James Follette
PennyMac Financial ServicesAbout James Follette
James Follette, 53, is Senior Managing Director and Chief Digital Officer at PennyMac Financial Services (PFSI) since November 2023, after leading mortgage operations and fulfillment since 2016 and serving in executive roles since 2011. He holds a B.B.A. in Accounting from the University of Notre Dame and an M.B.A. in Finance from the University of Chicago; his remit spans technology and servicing operations, risk mitigation, and digital strategy . Company performance during the latest year (FY2024) included net income of $311.4 million, ROE of 8.5%, production volume of $116.3 billion UPB (+17% YoY), servicing portfolio UPB of $665.8 billion (+10%), and a quarterly dividend increase to $0.30 (+50%), aligning annual incentives tied to ROE and strategic objectives .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| PFSI | Senior Managing Director & Chief Digital Officer | Nov 2023–present | Responsible for technology and servicing operations; advanced data/AI strategies and infrastructure supporting origination and servicing efficiency . |
| PFSI | Senior Managing Director & Chief Mortgage Operations Officer | Oct 2022–Nov 2023 | Led mortgage operations, operational risk management and process efficiency . |
| PFSI | Senior Managing Director & Chief Mortgage Fulfillment Officer | Feb 2018–Oct 2022 | Managed fulfillment across channels; drove automation and quality control . |
| PFSI | Managing Director, Mortgage Fulfillment | Feb 2016–Feb 2018 | Led fulfillment execution and operational controls . |
| PFSI/PNMAC | Various executive positions | 2011–2016 | Executive leadership across mortgage banking operations and risk . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Countrywide Financial / Bank of America (successor) | Managing Director, Risk Management | 2003–2011 | Led operations and transactional risk; oversight of operational management, risk mitigation, and business development . |
Fixed Compensation
Multi-year reported compensation (ASC 718 grant-date values for equity, actual non‑equity incentive payouts):
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 355,208 | 375,000 | 375,000 |
| Stock Awards ($) | 618,735 | 843,678 | 899,918 |
| Option Awards ($) | 222,594 | 296,050 | 329,977 |
| Non‑Equity Incentive ($) | 975,000 | 438,750 | 797,506 |
| All Other Comp ($) | 34,397 | 35,351 | 36,043 |
| Total ($) | 2,205,934 | 1,988,829 | 2,438,444 |
2024 base salary remained $375,000; annual target incentive was $975,000; actual annual incentive paid was $797,506 (81.8% of target) . Perquisites in 2024 included insurance premiums ($21,318) and 401(k) employer match ($13,800) .
Performance Compensation
Annual Incentive Structure and 2024 Outcomes
| Component | Weight | Target | Actual | Payout (% of Target) |
|---|---|---|---|---|
| ROE | 70% | 15% ROE = 100% payout | 8.5% ROE | 52.6% |
| Strategic Objectives | 30% | Defined goals = 100% payout | Achieved per Strategic Performance Table | 150% |
| Total | 100% | — | — | 81.8% (2014 actual payout) |
Strategic accomplishments included launching Non‑del+ on POWER+, servicing efficiencies, market share gains (#2 producer overall; #1 correspondent at 19.0% share; #3 broker at 4.1%), dividend increase, and technology/digital advances .
Long-Term Equity Awards (Granted Feb 29, 2024)
| Instrument | Shares | Grant-Date Fair Value ($) | Key Terms |
|---|---|---|---|
| Performance RSUs (PSUs) | 7,064 | 599,946 | 3-yr performance period (2024–2026); payout based on cumulative annualized ROE with leverage ratio and individual multipliers; max 300% . |
| Time-based RSUs | 3,532 | 299,973 | Vest in three equal annual installments from grant anniversary . |
| Stock Options | 8,830 | 329,977 | Exercise price $84.93; vest 1/3 annually over 3 years; 10-year term (expires 2/28/2034) . |
PSU design (2024 grants): ROE threshold <5% = 0%; target 15% = 100%; maximum ≥30% = 250%; leverage ratio multiplier from 50% (≥5x) to 120% (≤1.5x); individual effectiveness multiplier 60%–100%; max combined payout 300% .
2022 PSU cohort (performance period 1/1/2022–12/31/2024) paid 0% due to ROE of 8.8% below threshold, despite a 108.9% leverage multiplier; awards were forfeited in February 2025 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership | 71,498 shares (includes options exercisable within 60 days); <1% of outstanding; none pledged . |
| Stock Ownership Guidelines | Executives: 3× base salary; executives 5+ years are in compliance (includes unvested time-based RSUs) . |
| Anti-Pledging/Hedging | Prohibited for officers/directors; preclearance required; 10b5‑1 trading plans permitted during open windows; no margin accounts . |
Vested/Unvested Positions as of 12/31/2024 (valued at $102.14 per share):
- Unvested RSUs: 3,532 (2024) = $360,758; 3,087 (2023) = $315,306; 3,178 (2022) = $324,601 .
- Unearned PSUs (target): 7,064 (2024) = $721,517; 9,260 (2023) = $945,816; 2022 PSU cohort ultimately paid 0% and lapsed Feb 2025 .
- Options:
- 2024: 8,830 unexercisable; $84.93 strike; expires 2/28/2034 .
- 2023: 3,858 exercisable / 7,717 unexercisable; $60.74 strike; expires 2/23/2033 .
- 2022: 18,429 exercisable / 9,216 unexercisable; $57.10 strike; expires 2/22/2032 .
- 2021: 12,935 exercisable; $58.85 strike; expires 2/24/2031 .
- 2020: 20,259 exercisable; $59.68 strike; expires 12/13/2030 .
Valuation uses $102.14 closing price on 12/31/2024 for stock awards; options’ intrinsic value depends on market price vs strike .
Employment Terms
Change-of-Control Severance Plan (applies to named executive officers without separate employment agreements):
- Double-trigger: benefits require qualifying termination within two years post–change of control (termination other than for cause or resignation for good reason) .
- Benefits: 2× base salary; 200% of bonus (greater of last year or two-year average); acceleration of unvested time-based equity and performance awards at target (if not assumed), 18 months health benefits; 18 months outplacement .
Estimated change-of-control payouts for Follette (as of 12/31/2024):
| Component | Amount ($) |
|---|---|
| Base (2×) | 750,000 |
| Bonus (200%) | 1,595,012 |
| Equity Vesting | 4,292,395 |
| Total | 6,637,407 |
Clawbacks and Policies:
- SEC-compliant clawback for incentive-based compensation for Section 16 officers; additional clawback policy applies to all Senior Managing Directors .
- Strong compensation governance: heavy weighting to performance equity; prohibition on option repricing; no excise tax gross-ups for perquisites .
Deferred Compensation:
- Executive Deferred Compensation Plan adopted June 4, 2024; executives may defer salary/bonus/RSUs/PSUs; company may contribute; Follette had no contributions in 2024 (plan eligible) .
Investment Implications
- High pay-for-performance alignment: annual incentives linked 70% to ROE and 30% to strategic goals; FY2024 payout at 81.8% reflects under-target ROE discipline amid a high-rate mortgage environment .
- Long-term equity is substantial and performance-contingent: 50% PSUs with tightened design and widened payout range, plus RSUs and options; 2022 PSUs lapsed at 0%—a strong signal of metric rigor and reduced near-term sell pressure from that cohort .
- Equity overhang and vesting supply: meaningful unvested RSUs and option tranches across 2022–2024 grants; 2024 options have positive intrinsic value vs $102.14 year-end price, implying potential execution under 10b5‑1 plans, though pledging/hedging are prohibited and preclearance applies .
- Change-of-control economics: double-trigger plan with target vesting of performance awards if not assumed and ~ $6.64 million estimated payout could accelerate equity, creating event-driven supply; monitor M&A risk and award assumption terms .
- Ownership/skin-in-the-game: beneficial ownership (<1%) includes options exercisable within 60 days; executives with 5+ years are compliant with 3× salary stock ownership guidelines, and pledging is barred—mitigating alignment risk .