PHH Corp. lost $46 million in the second quarter as it continues efforts to exit mortgage origination and servicing and instead focus on subservicing.
The company added a $13 million pretax provision to its reserves to help pay for its False Claims Act settlement.
The Mount Laurel, N.J.-based company lost $12 million for the second quarter of 2016. PHH had a $67 million loss in the first quarter.
Even though the settlement was announced on Aug. 8, the $13 million provision to its legal and regulatory reserves was made during the second quarter.
The company also took a $4 million pretax loss on its mortgage servicing rights sales with an additional $1 million for transaction costs. Exit and disposal costs added another $16 million to PHH's pretax expenses.
Revenue fell to $112 million in the quarter from $196 million one year prior as origination fees fell to $37 million from $79 million and loan servicing income went down to $28 million from $44 million. PHH is exiting the origination and servicing businesses to become a subservicer. Its only origination activities will be in portfolio defense.
The initial asset sale from the PHH Home Loans joint venture to Guaranteed Rate closed on Aug. 7, with net proceeds of $7 million.
PHH completed the sale of its Freddie Mac servicing portfolio to New Residential in June.
The sale of $39.8 billion of Fannie Mae MSRs to the same company closed in July. Both sales brought in $442 million of total proceeds.
PHH will subservice both MSR portfolios for a five-year period.
PHH's origination's segment lost $25 million in the second quarter, compared with a profit of $13 million one year prior, as the company moved ahead with its plan to exit the private-label loan production business.
Origination volume was $5.5 billion for the quarter, down from $10.4 billion for last year's second quarter. The bulk of the decline came from the private-label segment, to $3.6 billion from $8 billion over the same period.
PHH lost $43 million in its servicing business compared with a $33 million loss last year. At quarter's end, the servicing portfolio shrunk by 31% to $159.8 billion.
The subservicing portfolio consisted of 351,109 loans on June 30, down 28% from 486,596 loans on June 30, 2016. The decline was primarily driven from the fourth quarter of 2016 insourcing and MSR sale actions of two clients, partially offset by the addition of subserviced loans from the June 2017 sale of MSRs to New Residential.
The owned MSR portfolio of 379,231 loans (down from 509,976 one year prior) included the Fannie Mae MSRs that New Residential acquired in July.