these elevated levels to move quickly to complete the work on the loan origination side to be able to deal with any increase in production.

Look, I think that the market is a tough one. I think you're going to continue to see consolidation in the market. But I think we have -- if you think about capital position, you think about what we built here with the leading correspondent aggregator, we're the #3 broker direct lender, our recap numbers are above 40% at levels that we have not seen in the history of the company. We're really positioned really well to take advantage of any decrease in rates that come about on the production side.

And likewise, on the servicing side, we're just continuing to get more and more efficient. And that scale is going to be a real benefit to us as we strategically address what the portfolio is.

Kevin Ryan

Yes. Remember, Don, we're going to be over $1 trillion in servicing when we close Cenlar. We're at scale.

Operator

Your next question comes from the line of Crispin Love with Piper Sandler.

Crispin Love

David, on capacity on the comment that you just made, it seems like you wouldn't need to add significant capacity if rates did rally. Is that fair? And is that because of the tech initiatives that you're taking right now? Just curious if I'm thinking about that correctly.

David Spector

Yes. Look, I'm not going to say -- we're going to have -- we'll be at zero because there's always a client who wants a human in the loop. Having said that, the human in the loop becomes less and less prevalent in terms of the refinancing of a mortgage. And even more importantly, on the processing side, the human in the loop has been greatly reduced. And so from my perspective, the amount of ads we're going to have to do, and I was looking at were looking yesterday like 100 basis point rally. It's less than 100 people across the consumer direct channel when historically, that number would have been multiples. And so I feel really good about what we're building.

And look, the longer rates stay where they are and you have capacity to leave the system, that's going to further lend itself for greater margin increases as well in a rally. And so I think we're positioned really well to be able to deal with anything that comes our way.

Crispin Love

And then on the Cenlar deal, can you talk about plans for the bank charter once the deal closes? Is that something that you're able to sell? Because I don't believe you're retaining it. Just if you can provide any color for the bank charter and just what's possible with that that would be great.

Kevin Ryan

Yes, Crispin, it's Kevin. I think we've talked about this in previous calls. We've done a lot of work on retaining it. I think a combination of Basel III has been slow to get implemented, although we're supportive of the likely changes in MSRs. And they've got 100 clients that are great clients, and we've got the lowest cost of service in the industry. So we want to get those loans on our platform as quickly as possible.

So our plan is to close the deal in Q1 ex the bank charter we're working -- Dan is really leading an effort to work with Cenlar's management to dispose of the deposits at that bank charter and that bank charter will just relinquish and we'll close the deal.

Crispin Love

Congratulations on the new role, Kevin.

Operator

Your next question comes from the line of Ryan Shelley with Bank of America.

Ryan Shelley

Just following up on the Cenlar acquisition, it looks like timing has slipped a bit into 1Q of next year. Could you just give everyone a reminder on what approvals you still need and if there's any customer transfer.

Daniel Perotti

Ryan, can you start from the top and speak up, please?

Ryan Shelley

Yes, just on Cenlar, just a quick follow-up. It looks like the timing has slipped a little bit into early next year. Can you just remind us of what approvals are still needed and if there's any potential that you could see that slip further?

Kevin Ryan

Yes. Ryan, it's Kevin. We heard you this time. We have basically all approvals, except for one state. You can likely guess which state that is, is generally slow in almost every transaction. We feel very good about where we are as far as getting that approval. And then we're just working with the OCC, as we said to the last question, on getting the deposits transferred. So we feel very comfortable in that Q1 timing.

We took more time to study the bank, right? So part of the slowdown was self-imposed.

Ryan Shelley

Understood. And then just one more on leverage. It sounds like you should expect leverage to tick down next quarter, especially after this MSR sale. Given the environment, can we generally expect next year, you guys aim to operate closer to that 1.5 target? And to get there, could we see future sales potentially of MSRs in the book?

Kevin Ryan

Yes. Look, I'll start and Dan may want to jump in. As David mentioned, this is opportunistic. We're going to be over $1 trillion of servicing post-Cenlar. We're clearly at scale. there's a strong bid in the market, particularly amongst banks for low note rate servicing where there's not a big recapture opportunity and the portfolio we're selling looks a bit like that.

And so we can sell MSRs and look at leverage. Leverage has come down, as Dan mentioned before, just organically over the last 2 weeks as the 10-year is sitting at rates lower than where we closed the quarter. So we have levers to pull. We have a lot of liquidity, and we certainly have levers to pull as it relates to leverage.

Daniel Perotti

Consistent with what I talked about earlier, we continue to evaluate potential MSR sales. But as Kevin said, there's nothing necessarily in the pipeline in terms of sales currently, and it's something that we continue to evaluate in terms of our capital options as to what can optimize both leverage as well as returns.

Operator

Your next question comes from the line of Shanna Qiu with Barclays.

Gengxuan Qiu

I know on the call, Dan mentioned that the MSR facility commitments increased with the improvement in the MSR fair value that was offset by the debt increase to fund the hedge requirement. It's like overall, it looks like net liquidity declined by $500 million to $3.5 billion, which I think is on the lower end of where you guys have run at in the past few years. Is this something that we should think of as a minimal level of liquidity? And are you guys thinking about any kind of liquidity risk that might materialize for the industry, maybe beyond just servicing advances?

Daniel Perotti

So our liquidity planning process and scenario planning process around liquidity is very robust. We have a weekly discipline where we are looking out at over a 12-month horizon that includes shocks to both interest rates and the potential impact of liquidity from that as we discussed on the call and how that can impact liquidity with respect to hedges as well as a potential significant delinquency shock as we saw in the shock that we use is similar to what we saw during COVID and what the impact of that would be if prepayments in a slower prepayment speed environment, so where P&I advances are also significantly impacted.

And as we're looking at the sizing of our facilities and our available liquidity, even in those scenarios, we still have excess liquidity for the combination of those 2 types of shocks. The overall liquidity level that we're looking at, as you said, is on the lower end of where we've been historically. Obviously, that has expanded -- or not obviously, but that has expanded as we've rallied down a little bit and we had a reversal of what we saw in Q3 or at the end of Q3 with respect to interest rates.

To the extent that we needed additional -- as we're looking at our liquidity planning, needed additional facility availability, we have very significant amounts of MSR collateral to be able to borrow against that is in excess of our current commitments. In other words, the liquidity that we show there is with relation to the current sizes of our facilities and to the extent that we saw liquidity or potential liquidity decline further below the thresholds that we would need to be able to fund advances in a shock scenario or combined with a significant interest rate shock, we would look to expand our liquidity further.

So that overall, with respect to the current levels, as you said, we generally would expect that to be on the lower end of what we would see given our overall liquidity planning or at least given the current size of the portfolio. But to the extent that we needed to increase that or saw a different shock, we have plenty of collateral to be able to expand our facilities further.

Gengxuan Qiu

And then I know you mentioned you guys were opportunistically selling MSRs. So I'm assuming that we should expect to book a gain on MSR sales in the fourth quarter.

Daniel Perotti

We are not expecting to book a gain. We sold the MSR portfolio near inconsistent with our mark. When you see the results in the fourth quarter, it will come through as normal fair value changes, not something that's a specific gain on sale, but the sale was consistent with where we have the portfolio mark.

Operator

There are no further questions at this time. I will now turn the call back to David Spector for closing remarks.

David Spector

Thank you, operator. And thank you all for joining us this afternoon. I encourage investors with additional questions to contact our Investor Relations team by e-mail or phone. And thanks again for the time and the good questions today.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.