PennyMac Financial Services investigated after 37% stock drop on refinancing woes

Bleichmar Fonti & Auld LLP is investigating PennyMac Financial Services Inc. for potential securities law violations after a 37% stock decline.

"PennyMac touted the success of its recapture efforts, representing to investors that its recapture rates were improving," the law firm said in its announcement.

On Jan. 29, PennyMac reported disappointing fourth-quarter 2025 results. During the earnings call held the same day, senior management revealed that although the company had increased its origination capacity to recapture more refinance business, many competitors had also added capacity, creating a highly competitive environment that constrained PennyMac's ability to take advantage of refinance opportunities. The stock fell 37%, from $140.70 at the close on Jan. 29 to as low as $93.50 on Jan. 30.

The decline erased more than a third of PennyMac's market value. Investors who purchased shares during the period when the company touted its recapture strategy may have legal options, the firm said. All representation is on a contingency fee basis, with shareholders not responsible for court costs or expenses.

PennyMac originates and services home mortgages. The company had increased its capacity to originate loans to better retain borrowers seeking to refinance — a process known as recapture — as interest rates declined. BFA is investigating whether PennyMac misrepresented its ability to recapture customers refinancing their mortgages.

The broader mortgage servicing sector faces similar headwinds as declining interest rates have spurred a wave of refinancing competition. PennyMac's struggles reflect a wider challenge as lenders compete for a shrinking pool of refinanceable mortgages.

Bleichmar Fonti & Auld is a leading international securities law firm that has recovered over $900 million from Tesla Inc.'s board of directors and $420 million from Teva Pharmaceutical Industries Ltd., according to its website. The firm has been named a top plaintiff law firm by Chambers USA, The Legal 500 and ISS SCAS, and its attorneys have been recognized as "Elite Trial Lawyers" by the National Law Journal and among the top "500 Leading Plaintiff Financial Lawyers" by Lawdragon.

The investigation adds uncertainty for PennyMac shareholders already reeling from the stock's decline. Investors will watch for any restatement of prior financial results or additional disclosures from the company, as well as potential class action filings in the coming weeks.

This article is for informational purposes only and does not constitute investment advice.