Voice of the Industry: David Spector

David Spector is the Chairman and Chief Executive Officer of Pennymac, one of the largest and most respected lenders and servicers in the country. Under his leadership, Pennymac has helped over 5 million Americans achieve and sustain homeownership, and it continues to set the standard in scale, innovation, and operational excellence. He became CEO in 2017 and Chairman in 2021, overseeing strategy for both PennyMac Financial Services Inc. and PennyMac Mortgage Investment Trust.

Some Background on Me

When I graduated from college, no one, or at least very few people said they wanted to become mortgage bankers. I started my career working on Wall Street for a company that, at the time, they were known as First Boston. I started in the analyst program for the mortgage finance group. Back then, mortgage finance was buying and securitizing non agency loans, jumbo loans in particular. So, I got some fundamental foundational understanding of what mortgage banking was in terms of secondary marketing. And when I left First Boston in 1989, shortly thereafter I joined a company called Countrywide, located in Pasadena. It was an opportunity to leverage what I learned in mortgage finance on Wall Street. And it was there that I was really fortunate to work with and meet some really influential people in my career. The first one was Stanford Kurland. Stan was CFO, but quickly after I joined, he became President of Countrywide, and really took it upon himself to sponsor my career in secondary marketing. I joined Countrywide in 1990 to close jumbo loan sales and negotiate contracts, but within a couple of years I took over the trading desk, where I was for the next 10+ years. From 1994 until my departure in 2006, I ran all of their secondary marketing. That’s where I learned how to price loans, how to hedge loans, how to price servicing, how to hedge servicing, etc. I took it upon myself to learn the needs and wants of different parts of the organization and their reliance on secondary marketing. What the correspondent division needed, other than price, could be a little bit different than what the broker division needed, could be a little bit different than what our call center needed, and so on.

I worked with Stan closely, but also learned from people like Angelo Mozilo, who was a really good leader himself. I had a front row seat to how everything coordinated and worked together. Those were really my formative years building the foundation to be able to get me to the point where I'm at today. I left Countrywide in 2006 and viewed it as an opportunity to continue to grow my career. I joined Morgan Stanley, where they were looking to build out their residential mortgage lending business, and they had

residential mortgage lending businesses around the globe. Given the intensity of the Countrywide job, given the fact that I'd been traveling domestically over the years, and given that I had a young family, I thought it would be a great opportunity for me to move to London and see the other side of the secondary marketing business, from the Street. But unfortunately, I joined in September of 2006 and it was only a few months before cracks started appearing in the mortgage market. Between my joining, until the end of December of 2007 when I left, I basically had to wind down a lot of different mortgage businesses. I saw all the things that did go wrong and could go wrong. And I think it is unfortunate what happened in that period of time, but it helped me understand truly, all the risks associated with mortgage banking.

Stan came calling again in October of 2007, saying that he was starting a company called Pennymac, and that I should move back to Southern California. It was a great opportunity to place a bet on myself. I felt that I had a really good understanding of mortgage banking, the capital markets function, and how it was a public/private partnership. And I had an opportunity to build something really strong and unique. We could build something that was legacy-free, which I knew at the time we were going to have to do. At Pennymac, I felt that we could build an organization that would be grounded in ethics, accountability, and reliability. Stan and I started the enterprise in 2008, with my first role being Chief Investment Officer, before becoming President, and ultimately CEO after Stan retired in 2019. Unfortunately Stan passed away from cancer in 2021, but the foundation of what we built still survives to this day. I'm really proud of the fact that we've had more than 5 million homeowners who have trusted us in their homeownership journey, and this motivates me every day. The work is personal, it's meaningful, and I truly believe we are the best in the industry. That's what keeps me fired up.

We're at another really interesting moment in mortgage banking, with technology and AI exploding all around us. I believe that we can use our mortgage understanding and our management team, which really is our superpower, to be able to continue to differentiate us while at the same time be the best business partner that we can be to our correspondent aggregators and to mortgage brokers. I am committed to keeping the industry competitive, ethical, and responsive to the needs of both borrowers and investors.

The Void Since Dave Stevens, and His Resonance

Let's talk about Dave a little bit. I believe, and many others agree, that he was the voice of the industry up until his passing. The voice of reason. He had that rare mix of technical knowledge and genuine passion. Someone who really was, I think to this day,

irreplaceable. And it seems like there's been kind of an echo chamber since his passing. Dave was a giant, and he led with vision and heart. Dave resonated because he was real. I often joked with Dave that he knew just enough to be dangerous. He was somebody who everybody respected. Whether you were CEO, or head of production, or head of a secondary marketing group, or in servicing, or you were a young loan officer, he really made you feel like your voice mattered, and he listened to you. And this is something I tell young people all the time: listening is the most under appreciated attribute a person can have.

Dave was also accessible. He was transparent. He would speak his mind. And anyone who knew Dave, a lot of the time you'd have to say, "Dave stop." Ha! He was able to, with humility, laugh at himself too. But he was also, more times than not, someone who really would listen and he would share his knowledge and lend support. He could speak to different constituencies. Whether it was to people on Wall Street, Main Street, or a President of the United States. He was able to alter his language, understand his audience, and really be an explainer, and that's what made him so valuable. And I think, above all, more than anything else, he believed in the mission of our work. He never let anyone forget that he really believed in the power and the importance of homeownership. When the great financial crisis hit, he was the one who really carried the industry on his back, and that's what made Dave so important, and in the mortgage banking hall of fame. He'll forever be there for the work that he did during that period of time. It's something that we're missing as an industry.

There are a lot of mortgage bankers who did exceptionally well during Covid, ourselves at Pennymac included. Then there are others who tangentially touch upon the industry who, obviously, we rely on and depend on, and they're good partners. But we have to really coalesce about what we believe we need to run our businesses. The last three years have been really hard, struggling years for many in the industry. We have a lot of people involved in the mortgage ecosystem who want a seat at the table, but I think we as mortgage bankers need to coalesce around one another, and first and foremost, work to really come together on what are the priority objectives for us as mortgage bankers.

An example I would give would be with the GSEs. I applaud the Trump administration for the work they're doing. I applaud Director Pulte for the work he's doing. We need him in our corner as an industry. And I think we just want a predictable, reliable GSE framework that works to keep the liquidity that we have in the industry. UMBS is the second biggest asset class in the world behind Treasuries, and we don't want to do anything to disrupt that. At the same time, most of us agree that being in

conservatorship is not a long term, sustainable outcome. We saw in the prior administration, FHFA advocating one course, and in prior administrations, we've seen others. That's just the nature of the political world we live in today. So, I give a lot of credit to the FHFA and the administration for trying to get the GSEs out of conservatorship. Dave would have agreed with me. I know that for a fact. He wasn't one to get people around a table and try to listen to everyone and then come up with a point of view. Anyone who knew Dave well would know that he'd walk in with his point of view, and if everyone around the table had a different point of view, he would take that into account, but he always came in as a leader, saying, "This is what we should be doing."

Current State of the Industry From a Market Standpoint

I will contend that this industry is so well capitalized at the moment. If you look at the top 10 independent mortgage banks, we are more sophisticated than independent mortgage banks have ever been. We have leadership at these companies that understands financial risk management, and that understands operational risk management. We're in the tougher part of a market cycle, no question. Mortgage rates have hovered around 7%, now for well over a year. The industry has been running at volumes for the last two to three years that have been at all time lows. As an industry, we focus on the dollar amount of mortgages that originated every year. But what people forget, is the fact that the average loan balance has increased so much, the number of units are at historically low levels, and everybody is really running at what I consider to be core functionality. It's going to be interesting when we see a rate decline, and rates will decline, those of us who have been able to have keep capacity in place, while, at the same time, invest in technology; I think you're going to see a reaction to lower rates at a pace that you've never seen before. Historically, when rates would decline, it would take about 90 days to get space procured and people hired to really be able to meet the demand of the market. Now, we're going to be able to move a lot faster. I've seen it during these brief little refi "boomlets" over the past year or two.

I do expect rates to decline back to the 6% range. We are primed and ready to go. Even during this tough period, and I'll use ourselves at Pennymac as an example, our loan production in Q2 2025 was up almost 40% year over year. Between correspondent, broker, and consumer direct channels, we originated or acquired nearly $40 billion in that quarter alone. And we're primed to be able to continue to build our servicing portfolio because of the investment in technology, and we're investing similarly on the production side as well. I would be remiss if I didn't give a shout out to our balanced business model, because that is what has allowed us to continue to deliver double digit returns to our shareholders during this period of time. Our servicing portfolio is at $700

billion as of the end of the second quarter. Our return on equity for the second quarter was 14%, which is really remarkable given that mortgage rates are at 7%. We've benefited from our multi-channel strategy in correspondent. Being the leading aggregator broker has been really important for us as a way for us to attract purchase money loans, and that allows us to continue to grow the servicing portfolio during any period of low refinances. We have this flywheel where we buy loans as a correspondent, and when rates decline, we look to refi those loans in our consumer direct channel. In our broker direct channel (TPO), we're not as quick to go after the refinance business because our partnership with brokers is a little bit different, and we respect the brokers. It's a really unique balanced business model that is well regarded by the industry and something that I'm very proud of. We are also primed to do really well over the next few years because we are not going to be distracted. And distractions are what everyone in the industry is facing, other than us. The largest retail originator and the largest servicer are about to close on a transaction where they want to try to smash these two companies together to create an even bigger business model. Whether it's a broker powerhouse trying to build a servicer, or whether it's another large originator that wants to build an asset management business, our current business model already allows us to be distraction free. And that's why I think we as an organization are uniquely positioned to grow and thrive over the next few years.

Current State of the Industry From a Regulatory Standpoint

I'm really encouraged with the direction where things are at the moment, and that's not because I'm anti-regulation. Coming out of the financial crisis, some additional regulation was needed. Now, much of that regulation was codified in Dodd Frank. Nobody believes that we're going to go back to the days of stated-income or negative amortization loans, etc. I think that technology has given us tools to prevent another great financial crisis. The fact that DU and LP are the currency of the industry is really vital. What we've seen over the last several years, particularly during the last administration, was an overcorrection and a continued kind of pounding on the mortgage industry for things that happened pre-Dodd- Frank and pre-financial crisis. There were layers and layers and layers of regulation placed on the industry without policymakers looking at what was already there. So, I do think that if the CFPB takes a lighter touch in some areas, we're going to be a much better industry, and most importantly, we're going to reduce the cost to originate for the borrower.

Since the financial crisis, the cost to originate alone has more than doubled to over $10,000, and that comes about at a time where we've had the greatest advancements in technology, and in our economy, that we've had in my career. It doesn't make sense.

Regulation is not the sole cause of increasing that cost, but it is, without a doubt, the primary cost. The fact that a loan origination file today is 500 pages or more is just incomprehensible. I like what I'm currently seeing out of D.C., but I really want to caution that we're getting rumblings that some of the states want to kind of fill what they view as the void coming out of that. I don't see it as a void. If the different states start imposing different regulatory regimes, it's going to hurt the borrowers in those states, and that's not what we want to see. I think policymakers understand that housing accounts for nearly 18% of GDP. They like stability, and quite frankly, I like the fact that we are not in the crosshairs of policymakers like we were. Hopefully, that means no major shocks on the horizon. Delinquencies are at historic lows. We're in a unique point: about 50% of the mortgages outstanding originated at a rate of 4.5% or below, and those borrowers are not going to default on their loans. Between the interest rate on the loans and the amount of equity in the homes, that is about a solid foundation of a servicing portfolio I've ever seen in my career.

We showed during the pandemic what we can do as an industry. Being able to create and adopt our own technology at Pennymac, made us able to quickly deploy forbearance programs. During Covid, we were the second largest issuer of forbearances in the industry. We're also able to meet the demands of our borrowers and offer them modifications where appropriate. Similarly, when VA introduced their VASP program, we were the lead early adopter of that program to help veterans. We're currently working with VA to stand up the new partial claims program, just one example of where technology can be really powerful. This also speaks to the power of a well capitalized, balanced business model. That's what's best for the industry. As we see consolidation in the industry, and we see more of a collaborative nature between regulators and industry participants, that's what's important in helping to drive down the cost to originate. It is important for the industry to band together and dedicate ourselves to reduce the cost to originate.

Where is the Industry Heading?

In addition to myself, people like Varun Krishna (Rocket), Mat Ishbia (UWM), and Stan Middleman (Freedom) are really focusing so much of their time on technology. We all have one goal: to create a fully automated digital mortgage experience. That means investing so many dollars, and so much time, in technology and AI to create that faster, smarter, more seamless loan process. I often say that I'm running a FinTech here at the company. I'm spending at least half my time on all things technology. Our team has done a great job: We've developed over 35 AI tools already that are really helping to

reduce faults or errors, to speed up decisions, and enhance the borrower experience. I'm excited about the new tools that will help our technology teammates expand what they can do and be more effective (e.g., Microsoft copilot is helping to develop faster code that is being used throughout our technology universe). We have other tools that do a lot of the work that previously would require universes of junior coders. We have a dedicated AI accelerator team that's working with our business leaders to help them understand what they can do with technology. We're working with partners like AWS and Google because they understand that it's in their best interest to help. And quite frankly, it helps build their cloud business. We were pretty early creating proprietary technology with our servicing platform, and one of the things we've learned is that legacy systems come with constraints and technology debt.

The ability to create new technology allows us to continue to add scale to our platform, and that's ultimately what's going to give us a competitive advantage. When you drill down to what this means for the different divisions, I think Pennymac TPO is going to be a huge beneficiary of this technology investment. We're building some really exciting tools that I can't wait to introduce to our brokers. It's going to empower them further. It's going to allow them to be able to serve their customers at any time of the day with less reliance on broker originators like UWM and Rocket, and that's why I'm really confident that getting to our 10% market share in that channel by the end of 2026 is, quite frankly, a low bar. The things we're doing with pricing, service, and transparency are really exciting, and our power plus platform is just the opening entree into showing the broker community what we're doing. I think similarly in our Pennymac Correspondent Channel, we're building some really great tools for our own call center that we're going to be able to deploy to our correspondent lenders. We want to protect our market leadership in the correspondent channel. And one of the ways we're going to do that is to continue to partner with our correspondent lenders, to give them the tools to become more efficient. Finally, we're going to be coming out with a non QM product sometime in the fall. It's going to start, I believe, in correspondent, then go into broker. The fact that we've been able to deploy that so quickly, while at the same time helping self employed borrowers and others with alternative income streams, what we've seen with AI to be able to deploy that product is super exciting. It's something that gives me great confidence that any issue that's presented to us in the market, we're going to be able to react even quicker than we've ever been able to react.

What is Being Overlooked?

I am really concerned for our servicing customers, specifically what I'm seeing in terms of the rising cost of homeowners insurance. It is getting some press, but there are also

rising property taxes for most people. So many of our homeowners who are sitting on low rate mortgages have seen property tax increases and homeowners insurance increases that if they're on a fixed income, it's got to be creating some additional stress, especially given what's gone on with inflation for the last five years. That’s something that we need to keep an eye on. If you look at some of the events that have come up, whether it's the fires here in California or hurricanes further east, the effect it's had and will have on our servicing portfolio is something that concerns me. Extending the efficiencies of servicing platforms, which have reduced operating expenses by around 30%, to the production side is really important moving forward.

On the human side, we as an industry have been so focused on the rollercoaster of rates, that I don't think enough has been said about right-sizing organizations. We've got to take the time to build the next generation of mortgage bankers. Keeping great talent in the industry is important, and growing that talent is important. My goal is to take out a lot of the human volatility in terms of you have to hire more people, and then you have to lay people off. No one wants to do that. I'm really hopeful that with technology and with a kind of a rational regulatory environment that we can really get to the goal of having more stable staffing levels and organizations.

There are so many positives for our industry. We've never been better capitalized. Delinquency rates are at historic lows. We need to continue to build on that, because mortgage banking is about rates being high, rates being low, and we're clearly re-normalizing in terms of how mortgage banking operates. You can have a really great career in mortgage banking and make a really good living doing so. We lost an entire generation of potential leaders between 2008 and roughly 2015 because mortgage banking had been stigmatized, and so we have to fill that void.