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PHH at crossroads with its mortgage business

Should it separate or sell it off?

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PHH Corporation [PHH] is still considering separating or even selling its mortgage business after losing business in the space last year. The company's stock slid less than a percent on the news.

In the fourth quarter, PHH reported $45 million in net income or $0.78 per basic share.

For the full year, the net income was $135 million or $2.36 per basic share.

According to the full year report, released after market close, full-year retail mortgage loan closings hit $47.4 billion, up 4% from 2012.

However, full-year total mortgage loan closings were $52.4 billion.

That's down 6% from 2012.

Things got even worse in the last quarter of the year.

Mortgage applications declined 18% sequentially in the fourth quarter to $10.4 billion.

"The Company has retained JPMorgan Securities, Centerview Partners and Kirkland & Ellis to assist in exploring ways to maximize shareholder value through the separation or sale of the company’s fleet business, mortgage business, or both," the report states.

During the fourth quarter of 2013, repurchase requests from the government-sponsored enterprises began to trail off.

"We did not record any repurchase and foreclosure-related charges during the third quarter of 2013. In the fourth quarter of 2012 repurchase and foreclosure-related charges were $37 million," the report states.

"We believe the GSEs are complete with substantially all repurchase demands for loans originated prior to 2009," the earnings conclude.

However, as government-insured loan foreclosures persist through 2014, PHH is expecting more losses, as some of the mortgages may not be eligible for insurance reimbursement.

PHH declined to include why these loans may not be eligible in the earnings report.

In January, the Consumer Financial Protection Bureau initiated administrative proceedings against PHH, allegeding that it harmed consumers through a mortgage insurance kickback scheme that started as early as 1995, in its latest enforcement action.

PHH hit back, denying the CFPB complaint even has grounding.

"We intend to vigorously defend against the CFPB's allegations; however, there can be no assurance that we will be successful in such efforts given the inherent uncertainties involved in litigation," the company said in a statement.

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