PHH Corp. (PHH) net income in the fourth quarter fell 93% from a year earlier as it took a hit in the fair value of its mortgage servicing rights.

The company reported net income of $13 million for the fourth quarter, or 22 cents a share, missing analysts' estimates of 73 cents a share. A year earlier in the same period, it brought in $181 million, or $3.26 a share, in net income.

A fourth quarter $132 million negative adjustment in the fair value of PHH's mortgage servicing rights caused partially by falling mortgage rates led to the dramatic drop in income. In the year-ago period, it posted a $199 million positive fair value adjustment.

For the full year, the mortgage services provider reported a net loss of $127 million or $2.26 per share. The analyst consensus was $2.37 a share, according to Yahoo Finance. In 2010, it reported net income of $48 million, 87 cents a share.

PHH's mortgage production segment earned $86 million in the quarter, up 161% from a year earlier. But it was down from $95 million in the previous quarter. The fourth-quarter segment profit is a reflection of the refinancing surge that began in the third quarter and strong gain on sale margins as well as improved economic hedge results relative to the fourth quarter, the company said.

The mortgage servicing segment lost $90 million in the quarter 2011, including $68 million in market-related and credit-related negative fair value adjustments on its mortgage servicing rights. The adjustment includes an impact of about $20 million related to the implementation of HARP 2.0 and increased assumptions of foreclosure-related costs.

PHH said it intends to retire its 2012 and 2013 debt maturities and pursue opportunities to maximize value.

"While some of these actions, combined with lower expected mortgage industry origination volumes, may have a negative impact on our 2012 earnings, we believe our narrowed and deliberate growth strategy and focus on operational excellence, customer satisfaction, and liquidity will result ultimately in a more profitable, less volatile and better capitalized company,” said Chief Executive Glen Messina.

Total fourth quarter mortgage closings totaled $15.6 billion, of which 65% was retail and 35% was wholesale/correspondent. Full-year total mortgage loan closings were $51.9 billion, of which 69% was retail and 31% was wholesale/correspondent. The volume represents a 6% increase from full-year 2010.