PHH Corp. posted net earnings of $75 million for the first quarter, turning a profit on its residential mortgage operation, but suffering charges on its servicing business. In 1Q11, the company earned $49 million.
PHH, which controls the nation's sixth largest originator, earned $117 million on production. The Mt. Laurel, N.J.-based company cited a strong level of interest rate locks, refinancings, and gain-on-sale margins.
The firm's servicing business lost $26 million in 1Q12 because of negative changes in the fair value of its mortgage servicing rights. It also suffered $65 million in foreclosure-related charges.
The foreclosure-related charges reflect increased repurchase requests, which PHH expects to suffer from throughout this year and into next.
PHH also entered into an agreement with Fannie Mae regarding a $1 billion committed early funding facility.
Under the agreement, Fannie Mae's right to terminate the facility based on PHH's credit ratings was removed and other termination events were added, including requiring PHH on the last day of each fiscal quarter to have consolidated net worth of at least $1 billion; a ratio of indebtedness to tangible net worth no greater than 6.5 to 1; and a minimum of $1 billion in committed mortgage warehouse or gestation facilities.
Discussing its liquidity (an issue in the past), the company said that as of March 31 it had $875 million of unrestricted cash and equivalents.
