Decline in Market Value of Loans Held for Sale Drives Nine Month
MT. LAUREL, N.J.--(BUSINESS WIRE)--Nov. 8, 2007--PHH Corporation
(NYSE:PHH) today announced results for the quarter and nine months
ended September 30, 2007.
Net revenues for the quarter ended September 30, 2007 were $484
million, a decrease of 9.5% from Net revenues of $535 million for the
quarter ended September 30, 2006. Net loss for the third quarter of
2007 was $38 million, compared to a Net loss for the third quarter of
2006 of $7 million. Basic and diluted loss per share for the three
months ended September 30, 2007 was $0.69 compared to $0.13 for the
three months ended September 30, 2006.
Net revenues for the nine months ended September 30, 2007 were
$1.69 billion compared to $1.67 billion for the same period in 2006,
an increase of 1%. Year-to-date Net loss through the third quarter of
2007 was $24 million, compared to a year-to-date Net loss through the
third quarter of 2006 of $17 million. Basic and diluted loss per share
for the nine months ended September 30, 2007 was $0.44 compared to
$0.32 for the same period in 2006.
Mortgage Production Segment
Net revenues for the quarter ended September 30, 2007 for the
Mortgage Production segment were negative $10 million compared to
positive Net revenues of $74 million for the quarter ended September
30, 2006. Segment loss for the third quarter of 2007 was $113 million
compared to segment loss of $49 million in the third quarter of 2006.
The increase in segment loss was primarily due to a $79 million
unfavorable change in the (Loss) gain on sale of mortgage loans, net.
During the third quarter of 2007, (Loss) gain on sale of mortgage
loans, net was negatively impacted by adverse secondary market
conditions primarily related to certain non-conforming loan products,
including jumbo, Alt-A, second lien products and loans with
origination flaws or performance issues ("scratch and dent"), that
experienced both a reduction in overall investor demand and discounted
pricing in the secondary mortgage market. The Company recognized
losses of $89 million in the third quarter of 2007 related to a
decline in the market value of these loans. The majority of the
non-conforming loans that the Company originated through the third
quarter of 2007 were either sold in the third quarter of 2007 or are
committed to be sold or securitized in the fourth quarter of 2007.
Total closings for the three months ended September 30, 2007 were
down 5% to $10.2 billion, compared to $10.7 billion for the same
period in 2006. Of this decline, purchase closings dropped 6% to $7.3
billion from $7.8 billion in the third quarter of 2006 while refinance
closings dropped 1%; fixed interest rate closings were up 2% and
adjustable rate closings were down 14% compared to the third quarter
of 2006. Overall origination volumes were negatively impacted by
adverse conditions in the secondary mortgage market.
Net revenues for the nine months ended September 30, 2007 were
$167 million compared to $268 million for the same period in 2006. For
the nine months ended September 30, 2007 segment loss was $160 million
compared to segment loss for the nine months ended September 30, 2006
of $96 million.
While the third quarter of 2007 was a difficult one for the
Mortgage Production segment, highlights include:
- Five new private label clients have been signed since July 1,
2007 bringing the total to ten new private label client
signings this year
- Discussions continue with a number of potential private label
clients
- Total closings were $10.2 billion for the quarter
Mortgage Servicing Segment
Net revenues for the third quarter of 2007 for the Mortgage
Servicing segment were $24 million versus Net revenues of $10 million
for the third quarter of 2006. Segment loss was $2 million for the
three months ended September 30, 2007, compared to segment loss of $7
million for the three months ended September 30, 2006.
Net revenues increased by $14 million (140%) during the third
quarter of 2007 compared to the third quarter of 2006. The increase in
Net revenues was due to a favorable change of $18 million in Valuation
adjustments related to mortgage servicing rights and a $3 million
increase in Other income that were partially offset by a $6 million
decrease in Loan servicing income and a $1 million decrease in
Mortgage net finance income.
Net revenues for the nine months ended September 30, 2007 were
$138 million versus $81 million for the nine months ended September
30, 2006. Segment profit for the nine months ended September 30, 2007
was $70 million compared to segment profit of $14 million in the same
period in 2006.
Highlights for the Mortgage Servicing segment in the third quarter
of 2007 include:
- Servicing portfolio at $166.9 billion, including subservicing
- Delinquency rate on the unpaid balance of 2.6%, which compares
favorably to the industry
- Sale of servicing associated with $9.6 billion of the unpaid
principal balance of underlying mortgage loans during the
third quarter of 2007
Fleet Management Services Segment
Net revenues for the third quarter of 2007 for our Fleet
Management Services segment were $470 million compared to Net revenues
in the third quarter of 2006 of $451 million. Segment profit for the
three months ended September 30, 2007 was $30 million compared to $24
million for the three months ended September 30, 2006.
The increase of $19 million in Net revenues in the third quarter
of 2007 compared to the third quarter of 2006 was primarily due to a
$13 million increase in Fleet lease income due to higher total lease
billings resulting from higher interest rates on variable interest
rate leases and new leases combined with a 2% increase in the average
number of leased vehicles. In addition, Fleet management fees
increased by $2 million during the third quarter of 2007 compared to
the third quarter of 2006 due to increases in fee-based products. The
$4 million increase in Other income in 2007 was primarily due to
increased interest income.
Also during the third quarter of 2007 compared to the third
quarter of 2006, the average number of leased vehicle and fuel cards
each increased 2%, while the average number of accident management
vehicles increased 1%. The average number of maintenance service cards
declined by 3% for the third quarter of 2007 compared to the third
quarter of 2006.
Net revenues for the nine months ended September 30, 2007 were
$1.4 billion compared to $1.3 billion for the nine months ended
September 30, 2006. Segment profit on a year-to-date basis as of
September 30, 2007 was $81 million versus $75 million for the same
period in 2006.
Liquidity
Given its expectations for mortgage origination volumes, the
Company believes that the committed capacity provided by the renewal
or replacement of, or commitments for, various financing facilities
detailed in the Company's Current Report on Form 8-K filed on November
2, 2007 (the "Form 8-K") and its other existing credit facilities is
adequate to fund the Company's ongoing mortgage operations for at
least the next 12 months. The Company will continue to evaluate
proposals for incremental mortgage warehouse facilities to provide
supplemental capacity as necessary.
It should also be noted that the Company's origination efforts
have focused on a higher concentration of conforming and other
traditional loan products which has resulted in accelerated sales of
loans held for sale thus reducing the size of the commitments needed.
Investors should consult the Form 8-K and the Company's Form 10-Q for
the quarter ended September 30, 2007, including the Subsequent Events
section, for more information regarding the Company's financing
activities.
Management Comments and Outlook
Terry Edwards, president and chief executive officer, stated,
"During the third quarter, our mortgage origination business
experienced slowing volumes as disruptions in the credit markets
reverberated throughout the industry. Earnings were negatively
impacted by declines in the market value of scratch and dent loans,
prime closed-end seconds, jumbo prime, conforming ARMs, and Alt-A
products--the majority of which were either sold in the third quarter
or are committed to be sold or securitized in the fourth quarter of
2007. We have adjusted our pricing on new mortgage products to reflect
the current environment. We expect a decline in overall originations
in 2008 and will incur severance and facility shut-down costs in the
fourth quarter of 2007 as we adjust headcount to our revised
origination forecasts for 2008. Given our results through the nine
months ended September 30, 2007 combined with lowered expectations for
the fourth quarter of 2007 due to industry weakness and our expected
severance and facility shut-down costs, we do not expect our combined
mortgage segments to be profitable for the year ended December 31,
2007.
"We continue to have success in growing our private-label mortgage
business. So far in 2007, we have signed ten new accounts including
Premier West, First Security, Signature Bank, American Momentum Bank,
and First Chicago Bank & Trust. We anticipate over $1 billion in
closed loans from these accounts during 2008 and are currently in
varying degrees of discussion with a number of prospective clients.
"During the quarter, our Fleet Management Services segment
generated positive results despite some adverse impact to spread
income resulting from disruption in the credit markets, which we
expect to continue into 2008."
Terry Edwards commented further, "We expect 2008 to be a year
characterized by uncertainty and volatility in the mortgage industry.
We have already reduced expenses, including headcount and facility
reductions, and will continue to review our cost structure to make
additional reductions we determine appropriate to align our costs to
future origination volumes. Our goal is to be profitable in our
combined mortgage segments for 2008. In our Fleet Management Services
segment, we expect continued good performance but results may be
negatively affected by increased credit costs.
"While this has been a very difficult quarter for the entire
financial services industry, we believe that PHH has weathered it more
favorably than many of our competitors--a strong testament to our
traditional approach, business model, conservative product offerings
and dedicated employees. We believe the long term prospects continue
to be bright for PHH Corporation."
About PHH Corporation
Headquartered in Mount Laurel, New Jersey, PHH Corporation is a
leading outsource provider of mortgage and vehicle fleet management
services. Its subsidiary, PHH Mortgage, is one of the top ten retail
originators of residential mortgages in the United States(1), and its
subsidiary, PHH Arval, is a leading fleet management services provider
in the United States and Canada. For additional information about the
company and its subsidiaries please visit our website at www.phh.com.
(1) Inside Mortgage Finance, Copyright 2007
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements are subject to known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. You should understand that these
statements are not guarantees of performance or results and are
preliminary in nature. Statements preceded by, followed by or that
otherwise include the words "believes", "expects", "anticipates",
"intends", "projects", "estimates", "plans", "may increase", "may
result", "will result", "may fluctuate" and similar expressions or
future or conditional verbs such as "will", "should", "would", "may"
and "could" are generally forward-looking in nature and not historical
facts. For example, the statements regarding our belief that the
committed capacity provided by the renewal or replacement of, or
commitments for, various financing facilities detailed in our Form 8-K
and our other existing credit facilities is adequate to fund the
Company's ongoing mortgage operations for at least the next 12 months,
our intention to continue to evaluate proposals for incremental
mortgage warehouse facilities to provide supplemental capacity as
necessary, our expectation of a decline in overall originations in
2008, our expectation that our combined mortgage segments will not be
profitable for the year ended December 31, 2007, our expectation as to
closed loans from new private-label mortgage accounts during 2008, our
intention to continue to review our cost structure to make additional
reductions we determine appropriate to align our costs to future
origination volumes, our goal to be profitable in our combined
mortgage segments for 2008, our expectation of continued good
performance in our Fleet Management Services segment, our belief that
PHH has weathered it more favorably than many of our competitors and
our belief that the long term prospects continue to be bright for the
Company are forward-looking statements.
You should consider the areas of risk described under the heading
"Cautionary Note Regarding Forward-Looking Statements" and "Risk
Factors" in our periodic reports filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended, in connection with any forward-looking statements that may be
made by us and our businesses generally. Except for our ongoing
obligations to disclose material information under the federal
securities laws, we undertake no obligation to release publicly any
updates or revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events unless
required by law.
PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- --------------------
2007 2006 2007 2006
-------- -------- --------- --------
Revenues
Mortgage fees $ 34 $ 33 $ 101 $ 98
Fleet management fees 41 39 122 117
-------- -------- --------- --------
Net fee income 75 72 223 215
-------- -------- --------- --------
Fleet lease income 403 390 1,190 1,143
-------- -------- --------- --------
(Loss) gain on sale of
mortgage loans, net (37) 42 76 168
-------- -------- --------- --------
Mortgage interest income 91 98 280 268
Mortgage interest expense (69) (71) (212) (200)
-------- -------- --------- --------
Mortgage net finance
income 22 27 68 68
-------- -------- --------- --------
Loan servicing income 123 129 384 383
-------- -------- --------- --------
Change in fair value of
mortgage servicing rights (249) (302) (232) (237)
Net derivative gain (loss)
related to mortgage
servicing rights 119 154 (93) (132)
-------- -------- --------- --------
Valuation adjustments
related to mortgage
servicing rights (130) (148) (325) (369)
-------- -------- --------- --------
Net loan servicing
(loss) income (7) (19) 59 14
-------- -------- --------- --------
Other income 28 23 74 65
-------- -------- --------- --------
Net revenues 484 535 1,690 1,673
-------- -------- --------- --------
Expenses
Salaries and related
expenses 81 81 249 257
Occupancy and other office
expenses 19 20 55 60
Depreciation on operating
leases 318 308 944 918
Fleet interest expense 55 51 159 143
Other depreciation and
amortization 6 9 22 27
Other operating expenses 92 97 274 274
-------- -------- --------- --------
Total expenses 571 566 1,703 1,679
-------- -------- --------- --------
Loss before income taxes and
minority interest (87) (31) (13) (6)
(Benefit from) provision for
income taxes (50) (25) 7 10
-------- -------- --------- --------
Loss before minority interest (37) (6) (20) (16)
Minority interest in income
of consolidated entities,
net of income taxes of $(1),
$(1), $(3) and $(1) 1 1 4 1
-------- -------- --------- --------
Net loss $ (38) $ (7) $ (24) $ (17)
======== ======== ========= ========
Basic and diluted loss per
share $ (0.69) $ (0.13) $ (0.44) $ (0.32)
======== ======== ========= ========
Weighted-average common
shares outstanding -- basic
and diluted 54.020 53.743 53.865 53.613
======== ======== ========= ========
PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30, December 31,
2007 2006
------------- -------------
ASSETS
Cash and cash equivalents $ 118 $ 123
Restricted cash 627 559
Mortgage loans held for sale, net 1,836 2,936
Accounts receivable, net 566 462
Net investment in fleet leases 4,168 4,147
Mortgage servicing rights 1,969 1,971
Investment securities 16 35
Property, plant and equipment, net 60 64
Goodwill 86 86
Other assets (1) 420 377
------------- -------------
Total assets $ 9,866 $ 10,760
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 466 $ 494
Debt 6,794 7,647
Deferred income taxes 758 766
Other liabilities 302 307
------------- -------------
Total liabilities 8,320 9,214
------------- -------------
Commitments and contingencies -- --
Minority interest 33 31
Total stockholders' equity (2) 1,513 1,515
------------- -------------
Total liabilities and stockholders' equity $ 9,866 $ 10,760
============= =============
(1) Other assets include intangible assets of $43 million and $47
million as of September 30, 2007 and December 31, 2006,
respectively.
(2) Outstanding shares of common stock were 54.009 million and 53.507
million as of September 30, 2007 and December 31, 2006,
respectively.
PHH CORPORATION AND SUBSIDIARIES
CONSOLIDATING SEGMENT RESULTS
(Unaudited)
(In millions)
Net Revenues Segment (Loss) Profit (1)
------------------------- --------------------------
Three Months Ended Three Months
September 30, Ended September 30,
------------------ -------------------
2007 2006 Change 2007 2006 Change
-------- ------- ------ -------- -------- ------
(In millions)
Mortgage
Production
segment $ (10) $ 74 $ (84) $ (113) $ (49) $(64)
Mortgage
Servicing
segment 24 10 14 (2) (7) 5
-------- ------- ----- -------- -------- -----
Total Mortgage
Services 14 84 (70) (115) (56) (59)
Fleet Management
Services segment 470 451 19 30 24 6
-------- ------- ----- -------- -------- -----
Total reportable
segments 484 535 (51) (85) (32) (53)
Other (2) -- -- -- (3) -- (3)
-------- ------- ----- -------- -------- -----
Total Company $ 484 $ 535 $ (51) $ (88) $ (32) $(56)
======== ======= ===== ======== ======== =====
Net Revenues Segment (Loss) Profit (1)
------------------------- --------------------------
Nine Months Ended Nine Months
September 30, Ended September 30,
------------------ -------------------
2007 2006 Change 2007 2006 Change
-------- ------- ------ -------- -------- ------
(In millions)
Mortgage
Production
segment $ 167 $ 268 $(101) $ (160) $ (96) $(64)
Mortgage
Servicing
segment 138 81 57 70 14 56
-------- ------- ----- -------- -------- -----
Total Mortgage
Services 305 349 (44) (90) (82) (8)
Fleet Management
Services segment 1,386 1,325 61 81 75 6
-------- ------- ----- -------- -------- -----
Total reportable
segments 1,691 1,674 17 (9) (7) (2)
Other (2) (1) (1) -- (8) -- (8)
-------- ------- ----- -------- -------- -----
Total Company $ 1,690 $ 1,673 $ 17 $ (17) $ (7) $(10)
======== ======= ===== ======== ======== =====
(1) The following is a reconciliation of Loss before income taxes and
minority interest to segment loss:
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
2007 2006 2007 2006
--------- -------- --------- --------
(In millions)
Loss before income taxes
and minority interest $ (87) $ (31) $ (13) $ (6)
Minority interest in
income of consolidated
entities, net of income
taxes 1 1 4 1
--------- -------- --------- --------
Segment loss $ (88) $ (32) $ (17) $ (7)
========= ======== ========= ========
(2) Net revenues reported under the heading Other for the nine months
ended September 30, 2007 and 2006 represent the elimination of $1
million of intersegment revenues recorded by the Mortgage
Servicing segment, which are offset in segment loss by the
elimination of $1 million of intersegment expense recorded by the
Fleet Management Services segment. Segment loss reported under
the heading Other for the three and nine months ended September
30, 2007 represents expenses related to the proposed merger with
General Electric Capital Corporation and its wholly owned
subsidiary, Jade Merger Sub, Inc.
PHH CORPORATION AND SUBSIDIARIES
MORTGAGE PRODUCTION SEGMENT RESULTS
THIRD QUARTER 2007 VS. THIRD QUARTER 2006
(Unaudited)
Three Months Ended
September 30,
-------------------
2007 2006 Change % Change
-------- -------- -------- ----------
(Dollars in millions, except
average loan amount)
Loans closed to be sold $ 7,382 $ 8,541 $(1,159) (14)%
Fee-based closings 2,793 2,125 668 31 %
-------- -------- ------- --------
Total closings $ 10,175 $ 10,666 $ (491) (5)%
======== ======== ======= ========
Purchase closings $ 7,331 $ 7,795 $ (464) (6)%
Refinance closings 2,844 2,871 (27) (1)%
-------- -------- ------- --------
Total closings $ 10,175 $ 10,666 $ (491) (5)%
======== ======== ======= ========
Fixed rate $ 6,374 $ 6,235 $ 139 2 %
Adjustable rate 3,801 4,431 (630) (14)%
-------- -------- ------- --------
Total closings $ 10,175 $ 10,666 $ (491) (5)%
======== ======== ======= ========
Number of loans closed (units) 47,031 54,255 (7,224) (13)%
======== ======== ======= ========
Average loan amount $216,361 $196,593 $19,768 10 %
======== ======== ======= ========
Loans sold $ 8,385 $ 8,726 $ (341) (4)%
======== ======== ======= ========
Three Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- -------- ----------
(In millions)
Mortgage fees $ 34 $ 33 $ 1 3 %
-------- -------- ------- --------
(Loss) gain on sale of
mortgage loans, net (37) 42 (79) n/m (1)
-------- -------- ------- ----------
Mortgage interest income 41 47 (6) (13)%
Mortgage interest expense (49) (48) (1) (2)%
-------- -------- ------- --------
Mortgage net finance expense (8) (1) (7) (700)%
-------- -------- ------- --------
Other income 1 -- 1 n/m (1)
-------- -------- ------- ----------
Net revenues (10) 74 (84) n/m (1)
-------- -------- ------- ----------
Salaries and related expenses 48 48 -- --
Occupancy and other office
expenses 12 13 (1) (8)%
Other depreciation and
amortization 4 5 (1) (20)%
Other operating expenses 38 56 (18) (32)%
-------- -------- ------- --------
Total expenses 102 122 (20) (16)%
-------- -------- ------- --------
Loss before income taxes (112) (48) (64) (133)%
Minority interest in income of
consolidated entities, net of
income taxes 1 1 -- --
-------- -------- ------- --------
Segment loss $ (113) $ (49) $ (64) (131)%
======== ======== ======= ========
(1) n/m -- Not meaningful.
PHH CORPORATION AND SUBSIDIARIES
MORTGAGE PRODUCTION SEGMENT RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 VS. NINE MONTHS ENDED SEPTEMBER
30, 2006
(Unaudited)
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- --------- ----------
(Dollars in millions, except
average loan amount)
Loans closed to be sold $ 23,231 $ 25,181 $ (1,950) (8)%
Fee-based closings 8,005 6,495 1,510 23 %
-------- -------- -------- --------
Total closings $ 31,236 $ 31,676 $ (440) (1)%
======== ======== ======== ========
Purchase closings $ 20,267 $ 22,465 $ (2,198) (10)%
Refinance closings 10,969 9,211 1,758 19 %
-------- -------- -------- --------
Total closings $ 31,236 $ 31,676 $ (440) (1)%
======== ======== ======== ========
Fixed rate $ 19,915 $ 17,536 $ 2,379 14 %
Adjustable rate 11,321 14,140 (2,819) (20)%
-------- -------- -------- --------
Total closings $ 31,236 $ 31,676 $ (440) (1)%
======== ======== ======== ========
Number of loans closed
(units) 145,359 158,578 (13,219) (8)%
======== ======== ======== ========
Average loan amount $214,891 $199,752 $ 15,139 8 %
======== ======== ======== ========
Loans sold $ 23,998 $ 24,858 $ (860) (3)%
======== ======== ======== ========
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- --------- ----------
(In millions)
Mortgage fees $ 101 $ 98 $ 3 3 %
-------- -------- -------- --------
Gain on sale of mortgage
loans, net 76 168 (92) (55)%
-------- -------- -------- --------
Mortgage interest income 140 137 3 2 %
Mortgage interest expense (153) (135) (18) (13)%
-------- -------- -------- --------
Mortgage net finance
(expense) income (13) 2 (15) n/m (1)
-------- -------- -------- ----------
Other income 3 -- 3 n/m (1)
-------- -------- -------- ----------
Net revenues 167 268 (101) (38)%
-------- -------- -------- --------
Salaries and related expenses 150 159 (9) (6)%
Occupancy and other office
expenses 34 39 (5) (13)%
Other depreciation and
amortization 12 16 (4) (25)%
Other operating expenses 127 149 (22) (15)%
-------- -------- -------- --------
Total expenses 323 363 (40) (11)%
-------- -------- -------- --------
Loss before income taxes (156) (95) (61) (64)%
Minority interest in income
of consolidated entities,
net of income taxes 4 1 3 300 %
-------- -------- -------- --------
Segment loss $ (160) $ (96) $ (64) (67)%
======== ======== ======== ========
(1) n/m -- Not meaningful.
PHH CORPORATION AND SUBSIDIARIES
MORTGAGE SERVICING SEGMENT RESULTS
THIRD QUARTER 2007 VS. THIRD QUARTER 2006
(Unaudited)
Three Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- ------- ----------
(In millions)
Average loan servicing
portfolio $165,770 $160,141 $5,629 4 %
======== ======== ====== ========
Three Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- ------- ----------
(In millions)
Mortgage interest income $ 50 $ 51 $ (1) (2)%
Mortgage interest expense (23) (23) -- --
-------- -------- ------ --------
Mortgage net finance income 27 28 (1) (4)%
-------- -------- ------ --------
Loan servicing income 123 129 (6) (5)%
-------- -------- ------ --------
Change in fair value of
mortgage servicing rights (249) (302) 53 18 %
Net derivative gain related to
mortgage servicing rights 119 154 (35) (23)%
-------- -------- ------ --------
Valuation adjustments related
to mortgage servicing rights (130) (148) 18 12 %
-------- -------- ------ --------
Net loan servicing loss (7) (19) 12 63 %
-------- -------- ------ --------
Other income 4 1 3 300 %
-------- -------- ------ --------
Net revenues 24 10 14 140 %
-------- -------- ------ --------
Salaries and related expenses 8 7 1 14 %
Occupancy and other office
expenses 2 3 (1) (33)%
Other operating expenses 16 7 9 129 %
-------- -------- ------ --------
Total expenses 26 17 9 53 %
-------- -------- ------ --------
Segment loss $ (2) $ (7) $ 5 71 %
======== ======== ====== ========
PHH CORPORATION AND SUBSIDIARIES
MORTGAGE SERVICING SEGMENT RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 VS. NINE MONTHS ENDED SEPTEMBER
30, 2006
(Unaudited)
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- ------- ----------
(In millions)
Average loan servicing
portfolio $163,508 $158,951 $4,557 3 %
======== ======== ====== ========
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
-------- -------- ------- --------
(In millions)
Mortgage interest income $ 141 $ 132 $ 9 7 %
Mortgage interest expense (64) (65) 1 2 %
-------- -------- ------ --------
Mortgage net finance income 77 67 10 15 %
-------- -------- ------ --------
Loan servicing income 384 383 1 --
-------- -------- ------ --------
Change in fair value of
mortgage servicing rights (232) (237) 5 2 %
Net derivative loss related to
mortgage servicing rights (93) (132) 39 30 %
-------- -------- ------ --------
Valuation adjustments related
to mortgage servicing rights (325) (369) 44 12 %
-------- -------- ------ --------
Net loan servicing income 59 14 45 321 %
-------- -------- ------ --------
Other income 2 -- 2 n/m (1)
-------- -------- ------ ----------
Net revenues 138 81 57 70 %
-------- -------- ------ --------
Salaries and related expenses 22 24 (2) (8)%
Occupancy and other office
expenses 7 8 (1) (13)%
Other depreciation and
amortization 1 1 -- --
Other operating expenses 38 34 4 12 %
-------- -------- ------ --------
Total expenses 68 67 1 1 %
-------- -------- ------ --------
Segment profit $ 70 $ 14 $ 56 400 %
======== ======== ====== ========
(1) n/m -- Not meaningful.
PHH CORPORATION AND SUBSIDIARIES
FLEET MANAGEMENT SERVICES SEGMENT RESULTS
THIRD QUARTER 2007 VS. THIRD QUARTER 2006
(Unaudited)
Average for the
Three Months
Ended September 30,
-------------------
2007 2006 Change % Change
--------- --------- --------- ----------
(In thousands of units)
Leased vehicles 343 335 8 2 %
Maintenance service cards 327 337 (10) (3)%
Fuel cards 332 325 7 2 %
Accident management vehicles 335 331 4 1 %
Three Months
Ended September 30,
-------------------
2007 2006 Change % Change
--------- --------- --------- ----------
(In millions)
Fleet management fees $ 41 $ 39 $ 2 5 %
Fleet lease income 403 390 13 3 %
Other income 26 22 4 18 %
--------- --------- --------- ----------
Net revenues 470 451 19 4 %
--------- --------- --------- ----------
Salaries and related expenses 23 21 2 10 %
Occupancy and other office
expenses 5 4 1 25 %
Depreciation on operating
leases 318 308 10 3 %
Fleet interest expense 55 51 4 8 %
Other depreciation and
amortization 2 4 (2) (50)%
Other operating expenses 37 39 (2) (5)%
--------- --------- --------- ----------
Total expenses 440 427 13 3 %
--------- --------- --------- ----------
Segment profit $ 30 $ 24 $ 6 25 %
========= ========= ========= ==========
PHH CORPORATION AND SUBSIDIARIES
FLEET MANAGEMENT SERVICES SEGMENT RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 VS. NINE MONTHS ENDED SEPTEMBER
30, 2006
(Unaudited)
Average for the
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
--------- --------- ------- ----------
(In thousands of units)
Leased vehicles 342 334 8 2 %
Maintenance service cards 332 340 (8) (2)%
Fuel cards 334 325 9 3 %
Accident management vehicles 337 330 7 2 %
Nine Months
Ended September 30,
-------------------
2007 2006 Change % Change
--------- --------- ------- ----------
(In millions)
Fleet management fees $ 122 $ 117 $ 5 4 %
Fleet lease income 1,190 1,143 47 4 %
Other income 74 65 9 14 %
--------- --------- ------ ----------
Net revenues 1,386 1,325 61 5 %
--------- --------- ------ ----------
Salaries and related expenses 69 64 5 8 %
Occupancy and other office
expenses 14 13 1 8 %
Depreciation on operating
leases 944 918 26 3 %
Fleet interest expense 160 144 16 11 %
Other depreciation and
amortization 9 10 (1) (10)%
Other operating expenses 109 101 8 8 %
--------- --------- ------ ----------
Total expenses 1,305 1,250 55 4 %
--------- --------- ------ ----------
Segment profit $ 81 $ 75 $ 6 8 %
========= ========= ====== ==========
PHH CORPORATION AND SUBSIDIARIES
MORTGAGE LOAN SERVICING PORTFOLIO
(Unaudited)
Portfolio Activity
Nine Months Ended
September 30,
------------------
2007 2006
------------------
(In millions)
Balance, beginning of period (1) $160,222 $154,843
Additions (2) 28,469 27,873
Payoffs, sales and curtailments (2) (21,780) (24,644)
Addition of certain subserviced home equity loans as
of June 30, 2006 (1) -- 2,130
------- -------
Balance, end of period (1) (3) $166,911 $160,202
======= =======
Portfolio Composition
September 30,
-------------------
2007 2006
--------- ---------
(In millions)
Owned servicing portfolio $147,512 $150,905
Subserviced portfolio (3) 19,399 9,297
--------- ---------
Total servicing portfolio $166,911 $160,202
========= =========
Fixed rate $110,241 $ 99,837
Adjustable rate 56,670 60,365
--------- ---------
Total servicing portfolio $166,911 $160,202
========= =========
Conventional loans $154,787 $148,761
Government loans 8,116 7,288
Home equity lines of credit 4,008 4,153
--------- ---------
Total servicing portfolio $166,911 $160,202
========= =========
Weighted-average interest rate 6.1% 6.1%
======== ========
Portfolio Delinquency (4)
September 30,
---------------------------------
2007 2006
---------------- ----------------
Number Unpaid Number Unpaid
of Loans Balance of Loans Balance
-------- ------- -------- -------
30 days 2.18% 1.90% 2.02% 1.75%
60 days 0.48% 0.42% 0.46% 0.37%
90 or more days 0.38% 0.32% 0.32% 0.25%
------- ------ ------- ------
Total delinquency 3.04% 2.64% 2.80% 2.37%
======= ====== ======= ======
Foreclosure/real estate
owned/bankruptcies 0.89% 0.71% 0.83% 0.59%
======= ====== ======= ======
(1) Prior to June 30, 2006, certain home equity loans subserviced for
others were excluded from the disclosed portfolio activity. As a
result of a systems conversion during the second quarter of 2006,
these loans subserviced for others are included in the portfolio
balance as of January 1, 2007, September 30, 2007 and September
30, 2006. The amount of home equity loans subserviced for others
and excluded from the portfolio balance as of January 1, 2006 was
approximately $2.5 billion.
(2) Excludes activity related to certain home equity loans subserviced
for others described above in the six months ended June 30, 2006.
(3) During the nine months ended September 30, 2007, the Company sold
the mortgage servicing rights associated with $9.6 billion of the
unpaid principal balance of underlying mortgage loans; however,
because the Company subserviced these loans until the mortgage
servicing rights were transferred from the Company's systems to
the purchaser's systems in the fourth quarter of 2007, these
loans are included in the Company's mortgage loan servicing
portfolio balance as of September 30, 2007.
(4) Represents the loan servicing portfolio delinquencies as a
percentage of the total number of loans and the total unpaid
balance of the portfolio.
PHH CORPORATION AND SUBSIDIARIES
NET LOSS ON MORTGAGE SERVICING RIGHTS RISK MANAGEMENT ACTIVITIES
(Unaudited)
Three Months
Ended September 30,
-------------------
2007 2006
--------- ---------
(In millions)
Net derivative gain related to mortgage servicing
rights $ 119 $ 154
Change in fair value of mortgage servicing rights
due to changes in market inputs or assumptions
used in the valuation model (159) (211)
-------- --------
Net loss on MSRs risk management activities $ (40) $ (57)
======== ========
Nine Months
Ended September 30,
-------------------
2007 2006
--------- ---------
(In millions)
Net derivative loss related to mortgage servicing
rights $ (93) $ (132)
Change in fair value of mortgage servicing rights
due to changes in market inputs or assumptions
used in the valuation model 21 54
-------- --------
Net loss on MSRs risk management activities $ (72) $ (78)
======== ========
PHH CORPORATION AND SUBSIDIARIES
AVAILABLE FUNDING UNDER ASSET-BACKED DEBT
ARRANGEMENTS AND UNSECURED COMMITTED CREDIT FACILITIES
(Unaudited)
As of September 30, 2007, available funding under our asset-backed
debt arrangements and unsecured committed credit facilities consisted
of:
Utilized Available
Capacity (1) Capacity Capacity
------------ ------------- -------------
(In millions)
Asset-Backed Funding
Arrangements:
Vehicle management $ 3,916 $ 3,633 $ 283
Mortgage warehouse 2,768 1,222 1,546
Unsecured Committed Credit
Facilities (2) 1,916 1,314 602
(1) Capacity is dependent upon maintaining compliance with, or
obtaining waivers of, the terms, conditions and covenants of the
respective agreements. With respect to asset-backed funding
arrangements, capacity may be further limited by the availability
of asset eligibility requirements under the respective
agreements.
(2) Available capacity reflects a reduction in availability due to an
allocation against the facilities of $47 million which fully
supports the outstanding unsecured commercial paper issued by the
Company as of September 30, 2007. Under the Company's policy, all
of the outstanding unsecured commercial paper is supported by
available capacity under its unsecured committed credit
facilities with the exception of the Company's $415 million
unsecured term loan facility. The sole purpose of this non-
revolving facility is the funding of the retirement of the
Company's unsecured medium-term notes. Utilized capacity includes
$415 million that was utilized to fund notes tendered under the
tender and consent offer which closed on September 14, 2006. In
addition, utilized capacity reflects $7 million of letters of
credit issued under the Company's $1.3 billion revolving credit
facility.
CONTACT: PHH Corporation
Investors:
Nancy R. Kyle, 856-917-4268
or
Media:
Karen K. McCallson, 856-917-8679
SOURCE: PHH Corporation
