PennyMac Financial Services and its servicing arm PennyMac Loan Services are facing a cluster of active lawsuits and investigations, and have recently closed one of the costliest disputes in company history. The current PennyMac lawsuits include a certified-track class action over debit-card and phone payment fees, a proposed veterans’ class action over VA COVID-19 forbearance handling, investor litigation over LIBOR-to-SOFR treatment of preferred shares, and multiple securities fraud investigations opened after a sharp January 2026 stock drop. Below is where each case stands and what it involves.
Pay-to-Pay Fee Class Action
A North Carolina homeowner, Clayton Williams, is leading a federal class action alleging PennyMac charges illegal “convenience” fees when borrowers pay by debit card or phone. The complaint says PennyMac collects $6.75 for a debit card payment and $15 for a phone payment, while the actual processing cost is allegedly $0.50 or less, and that the fees are not authorized by standard mortgage contracts.1National Mortgage News. PennyMac Pay-to-Pay Lawsuit to Move Forward, Judge Rules
PennyMac tried to end the case at the pleadings stage, arguing the fees are charged by a third-party vendor for optional services outside the mortgage contract. U.S. District Judge Irene Berger disagreed in December 2025, finding that Williams had adequately alleged PennyMac “exercises control over the collection of the pay-to-pay fees.”1National Mortgage News. PennyMac Pay-to-Pay Lawsuit to Move Forward, Judge Rules The proposed class covers North Carolina borrowers, with suggested damages above $5 million. The case is now in discovery. Court-ordered mediation must finish by August 2026, and both class certification and dispositive motions are due by December 2026.2PACER Monitor. Williams v. PennyMac Loan Services, LLC
VA COVID-19 Forbearance Class Action
Vietnam War veteran James Cyrus filed a proposed class action against PennyMac in July 2024 in the U.S. District Court for the District of Connecticut. The complaint alleges PennyMac used “bait-and-switch” tactics with VA-backed COVID-19 mortgage relief. Under the 2020 CARES Act, borrowers with federally backed loans were entitled to a 180-day payment pause, and the VA’s deferred-payment program was designed to roll missed payments into a non-interest-bearing second loan payable only at the end of the mortgage.3Bloomberg Law. PennyMac Hit With Veterans’ Suit Over COVID-19 Mortgage Relief
According to Cyrus, PennyMac encouraged veterans to enter the deferral program and then stopped accepting applications without notifying borrowers. Veterans who missed the window were allegedly pushed into loan modifications carrying higher interest rates, late charges, and closing fees. Cyrus says his own interest rate more than doubled after forbearance. The suit brings claims for breach of contract, violations of Connecticut business law, and unjust enrichment, and notes that PennyMac services over 450,000 VA-backed mortgages.3Bloomberg Law. PennyMac Hit With Veterans’ Suit Over COVID-19 Mortgage Relief
On September 30, 2025, U.S. District Judge Victor A. Bolden largely denied PennyMac’s motion to dismiss, letting most claims move forward.4Bursor & Fisher. Military Veteran Defeats Motion to Dismiss in Class Action Against VA Mortgage Servicer
Preferred Shares LIBOR Litigation
Investors holding two series of PennyMac’s fixed-to-floating rate preferred shares are suing over how the company handled the end of LIBOR. Congress passed the Adjustable Interest Rate (LIBOR) Act, and the Federal Reserve issued Regulation ZZ, requiring contracts that referenced LIBOR but lacked fallback provisions to transition to the Secured Overnight Financing Rate. The plaintiffs allege PennyMac ignored that framework and locked in the original fixed dividend rate instead of switching to a SOFR-based floating rate, costing shareholders millions in foregone dividends.5Berman Tabacco. Berman Tabacco Defeats Motion to Dismiss in PennyMac Preferred Shares Litigation
The case, Verthelyi v. PennyMac Mortgage Investment Trust and PNMAC Capital Management, LLC (No. 2:24-cv-05028), is pending in the Central District of California and brings claims under California’s Unfair Competition Law. On February 26, 2025, Judge Michael W. Fitzgerald denied the defendants’ motions to dismiss in their entirety.5Berman Tabacco. Berman Tabacco Defeats Motion to Dismiss in PennyMac Preferred Shares Litigation PennyMac then secured permission to take an interlocutory appeal to the Ninth Circuit, and the district court proceedings are stayed while that appeal plays out.6Berman Tabacco. PennyMac Preferred Shares Litigation The Ninth Circuit granted the petition on July 17, 2025. PennyMac filed its opening brief in October 2025, and the appellee filed its answering brief in December 2025.7Justia. Verthelyi v. PennyMac Mortgage Investment Trust, No. 25-4458
2026 Securities Fraud Investigations
PennyMac stock fell sharply after the company released its fourth-quarter and full-year 2025 results on January 29, 2026. Revenue came in at $538 million, missing analyst estimates by roughly $83 million, and earnings per share of $1.96 fell $1.27 short of expectations. Return on equity was 10%, well below the company’s prior guidance of “high-teens to low-20s.” CEO David Spector attributed the shortfall to unexpectedly high runoff in PennyMac’s mortgage servicing rights portfolio, which failed to hedge production income the way management had expected.8BusinessWire. Securities Fraud Investigation Into PennyMac Financial Services Shares closed at $140.70 on January 29 and traded as low as $93.50 the next day, a drop of more than 33%.9GlobeNewsWire. PFSI Securities Investigation — PennyMac 37% Stock Drop
Several plaintiffs’ firms, including Bleichmar Fonti & Auld, Glancy Prongay & Wolke, the Rosen Law Firm, and the Law Offices of Frank R. Cruz, announced investigations into whether PennyMac violated federal securities laws by issuing misleading statements about its ability to recapture refinancing customers and about its financial outlook.10HousingWire. PennyMac Shareholder Investigation Earnings As of mid-2026, the probes remain at the investigation stage. No formal securities class action complaint with a case number has been filed.11Rosen Law Firm. PennyMac Financial Services Investigation A PennyMac spokesperson said the company “does not express views regarding unconfirmed reports.”
Black Knight Antitrust Arbitration and $150 Million Award
PennyMac’s largest concluded dispute grew out of its 2019 decision to leave Black Knight’s dominant mortgage servicing software, LoanSphere MSP. A Black Knight affiliate sued PennyMac in Florida state court on November 5, 2019, seeking ownership of custom modules PennyMac had built. PennyMac responded the next day with an antitrust suit in the Central District of California, alleging Black Knight used its market dominance for unlawful product tying under the Sherman Act, the California Cartwright Act, and California’s Unfair Competition Law.12PennyMac Financial Services. PennyMac Financial Services Files Antitrust Lawsuit Against Black Knight
A Florida judge sent the case to arbitration in April 2020, and PennyMac dismissed its California suit to pursue its antitrust theories as counterclaims before arbitrator David H. Lichter. The arbitrator issued an interim award on November 28, 2023, and a corrected final award on January 12, 2024. He found that PennyMac had breached its Master Services Agreement by incorporating Black Knight confidential information into its proprietary Servicing Systems Environment (SSE) software, and awarded Black Knight $150,231,878 in contract damages plus $6,958,795 in prejudgment interest.13SEC. PennyMac Motion to Confirm Arbitration Award, Exhibit 99-1 Black Knight’s trade-secret misappropriation claims under Florida law were rejected, and its request for an injunction transferring SSE back to Black Knight was denied, letting PennyMac keep using its own servicing technology.14Inside Mortgage Finance. PennyMac Ordered to Pay $155 Million in Tech Breakup
The arbitrator also ruled for PennyMac on its Sherman Act monopolization counterclaim, ordering injunctive relief against certain Black Knight practices, but awarded no monetary damages to PennyMac. The exact terms of the injunction were sealed. PennyMac sought public disclosure; Intercontinental Exchange, which acquired Black Knight in September 2023, opposed it.15Jus Mundi. Judgment on Confirmed Arbitration Award, PennyMac v. Black Knight On March 15, 2024, the Circuit Court in Duval County, Florida confirmed both awards. A September 2025 docket update lists the case as concluded.16Jus Mundi. Order Confirming Arbitration Award, PennyMac v. Black Knight
Force-Placed Insurance Cases
Force-placed insurance, meaning policies a servicer buys on a borrower’s behalf when the borrower’s own coverage lapses, has produced several PennyMac cases.
The largest was Cooper v. PennyMac Loan Services LLC (No. 1:16-cv-20413) in the Southern District of Florida. The class action alleged PennyMac force-placed hazard, flood, and wind insurance at excessive rates and received unauthorized “kickbacks” from insurers. The case settled with final approval on May 16, 2017. Eligible borrowers charged for force-placed policies issued by QBE-related defendants between February 2011 and October 2016 received cash or account credits equal to 10.5% or 5.5% of the net premium, depending on timing. The defendants denied wrongdoing.17Top Class Actions. PennyMac Loan Services Force-Placed Insurance Class Action Settlement
In PennyMac Loan Services, LLC v. Johnson (No. COA22-629), a North Carolina borrower counterclaimed that PennyMac force-placed insurance on parcels not covered by his mortgage. The North Carolina Court of Appeals ruled in April 2023 that PennyMac had a “reasonable basis” to believe coverage was required and dismissed Johnson’s Fair Debt Collection Practices Act claims, holding that PennyMac, as the owner of the mortgage debt, was not a “debt collector” under the statute. The court noted PennyMac had already refunded the force-placed charges after Johnson complained to the state banking regulator.18FindLaw. PennyMac Loan Services v. Johnson, No. COA22-629
In Charney v. PennyMac Loan Services (No. 1:2023cv02955) in the District of Maryland, the plaintiffs allege PennyMac failed to pay their homeowner’s insurance premium from escrow, letting the policy lapse before their home was damaged by fire in March 2022. PennyMac later obtained a retroactive force-placed policy, but it excluded personal property and loss-of-use coverage. In May 2024, the court dismissed the negligence claim under the economic loss doctrine but allowed breach-of-contract and RESPA claims to proceed.19Justia. Charney v. PennyMac Loan Services, Memorandum Opinion