Annaly and PennyMac form strategic mortgage servicing partnership

Published 01/10/2025, 21:26
Annaly and PennyMac form strategic mortgage servicing partnership

NEW YORK - Annaly Capital Management, Inc. (NYSE:NLY), a $13.2 billion market cap mortgage REIT with an impressive 13.85% dividend yield and 29-year track record of consistent dividend payments, and PennyMac Financial Services, Inc. (NYSE:PFSI) have entered into a subservicing agreement and master purchase agreement, according to a press release statement. According to InvestingPro analysis, Annaly currently maintains a GOOD financial health score and appears undervalued based on its Fair Value assessment.

As part of the arrangement, Annaly has purchased a portfolio of mortgage servicing rights (MSR) from PennyMac, which will continue to handle all servicing and recapture activities for the transferred MSR.

Annaly, a residential mortgage real estate investment trust, has approximately $90 billion in assets across its investment strategies. Its MSR portfolio consists of about 680,000 loans with $219 billion in unpaid principal balance and $3.3 billion in market value as of June 30, 2025.

"We look forward to collaborating with PennyMac through this strategic partnership," said David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer of Annaly. The company’s strong market position is reflected in analysts’ positive outlook, with net income expected to grow this year.

Since 2020, Annaly has expanded its MSR holdings to become a top 10 servicer of Agency MBS. The company’s current MSR portfolio consists primarily of conventional loans with a weighted average FICO score of 757 at origination and an average note rate of 3.24%.

PennyMac, which ranks as the second largest mortgage loan producer and sixth largest residential home loan servicer in the U.S., views the partnership as an opportunity to optimize its capital position.

"We’re especially excited to continue subservicing and providing recapture activities for this portfolio, which accelerates the growth of our new subservicing business," said David Spector, Chairman and CEO of PennyMac.

As of June 30, 2025, PennyMac serviced loans totaling $700 billion in unpaid principal balance and had produced $134 billion in newly originated loans for the twelve months ended on that date.

In other recent news, Annaly Capital Management reported its second-quarter 2025 earnings, showcasing a mixed financial performance. The company surpassed earnings per share (EPS) expectations, achieving an EPS of $0.73 compared to the forecasted $0.71. However, revenue significantly fell short, totaling $273.2 million against the anticipated $461.81 million. Annaly Capital Management also announced a public offering of 10 million shares of its 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock, raising approximately $250 million in gross proceeds. This preferred stock has a liquidation preference of $25.00 per share and is expected to close in August 2025, subject to customary conditions. Additionally, RBC Capital raised its price target for Annaly Capital Management to $23.00 from $21.00, maintaining an Outperform rating. RBC Capital highlighted the company’s well-diversified capital allocation and strong liquidity position as positive factors. These recent developments reflect ongoing strategic financial maneuvers by Annaly Capital Management.

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