Speaking at the Keefe, Bruyette & Woods Mortgage Finance Conference in New York Tuesday, Messina added that he was encouraged about how the primary market rates have reacted in relation to the increase in secondary market interest rates.
The company’s correspondent production channel has a 2013 goal of between 10% and 15% of its total volume. In the first quarter it was in the area of 12% to 13%. Messina said he liked the “sweet spot” Mount Laurel, N.J.-based PHH has in that channel.
It made the decision not to be the price leader in that arena, but rather to do business with a core client base.
He said the tighter regulatory environment was both a benefit and a hindrance to PHH’s business model. There are those firms which have elected to outsource originations because of the new rules and as a result, that benefits the private-label business.
But newly added PLS client HSBC is also subservicing its portfolio at PHH and because it was involved in the servicing settlement, PHH needed to conform its operations to those standards.
Still, the correspondent channel is seen as a feeder for the PLS business, from those firms looking to totally outsource, Messina said.
As for the qualified mortgage regulation, Messina felt it would have a minimal affect on PHH’s own business, as only a small amount of retained production would be impacted; much of what it produces is sold to the agencies.
Most of the PLS jumbo loans originated stay on its clients’ balance sheet. The quality of these loans is very strong, he said, adding so far he has received no feedback that QM would affect them.
Messina said the Realogy joint venture is doing well; he and Realogy CEO Richard Smith are actively involved in the decision making process for its business strategy. PHH owns 50.1% of the venture.
The contract for the JV is up for renewal in 2017, but Realogy would have to notify PHH of its intent to end the relationship in 2015. Messina said he has heard nothing so far which indicates Realogy is dissatisfied with the JV.
Messina said PHH is working on creating an off-balance sheet financing facility with its mortgage servicing rights, calling it a source which is not capital intensive.
There are investors interested in providing such financing and the pricing is getting more realistic. He desires a long-term flow arrangement.
But to do such a transaction, PHH would need approval from the government-sponsored agencies and their regulator, the Federal Housing Finance Agency, he said. The PLS clients who PHH subservices also have to comfortable with the arrangement, he added.
