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PHH Mortgage will also provide HSBC with mortgage origination processing services, as well as subservicing of a $15.5 billion prime mortgage loan portfolio and $36.6 billion of loans serviced for third-party investors.
"Note that the company will not be bringing HSBC's mortgage servicing rights asset onto its balance sheet as this is a subservicing arrangement," remarked FBR Capital Markets ($23.75 0.37%) analyst Paul Miller in an email to clients.
"This will provide more servicing and origination fee revenue in 2013 without the volatility associated with marking the MSR to fair value," he added. "We believe that this agreement is a meaningful development for PHH, will likely be accretive to earnings, and will offer further proof of management's focus on strengthening core operations."
According to a press release, 400 employees from HSBC mortgage department in Depew, N.Y. will transfer employment, but not location, to PHH Mortgage.
The agreement is effective immediately.
"We are pleased to welcome many HSBC employees to the PHH Mortgage team," said Smriti Popenoe, interim president of PHH Mortgage, in the statement. "This is an outstanding example of the commitment of our private label services business to serving the nation's leading financial institutions, regional banks, community banks and credit unions, and we look forward to a long-term, strategic relationship."
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