PHH Corp Q1 net doubles to $30 mln; mortgage servicing unit swings to loss

LONDON, May 09, 2008 (Thomson Financial via COMTEX) -- PHHW | news | PowerRating | PR Charts -- PHH Corp said first-quarter net profit doubled on an increase in revenues although, as expected, its mortgage servicing unit was hit by the wider mortgage market volatility.

The mortgage and fleet management outsourcing company said net income in the quarter ended March 31 was $30 million compared to $15 million in the same period a year earlier. Diluted earnings per share in the quarter was $0.55 compared with $0.27.

Net revenues in the quarter were $642 million, up 8 percent from last year's $596 million.

PHH's Mortgage Production unit reported a rise in revenues to $126 million from $71 million, and a narrowing of its net loss to $8 million from last year's loss of $39 million.

The narrower loss was primarily due to an increase in margins on conforming mortgage loans and the benefit of adopting new fair value accounting pronouncements, said PHH, although these were partially offset by a decline in the valuation of adjustable-rate, scratch and dent, and jumbo mortgage loans; unfavourable hedge results related to mortgage loans held for sale; and interest rate lock commitments due to interest rate volatility.

In the Mortgage Servicing unit, revenues fell to $19 million from $75 million, and the segment swung to a loss of $16 million from last year's profit of $55 million.

PHH said the loss was primarily due to a higher net loss on mortgage servicing rights (MSR) risk management activities, decreased loan servicing income due to sales of our MSRs during 2007 and an increase in foreclosure losses and reserves associated with loans sold with recourse.

In the Fleet Management Services unit, revenues fell slightly to $448 million from $450 million, although net profit rose to $24 million from $21 million on a decrease in operating costs.

Commenting on the results, Terry Edwards, president and chief executive officer, said: "While we experienced higher refinance activity and overall production volumes during the first quarter of 2008, the mortgage business continued to be affected by, among other things, the widening of credit spreads and the lack of liquidity for all mortgage products, with the exception of 30-year conforming and 15-year fixed-rate products.

Looking ahead, Edwards said that although the financial services sector is expected to "remain challenging for the remainder of 2008", he believes both businesses are "well positioned".

PHH also announced Clair Raubenstine is completing his term as executive vice president and chief financial officer. Raubenstine will continue in these roles until a successor is in place. tf.TFN-Europe_newsdesk@thomson.com ak/sal/slj

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