On December 30, 2013, PennyMac Financial Services, Inc. (the Company), through its subsidiary, PennyMac Loan Services, LLC ('PLS'), and Private National Mortgage Acceptance Company, LLC ('PNMAC'), entered into an amendment to its Second Amended and Restated Loan and Security Agreement with CSFB, dated as of March 27, 2012 (the 'Loan and Security Agreement'). The amendment to the Loan and Security Agreement was approved by a committee of the company's board of directors comprised solely of independent members thereof. Pursuant to the terms of the Loan and Security Agreement, CSFB made available to PLS a revolving credit facility in an amount not to exceed $117 million (the 'Facility') in order to finance certain mortgage servicing rights and receivables owned by PLS.

The principal amount of each borrowing under the Facility is based upon a percentage of the market value of the related mortgage servicing rights or receivable, as applicable, pledged by PLS. Upon PLS's repayment of a borrowing, PLS is required to repay CSFB the principal amount of such borrowing plus accrued interest (at a rate reflective of the current market) to the date of such repayment. PLS also pays CSFB a fee for the structuring of the Facility, as well as certain other administrative costs and expenses in connection with CSFB's management and ongoing administration of the Facility.

The Facility requires that PLS make certain representations, warranties and covenants customary for this type of transaction, including certain financial covenants consistent with PLS's other credit facilities. The mortgage servicing rights and receivables pledged under the Facility also serve as cross-collateral for PLS's obligations under a separate mortgage loan repurchase agreement with CSFB. The Facility also contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction.

The remedies for such events of default include the acceleration of the principal amount outstanding under the Facility and the liquidation by CSFB of the pledged mortgage servicing rights and receivables then securing the borrowings. The obligations of PLS are fully guaranteed by PNMAC. As amended, the Loan and Security Agreement now also provides that, to the extent PMH breaches the terms of its Security and Subordination Agreement, a 'trigger event' may be deemed to exist, whereby PLS would be required to either (i) repay CSFB in full the outstanding borrowings under the Loan and Security Agreement, or (ii) repurchase the excess servicing spread from PMH at fair market value.

To the extent PLS is unable to repay the loan under the Loan and Security Agreement or repurchase the excess servicing spread, an event of default would exist under the Loan and Security Agreement.