Mortgage Sector Returns PHH to Profitability in Q409
Growing volumes of mortgage origination and servicing earned PHH Corporation (PHH) a profit in Q409, in a trend the CEO expects will continue for the company, but not for the industry. The New Jersey-based retail residential mortgage originator and fleet operator made $97m, or $1.76 per share, compared to $52m loss in Q309 and a $216m loss in Q408. PHH earned $153m, or $2.80 per share, in 2009, compared to a $254m total loss in 2008. Higher volumes of mortgage loans and earnings in the mortgage production segment aided the turnaround. The PHH mortgage production segment profited $65m in Q409, totaling $306m for the year. PHH originated $8.7bn during Q409, totaling $37.6bn for the entire year. The PHH mortgage production segment lost $93m in 2008, despite originating a nearly the same amount of loans - $33.9bn worth of mortgages in 2008. The decline in income came from a $69m drop in the valuation of those mortgages. Jerry Selitto, president and CEO of PHH, said investors should begin to see incremental improvements through 2010 as they push toward a goal of a 13% return to shareholders beginning in 2011. "Although the mortgage industry outlook for production volumes forecasts a decline in 2010 to $1.3 trillion, we expect to continue to make progress in increasing market share by signing new private label customers and improving the penetration rate in our real estate channel, among other revenue initiatives,” Selitto said. In late January, the North American commercial fleet side of PHH managed to free up some liquidity through the partial placement of a $350m securitization platform based on its lease transactions. The revolving credit facility, a hybrid placed with institutional investors, is helping PHH reduce its borrowings and in an investor call on Q409 earning, the company praised the deal as a big step forward to smoother operations. "We remain encouraged by the improvements we have seen over the last twelve months in asset backed securities markets, both in Canada and the U.S., and the demand for securities backed by PHH fleet assets," said George Kilroy, president of PHH Arval, the fleet side of the business, in a release dated January 27. Write to Jon Prior.