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Servicing Hedge Proves Costly for PHH.
PHH Corp., Mount Laurel, N.J., has been the subject of some unwelcome headlines recently because of accounting issues that have dogged the company.
But sometimes lost amid the big picture of PHH's accounting review is the role that mortgage servicing has played in the company's lackluster results recently.
In the company's most recent financial filing, PHH said that poor performance of its mortgage servicing hedge depressed the company's overall operating performance in the fourth quarter of 2006.
The company also said it has undertaken a major cost-cutting initiative to try to return its mortgage operations to profitability.
At a time when most lenders reported generally stable mortgage servicing and hedging results, PHH president and CEO Terry Edwards said that a tightening in the relationship between mortgage rates and 10-year swap rates tightened by 6 basis points during the quarter, leading to a negative $20 million cost in the mortgage servicing segment.
But the fourth quarter's bad news could turn into good news someday, if only things got back to normal.
"Should the spread relationship between swaps and mortgages revert to historical trends, we expect that our hedge position would allow us to recoup this loss in future periods," Mr. Edwards said in a company statement.
- DCR Rates PHH Corporation's Commercial Paper Program 'D-1' And Senior Debt 'A+'
- Press release article from: PR Newswire April 30, 1998 700+ words
...of December 31, 1997, PHH's mortgage servicing portfolio totaled $29...average of 0.67 percent. PHH's interest rate hedging...The valuation of the mortgage servicing asset is conservative. PHH is active in hedging its...
- Fitch Expects to Rate PHH's Senior Unsecured Debt 'A-'.
- Press release article from: Business Wire January 6, 2005 700+ words
...over the near term. PHH's capital requirements...activities resulting in mortgage servicing rights (MSRs) and...Fitch does not expect PHH's sizable mortgage servicing asset will exhibit...in the near term. PHH funds its operations...
- DCR Lowers PHH Corporation's Senior Debt Rating to 'A' and Reaffirms 'D-1'...
- Press release article from: PR Newswire July 26, 1999 700+ words
...of December 31, 1998, PHH's mortgage servicing portfolio totaled $41...average of 1.14 percent. PHH's interest rate hedging...The valuation of the mortgage servicing asset is conservative. PHH is active in hedging its...
- PHH Corporation Announces Third Quarter 2009 Results.(Financial report)
- Newspaper article from: Investment Weekly News November 21, 2009 700+ words
...Net loss attributable to PHH Corporation for the third quarter...loss per share attributable to PHH Corporation were $(0.94...negative change in the value of mortgage servicing rights ("MSRs") due to...61 million impairment of PHH Home Loans' Goodwill. Consolidated...
- Originations Benefit PHH.
- News wire article from: Mortgage Line June 27, 2008 700+ words
...rates. In the mortgage servicing segment, PHH generated $19...of last year. PHH's mortgage servicing loss was $16 million...delinquency rate on the mortgage servicing portfolio was 2...mortgage business, PHH reported strong...
- PHH Corporation Announces Second Quarter 2009 Results.(Financial report)
- Press release article from: Business Wire August 4, 2009 700+ words
...share attributable to PHH Corporation of $0...greater increase in the mortgage servicing rights ("MSR") mark...share attributable to PHH Corporation of $0...related charges in our Mortgage Servicing segment and increased...president, stated, "PHH's strong second quarter...
- DCR Adds PHH Corporation's Senior Debt Rating to Rating Watch-Down and...
- Press release article from: PR Newswire May 26, 1999 700+ words
...of December 31, 1998, PHH's mortgage servicing portfolio totaled $41...average of 1.14 percent. PHH's interest rate hedging...The valuation of the mortgage servicing asset is conservative. PHH is active in hedging its...
- PHH Corp. must restate earnings.
- Newspaper article from: Baltimore Sun (Baltimore, MD) July 22, 2006 700+ words
...Terrence W. Edwards, PHH's chief executive, said...review, done at the request of PHH's audit committee, found...being counted as cash flow from mortgage servicing, the statement said. "We...recognition." Nancy Kyle, PHH vice president of investor...
Source: HighBeam Research, Servicing Hedge Proves Costly for PHH.