Fitch Smiles on Cendant Mortgage Sale Idea

Cendant Corp.'s announcement that it will consider selling its mortgage business represents "a positive development" for the credit profiles of Cendant and its PHH Corp. subsidiary, according to Fitch Ratings.The rating agency said a divestiture of the mortgage origination platform and mortgage servicing business would help the companies "by removing an interest-rate-sensitive business involving complex hedging strategies." (Cendant's mortgage business is a unit of PHH Corp.) Divestiture would also represent another step by Cendant toward simplifying its business model, Fitch said. "A divestiture of the mortgage business would not necessarily reduce Cendant's corporate debt unless proceeds from the sale are applied to debt reduction," the rating agency observed. "However, a divestiture would eliminate risks associated with mortgage servicing rights" and securitizations of residential mortgages, Fitch said, adding that the main credit risk is the MSRs. Fitch can be found online at http://www.fitchratings.com.