PHH Corporation (NYSE: PHH):
Highlights:
- Net loss attributable to PHH
Corporation of $49 million or $1.49 per basic share, which includes
a $30 million unfavorable impact from federal tax reform, $18
million of pre-tax operating losses related to PLS and $13 million
pre-tax expenses related to Exit and disposal costs that were
partially offset by $16 million of favorable pre-tax notable
items.
- Entered into a definitive agreement
for the sale of the Company to Ocwen Financial Corporation at a
price of $360 million, or $11.00 per share on a fully-diluted
basis.
- Updates estimate of potential excess
cash(1) to $635 million from $655 million, which
includes $301 million of share repurchases completed in 2017. The
update to the estimate is due to the impact of federal tax reform,
which was partially offset by lower liquidity earmarks and certain
other cash inflows.
- Our Total Servicing Portfolio was
comprised of 671,790 loans serviced representing $148 billion of
unpaid principal balance, including 629,174 loans in our
subservicing portfolio.
Summary Consolidated Results
(In millions, except per share amounts)
Three Months EndedDecember
31,
Year EndedDecember 31,
2017 2016 2017 2016 GAAP Results
Net revenues $ 109 $ 72 $ 456 $ 622 Loss before income taxes (7 )
(206 ) (273 ) (304 ) Net loss attributable to PHH Corporation (49 )
(133 ) (217 ) (202 ) Basic & Diluted loss per share
attributable to PHH Corporation $ (1.49 ) $ (2.49 ) $ (4.62 ) $
(3.77 ) Weighted-average common shares outstanding — Basic &
Diluted shares 32.631 53.659 46.912 53.627
Non-GAAP
Results* Core loss (pre-tax) $ (22 ) $ (151 ) $ (284 ) $ (223 )
Core loss (after-tax) (48 ) (100 ) (210 ) (147 ) Core loss per
share $ (1.44 ) $ (1.86 ) $ (4.47 ) $ (2.74 )
_______________
(1)
The amount of excess cash is dependent
upon a variety of factors, including the execution of the sale of
our remaining MSRs committed for sale and the related servicing
advances, the monetization of our investment in PHH Home Loans, the
successful completion of our PLS exit activities, the resolution of
our outstanding legal and regulatory matters and the successful
completion of other restructuring and capital management activities
in accordance with our assumptions. There can be no assurances that
the actions will result in the amount of estimated excess cash.
*
Non-GAAP Financial Measures: Core
earnings or loss (pre-tax), core earnings or loss (after-tax) and
core earnings or loss per share are financial measures that are not
in accordance with U.S. generally accepted accounting principles
(GAAP). See the “Note Regarding Non-GAAP Financial Measures” below
for a detailed description and reconciliation of such Non-GAAP
financial measures to their most directly comparable GAAP financial
measures, as required by Regulation G.
Notable items, Exit and disposal costs and net MSRs fair value
adjustments included the following:
Three Months Ended December 31, 2017
2016 Pre-Tax Post-Tax Pre-Tax
Post-Tax $ Per Share $ Per
Share Notable items: Net proceeds from PHH Home Loans asset
sales (1) $ 21 $ 0.39 $ — $ — Legal and regulatory reserves 2 0.03
(22 ) (0.27 ) Strategic review expenses (6 )
(0.11
) (21 ) (0.24 ) Equity method investment (impairment) / gain on
acquisition of interests 1 0.03 (23 ) (0.26 ) Loss from MSR sales
and related costs (2 ) (0.03 ) (1 ) (0.01 ) Re-engineering and
growth investments — — (6 ) (0.07 ) Exit and disposal costs
$ (13 ) $ (0.24 ) $ (41 ) (0.47 ) Market-related MSRs asset and
secured liability fair value adjustments, net of related
derivatives (3 ) (0.05 ) (55 ) (0.63 ) _______________ (1)
During the fourth quarter of 2017, we completed the
remaining three asset sales of our PHH Home Loans Joint Venture to
Guaranteed Rate Affinity, and recognized a gain of $42 million in
Other income, which is reduced to $21 million after excluding the
portion attributable to noncontrolling interest.
Capital Update
In November 2017, our Board of Directors provided a $100 million
share repurchase authorization. We have not repurchased shares
under this authorization as a result of becoming engaged in
material discussions for the sale of the Company.
Legal and Regulatory Update
In connection with the Consumer Financial Protection Bureau’s
("CFPB") enforcement action with respect to our legacy reinsurance
activities, in January 2018, the en banc court of the United States
Court of Appeals for the District of Columbia Circuit reinstated
the October 2016 panel decision as it related to the
RESPA issues, which included vacating the CFPB’s order
imposing $109 million in disgorgement penalties. In
February 2018 the en banc court remanded the matter back to the
CFPB for further proceedings in compliance with the reinstated
panel opinion.
We reached a settlement agreement with a multistate coalition of
certain mortgage banking regulators ("MMC") and consent orders with
certain state attorneys general to resolve and close out findings
from the MMC examination, without any admission of liability. Under
the terms of the settlement, we will pay approximately $45 million
in aggregate, of which $38 million was paid during the fourth
quarter of 2017. The remaining settlement amount not yet paid is
included in our recorded liability as of December 31, 2017.
Strategic Transaction Call/Webcast
The Company will host a conference call at 10:00 a.m. (Eastern
Time) on Wednesday, February 28, 2018, to discuss the strategic
transaction. All interested parties are welcome to participate. A
presentation will accompany the conference call and be available by
visiting the Investor Relations page of PHH's website at
www.phh.com on Wednesday, February 28,
2018, prior to the start of the conference call.
You can access the conference call by dialing (800) 239-9838 or
(323) 794-2551 and using the conference ID 7092674 approximately 10
minutes prior to the call. The conference call will also be
webcast, which can be accessed from the Investor Relations page of
PHH's website at www.phh.com under
webcasts and presentations.
A replay will be available beginning shortly after the end of
the call through March 16, 2018, by dialing (888) 203-1112 or (719)
457-0820 and using conference ID 7092674, or by visiting the
Investor Relations page of PHH's website at www.phh.com.
About PHH Corporation
PHH Corporation (NYSE: PHH), through its subsidiary, PHH
Mortgage, is one of the largest subservicers of residential
mortgages in the United States. PHH Mortgage provides servicing and
portfolio retention solutions to investors of MSRs, financial and
wealth management institutions, regional and community banks, and
credit unions. Headquartered in Mount Laurel, New Jersey, the
Company has been providing mortgage lending and servicing solutions
since 1984 and is dedicated to responsible and ethical practices
while delivering an exceptional customer experience. For additional
information, please visit www.phh.com.
Forward-Looking Statements
Certain statements in this press release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Generally, forward looking-statements are not
based on historical facts but instead represent only our current
beliefs regarding future events. All forward-looking statements
are, by their nature, subject to risks, uncertainties and other
factors that could cause actual results, performance or
achievements to differ materially from those expressed or implied
in such forward-looking statements. Investors are cautioned not to
place undue reliance on these forward-looking statements. Such
statements may be identified by words such as “expects,”
“anticipates,” “intends,” “projects,” “estimates,” “plans,” “may
increase,” “may fluctuate” and similar expressions or future or
conditional verbs such as “will,” “should,” “would,” “may” and
“could.”
You should understand that forward-looking statements are not
guarantees of performance or results and are preliminary in nature.
You should consider the areas of risk described under the heading
“Cautionary Note Regarding Forward-Looking Statements” and “Risk
Factors” in our periodic reports filed with the U.S. Securities and
Exchange Commission, including our most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q, in connection with
any forward-looking statements that may be made by us or our
businesses generally. Such periodic reports are available in the
“Investors” section of our website at http://www.phh.com and are
also available at http://www.sec.gov. Except for our ongoing
obligations to disclose material information under the federal
securities laws, applicable stock exchange listing standards and
unless otherwise required by law, we undertake no obligation to
release publicly any updates or revisions to any forward-looking
statements or to report the occurrence or non-occurrence of
anticipated or unanticipated events.
PHH CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
December 31, 2017 2016 ASSETS
Cash and cash equivalents $ 542 $ 906 Restricted cash 41 57
Mortgage loans held for sale 270 683 Accounts receivable, net 78 66
Servicing advances, net (1) 356 628 Mortgage servicing rights (1)
476 690 Property and equipment, net 22 36 Other assets 26
109
Total assets $ 1,811 $ 3,175
LIABILITIES Accounts payable and accrued expenses $ 141 $
193 Subservicing advance liabilities 232 290 Mortgage servicing
rights secured liability (2) 419 — Mortgage warehouse and advance
facilities 252 655 Unsecured debt, net (3) 118 607 Loan repurchase
and indemnification liability 29 49 Mandatorily redeemable
noncontrolling interest 20 — Deferred taxes, net — 101 Other
liabilities 47 157
Total liabilities 1,258
2,052 Redeemable noncontrolling interest — 33
Total PHH
Corporation stockholders’ equity 553 1,090
Total
liabilities and equity $ 1,811 $ 3,175
_______________ (1)
MSR and Advances Sale Commitments.
As of December 31, 2017, we had commitments to sell MSRs,
representing $6.5 billion of unpaid principal balance, for $39
million in MSR fair value. Additionally, we had commitments to
transfer approximately $110 million in Servicing advances to the
counterparties of these agreements.
(2)
MSRs secured liability. In 2017, we
completed sales of MSRs to New Residential which did not qualify
for sale accounting treatment under GAAP and have been treated as a
secured borrowing. Under this accounting treatment, the $419
million of related MSRs remain on the Condensed Consolidated
Balance Sheet within Mortgage servicing rights and the proceeds
from the sale are recognized as a MSRs secured liability.
We have elected to record the MSRs secured liability at fair
value thereafter, consistent with the accounting treatment of the
related MSR asset, and any changes in fair value of the MSR asset
and liability related the New Residential transfers will fully
offset in the Consolidated Statements of Operations. (3)
Unsecured Debt Tender Completed. In
July 2017, we completed a tender offer on our unsecured debt and
repaid $496 million principal for $524 million in cash, plus
accrued interest. After the completion of the tender offer, $119
million principal of unsecured debt remains outstanding.
PHH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In millions,
except per share data) Three Months
EndedDecember 31, Year EndedDecember 31,
2017 2016 2017 2016
REVENUES Origination and other loan fees $ 22 $ 65 $ 136 $
280 Gain on loans held for sale, net 15 50 144 262 Loan servicing
income (loss), net 41 (13 ) 137 125 Net interest expense (13 ) (9 )
(36 ) (32 ) Other income (loss) 44 (21 ) 75 (13 )
Net revenues 109 72 456 622
EXPENSES Salaries and related expenses 40 77 263 345
Commissions 6 15 44 64 Loan origination expenses 4 12 31 64
Foreclosure and repossession expenses 3 9 19 35 Professional and
third-party service fees 28 45 120 156 Technology equipment and
software expenses 8 12 35 42 Occupancy and other office expenses 7
12 33 47 Depreciation and amortization 3 3 14 16 Exit and disposal
costs 13 41 62 41 Other operating expenses 4 52 108
116
Total expenses 116 278 729
926
Loss before income taxes (7 ) (206 ) (273
) (304 ) Income tax expense (benefit) 24 (73 ) (79 ) (111 )
Net loss (31 ) (133 ) (194 ) (193 ) Less: net income
attributable to noncontrolling interest 18 — 23
9
Net loss attributable to PHH Corporation $
(49 ) $ (133 ) $ (217 ) $ (202 )
Basic and Diluted loss
per share attributable to PHH Corporation $ (1.49 ) $ (2.49 ) $
(4.62 ) $ (3.77 )
Segment Results (In millions)
FourthQuarter2016
Fourth Quarter 2017
MortgageProduction
MortgageServicing
Other
Total PHHCorporation
Total PHHCorporation
Origination and other loan fees $ 22 $ — $ — $ 22 $ 65 Gain on
loans held for sale, net 15 — — 15 50 Loan servicing income — 46 —
46 82 MSRs asset & secured liability fair value adjustments:
Prepayments and receipt of recurring cash flows — (2 ) — (2 ) (40 )
Market-related, net of derivatives — (3 ) — (3 ) (55 ) Net interest
income (expense) 1 (14 ) — (13 ) (9 ) Other income (loss) 44
— — 44 (21 )
Net revenues 82 27
— 109 72 Salaries and related
expenses 19 12 9 40 77 Commissions 6 — — 6 15 Loan origination
expenses 4 — — 4 12 Foreclosure and repossession expenses — 3 — 3 9
Professional and third-party service fees 6 7 15 28 45 Technology
equipment and software expenses — 3 5 8 12 Occupancy and other
office expenses 4 3 — 7 12 Depreciation and amortization 1 — 2 3 3
Exit and disposal costs 9 — 4 13 41 Other operating expenses:
Repurchase and foreclosure-related charges — (4 ) — (4 ) 9 Legal
and regulatory reserves — (2 ) — (2 ) 22 Corporate overhead
allocation 20 7 (27 ) — — Other 3 5 2 10
21
Total expenses 72 34 10
116 278
Income (loss) before income
taxes 10 (7 ) (10 ) $ (7 ) $ (206 ) Less: net income
attributable to noncontrolling interest 18 — —
Segment loss $ (8 ) $ (7 ) $ (10 )
Segment Results (In millions)
Year EndedDecember31,
2016
Year Ended December 31, 2017
MortgageProduction
MortgageServicing
Other
Total PHHCorporation
Total PHHCorporation
Origination and other loan fees $ 136 $ — $ — $ 136 $ 280 Gain on
loans held for sale, net 144 — — 144 262 Loan servicing income —
208 — 208 353 MSRs asset & secured liability fair value
adjustments: Prepayments and receipt of recurring cash flows — (59
) — (59 ) (138 ) Market-related, net of derivatives — (12 ) — (12 )
(90 ) Net interest income (expense) 5 (41 ) — (36 ) (32 ) Other
income (loss) 73 2 — 75 (13 )
Net
revenues 358 98 — 456 622
Salaries and related expenses 150 58 55 263 345 Commissions
44 — — 44 64 Loan origination expenses 31 — — 31 64 Foreclosure and
repossession expenses — 19 — 19 35 Professional and third-party
service fees 26 32 62 120 156 Technology equipment and software
expenses 3 14 18 35 42 Occupancy and other office expenses 20 11 2
33 47 Depreciation and amortization 6 2 6 14 16 Exit and disposal
costs 38 2 22 62 41 Other operating expenses: Repurchase and
foreclosure-related charges — 3 — 3 19 Loss on early debt
retirement — — 34 34 — Legal and regulatory reserves — 22 — 22 38
Corporate overhead allocation 92 34 (126 ) — — Other 17 22
10 49 59
Total expenses 427
219 83 729 926
Loss before
income taxes (69 ) (121 ) (83 ) $ (273 ) $ (304 ) Less: net
income attributable to noncontrolling interest 23 — —
Segment loss $ (92 ) $ (121 ) $ (83 )
Mortgage Production
Mortgage Production segment loss in the fourth quarter of 2017
was $8 million, compared to a loss of $62 million in the fourth
quarter of 2016. Our results in the segment reflect the reduced
volumes associated with our exit of the PLS business during 2017,
and reductions in our Real Estate channel from the transfer of our
PHH Home Loans locations. In addition, the fourth quarter of 2017
segment loss includes $18 million of PLS operating losses and $9
million of Exit and disposal costs, that were partially offset by a
$21 million net gain on sale from the proceeds of the PHH Home
Loans asset sales.
Net revenues were $82 million, a decline of $14 million or 15%
from the fourth quarter of 2016 primarily driven by lower
application and closing volumes from our PLS business and Real
Estate channel. Total retail closing units in the fourth quarter of
2017 declined by 64%, primarily driving the decrease of $43 million
in Origination and other loan fees, compared to the fourth quarter
of 2016. Gain on loans held for sale, net decreased by $35 million
compared to the fourth quarter of 2016, primarily from a 67%
decrease in saleable applications that was related to our exit of
the PLS business and transfer of our PHH Home Loans locations.
These declines were offset by an increase to Other income of $42
million primarily as a result of the gross proceeds from PHH Home
Loans asset sales.
Total expenses were $72 million, a decline of $86 million or
54%, from the fourth quarter of 2016. Salaries and related expenses
decreased by $30 million as a result of declining average employee
headcount from our exit and Reorganization activities, and lower
contract labor and overtime from declining application volumes.
Commissions were down $9 million primarily due to a 57% decrease in
closing volume from our Real Estate channel and lower private label
closing volume, and Loan origination expenses were down $8 million
primarily due to a 72% decrease in retail application units. Exit
and disposal costs decreased by $24 million primarily from asset
impairment charges of $15 million in 2016, and lower severance and
retention expenses for employees impacted by our exit and
Reorganization activities. Corporate overhead allocation decreased
by $6 million primarily due to reduced professional fees for
information technology shared services. Other expenses decreased by
$6 million from a decrease in certain loan fees from less
production.
We accepted our last application from our PLS clients during the
fourth quarter of 2017, and we expect to be substantially complete
with the wind-down of the PLS business by the end of the first
quarter of 2018, subject to certain transition support
requirements. In addition, during the fourth quarter of 2017, we
completed our asset sales of PHH Home Loans to Guaranteed Rate
Affinity, LLC. We expect to liquidate the residual assets of PHH
Home Loans, and we have agreed to purchase Realogy's membership
interests at book value on or before March 19, 2018. At the
completion of these actions, we expect to discontinue the
operations of our PLS business and Real Estate channel.
Three Months EndedDecember
31,
Year EndedDecember 31, 2017 2016
2017 2016 (In millions)
Segment
Results:
Origination and other loan fees $ 22 $ 65 $ 136 $ 280 Gain on loans
held for sale, net 15 50 144 262 Net interest expense 1 2 5 10
Other income (loss) 44 (21 ) 73 (13 )
Net
revenues 82 96 358 539
Salaries and related expenses 19 49 150 216 Commissions 6 15 44 64
Loan origination expenses 4 12 31 64 Professional and third-party
service fees 6 5 26 22 Technology equipment and software expenses —
1 3 4 Occupancy and other office expenses 4 7 20 27 Depreciation
and amortization 1 1 6 8 Exit and disposal costs 9 33 38 33 Other
operating expenses 23 35 109 145
Total expenses 72 158 427 583
Income (loss) before income taxes 10 (62 ) (69 ) (44 ) Less: net
income attributable to noncontrolling interest 18 —
23 9
Segment loss $ (8 ) $ (62 ) $ (92 ) $ (53
)
Three Months EndedDecember
31,
Year EndedDecember 31, 2017 2016
2017 2016 ($ in millions)
Closings:
Saleable to investors $ 1,094 $ 2,552 $ 6,757 $ 10,146 Fee-based
2,368 6,333 13,000 27,083 Total $ 3,462
$ 8,885 $ 19,757 $ 37,229 Purchase $ 1,716 $
3,392 $ 10,999 $ 16,140 Refinance 1,746 5,493 8,758
21,089 Total $ 3,462 $ 8,885 $ 19,757 $
37,229 Retail - PLS and Portfolio Retention $ 2,700 $ 7,100
$ 14,287 $ 29,261 Retail - Real Estate 762 1,785
5,470 7,383 Total retail 3,462 8,885 19,757 36,644
Wholesale/correspondent — — — 585 Total $
3,462 $ 8,885 $ 19,757 $ 37,229 Retail
- PLS and Portfolio Retention (units) 4,446 12,371 23,588 51,089
Retail - Real Estate (units) 2,310 6,147 18,239
26,075 Total retail (units) 6,756 18,518 41,827 77,164
Wholesale/correspondent (units) — — — 2,298
Total (units) 6,756 18,518 41,827 79,462
Applications:
Saleable to investors $ 876 $ 2,695 $ 8,829 $ 14,275 Fee-based
1,424 5,414 13,047 31,134 Total $ 2,300
$ 8,109 $ 21,876 $ 45,409
Other:
IRLCs expected to close $ 400 $ 688 $ 2,473 $ 4,373 Total loan
margin on IRLCs (in basis points) 299 405 305 352 Loans sold $
1,451 $ 2,744 $ 7,233 $ 10,548
Mortgage Servicing
Mortgage Servicing segment loss in the fourth quarter of 2017
was $7 million, compared to a loss of $117 million in the fourth
quarter of 2016.
Net revenues were $27 million, an increase of $51 million from
the fourth quarter of 2016, primarily driven by a $54 million
favorable change in Loan servicing income, net. The improvement in
Net revenues primarily reflects lower changes in fair value in our
MSRs of $90 million from a 90% decline in our average capitalized
servicing portfolio resulting from our MSR sales during 2017. This
was partially offset by a decrease in contractual loan servicing
income from the shift in mix of our serving portfolio to primarily
subserviced loans which lowers our contractual servicing fees since
we receive a smaller fee per loan from our subservicing clients as
compared to the servicing fee received for our capitalized
servicing rights.
Total expenses were $34 million, a decline of $59 million or 63%
compared to the fourth quarter of 2016. Salaries and related
expenses decreased by $2 million due to declines in average
employee headcount. Foreclosure and repossession expenses decreased
by $6 million primarily due to lower foreclosure activity and
improved delinquencies that were partially the result of the
Lakeview MSR sales of delinquent government loans. We had a $24
million favorable change for legal and regulatory matters compared
to the fourth quarter of 2016, driven by adjustments for negotiated
settlements related to our legacy mortgage servicing practices and
provisions for other matters. Corporate overhead allocation
decreased by $4 million primarily from decreases in professional
fees for information technology shared services. Repurchase and
foreclosure-related charges had a favorable change of $13 million
resulting from higher expenses in 2016 that were not reimbursed
pursuant to mortgage insurance programs.
At December 31, 2017, our subservicing portfolio consisted
of approximately 629,000 units, up 138% from December 31,
2016. The increase in total subservicing units during 2017 was
primarily driven by the addition of subserviced loans from the
sales of MSRs to New Residential Mortgage, LLC. We expect the
transfer of approximately 115,000 subservicing units off of our
platform between May 2018 and April 2019, based upon receipt in
February 2018 of formal notices and verbal indications from two of
our largest subservicing clients. Approximately 65,000 of these
units are subject to a portfolio defense agreement and will no
longer be solicitable units upon transfer to a new servicer.
Three Months
EndedDecember 31, Year EndedDecember 31,
2017 2016 2017 2016
(In millions)
Segment
Results:
Loan servicing income (loss), net $ 41 $ (13 ) $ 137 $ 125 Net
interest expense (14 ) (11 ) (41 ) (42 ) Other income — —
2 —
Net revenues 27 (24 ) 98
83 Salaries and related expenses 12 14 58 68
Foreclosure and repossession expenses 3 9 19 35 Professional and
third-party service fees 7 8 32 35 Technology equipment and
software expenses 3 5 14 17 Occupancy and other office expenses 3 4
11 17 Depreciation and amortization — 1 2 3 Exit and disposal costs
— — 2 — Other operating expenses 6 52 81 131
Total expenses 34 93 219 306
Segment loss $ (7 ) $ (117 ) $ (121 ) $ (223 )
December 31, 2017 2016 ($ in
millions)
Total Loan
Servicing Portfolio:
Conventional loans $ 137,029 $ 151,004 Government loans 9,715
21,801 Home equity lines of credit 1,411 1,837 Total
Unpaid Principal Balance $ 148,155 $ 174,642 Number of loans
in owned portfolio (units) 42,616 567,647 Number of subserviced
loans (units) (1) 629,174 264,718 Total number of
loans serviced (units) 671,790 832,365 Weighted-average
interest rate 3.9 % 3.8 %
Portfolio
delinquency
% of UPB - 30 days or more past due 2.49 % 2.56 % % of UPB -
Foreclosure, REO and Bankruptcy 1.49 % 1.96 % Units - 30 days or
more past due 3.54 % 3.59 % Units - Foreclosure, REO and Bankruptcy
2.02 % 2.37 %
Total Capitalized
Servicing Portfolio:
Unpaid Principal Balance of capitalized MSRs owned $ 8,592 $ 84,657
Unpaid Principal Balance of capitalized MSRs in secured borrowing
arrangement (2) 49,193 — Total Unpaid Principal
Balance of capitalized servicing portfolio $ 57,785 $ 84,657
Capitalized servicing rate 0.82 % 0.82 % Capitalized servicing
multiple 3.0 2.9 Weighted-average servicing fee (in basis points)
27 28
Three Months
EndedDecember 31, Year EndedDecember 31,
2017 2016 2017 2016
(In millions)
Total Loan
Servicing Portfolio:
Average Portfolio UPB $ 149,965 $ 197,263 $ 159,671 $ 220,458
Owned Capitalized
Servicing Portfolio: (3)
Average Portfolio UPB 8,845 86,607 43,547 92,303 Payoffs and
principal curtailments 418 5,109 7,667 19,211 Sales 542 254 17,628
996 _______________ (1) For December 31, 2017,
includes 363,062 units of New Residential subserviced loans that
are accounted for as a secured borrowing arrangement. (2)
Represents MSRs sold to New Residential during 2017 that are
accounted for as a secured borrowing arrangement. (3) For
2017, balances exclude MSRs sold to New Residential that are
accounted for as a secured borrowing arrangement.
* NOTE REGARDING NON-GAAP FINANCIAL MEASURES
Core earnings or loss (pre-tax and after-tax) and core earnings
or loss per share are financial measures that are not in accordance
with GAAP. See Non-GAAP Reconciliations below for a reconciliation
of these measures to the most directly comparable GAAP financial
measures as required by Regulation G.
These Non-GAAP measures are used in managing certain aspects of
the Company’s business. For example, management’s reviews of
results incorporate Non-GAAP measures and the Company has also
designed certain management incentives based upon the achievement
of targets related to Non-GAAP measures. The Company believes that
these Non-GAAP Financial Measures can be useful to investors
because they provide a means by which investors can evaluate the
Company’s underlying key drivers and operating performance of the
business, exclusive of certain adjustments and activities that
investors may consider to be unrelated to the underlying economic
performance of the business for a given period.
The Company also believes that any meaningful analysis of the
Company’s financial performance by investors requires an
understanding of the factors that drive the Company’s underlying
operating performance which can be obscured by significant
unrealized changes in value of the Company’s mortgage servicing
rights and mortgage servicing rights secured liability, as well as
any gain or loss on derivatives that are intended to offset
market-related fair value adjustments on the Company’s mortgage
servicing rights.
The Company believes these Non-GAAP measures provide useful
information to investors that is supplementary to our results in
accordance with GAAP; however, there are inherent limitations to
these measures and they should not be viewed as a substitute for
our results in accordance with GAAP as measurements of the
Company's financial performance.
Core earnings or loss (pre-tax and
after-tax) and core earnings or loss per share
Core earnings or loss (after-tax) and core earnings or loss per
share involves differences from Net income or loss attributable to
PHH Corporation and Basic earnings or loss per share attributable
to PHH Corporation computed in accordance with GAAP.
Core earnings or loss (pre-tax and after-tax) and core earnings
or loss per share measure the Company’s financial performance
excluding unrealized changes in fair value of the Company’s
mortgage servicing rights and mortgage servicing rights secured
liability that are based upon projections of expected future cash
flows and prepayments as well as realized and unrealized changes in
the fair value of derivatives that are intended to offset changes
in the fair value of mortgage servicing rights. The changes in fair
value of mortgage servicing rights, mortgage servicing rights
secured liability and related derivatives are highly sensitive to
changes in interest rates and are dependent upon the level of
current and projected interest rates at the end of each reporting
period.
NON-GAAP RECONCILIATIONS - CORE
EARNINGS
(In millions, except per share
data)
See “Note Regarding Non-GAAP Financial Measures” above in
this press release for a description of the uses and limitations of
the Non-GAAP Financial Measures.
CORE EARNINGS -
Regulation G Reconciliation Three Months
EndedDecember 31, Year EndedDecember
31, 2017 2016 2017
2016 Loss before income taxes - as reported $ (7 ) $ (206 )
$ (273 ) $ (304 ) Less: net income attributable to noncontrolling
interest 18 — 23 9 Segment loss (25 )
(206 ) (296 ) (313 ) Market-related fair value adjustments (1) 3
(74 ) 12 100 Net derivative loss (gain) related to MSRs —
129 — (10 )
Core loss (pre-tax) $
(22 ) $ (151 ) $
(284 ) $ (223 ) Net loss
attributable to PHH Corporation - as reported $ (49 ) $ (133 ) $
(217 ) $ (202 ) Market-related fair value adjustments (1) 3 (74 )
12 100 Net derivative loss (gain) related to MSRs — 129
— (10 ) (46 ) (78 ) (205 ) (112 ) Income tax expense
on Core adjustments(2) 2 22 5 35
Core loss (after-tax) $ (48 ) $
(100 ) $ (210 ) $
(147 ) Core loss (after-tax) per share
(3) $ (1.44 ) $ (1.86
) $ (4.47 ) $ (2.74
) CORE EARNINGS BY SEGMENT - Regulation G
Reconciliation
MortgageProductionSegment
MortgageServicingSegment
Other
MortgageProductionSegment
MortgageServicingSegment
Other Three Months Ended December 31, 2017
Year Ended December 31, 2017 Segment loss $ (8 ) $ (7 ) $
(10 ) $ (92 ) $ (121 ) $ (83 ) Market-related fair value
adjustments(1) — 3 — — 12 —
Core loss (pre-tax) $ (8 ) $ (4 ) $ (10 ) $ (92 ) $
(109 ) $ (83 )
Three Months Ended December 31, 2016
Year Ended December 31, 2016 Segment loss $ (62 ) $ (117 ) $
(27 ) $ (53 ) $ (223 ) $ (37 ) Market-related fair value
adjustments(1) — (74 ) — — 100 — Net derivative loss (gain) related
to MSRs — 129 — — (10 ) —
Core loss (pre-tax) $ (62 ) $ (62 ) $ (27 ) $ (53 ) $ (133 )
$ (37 ) _____________ (1) Represents the Change in
fair value of the MSR asset and secured liability due to changes in
market inputs and assumptions used in the valuation model.
(2) An incremental effective tax rate of 39% was applied to arrive
at the net of taxes amounts. (3) Basic weighted-average
shares outstanding of 32.631 million and 53.659 million for the
three months ended December 31, 2017 and 2016, respectively, and
46.912 million and 53.627 million for the year ended December 31,
2017 and 2016, respectively, were used to calculate per share
amounts.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180227006661/en/
PHH CorporationInvestorsHugo Arias,
856-917-0108hugo.arias@phh.comorMediaDico Akseraylian,
856-917-0066dico.akseraylian@phh.com
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