Bank of America's deal to buy Merrill Lynch could spell trouble for PHH Corp., which has a mortgage lending and servicing relationship with Merrill. Analysts at FBR Capital Markets note that the lending and servicing contract cannot be terminated until the end of 2010, but say they expect that Bank of America probably will take over Merrill's lending and servicing business at that time. FBR said Merrill accounts for 20%, or $8 billion, of PHH's origination volume. The loss of the Merrill relationship could be "incrementally negative for PHH," an FBR report said. FBR lowered its rating on PHH to "market perform" in the wake of the BoA/Merrill Lynch deal.
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