PennyMac Mortgage Investment Trust saw its fourth-quarter profit rise as its correspondent lending business surged.
Moorpark, Calif.-based PennyMac posted net income for the fourth-quarter of $19.6 million, or 70 cents a share, beating analysts estimates. That compared to net income of $7.3 million, or 43 cents a share, a year ago.
On average, analysts expected the company to earn 65 cents a share, according to Thomson Reuters I/B/E/S.
For the 2011 fiscal year, PennyMac earned $64.4 million, or $2.41 a share, on total net investment income for the year of $128.6 million.
PennyMac said it expects 2012 mortgage originations in the United States to hit the $1 trillion mark, with $300 million through coorespondent lending. However, new regulatory and capital requirements are causing the big banks to retreat from the mortgage industry, PennyMac said. The result is more opportunity in the mortgage servicing space, the real estate investment trust said, especially with the industry in a period of reform.
"PennyMac will continue to pursue distressed whole loan investments, while also seeking new opportunities, such as mortgage servicing rights," the earnings report states. "Correspondent volume should steadily increase as this becomes a greater component of PennyMac's earnings over the year."
In the most recent fourth quarter, PennyMac's fundings in the correspondent lending side of the business hit $991 million with rate locks of $1.3 billion. Conventional loans made up $566 million of total correspondent funding, followed by Federal Housing Administration loans, which made up $410 million, and jumbo loans, which hit $15 million.
The pre-tax gain of $7.4 million tied to the correspondent lending segment is attributed to conventional and jumbo loans.
During the quarter, PMT agreed to purchase a pool of mortgage loans and REOs with an unpaid principal balance of $49 million. By year end, the company's portfolio of residential mortgage loans, REOs and mortgage-backed securities were valued at $826 million.
Total investment income for 4Q hit $38.7 million.