PennyMac expands direct-to-consumer business

Based in California PennyMac Financial Services will invest $3.9 million to open a new mortgage origination center in Franklin, Tennessee. The non-bank mortgage lender is expanding its direct-to-consumer lending business as some competitors lay off employees in hopes the channel will cool with higher mortgage rates.

PennyMac’s new project will create 325 jobs in Williamson County, but employees will acquire and interact with customers across the country via headset. The company said it has 2 million customers and more than 7,000 employees across 16 locations.

Doug Jones, president and director of mortgage banking at PennyMac, said in a statement that the new facility will boost PennyMac’s operations coast to coast “while supporting the organization’s overall growth initiatives.”

PennyMac is growing rapidly with its direct-to-consumer lending business. The company originated $11.1 billion in channel loans in Q3 2021, up 76% from the same period of 2020.

In a press release announcing third quarter results, the company said the increase in earnings “was due in particular to strong execution in our direct-to-consumer lending channel, which locked and funded record volumes.” The consumer direct channel contributed $446.7 million in revenue in Q3 2021, or 80% of the total.

However, the lender’s direct consumer market share was only 1.4% from January to September 2021, compared to 0.7% at the end of 2019.

The direct-to-consumer lending business holds the lowest market share for the company compared to other channels, such as correspondent (17.7%) and broker (2.4%). Regarding the brokerage division, the company announced that it had transitioned from PennyMac Broker Direct to Pennymac TPO and launched a new technology platform “to help brokers achieve their business goals and aspirations.”

In recent months, lenders offering direct-to-consumer models with heavier refi businesses have announced layoffs of loan officers. Earlier this month, Wyndham Capital Mortgageheadquartered in Charlotte, North Carolina, said it has laid off 35 LOs in Dallas, Charlotte, Salt Lake City, Kansas City and Phoenix.

Digital Mortgage Lender better.com laid off 9% of its workforce ahead of a $750 million cash injection from backer SoftBank Group. Meanwhile, based in Chicago Interfirst Mortgage Co. laid off 77 employees at its Charlotte, North Carolina office and 274 at its Chicago-area site.

Analysts say these lenders tend to be heavyweight and rely on call centers for hospitality, struggling to find a place in a buying market as rates climb and spreads begin to compress.