Next month PHH Corp., Mt. Laurel, N.J., will report first quarter earnings but this time around it likely won’t announce a large markup in the value of its mortgage servicing rights, according to a new report from FBR Capital Markets.
FBR points out that mortgage rates have remained fairly stable in the first quarter and cautions that “estimating the exact valuation change is nearly impossible as several variables go into that number, but the movement in the 30-year fixed rate mortgage is a good proxy.”
In the fourth quarter PHH reported strong profits but some of that was due to a $287 million market-related adjustment to the value of its MSRs.
Among all home servicers, PHH ranks seventh in the nation with $166 billion in receivables, according to the Quarterly Data Report.
When rates rise, MSRs become more valuable because the likelihood of prepayments via refinancings falls.
In its report FBR reiterates its ‘outperform’ rating on PHH’s stock, saying its valuation is “too compelling to ignore.”
