PHH Corporation Announces First Quarter 2008 Results

Business Wire, May 9, 2008

PHH to host conference call at 10:00 a.m. EDT on May 9, 2008

MT. LAUREL, N.J. -- PHH Corporation (NYSE: PHH) today announced results for the three months ended March 31, 2008.

Net revenues for the three months ended March 31, 2008 were $642 million, an increase of 8% from Net revenues of $596 million for the three months ended March 31, 2007.

Income before income taxes and minority interest of $44 million for the three months ended March 31, 2008 increased by $11 million, or 33%, compared to $33 million for the three months ended March 31, 2007. Income before income taxes and minority interest for the three months ended March 31, 2008 includes the receipt of a reverse termination fee from Blackstone Capital Partners V L.P., net of merger related expenses, of $42 million and a $30 million favorable impact related to adopting fair value accounting pronouncements.

Net income for the three months ended March 31, 2008 was $30 million compared to $15 million for the three months ended March 31, 2007. Basic and Diluted earnings per share for the three months ended March 31, 2008 was $0.55 compared to Basic and Diluted earnings per share of $0.28 and $0.27, respectively, for the three months ended March 31, 2007.

Mortgage Production Segment

Net revenues for the three months ended March 31, 2008 for the mortgage production segment were $126 million compared to Net revenues of $71 million for the three months ended March 31, 2007. Segment loss for the three months ended March 31, 2008 was $8 million compared to segment loss of $39 million for the three months ended March 31, 2007.

The decrease in segment loss for the three months ended March 31, 2008 in comparison to the same period in 2007 was primarily due to an increase in margins on conforming mortgage loans and the benefit of adopting new fair value accounting pronouncements, which were partially offset by a decline in the valuation of adjustable-rate, scratch and dent and jumbo mortgage loans and unfavorable hedge results related to our mortgage loans held for sale and interest rate lock commitments due to interest rate volatility.

Total closings for the three months ended March 31, 2008 increased 6% to $10.0 billion, compared to $9.4 billion for the same period in 2007. Of this increase, refinance closings rose 41% to $5.2 billion from $3.7 billion in the three months ended March 31, 2007 while purchase closings dropped 16% to $4.7 billion from $5.7 billion in the three months ended March 31, 2007. Overall origination volumes were positively impacted by an increase in refinancing activity due to lower mortgage interest rates.

Highlights for the mortgage production segment included:

* $10.0 billion of originations, a 6% increase, during the three months ended March 31, 2008 compared to the three months ended March 31, 2007

* $7.1 billion of loans closed to be sold during the three months ended March 31, 2008, approximately 90% of which were conforming

* A $15 million reduction in Total expenses during the three months ended March 31, 2008 compared to the three months ended March 31, 2007 resulting from our efforts to reduce costs

* Five new private-label client signings during the three months ended March 31, 2008, including: Comerica Bank, The Dime Savings Bank of Williamsburgh, Union Center National Bank and Bank of Sierra

Mortgage Servicing Segment

Net revenues for the three months ended March 31, 2008 for the mortgage servicing segment were $19 million compared to Net revenues of $75 million for the three months ended March 31, 2007. Segment loss was $16 million for the three months ended March 31, 2008, compared to segment profit of $55 million for the three months ended March 31, 2007.

The unfavorable change in segment (loss) profit of $71 million during the three months ended March 31, 2008 compared to the three months ended March 31, 2007 was due primarily to a higher net loss on mortgage servicing rights (MSRs) 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.

Highlights for the mortgage servicing segment included:

* Capitalized servicing rate of MSRs at 1.15% as of March 31, 2008

* Delinquency rate as a percentage of the total unpaid principal balance of the mortgage loan servicing portfolio at 2.28% as of March 31, 2008, which the Company believes compares favorably to the industry

Fleet Management Services Segment

Net revenues for the three months ended March 31, 2008 for the fleet management services segment were $448 million compared to Net revenues for the three months ended March 31, 2007 of $450 million. Segment profit for the three months ended March 31, 2008 was $24 million compared to $21 million for the three months ended March 31, 2007.

The increase of $3 million in segment profit in the first quarter of 2008 compared to the first quarter of 2007 was primarily due to a decrease in corporate overhead costs.

During the three months ended March 31, 2008 compared to the three months ended March 31, 2007, the average number of leased vehicles remained at 340,000 units, fuel card units decreased 6% from 331,000 units to 310,000 units, maintenance service cards decreased 9% from 338,000 units to 308,000 units and accident management vehicle units decreased 3% from 336,000 units to 327,000 units.