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Investments

REO performance pushes PennyMac profit

PMT sold one-quarter of its re-performing loan portfolio

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PennyMac Mortgage Investment Trust (PMT) reported better-than-expected fourth quarter 2013 earnings results on Wednesday, relative to the company’s forecasts given strong valuation gains, and a deeper look at its financials shows that its REO portfolio and higher capitalized interest on modifications are helping the real estate investment trust in its success.

Though the origination environment remains challenging, the company reported a positive earnings result in the segment — as fulfillment expenses declined.

The company believes it is well positioned for sustainable and significant returns given growing servicing assets, future distressed loan and excess MSR purchase opportunities and a strong mortgage business that should rebound going forward.

Bloomberg reporter Jody Shenn said Thursday that the $223 million sale of re-performing mortgages by PMT – one-quarter of its re-performing loan portfolio – completed in January but disclosed in the company’s earnings report was the first bulk transaction for the mREIT.

“We see this as helping to diffuse the concern some investors have over the non-cash nature of the valuation gains in the NPL book over the last few quarters,” said Jefferies analyst Daniel Furtado.

PMT CEO Stanford Kurland said the proceeds will be used on higher yielding investments.

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