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July 21, 2011

Ms. Cicely LaMothe

Senior Assistant Chief Accountant

United States Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

SUBJECT:

File   No. 001-34416

Response   to your comment letter

PennyMac   Mortgage Investment Trust

Form 10-K   for the year ended December 31, 2010

Filed   on March 7, 2011

Dear Ms. LaMothe:

I am writing in response to your letter dated July 7, 2011 regarding your review of the Annual Report on Form 10-K of PennyMac Mortgage Investment Trust (“PMT” or the “Company”) for the year ended December 31, 2010 as filed on March 7, 2011.

Following are our responses to your comments.  For ease of review, we have reprinted your comments in bold face followed by our responses.

Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 47

1.                                      In future Exchange Act periodic reports, please discuss the current relationship between your weighted average yield on assets as compared to your weighted average financing costs, and clarify whether your average cost of funds reflects the impact of swaps for the covered periods. In addition, please compare the current spread to the prior reporting period spread.

We will add disclosure of the Company’s weighted-average financing costs to the net investment income table beginning with the Quarterly Report for the quarter ended June 30, 2011.  The disclosure will take the following form for each of the comparative reporting periods:

Quarter ended June 30, 2011

Interest income/expense

Net gain

Total

Annualized %

Coupon

Discount
   accrual

Total

(loss) on
   investments

revenue/
    expense

Average
   balance

Interest
   yield/cost

Total
   return

(dollars in thousands)

Assets:

Short term investments

$

xx

$

xx

$

xx

$

xx

$

xx

$

xx,xxx

x.xx

%

x.xx

%

Mortgage-backed securities:

Non-Agency subprime

xx

xxx

xxx

xxx

xxx

xx,xxx

x.xx

%

x.xx

%

Non-Agency Alt-A

xxx

xxx

xxx

xxx

xxx

xx,xxx

x.xx

%

x.xx

%

Non-Agency prime jumbo

xxx

x

xx

xx

xx

x,xxx

x.xx

%

x.xx

%

Total mortgage-backed securities

xxx

xxx

xxx

xxx

xxx

xx,xxx

x.xx

%

x.xx

%

Mortgage loans

x,xxx

xxx

x,xxx

xx,xxx

xx,xxx

xxx,xxx

x.xx

%

x.xx

%

x,xxx

$

xxx

$

x,xxx

$

xx,xxx

$

xx,xxx

$

xxx,xxx

x.xx

%

x.xx

%

Liabilities:

Loans sold under agreements to repurchase

$

x,xxx

$

x,xxx

$

xx,xxx

$

xxx,xxx

x.xx

%

Securities sold under agreements to repurchase

xxx

xxx

xxx

xx,xxx

x.xx

%

Real estate acquired in settlement of loans sold   under agreements to repurchase

xx

xx

xx

x,xxx

x.xx

%

$

x,xxx

$

xx,xxx

x.xx

%

Continuation of management response:

During 2009 and 2010, PMT’s balance sheet was primarily equity financed.  During 2011 through June 30, the Company’s debt financing has grown substantially but is primarily financing non-interest earning assets.  Accordingly, from inception through June 30, 2011, the relationship of interest income to interest expense has been much less direct at PMT than the relationship that exists at traditional investors in performing assets that earn interest.  However, the Company continually evaluates its income statement presentation and its disclosures in Management’s Discussion & Analysis and will discuss the relationship between interest income and expense if and when its balance sheet structure migrates to a performing asset-dominated composition.

We will clarify whether PMT’s average cost of funds reflects the effect of swaps for the covered periods if and when the Company enters into any interest rate swap transactions.

Asset Acquisitions, page 56

2.                                      We note that a majority of your assets were purchased from one large financial institution and that you have a pending purchase in the amount of

27001 Agoura Road, Calabasas, CA 91301

Phone: (818) 224-7442   Website: www.PennyMacUSA.com

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$34.0 million from that same institution. In future Exchange Act periodic reports, please identify this counterparty.

We will identify this institution, CitiMortgage, Inc. and/or its affiliates, in future filings.

Net Investment Income, pages 57 — 59

3.                                      Reference is made to page 59.  We note your gain on mortgage loans resulted from payoffs, valuation changes, and sales. Please tell us and expand future filings to discuss each component in greater detail.  Your discussion should include a summary of the significant transactions related to payoffs and sales activity and any trends noted.  In addition, to the extent applicable, please quantify and discuss any gains within each component that resulted from your loan modification efforts.

Our response is combined with the response to comment 4 below.

4.                                      Further, please explain the factors contributing to the valuation changes and whether they were driven by changes in expectations regarding contractual cash flow or changes in credit risk. In addition, disclose significant inputs used in your valuation, period-to-period changes in those assumptions and a discussion of the economic drivers supporting those changes.  Please provide us the disclosure you will include in future Exchange Act periodic reports to address this issue.

PMT’s gains resulting from payoffs and loan sales have to date been comprised of transactions involving individual loans.  Accordingly, we expect to limit the discussion of gains arising from these transactions to a comparison of the aggregate volume of individual loan activity between the periods unless significant bulk transactions are involved for which separate disclosure will be provided.  The previous disclosure of comparisons of these loan payoffs and loan sales gains between periods has been limited due to the lack of historical data with which to compare current period results.  We expect to expand the comparisons of periods as relevant historical data are developed.

With respect to loan modifications, the Company does not measure the gain or loss from loan modifications separately from the change in fair value that occurs in the reporting period.  In the period of modification, the fair value of the modified loan is compared to the fair value of the loan prior to modification and the difference is reported as a component of gain (loss) on

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investments in mortgage loans in the income statement.  We elect the fair value option in accordance with ASC 825-10-15 for all of our investments in loans.

We expect that future disclosures explaining the factors contributing to the valuation changes will approximate the following disclosure made in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011:

“The net gains on mortgage loans arising from valuation changes were due primarily to the changes in value of loans as the loans moved through the resolution process during the quarter and to reductions in the discount rates we use to estimate the fair value of certain of our mortgage loans. During the quarter ended March 31, 2011, we observed increasing demand for distressed mortgage assets as reflected in increased transaction prices. As a result of these observations the discount rates we use to estimate the fair value of certain of our mortgage loans was decreased to reflect our observations.”

In addition to the items presented in our response to comment 13, we will supplement our discussion with the following table, which ends after footnote 1, for each of the comparative reporting periods.  We will discuss key factors influencing valuation changes, including changes in credit risk as appropriate:

Financial
   Statement Item

Fair Value at
    Reporting
   Date(s)

Valuation
   Technique

Key Input

Range
   (Weighted
   Average)

Mortgage-backed securities(1)

$

xxx,xxx

Broker quote

Discount rate

xx.x% to xx.x%
   (xx.x%)

Prepayment speed

xx.x% to xx.x%
    (xx.x%)

Collateral remaining loss percentage

xx.x% to xx.x%
    (xx.x%)

Mortgage loans

$

xxx,xxx

Discounted cash flow

Discount rate

xx.x% to xx.x%
    (xx.x%)

Twelve-month housing price index change

(x.x)% to (x.x%)
    (x.x%)

Prepayment speed

xx.x% to xx.x%
    (x.x%)

(1) With respect to mortgage-backed securities, key inputs are those used to evaluate broker indications of value.

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Because PMT’s investments in mortgage loans are predominantly nonperforming, the loans’ valuations are not driven by expectations with respect to contractual cash flows.

5.                                      In future Exchange Act periodic reports, please disclose the valuation changes by loan type.

The primary driver of how loans are valued is the loans’ performance status.  Accordingly, in future Exchange Act filings, we will disclose valuation changes segregated between performing and nonperforming loans as shown below:

Net gains on mortgage loans at fair value are summarized below for the periods presented:

Quarter ended
    xxxx,xx,

x months ended
    xxxx xx,

201x

201x

201x

201x

(in thousands)

Valuation changes:

Performing loans

$

xx

$

xx

$

xx

$

xx

Nonperforming loans

xx,xxx

x,xxx

x,xxx

xxx

xx,xxx

x,xxx

x,xxx

$

xxx

Payoffs

x,xxx

xxx

x,xxx

xxx

Sales

x,xxx

xxx

x,xxx

xxx

$

xx,xxx

$

x,xxx

$

x,xxx

$

xxx

6.                                      We note your measure of proceeds received from loans resolved during 2010 as it relates to the purchase price of those loans. To balance your discussion, tell us what consideration was given to quantifying the expenses or cash outflows associated with the settled loans.

The purpose of presenting information on the purchase price of loans resolved during 2010 as compared to the proceeds for the period from acquisition through the resolution event of such loans is to give the reader the ability to evaluate the Company’s performance by comparing the cash inflows (which are net of closing costs and fees) and cash outlay for the loans that were resolved in the period.

Because PMT has elected fair value accounting for its loan investments, its periodic income statements include as a component of income, the change in fair value of the loans.  The gain (loss) on disposition of a loan (through payoff or sale) on the income statement reflects the difference between the proceeds received and the fair value at the later of the beginning of the period or acquisition rather than the difference between original cost and proceeds received.  The gains or losses on the sale of real estate acquired in settlement of loans is included in the income statement as a component of Results of real estate acquired in settlement of loans.

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This line item also includes value changes, in accordance with the lower of cost or market accounting policy described in Note 3 to PMT’s financial statements, from the later of the beginning of the period or acquisition of the real estate to the end of the period.

In management’s view, the reader’s understanding of PMT’s financial results can be enhanced by providing information on cash inflows and cash outflows over the holding period of an acquired distressed asset.

Management believes that a comparison of proceeds (net of costs and fees) and original cash outlay is a meaningful way for readers to assess the effectiveness of the Company’s business strategy over the entire holding period of a loan.

We will continue to evaluate the relevance and usefulness of the current disclosure in future periodic filings.

7.                                      You disclose on page 59, that you cannot provide assurances that the cash received on settled loans is indicative of future cash receipts on your existing mortgage investments or on future investments in mortgage-related assets.  Please clarify if there is any backtesting performed subsequent to the settlement to validate the values assigned to these assets and whether you use that information in updating your fair value model.  In addition, please disclose in future periodic reports whether you believe the fair values reflected diverge materially from amounts you currently anticipate realizing upon settlement.  If so, disclose why and the basis for your views.

The Company’s manager, PNMAC Capital Management, LLC (“PCM”), assesses the effectiveness of its model by comparing actual versus model-forecasted results on a monthly basis.  PCM uses the results of such surveillance in its periodic evaluation of the assumptions used in the valuation process.  We will revise future disclosures to indicate this.

We do not believe that the fair values recorded by the Company diverge materially from the values that the Company would presently realize in an arms’ length sale.  However, the market for PMT’s mortgage assets is illiquid with very few participants.  One of the consequences of this market state is that the loans are classified as “Level 3” and determination of the loans’ fair values is subject to the uncertainties inherent in their illiquidity.

We will include a statement to the following effect in future periodic reports:

“While management believes that the Company’s current fair value estimates are representative of current value at the reporting date, the market for PMT’s mortgage assets is illiquid with very few market participants.   In addition, PMT’s business strategy is to enhance value during the period in which the loans are held; the resulting appreciation or depreciation in the fair value of the loans would be recorded during the holding period and ultimately realized at the end of the holding period.”

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Investment Portfolio Composition, page 60

8.                                      Tell us what consideration was given to also including a tabular presentation showing the fair value of your mortgage-backed securities and your mortgage loan portfolio as compared to the fair value of the underlying collateral.  Provide a discussion of how collateral values are considered and verified in your fair value analyses for these assets.

We did not consider including a tabular presentation showing the fair value of the underlying collateral to PMT’s mortgage-backed securities (“MBS”).  The current investment in mortgage-backed securities has remaining aggregate average lives of less than one year and is comprised of currently cash flowing securities in senior tranches of securitizations that were completed by various lenders.  Providing a reasonably accurate measure of the fair value of the real estate collateral underlying the mortgage collateral for the Company’s securities would be very difficult as the Company does not have access to property addresses for the loans in the MBS.

As further discussed in the response to comment 13, an analytical review of the bond values provided to us by brokers is performed.  Collateral values are indirectly considered in the analysis because the current and projected severity and losses, which are derived from collateral value, are reviewed.  Because of the analytical review performed, the seniority and currently cash flowing nature of the securities and the lack of accuracy surrounding the collateral values, we do not believe that including a tabular presentation of the fair value of the underlying collateral is appropriate.

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With respect to mortgage loans, we have not previously considered tabular presentation comparing the fair value of our mortgage loans to the fair value of the underlying collateral.  In future periodic filings, we will present the following table:

June 30, 2011

December 31, 2010

Fair Values

Loan

Collateral

Loan

Collateral

(in thousands)

Performing loans

$

xx

$

xx

$

xx

$

xx

Nonperforming loans

xx,xxx

x,xxx

x,xxx

xxx

$

xx,xxx

$

x,xxx

$

x,xxx

$

xxx

Property values for the mortgage loan portfolio are originally obtained from brokerage price opinions (“BPOs”) ordered when a pool is purchas