PHH Phh Corp

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

Table of Contents

Invitation to 2017 Annual Meeting

April 28, 2017

Dear Fellow Stockholder:

You are cordially invited to attend the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of PHH Corporation (the “Company”), which will be held at our offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, on Wednesday, June 28, 2017, at 10:00 a.m., local time. At the Annual Meeting, stockholders will be asked to vote on the matters described in the accompanying Notice of 2017 Annual Meeting.

YOUR VOTE IS EXTREMELY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.

In order to ensure that your shares are represented at the Annual Meeting, whether you plan to attend or not, please vote in accordance with the enclosed instructions. You can vote your shares by telephone, electronically via the Internet or by completing and returning the enclosed proxy card or vote instruction form. If you vote using the enclosed proxy card or vote instruction form, you must sign, date and mail the proxy card or vote instruction form in the enclosed envelope. If you decide to attend the Annual Meeting and wish to modify your vote, you may revoke your proxy and vote in person at the meeting.

Admission to the Annual Meeting will be by admission ticket only. If you are a stockholder of record and plan to attend the Annual Meeting, retain the top portion of your proxy card as your admission ticket and bring it and a photo ID with you so that you may gain admission to the meeting. If your shares are held through a bank, broker or other nominee, please contact your nominee and request that the nominee obtain an admission ticket for you or provide you with evidence of your share ownership, which will gain you admission to the Annual Meeting.

Thank you for your continued interest in PHH Corporation. We look forward to seeing you at the meeting. Sincerely,

Glen A. Messina

President and Chief Executive Officer

Table of Contents

Table of Contents

Table of Contents

TABLE OF CONTENTS

Table of Contents

2017 ANNUAL MEETING

GENERAL INFORMATION ABOUT THE 2017 ANNUAL MEETING

Why am I receiving these proxy materials?

You are receiving these proxy materials because our Board of Directors (the “Board”) is soliciting your proxy to cast your vote at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of PHH Corporation, a Maryland corporation (“we,” “our,” “us,” “PHH” or the “Company”), and any adjournment or postponement of the Annual Meeting. This Proxy Statement, the accompanying Notice of 2017 Annual Meeting, our Annual Report on Form 10 K for the year ended December 31, 2016 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2017 (the “2016 Annual Report”), and the enclosed proxy card or vote instruction form for those stockholders that have been sent printed copies of our proxy materials are being mailed to stockholders or are first being made available to stockholders via the Internet on or about April 28, 2017.

When and where is the Annual Meeting going to be held?

The Annual Meeting will be held at our offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey, on Wednesday, June 28, 2017, at 10:00 a.m., local time. Registration and seating will begin at 9:00 a.m., local time.

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will vote on the matters described in the accompanying Notice of 2017 Annual Meeting and this Proxy Statement. The only matters expected to be voted upon at the Annual Meeting are (1) the Director Election Proposal, (2) the Ratification of Auditors Proposal, (3) the Say on Pay Vote and (4) the Say on Frequency Vote.

What are the Board’s recommendations for how I should vote my shares?

The Board recommends that you vote your shares as follows:

·              Proposal 1: FOR the election of each of Ms. Jane D. Carlin, Mr. Robert B. Crowl, Mr. James O. Egan, Mr. James C. Neuhauser, Mr. Charles P. Pizzi, Mr. Kevin Stein and Mr. Carroll R. Wetzel, Jr., each to serve until the 2018 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified, or until their earlier death, retirement or resignation;

·              Proposal 2: FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017;

·              Proposal 3: FOR the advisory resolution approving compensation of our named executive officers as disclosed pursuant to Item 402 of Regulation S K; and

·              Proposal 4:  FOR an ANNUAL advisory vote on the compensation of our named executive officers.

Table of Contents

2017 ANNUAL MEETING

Who can attend the Annual Meeting?

Only stockholders of record as of the close of business on April 28, 2017, or their duly appointed proxies, may attend the Annual Meeting. Stockholders will be asked to present valid picture identification, such as a driver’s license or passport. Please note that, if you hold your shares in “street name” (that is, through a bank, broker or other nominee), you must bring either a copy of the vote instruction form provided by your bank, broker or other nominee or a copy of a brokerage statement reflecting your stock ownership as of the record date.

Cameras and video recording devices will not be permitted at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting beginning ten days prior to the Annual Meeting during ordinary business hours at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, our principal place of business, and ending on the date of the Annual Meeting.

Do I need an admission ticket to attend the Annual Meeting?

Yes.  Attendance at the Annual Meeting will be limited to stockholders of record as of the record date, their authorized representatives and our guests. Admission will be by admission ticket only.  For registered stockholders, the top portion of the proxy card enclosed with the Proxy Statement will serve as an admission ticket.  If you are a beneficial owner and hold your shares in “street name,” or through an intermediary, such as a bank, broker or other nominee, you should request an admission ticket from your bank, broker or other nominee or send a request in writing to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, and include proof of ownership of PHH Corporation common stock, such as a bank or brokerage firm account statement or letter from the bank, broker or other nominee holding your stock, confirming your beneficial ownership.  Stockholders who do not obtain admission tickets in advance of the Annual Meeting may obtain them on the date of the Annual Meeting at the registration desk upon verifying their stock ownership as of the record date.  In accordance with our security procedures, all persons attending the Annual Meeting must present picture identification along with their admission ticket or proof of beneficial ownership in order to gain admission to the meeting.  Admission to the Annual Meeting will be expedited if admission tickets are obtained in advance.  Admission tickets may be issued to others at our discretion.

How many votes must be present at the Annual Meeting to constitute a quorum?

Stockholders holding a majority of the issued and outstanding shares of our common stock entitled to vote as of the record date, April 28, 2017, must be present, in person or by proxy, to constitute a quorum at the Annual Meeting. As of the record date, there were 53,612,270 shares of our common stock issued and outstanding. Shares represented by abstentions on any proposal to be acted upon by stockholders at the Annual Meeting will be treated as present at the Annual Meeting for purposes of determining whether a quorum is present.

How many votes can be cast by all stockholders?

53,612,270 votes may be cast at the Annual Meeting. Each stockholder is entitled to cast one vote for each share of common stock held by such stockholder as of the record date. There is no cumulative voting and the holders of our common stock vote together as a single class.

Table of Contents

2017 ANNUAL MEETING

What vote is needed for each of the proposals to be adopted?

·              Proposal 1—Director Election Proposal: Directors are elected by a plurality of all of the votes cast by stockholders of record as of the record date that are present, in person or by proxy, at a meeting of stockholders at which a quorum is present. Accordingly, the seven candidates with the highest number of “ FOR ” votes will be elected, subject to our majority vote standard for directors in uncontested elections as set forth in our Corporate Governance Guidelines and described below. Under applicable Maryland law, abstentions and broker non votes, if any, will not be counted as votes cast for the election of directors and, therefore, will have no effect on the outcome of the vote, although abstentions and broker non votes will be taken into account for purposes of determining whether a quorum is present at the meeting.

Under our Corporate Governance Guidelines, a director that fails to receive more votes cast “for” than “against” his or her election or re election is expected to tender his or her resignation from the Board and, within 90 days following certification of the stockholder vote, the Corporate Governance Committee of the Board is required to determine whether to accept the director’s resignation and to submit such recommendation for prompt consideration by the Board. Under our Corporate Governance Guidelines, the Board is required to act on any such recommendation from the Corporate Governance Committee and the Board shall nominate for election or re election as director only candidates who agree to tender, promptly following such person’s failure to receive the required vote for election or re election at the next meeting at which such person would face election or re election, an irrevocable resignation that will be effective upon Board acceptance of such resignation.

·              Proposal 2—Ratification of Auditors Proposal: Approval of the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 requires the affirmative vote of a majority of the votes cast on the proposal by stockholders of record as of the record  date that are present, in person or by  proxy,  at a meeting of stockholders at which  a quorum is present. Under applicable Maryland law, abstentions will be taken into account for the purpose of determining whether a quorum is present at the meeting, but will not be counted as votes cast on the proposal and will have no effect on the outcome of the vote..

·              Proposal 3—Say on Pay Vote: Approval of the advisory resolution approving compensation of our named executive officers as disclosed pursuant to Item 402 of Regulation S K requires the affirmative vote of a majority of all of the votes cast on the proposal by stockholders of record as of the record date that are present, in person or by proxy, at a meeting of stockholders at which a quorum is present. Under applicable Maryland law, abstentions and broker non votes, if any, will be taken into account  for the purpose of determining whether a quorum is present at the meeting, but will not be counted as votes cast on the proposal and will have no effect on the outcome of the vote. Although the Say on Pay Vote is only advisory in nature and is not binding on the Board or the Company, we intend to review the voting results with the Board and the Human Capital and Compensation Committee of the Board so that such voting results may be taken into consideration in connection with future executive compensation decisions.

·              Proposal 4—Say on Frequency Vote: The frequency of the advisory vote concerning the compensation of our named executive officers receiving the greatest number of votes — every year, every two years or every three years — will be the frequency recommended by our stockholders. Under applicable Maryland law, abstentions and broker non-votes, if any, will be taken into account for the purpose of determining whether a quorum is present at the meeting, but will not be counted as votes cast on the proposal and will have no effect on the outcome of the vote. Although the Say on Frequency Vote is only advisory in nature and is not binding on the Board or the Company, we intend to review the voting results with the Board and the Human Capital and Compensation Committee of the Board so that such voting results may be taken into consideration in connection with future decisions concerning the frequency of our advisory vote on executive compensation.

·              Other business: All other business that may properly come before the Annual Meeting requires the affirmative vote of a majority of all of the votes cast on the proposal by stockholders of record as of the record date that are present, in person or by proxy, at a meeting of stockholders at which a quorum is present. Under applicable Maryland law, abstentions and broker non votes, if any, will be taken into account for the purpose of determining whether a quorum is present at the meeting, but will not be counted as votes cast on the proposal and will have no effect on the outcome of the vote.

Table of Contents

2017 ANNUAL MEETING

What is a broker non-vote?

Generally, a broker non vote occurs when shares held by a bank, broker or other nominee for a beneficial owner are not voted with respect to a particular proposal because (i) the nominee has not received voting instructions from the beneficial owner and (ii) the nominee lacks discretionary voting power to vote such shares. Under the rules of the New York Stock Exchange (the “NYSE”), a nominee does not have discretionary voting power with respect to “non  routine” matters.

“Non routine” matters under the NYSE’s rules include director elections, whether contested or uncontested, and votes concerning executive compensation and certain corporate governance proposals. As a result, your bank, broker or other nominee may only vote your shares on “non routine” matters if you have provided your bank, broker or other nominee with specific voting instructions.

Thus, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on “non routine” matters, your bank, broker or other nominee will not be able to vote your shares on your behalf and your shares will be reported as “broker non votes.” For matters that are still considered “routine” under the NYSE’s rules (e.g., ratification of auditors), your bank, broker or other nominee may continue to exercise discretionary voting authority and may vote your shares on your behalf for such routine matters even if you fail to provide your bank, broker or other nominee with specific voting instructions as to how you would like your shares voted on such routine matters.

We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted for each proposal to be voted upon. You should vote your shares by following the instructions provided on the vote instruction form that you receive from your bank, broker or other nominee.

How do I vote?

You can vote in person or by valid proxy received by telephone, via the Internet or by mail. We urge you to vote by doing one of the following:

The deadline for voting by telephone or electronically through the Internet is 11:59 p.m. EDT on June 27, 2017.

Table of Contents

2017 ANNUAL MEETING

Can I change my vote?

Yes. A proxy may be revoked at any time prior to the voting at the Annual Meeting by submitting a later dated proxy (including a proxy authorization submitted by telephone or electronically through the Internet prior to the deadline for voting by telephone or the Internet), by giving timely written notice of such revocation to  our Corporate Secretary in advance of the Annual Meeting or by attending the Annual Meeting and voting in person. If you have shares held by a bank, broker or other nominee or in “street name,” you may change your vote by submitting a later dated voting instruction form to your broker, bank or other nominee or fiduciary, or if you obtained a legal proxy from your broker, bank nominee or fiduciary giving you the right to vote your shares, by attending the Annual Meeting and voting in person.

Could other matters be decided at the Annual Meeting?

The Board does not intend to bring any matter before the Annual Meeting other than those described in this Proxy Statement. If any other matters properly come before the Annual Meeting, the persons named in the enclosed proxy card, or their duly appointed substitutes acting at the Annual Meeting, will be authorized to vote or otherwise act in respect of any such matters in their discretion.

What if I vote for some but not all of the proposals?

Shares of our common stock represented by proxies received by us (whether received through the return of the enclosed proxy card or received via telephone or the Internet) where the stockholder has provided voting instructions with respect to the proposals described in this Proxy Statement, including the Director Election Proposal, the Ratification of Auditors Proposal, the Say on Pay Vote and the Say on Frequency Vote will be voted in accordance with the voting instructions so made. If your proxy card is properly executed and returned but does not contain voting instructions as to one or more of the proposals to be voted upon at the Annual Meeting, or if you give your proxy by telephone or via the Internet without indicating how you want to vote on each of the proposals to be voted upon at the Annual Meeting, your shares will be voted:

·              FOR t he Director Election Proposal;

·              FOR the Ratification of Auditors Proposal;

·              FOR the Say on Pay Vote;

·              FOR an ANNUAL Say on Frequency Vote; and

·              At the discretion of the persons named in the enclosed proxy card, on any other matter that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.

If your shares are held in street name and you do not properly instruct your bank, broker or other nominee how to vote your shares, your bank, broker or other nominee may either use its discretion to vote your shares on matters deemed “routine” by the NYSE or may not vote your shares. For any matters deemed “non routine” by the NYSE, your bank, broker or other nominee would not be able to vote  your shares on such matters.  We encourage you to provide instructions to your bank, broker or other nominee by carefully following the instructions provided to ensure that your shares are voted at the Annual Meeting in accordance with your desires.

Table of Contents

2017 ANNUAL MEETING

Who will pay for the cost of this proxy solicitation?

We will pay the cost of soliciting proxies on behalf of our Board. Our directors, officers and employees may solicit proxies on our behalf in person or by telephone, facsimile or electronically through the Internet, as described above. We have engaged Broadridge Financial Solutions, Inc. (“Broadridge”) to assist us in the distribution and solicitation of proxies. We will also reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending our proxy materials to beneficial owners of our common stock as of the record date.

Who will count and certify the vote?

Representatives of Broadridge will count the votes and certify the voting results. The voting results are expected to be published in a Current Report on Form 8 K filed with the SEC within four business days following the conclusion of the Annual Meeting.

How can I access the proxy materials and 2016 Annual Report electronically?

Copies of the Notice of 2017 Annual Meeting, Proxy Statement and 2016 Annual Report, as well as other materials filed by us with the SEC, are available without charge to stockholders on our corporate website at www.phh.com or upon written request to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054. You can elect to receive future annual reports, proxy statements and other proxy materials electronically by marking the appropriate box on your proxy card or vote instruction form or by following the instructions provided if you vote by telephone or via the Internet.

Copies of our Corporate Governance Guidelines, Independence Standards for Directors, Code of Business Ethics & Conduct, Code of Ethics for Chief Executive Officer and Senior Financial Officers, and the charters   of each standing committee of our Board, including our Audit Committee, Human Capital and Compensation Committee, Corporate Governance Committee and Finance, Compliance & Risk Management Committee, are also available without charge to stockholders on our corporate website at www.phh.com under the heading “Investors—Corporate Governance” or upon written request to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054.

Table of Contents

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

BOARD OF DIRECTORS

During 2016, our Board held twenty-six meetings. Each incumbent director attended at least 75% of the meetings held by the Board during the period in which each such director served as a member of the Board. All directors are expected to attend Board meetings, meetings of the Committees upon which they serve and meetings of our stockholders absent exceptional cause. All seven of our directors that were serving as directors on June 7, 2016 attended the 2016 Annual Meeting of Stockholders held on that date.

Table of Contents

Table of Contents

Table of Contents

Agreement with EJF

On April 28, 2017, the Company entered into an agreement (the “EJF Agreement”) with EJF Capital LLC, EJF Debt Opportunities Master Fund, L.P. and EJF Debt Opportunities GP, LLC (collectively, “EJF”). Based on EJF’s amended Schedule 13D filed March 17, 2017, EJF and its affiliates beneficially own an aggregate of approximately 9.9% of the Company’s common stock.  Under the terms of the EJF Agreement, the Company agreed to nominate Mr. Neuhauser and Mr. Stein for election to the Board at the Annual Meeting, subject to the terms of the EJF Agreement. In connection with the execution of the EJF Agreement, the Company appointed Mr. Neuhauser and Mr. Stein to serve as observers to the Board until the Annual Meeting. In addition, if Mr. Neuhauser and Mr. Stein are elected to the Board at the Annual Meeting, the Company has also agreed to cause each of the Board’s committees to include at least one of them during the applicable commitment period, which is expected to run until the thirtieth day prior to the deadline for submission of stockholder nominations and proposals in accordance with the Company’s by-laws for the Company’s 2018 annual meeting of stockholders.  Under the terms of the EJF Agreement, EJF has agreed to vote the shares of the Company’s common stock that it beneficially owns in favor of the Company’s nominees for election at the Annual Meeting.  The EJF Agreement also subjects EJF to certain customary standstill provisions during the commitment period.

The decisions of Mr. Gibbons and Ms. Reif not to stand for re-election at the Annual Meeting were unrelated to the Company’s agreement with EJF.

Independence of the Board of Directors

Under the rules of the NYSE and the SEC, our Board is required to affirmatively determine which directors are independent and to disclose such determination in our annual report to stockholders and in our proxy statement for each annual meeting of stockholders. Our Board has reviewed each director’s relationships with us in conjunction with our previously adopted categorical Independence Standards for Directors (the “Independence Standards”) and Section 303A of the NYSE’s Listed Company Manual (the “NYSE Listing Standards”). A copy of our categorical Independence Standards is available on our corporate website at www. phh.com under the heading “Investors—Corporate Governance.” A copy of our Independence Standards is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Based on the Board’s review, our Board has affirmatively determined that each of our current non employee directors and director nominees is independent within the meaning of our categorical Independence Standards and the NYSE Listing Standards and has no material relationship with us or any of our subsidiaries, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Our Board has also determined that Mr. Messina, who serves as a director and our President and Chief Executive Officer, is not an independent director. Accordingly, 86% of our current incumbent directors are independent, representing more than two thirds of our directors as required by our Corporate Governance Guidelines. Furthermore, our Board has determined that Mr. Crowl, who currently serves as our Executive Vice President and Chief Operating Officer and will succeed Mr. Messina as our President and Chief Executive Officer at the Annual Meeting, is not independent. Accordingly, 86% of our director nominees standing for election at the Annual Meeting are independent, representing more than two thirds of our directors as required by our Corporate Governance Guidelines.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

COMMITTEES OF THE BOARD

The Board has a standing Audit Committee, Human Capital and Compensation Committee, Corporate Governance Committee and Finance, Compliance & Risk Management Committee. Each standing committee consists solely of directors who have been affirmatively determined to be “independent” within the meaning of the NYSE Listing Standards and our Independence Standards. Each standing committee operates pursuant to a written charter and a copy of each such committee’s charter is available on our corporate website at www.phh. com under the heading “Investors—Corporate Governance.” A copy of each such committee’s charter is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054. Additionally, as discussed further below, on October 8, 2015 the Board established a temporary Special Committee, consisting of independent directors and Mr. Messina, our President and Chief Executive Officer.

On April 27, 2017, in anticipation of our previously-announced intent to transition to a business focused on subservicing and portfolio retention services and in order to, among other things, reduce Board-related expenses, the Board determined that effective at the Annual Meeting, the Audit Committee will assume the functions of both the Finance, Compliance & Risk Management Committee and the Special Committee, and those two committees will be dissolved.

Audit Committee

The Audit Committee assists our Board in the oversight of the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence, the performance of our independent registered public accounting firm and our internal audit function, and our compliance with legal and regulatory requirements. The Audit Committee is a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee also oversees our corporate accounting and reporting practices by:

·       meeting with our financial management and independent registered public accounting firm to review and discuss our financial statements, quarterly earnings releases and financial data, and internal controls over financial reporting;

·       appointing and pre approving all services provided by the independent registered public accounting firm that will audit our financial statements;

·       reviewing the internal audit plan; and

·       reviewing the scope, procedures and results of our audits.

Effective at the Annual Meeting, the Finance, Compliance & Risk Management Committee and the Special Committee will each be dissolved and the Audit Committee will assume all functions that were previously performed by those two committees.

The Audit Committee is currently comprised of Ms. Carlin and Messrs. Egan, Gibbons and Wetzel (Chair). Immediately following the Annual Meeting, the Audit Committee is intended to be co-chaired by Ms. Carlin (currently chair of both the Finance, Compliance & Risk Management Committee and the Special Committee) and Mr. Wetzel and to include Messrs. Egan and Neuhauser as members. Our Board has determined that Messrs. Egan and Gibbons qualify as “audit committee financial experts” within the meaning of applicable SEC rules and are independent directors under the Independence Standards and the NYSE Listing Standards. During 2016, the Audit Committee met twelve times and each incumbent member of the Audit Committee attended at least 75% of the meetings held by the Audit Committee during the period in which each such member served as a member of the Audit Committee.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Human Capital and Compensation Committee

The Human Capital and Compensation Committee (the “HC&CC”) determines and approves all elements of compensation for our senior management and our Chief Executive Officer (whose compensation is further subject to final approval by the Board), reviews and approves our compensation strategy, including the elements of total compensation for senior management, reviews and approves the annual bonus and long term bonus incentive plans, and reviews and grants equity awards for our employees. The HC&CC also assists us in reviewing and approving our management’s succession planning for the Management Operating Committee and our stated compensation philosophy and strategy for all employees, and developing compensation and benefit strategies to attract, develop and retain qualified employees. See “Executive Compensation” for additional information regarding the process for the determination and consideration of executive compensation. The HC&CC is also responsible for reviewing and recommending to the Board the compensation of our non employee directors.

The HC&CC is currently comprised of Ms. Reif (Chair) and Messrs. Egan, Pizzi and Wetzel. Immediately following the Annual Meeting, the HC&CC is intended to be comprised of Messrs. Pizzi (Chair), Stein and Wetzel. During 2016, the HC&CC met sixteen times and each incumbent member of the HC&CC attended at least 75% of the meetings held by the HC&CC during the period in which each such member served as a member of the HC&CC.

Corporate Governance Committee

The Corporate Governance Committee’s responsibilities include considering matters of corporate governance and reviewing and revising our Corporate Governance Guidelines, Code of Business Ethics & Conduct, and Code of Ethics for Chief Executive Officer and Senior Financial Officers. The Corporate Governance Committee identifies, evaluates and recommends nominees for our Board for each annual meeting (see “Corporate Governance—Nomination Process and Qualifications for Director Nominees” below), evaluates the composition, organization and governance of our Board and its committees, and develops and recommends corporate governance principles and policies applicable to us.

The Corporate Governance Committee is currently comprised of Messrs. Egan, Pizzi (Chair) and Wetzel. Immediately following the annual meeting, the Corporate Governance Committee is intended to be comprised of Ms. Carlin (Chair) and Messrs. Pizzi and Stein. During 2016, the Corporate Governance Committee met nine times and each incumbent member of the Corporate Governance Committee attended at least 75% of the meetings held by the Corporate Governance Committee during the period in which each such member served as a member of the Corporate Governance Committee.

Finance, Compliance & Risk Management Committee

The Finance, Compliance & Risk Management Committee (the “FCRMC”) assists our Board in fulfilling its oversight responsibilities with respect to the assessment of our overall capital structure and its impact on the generation of appropriate risk adjusted returns, and with the identification, review and reporting of significant issues with respect to our compliance management system, as well as the existence, operation and effectiveness of our risk management programs, policies and practices. The FCRMC also assists the Board, the Audit Committee and other Board Committees, as determined by the Board from time to time, with the oversight of significant regulatory and compliance matters.

The FCRMC is currently comprised Mses. Carlin (Chair) and Reif and Mr. Gibbons. Effective at the Annual Meeting, the FCRMC will be dissolved and the Audit Committee will assume all functions that were previously performed by the FCRMC.

During 2016, the FCRMC met seven times, and each incumbent member of the FCRMC attended at least 75% of the meetings held by the FCRMC during the period in which each such member served as a member of the FCRMC.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Special Committee

The temporary Special Committee was formed to assist the Board, the Audit Committee and other Board committees with the oversight of governance, audit, asset management, information security, business continuity and human capital initiatives relating to our information technology organization and systems that our or our clients’ regulators have requested or expect direct Board oversight.

The Special Committee is currently comprised of Mses. Carlin (Chair) and Reif and Mr. Messina. Effective at the Annual Meeting, the Special Committee will be dissolved and the Audit Committee will assume all functions that were previously performed by the Special Committee.

During 2016, the Special Committee met ten times, and each incumbent member of the Special Committee attended at least 75% of the meetings held by the Special Committee during the period in which each such member served as a member of the Special Committee.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

CORPORATE GOVERNANCE

Board of Directors’ Role in Risk Oversight

Our business and affairs are managed under the direction of the Board in accordance with our By Laws. The role of the Board is one of oversight, including as to matters relating to risk management. Our management is responsible for managing our day to day operations and affairs, including the development and implementation of systems and processes to identify and monitor our risks and policies and procedures to ensure that risks undertaken by us are consistent with our business objectives and risk tolerances. To assist it in fulfilling its oversight function, the Board has established four standing committees comprised of the Audit Committee, the HC&CC, the Corporate Governance Committee and the FCRMC, as well as the temporary Special Committee. Each committee regularly reports to the Board and is responsible for oversight in connection with actions taken by such committee consistent with the exercise of fiduciary duties by the directors serving on such committee. Our risk management process is intended to ensure that our risks are undertaken knowingly and purposefully.

As noted above, a primary purpose of the FCRMC is to assist the Board in fulfilling its oversight responsibilities with respect to the assessment of our overall capital structure and its impact on the generation of appropriate risk adjusted returns, as well as the existence, operation and effectiveness of our risk management programs, policies and practices, among other things. The FCRMC regularly discusses with our management, including, among others, our Chief Executive Officer, Chief Financial Officer, Chief Risk and Compliance Officer and Treasurer, the risks we face and management’s plans and initiatives undertaken to mitigate such risks.

The Audit Committee charter provides that the Audit Committee is responsible for discussing our guidelines and policies governing the process by which we undertake risk assessment and risk management, including our major financial risk exposures and the steps our management has taken to monitor and control such exposures. Further, as part of our periodic reporting process, management reviews with the Audit Committee our disclosure process and the disclosures contained in our periodic reports filed with the SEC, including disclosure concerning our risk factors.

The HC&CC has focused on aligning our compensation policies with our long term interests and avoiding short term rewards for management decisions that could pose long term risks to us as described in more detail below under “Executive Compensation.” The Board’s compensation risk governance includes the HC&CC consulting with the Board’s Audit Committee and FCRMC around compensation and risk. The FCRMC reviews the risk factors each year, and reviews program changes for these factors, consistent with its charter.

As discussed in “Committees of the Board” above, on April 27, 2017, in anticipation of our previously-announced intent to transition to a business focused on subservicing and portfolio retention services and in order to, among other things, reduce Board-related expenses, the Board determined that effective at the Annual Meeting, the Audit Committee will assume the functions of both the Finance, Compliance & Risk Management Committee and the Special Committee, and those two committees will be dissolved.

Board Leadership Structure

Since 2005, our Chairman of the Board has been an independent, non employee director. The Chairman of the Board is elected by a majority vote of the directors. Currently, James O. Egan serves as our non executive Chairman of the Board, a position he has held since June 17, 2009. Mr. Egan has served as a director since March 30, 2009. Mr. Egan currently serves as a member of the Audit Committee, Corporate Governance Committee and HC&CC and it is expected that immediately after the Annual Meeting, Mr. Egan will serve solely as a member of the Audit Committee.

In his capacity as non executive  Chairman of the Board, Mr.  Egan leads all meetings of our Board at which   he is present, but does not serve as an employee or corporate officer. The non executive Chairman of the Board serves on appropriate committees as requested by the Board, sets meeting schedules and agendas and manages information flow to the Board to assure appropriate understanding of, and discussion regarding matters of interest or concern to the Board. The non executive Chairman of the Board also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as the Board may from time to time prescribe.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Although the Board does not currently have a policy requiring that the positions of Chairman of the Board and Chief Executive Officer be separated, the Board continues to believe that it is appropriate for the Chairman of the Board to be an independent, non employee director to ensure that the Board operates independently of management in the fulfillment of its oversight function and that the matters presented for consideration by the Board and its committees reflect matters of key importance to us and our stockholders as determined by the independent directors.

Executive Sessions of Non-Management Directors

Executive sessions of non management directors are held regularly by the Board and its Committees without management present to discuss the criteria upon which to base the performance of the Chief Executive Officer and other senior executives, the performance of the Chief Executive Officer and other senior executives against such criteria, the compensation of the Chief Executive Officer and other senior executives and any other relevant matters. Our Board has designated Mr. Egan, our non executive Chairman of the Board, as the presiding director of executive sessions of the non management directors of the Board.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines to assist the Board in monitoring the effectiveness of decision making, both at the Board and management levels and to enhance long term stockholder value. The Corporate Governance Guidelines outline the following:

·       the responsibilities of the Board;

·       the composition of the Board, including the requirement that two thirds of the directors be independent within the meaning of the NYSE Listing Standards;

·       Director duties, tenure, retirement and succession;

·       conduct of Board and Committee meetings; and

·       the selection and evaluation of the Chief Executive Officer.

Our Corporate Governance Guidelines are available on our corporate website at www.phh.com under the heading “Investors—Corporate Governance—Corporate Governance Guidelines.” A copy of our Corporate Governance Guidelines is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Code of Business Ethics & Conduct

We are committed to conducting business ethically and in compliance with applicable laws, rules and regulations. In furtherance of this commitment, we promote ethical behavior and have adopted a Code of Business Ethics & Conduct (the “Code of Conduct”) that is applicable to all of our directors, officers and employees. The Code of Conduct provides, among other things:

·       guidelines for our directors, officers and employees with respect to ethical handling of conflicts of interest, including special procedures covering related party transactions between us and members of our management operating committee or directors and their families, examples of the most common types of conflicts of interest that require disclosure (e.g., personal or family relationships with suppliers, vendors or contractors or a directors’ service on other boards of directors) or that should be avoided altogether (e.g., receipt of improper personal benefits, having an ownership interest in other businesses that may compromise an officer’s loyalty to us, obtaining outside employment with a competitor of ours, etc.);

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

·       restrictions on competition between us and our directors, officers and employees and the protection of all our proprietary and personal and confidential information in our possession;

·       a set of standards to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by us, including, for example, a specific requirement that all financial records must be maintained accurately and in accordance with appropriate controls;

·       a requirement to comply with all applicable laws, rules and regulations;

·       restrictions on insider trading by our directors, officers and employees;

·       guidance providing resources for compliance with the Code of Conduct and promoting prompt internal communication of any suspected violations of the Code of Conduct to the appropriate person or persons identified in the Code of Conduct, including information regarding our toll free and anonymous Integrity hotline and secure website and our commitment to non retaliation for reporting suspected violations of the Code of Conduct in good faith; and

·       disciplinary measures for violations of the Code of Conduct and any other applicable rules and regulations.

The Code of Conduct is available on our corporate website at www.phh.com under the heading “Investors— Corporate Governance—Code of Business Ethics & Conduct.”   We  will post any amendments to the Code   of Conduct, or waivers of its provisions with respect to our directors or executive officers, to our corporate website under the heading “Investors—Corporate Governance”. A copy of the Code of Conduct is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

Our Board has also adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers (the “Financial Officers Code”) that is applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Controller and other persons performing similar functions (the “Covered Officers”). The Financial Officers Code provides, among other things:

·       guidelines for our Covered Officers with respect to ethical handling of conflicts of interest, including procedures for handling any actual or apparent conflicts of interests;

·       a set of standards to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by us, including, for example, a specific prohibition from misrepresenting, omitting or causing others to misrepresent or omit material facts about us in our financial reporting and disclosure process;

·       a requirement to comply with all applicable laws, rules and regulations;

·       guidance promoting prompt internal communication of any violations, whether actual or probable, of the Financial Officers Code to the Chief Risk and Compliance Officer; and

·       disciplinary measures for violations of the Code of Conduct or failure to adhere to the Financial Officers Code.

The Financial Officers Code is available on our corporate website at www.phh.com under the heading “Investors—Corporate Governance—Code of Ethics for CEO and SFOs.” We will post any amendments to the Financial Officers Code, or waivers of its provisions for any of our executive officers, to our corporate website under the heading “Investors—Corporate Governance.” A copy of the Financial Officers Code is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Nomination Process and Qualifications for Director Nominees

The Board has established certain procedures and criteria for the selection of nominees for election to our Board. In accordance with such procedures and criteria as set forth in our Corporate Governance Guidelines, the Board seeks members from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Pursuant to its charter, the Corporate Governance Committee is required to identify individuals qualified to become members of the Board, which shall be consistent with the Board’s criteria for selecting new directors. In identifying possible director candidates, the Corporate Governance Committee considers recommendations of professional search firms, stockholders, and members of management or the Board. In evaluating possible director candidates, the Corporate Governance Committee, consistent with the Board’s Corporate Governance Guidelines and its charter, considers criteria such as skills, experience, age, diversity, and availability to prepare, attend and participate in Board and Board committee meetings, as well as personal qualities of leadership, character, judgment, and reputation for integrity and adherence to the highest ethical standards, so as to enhance the Board’s ability to oversee in the interest of our stockholders our affairs and business, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NYSE requirement. In considering diversity, the Corporate Governance Committee considers general principles of diversity in the broadest sense and seeks to recommend the nomination of directors who represent different qualities and attributes and a mix of professional and personal backgrounds, experiences and perspectives that will enhance the quality of the Board’s deliberations and oversight of our business.

The Corporate Governance Committee is also responsible for conducting a review of the credentials of individuals it wishes to recommend to the Board as a director nominee, recommending director nominees to the Board for submission for a stockholder vote at either an annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors, reviewing the suitability for continued service as a director of each Board member when his or her term expires and when he or she has a significant change in status, including but not limited to an employment change, and recommending whether such a director should be re nominated to the Board or continue as a director. The Corporate Governance Committee’s assessment of director nominees includes an examination of whether the individual is independent and whether the individual’s service as a director may give rise to a conflict of interest, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board. Additionally, the Corporate Governance Committee conducts a vetting process that generally includes, among other things, personal interviews, discussions with professional references, background and credit checks, and resume verification. When formulating its director nominee recommendations, the Corporate Governance Committee also considers the advice and recommendations from others as it deems appropriate.

Our By Laws provide the procedure for stockholders to make director nominations either at any annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors. A stockholder who is both a stockholder of record on the date of notice as provided for in our By Laws and on the record date for the determination of stockholders entitled to vote at such meeting and gives timely notice can nominate persons for election to our Board either at an annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors. The notice must be delivered to or mailed and received by the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054:

·       in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the 90th day prior to the date of such annual meeting and not later than the close of business on the later of the 60th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such annual meeting is first made; and

·       in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was sent or public announcement of the date of the special meeting was made, whichever first occurs.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

The stockholder’s notice to our Corporate Secretary must be in writing and include the information set forth in Section 1.10 of our By Laws. Such notice must be accompanied by a written consent to be named as a nominee and to serve as a director if elected, signed by each person whom the stockholder proposes to nominate for election as a director. No person shall be eligible for election as a director unless nominated in accordance with the procedures set forth in our By Laws. If the chairman of the meeting determines that a nomination was not made in accordance with the above described procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice of a stockholder proposal under our By Laws.

Communication with Non-Management Directors

In accordance with our Corporate Governance Guidelines, all stockholder and interested party communications to any director, the non management directors as a group or the Board shall be forwarded to the attention of the Chair of the Corporate Governance Committee, c/o the Corporate Secretary, 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054. The Corporate Secretary shall review all such stockholder and interested party communications and discard those which (i) are not related to our business or governance of our Company, (ii) are commercial solicitations which are not relevant to the Board’s responsibilities and duties, (iii) pose a threat to health or safety or (iv) the Chair of the Corporate Governance Committee has otherwise instructed the Corporate Secretary not to forward. The Corporate Secretary will then forward all relevant stockholder and interested party communications to the Chair of the Corporate Governance Committee for review and dissemination.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Table of Contents

CONSUMER CREDIT LOANS IN THE ORDINARY COURSE OF BUSINESS

One or more of our mortgage lending subsidiaries has made, in the ordinary course of their respective consumer credit businesses, mortgage loans and/or home equity lines of credit to certain of our directors and executive officers or their immediate family members of types generally made available to the public by such mortgage lending subsidiaries. Such mortgage loans and/or home equity lines of credit were made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with our other customers generally, and they did not involve more than the normal risk of collectability or present other unfavorable features. Generally, we sell these mortgage loans and/or home equity lines of credit, soon after origination, into the secondary market in the ordinary course of business.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

(1)     The non-executive chairman of the Board receives an annual retainer that is approximately $75,000 greater in the aggregate than the retainer paid to other non-employee directors. Accordingly, for the 2016-2017 Term, Chairman Egan was paid $113,977 in cash and was granted Director RSUs with an aggregate grant date fair value of $181,020.

(2)     For the 2016-2017 Term, the retainer for each director other than Chairman Egan consists of $85,000 paid in cash and Director RSUs with an aggregate grant date fair value of $134,986.

(3)     Prior to Mr. Parseghian’s retirement from the Board upon expiration of the 2015-2016 Term, the FCRMC was co-chaired by Mr. Parseghian and Ms. Carlin, each of whom received a $25,000 co-chair stipend for the 2015-2016 Term. From and after Mr. Parseghian’s retirement, Ms. Carlin served as the sole chair of the FCRMC.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

(1)     The amounts shown in the Stock Awards column represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”) for awards granted during our 2016 fiscal year, not the actual amounts paid to or realized by our independent directors during our 2016 fiscal year. As detailed below, the value reflected in this column includes the entire value of the annual grant attributable to Board service for the 2016-2017 Term. Pursuant to ASC 718, the grant date fair value is calculated using the closing market price of our common stock on the date of grant. See also Note 17, “Stock-Based Compensation” in the Notes to Consolidated Financial Statements included in the 2016 Annual Report for the assumptions used in calculating our equity based compensation expense.

(2)     Fees Earned and Stock Awards for Messrs. Loren and Parseghian reflect active service as a director from January 1, 2016 to immediately prior to the 2016 annual meeting of stockholders, as they did not seek re-election to the Board upon expiration of the 2015-2016 Term. During this time, the final two installments of the equity compensation granted to non-employee directors (including Messrs. Loren and Parseghian) in May 2015 for the 2015-2016 Term vested, but Messrs. Loren and Parseghian were not granted equity awards in fiscal year 2016. At the time of their resignations, Mr. Loren was a member of the Corporate Governance and Special Committees and Mr. Parseghian was a member of the Audit Committee and the co-chair of the FCRMC.

(3)     Mr. Loren received $50,000 for work performed in 2016 after the conclusion of his Board service pursuant to a consulting contract with the Company pursuant to which, among other services, Mr. Loren assisted in the Company’s review and analysis of strategic alternatives.

(4)     Ms. Reif was appointed to the Special Committee on April 14, 2016 and was not reappointed to the Corporate Governance Committee on June 9, 2016.

(5)     Mr. Wetzel was appointed to the Corporate Governance Committee on June 9, 2016.

Table of Contents

PROPOSAL 1 — DIRECTOR ELECTION

(1)     Equity award granted pursuant to the Program on June 9, 2016 that vests in four equal installments on September 30, 2016, December 31, 2016, March 31, 2017 and the Annual Meeting, subject to continuing Board service on the applicable vesting date, except in the case of death, disability or a termination of service following a change in control, in which case vesting is accelerated.

(2)     All non-employee directors who were granted equity awards in 2016 elected to have such awards delivered as Director RSUs with settlement deferred until termination of service from the Board.

(3)     Messrs. Loren and Parseghian did not seek re-election to the Board upon expiration of the 2015-2016 Term and, therefore, were not granted equity awards in 2016.

We have never provided stock option awards to our non-employee directors; therefore there were no option awards outstanding at December 31, 2016 for any of the above listed directors.

Non-Employee Director and Employee Share Ownership and Retention Policy

To further align the interests of non-employee directors with those of stockholders, non-employee directors are required to retain net shares of the Company’s common stock, which includes vested and unvested Director RSUs, equal to five times the cash portion of the Board retainer, consistent with the terms of the Non-Employee Director and Employee Share Ownership and Retention Policy, which became effective February 26, 2015. Pursuant to that policy, non-employee directors are permitted to sell accumulated equity so long as their share retention requirements are met and only when consistent with applicable securities laws and Company trading policies. As of January 3, 2017, all non-employee directors were in compliance with this ownership and retention policy. In addition, our Policy Prohibiting Pledging and/or Hedging of PHH Corporation Securities, which became effective January 24, 2013, prohibits our non-employee directors from pledging Company securities as collateral for a loan, holding Company securities in a margin account or engaging in any hedging transactions with respect to the Company’s securities.

Table of Contents

Table of Contents

PROPOSAL 2 — RATIFICATION OF AUDITORS

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our Audit Committee is responsible for pre approving all audit services and permitted non audit services, including the fees and terms thereof, to be performed for us and our subsidiaries by our independent registered public accounting firm, Deloitte & Touche LLP (the “Independent Auditor”). The Audit Committee has adopted a pre approval policy and implemented procedures that provide that all engagements of our Independent Auditor are reviewed and pre approved by the Audit Committee, except for such services that fall within the de minimis exception for non audit services described in Section 10A(i)(1)(B) of the Exchange Act that our Audit Committee approves prior to the completion of the audit. The pre approval policy also permits the delegation of pre approval authority to a member of the Audit Committee between meetings of the Audit Committee, and any such approvals are reviewed and ratified by the Audit Committee at its next scheduled meeting.

For the years ended December 31, 2016 and 2015, professional services were performed for us by our Independent Auditor pursuant to the oversight of our Audit Committee.

Set forth below are the fees billed to us by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited and their respective affiliates. All fees and services were approved in accordance with the Audit Committee’s pre approval policy.

Audit Fees . Audit fees primarily related to the annual audits of the Consolidated Financial Statements included in our Annual Reports on Form 10 K and our internal control over financial reporting, as required by Section 404 of the Sarbanes Oxley Act of 2002, the reviews of the Condensed Consolidated Financial Statements included in our Quarterly Reports on Form 10 Q and services provided in connection with regulatory and statutory filings. The increase in audit fees from 2015 was a result of our engagement of the Independent Auditor to perform certain subsidiary audits in 2016 that had been performed by another firm in prior years.

Audit Related Fees. Audit-related fees primarily relate to fees for (i) consultations as to the accounting or disclosure treatment of contemplated or executed transactions, which for 2016, included transactions contemplated and executed in connection with our evaluation of strategic alternatives and (ii) service auditor reports on internal controls.

Tax Fees. Tax fees related to tax compliance, tax advice and tax planning. The decrease in tax fees paid to the Independent Auditor from 2015 to 2016 was a result of our engagement of a third party to provide those services in 2016.

All Other Fees. The aggregate fees billed for all other services during the years ended December 31, 2016 and 2015 were not significant.

Table of Contents

PROPOSAL 2 — RATIFICATION OF AUDITORS

Table of Contents

Table of Contents

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

LETTER FROM BOARD AND COMPENSATION COMMITTEE CHAIRS

Dear Fellow Shareholders:

In light of the unique human capital challenges confronting PHH in 2016 and in response to your feedback, we would like to share with you the context within which we developed our 2016 compensation programs and some of our actions in 2017.

2016 was a transformative year for PHH. We have taken actions to monetize most of the balance sheet, exited certain businesses resolved certain, and made substantial progress toward resolving other, legacy regulatory matters. In addition, the regulatory environment for mortgage companies continued to intensify. This had a large impact on the cost structures within our businesses across the board but, in particular, in our Private Label Solutions business, where we are held to bank level regulatory compliance standards. Our operations are required to be fully compliant with our client and numerous regulatory demands, and responsive to thousands of regulatory examination and information requests.

Due to these industry and regulatory dynamics, as well as shareholder feedback, in March 2016 we commenced a comprehensive review of all strategic options available to maximize shareholder value. The comprehensive nature of this process is discussed in the preliminary proxy statement filed on April 21, 2017.

In order to preserve and maximize shareholder value during 2016, the Human Capital and Compensation Committee (“HC&CC”) focused on value generation and management and key employee stability. Specifically, the HC&CC, through the short and long term pay programs put in place in 2016 focused the leadership team on:

·             completion of the strategic review process and evaluations of outcomes as well as development of execution plans; and

·             maintenance of the quality and efficacy of the Company’s compliance management programs and business lines; and

·             financial objectives contained in the 2016 Business Plan.

Moreover, because the exploration and consideration of strategic options created meaningful uncertainty in the business with potentially adverse consequences to our leadership team, including the possible elimination of their own positions, our compensation framework for 2016 was also designed to retain the NEOs and other members of the leadership team, whose experience and skills would be essential to completing and executing against the strategic evaluation and resulting actions. It is within this context that we developed our 2016 executive compensation program and within which we made our decisions.

With regard to the 2016 MIP, we maintained the prior year MIP target opportunities, and allocated 75% of the award to strategic evaluation and maintenance of the business (i.e. Adjusted Contribution Margin and Adjusted Shared Service Cost) and 25% to individual contributions.

As pertains to the 2016 LTIP, we first reviewed the current “handcuffs” in place for each of the Named Executive Officers. Given our evaluation of the current handcuff levels , we then provided all NEO’s with time based RSUs for incremental retention as well as upside opportunity tied to stock price movement. In order to provide additional incentive and upside potential for certain NEOs, we structured a PRSU award that is directly aligned with shareholder value creation with a TSR metric, with rewards increasing as TSR increases.

For 2017 consistent with the ongoing transformation taking place, in lieu of our typical LTIP , the NEO’s received cash-based awards. These awards are ONLY earned if targeted levels of cash are available for distribution to shareholders and are achieved by the end of December 31, 2017.

One of our major priorities in 2017 is cost reduction. In addition to the many programs undertaken by management to lower PHH’s overall cost structure, the HC&CC took action to lower the leadership compensation costs on a go forward basis. We commenced the execution of a management transition and have a succession plan with individual by individual exit dates for the remainder of 2017. Additionally, we are transitioning the Board to a lower cost structure and will be consolidating two of the current committees into the Audit Committee. In the future when we become a smaller company, we will revisit board size and overall director compensation.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

We believe the compensation framework we developed accomplished the desired result. We retained 100% of the executive leadership team and delivered a plan to monetize assets and return capital to shareholders. We continue to maintain the value of our operations by meeting our regulatory and compliance requirements and began the transition to a lower cost structure.

We invite you to read the following Compensation Discussion and Analysis for further details on our decisions on compensation during this transition and we look forward to further shareholder engagement.

Sincerely,

Deborah M Reif

Chair, Human Capital and Compensation Committee

James O. Egan

Chairman of the Board

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

(i)              two separate agreements to sell substantially all of our mortgage servicing rights (“MSRs”) and related servicing advances;

(ii)           a three year subservicing arrangement with New Residential to subservice the MSR portfolio sold to them, which as of December 31, 2016 consisted of approximately 467,000 mortgage loans; and

(iii)        a complex transaction with Guaranteed Rate Affinity which includes the sale of certain assets of our PHH Home Loans joint venture with Realogy followed by the monetization of the net investment in that entity.

We did not receive an actionable proposal to acquire the entire Company or our PLS originations platform, nor did we receive an actionable proposal for our subservicing platform that reflected the future value of its expected cash flows.

The Board and Company management determined that, at the time of completion of the strategic review process, a complete dissolution of the business was not the best outcome for stockholders.  This is because  of its higher costs, adverse tax consequences, potentially prolonged timing for capital distributions, and unquantifiable risks. We are, however, exiting those business platforms that were deemed unattractive. We have exited the correspondent lending business, and are exiting the PLS origination business. We have entered into a transaction with LenderLive whereby we transferred to them certain operating assets, personnel, and responsibilities associated with PLS mortgage origination fulfillment functions. We believe this will help mitigate certain operating risks associated with the wind down of the PLS originations business, including by alleviating the risk of employee attrition that could adversely impact our ability to satisfy the service level agreements and other PLS contractual requirements.

Once we have the appropriate level of certainty with respect to the amount and timing of sources and uses   of cash from our strategic actions, we intend to commence returning to stockholders substantially all of our excess cash. We also intend to transition to a business model comprised of subservicing and portfolio retention services. We expect this will enable us to maximize near term capital distributions, preserve the value of our tax assets and create incremental value through potential future earnings and by maintaining flexibility to consider future strategic actions.

For a full discussion and overview of PHH’s business during 2016 and the anticipated transactions please refer to our 2016 Annual Report and the preliminary proxy statement filed on April 21, 2017.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

2016 Executive Compensation Summary

As discussed in “2016 Business Environment” above, a large portion of management’s time and resources in 2016 were devoted to the Company’s strategic review process. The Board considered stockholder sentiment regarding the critical importance of conducting a thorough and comprehensive strategic review process that explored all options to maximize stockholder value. The HC&CC viewed the retention of key talent during this time of uncertainty as essential to ensuring an effective strategic review process, and this was a significant factor underlying the HC&CC’s decision making in 2016, which is summarized below.

Management Incentive Plan Design. The HC&CC considered the difficulty of maintaining and operating the business while simultaneously engaging in the Company’s evaluation of strategic alternatives, and the resulting criticality of retaining executive leadership during that process. Thus, when approving the Management Incentive Plan (the “MIP”) relating to 2016, the HC&CC decided to maintain the prior year’s target MIP opportunities for all NEOs except Mr. Kaplan (whose 2016 MIP target level was increased from 60% to 80% of his base salary to recognize strong performance and expanded responsibilities). In March 2016, after consideration of a number of variables, including the Company’s 2016 business plan, market data, proxy advisor and stockholder feedback and the Company’s evaluation of strategic alternatives announced on March 9, 2016, the HC&CC approved 2016 MIP performance goals based upon tangible book value per basic share, satisfactory completion of the Company’s strategic review process and adjusted direct contribution margin and adjusted shared services costs as compared to the 2016 business plan.

Long-Term Incentive Plan Design. In May 2016, the HC&CC designed and approved the Long Term Incentive Plan (the “LTIP”) for 2016 in a manner consistent with the Company’s strategic plan and business objectives, and while considering the need to retain executive leadership to execute those plans and objectives. All of  the long-term incentives granted to our NEOs in 2016 were in the form of equity-based awards, resulting in 62% of their compensation being tied to movement in the Company’s stock price, thus aligning our NEOs with stockholder interests. All NEOs were granted time-vested Restricted Stock Units (“RSUs”) that, subject to the exceptions and details described later in this CD&A, fully vest on the third anniversary of the grant date.

In addition, given the importance of completing the strategic review process and determining a path forward designed to create stockholder value, and in light of the critical roles our CEO, CFO and chief legal officer played in such process, the HC&CC determined that these three NEOs should have  a considerable portion   of their long-term incentive award connected to the Company’s total shareholder return (“TSR”), and thus included Performance Restricted Stock Units (“PRSUs”) in their 2016 LTIP awards that are linked to TSR. As a result, the grant date fair market values (as reported in the Summary Compensation Table below) of the LTIP awards granted to the NEOs in 2016 were greater than those granted to the NEOs in 2015 in order to incentivize NEOs to satisfy certain performance objectives during the course of, and after, the strategic review process. For example, Mr. Messina’s 2016 LTIP award represented a grant date fair market value increase of $2.94 million compared to his 2015 LTIP award; however subject to the full terms of the award, 84% of the increase is subject to reduction based upon the extent to which the Company does not deliver a 22.89% TSR (and to total forfeiture if the Company does not deliver positive TSR) over its May 19, 2016 starting point.

2016 Performance Determination. In March 2017, the HC&CC reviewed our NEO’s 2016 performance against the performance goals to which the 2016 MIP awards were subject. After careful consideration of both Company performance against the 2016 MIP performance goals and individual NEO accomplishments against their respective pre-established objectives, for reasons detailed below, the HC&CC determined that performance warranted 2016 MIP awards for our NEOs at above target levels. In particular, our NEOs received in the aggregate 107% of their target MIP payment for 2016, which as detailed later in this CD&A, included funding attributable to each NEO’s individual performance objectives in addition to the objectives based upon Company performance.

2017 Incentive Compensation Tied to Available Excess Cash. Also in March 2017, consistent with the Company’s publicly-announced intent to distribute excess cash to stockholders and its pay-for-performance compensation philosophy, the Board approved a new 2017-2018 cash performance incentive award program (the “2017-2018 CPIA”) in lieu of a 2017 grant under the current equity-based long-term incentive program. In deviating from the long-term equity incentive award program, the 2017-2018 CPIA instead provides NEOs with a cash-based award payable based upon the extent to which certain levels of excess cash are available for distribution to the Company’s stockholders by December 31, 2017.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Executive Transitions in 2017

In anticipation of the Company’s transition to a business focused on subservicing and portfolio retention services, the Board and Company management have continuously evaluated ways to reduce costs.  In light  of the Company’s cost-reduction initiatives, the Board and senior management adopted a succession plan for senior management, and in March 2017 the Company announced several resulting leadership changes.

On March 30, 2017, the Company announced that Mr. Messina will continue to serve as the Company’s President and Chief Executive Officer until the Annual Meeting, at which time he will step down from such positions. In anticipation of his termination of employment, Mr. Messina entered into a separation letter that describes the benefits to which he will be entitled in connection with his departure, which include, subject to his execution of a general release agreement, termination without cause benefits under our Tier I Severance Plan (amended and restated effective May 19, 2016, the “Tier I Plan”), and full vesting of his outstanding equity awards, subject to all applicable performance and settlement provisions. Mr. Messina will remain subject to his twenty-four (24) month restrictive covenant agreement, which contains non-compete and non-solicit provisions.

In connection with the anticipated departure of Mr. Messina, on March 29, 2017, Mr. Crowl was appointed Chief Operating Officer, reporting to Mr. Messina. At the Annual Meeting, Mr. Crowl will stand for election to become a member of the Board and will succeed Mr. Messina in the role of President and Chief Executive Officer. In connection with his appointment to COO and future assumption of the role of President and CEO, effective March 30, 2017, Mr. Crowl and the Company entered into an employment agreement that will remain in effect, unless terminated sooner by either party, through March 31, 2018, after which the term may be extended by mutual agreement. Under his employment agreement, Mr. Crowl will receive an annual base salary of $575,000. Mr. Crowl will remain eligible to participate in the Company’s annual management incentive plan, with a 2017 target award of 125% of his annual base salary earned in 2017, and will be eligible to receive the 2017-2018 CPIA with a target award of 130% of his annual base salary.

Under his employment agreement, Mr. Crowl is entitled to receive certain benefits upon termination of employment by the Company without cause or resignation by Mr. Crowl for good reason, in each case, subject to his execution of a general release agreement. These benefits include termination without cause benefits under the Tier I Plan. If Mr. Crowl is not elected to the Board at the Annual Meeting, he will continue to act as the Company’s Interim CEO until the earlier of December 31, 2017 or the appointment of a new CEO, and any termination of employment in connection therewith will be treated as a termination without cause. Mr. Crowl’s employment agreement also includes confidentiality provisions and non-competition and non-solicitation restrictive covenants that apply for twelve (12) months following any termination of employment.

On March 30, 2017, the Company also announced that Ms. Ruggieri will continue to serve as the Company’s Chief Human Resources Officer until June 30, 2017 at which time she will step down from such position. In anticipation of her termination of employment, Ms. Ruggieri entered into a separation letter that describes the benefits to which she will be entitled in connection with her departure, which include, subject to her execution of a general release agreement, termination without cause benefits under the under the Tier I Plan, and full vesting of her outstanding equity awards, subject to all applicable performance and settlement provisions. Ms. Ruggieri continues to be subject to her twelve (12) month restrictive covenant agreement, which contains non- compete and non-solicit provisions.

On March 30, 2017, the Company also announced that Messrs. Kaplan and Brown will continue to serve as the Company’s SVP and Chief Risk and Compliance Officer and SVP, General Counsel and Secretary, respectively, until the end of the year, at which time they will step down from such positions. In anticipation of their terminations of employment, they have each entered into a separation letter that describes the benefits to which each will be entitled in connection with his departure, which include, subject to execution of a general release agreement, termination without cause benefits under the Tier I Plan. Each of Messrs. Kaplan and Brown also continues to be subject to a twelve (12) month restrictive covenant agreement, which contains non- compete and non-solicit provisions.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Compensation Philosophy and Structure

Our total rewards philosophy is to pay for performance, and is intended to align our compensation opportunities with sustainable long-term stockholder value creation. We structure our compensation to deliver on our philosophy, as follows:

·        PAY FOR PERFORMANCE: A significant portion of our NEOs’ total direct compensation opportunity is in the form of variable pay linked to performance in the form of both annual MIP and LTIP awards.

·        PERSPECTIVES OF KEY EXTERNAL STAKEHOLDERS: The HC&CC considers a number of perspectives to ensure our NEO compensation program continues to be market competitive, tax efficient and generally consistent with best practices, while remaining aligned with stockholder interests. For example, the HC&CC carefully considers the opinions provided by ISS and Glass Lewis in response to our Advisory “Say on Pay” recommendation, which last year garnered an approval rate of 70% of the votes cast. In addition, our senior management met with stockholders throughout the year, as did certain members of our Board from time to time, creating an opportunity for stockholders to express their views regarding the Company. The HC&CC believes that it is sound governance practice to consider the information gleaned from this engagement with stockholders and the input of stockholder advisory groups when formulating the design of our programs disclosed in this Proxy Statement.

·        VARIABLE PAY: We take a rigorous approach to setting and reviewing performance objectives and related compensation to ensure we are operating within our risk framework, and that appropriate controls are in place to monitor and assess performance. At the beginning of the year, the HC&CC reviews the proposed performance objectives for the CEO and our NEOs to ensure they are appropriate and align with short- and long-term objectives, including those contained in the Board -approved business plan. After the end of the year, the HC&CC assesses the performance of the CEO, other NEOs and the Company against the pre-established performance objectives to determine each NEO’s final performance achievement.

·        ALIGNMENT OF LONG-TERM INCENTIVE COMPENSATION TO STOCK PRICE PERFORMANCE AND TOTAL SHAREHOLDER RETURN (TSR): As discussed in “2016 Executive Compensation Summary” above, 62% of the compensation provided to our NEOs in 2016 is dependent on the Company’s stock price. Moreover, in light of the critical roles our CEO, CFO and chief legal officer played in the strategic review process, in 2016 we linked half of the underlying restricted stock units awarded to those three NEOs to TSR, requiring a return of 22.89% over the three-year measurement period to realize the target number of restricted equity units.

·        SHARE OWNERSHIP AND RETENTION POLICY: To further align the interests of our NEOs with those of our stockholders, our NEOs are required to retain net shares of five times base salary for our CEO, four times base salary for our CFO, and three times base salary for the other NEOs, consistent with the terms of the Non-Employee Director and Employee Share Ownership and Retention Policy, which became effective February 26, 2015. As of January 3, 2017, all NEOs were in compliance with this policy with the exception of Ms. Ruggieri, who retained net shares with a value equal to 87% of her targeted amount, as the net shares resulting from equity awards granted to her did not equal the minimum retention requirements. Accordingly, Ms. Ruggieri may not dispose of shares until her share ownership requirement is met (except for limited circumstances) and is required to retain 100% of the net shares received in connection with her equity grant in accordance with the Company’s ownership and retention policy.

·        CLAWBACK FEATURES: All of our LTIP awards granted to NEOs in 2016 contain provisions permitting the Company to recoup payments under the award if the NEO violates any non-compete, non-solicit or other restrictive covenant agreement or, within three years of the grant date of the award, is terminated for cause, engages in conducted that causes material financial or reputational harm to the Company, provides materially inaccurate information related to publicly reported financial statements, improperly or with gross negligence fails to assess or report relevant material risks or violates the Company’s Code of Business Ethics & Conduct.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

·        PEER BENCHMARKING: In addition to benchmarking NEO salary, we also benchmark the portion of NEO pay that is at-risk compared to others in our peer group. As shown in the chart below, the target mix of pay for our NEOs in 2016 demonstrates the Company’s compensation programs are designed to emphasize variable compensation to a greater degree than those of our peer group generally, and more specifically, over the long-term.

·        MARKET COMPETITIVE PRACTICES : The HC&CC used the following group of 18 publicly traded companies as the peer group, which remained unchanged from the prior year, to inform decisions relating to 2016 compensation:

Compared to our peer group, as of December 31, 2016 the Company ranked in the 48th percentile for revenue, the 22nd percentile for market capitalization and the 65th percentile for number of employees.

In addition to peer group benchmarking data, the HC&CC examines market compensation data from independent compensation surveys, including Towers Watson, Mercer and McLagan, to ensure that compensation decisions are based on information that includes larger banking and financial institutions representative of the type of companies with which we compete for key talent. In particular, the HC&CC evaluates base salary, short- and long-term incentives and actual and target total compensation levels against survey data. This evaluation included the median and percentile ranges for each compensation component and for all compensation in the aggregate.

The HC&CC further reviews the realizable value of outstanding equity grants to analyze the pay for performance compensation opportunity to market data ranges. In doing so, the HC&CC determined that the total compensation opportunity for NEOs for 2016, including realizable value, was appropriate given the strong emphasis on performance-based compensation.

·        ANNUAL REVIEW OF COMPENSATION COMPONENTS: The HC&CC annually examines each component of pay to ensure it remains relevant and appropriate.

·                    2016 Base Salary. Base salary is the principal fixed component of the total direct compensation of our NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and overall contributions. Generally, the HC&CC uses peer group compensation to inform NEO base salary determinations, but ultimately focuses on the individual NEO performance and criticality of the role when establishing base salary.  The HC&CC made only one adjustment to NEO salaries in 2016, a

$25,000 increase to the salary of Mr. Kaplan, our Chief Risk and Compliance Officer. This was the first adjustment to any NEO salary in two years.

·                    2016 Annual MIP Opportunity and Award. The MIP opportunity, including the target and maximum payout levels, is reviewed and approved annually by the HC&CC and includes an assessment of the scope and impact of each NEO’s position. The NEO’s total cash opportunity against the market median total cash position of the peer group and other relevant market data is also used to inform the MIP opportunity. With the exception of an adjustment to the MIP target for Mr. Kaplan in 2016, the HC&CC has not changed target opportunities for any of the NEOs since March 2015.

The opportunity of certain NEOs to earn a MIP award is conditioned upon, among other things, PHH meeting an Internal Revenue Code Section 162(m)-covered performance goal of an enumerated minimum tangible book value per basic share on December 31, 2016, as described in more detail below. The HC&CC also reviewed the performance of the Company during 2016 against pre-established financial and strategic objectives set by the HC&CC, as described in more detail below. The HC&CC may apply negative discretion, if appropriate, to reduce the individual awards from levels otherwise funded based on Company performance. The NEOs’ 2016 MIP awards were determined in March 2017, upon certification of the MIP performance goals in accordance with Section 162(m).

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

·                    2016 LTIP Awards. In determining each NEO’s LTIP opportunity, the HC&CC examines numerous variables including retention concerns, business needs, and the NEO’s performance during the prior year, as well as the total direct compensation position compared to the total direct compensation opportunity in the market peer group at the time of grant. The LTIP awards provided to our NEOs in 2016 were delivered either as a combination of PRSUs and RSUs or entirely as RSUs. The decision on the form of awards was determined by the HC&CC’s assessment of the NEO’s principal accountability for driving TSR. The HC&CC granted the NEOs’ LTIP awards on May 22, 2016.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Parties Involved in the Corporate Governance of our Executive Compensation Programs

The governance of our executive compensation programs generally occurs through interaction of three groups: the HC&CC, management and the HC&CC’s independent compensation consultant. In 2016, on occasion and as appropriate, the HC&CC enlisted the advice of Latham & Watkins LLP, independent counsel to the Board, and engaged Bryan Cave LLP, independent counsel specializing in executive and non-employee director compensation matters.

ROLE OF THE HC&CC

The HC&CC is responsible for overseeing the development and approval of our compensation and benefits policies and programs. The HC&CC, consisting of four independent directors, is responsible for the design, review and approval of all aspects of our executive compensation program. Among its duties, the HC&CC formulates recommendations to the Board for CEO compensation, and reviews and approves all compensation recommendations for the other NEOs. The HC&CC’s review for NEOs also includes:

·    approval of corporate incentive goals and objectives relevant to compensation;

·    evaluation of individual performance results based on these goals and objectives;

·    evaluation of the market competitiveness of each NEO’s total compensation; and

·    approval of any changes to compensation, including, but not limited to, base salary, annual and long- term incentive award opportunities, severance payments and retention programs.

ROLE OF MANAGEMENT

Our CEO, in consultation with the Chief Human Resources Officer, makes recommendations to the HC&CC as it relates to the compensation of NEOs (other than himself and herself). Our CEO provides an annual performance self-assessment to the HC&CC, but otherwise is not involved in deliberations relating to his own compensation.

ROLE OF INDEPENDENT COMPENSATION CONSULTANT

The primary role of FW Cook is to assist the HC&CC and the Board with the evaluation of our executive compensation programs, both as to compensation levels and design. FW Cook serves as the independent compensation consultant to the HC&CC and does not provide any other services to PHH. During 2016, FW Cook performed a number of services for the HC&CC, including but not limited to reviewing and providing guidance on:

·    ISS and Glass-Lewis reports relating to the 2016 Proxy Statement;

·    design of the 2016 MIP and LTIP awards;

·    market competitiveness of the 2016 compensation opportunities for our NEOs;

·    the Company’s peer group for purposes of informing compensation decisions;

·    market competitiveness of the Board’s compensation program;

·    the HC&CC charter; and

·    providing advice concerning stockholder inquiries regarding our executive compensation program.

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

Base Salaries

Base salaries are intended to provide a level of cash compensation that is competitive and appropriate in relation to the responsibilities of the executive’s position. The HC&CC adjusted only the salary of Mr. Kaplan during 2016 based on his strong performance and a market assessment of his role. Current base salaries represent relative market competitive positioning, experience, tenure, performance and contributions to our success.

(1)     Mr. Kaplan’s salary increase was effective March 2, 2016.

2016 Management Incentive Plan

The MIP awards received by our NEOs in 2016 were structured to be qualified performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code (“Section 162(m)”) and could only be earned and paid if the Company’s tangible book value per basic share was at least $19.45 on December 31, 2016. This goal was set in March 2016 upon giving consideration to, among other things, forecasted earnings, potential variances to the value of the Company’s MSRs, and reasonably possible losses in excess of recorded reserves. If the goal was not met, the NEOs would not be eligible for a payment under the 2016 MIP. The Section 162(m) performance goal was achieved in that the Company’s tangible book value per basic share on December 31, 2016 was $20.37.

Each of our NEOs would become eligible to receive payment of up to 300% of their 2016 MIP target upon achievement of the Section 162(m) performance goal, which award amount would then be determined by the HC&CC after its exercise of negative discretion based on its evaluation of Company and individual NEO performance against a variety of pre-established financial and strategic objectives, as described in more detail below. Consistent with historical practice, meeting the maximum prescribed achievement levels could typically result in a MIP award of up to 150% of the target amount. The difference between the 150% maximum funding based on the pre-established objectives and the 300% maximum payment that could become payable upon achievement of the Section 162(m) performance goal is designed to give the HC&CC discretion to reward NEOs for extraordinary individual performance, while preserving tax deductibility under Section 162(m).

In March 2016, the HC&CC approved a set of financial and strategic objectives to be achieved by the Company, which applies to 75% of each NEO’s MIP opportunity. The remaining 25% of the 2016 MIP opportunity was determined based on achievement of certain pre-established individual performance objectives unique to each NEO, which were also approved by the HC&CC. For each of the Company-based objectives described below, the HC&CC established a threshold, target and maximum achievement level. Under the terms of the MIP:

·        If the threshold achievement level for an objective was not met, the NEOs would not receive any MIP opportunity with respect to that objective;

·        If the threshold achievement level for an objective was met but the target achievement level was not, the NEOs would receive a MIP opportunity equal to 50% of the MIP target for that objective;

·        If the target achievement level for an objective was met but the maximum achievement level was not, the NEOs would receive a MIP award equal to the MIP target for that objective;

·        If the maximum achievement level for an objective was met or exceeded, the NEOs would receive a MIP opportunity of 150% of the MIP target for that objective. Thus, as previously discussed, reaching the maximum achievement level for every objective could result in the NEOs receiving a MIP opportunity of 150% of the targeted amount; and

Table of Contents

PROPOSALS 3/4 — SAY ON PAY/FREQUENCY VOTES

·                    The payout percentage for a level of achievement above threshold level and between the levels described above would be determined based on straight-line interpolation.

The financial and strategic objectives used by the HC&CC to determine 75% of each NEO’s MIP opportunity, and the results for each such objective, are as set forth below:

Completion of Strategic Review. Under the terms of the MIP, the objective regarding satisfactory completion of our strategic review required that the review be completed by June 30, 2016 in order to reach the “Target” achievement level for the objective. However, the HC&CC noted the timeframe for the review was necessarily extended as a result of the number of parties who entered the process, the absence of actionable offers for the entire company or the PLS platform, the diversity of options and alternatives that emerged through the process, the need to prepare alternative business plan scenarios late in the process and the decision to enter into four separate transactions. In light of these factors, and the Board’s expectation that the transactions contemplated under the executed agreements will maximize value for stockholders, ascribed a “Target” achievement level and provided 100% funding for this objective.

Adjusted Direct Contribution Margin. ADCM measures revenue less direct expenses for each applicable business unit, as adjusted for one-time items including certain PLS agreement fulfillment costs and management incentive costs. The ADCM objective was measured as follows:

Table of Contents

PROPOSAL 3 — SAY ON PAY VOTE

The actual ADCM for 2016 was 79.4% of the ADCM set forth in the 2016 business plan.  In March 2017, the HC&CC confirmed the one-time items used to adjust the ADCM for purposes of calculating performance under this MIP objective to offset certain unanticipated burdens on ADCM. Most notably, the HC&CC adjusted the ADCM to offset the loss of revenue from the decision to exit the corresponding lending channel, to take into account the December 2016 resolution agreements to resolve certain representation and warranty exposure entered into with Fannie Mae and Freddie Mac, and to reconsider certain allocation decisions made in the 2016 plan. As a result of these adjustments, the ADCM for these purposes equaled 86% of that set forth in the 2016 plan. Since this performance falls between the “Threshold” achievement level and “Target” achievement level, the funding for this objective was determined by straight-line interpolation between the “Threshold” level and the lower end of the “Target” level, ultimately resulting in 86.9% of target funding for the ADCM objective.

Adjusted Shared Services Costs. ASSC measures actual shared services costs before corporate unallocated expenses, management incentive costs and expenses and delayed costs savings related to certain information technology remediation efforts. Shared services costs of our business consist of overhead functions recognized within both our mortgage operations and centralized corporate platform to provide general and administrative functions to our reportable segments. These shared services include support associated with information technology, enterprise risk management, mortgage operations quality control and fulfillment support services, human resources, and accounting and finance, among other functions. The costs associated with these shared functions, in addition to the cost of managing the overall corporate function, are generally allocated to our reportable segments based on defined allocation rates for each function, as estimated based upon the actual and estimated usage by function or expense category. Total Expenses as recognized in our annual financial statements for 2016 consists of the sum of total shared services costs, direct costs (included in the ADCM metric), notable items, and exit and disposal costs (in each case, excluding any adjustments considered in establishing the MIP objective).

The ASSC objective was measured as follows:

The actual ASSC for 2016 was 100.8% of the ASSC set forth in the 2016 business plan; thus, the “Target” achievement level was met and 100% funding was provided for this objective.

Individual Performance Objectives. The remaining 25% of 2016 MIP award opportunities was directly related to each NEO’s leadership competencies and performance against their individual objectives for 2016. In March 2017, the HC&CC reviewed each NEO’s full year performance to determine each NEO’s 2016 MIP payment attributable to the individual performance metrics and, together with the achievement of the Company performance metrics, the total 2016 MIP award.  Summarized below is a description of each NEO’s factors that determined the individual performance component of the MIP award and each NEO’s ultimate 2016 MIP award, other than Mr. Messina, whose compensation is discussed in detail in the “Total Compensation of our Chief Executive Officer” section below.

·        Mr. Crowl was awarded the maximum 150% of the funding in connection with his individual objectives, which resulted in a final award equal to 108% of his 2016 MIP target. The award recognized the instrumental role he played in each stage of the strategic review process and the evaluation of numerous financial scenarios and related stockholder value creation opportunities. In addition, Mr. Crowl helped lead the execution of key strategic decisions made during 2016, including the decision to exit the PLS channel and the sale of the Company’s MSRs in two separate transactions.

·        Mr. Brown was awarded the maximum 150% of the funding in connection with his individual objectives, which resulted in a final award equal to 108% of his 2016 MIP target. The award recognized the role he played supporting every aspect of the strategic review process, including

Table of Contents

PROPOSAL 3 — SAY ON PAY VOTE

supporting multiple complex transactions and analyzing the legal and contractual implications of several strategic directions considered by the Board, while simultaneously resolving certain, and making substantial progress towards resolving other, legacy regulatory matters.

·        Mr. Kaplan was awarded 120% of the funding in connection with his individual objectives, which resulted in a final award equal to 101% of his 2016 MIP target. The award recognized the role he played in providing cross-functional leadership and support for significant remediation activities in our information technology organization and systems, building a high performing Information Security organization, and executing against required management action plans, as well as his involvement in the strategic review process, and identifying, escalating and contributing to solving enterprise-wide risk challenges.

·        Ms. Ruggieri was awarded 120% of the funding in connection with her individual objectives, which resulted in a MIP award equal to 101% of her 2016 MIP target. The award recognized the leadership she provided in supporting the strategic review process, which included developing appropriate and effective retention, incentive and employee assistance programs to effectively manage the exit of the correspondent lending and PLS channels, the closure of our Williamsville, NY site, and the human capital impact of our review of strategic alternatives.

In summary, on March 2, 2017 the HC&CC approved the following MIP payments for 2016 performance:

Long-Term Incentive Awards Granted in 2016

The HC&CC considers equity-based awards to our NEOs as an appropriate and effective method of retaining key executive talent and aligning their interests with the interests of our stockholders. Eligibility for equity- based awards, the number of shares underlying each award, and the terms and conditions of each award are determined by the HC&CC upon consultation with management and the HC&CC’s compensation consultant. In granting equity awards, the HC&CC considers several factors, including, but not limited to, total compensation relative to our peer group, the mix of performance and time-vested compensation, the applicable NEO’s demonstrated performance and leadership and the criticality of the role.

Consistent with the Company’s pay for performance philosophy, in the second quarter of 2016, the HC&CC approved long-term incentive awards for NEOs under the 2014 EIP that included both PRSUs and RSUs. These awards were retentive in nature and designed to align to stockholder interests over a three -year period.

TIME-VESTED RESTRICTED STOCK UNITS

RSU awards were granted to all NEOs on May 22, 2016. With the exception of Mr. Messina, the awards vest in equal thirds on the first, second and third anniversaries of the grant date. Mr. Messina’s award vests 50% on each of the second and third anniversaries of the grant date. Subject to the terms of the award and provided the participant remains employed by the Company through the last day of the relevant vesting period, the applicable RSUs become vested stock units.

Table of Contents

PROPOSAL 3 — SAY ON PAY VOTE

Full vesting of these outstanding RSUs occurs prior to the third anniversary of the grant (i) the NEO is terminated without cause prior to the expiration of the final vesting period or (ii) the NEO experiences a separation from service due to death or disability. Under these circumstances, vested stock units are settled in cash, unless the HC&CC, in its sole discretion, authorizes settlement in stock. Settlement of vested units is not accelerated from the original vesting schedule except in the event of death or disability.

PERFORMANCE-RESTRICTED STOCK UNITS

The HC&CC determined that Messrs. Messina, Crowl and Brown should have a considerable portion of their long-term incentive award connected to TSR, and thus included PRSUs in their 2016 LTIP awards, in light of the roles they would play in assessing strategic alternatives and executing against them over the longer-term. Subject to the participant’s continuous service with the Company and subject to other key provisions in the defined events described below, the award vests on May 22, 2019.

The performance measure is PHH’s TSR over the three-year performance period from May 19, 2016 through May 19, 2019 (or, if sooner, the occurrence of a change in control as defined in the award). The denomination of TSR is calculated from a baseline share price of $12.80, which was the share price at the start of the measurement period. Per the terms of the awards, (i) 100% of the PRSUs vest if the TSR over the performance period equals or exceeds the target level of 22.89%, (ii) a maximum of 150% of the PRSUs vest for Mr. Messina and 200% of the PRSUs vest for Messrs. Crowl and Brown, if the TSR over the performance period equals or exceeds 64.06%, (iii) a payout percentage for an achievement level above the target level described above but below the maximum level described above would be determined based on straight-line interpolation, (iv) a payout percentage for an achievement level below the target level described above but above 0% would be determined based on straight-line interpolation and (v) all of the PRSUs are forfeited if the TSR over the performance period is 0% or negative.

Full vesting of these outstanding PRSUs occurs prior to the conclusion of the three-year measurement period if (i) the NEO is terminated without cause prior to the expiration of the vesting period (with the number of PRSUs earned remaining subject to the achievement of the performance measure over the performance period); or (ii) the NEO experiences a separation from service due to death or disability (with the number of PRSUs earned being determined based on performance through the date of such death or disability). Under these circumstances, vested stock units are settled in cash, unless the HC&CC, in its sole discretion, authorizes settlement in stock. Additionally, settlement of vested units is not accelerated from the original vesting schedule except in the event of death or disability.

Table of Contents

PROPOSAL 3 — SAY ON PAY VOTE

Performance-Based Long-Term Incentive Awards Forfeited in 2016

In 2016, the performance measurement periods closed for certain PRSUs previously granted to our NEOs. No PRSUs granted to NEOs vested in 2016.

Specifically, the PRSU awards granted on March 29, 2013 required that the average closing price of PHH stock over the 90 days leading up to the three-year anniversary of the grant date had to be no less than $25.00 in order for one-third of the PRSUs to vest and to be no less than $30.00 for 100% of the PRSUs to vest. These awards were forfeited because the Company’s stock price for the applicable measurement period was below the $25.00 threshold.

Additionally, the second tranche (representing one-third) of the PRSU awards granted on February 25, 2015 to all NEOs other than Mr. Messina, and on March 1, 2015 to Mr. Messina, were also forfeited for failure to meet the performance conditions. These awards require the Company’s TSR to be both positive and perform at or above the 33rd percentile of companies listed in the KBW Mortgage Finance Index for the annual performance period ending December 31, 2015, 2016 or 2017, as applicable. The Company’s TSR was negative for the second performance period.  In December 2016, the KBW Mortgage Finance Index was discontinued.  To preserve the intended performance measures under the February 25, 2015 PRSU award granted to NEOs and the March 1, 2015 PRSU award granted to Mr. Messina as closely as possible, the HC&CC amended those PRSUs to independently track the component companies included in the KBW Mortgage Finance Index as of the date it was discontinued for the remaining portion of the measurement period.