Production Breaks Even, Servicing Takes Loss in PHH's 4Q

PHH Corp., Mt. Laurel, N.J., said its mortgage production segment was profitable in December, allowing that unit to break even for the fourth quarter; but its mortgage servicing segment lost $382 million in the three-month period due to $445 million of valuation adjustments on mortgage servicing rights, contributing to a 4Q loss for the company as a whole. For the fourth quarter, the company lost $216 million ($3.98 per share), compared with net income of $12 million ($0.21 per share) for the same quarter of 2007. For the full year, PHH lost $254 million ($4.68 per share), vs. a net loss of $12 million ($0.23 per share) in 2007. The servicing adjustment consists of a $390 million writedown of the mortgage servicing asset and $55 million reduction in MSR value due to prepayments and portfolio decay. There also were foreclosure-related charges of $16 million and a net reinsurance loss of $13 million. PHH serviced just under $150 billion at the end of last year. The production segment's break-even results included $12 million of writedowns for scratch-and-dent and second-lien mortgage loans plus $4 million of reorganization costs. PHH originated $5.4 billion during the quarter, down from $8.3 billion in the same period in 2007. However, because of cost savings initiatives, the company said it believes it has lowered the break-even point for the production segment from $39 billion in annual volume to $27 billion.