Pennymac’s pending acquisition of Cenlar FSB features some stunning numbers: a $173M* purchase price that gives the nonbank lender/servicer an additional $740B UPB in servicing(!), $460M in annual subservicing revenue, 100 clients & another 2M customers. The deal wasn’t exactly a shock.

“Pennymac has been working toward a shift for a while,” said Pivot Financial’s Jennifer McGuinness. “For a lender they sit on the top of the league tables, and if they didn't do something like this, in my humble opinion, that would not continue.”

But Pennymac is publicly downplaying the deal as a very unsexy fee income play—explicitly not a strategy to feed originations. Basically, “Guys, we just really love the idea of subservicing 😴.” 

In today’s special ed. of The Scoop exclusively for paid subscribers, we break down the deal, dive into what it means for mortgage tech, & explore the broader consequences of consolidation in the servicing space.

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)

While $173M (plus up to $85M more if certain milestones are hit) is nothing to sneeze at, the price would appear to reflect very low expectations for recapture & some warts at the subservicing giant. After all, multiple companies had already passed on acquiring Cenlar, which still has a consent order in place from the OCC (and would be surrendering its banking charter as part of the acquisition).

Pennymac disclosed that $307B of the portfolio is in the process of leaving Cenlar or has break clauses allowing a move to a different subservicer should Cenlar be sold (👋 ServiceMac).