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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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MARYLAND
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52-0551284
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification Number)
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3000 LEADENHALL ROAD
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08054
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MT. LAUREL, NEW JERSEY
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(Zip Code)
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(Address of principal executive offices)
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TABLE OF CONTENTS
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Page
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▪
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our expectations related to our strategic options or strategic priorities, including any expected impacts on our results;
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▪
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potential dispositions, partnerships, joint ventures and changes in product offerings;
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▪
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anticipated future origination volumes and loan margins in the mortgage industry;
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▪
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our expectations for our private label business, including the impact of changes to certain client relationships on our loan origination volumes and servicing portfolio;
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▪
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our expectations of preserving balance sheet value through an effective MSR hedging program;
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our expectations of the impacts of regulatory changes on our business;
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our assessment of legal and regulatory proceedings and the associated impact on our financial statements;
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our expectations around future losses from representation and warranty claims, and associated reserves and provisions; and
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the impact of the adoption of recently issued accounting pronouncements on our financial statements.
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the effects of our comprehensive review of all strategic options and any transaction that may result, on our business, management resources, customer and employee relationships, and financial position;
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our ability to achieve our strategic priorities and implement changes to meet our operational and financial objectives;
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the effects of any declines in origination volumes sourced from our private label client relationships, driven by our clients' actions, business strategies or otherwise;
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▪
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the effects of any termination of our subservicing agreements by any of our largest subservicing clients or on a material portion of our subservicing portfolio;
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the effects of market volatility or macroeconomic changes and financial market regulations on the availability and cost of our financing arrangements and the value of our assets;
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the effects of changes in current interest rates on our business, the value of our mortgage servicing rights and our financing costs;
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our decisions regarding the use of derivatives and hedge strategies related to our mortgage servicing rights;
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▪
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the impact of changes in the U.S. financial condition and fiscal and monetary policies, or any actions taken or to be taken by the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System on the credit markets and the U.S. economy;
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▪
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the effects on our business of any declines in the volume of U.S. home sales and home prices, due to adverse economic changes or otherwise;
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▪
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the effects of any significant adverse changes in the underwriting criteria or the existence or programs of government-sponsored entities, including Fannie Mae and Freddie Mac, including any changes caused by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other actions of the federal government;
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▪
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the ability to maintain our status as a government sponsored entity-approved seller and servicer, including the ability to continue to comply with the respective selling and servicing guides;
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▪
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the effects of changes in, or our failure to comply with, laws and regulations, including mortgage- and real estate-related laws and regulations, those that we are exposed to through our private label relationships, and changes in the status of government sponsored-entities;
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the effects of the outcome or resolutions of any inquiries, investigations or appeals related to our mortgage origination or servicing activities, any litigation related to our mortgage origination or servicing activities, or any related fines, penalties and increased costs, and the associated impact on our liquidity;
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▪
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the ability to maintain our relationships with our existing clients, including our ability to comply with any changes in the terms of certain of our private label client agreements and any related service level agreements, and to establish relationships with new clients;
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▪
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the effects of competition in our business, including competitors with greater financial resources and broader product lines;
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the inability or unwillingness of any of the counterparties to our significant customer contracts, hedging agreements, or financing arrangements to perform their respective obligations under such contracts, or to renew on terms favorable to us;
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the impacts of our credit ratings, including the impact on our cost of capital and ability to access the debt markets, as well as on our current or potential customers’ assessment of our long-term stability;
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the ability to obtain or renew financing on acceptable terms, if at all, to finance our mortgage loans held for sale and servicing advances, or to fund our strategies;
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the ability to operate within the limitations imposed by our financing arrangements and to maintain or generate the amount of cash required to service our indebtedness and operate our business;
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any failure to comply with covenants or asset eligibility requirements under our financing arrangements; and
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the effects of any failure in or breach of our technology infrastructure, or those of our outsource providers, or any failure to implement changes to our information systems in a manner sufficient to comply with applicable laws, regulations and our contractual obligations.
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Item 1. Financial Statements
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2016
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2015
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2016
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2015
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||||||||
REVENUES
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Origination and other loan fees
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$
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79
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$
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87
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$
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140
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$
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145
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Gain on loans held for sale, net
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77
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86
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125
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168
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Net loan servicing income:
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Loan servicing income
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91
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100
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182
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204
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Change in fair value of mortgage servicing rights
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(105
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)
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18
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(226
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)
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(8
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)
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Net derivative gain (loss) related to mortgage servicing rights
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58
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(49
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)
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143
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4
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||||
Net loan servicing income
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44
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69
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99
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200
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Net interest expense:
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Interest income
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12
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13
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21
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22
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Secured interest expense
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(8
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)
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(9
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)
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(16
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)
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(18
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)
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Unsecured interest expense
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(11
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)
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(16
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)
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(21
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)
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(33
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)
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Net interest expense
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(7
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)
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(12
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)
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(16
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)
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(29
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)
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Other income
|
3
|
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7
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|
5
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14
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Net revenues
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196
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|
237
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|
353
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498
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EXPENSES
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Salaries and related expenses
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92
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85
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182
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172
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Commissions
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18
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27
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30
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46
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Loan origination expenses
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18
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25
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34
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49
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Foreclosure and repossession expenses
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9
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15
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16
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30
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Professional and third-party service fees
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37
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45
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76
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87
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Technology equipment and software expenses
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10
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9
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20
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19
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Occupancy and other office expenses
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11
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12
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24
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24
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Depreciation and amortization
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5
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4
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9
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9
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Other operating expenses
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16
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89
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31
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105
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Total expenses
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216
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311
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422
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541
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Loss before income taxes
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(20
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)
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(74
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)
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(69
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)
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(43
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)
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Income tax benefit
|
(11
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)
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(18
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)
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(30
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)
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(10
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)
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Net loss
|
(9
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)
|
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(56
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)
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(39
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)
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(33
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)
|
||||
Less: net income attributable to noncontrolling interest
|
3
|
|
|
6
|
|
|
3
|
|
|
8
|
|
||||
Net loss attributable to PHH Corporation
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$
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(12
|
)
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|
$
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(62
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)
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|
$
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(42
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)
|
|
$
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(41
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)
|
|
|
|
|
|
|
|
|
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Basic and Diluted loss per share attributable to PHH Corporation
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$
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(0.22
|
)
|
|
$
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(1.20
|
)
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|
$
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(0.78
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)
|
|
$
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(0.80
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)
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
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$
|
(9
|
)
|
|
$
|
(56
|
)
|
|
$
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(39
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)
|
|
$
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(33
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)
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Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
||||||
Change in unfunded pension liability, net
|
—
|
|
|
—
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|
|
—
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|
|
1
|
|
||||
Total other comprehensive income, net of tax
|
—
|
|
|
—
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|
|
—
|
|
|
1
|
|
||||
Total comprehensive loss
|
(9
|
)
|
|
(56
|
)
|
|
(39
|
)
|
|
(32
|
)
|
||||
Less: comprehensive income attributable to noncontrolling interest
|
3
|
|
|
6
|
|
|
3
|
|
|
8
|
|
||||
Comprehensive loss attributable to PHH Corporation
|
$
|
(12
|
)
|
|
$
|
(62
|
)
|
|
$
|
(42
|
)
|
|
$
|
(40
|
)
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,005
|
|
|
$
|
906
|
|
Restricted cash
|
54
|
|
|
47
|
|
||
Mortgage loans held for sale
|
922
|
|
|
743
|
|
||
Accounts receivable, net
|
82
|
|
|
81
|
|
||
Servicing advances, net
|
657
|
|
|
691
|
|
||
Mortgage servicing rights
|
679
|
|
|
880
|
|
||
Property and equipment, net
|
50
|
|
|
47
|
|
||
Other assets
|
182
|
|
|
247
|
|
||
Total assets
(1)
|
$
|
3,631
|
|
|
$
|
3,642
|
|
|
|
|
|
||||
LIABILITIES
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
225
|
|
|
$
|
251
|
|
Subservicing advance liabilities
|
316
|
|
|
314
|
|
||
Debt
|
1,471
|
|
|
1,348
|
|
||
Deferred taxes
|
125
|
|
|
182
|
|
||
Loan repurchase and indemnification liability
|
62
|
|
|
62
|
|
||
Other liabilities
|
151
|
|
|
137
|
|
||
Total liabilities
(1)
|
2,350
|
|
|
2,294
|
|
||
Commitments and contingencies (Note 10)
|
|
|
|
|
|
||
|
|
|
|
||||
EQUITY
|
|
|
|
|
|
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Preferred stock, $0.01 par value; 1,090,000 shares authorized;
none issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 273,910,000 shares authorized;
53,527,838 shares issued and outstanding at June 30, 2016;
55,007,983 shares issued and outstanding at December 31, 2015
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
883
|
|
|
911
|
|
||
Retained earnings
|
374
|
|
|
416
|
|
||
Accumulated other comprehensive loss
(2)
|
(10
|
)
|
|
(10
|
)
|
||
Total PHH Corporation stockholders’ equity
|
1,248
|
|
|
1,318
|
|
||
Noncontrolling interest
|
33
|
|
|
30
|
|
||
Total equity
|
1,281
|
|
|
1,348
|
|
||
Total liabilities and equity
|
$
|
3,631
|
|
|
$
|
3,642
|
|
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(1)
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The Condensed Consolidated Balance Sheets include assets of variable interest entities which can be used only to settle the obligations and liabilities of variable interest entities which creditors or beneficial interest holders do not have recourse to PHH Corporation and subsidiaries as follows:
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June 30,
2016 |
|
December 31,
2015 |
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ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
56
|
|
|
$
|
80
|
|
Restricted cash
|
23
|
|
|
18
|
|
||
Mortgage loans held for sale
|
521
|
|
|
389
|
|
||
Accounts receivable, net
|
12
|
|
|
5
|
|
||
Servicing advances, net
|
152
|
|
|
157
|
|
||
Property and equipment, net
|
1
|
|
|
1
|
|
||
Other assets
|
19
|
|
|
12
|
|
||
Total assets
|
$
|
784
|
|
|
$
|
662
|
|
|
|
|
|
||||
LIABILITIES
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
20
|
|
|
$
|
14
|
|
Debt
|
554
|
|
|
456
|
|
||
Other liabilities
|
8
|
|
|
6
|
|
||
Total liabilities
|
$
|
582
|
|
|
$
|
476
|
|
(2)
|
Includes amounts recorded related to the Company’s defined benefit pension plan, net of income tax benefits of
$6 million
as of both
June 30, 2016
and
December 31, 2015
. During both the
three and six
months ended
June 30, 2016
and
June 30, 2015
, there were no amounts reclassified out of Accumulated other comprehensive loss.
|
|
PHH Corporation Stockholders’ Equity
|
|
|
|
|
|||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2015
|
55,007,983
|
|
|
$
|
1
|
|
|
$
|
911
|
|
|
$
|
416
|
|
|
$
|
(10
|
)
|
|
$
|
30
|
|
|
$
|
1,348
|
|
Total comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
3
|
|
|
(39
|
)
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Stock issued under share-based payment plans (includes $9 benefit from excess tax shortfall)
|
28,627
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||
Repurchase of Common stock
|
(1,508,772
|
)
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
||||||
Balance at June 30, 2016
|
53,527,838
|
|
|
$
|
1
|
|
|
$
|
883
|
|
|
$
|
374
|
|
|
$
|
(10
|
)
|
|
$
|
33
|
|
|
$
|
1,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Six Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2014
|
51,143,723
|
|
|
$
|
1
|
|
|
$
|
989
|
|
|
$
|
566
|
|
|
$
|
(11
|
)
|
|
$
|
26
|
|
|
$
|
1,571
|
|
Total comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
1
|
|
|
8
|
|
|
(32
|
)
|
||||||
Distributions to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Stock issued under share-based payment plans
|
160,693
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Repurchase of Common stock
|
(1,574,252
|
)
|
|
(1
|
)
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Conversion of Convertible Notes
|
10,075,653
|
|
|
1
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
||||||
Recognition of deferred taxes related to Convertible notes
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Balance at June 30, 2015
|
59,805,817
|
|
|
$
|
1
|
|
|
$
|
986
|
|
|
$
|
520
|
|
|
$
|
(10
|
)
|
|
$
|
30
|
|
|
$
|
1,527
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net loss
|
$
|
(39
|
)
|
|
$
|
(33
|
)
|
Adjustments to reconcile Net loss to net cash used in operating activities:
|
|
|
|
|
|
||
Capitalization of originated mortgage servicing rights
|
(30
|
)
|
|
(48
|
)
|
||
Net loss on mortgage servicing rights and related derivatives
|
83
|
|
|
4
|
|
||
Loss on early extinguishment of debt
|
—
|
|
|
30
|
|
||
Origination of mortgage loans held for sale
|
(5,050
|
)
|
|
(7,262
|
)
|
||
Proceeds on sale of and payments from mortgage loans held for sale
|
4,999
|
|
|
6,938
|
|
||
Net gain on interest rate lock commitments, mortgage loans held for sale and related derivatives
|
(134
|
)
|
|
(151
|
)
|
||
Depreciation and amortization
|
9
|
|
|
9
|
|
||
Deferred income tax benefit
|
(58
|
)
|
|
(2
|
)
|
||
Other adjustments and changes in other assets and liabilities, net
|
84
|
|
|
66
|
|
||
Net cash used in operating activities
|
(136
|
)
|
|
(449
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
||
Net cash received on derivatives related to mortgage servicing rights
|
146
|
|
|
5
|
|
||
Proceeds on sale of mortgage servicing rights
|
4
|
|
|
36
|
|
||
Purchases of property and equipment
|
(9
|
)
|
|
(16
|
)
|
||
(Increase) decrease in restricted cash
|
(7
|
)
|
|
13
|
|
||
Other, net
|
5
|
|
|
3
|
|
||
Net cash provided by investing activities
|
139
|
|
|
41
|
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from secured borrowings
|
6,014
|
|
|
9,199
|
|
||
Principal payments on secured borrowings
|
(5,892
|
)
|
|
(8,812
|
)
|
||
Principal payments on unsecured borrowings
|
—
|
|
|
(243
|
)
|
||
Cash tender premiums for convertible debt
|
—
|
|
|
(30
|
)
|
||
Repurchase of Common stock
|
(23
|
)
|
|
—
|
|
||
Cash paid for debt issuance costs
|
(3
|
)
|
|
(4
|
)
|
||
Distributions to noncontrolling interest
|
—
|
|
|
(4
|
)
|
||
Issuances of Common stock
|
—
|
|
|
2
|
|
||
Other, net
|
—
|
|
|
(1
|
)
|
||
Net cash provided by financing activities
|
96
|
|
|
107
|
|
||
|
|
|
|
||||
Net increase (decrease) in Cash and cash equivalents
|
99
|
|
|
(301
|
)
|
||
Cash and cash equivalents at beginning of period
|
906
|
|
|
1,259
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,005
|
|
|
$
|
958
|
|
1. Summary of Significant Accounting Policies
|
•
|
ASU 2016-08, “Principal Versus Agent Considerations (Reporting Revenue Gross versus Net).” The amendments to this update were issued in March 2016 and are intended to improve the implementation guidance on principal versus agent considerations in ASU 2014-09 by clarifying how an entity should identify the unit of accounting (i.e. the specified good or service) and how an entity should apply the control principle to certain types of arrangements.
|
•
|
ASU 2016-10, “Identifying Performance Obligations and Licensing.” The amendments to this update were issued in April 2016 and are intended to improve the implementation guidance on identifying performance obligations by reducing
|
•
|
ASU 2016-12, "Narrow-Scope Improvements and Practical Expedients." The amendments to this update were issued in May 2016 and clarify certain core recognition principles and provide practical expedients available at transition. The improvements address collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition.
|
2. Earnings Per Share
|
•
|
the repurchase of
1,508,772
shares during January 2016 under an open market repurchase program;
|
•
|
the issuance of
10,075,653
shares during June 2015 which represented the amount by which the conversion value exceeded the note principal under an exchange offer of certain convertible debt; and
|
•
|
the receipt and retirement of
1,574,252
shares during March 2015 which represented the final delivery of shares under accelerated repurchase programs.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions, except share and per share data)
|
||||||||||||||
Net loss attributable to PHH Corporation
|
$
|
(12
|
)
|
|
$
|
(62
|
)
|
|
$
|
(42
|
)
|
|
$
|
(41
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding — basic & diluted
|
53,568,357
|
|
|
51,135,313
|
|
|
53,635,793
|
|
|
51,154,163
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted loss per share attributable to PHH Corporation
|
$
|
(0.22
|
)
|
|
$
|
(1.20
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.80
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Outstanding stock-based compensation awards
(1)
|
1,946,982
|
|
|
1,836,791
|
|
|
1,946,982
|
|
|
1,836,791
|
|
Assumed conversion of debt securities
|
—
|
|
|
8,482,846
|
|
|
—
|
|
|
8,751,067
|
|
(1)
|
For the
three and six
months ended
June 30, 2016
, excludes
493,657
shares that are contingently issuable for which the contingency has not been met.
|
3. Transfers and Servicing of Mortgage Loans
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
|
$
|
98,990
|
|
|
$
|
112,686
|
|
Additions
|
2,960
|
|
|
4,323
|
|
||
Payoffs and curtailments
|
(8,767
|
)
|
|
(9,966
|
)
|
||
Sales
|
(496
|
)
|
|
(2,338
|
)
|
||
Balance, end of period
|
$
|
92,687
|
|
|
$
|
104,705
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
|
$
|
880
|
|
|
$
|
1,005
|
|
Additions
|
30
|
|
|
48
|
|
||
Sales
|
(5
|
)
|
|
(25
|
)
|
||
Changes in fair value due to:
|
|
|
|
|
|
||
Realization of expected cash flows
|
(61
|
)
|
|
(89
|
)
|
||
Changes in market inputs or assumptions used in the valuation model
|
(165
|
)
|
|
81
|
|
||
Balance, end of period
|
$
|
679
|
|
|
$
|
1,020
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Servicing fees from capitalized portfolio
|
$
|
67
|
|
|
$
|
77
|
|
|
$
|
137
|
|
|
$
|
156
|
|
Late fees
|
5
|
|
|
3
|
|
|
8
|
|
|
7
|
|
||||
Other ancillary servicing revenue
|
5
|
|
|
8
|
|
|
8
|
|
|
15
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
(In millions)
|
||||||
Proceeds from new loan sales or securitizations
|
$
|
3,055
|
|
|
$
|
4,439
|
|
Servicing fees from capitalized portfolio
(1)
|
137
|
|
|
156
|
|
||
Purchases of previously sold loans
(2)
|
(169
|
)
|
|
(16
|
)
|
||
Servicing advances
(3)
|
(836
|
)
|
|
(1,018
|
)
|
||
Repayment of servicing advances
(3)
|
872
|
|
|
1,041
|
|
(1)
|
Excludes late fees and other ancillary servicing revenue.
|
(2)
|
Includes purchases of repurchase eligible loans and excludes indemnification payments to investors and insurers of the related mortgage loans.
|
(3)
|
Outstanding servicing advance receivables are presented in Servicing advances, net in the
Condensed Consolidated Balance Sheets
, except for advances related to loans in foreclosure or real estate owned, which are included in Other assets.
|
4. Derivatives
|
▪
|
Forward delivery commitments
—Related to interest rate and price risk for mortgage loans held for sale and interest rate lock commitments
|
▪
|
Option contracts
—Related to interest rate and price risk for mortgage loans held for sale and interest rate lock commitments
|
▪
|
MSR-related agreements
—Related to interest rate risk for mortgage servicing rights
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Interest rate lock commitments
|
$
|
1,437
|
|
|
$
|
1,048
|
|
Forward delivery commitments
|
4,049
|
|
|
2,468
|
|
||
Option contracts
|
—
|
|
|
125
|
|
||
MSR-related agreements
|
4,215
|
|
|
3,945
|
|
|
June 30, 2016
|
||||||||||||||
|
Gross Assets
|
|
Offsetting
Payables
|
|
Cash Collateral
Received
|
|
Net Amount
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
5
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
MSR-related agreements
|
112
|
|
|
(104
|
)
|
|
(1
|
)
|
|
7
|
|
||||
Derivative assets subject to netting
|
117
|
|
|
(109
|
)
|
|
(1
|
)
|
|
7
|
|
||||
Not subject to master netting arrangements:
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
||||
Forward delivery commitments
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Derivative assets not subject to netting
|
42
|
|
|
—
|
|
|
—
|
|
|
42
|
|
||||
Total derivative assets
|
$
|
159
|
|
|
$
|
(109
|
)
|
|
$
|
(1
|
)
|
|
$
|
49
|
|
|
Gross Liabilities
|
|
Offsetting
Receivables
|
|
Cash Collateral
Received (Paid)
|
|
Net Amount
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
15
|
|
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
2
|
|
MSR-related agreements
|
—
|
|
|
(102
|
)
|
|
110
|
|
|
8
|
|
||||
Derivative liabilities subject to netting
|
15
|
|
|
(109
|
)
|
|
104
|
|
|
10
|
|
||||
Not subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total derivative liabilities
|
$
|
18
|
|
|
$
|
(109
|
)
|
|
$
|
104
|
|
|
$
|
13
|
|
|
December 31, 2015
|
||||||||||||||
|
Gross Assets
|
|
Offsetting
Payables
|
|
Cash Collateral
Received
|
|
Net Amount
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
||||||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
MSR-related agreements
|
27
|
|
|
—
|
|
|
(23
|
)
|
|
4
|
|
||||
Derivative assets subject to netting
|
29
|
|
|
(2
|
)
|
|
(23
|
)
|
|
4
|
|
||||
Not subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments
|
21
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
Forward delivery commitments
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Derivative assets not subject to netting
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||
Total derivative assets
|
$
|
51
|
|
|
$
|
(2
|
)
|
|
$
|
(23
|
)
|
|
$
|
26
|
|
|
Gross Liabilities
|
|
Offsetting
Receivables |
|
Cash Collateral
Received |
|
Net Amount
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
2
|
|
Total derivative liabilities
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net:
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments
|
$
|
101
|
|
|
$
|
54
|
|
|
$
|
178
|
|
|
$
|
135
|
|
Forward delivery commitments
|
(14
|
)
|
|
28
|
|
|
(35
|
)
|
|
11
|
|
||||
Option contracts
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Net derivative gain (loss) related to mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|
||||||
MSR-related agreements
|
58
|
|
|
(49
|
)
|
|
143
|
|
|
4
|
|
5. Other Assets
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Derivatives
|
$
|
49
|
|
|
$
|
26
|
|
Repurchase eligible loans
(1)
|
42
|
|
|
104
|
|
||
Equity method investments
|
32
|
|
|
32
|
|
||
Mortgage loans in foreclosure, net
|
23
|
|
|
24
|
|
||
Real estate owned, net
|
15
|
|
|
21
|
|
||
Income taxes receivable
|
—
|
|
|
23
|
|
||
Other
|
21
|
|
|
17
|
|
||
Total
|
$
|
182
|
|
|
$
|
247
|
|
(1)
|
Repurchase eligible loans represent certain mortgage loans sold pursuant to Government National Mortgage Association programs where the Company, as servicer, has the unilateral option to repurchase the loan if certain criteria are met, including if a loan is greater than
90
days delinquent and where it has been determined that there is more than a trivial benefit from exercising the repurchase option. Regardless of whether the repurchase option has been exercised, the Company must recognize eligible loans within Other assets and a corresponding repurchase liability within Accounts payable and accrued expenses in the
Condensed Consolidated Balance Sheets
.
|
6. Other Liabilities
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Legal and regulatory matters (Note 10)
|
$
|
110
|
|
|
$
|
105
|
|
Derivatives
|
13
|
|
|
2
|
|
||
Pension and other post employment benefits
|
11
|
|
|
11
|
|
||
Income tax contingencies
|
9
|
|
|
9
|
|
||
Other
|
8
|
|
|
10
|
|
||
Total
|
$
|
151
|
|
|
$
|
137
|
|
7. Debt and Borrowing Arrangements
|
|
June 30, 2016
|
|
December 31,
2015 |
|||||||||||
|
Balance
|
|
Interest
Rate (1) |
|
Available
Capacity
(2)
|
|
Balance
|
|||||||
|
(In millions)
|
|||||||||||||
Committed warehouse facilities
|
$
|
764
|
|
|
2.1
|
%
|
|
$
|
486
|
|
|
$
|
632
|
|
Uncommitted warehouse facilities
|
3
|
|
|
3.5
|
%
|
|
2,797
|
|
|
—
|
|
|||
Servicing advance facility
|
98
|
|
|
2.5
|
%
|
|
57
|
|
|
111
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Term notes due in 2019
(3)
|
272
|
|
|
7.375
|
%
|
|
n/a
|
|
|
271
|
|
|||
Term notes due in 2021
(3)
|
334
|
|
|
6.375
|
%
|
|
n/a
|
|
|
334
|
|
|||
Unsecured debt
|
606
|
|
|
|
|
|
|
|
|
605
|
|
|||
Total
|
$
|
1,471
|
|
|
|
|
|
|
|
|
$
|
1,348
|
|
(1)
|
Interest rate shown represents the stated interest rate of outstanding borrowings, which may differ from the effective rate due to the amortization of premiums, discounts and issuance costs. Warehouse facilities and the servicing advance facility are variable-rate. Rate shown for warehouse facilities represents the weighted-average rate of current outstanding borrowings.
|
(2)
|
Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the terms, conditions and covenants of the respective agreements, including asset-eligibility requirements.
|
(3)
|
Deferred issuance costs were reclassified from the prior year presentation in Other assets to a reduction in Unsecured debt.
|
|
Warehouse
Facilities
|
|
Servicing
Advance
Facility
|
||||
|
(In millions)
|
||||||
Restricted cash
|
$
|
7
|
|
|
$
|
14
|
|
Servicing advances
|
—
|
|
|
152
|
|
||
Mortgage loans held for sale (unpaid principal balance)
|
795
|
|
|
—
|
|
||
Total
|
$
|
802
|
|
|
$
|
166
|
|
|
Warehouse
Facilities
|
|
Servicing
Advance
Facility
(1)
|
|
Unsecured
Debt
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Within one year
|
$
|
767
|
|
|
$
|
98
|
|
|
$
|
—
|
|
|
$
|
865
|
|
Between one and two years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Between two and three years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Between three and four years
|
—
|
|
|
—
|
|
|
275
|
|
|
275
|
|
||||
Between four and five years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Thereafter
|
—
|
|
|
—
|
|
|
340
|
|
|
340
|
|
||||
|
$
|
767
|
|
|
$
|
98
|
|
|
$
|
615
|
|
|
$
|
1,480
|
|
(1)
|
Maturities of the servicing advance facility represent estimated payments based on the expected cash inflows of the receivables.
|
8. Income Taxes
|
|
|
|
|
|
|
|
|
9. Credit Risk
|
▪
|
Consumer credit risk
—through mortgage banking activities as a result of originating and servicing residential mortgage loans
|
▪
|
Counterparty credit risk
—through derivative transactions, sales agreements and various mortgage loan origination and servicing agreements
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Loan Servicing Portfolio Composition
|
|
|
|
|
|
||
Owned
|
$
|
93,674
|
|
|
$
|
99,869
|
|
Subserviced
|
138,067
|
|
|
126,390
|
|
||
Total
|
$
|
231,741
|
|
|
$
|
226,259
|
|
|
|
|
|
||||
Conventional loans
|
$
|
204,208
|
|
|
$
|
197,971
|
|
Government loans
|
23,521
|
|
|
24,087
|
|
||
Home equity lines of credit
|
4,012
|
|
|
4,201
|
|
||
Total
|
$
|
231,741
|
|
|
$
|
226,259
|
|
|
|
|
|
||||
Weighted-average interest rate
|
3.8
|
%
|
|
3.8
|
%
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||
|
Number of
Loans
|
|
Unpaid
Balance
|
|
Number of
Loans
|
|
Unpaid
Balance
|
||||
Portfolio Delinquency
(1)
|
|
|
|
|
|
|
|
|
|
|
|
30 days
|
2.10
|
%
|
|
1.48
|
%
|
|
2.22
|
%
|
|
1.55
|
%
|
60 days
|
0.38
|
|
|
0.26
|
|
|
0.44
|
|
|
0.30
|
|
90 or more days
|
0.63
|
|
|
0.47
|
|
|
0.82
|
|
|
0.62
|
|
Total
|
3.11
|
%
|
|
2.21
|
%
|
|
3.48
|
%
|
|
2.47
|
%
|
|
|
|
|
|
|
|
|
||||
Foreclosure/real estate owned
(2)
|
1.62
|
%
|
|
1.37
|
%
|
|
1.74
|
%
|
|
1.51
|
%
|
(1)
|
Represents portfolio delinquencies as a percentage of the total number of loans and the total unpaid balance of the portfolio.
|
(2)
|
As of
June 30, 2016
and
December 31, 2015
, the total servicing portfolio included
14,178
and
15,487
of loans in foreclosure with an unpaid principal balance of
$2.8 billion
and
$3.0 billion
, respectively.
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
|
$
|
89
|
|
|
$
|
93
|
|
Realized losses
|
(12
|
)
|
|
(13
|
)
|
||
Increase in reserves due to:
|
|
|
|
|
|
||
Changes in assumptions
|
3
|
|
|
6
|
|
||
New loan sales
|
4
|
|
|
6
|
|
||
Balance, end of period
|
$
|
84
|
|
|
$
|
92
|
|
•
|
uncertainty related to loss exposure to loans from origination years where the Agencies have substantially completed or resolved their file reviews; and
|
•
|
uncertainty related to losses associated with loans with defects that were excluded from the resolution agreement with Fannie Mae (which excludes loans with certain title defects or violations of law that were originated and delivered prior to July 1, 2012).
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Mortgage loans in foreclosure and related advances
|
$
|
32
|
|
|
$
|
34
|
|
Allowance for probable foreclosure losses
|
(9
|
)
|
|
(10
|
)
|
||
Mortgage loans in foreclosure, net
|
$
|
23
|
|
|
$
|
24
|
|
|
|
|
|
||||
Real estate owned and related advances
|
$
|
28
|
|
|
$
|
38
|
|
Adjustment to value for real estate owned
|
(13
|
)
|
|
(17
|
)
|
||
Real estate owned, net
|
$
|
15
|
|
|
$
|
21
|
|
10. Commitments and Contingencies
|
11. Fair Value Measurements
|
|
June 30, 2016
|
||||||||||||||||||
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Cash
Collateral
and Netting
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans held for sale
|
$
|
—
|
|
|
$
|
880
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
922
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
679
|
|
|
—
|
|
|
679
|
|
|||||
Other assets—Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
39
|
|
|||||
Forward delivery commitments
|
—
|
|
|
8
|
|
|
—
|
|
|
(5
|
)
|
|
3
|
|
|||||
MSR-related agreements
|
—
|
|
|
112
|
|
|
—
|
|
|
(105
|
)
|
|
7
|
|
|||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other liabilities—Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forward delivery commitments
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
$
|
5
|
|
MSR-related agreements
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|
December 31, 2015
|
||||||||||||||||||
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Cash
Collateral
and Netting
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans held for sale
|
$
|
—
|
|
|
$
|
704
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
743
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
880
|
|
|
—
|
|
|
880
|
|
|||||
Other assets—Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|||||
Forward delivery commitments
|
—
|
|
|
3
|
|
|
—
|
|
|
(2
|
)
|
|
1
|
|
|||||
MSR-related agreements
|
—
|
|
|
27
|
|
|
—
|
|
|
(23
|
)
|
|
4
|
|
|||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other liabilities—Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forward delivery commitments
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Total
|
|
Loans 90 days or
more past due and
on non-accrual
status
|
|
Total
|
|
Loans 90 days or
more past due and
on non-accrual
status
|
||||||||
|
(In millions)
|
||||||||||||||
Carrying amount
|
$
|
922
|
|
|
$
|
8
|
|
|
$
|
743
|
|
|
$
|
9
|
|
Aggregate unpaid principal balance
|
909
|
|
|
11
|
|
|
738
|
|
|
11
|
|
||||
Difference
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
First mortgages:
|
|
|
|
|
|
||
Conforming
|
$
|
720
|
|
|
$
|
616
|
|
Non-conforming
|
159
|
|
|
88
|
|
||
Total first mortgages
|
879
|
|
|
704
|
|
||
Second lien
|
4
|
|
|
4
|
|
||
Scratch and Dent
|
38
|
|
|
35
|
|
||
Other
|
1
|
|
|
—
|
|
||
Total
|
$
|
922
|
|
|
$
|
743
|
|
|
Six Months Ended
June 30, |
||||
|
2016
|
|
2015
|
||
Initial capitalization rate of additions to MSRs
|
1.02
|
%
|
|
1.11
|
%
|
|
June 30,
2016 |
|
December 31,
2015 |
||
Capitalization servicing rate
|
0.73
|
%
|
|
0.89
|
%
|
Capitalization servicing multiple
|
2.6
|
|
|
3.1
|
|
Weighted-average servicing fee (in basis points)
|
29
|
|
|
29
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||
Weighted-average prepayment speed (CPR)
|
12.3
|
%
|
|
9.1
|
%
|
Option adjusted spread, in basis points (OAS)
|
992
|
|
|
977
|
|
Weighted-average delinquency rate
|
5.4
|
%
|
|
5.3
|
%
|
|
June 30, 2016
|
||||||||||
|
Weighted-
Average
Prepayment
Speed
|
|
Option
Adjusted
Spread
|
|
Weighted-
Average
Delinquency
Rate
|
||||||
|
(In millions)
|
||||||||||
Impact on fair value of 10% adverse change
|
$
|
(34
|
)
|
|
$
|
(28
|
)
|
|
$
|
(18
|
)
|
Impact on fair value of 20% adverse change
|
(66
|
)
|
|
(54
|
)
|
|
(37
|
)
|
|
Three Months Ended
June 30, 2016 |
|
Three Months Ended
June 30, 2015 |
||||||||||||||||||||
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Balance, beginning of period
|
$
|
41
|
|
|
$
|
770
|
|
|
$
|
28
|
|
|
$
|
41
|
|
|
$
|
986
|
|
|
$
|
38
|
|
Purchases, Issuances, Sales and Settlements:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
3
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
2
|
|
|
17
|
|
|
—
|
|
|
2
|
|
|
28
|
|
|
—
|
|
||||||
Sales
|
(6
|
)
|
|
(3
|
)
|
|
—
|
|
|
(4
|
)
|
|
(12
|
)
|
|
—
|
|
||||||
Settlements
|
(4
|
)
|
|
—
|
|
|
(90
|
)
|
|
(3
|
)
|
|
—
|
|
|
(70
|
)
|
||||||
|
(5
|
)
|
|
14
|
|
|
(90
|
)
|
|
5
|
|
|
16
|
|
|
(70
|
)
|
||||||
Realized and unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gain on loans held for sale, net
|
—
|
|
|
—
|
|
|
101
|
|
|
—
|
|
|
—
|
|
|
54
|
|
||||||
Change in fair value of MSRs
|
—
|
|
|
(105
|
)
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
||||||
Interest income
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||
|
1
|
|
|
(105
|
)
|
|
101
|
|
|
2
|
|
|
18
|
|
|
54
|
|
||||||
Transfers into Level Three
|
9
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
||||||
Transfers out of Level Three
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
||||||
Balance, end of period
|
$
|
42
|
|
|
$
|
679
|
|
|
$
|
39
|
|
|
$
|
48
|
|
|
$
|
1,020
|
|
|
$
|
22
|
|
|
Six Months Ended
June 30, 2016 |
|
Six Months Ended
June 30, 2015 |
||||||||||||||||||||
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Balance, beginning of period
|
$
|
39
|
|
|
$
|
880
|
|
|
$
|
21
|
|
|
$
|
42
|
|
|
$
|
1,005
|
|
|
$
|
22
|
|
Purchases, Issuances, Sales and Settlements:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
8
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
3
|
|
|
30
|
|
|
—
|
|
|
2
|
|
|
48
|
|
|
—
|
|
||||||
Sales
|
(14
|
)
|
|
(5
|
)
|
|
—
|
|
|
(8
|
)
|
|
(25
|
)
|
|
—
|
|
||||||
Settlements
|
(5
|
)
|
|
—
|
|
|
(160
|
)
|
|
(5
|
)
|
|
—
|
|
|
(135
|
)
|
||||||
|
(8
|
)
|
|
25
|
|
|
(160
|
)
|
|
6
|
|
|
23
|
|
|
(135
|
)
|
||||||
Realized and unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gain on loans held for sale, net
|
—
|
|
|
—
|
|
|
178
|
|
|
1
|
|
|
—
|
|
|
135
|
|
||||||
Change in fair value of MSRs
|
—
|
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
||||||
Interest income
|
2
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||||
|
2
|
|
|
(226
|
)
|
|
178
|
|
|
4
|
|
|
(8
|
)
|
|
135
|
|
||||||
Transfers into Level Three
|
20
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
||||||
Transfers out of Level Three
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
||||||
Balance, end of period
|
$
|
42
|
|
|
$
|
679
|
|
|
$
|
39
|
|
|
$
|
48
|
|
|
$
|
1,020
|
|
|
$
|
22
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net
|
$
|
35
|
|
|
$
|
18
|
|
|
$
|
35
|
|
|
$
|
18
|
|
Change in fair value of mortgage servicing rights
|
(70
|
)
|
|
69
|
|
|
(165
|
)
|
|
81
|
|
12. Variable Interest Entities
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
PHH Home
Loans
|
|
Servicing
Advance
Receivables
Trust
|
|
PHH Home
Loans
|
|
Servicing
Advance
Receivables
Trust
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
Restricted cash
|
9
|
|
|
14
|
|
|
5
|
|
|
13
|
|
||||
Mortgage loans held for sale
|
521
|
|
|
—
|
|
|
389
|
|
|
—
|
|
||||
Accounts receivable, net
|
12
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Servicing advances, net
|
—
|
|
|
152
|
|
|
—
|
|
|
157
|
|
||||
Property and equipment, net
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Other assets
|
18
|
|
|
1
|
|
|
11
|
|
|
1
|
|
||||
Total assets
|
$
|
617
|
|
|
$
|
167
|
|
|
$
|
491
|
|
|
$
|
171
|
|
Assets held as collateral
|
$
|
476
|
|
|
$
|
166
|
|
|
$
|
361
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
Debt
|
456
|
|
|
98
|
|
|
345
|
|
|
111
|
|
||||
Other liabilities
|
8
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Total liabilities
(1)
|
$
|
484
|
|
|
$
|
98
|
|
|
$
|
365
|
|
|
$
|
111
|
|
(1)
|
Excludes intercompany payables.
|
13. Segment Information
|
■
|
Mortgage Production
— provides mortgage loan origination services and sells mortgage loans.
|
■
|
Mortgage Servicing
— performs servicing activities for loans originated by PHH Mortgage and mortgage servicing rights purchased from others, and acts as a subservicer for certain clients that own the underlying mortgage servicing rights.
|
|
Total Assets
|
||||||
|
June 30,
2016 |
|
December 31, 2015
|
||||
|
(In millions)
|
||||||
Mortgage Production segment
|
$
|
1,198
|
|
|
$
|
1,036
|
|
Mortgage Servicing segment
|
1,496
|
|
|
1,802
|
|
||
Other
|
937
|
|
|
804
|
|
||
Total
|
$
|
3,631
|
|
|
$
|
3,642
|
|
|
Net Revenues
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Mortgage Production segment
|
$
|
162
|
|
|
$
|
174
|
|
|
$
|
275
|
|
|
$
|
311
|
|
Mortgage Servicing segment
|
34
|
|
|
60
|
|
|
78
|
|
|
181
|
|
||||
Other
|
—
|
|
|
3
|
|
|
—
|
|
|
6
|
|
||||
Total
|
$
|
196
|
|
|
$
|
237
|
|
|
$
|
353
|
|
|
$
|
498
|
|
|
Segment Profit (Loss)
(2)
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Mortgage Production segment
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
(13
|
)
|
|
$
|
(16
|
)
|
Mortgage Servicing segment
|
(33
|
)
|
|
(46
|
)
|
|
(54
|
)
|
|
11
|
|
||||
Other
(1)
|
(3
|
)
|
|
(37
|
)
|
|
(5
|
)
|
|
(46
|
)
|
||||
Total
|
$
|
(23
|
)
|
|
$
|
(80
|
)
|
|
$
|
(72
|
)
|
|
$
|
(51
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Loss before income taxes
|
$
|
(20
|
)
|
|
$
|
(74
|
)
|
|
$
|
(69
|
)
|
|
$
|
(43
|
)
|
Less: net income attributable to noncontrolling interest
|
3
|
|
|
6
|
|
|
3
|
|
|
8
|
|
||||
Segment loss
|
$
|
(23
|
)
|
|
$
|
(80
|
)
|
|
$
|
(72
|
)
|
|
$
|
(51
|
)
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
▪
|
Results of Operations
|
▪
|
Risk Management
|
▪
|
Liquidity and Capital Resources
|
▪
|
Critical Accounting Policies and Estimates
|
▪
|
Recently Issued Accounting Pronouncements
|
Executive Summary
|
•
|
In the past week,
Merrill Lynch Home Loans
, a division of Bank of America, National Association ("Merrill Lynch"), has advised us of its intentions to insource additional loan products to their internal operations by the end of the year. When combined with their prior actions to move the origination of certain mortgage loan products to internal operations, we estimate that the combined effect of these changes could represent a reduction of approximately
60%
of Merrill Lynch’s loan closing volume or approximately
15%
of our total 2015 loan closing volume, in each case on an annualized basis, based on dollars of closing volume for the year ended December 31, 2015. For the second quarter of 2016, Merrill Lynch's application units were down by
30%
compared to the second quarter of 2015.
|
•
|
Morgan Stanley Private Bank, National Association
(“MSPBNA”), which represented 20% of our loan closing volume (by dollars) for the year ended December 31, 2015 has exercised its contractual right to extend origination services with us through October 31, 2017. At the same time, MSPBNA has informed us that it is assessing the arrangement for its mortgage origination services upon this new expiration date. PHH and MSPBNA are engaged in discussions regarding ways in which the two parties could continue to partner upon contract expiration, although there can be no assurances that any arrangement will result between the parties. MSPBNA has also indicated its intention to maintain its subservicing portfolio at the Company at this time.
|
RESULTS OF OPERATIONS
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
Net revenues
|
$
|
196
|
|
|
$
|
237
|
|
|
$
|
353
|
|
|
$
|
498
|
|
Total expenses
|
216
|
|
|
311
|
|
|
422
|
|
|
541
|
|
||||
Loss from before income taxes
|
(20
|
)
|
|
(74
|
)
|
|
(69
|
)
|
|
(43
|
)
|
||||
Income tax benefit
|
(11
|
)
|
|
(18
|
)
|
|
(30
|
)
|
|
(10
|
)
|
||||
Net loss
|
(9
|
)
|
|
(56
|
)
|
|
(39
|
)
|
|
(33
|
)
|
||||
Less: net income attributable to noncontrolling interest
|
3
|
|
|
6
|
|
|
3
|
|
|
8
|
|
||||
Net loss attributable to PHH Corporation
|
$
|
(12
|
)
|
|
$
|
(62
|
)
|
|
$
|
(42
|
)
|
|
$
|
(41
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted loss per share attributable to PHH Corporation
|
$
|
(0.22
|
)
|
|
$
|
(1.20
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.80
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
79
|
|
|
$
|
87
|
|
|
$
|
140
|
|
|
$
|
145
|
|
Gain on loans held for sale, net
|
77
|
|
|
86
|
|
|
125
|
|
|
168
|
|
||||
Loan servicing income
|
91
|
|
|
100
|
|
|
182
|
|
|
204
|
|
||||
Change in fair value of mortgage servicing rights, net of related derivatives
|
(47
|
)
|
|
(31
|
)
|
|
(83
|
)
|
|
(4
|
)
|
||||
Net interest expense
|
(7
|
)
|
|
(12
|
)
|
|
(16
|
)
|
|
(29
|
)
|
||||
Other income
|
3
|
|
|
7
|
|
|
5
|
|
|
14
|
|
||||
Net revenues
|
$
|
196
|
|
|
$
|
237
|
|
|
$
|
353
|
|
|
$
|
498
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Salaries and related expenses
|
$
|
92
|
|
|
$
|
85
|
|
|
$
|
182
|
|
|
$
|
172
|
|
Commissions
|
18
|
|
|
27
|
|
|
30
|
|
|
46
|
|
||||
Loan origination expenses
|
18
|
|
|
25
|
|
|
34
|
|
|
49
|
|
||||
Foreclosure and repossession expenses
|
9
|
|
|
15
|
|
|
16
|
|
|
30
|
|
||||
Professional and third-party service fees
|
37
|
|
|
45
|
|
|
76
|
|
|
87
|
|
||||
Technology equipment and software expenses
|
10
|
|
|
9
|
|
|
20
|
|
|
19
|
|
||||
Occupancy and other office expenses
|
11
|
|
|
12
|
|
|
24
|
|
|
24
|
|
||||
Depreciation and amortization
|
5
|
|
|
4
|
|
|
9
|
|
|
9
|
|
||||
Other operating expenses:
|
|
|
|
|
|
|
|
||||||||
Legal and regulatory reserves
|
—
|
|
|
34
|
|
|
5
|
|
|
34
|
|
||||
Loss on early debt retirement
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
||||
Other
|
16
|
|
|
25
|
|
|
26
|
|
|
41
|
|
||||
Total expenses
|
$
|
216
|
|
|
$
|
311
|
|
|
$
|
422
|
|
|
$
|
541
|
|
Mortgage Production Segment
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
($ In millions)
|
||||||||||||||
Closings:
|
|
|
|
|
|
|
|
|
|
||||||
Saleable to investors
|
$
|
2,847
|
|
|
$
|
4,121
|
|
|
$
|
4,835
|
|
|
$
|
7,223
|
|
Fee-based
|
7,525
|
|
|
7,952
|
|
|
13,492
|
|
|
14,202
|
|
||||
Total
|
$
|
10,372
|
|
|
$
|
12,073
|
|
|
$
|
18,327
|
|
|
$
|
21,425
|
|
|
|
|
|
|
|
|
|
||||||||
Purchase
|
$
|
4,953
|
|
|
$
|
6,107
|
|
|
$
|
8,327
|
|
|
$
|
9,923
|
|
Refinance
|
5,419
|
|
|
5,966
|
|
|
10,000
|
|
|
11,502
|
|
||||
Total
|
$
|
10,372
|
|
|
$
|
12,073
|
|
|
$
|
18,327
|
|
|
$
|
21,425
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS
|
$
|
7,955
|
|
|
$
|
8,889
|
|
|
$
|
14,308
|
|
|
$
|
15,936
|
|
Retail - Real Estate
|
2,120
|
|
|
2,803
|
|
|
3,461
|
|
|
4,822
|
|
||||
Total retail
|
10,075
|
|
|
11,692
|
|
|
17,769
|
|
|
20,758
|
|
||||
Wholesale/correspondent
|
297
|
|
|
381
|
|
|
558
|
|
|
667
|
|
||||
Total
|
$
|
10,372
|
|
|
$
|
12,073
|
|
|
$
|
18,327
|
|
|
$
|
21,425
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS (units)
|
13,439
|
|
|
16,658
|
|
|
25,128
|
|
|
30,283
|
|
||||
Retail - Real Estate (units)
|
7,581
|
|
|
10,176
|
|
|
12,549
|
|
|
17,784
|
|
||||
Total retail (units)
|
21,020
|
|
|
26,834
|
|
|
37,677
|
|
|
48,067
|
|
||||
Wholesale/correspondent (units)
|
1,180
|
|
|
1,632
|
|
|
2,191
|
|
|
2,939
|
|
||||
Total (units)
|
22,200
|
|
|
28,466
|
|
|
39,868
|
|
|
51,006
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Applications:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Saleable to investors
|
$
|
4,132
|
|
|
$
|
5,445
|
|
|
$
|
7,444
|
|
|
$
|
10,813
|
|
Fee-based
|
8,512
|
|
|
8,574
|
|
|
17,503
|
|
|
18,382
|
|
||||
Total
|
$
|
12,644
|
|
|
$
|
14,019
|
|
|
$
|
24,947
|
|
|
$
|
29,195
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS
|
$
|
9,742
|
|
|
$
|
9,994
|
|
|
$
|
19,450
|
|
|
$
|
21,424
|
|
Retail - Real Estate
|
2,729
|
|
|
3,424
|
|
|
4,806
|
|
|
6,566
|
|
||||
Total retail
|
12,471
|
|
|
13,418
|
|
|
24,256
|
|
|
27,990
|
|
||||
Wholesale/correspondent
|
173
|
|
|
601
|
|
|
691
|
|
|
1,205
|
|
||||
Total
|
$
|
12,644
|
|
|
$
|
14,019
|
|
|
$
|
24,947
|
|
|
$
|
29,195
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS (units)
|
18,214
|
|
|
19,856
|
|
|
34,777
|
|
|
41,782
|
|
||||
Retail - Real Estate (units)
|
9,620
|
|
|
12,350
|
|
|
17,173
|
|
|
24,056
|
|
||||
Total retail (units)
|
27,834
|
|
|
32,206
|
|
|
51,950
|
|
|
65,838
|
|
||||
Wholesale/correspondent (units)
|
703
|
|
|
2,592
|
|
|
2,649
|
|
|
5,174
|
|
||||
Total (units)
|
28,537
|
|
|
34,798
|
|
|
54,599
|
|
|
71,012
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
|
|
|
|
||||
IRLCs expected to close
|
$
|
1,318
|
|
|
$
|
2,158
|
|
|
$
|
2,486
|
|
|
$
|
4,293
|
|
Total loan margin on IRLCs (in basis points)
|
343
|
|
|
299
|
|
|
321
|
|
|
307
|
|
||||
Loans sold
|
$
|
2,687
|
|
|
$
|
3,804
|
|
|
$
|
4,850
|
|
|
$
|
6,768
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
79
|
|
|
$
|
87
|
|
|
$
|
140
|
|
|
$
|
145
|
|
Gain on loans held for sale, net
|
77
|
|
|
86
|
|
|
125
|
|
|
168
|
|
||||
Net interest income (expense):
|
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
9
|
|
|
11
|
|
|
16
|
|
|
20
|
|
||||
Secured interest expense
|
(6
|
)
|
|
(6
|
)
|
|
(11
|
)
|
|
(12
|
)
|
||||
Unsecured interest expense
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(15
|
)
|
||||
Net interest income (expense)
|
3
|
|
|
(2
|
)
|
|
5
|
|
|
(7
|
)
|
||||
Other income
|
3
|
|
|
3
|
|
|
5
|
|
|
5
|
|
||||
Net revenues
|
162
|
|
|
174
|
|
|
275
|
|
|
311
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses
|
57
|
|
|
57
|
|
|
114
|
|
|
112
|
|
||||
Commissions
|
18
|
|
|
27
|
|
|
30
|
|
|
46
|
|
||||
Loan origination expenses
|
18
|
|
|
25
|
|
|
34
|
|
|
49
|
|
||||
Professional and third-party service fees
|
6
|
|
|
9
|
|
|
11
|
|
|
16
|
|
||||
Technology equipment and software expenses
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Occupancy and other office expenses
|
7
|
|
|
7
|
|
|
14
|
|
|
14
|
|
||||
Depreciation and amortization
|
3
|
|
|
3
|
|
|
5
|
|
|
6
|
|
||||
Other operating expenses
|
36
|
|
|
36
|
|
|
75
|
|
|
74
|
|
||||
Total expenses
|
146
|
|
|
165
|
|
|
285
|
|
|
319
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Profit (loss) before income taxes
|
16
|
|
|
9
|
|
|
(10
|
)
|
|
(8
|
)
|
||||
Less: net income attributable to noncontrolling interest
|
3
|
|
|
6
|
|
|
3
|
|
|
8
|
|
||||
Segment profit (loss)
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
(13
|
)
|
|
$
|
(16
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net:
|
|
|
|
|
|
|
|
|
|
||||||
Gain on loans
|
$
|
66
|
|
|
$
|
76
|
|
|
$
|
106
|
|
|
$
|
147
|
|
Change in fair value of Scratch and Dent and certain non-conforming mortgage loans
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
||||
Economic hedge results
|
12
|
|
|
11
|
|
|
22
|
|
|
22
|
|
||||
Total change in fair value of mortgage loans and related derivatives
|
11
|
|
|
10
|
|
|
19
|
|
|
21
|
|
||||
Total
|
$
|
77
|
|
|
$
|
86
|
|
|
$
|
125
|
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, benefits and incentives
|
$
|
52
|
|
|
$
|
51
|
|
|
$
|
105
|
|
|
$
|
103
|
|
Contract labor and overtime
|
5
|
|
|
6
|
|
|
9
|
|
|
9
|
|
||||
Total
|
$
|
57
|
|
|
$
|
57
|
|
|
$
|
114
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
||||||||
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate overhead allocation
|
$
|
30
|
|
|
$
|
31
|
|
|
$
|
64
|
|
|
$
|
63
|
|
Other expenses
|
6
|
|
|
5
|
|
|
11
|
|
|
11
|
|
||||
Total
|
$
|
36
|
|
|
$
|
36
|
|
|
$
|
75
|
|
|
$
|
74
|
|
Mortgage Servicing Segment
|
|
June 30,
|
||||||
|
2016
|
|
2015
|
||||
|
($ In millions)
|
||||||
Total Loan Servicing Portfolio:
|
|
|
|
||||
Unpaid Principal Balance
|
$
|
231,741
|
|
|
$
|
225,227
|
|
|
|
|
|
||||
Number of loans in owned portfolio (units)
|
609,976
|
|
|
675,587
|
|
||
Number of subserviced loans (units)
|
486,596
|
|
|
439,137
|
|
||
Total number of loans serviced (units)
|
1,096,572
|
|
|
1,114,724
|
|
||
|
|
|
|
||||
Capitalized Servicing Portfolio:
|
|
|
|
||||
Unpaid Principal Balance
|
$
|
92,687
|
|
|
$
|
104,705
|
|
Capitalized servicing rate
|
0.73
|
%
|
|
0.97
|
%
|
||
Capitalized servicing multiple
|
2.6
|
|
|
3.4
|
|
||
Weighted-average servicing fee (in basis points)
|
29
|
|
|
29
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Total Loan Servicing Portfolio:
|
|
|
|
|
|
|
|
||||||||
Average Portfolio UPB
|
$
|
232,529
|
|
|
$
|
224,467
|
|
|
$
|
230,951
|
|
|
$
|
225,148
|
|
|
|
|
|
|
|
|
|
||||||||
Capitalized Servicing Portfolio:
|
|
|
|
|
|
|
|
||||||||
Average Portfolio UPB
|
$
|
94,431
|
|
|
$
|
106,728
|
|
|
$
|
96,028
|
|
|
$
|
108,773
|
|
Payoffs and principal curtailments
|
4,812
|
|
|
5,387
|
|
|
8,767
|
|
|
9,966
|
|
||||
Sales
|
224
|
|
|
1,110
|
|
|
496
|
|
|
2,338
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Net loan servicing income:
|
|
|
|
|
|
|
|
|
|
||||||
Loan servicing income
|
$
|
91
|
|
|
$
|
100
|
|
|
$
|
182
|
|
|
$
|
204
|
|
Change in fair value of mortgage servicing rights
|
(105
|
)
|
|
18
|
|
|
(226
|
)
|
|
(8
|
)
|
||||
Net derivative gain (loss) related to MSRs
|
58
|
|
|
(49
|
)
|
|
143
|
|
|
4
|
|
||||
Net loan servicing income
|
44
|
|
|
69
|
|
|
99
|
|
|
200
|
|
||||
Net interest expense:
|
|
|
|
|
|
|
|
|
|||||||
Interest income
|
3
|
|
|
2
|
|
|
5
|
|
|
2
|
|
||||
Secured interest expense
|
(2
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
(6
|
)
|
||||
Unsecured interest expense
|
(11
|
)
|
|
(9
|
)
|
|
(21
|
)
|
|
(18
|
)
|
||||
Net interest expense
|
(10
|
)
|
|
(10
|
)
|
|
(21
|
)
|
|
(22
|
)
|
||||
Other income
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Net revenues
|
34
|
|
|
60
|
|
|
78
|
|
|
181
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses
|
19
|
|
|
14
|
|
|
37
|
|
|
30
|
|
||||
Foreclosure and repossession expenses
|
9
|
|
|
15
|
|
|
16
|
|
|
30
|
|
||||
Professional and third-party service fees
|
9
|
|
|
7
|
|
|
18
|
|
|
14
|
|
||||
Technology equipment and software expenses
|
4
|
|
|
4
|
|
|
8
|
|
|
8
|
|
||||
Occupancy and other office expenses
|
4
|
|
|
4
|
|
|
9
|
|
|
8
|
|
||||
Depreciation and amortization
|
1
|
|
|
1
|
|
|
2
|
|
|
1
|
|
||||
Other operating expenses
|
21
|
|
|
61
|
|
|
42
|
|
|
79
|
|
||||
Total expenses
|
67
|
|
|
106
|
|
|
132
|
|
|
170
|
|
||||
Segment (loss) profit
|
$
|
(33
|
)
|
|
$
|
(46
|
)
|
|
$
|
(54
|
)
|
|
$
|
11
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Loan servicing income:
|
|
|
|
|
|
|
|
|
|
||||||
Servicing fees from capitalized portfolio
|
$
|
67
|
|
|
$
|
77
|
|
|
$
|
137
|
|
|
$
|
156
|
|
Subservicing fees
|
18
|
|
|
16
|
|
|
36
|
|
|
34
|
|
||||
Late fees and other ancillary servicing revenue
|
10
|
|
|
11
|
|
|
16
|
|
|
22
|
|
||||
Curtailment interest paid to investors
|
(4
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|
(8
|
)
|
||||
Total
|
$
|
91
|
|
|
$
|
100
|
|
|
$
|
182
|
|
|
$
|
204
|
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value of mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|||||||
Actual prepayments of the underlying mortgage loans
|
$
|
(27
|
)
|
|
$
|
(40
|
)
|
|
$
|
(48
|
)
|
|
$
|
(68
|
)
|
Actual receipts of recurring cash flows
|
(8
|
)
|
|
(11
|
)
|
|
(13
|
)
|
|
(21
|
)
|
||||
Market-related fair value adjustments
|
(70
|
)
|
|
69
|
|
|
(165
|
)
|
|
81
|
|
||||
Total
|
$
|
(105
|
)
|
|
$
|
18
|
|
|
$
|
(226
|
)
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Corporate overhead allocation
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
27
|
|
|
$
|
21
|
|
Repurchase and foreclosure-related charges
|
5
|
|
|
4
|
|
|
3
|
|
|
6
|
|
||||
Legal and regulatory reserves
|
—
|
|
|
34
|
|
|
5
|
|
|
34
|
|
||||
Other expenses
|
3
|
|
|
13
|
|
|
7
|
|
|
18
|
|
||||
Total
|
$
|
21
|
|
|
$
|
61
|
|
|
$
|
42
|
|
|
$
|
79
|
|
Other
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions)
|
||||||||||||||
Net revenues
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Salaries and related expenses
|
16
|
|
|
14
|
|
|
31
|
|
|
30
|
|
||||
Professional and third-party service fees
|
22
|
|
|
29
|
|
|
47
|
|
|
57
|
|
||||
Technology equipment and software expenses
|
5
|
|
|
4
|
|
|
10
|
|
|
9
|
|
||||
Occupancy and other office expenses
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Depreciation and amortization
|
1
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||
Other operating expenses:
|
|
|
|
|
|
|
|
||||||||
Loss on early debt retirement
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
||||
Other
|
2
|
|
|
3
|
|
|
5
|
|
|
6
|
|
||||
Total expenses before allocation
|
46
|
|
|
81
|
|
|
96
|
|
|
136
|
|
||||
Corporate overhead allocation:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage Production segment
|
(30
|
)
|
|
(31
|
)
|
|
(64
|
)
|
|
(63
|
)
|
||||
Mortgage Servicing segment
|
(13
|
)
|
|
(10
|
)
|
|
(27
|
)
|
|
(21
|
)
|
||||
Total expenses
|
3
|
|
|
40
|
|
|
5
|
|
|
52
|
|
||||
Net loss before income taxes
|
$
|
(3
|
)
|
|
$
|
(37
|
)
|
|
$
|
(5
|
)
|
|
$
|
(46
|
)
|
RISK MANAGEMENT
|
Interest Rate Risk
|
Consumer Credit Risk
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions)
|
||||||
Loan repurchase and indemnification liability
|
$
|
62
|
|
|
$
|
62
|
|
Adjustment to value for real estate owned
|
13
|
|
|
17
|
|
||
Allowance for probable foreclosure losses
|
9
|
|
|
10
|
|
||
Total
|
$
|
84
|
|
|
$
|
89
|
|
Counterparty and Concentration Risk
|
•
|
20% from our relationships with Realogy and its affiliates;
|
•
|
27% from Merrill Lynch;
|
•
|
21% from Morgan Stanley Private Bank, N.A.; and
|
•
|
10% from HSBC Bank USA.
|
Operational Risk
|
LIQUIDITY AND CAPITAL RESOURCES
|
Cash Flows
|
▪
|
$365 million to $415 million for identified contingencies, including amounts related to mortgage loan repurchases and legal and regulatory matters;
|
▪
|
$75 million to $150 million cash reserves for mortgage-related interest rate risk management activities, including our current MSR hedge position; and
|
▪
|
$100 million to $125 million for working capital needs.
|
|
Six Months Ended
June 30, |
|
|
||||||||
|
2016
|
|
2015
|
|
Change
|
||||||
|
(In millions)
|
||||||||||
Cash (used in) provided by:
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
$
|
(136
|
)
|
|
$
|
(449
|
)
|
|
$
|
313
|
|
Investing activities
|
139
|
|
|
41
|
|
|
98
|
|
|||
Financing activities
|
96
|
|
|
107
|
|
|
(11
|
)
|
|||
Net increase (decrease) in Cash and cash equivalents
|
$
|
99
|
|
|
$
|
(301
|
)
|
|
$
|
400
|
|
Debt
|
|
Balance
|
|
Collateral
(1)
|
||||
|
(In millions)
|
||||||
Warehouse facilities
|
$
|
767
|
|
|
$
|
802
|
|
Servicing advance facility
|
98
|
|
|
166
|
|
||
Unsecured debt
|
606
|
|
|
—
|
|
||
Total
|
$
|
1,471
|
|
|
$
|
968
|
|
(1)
|
Assets held as collateral are not available to pay our general obligations.
|
|
Balance
|
|
Total
Capacity
|
|
Available
Capacity
(1)
|
|
Maturity
Date
|
||||||
|
|
|
(In millions)
|
|
|
|
|
||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|||
Committed facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Fannie Mae
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
300
|
|
|
12/13/2016
|
Wells Fargo Bank, N.A.
|
394
|
|
|
450
|
|
|
56
|
|
|
4/2/2017
|
|||
Bank of America, N.A.
|
270
|
|
|
400
|
|
|
130
|
|
|
12/16/2016
|
|||
Barclays Bank PLC
|
100
|
|
|
100
|
|
|
—
|
|
|
3/28/2017
|
|||
Committed warehouse facilities
|
764
|
|
|
1,250
|
|
|
486
|
|
|
|
|||
Uncommitted facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Fannie Mae
|
—
|
|
|
2,700
|
|
|
2,700
|
|
|
n/a
|
|||
Barclays Bank PLC
|
3
|
|
|
100
|
|
|
97
|
|
|
n/a
|
|||
Total
|
$
|
767
|
|
|
$
|
4,050
|
|
|
$
|
3,283
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Off-Balance Sheet Gestation Facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Uncommitted facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
JP Morgan Chase Bank, N.A.
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
n/a
|
(1)
|
Capacity is dependent upon maintaining compliance with the terms, conditions and covenants of the respective agreements and may be further limited by asset eligibility requirements.
|
|
Balance
|
|
Total
Capacity
|
|
Available
Capacity
(1)
|
|
Maturity
Date
|
|||||||
|
|
|
(In millions)
|
|
|
|
|
|
||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|||
PSART Servicing Advance facility
|
$
|
98
|
|
|
$
|
155
|
|
|
$
|
57
|
|
|
6/15/18
|
(2)
|
Subservicing advance liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Client-funded amounts
|
316
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||
Total
|
$
|
414
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Capacity is dependent upon maintaining compliance with the terms, conditions and covenants of the respective agreements and may be further limited by asset eligibility requirements.
|
(2)
|
The facility has a revolving period through June 15, 2017, after which the facility goes into amortization. The maturity date of June 15, 2018 presented above represents the final repayment date of the amortizing notes.
|
|
Balance
|
|
Balance
at Maturity
|
|
Maturity
Date
|
|||||
|
(In millions)
|
|
|
|
||||||
7.375% Term notes due in 2019
|
272
|
|
|
275
|
|
|
9/1/2019
|
|
||
6.375% Term notes due in 2021
|
334
|
|
|
340
|
|
|
8/15/2021
|
|
||
Total
|
$
|
606
|
|
|
$
|
615
|
|
|
0
|
|
|
Senior
Debt
|
|
Short-Term
Debt
|
Moody’s Investors Service
|
Ba3
|
|
NP
|
Standard & Poor's Rating Services
|
B
|
|
N/A
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
|
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
Interest Rate Risk
|
|
Change in Fair Value
|
||||||||||||||||||||||
|
Down
100 bps
|
|
Down
50 bps
|
|
Down
25 bps
|
|
Up
25 bps
|
|
Up
50 bps
|
|
Up
100 bps
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Mortgage pipeline:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage loans held for sale
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
|
$
|
(19
|
)
|
Interest rate lock commitments
(1)
|
4
|
|
|
6
|
|
|
4
|
|
|
(6
|
)
|
|
(14
|
)
|
|
(34
|
)
|
||||||
Forward loan sale commitments
(1)
|
(10
|
)
|
|
(11
|
)
|
|
(7
|
)
|
|
10
|
|
|
23
|
|
|
52
|
|
||||||
Option contracts
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Total Mortgage pipeline
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
MSRs and related derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage servicing rights
|
(204
|
)
|
|
(106
|
)
|
|
(53
|
)
|
|
52
|
|
|
100
|
|
|
187
|
|
||||||
Derivatives related to MSRs
(1)
|
235
|
|
|
105
|
|
|
51
|
|
|
(46
|
)
|
|
(86
|
)
|
|
(141
|
)
|
||||||
Total MSRs and related derivatives
|
31
|
|
|
(1
|
)
|
|
(2
|
)
|
|
6
|
|
|
14
|
|
|
46
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unsecured term debt
|
(20
|
)
|
|
(10
|
)
|
|
(5
|
)
|
|
5
|
|
|
10
|
|
|
20
|
|
||||||
Total, net
|
$
|
9
|
|
|
$
|
(12
|
)
|
|
$
|
(7
|
)
|
|
$
|
11
|
|
|
$
|
25
|
|
|
$
|
67
|
|
(1)
|
Included in Other assets or Other liabilities in the
Condensed Consolidated Balance Sheets
.
|
Item 4. Controls and Procedures
|
DISCLOSURE CONTROLS AND PROCEDURES
|
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
|
Item 1. Legal Proceedings
|
Item 1A. Risk Factors
|
Risks Related to Our Strategies
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3. Defaults Upon Senior Securities
|
Item 4. Mine Safety Disclosures
|
Item 5. Other Information
|
Item 6. Exhibits
|
|
PHH CORPORATION
|
|
|
|
|
|
By:
|
/s/ Glen A. Messina
|
|
|
Glen A. Messina
|
|
|
President and Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Michael R. Bogansky
|
|
|
Michael R. Bogansky
|
|
|
Senior Vice President, Controller
|
|
|
(Principal Accounting Officer)
|
Exhibit No.
|
|
Description
|
|
Incorporation by Reference
|
|
|
|
|
|
10.1†
|
|
Amended and Restated Tier I Severance Pay Plan.
|
|
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 25, 2016.
|
|
|
|
|
|
10.2
|
|
Letter Agreement between Fannie Mae and PHH Mortgage Corporation dated June 13, 2016.
|
|
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 15, 2016.
|
|
|
|
|
|
10.3†**
|
|
Form of 2016 Performance Restricted Stock Unit Award Notice and Agreement
|
|
Filed herewith.
|
|
|
|
|
|
10.4†
|
|
Form of 2016 Restricted Stock Unit Award Notice and Agreement
|
|
Filed herewith.
|
|
|
|
|
|
10.5†**
|
|
Form of May 2016 Performance Restricted Stock Unit Award Notice and Agreement
|
|
Filed herewith.
|
|
|
|
|
|
10.6†
|
|
Form of May 2016 Restricted Stock Unit Award Notice and Agreement
|
|
Filed herewith.
|
|
|
|
|
|
10.7†
|
|
PHH 2015 Corporation Management Incentive Plan (Under the PHH Corporation 2014 Equity and Incentive Plan).
|
|
Filed herewith.
|
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Filed herewith.
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Filed herewith.
|
|
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Furnished herewith.
|
|
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Furnished herewith.
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
Filed herewith.
|
**
|
Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the SEC.
|
A.
|
Grant Date
: ______________, 2016.
|
B.
|
Plan Under Which Granted
: PHH Corporation 2014 Equity and Incentive Plan (the “
Plan
”).
|
C.
|
Performance Restricted Stock Units
: The target number of Performance Restricted Stock Units subject to the Award shall be __________________ (_____) (“
Target Stock Units
”), with a maximum amount of Performance Restricted Stock Units equal to 150% of the Target Stock Units available under this Award, subject to the terms hereof. Each Performance Restricted Stock Unit represents the Company’s unfunded and unsecured obligation to issue one share of the Company’s common stock (“
Stock
”) in accordance with this Award, subject to the terms of this Award and the Plan.
|
D.
|
Dividend Equivalents
: Each Performance Restricted Stock Unit shall accrue Dividend Equivalents equal to the dividends per share paid on one share of Stock to a shareholder of record on or after the Grant Date. Dividend Equivalents will vest and be settled as provided in
Schedule 1
attached hereto.
|
E.
|
Vesting Schedule
: The Performance Restricted Stock Units shall vest, if at all, in accordance with
Schedule 1
attached hereto. Performance Restricted Stock Units that become vested in accordance with
Schedule 1
are “
Vested Stock Units
.”
|
F.
|
Settlement of Vested Stock Units
: Subject to the attached Terms and Conditions, shares of Stock or cash, as applicable, attributable to the applicable Vested Stock Units are to be settled on a date selected by the Company that is no later than sixty (60) days following the date specified in
Schedule 1
(each a “
Distribution Date
”)
|
*
|
The Achieved Percentage, and therefore the number of Vested Stock Units, for TSR performance between the levels set forth in the table above and above the “Threshold” level will be determined based on straight-line interpolation.
|
II.
|
Notwithstanding Part I:
|
(A)
|
Upon the Participant’s Separation from Service due to a termination of employment by the Company and its Affiliates without Cause
prior to the last day of the Vesting Period, the Participant will remain entitled to receive the full number of Performance Restricted Stock Units that become Vested Stock Units based on the Achieved Percentage based on TSR calculated as of the last day of the Measurement Period with such Vested Stock Units settled as soon as practicable following the end of the Vesting Period. Notwithstanding the foregoing, in the event the Participant violates any non-competition, non-solicitation, non-disclosure, or other restrictive covenant agreement with the Company or its Affiliates prior to the Distribution Date, then the Participant shall not be vested in any portion of the Performance Restricted Stock Units under this Award and the entire Award will be forfeited.
|
(B)
|
Notwithstanding (A), above, subject to the other terms of this Award, upon the Participant’s death or Disability during the Participant’s service with the Company and its Affiliates and prior to the end of the Vesting Period, the Performance Restricted Stock Units will become Vested Stock Units and will be settled as soon as practicable following the date of the Participant’s death or Disability. For purposes of determining the number of Vested Stock Units under this Part II(B), the Achieved Percentage for the Measurement Period shall be the percentage based on actual performance through the date of the Participant’s death or Disability (or the end of the Measurement Period, if earlier).
|
III.
|
Unless the Participant has experienced a Separation from Service in accordance with II(A), the Participant must be employed by the Company or an Affiliate and must not have incurred a Separation from Service on the date an applicable dividend is paid to be entitled to Dividend Equivalents in respect of that dividend. Dividend Equivalents accrued with respect to a Performance Restricted Stock Unit will be paid to the Participant on the Distribution Date for such Performance Restricted Stock Unit.
|
IV.
|
Except as otherwise provided in this Vesting Schedule, any Performance Restricted Stock Units, and all Dividend Equivalents with respect to such Performance Restricted Stock Units, shall be forfeited at the time the Participant’s service with the Company and its Affiliates ceases, regardless of the reason and there shall be no proration for partial service.
|
V.
|
Notwithstanding anything in this Award to the contrary, if the Participant has not signed a restrictive covenant agreement in a form acceptable to the Company by no later than thirty (30) days after the Grant Date, the Award shall be forfeited. Furthermore, if the Company determines that the Participant has violated the restrictive covenant agreement, any portion of the Award which has not been settled or paid will be forfeited.
|
A.
|
Grant Date
: ______________, 2016.
|
B.
|
Plan Under Which Granted
: PHH Corporation 2014 Equity and Incentive Plan (the “
Plan
”).
|
C.
|
Restricted Stock Units
: The number of Restricted Stock Units subject to the Award shall be _______________ (__________). Each Restricted Stock Unit represents the Company’s unfunded and unsecured obligation to issue one share of the Company’s common stock (“
Stock
”) in accordance with this Award, subject to the terms of this Award and the Plan.
|
D.
|
Dividend Equivalents
: Each Restricted Stock Unit shall accrue Dividend Equivalents equal to the dividends per share paid on one share of Stock to a shareholder of record on or after the Grant Date. Dividend Equivalents will vest and be settled as provided in
Schedule 1
attached hereto.
|
E.
|
Vesting Schedule
: The Restricted Stock Units shall vest, if at all, in accordance with
Schedule 1
attached hereto. Restricted Stock Units that become vested in accordance with
Schedule 1
are “
Vested Stock Units
.”
|
F.
|
Settlement of Vested Stock Units
: Subject to the attached Terms and Conditions, shares of Stock or cash, as applicable, attributable to the applicable Vested Stock Units are to be settled on a date selected by the Company that is no later than sixty (60) days following the date specified in
Schedule 1
(each a “
Distribution Date
”).
|
I.
|
Provided that the Participant remains in continuous service of the Company or any Affiliate through the applicable last day of the Vesting Period described in this Part I, the Restricted Stock Units shall become Vested Stock Units in accordance with the following Vesting Schedule and be settled as soon as practicable following the date the Restricted Stock Units become Vested Stock Units:
|
II.
|
Notwithstanding Part I, all remaining Restricted Stock Units will become Vested Stock Units upon either of the following, in each case before the last day of the final Vesting Period under Part I:
|
(a)
|
the Participant’s Separation from Service due to a termination of employment by the Company and its Affiliates without Cause, in which case the Vested Stock Units will be settled upon the applicable Distribution Date that would otherwise have applied under Part I; or
|
(b)
|
the Participant’s death or Disability during the Participant’s service with the Company and its Affiliates in which case all the Vested Stock Units will be settled as soon as practicable following the date of the Participant’s death or Disability.
|
III.
|
Unless the Participant has experienced a Separation from Service in accordance with II(A), the Participant must be employed by the Company or an Affiliate and must not have incurred a Separation from Service on the date an applicable dividend is paid to be entitled to Dividend Equivalents in respect of that dividend. Dividend Equivalents accrued with respect to a Restricted Stock Unit will be paid to the Participant on the Distribution Date for such Restricted Stock Unit.
|
IV.
|
Except as otherwise provided in this Vesting Schedule, any portion of the Restricted Stock Units which have not become Vested Stock Units, and all Dividend Equivalents with respect to such Restricted Stock Units, shall be forfeited at the time the Participant’s service with the Company and its Affiliates ceases, regardless of the reason and there shall be no proration for partial service.
|
V.
|
Notwithstanding anything in this Award to the contrary, if the Participant has not signed a restrictive covenant agreement in a form acceptable to the Company by no later than thirty (30) days after the Grant Date, the Award shall be forfeited. Furthermore, if the Company determines that the Participant has violated the restrictive covenant agreement, any portion of the Award which has not been settled or paid will be forfeited.
|
*
|
The Achieved Percentage, and therefore the number of Vested Stock Units, for TSR performance between the levels set forth in the table above and above the “Threshold” level will be determined based on straight-line interpolation.
|
II.
|
Notwithstanding Part I:
|
(A)
|
Upon the Participant’s Separation from Service due to a termination of employment by the Company and its Affiliates without Cause
prior to the last day of the Vesting Period, the Participant will remain entitled to receive the full number of Performance Restricted Stock Units that become Vested Stock Units based on the Achieved Percentage based on TSR calculated as of the last day of the Measurement Period with such Vested Stock Units settled as soon as practicable following the end of the Vesting Period. Notwithstanding the foregoing, in the event the Participant violates any non-competition, non-solicitation, non-disclosure, or other restrictive covenant agreement with the Company or its Affiliates prior to the Distribution Date, then the Participant shall not be vested in any portion of the Performance Restricted Stock Units under this Award and the entire Award will be forfeited.
|
(B)
|
Notwithstanding (A), above, subject to the other terms of this Award, upon the Participant’s death or Disability during the Participant’s service with the Company and its Affiliates and prior to the end of the Vesting Period, the Performance Restricted Stock Units will become Vested Stock Units and will be settled as soon as practicable following the date of the Participant’s death or Disability. For purposes of determining the number of Vested Stock Units under this Part II(B), the Achieved Percentage for the Measurement Period shall be the percentage based on actual performance through the date of the Participant’s death or Disability (or the end of the Measurement Period, if earlier).
|
III.
|
Unless the Participant has experienced a Separation from Service in accordance with II(A), the Participant must be employed by the Company or an Affiliate and must not have incurred a Separation from Service on the date an applicable dividend is paid to be entitled to Dividend Equivalents in respect of that dividend. Dividend Equivalents accrued with respect to a Performance Restricted Stock Unit will be paid to the Participant on the Distribution Date for such Performance Restricted Stock Unit.
|
IV.
|
Except as otherwise provided in this Vesting Schedule, any Performance Restricted Stock Units, and all Dividend Equivalents with respect to such Performance Restricted Stock Units, shall be forfeited at the time the Participant’s service with the Company and its Affiliates ceases, regardless of the reason and there shall be no proration for partial service.
|
V.
|
Notwithstanding anything in this Award to the contrary, if the Participant has not signed a restrictive covenant agreement in a form acceptable to the Company by no later than thirty (30) days after the Grant Date, the Award shall be forfeited. Furthermore, if the Company determines that the Participant has violated the restrictive covenant agreement, any portion of the Award which has not been settled or paid will be forfeited.
|
A.
|
Grant Date
: ______________, 2016.
|
B.
|
Plan Under Which Granted
: PHH Corporation 2014 Equity and Incentive Plan (the “
Plan
”).
|
C.
|
Restricted Stock Units
: The number of Restricted Stock Units subject to the Award shall be _______________ (__________). Each Restricted Stock Unit represents the Company’s unfunded and unsecured obligation to issue one share of the Company’s common stock (“
Stock
”) in accordance with this Award, subject to the terms of this Award and the Plan.
|
D.
|
Dividend Equivalents
: Each Restricted Stock Unit shall accrue Dividend Equivalents equal to the dividends per share paid on one share of Stock to a shareholder of record on or after the Grant Date. Dividend Equivalents will vest and be settled as provided in
Schedule 1
attached hereto.
|
E.
|
Vesting Schedule
: The Restricted Stock Units shall vest, if at all, in accordance with
Schedule 1
attached hereto. Restricted Stock Units that become vested in accordance with
Schedule 1
are “
Vested Stock Units
.”
|
F.
|
Settlement of Vested Stock Units
: Subject to the attached Terms and Conditions, shares of Stock or cash, as applicable, attributable to the applicable Vested Stock Units are to be settled on a date selected by the Company that is no later than sixty (60) days following the date specified in
Schedule 1
(each a “
Distribution Date
”).
|
I.
|
Provided that the Participant remains in continuous service of the Company or any Affiliate through the applicable last day of the Vesting Period described in this Part I, the Restricted Stock Units shall become Vested Stock Units in accordance with the following Vesting Schedule and be settled as soon as practicable following the date the Restricted Stock Units become Vested Stock Units:
|
II.
|
Notwithstanding Part I, all remaining Restricted Stock Units will become Vested Stock Units upon either of the following, in each case before the last day of the final Vesting Period under Part I:
|
(a)
|
the Participant’s Separation from Service due to a termination of employment by the Company and its Affiliates without Cause, in which case the Vested Stock Units will be settled upon the applicable Distribution Date that would otherwise have applied under Part I; or
|
(b)
|
the Participant’s death or Disability during the Participant’s service with the Company and its Affiliates in which case all the Vested Stock Units will be settled as soon as practicable following the date of the Participant’s death or Disability.
|
III.
|
Unless the Participant has experienced a Separation from Service in accordance with II(A), the Participant must be employed by the Company or an Affiliate and must not have incurred a Separation from Service on the date an applicable dividend is paid to be entitled to Dividend Equivalents in respect of that dividend. Dividend Equivalents accrued with respect to a Restricted Stock Unit will be paid to the Participant on the Distribution Date for such Restricted Stock Unit.
|
IV.
|
Except as otherwise provided in this Vesting Schedule, any portion of the Restricted Stock Units which have not become Vested Stock Units, and all Dividend Equivalents with respect to such Restricted Stock Units, shall be forfeited at the time the Participant’s service with the Company and its Affiliates ceases, regardless of the reason and there shall be no proration for partial service.
|
V.
|
Notwithstanding anything in this Award to the contrary, if the Participant has not signed a restrictive covenant agreement in a form acceptable to the Company by no later than thirty (30) days after the Grant Date, the Award shall be forfeited. Furthermore, if the Company determines that the Participant has violated the restrictive covenant agreement, any portion of the Award which has not been settled or paid will be forfeited.
|
5.5.
|
Change in Control Provisions
.
|
6.5.
|
Miscellaneous
.
|
|
By:
|
/s/ Glen A. Messina
|
|
|
Glen A. Messina
|
|
|
President and Chief Executive Officer
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
Executive Vice President and Chief Financial Officer
|
|
By:
|
/s/ Glen A. Messina
|
|
|
Glen A. Messina
|
|
|
President and Chief Executive Officer
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
Executive Vice President and Chief Financial Officer
|