PennyMac Mortgage Investment Trust (PMT) risk factors, 2026 10-K

Other

1. 01Interest rate fluctuations could significantly decrease our results of operations and cash flows and the fair value of our investments100% rewritten
2. 02Our or PLS’ inability to meet certain net worth and liquidity requirements imposed by the Agencies could have a material adverse effect on our business, financial condition, liquidity and results of operation41% rewritten
3. 03We may engage in mortgage loan securitizations that could adversely affect our business, financial condition, liquidity and results of operations98% rewritten
4. 04Existing or new rules and regulations by federal and state regulators could result in enforcement actions, fines, penalties and reputational harmnew
5. 05Our correspondent production activities could subject us to increased risk of loss that could adversely affect our business, financial condition, liquidity and results of operations100% rewritten
6. 06Our retention of credit risk underlying loans is inherently uncertain and exposes us to a risk of loss44% rewritten
7. 07Climate change, adverse weather conditions, man-made or natural disasters, pandemics, wars and armed conflicts, terrorist attacks, and other long term physical and environmental changes and conditions could adversely impact properties that we own or that collateralize loans we own or service42% rewritten
8. 08Many of our investments are illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditionsnew
9. 09Even if we qualify as a REIT, we face tax liabilities that reduce our cash flow, and a significant portion of our income may be earned through TRSs that are subject to U.S. federal income taxation

Risks Related to Our Business

1. 10Interest rate fluctuations could significantly decrease our results of operations and cash flows and the fair value of our investmentsnew
2. 11Our investments are highly dependent on macroeconomic, real estate, mortgage and financial market conditions that could materially and adversely affect our business, financial condition, liquidity and results of operationsnew
3. 12amount of time to realizenew
4. 13Rising homeownership costs may negatively impact housing affordability and increase mortgage delinquencies, defaults, and foreclosuresnew
5. 14Because we and PLS are not federally chartered depository institutions, neither we nor PLS benefit from exemptions to state mortgage lending, loan servicing or debt collection licensing and regulatory requirements. Accordingly, PLS is licensed in all state jurisdictions where it is required to be licensednew
6. 15impact our business, financial condition, liquidity, results of operations and ability to make distributions to our shareholdersnew
7. 16We have a substantial amount of indebtedness, which may limit our financial and operating activities, expose us to substantial increases in costs due to interest rate fluctuations, expose us to the risk of default under our debt obligations and adversely affect our ability to incur additional debt to fund future needs
8. 17place us at a competitive disadvantage to competitors that have relatively less debt than we have
9. 18From time to time we may be affected by general economic conditions, industry trends, performance and many other factors outside our controlnew
10. 19We finance our investments with borrowings, which may materially and adversely affect our return on our investments and may reduce cash available for distribution to our shareholders
11. 20Our financing agreements contain financial and restrictive covenants that could adversely affect our financial condition and our ability to operate our businesses
12. 21We may not be able to raise the debt or equity capital required to finance our assets or grow our business74% rewritten
13. 22We operate in a highly regulated industry and the continually changing federal, state and local laws and regulations could materially and adversely affect our business, financial condition, liquidity and results of operations56% rewritten
14. 23Existing new rules and regulations by federal and state regulators could result in enforcement actions, fines, penalties and reputational harmnew
15. 24We are highly dependent on U.S. government-sponsored entities and government agencies, and any organizational or pricing changes at such entities or their regulators could materially and adversely affect our business, liquidity, financial condition and results of operationsnew
16. 25Failures at financial institutions at which we deposit funds or maintain investments could adversely affect us
17. 26We are subject to risks associated with the discontinuation of LIBOR, including its impact on our Series A Preferred Shares and Series B Preferred Shares
18. 27We are subject to market risk and declines in credit quality and changes in credit spreads, which may adversely affect investment income and cause realized and unrealized losses
19. 28Hedging against interest rate exposure may materially and adversely affect our business, financial condition, liquidity, results of operations and cash flows
20. 29we may fail to recalculate, re‑adjust and execute hedges in an efficient manner51% rewritten
21. 30Our correspondent production activities depend, in part, upon PLS’ and PFSI’s ability to adapt to and implement technological changes and to successfully develop, implement and protect their proprietary technology25% rewritten
22. 31Technology disruptions or failures, including a failure in our and our Manager’s information systems or those of third parties with whom we or our Manager does business, could disrupt our or our Manager’s business, cause legal or reputational harm and adversely impact our results of operations and financial condition66% rewritten
23. 32Our and our Manager’s services rely on software and services from third-party vendors and if any of these services became unavailable or unreliable, it could adversely affect the quality and timeliness of services and adversely impact our results of operations and financial condition
24. 33The development, proliferation and use of artificial intelligence could give rise to legal and/or regulatory action, damage our and our Manager’s reputation or otherwise materially harm our and our Manager’s business61% rewritten
25. 34The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulations and conflicting legal requirements65% rewritten

Risks Related to Our Investments

1. 35Our retention of credit risk underlying loans is inherently uncertain and exposes us to a risk of loss25% rewritten
2. 36The loans in which we invest subject us to costs and losses arising from delinquency and foreclosure, as well as the risks associated with residential real estate and residential real estate-related investments, any of which could result in losses to us
3. 37Our ownership of mortgage servicing rights exposes us to significant prepayment, delinquency, interest rate and regulatory risks
4. 38adversely impacting our business, financial condition, liquidity, results of operations and ability to make distributions to our shareholdersnew
5. 39Failure to service loans according to various Servicing Guidelines and other contractual requirements may result in the termination of our servicing agreement and MSRs, which could adversely affect our business, financial condition, liquidity and results of operationsnew
6. 40We may change our investment strategies and policies without shareholder consent, and this may materially and adversely affect the market value of our Common Shares and our ability to make distributions to our shareholders
7. 41Investments in subordinate loans and mortgage securities could subject us to increased risk of losses
8. 42Many of our investments are unrated or, where any credit ratings are assigned to our investments, they will be subject to ongoing evaluations and revisions and we can provide no assurance that those ratings will not be downgraded
9. 43We may be materially and adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated at any given time, as well as from unfavorable changes in the related geographic regions52% rewritten
10. 44Fair values of many of our investments are estimates and the realization of reduced values from our recorded estimates may materially and adversely affect periodic reported results and credit availability, which may reduce earnings and, in turn, cash available for distribution to our shareholders100% rewritten
11. 45Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting interpretations or assumptions could impact our financial statements
12. 46We and PCM utilize analytical models and data in connection with the valuation of our investments, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks
13. 47We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition, liquidity and results of operations
14. 48We are subject to counterparty risk and may be unable to seek indemnity or require our counterparties to repurchase loans if they breach representations and warranties, which could cause us to suffer losses

Risks Related to Our Management and Relationship with Our Manager and Its Affiliates

1. 49We are dependent upon PCM and PLS and their resources and may not find suitable replacements if any of our service agreements with PCM or PLS are terminated39% rewritten
2. 50not be able to replace these services in a timely manner or on favorable terms, or at all, and we ultimately would be required to compete against PLS as it relates to our correspondent business activitiesnew
3. 51The management fee structure may provide incentives not fully aligned with our interest and may create greater investment risk
4. 52The servicing fee structure could create a conflict of interest
5. 53Termination of our management agreement and/or servicing agreement with PCM and PLS, which are wholly-owned subsidiaries of PFSI, would be difficult and could result in a significant termination fee or loss
6. 54Our relationship with PFSI, PCM and PLS may result in conflicts of interest
7. 55We may encounter conflicts of interest in our Manager’s efforts to appropriately allocate its time and services between activities of PFSI and the management of us, and the loss of the services of our Manager’s management team could adversely affect us and other entities or accounts that they may manage in the future
8. 56PCM and PLS both have limited liability and indemnity rights

Risks Related to Our Organization and Structure

1. 57Certain provisions of Maryland law, our staggered board of trustees and certain provisions in our declaration of trust could each inhibit a change in our control59% rewritten
2. 58terms of our trustees may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interests of our shareholdersnew
3. 59Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit shareholder recourse in the event of actions not in the best interest of our shareholders
4. 60Our declaration of trust contains provisions that make removal of our trustees difficult, which could make it difficult for our shareholders to effect changes to our management
5. 61Our bylaws include an exclusive forum provision that could limit our shareholders’ ability to obtain a judicial forum viewed by the shareholders as more favorable for disputes with us or our trustees or officers
6. 62Failure to maintain exemptions or exclusions from registration under the Investment Company Act could materially and adversely affect us
7. 63Rapid changes in the fair values of our investments may make it more difficult for us to maintain our REIT qualification or exclusion from the Investment Company Act

Risks Related to Taxation

1. 64Our failure to qualify as a REIT would result in higher taxes and reduced cash available for distribution to our shareholders43% rewritten
2. 65The percentage of our assets held through TRSs and the amount of our income that we can receive in the form of TRS dividends are subject to statutory limitations that could jeopardize our REIT status and limit our pursuit of certain investment strategies
3. 66Ordinary dividends payable by REITs do not generally qualify for the reduced tax rates applicable to certain corporate dividends
4. 67We have not established a minimum distribution payment level and no assurance can be given that we will be able to make distributions to our shareholders in the future at current levels or at all
5. 68the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates
6. 69The REIT distribution requirements could materially and adversely affect our ability to execute our business strategies
7. 70We may be required to report taxable income early in our holding period for certain investments in excess of the economic income we ultimately realize from them
8. 71The share ownership limits applicable to us that are imposed by the Internal Revenue Code for REITs and our declaration of trust may restrict our business combination opportunities
9. 72Complying with the REIT requirements can be difficult and may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
10. 73Complying with the REIT requirements may limit our ability to hedge effectively
11. 74The tax on prohibited transactions limits our ability to engage in transactions, including certain methods of securitizing loans that would be treated as sales for U.S. federal income tax purposes70% rewritten
12. 75The taxable mortgage pool (“TMP”) rules may increase the taxes that we or our shareholders may incur, and may limit the manner in which we effect future securitizations
13. 76New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT59% rewritten
14. 77laws and interpretations thereof could materially and adversely affect us and our shareholders. We cannot predict how changes in the tax laws might affect us or our shareholdersnew

General Risks

1. 78Our and our Manager’s risk management efforts may not be effective in identifying our significant risks and designing and implementing adequate internal controls to mitigate those risks
2. 79We could be harmed by misconduct or fraud that is difficult to detect
3. 80Our failure to appropriately address various issues that may give rise to reputational risk could adversely affect our business, financial condition and results of operations
4. 81regulatory action, impact our ability to attract and retain customers, trading counterparties, investors and employees and adversely affect our business, financial condition, liquidity, results of operations and our ability to make distributions to our shareholders
5. 82If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud
6. 83We operate in a highly competitive market and decreased margins resulting from increased competition or our inability to compete successfully could adversely affect our business, financial condition, liquidity and results of operations
7. 84Future issuances of our equity and debt securities may rank senior to our Common Shares and may materially and adversely affect the market price of our Common Shares72% rewritten
8. 85distributions, to holders of our Common Shares. In addition, upon liquidation, holders of our debt securities and other loans would receive a distribution of our available assets before holders of our common sharesnew
9. 86Initiating new business activities or investment strategies, developing new products or significantly expanding existing business activities or investment strategies may expose us to new risks and increase our cost of doing business
10. 87We may not be able to successfully generate sufficient returns and cash flows to make or sustain distributions to our shareholders