Mortgage Units Drive Big Quarter for PHH

PHH Corp. generated a $106 million profit for the second quarter, up from $16 million a year ago, mainly due to the strong performance of its mortgage production and servicing business. The Mount Laurel, N.J.-based company said it had stronger mortgage production margins, a higher volume of first mortgage originations and an increase in mortgage servicing rights mark-to-market valuation and benefited from cost efficiency efforts in both segments. PHH Corp. originated $11 billion in single-family loans during the quarter and the production unit posted earnings of $82 million. The servicing unit posted $86 million in earnings. Acting chief executive and president George Kilroy said PHH has reduced its fixed general and administrative costs by $14 million year-to-date over the prior year period. "Moving forward, we expect the near-term environment to provide attractive consumer mortgage interest rates, and we are well-positioned to leverage those dynamics. We also believe that the wider production margins we are currently experiencing are reflective of a longer term view of the returns required to manage the underlying risk of a mortgage production business, which is another encouraging trend. Our mortgage servicing portfolio may continue to see some erosion from loan defaults and prepayments due to ongoing recessionary trends. However, the servicing we are now adding is more valuable than the current portfolio given lower note rates, better credit quality and a longer expected life," he said.