Servicing Writedown Hurts PHH

PHH Corp. recorded a $71 million write-down on its mortgage servicing assets for the first quarter, which crimped profits.The Mt. Laurel, N.J., mortgage company reported a decline in net income at the company to $2 million ($0.04 per share) from $30 million ($0.55 per share) for the first quarter of 2008. By segment, mortgage servicing had a loss of $118 million, canceling out the $113 million profit of the mortgage production segment. PHH originated $8.9 billion in the first quarter 2009, down from $10 billion in the same period one year prior. Terry Edwards, president and chief executive, said the mortgage production segment "had its strongest quarter since the spin-off, as we experienced increased refinance volumes" adding that PHH expects this to continue through the summer months. Only 29% of PHH's first quarter 2009 volume was from home purchases. But refinancings drove PHH to the servicing asset write-down as well as forcing it to take a $92 million reduction in the value of its MSRs. The company does not hedge its MSRs.