Hedging Hurts PHH's Results
PHH Corp.'s mortgage production revenue jumped nearly 78% in the first quarter, but the company still lost money overall from its home loan business.
The company said that despite an increase in margins on conforming loans and beneficial accounting changes, PHH lost money due to declines in the value of adjustable-rate, "scratch and dent" and jumbo mortgage loans. Unfavorable hedge results related to mortgage loans held for sale and interest rate lock commitments also were a drain on earnings. In the mortgage servicing segment, PHH generated $19 million of revenue during the first quarter, compared to $75 million in the first quarter of last year. PHH's mortgage servicing loss was $16 million, reflecting a net loss on risk management activities related to the mortgage servicing rights. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/