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PennyMac, headed by former No. 2 at Countrywide, files for IPO

February 08, 2013|By E. Scott Reckard
  • The number of homes in foreclosure and the inventory of repossessed homes on the market fell nationally in December. Above, a property in foreclosure in Glendale.
The number of homes in foreclosure and the inventory of repossessed homes… (Kevork Djansezian / Getty…)

PennyMac Financial Services Inc., the 5-year-old mortgage company founded by former Countrywide Financial Corp. President Stanford L. Kurland, plans to go public on the New York Stock Exchange. 

PennyMac, which makes, buys, sells and services residential loans, intends to raise up to $287.5 million in a public offering, the Moorpark-based company said in a prospectus filed Thursday with the Securities and Exchange Commission. 

The filing did not include the proposed share price and stock ticker for PennyMac.

Quiz: How much do you know about mortgages?

The company, set up initially to do workouts on distressed loans, later began refinancing and originating mortgages online and buying loans from smaller lenders. It also manages two private funds and a publicly traded real estate trust that invests in mortgages.

Kurland, 60, resigned from Countrywide in 2006, nearly two years before the Calabasas-based lender was acquired by Bank of America Corp.  Countrywide, at the time the largest U.S. mortgage lender, had been battered by defaults on subprime and other risky loans, and BofA has since racked up some $50 billion in losses related to home lending.

Kurland once was regarded as the likely successor to Countrywide Chief Executive Angelo Mozilo, the lender's co-founder. Mozilo paid $22.5 million in 2010 to resolve Securities and Exchange Commission allegations that Countrywide misled investors about the risks it was running – the largest penalty ever paid to the SEC by the head of a public company.

PennyMac said it benefits from having none of the legal liabilities from the mortgage meltdown that continue to plague BofA and other big banks. It is moving into the so-called correspondent mortgage channel, buying loans in bulk from smaller originators -- one of the parts of the business that a retrenching BofA has retreated from.

Seven of its top nine executives, including Kurland, are former Countrywide employees. The prospectus warned investors that "existing or future investigations, litigation or negative publicity involving Countrywide" could "generate negative publicity or media attention for us or adversely impact us.”

It painted the executive's experience as a benefit, however, saying they “have long-standing relationships with our critical institutional partners,” referring to government-backed mortgage giants like Fannie Mae, Freddie Mac and the Federal Housing Administration as well as a host of smaller lenders.

“We have successfully turned such relationships into our competitive advantage over other new entrants in our businesses," the prospectus said.

PennyMac was founded in 2008 with backing from private investors BlackRock Inc. and HC Partners. It said Thursday that it earned $60.4 million through the first nine months of 2012 on revenue of $157.3 million, up from a profit of $11.5 million on revenue of $60.4 million during the same period of 2011.

The company's publicly traded affiliate, PennyMac Mortgage Investment Trust, was established in July 2009 as a vehicle for buying loans. Its shares fell 4% Thursday to $25.47 on news that the holding company would go public, but the stock rose 28 cents to $25.75 in morning trading Friday.


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