PennyMac’s 33% Plunge Reveals Risks to Mortgage Lenders

Mortgage company stocks tumbled Friday after PennyMac Financial Services Inc.’s reported profits that were significantly below Wall Street’s expectations, dampening the outlook for other lenders as the industry is squeezed by increasing competition.

The company’s shares closed down 33% at $99.92 on Friday, wiping out nearly $2.6 billion from their market value, after its fourth quarter per-share profit came in at $1.97, compared with the more than $3 expected by analysts. The miss was driven by borrowers paying off their loans faster than expected, which exerted a drag on its income.