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Quarterly residential mortgage production by lender. Subprime, Alt-A, home equity and conforming originations. Volume by quarter since 2003.

Huge Loss for PHH Mortgage

Q4 originations sink 36% from Q3

Feb. 12, 2014

By Mortgage Daily staff

Deterioration in mortgage production metrics at PHH Mortgage drove annual mortgage profits to a loss. A sale of the unit is now on the table.

Fourth-quarter earnings data from parent PHH Corp. indicate that loan production amounted to $9.506 billion during the three months ended Dec. 31, 2013.

The last time PHH's mortgage fundings were this slow was in the first-quarter 2010, when $7.8 billion was closed.

Business dropped from the third quarter 2013, when $14.771 billion was originated.

Residential loan volume also diminished from the fourth-quarter 2012, when the Mount Laurel, N.J.-based company generated $14.413 billion in loan closings.

The private-label origination channel was responsible for $6.8 billion of fourth-quarter 2013 activity, while the retail real estate segment generated $2.1 billion and wholesale-correspondent business was $0.549 billion.

Full year 2013 originations amounted to $52.367 billion. Annual activity slipped from $55.584 billion during all of 2012.

First-quarter 2014 originations are likely to see a further slowdown based on new loan applications, which slowed to $10.4 billion in the fourth quarter from $12.6 billion in the third quarter.

Interest rate lock commitments slid to $2.1 billion from $2.9 billion.

PHH is on track to close less than $40 million in 2014, nearly a third less than in the latest 12-month period, though global events could dictate otherwise.

The mortgage servicing portfolio was slightly lower at 1,215,062 loans for $226.837 billion compared to 1,232,712 units serviced for $227.973 billion as of Sept. 30.

PHH serviced 1,015,286 loans for just $183.730 billion as of Dec. 31, 2012.

Of the latest servicing portfolio, $130.494 billion was owned and $96.343 billion was sub-serviced.

Portfolio delinquency of at least 30 days, including foreclosures and real-estate-owned, was 5.70 percent based on the unpaid balance.

The rate improved from 5.73 percent in the last report.

But delinquency has worsened compared to the end of 2012, when the total rate was 5.07 percent.

The Dec. 31, 2013, rate reflected a 30-plus rate, excluding foreclosures, of 4.34 percent, and a 2.46 percent foreclosure-REO rate.

As of the end of last year, $191 million in repurchase and indemnification demands were unresolved. It was the highest level since the end of 2012, when $213 million in demands were unresolved.

Last year's mortgage earnings were a $78 million loss, swinging from a $182 million profit in 2012.

Mortgage earnings included $22 million from mortgage production, plummeting from $416 million during 2012.

"The increased mix of fee-based closings has adversely affected the profitability of our mortgage production segment as the revenue per loan on fee-based closings is generally lower than the revenue per loan on saleable closings," the report stated.

Earnings from servicing improved, however, with losses cut to $100 million in 2013 from the prior year's $234 million loss.

PHH Corp. said in the report that it is exploring options to maximize shareholder value, including the possible sale of its mortgage business.

Pre-tax income at parent PHH Corp. swung to a $61 million profit from a $74 million third-quarter loss. But earnings fell short of the $99 million earned in the final three months of 2012.

PHH profile

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