Pennymac and Annaly forge new mortgage servicing alliance

Annaly has formed a new partnership with Pennymac, adding another major publicly-traded nonbank mortgage company as one of its subservicers.

The real-estate investment trust, which also has a subservicing partnership with Rocket Cos., will be tied in with a master purchase agreement in which Annaly will buy certain assets from Pennymac.

The purchase agreement relates to a portfolio Pennymac is selling to the REIT investor and will manage as a subservicer in a partnership that will help the nonbank grow a new business line while providing a customer relationship focus Annaly values, according to a joint press release.

"We stand to benefit from Pennymac's strong recapture capabilities," said David Finkelstein, Annaly's CEO and co-chief investment officer.

The sale of MSRs also is in line with plans Pennymac has to reconfigure the composition of its portfolio.

"This sale continues our efforts to drive the concentration of our MSR portfolio toward higher-rate loans with significant recapture potential and is a prime example of our active capital management activities," said David Spector, Pennymac's chairman and CEO.

Pricing trends nonbank mortgage execs see in subservicing

Advances in automation and industry consolidation have driven competition in subservicing and brought down costs this year, Finkelstein said during his company's second-quarter earnings call.

"We think there's going to be a lot of differentiation in servicing and we've partnered with the ones who are making these investments," he said during the July call. "They provide great service and what we provide them is we help them with their scale. But also we're a capital and liquidity provider when there's a need to move MSR off balance-sheet."

Spector said in a more recent appearance at an investor conference that while there has been fierce competition in subservicing he sees potential opportunities opening up.

Subservicing has seen "rational pricing returning to the sector," Spector said during a presentation at Barclays' Global Financial Services Conference last month.

He also said at that time that "owners of servicing who've been buying it as a financial asset" have been among Pennymac's prospects for subservicing clients.

Why subservicing could be more dynamic heading into 2026

"I would expect our subservicing business to grow over the next 12 months and really be able to step in where others may be looking to step out," Spector added.

Spector said during Pennymac's July earnings call that he anticipated more subservicing changes in the second half of the year and possibly into 2026 as players re-evaluate the space.

"I think over the next 6 to 12 months, you'll see more servicing moving amongst subservicers. So we're just positioning ourselves to be one of those subservicers to capitalize on the opportunity," he said.

One industry giant, United Wholesale Mortgage, ended a subservicing contract it had with Mr. Cooper earlier this year because of that company's plans for its recently-closed merger with a chief competitor to UWM, Rocket. 

CEO Mat Ishia said during his company's earnings call in August that UWM was on track to bring subservicing entirely in-house by early 2026. At the time, the company was continuing to incur subservicing costs because it had moved the former Rocket business to a single player.