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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 actions and their outcomes resulting from our strategic review, including the timing of any such actions, our estimates of transaction proceeds, operating losses and exit costs, the amount and our expected use of any proceeds, and any other anticipated impacts on our results, client and counterparty relationships, debt arrangements, employee relations or expected value to shareholders;
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▪
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our projected financial results and expected capital structure for the remaining business after executing the actions resulting from our strategic review, based on our assessment of the market for subservicing and portfolio retention services, our business strategy and our competitive position;
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our expectations related to any future strategic actions after completion of our current actions resulting from the strategic review;
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the method, amounts and timing of any capital returns to shareholders;
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anticipated future origination volumes and loan margins in the mortgage industry;
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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 strategic actions, and any associated transactions, on our business, management resources, customer, counterparty and employee relationships, capital structure and financial position;
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▪
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our ability to execute and complete the actions resulting from our strategic review and implement changes to meet our operational and financial objectives, including (i) restructuring our remaining business and shared services platform; (ii) achieving our growth objectives and assumptions; and (iii) resolving our legacy legal and regulatory matters;
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▪
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any failure to execute any portion of the remaining sales of MSRs under our existing agreements, or realize estimated proceeds from the transactions, which may be driven by the following reasons, among other factors: (i) not receiving required regulatory, investor, agency, private loan investor and/or client (originations source) approvals for any portion of the sale portfolio; (ii) changes in the composition of the portfolio and related servicing advances outstanding on each sale date; and (iii) not meeting any other conditions precedent to closing, as defined in the respective agreements;
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▪
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any failure to execute the sale of certain assets of PHH Home Loans and its subsidiaries, or realize estimated proceeds from the transactions, which may be driven by the following reasons, among other factors: (i) not receiving required regulatory and agency approvals; and (ii) not meeting any other conditions precedent to closing, as defined in the respective agreements;
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▪
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available excess cash from our strategic actions is dependent upon a variety of factors, including the execution of the sale of our remaining MSRs, the monetization of our investment in PHH Home Loans, the successful completion of our PLS exit activities at a certain total expense, the resolution of our outstanding legal and regulatory matters and the
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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, the value of our assets and the housing market;
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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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the impact of changes in U.S. financial conditions 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 of any significant adverse changes in the underwriting criteria or the existence or programs of government-sponsored entities, such as 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, our ability to operationalize changes necessary to comply with updates to such guides and programs and our ability to maintain the required minimum capital;
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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 and those that we are exposed to through our private label relationships until the complete exit from this business channel;
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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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the ability to maintain our relationships with our existing clients, including our ability to comply with the terms of our private label and subservicing client agreements and any related service level agreements;
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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, if at all;
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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;
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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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▪
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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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2017
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2016
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2017
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2016
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REVENUES
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Origination and other loan fees
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$
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37
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$
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79
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$
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81
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$
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140
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Gain on loans held for sale, net
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52
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77
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94
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125
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Loan servicing income, net
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28
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44
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61
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99
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Net interest expense
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(6
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)
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(7
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)
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(13
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)
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(16
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)
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Other income
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1
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3
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3
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5
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Net revenues
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112
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196
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226
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353
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EXPENSES
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Salaries and related expenses
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75
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92
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161
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182
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Commissions
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14
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18
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25
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30
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Loan origination expenses
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9
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18
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18
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34
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Foreclosure and repossession expenses
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5
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9
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12
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16
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Professional and third-party service fees
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30
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37
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67
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76
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Technology equipment and software expenses
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9
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10
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18
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20
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Occupancy and other office expenses
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9
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11
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18
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24
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Depreciation and amortization
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3
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5
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7
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9
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Exit and disposal costs
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16
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—
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41
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—
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Other operating expenses
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25
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16
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47
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31
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Total expenses
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195
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216
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414
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422
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Loss before income taxes
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(83
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)
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(20
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)
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(188
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)
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(69
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)
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Income tax benefit
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(33
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)
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(11
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)
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(67
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)
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(30
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)
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Net loss
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(50
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)
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(9
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)
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(121
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)
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(39
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)
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Less: net (loss) income attributable to noncontrolling interest
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(4
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)
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3
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(8
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)
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3
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Net loss attributable to PHH Corporation
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$
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(46
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)
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$
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(12
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)
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$
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(113
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)
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$
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(42
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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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(0.86
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)
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$
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(0.22
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)
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$
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(2.11
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)
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$
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(0.78
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)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2017
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2016
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2017
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2016
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||||||||
Net loss
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$
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(50
|
)
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$
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(9
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)
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$
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(121
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)
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$
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(39
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)
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Total comprehensive loss
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$
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(50
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)
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$
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(9
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)
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$
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(121
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)
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$
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(39
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)
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Less: comprehensive (loss) income attributable to noncontrolling interest
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(4
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)
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3
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(8
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)
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3
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Comprehensive loss attributable to PHH Corporation
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$
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(46
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)
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|
$
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(12
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)
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$
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(113
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)
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|
$
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(42
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)
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June 30,
2017 |
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December 31,
2016 |
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ASSETS
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Cash and cash equivalents
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$
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1,001
|
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$
|
906
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Restricted cash
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75
|
|
|
57
|
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Mortgage loans held for sale
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625
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|
683
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Accounts receivable, net
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74
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66
|
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Servicing advances, net
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473
|
|
|
628
|
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Mortgage servicing rights
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555
|
|
|
690
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|
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Property and equipment, net
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28
|
|
|
36
|
|
||
Other assets
|
75
|
|
|
109
|
|
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Total assets
(1)
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$
|
2,906
|
|
|
$
|
3,175
|
|
|
|
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LIABILITIES
|
|
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Accounts payable and accrued expenses
|
$
|
205
|
|
|
$
|
193
|
|
Subservicing advance liabilities
|
205
|
|
|
290
|
|
||
Mortgage servicing rights secured liability
|
114
|
|
|
—
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|
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Debt, net
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1,192
|
|
|
1,262
|
|
||
Deferred taxes, net
|
11
|
|
|
101
|
|
||
Loan repurchase and indemnification liability
|
41
|
|
|
49
|
|
||
Other liabilities
|
160
|
|
|
157
|
|
||
Total liabilities
(1)
|
1,928
|
|
|
2,052
|
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Commitments and contingencies (Note 10)
|
|
|
|
|
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EQUITY
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|
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Preferred stock, $0.01 par value; 1,090,000 shares authorized;
none issued or outstanding
|
—
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|
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—
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|
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Common stock, $0.01 par value; 273,910,000 shares authorized;
51,949,019 shares issued and outstanding at June 30, 2017;
53,599,433 shares issued and outstanding at December 31, 2016
|
1
|
|
|
1
|
|
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Additional paid-in capital
|
863
|
|
|
887
|
|
||
Retained earnings
|
101
|
|
|
214
|
|
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Accumulated other comprehensive loss
(2)
|
(10
|
)
|
|
(10
|
)
|
||
Total PHH Corporation stockholders’ equity
|
955
|
|
|
1,092
|
|
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Noncontrolling interest
|
23
|
|
|
31
|
|
||
Total equity
|
978
|
|
|
1,123
|
|
||
Total liabilities and equity
|
$
|
2,906
|
|
|
$
|
3,175
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(1)
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The Condensed Consolidated Balance Sheets include assets and liabilities of variable interest entities which can be used only to settle the obligations and liabilities of the variable interest entities which creditors or beneficial interest holders do not have recourse to PHH Corporation and subsidiaries. These assets and liabilities are as follows:
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June 30,
2017 |
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December 31,
2016 |
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ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
61
|
|
|
$
|
67
|
|
Restricted cash
|
31
|
|
|
24
|
|
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Mortgage loans held for sale
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327
|
|
|
350
|
|
||
Accounts receivable, net
|
13
|
|
|
9
|
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Servicing advances, net
|
116
|
|
|
150
|
|
||
Property and equipment, net
|
1
|
|
|
1
|
|
||
Other assets
|
10
|
|
|
12
|
|
||
Total assets
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$
|
559
|
|
|
$
|
613
|
|
|
|
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|
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LIABILITIES
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|
|
|
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Accounts payable and accrued expenses
|
$
|
12
|
|
|
$
|
11
|
|
Debt
|
341
|
|
|
399
|
|
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Other liabilities
|
6
|
|
|
5
|
|
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Total liabilities
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$
|
359
|
|
|
$
|
415
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(2)
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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, 2017
and
December 31, 2016
. During both the
three and six
months ended
June 30, 2017
and
June 30, 2016
, there were no amounts reclassified out of Accumulated other comprehensive loss.
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PHH Corporation Stockholders’ Equity
|
|
|
|
|
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|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Noncontrolling
Interest
|
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Total
Equity
|
|||||||||||||||
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Shares
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Amount
|
|
|
|
|
|
||||||||||||||||||
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Balance at December 31, 2016
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53,599,433
|
|
|
$
|
1
|
|
|
$
|
887
|
|
|
$
|
214
|
|
|
$
|
(10
|
)
|
|
$
|
31
|
|
|
$
|
1,123
|
|
Total comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(113
|
)
|
|
—
|
|
|
(8
|
)
|
|
(121
|
)
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Reclassification of stock awards
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Stock issued under share-based payment plans
|
110,550
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Repurchase of Common stock
|
(1,760,964
|
)
|
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
||||||
Balance at June 30, 2017
|
51,949,019
|
|
|
$
|
1
|
|
|
$
|
863
|
|
|
$
|
101
|
|
|
$
|
(10
|
)
|
|
$
|
23
|
|
|
$
|
978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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, |
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net loss
|
$
|
(121
|
)
|
|
$
|
(39
|
)
|
Adjustments to reconcile Net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Capitalization of originated mortgage servicing rights
|
(18
|
)
|
|
(30
|
)
|
||
Change in fair value of mortgage servicing rights and related derivatives
|
58
|
|
|
83
|
|
||
Change in fair value of mortgage servicing rights secured liability
|
1
|
|
|
—
|
|
||
Origination of mortgage loans held for sale
|
(3,791
|
)
|
|
(5,050
|
)
|
||
Proceeds on sale of and payments from mortgage loans held for sale
|
3,977
|
|
|
4,999
|
|
||
Net gain on interest rate lock commitments, mortgage loans held for sale and related derivatives
|
(121
|
)
|
|
(134
|
)
|
||
Depreciation and amortization
|
7
|
|
|
9
|
|
||
Deferred income tax benefit
|
(90
|
)
|
|
(58
|
)
|
||
Other adjustments and changes in other assets and liabilities, net
|
148
|
|
|
84
|
|
||
Net cash provided by (used in) operating activities
|
50
|
|
|
(136
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
||
Net cash (paid) received on derivatives related to mortgage servicing rights
|
(45
|
)
|
|
146
|
|
||
Proceeds on sale of mortgage servicing rights
|
91
|
|
|
4
|
|
||
Proceeds on sale of servicing advances
|
11
|
|
|
—
|
|
||
Purchases of property and equipment
|
—
|
|
|
(9
|
)
|
||
Increase in restricted cash
|
(18
|
)
|
|
(7
|
)
|
||
Other, net
|
—
|
|
|
5
|
|
||
Net cash provided by investing activities
|
39
|
|
|
139
|
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from secured borrowings
|
4,463
|
|
|
6,014
|
|
||
Principal payments on secured borrowings
|
(4,533
|
)
|
|
(5,892
|
)
|
||
Proceeds from mortgage servicing rights secured liability
|
102
|
|
|
—
|
|
||
Repurchase of common stock
|
(24
|
)
|
|
(23
|
)
|
||
Other, net
|
(2
|
)
|
|
(3
|
)
|
||
Net cash provided by financing activities
|
6
|
|
|
96
|
|
||
|
|
|
|
||||
Net increase in Cash and cash equivalents
|
95
|
|
|
99
|
|
||
Cash and cash equivalents at beginning of period
|
906
|
|
|
906
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,001
|
|
|
$
|
1,005
|
|
1. Summary of Significant Accounting Policies
|
•
|
Accounting for income taxes.
The Company recognized all excess tax benefits and tax deficiencies as income tax expense or benefit in the statement of income and applied this provision prospectively. The tax effects were treated as discrete items to calculate the effective tax rate and resulted in
$2 million
of income tax expense during the
six months ended June 30, 2017
.
|
•
|
Forfeiture rates.
The Company elected to account for forfeitures as they occur and applied this provision using a modified retrospective approach. The impact to opening retained earnings was not significant.
|
•
|
Statement of Cash Flows.
On a retrospective basis, the Company classified cash paid by an employer when directly withholding shares for tax withholding purposes as a financing activity which totaled
$1 million
during the
six months ended June 30, 2017
. The amount of tax withholding was not significant for the
six months ended June 30, 2016
. In addition, on a prospective basis, the Company will classify excess tax benefits as an operating activity which did not have an impact to the statement of cash flows.
|
•
|
In May 2014, the FASB issued ASU 2014-9, “Revenue from Contracts with Customers.” The core principle requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services. The FASB has issued several amendments to provide additional clarification and implementation instructions relating to (i) principal versus agent considerations, (ii) identifying performance obligations and licensing, (iii) narrow-scope improvements and practical expedients and (iv) technical corrections and improvements. These updates are to be applied retrospectively to all prior periods presented or through a cumulative adjustment in the year of adoption, and are effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted.
|
•
|
In March 2017, the FASB issued ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." This update changes the income statement presentation of defined benefit plan expense by requiring the service cost component to be presented in the same line item as other compensation costs and all other components (including interest cost, amortization of prior service cost, settlements, etc.) to be presented separately from the service cost component. This update is effective for the first interim and annual periods beginning after December 15, 2017, with early adoption permitted. At adoption, this update will be applied retrospectively. The Company's defined benefit pension plan and the other post-employment benefits plan are frozen, wherein the plans only accrue additional benefits for a very limited number of employees. As a result, the Company does not expect the adoption of this update to have a significant impact on its financial statements.
|
•
|
In May 2017, the FASB issued ASU 2017-09, "Scope of Modification Accounting." This update clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This update is effective for the first interim and annual periods beginning after December 15, 2017, with early adoption permitted. At adoption, this update will be applied prospectively. The Company does not expect the adoption of this update to have a significant impact on its financial statements.
|
2. Exit Costs
|
|
As of June 30, 2017
|
||||||||||||||||||
|
Severance and Termination Benefits
|
|
Facility Exit Costs
|
|
Contract Termination & Other Costs
|
|
Non-Cash Charges & Impairments
(1)
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Costs incurred in current year:
|
|
|
|
|
|
|
|
|
|
||||||||||
First quarter
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Second quarter
|
4
|
|
|
—
|
|
|
8
|
|
|
(4
|
)
|
|
8
|
|
|||||
|
8
|
|
|
4
|
|
|
8
|
|
|
(4
|
)
|
|
16
|
|
|||||
Cumulative costs recognized in prior year
|
22
|
|
|
—
|
|
|
4
|
|
|
15
|
|
|
41
|
|
|||||
Estimate of remaining costs
|
8
|
|
|
20
|
|
|
15
|
|
|
—
|
|
|
43
|
|
|||||
Total
|
$
|
38
|
|
|
$
|
24
|
|
|
$
|
27
|
|
|
$
|
11
|
|
|
$
|
100
|
|
(1)
|
During the second quarter of 2017, the Company recorded
$4 million
to reverse previously accrued liabilities associated with the Jacksonville facility.
|
|
Mortgage Production
|
|
Other
|
|
Total
|
||||||
|
(In millions)
|
||||||||||
Costs incurred in current year:
|
|
|
|
|
|
||||||
First quarter
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
8
|
|
Second quarter
|
7
|
|
|
1
|
|
|
8
|
|
|||
|
14
|
|
|
2
|
|
|
16
|
|
|||
Cumulative costs recognized in prior year
|
33
|
|
|
8
|
|
|
41
|
|
|||
Estimate of remaining costs
|
36
|
|
|
7
|
|
|
43
|
|
|||
Total
|
$
|
83
|
|
|
$
|
17
|
|
|
$
|
100
|
|
|
As of June 30, 2017
|
||||||||||||||
|
Severance and Termination Benefits
|
|
Facility Exit Costs
|
|
Non-Cash Charges & Impairments
(1)
|
|
Total
(2)
|
||||||||
|
(In millions)
|
||||||||||||||
Costs incurred in current year:
|
|
|
|
|
|
|
|
||||||||
First quarter
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
Second quarter
|
4
|
|
|
2
|
|
|
2
|
|
|
8
|
|
||||
|
21
|
|
|
2
|
|
|
2
|
|
|
25
|
|
||||
Cumulative costs recognized in prior year
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Estimate of remaining costs
|
10
|
|
|
3
|
|
|
2
|
|
|
15
|
|
||||
Total
|
$
|
31
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
40
|
|
(1)
|
During the second quarter of 2017, the Company recorded a
$2 million
impairment for an equity method investment.
|
(2)
|
Exit Costs related to our Reorganization include amounts attributable to noncontrolling interest, representing
$2 million
of Costs incurred during the
six months ended June 30, 2017
, and
$8 million
of Total program costs. Refer to
Note 12, 'Variable Interest Entities'
for further information regarding our agreements to sell certain assets of PHH Home Loans and its subsidiaries and exit the Real Estate channel.
|
|
Mortgage Production
|
|
Mortgage Servicing
|
|
Other
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Costs incurred in current year:
|
|
|
|
|
|
|
|
||||||||
First quarter
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
9
|
|
|
$
|
17
|
|
Second quarter
|
3
|
|
|
—
|
|
|
5
|
|
|
8
|
|
||||
|
9
|
|
|
2
|
|
|
14
|
|
|
25
|
|
||||
Cumulative costs recognized in prior year
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Estimate of remaining costs
|
14
|
|
|
—
|
|
|
1
|
|
|
15
|
|
||||
Total
|
$
|
23
|
|
|
$
|
2
|
|
|
$
|
15
|
|
|
$
|
40
|
|
|
Six Months Ended June 30, 2017
|
||||||||||||||
|
Severance and Termination Benefits
|
|
Facility Exit Costs
|
|
Contract Termination & Other Costs
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Balance, beginning of period
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
25
|
|
Charges
|
29
|
|
|
6
|
|
|
8
|
|
|
43
|
|
||||
Paid
|
(1
|
)
|
|
(6
|
)
|
|
—
|
|
|
(7
|
)
|
||||
Adjustments
(1)
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Balance, end of period
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
65
|
|
(1)
|
This adjustment represents previously accrued amounts of existing retention and incentive awards for exiting employees that will be paid out upon termination and other non-cash charges.
|
3. Earnings Per Share
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions, except share and per share data)
|
||||||||||||||
Net loss attributable to PHH Corporation
|
$
|
(46
|
)
|
|
$
|
(12
|
)
|
|
$
|
(113
|
)
|
|
$
|
(42
|
)
|
Weighted-average common shares outstanding — basic & diluted
|
53,342,256
|
|
|
53,568,357
|
|
|
53,511,445
|
|
|
53,635,793
|
|
||||
Basic and Diluted loss per share attributable to PHH Corporation
|
$
|
(0.86
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(2.11
|
)
|
|
$
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive securities excluded from the computation of diluted shares:
|
|
|
|
|
|
|
|
||||||||
Outstanding stock-based compensation awards
(1)
|
1,098,464
|
|
|
1,946,982
|
|
|
1,098,464
|
|
|
1,946,982
|
|
|
|
|
|
|
|
|
|
(1)
|
For the
three and six
months ended
June 30, 2017
, excludes
48,941
shares that are contingently issuable for which the contingency has not been met.
|
4. Servicing Activities
|
|
June 30,
2017 |
|
December 31,
2016 |
||||||||||||
|
Fair Value
|
|
UPB
|
|
Fair Value
|
|
UPB
|
||||||||
|
(In millions)
|
||||||||||||||
Capitalized MSRs owned
|
$
|
441
|
|
|
$
|
53,933
|
|
|
$
|
690
|
|
|
$
|
84,657
|
|
Capitalized MSRs under secured borrowing arrangements and subserviced
(1)
|
114
|
|
|
13,084
|
|
|
—
|
|
|
—
|
|
||||
Total capitalized MSRs
|
$
|
555
|
|
|
$
|
67,017
|
|
|
$
|
690
|
|
|
$
|
84,657
|
|
Subserviced
|
|
|
91,986
|
|
|
|
|
89,170
|
|
||||||
Other owned servicing
|
|
|
760
|
|
|
|
|
815
|
|
||||||
Total
|
|
|
$
|
159,763
|
|
|
|
|
$
|
174,642
|
|
(1)
|
Accounted for as a secured borrowing arrangement. Refer to
Note 1, 'Summary of Significant Accounting Policies'
for additional information.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Servicing fees from capitalized portfolio
(1)
|
$
|
49
|
|
|
$
|
67
|
|
|
$
|
103
|
|
|
$
|
137
|
|
Subservicing fees
|
10
|
|
|
18
|
|
|
21
|
|
|
36
|
|
||||
Late fees and other ancillary revenue
|
6
|
|
|
10
|
|
|
15
|
|
|
18
|
|
||||
Loss on sale of MSRs
|
(4
|
)
|
|
—
|
|
|
(13
|
)
|
|
(2
|
)
|
||||
Curtailment interest paid to investors
|
(3
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
(7
|
)
|
||||
Loan servicing income
|
58
|
|
|
91
|
|
|
120
|
|
|
182
|
|
||||
Change in fair value of MSRs, net of related derivatives
(2)
|
(29
|
)
|
|
(47
|
)
|
|
(58
|
)
|
|
(83
|
)
|
||||
Change in fair value of MSRs secured liability
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Loan servicing income, net
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
61
|
|
|
$
|
99
|
|
(1)
|
Servicing fees from capitalized portfolio include
$1 million
related to the estimated yield on capitalized MSRs treated as a secured borrowing arrangement for both the
three and six months ended
June 30, 2017
. This is fully offset by the
MSRs secured interest expense
included in Net interest expense.
|
(2)
|
Net of derivative gains of
$58 million
and
$143 million
for the
three and six months ended
June 30, 2016
, respectively. Derivative gains for the
three and six months ended
June 30, 2017
were not significant.
|
|
June 30, 2017
|
||||||
|
UPB
|
|
Fair Value
|
||||
|
(In millions)
|
||||||
MSR commitments:
|
|
|
|
||||
New Residential Investment Corp.
|
$
|
49,118
|
|
|
$
|
403
|
|
Lakeview Loan Servicing, LLC
|
1,989
|
|
|
12
|
|
||
Other counterparties
|
1,240
|
|
|
12
|
|
||
MSRs capitalized under secured borrowing arrangements and subserviced
|
13,084
|
|
|
114
|
|
||
Non-committed
|
1,586
|
|
|
14
|
|
||
Total MSRs
|
$
|
67,017
|
|
|
$
|
555
|
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
|
$
|
84,657
|
|
|
$
|
98,990
|
|
Additions
|
1,605
|
|
|
2,960
|
|
||
Payoffs and curtailments
|
(6,729
|
)
|
|
(8,767
|
)
|
||
Sales
|
(12,516
|
)
|
|
(496
|
)
|
||
Balance, end of period
|
$
|
67,017
|
|
|
$
|
92,687
|
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
(1)
|
$
|
690
|
|
|
$
|
880
|
|
Additions
|
18
|
|
|
30
|
|
||
Sales
|
(95
|
)
|
|
(5
|
)
|
||
Changes in fair value due to:
|
|
|
|
|
|
||
Realization of expected cash flows
|
(53
|
)
|
|
(61
|
)
|
||
Changes in market inputs or assumptions used in the valuation model
|
(5
|
)
|
|
(165
|
)
|
||
Balance, end of period
(1)
|
$
|
555
|
|
|
$
|
679
|
|
(1)
|
As of
June 30, 2017
and
December 31, 2016
, the MSRs had a weighted-average life of
6.0 years
and
6.3 years
, respectively. See
Note 11, 'Fair Value Measurements'
for additional information regarding the valuation of MSRs.
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Proceeds from new loan sales or securitizations
|
$
|
1,651
|
|
|
$
|
3,055
|
|
Servicing fees from capitalized portfolio
(1)
|
104
|
|
|
153
|
|
||
Purchases of previously sold loans
(2)
|
(15
|
)
|
|
(169
|
)
|
||
Servicing advances
(3)
|
(627
|
)
|
|
(836
|
)
|
||
Repayment of servicing advances
(3)
|
782
|
|
|
872
|
|
(1)
|
Includes servicing fees, late fees and other ancillary servicing revenue in which the Company has continuing involvement.
|
(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. Repayment of servicing advances includes the
$21 million
received for advances from the Lakeview and New Residential sales of MSRs executed in the
six months ended June 30, 2017
.
|
5. 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,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
Interest rate lock commitments
|
$
|
887
|
|
|
$
|
862
|
|
Forward delivery commitments
|
1,811
|
|
|
2,104
|
|
||
Option contracts
|
105
|
|
|
120
|
|
||
MSR-related agreements
(1)
|
—
|
|
|
260
|
|
(1)
|
In the fourth quarter of 2016, the Company significantly reduced its MSR-related derivative hedge coverage as a result of the MSR sale agreements that fix the prices the Company expects to realize at future transfer dates. The remaining MSR-related derivatives were settled during the
six months ended June 30, 2017
. For further discussion of the MSR sale agreements, see
Note 4, 'Servicing Activities'
.
|
|
June 30, 2017
|
||||||||||||||
|
Gross Assets
|
|
Offsetting
Payables
|
|
Cash Collateral
Paid |
|
Net Amount
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
1
|
|
|
$
|
2
|
|
Not subject to master netting arrangements:
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
Total derivative assets
|
$
|
19
|
|
|
$
|
(2
|
)
|
|
$
|
1
|
|
|
$
|
18
|
|
|
Gross Liabilities
|
|
Offsetting
Receivables
|
|
Cash Collateral
|
|
Net Amount
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Total derivative liabilities
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31, 2016
|
||||||||||||||
|
Gross Assets
|
|
Offsetting
Payables
|
|
Cash Collateral
Paid
|
|
Net Amount
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
||||||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
13
|
|
|
$
|
(43
|
)
|
|
$
|
31
|
|
|
$
|
1
|
|
MSR-related agreements
|
19
|
|
|
(22
|
)
|
|
4
|
|
|
1
|
|
||||
Option contracts
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Derivative assets subject to netting
|
33
|
|
|
(66
|
)
|
|
35
|
|
|
2
|
|
||||
Not subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate lock commitments
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||
Forward delivery commitments
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Derivative assets not subject to netting
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
||||
Total derivative assets
|
$
|
52
|
|
|
$
|
(66
|
)
|
|
$
|
35
|
|
|
$
|
21
|
|
|
Gross Liabilities
|
|
Offsetting
Receivables |
|
Cash Collateral
Received |
|
Net Amount
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subject to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward delivery commitments
|
$
|
4
|
|
|
$
|
(10
|
)
|
|
$
|
11
|
|
|
$
|
5
|
|
MSR-related agreements
|
65
|
|
|
(55
|
)
|
|
2
|
|
|
12
|
|
||||
Option contracts
|
—
|
|
|
(1
|
)
|
|
2
|
|
|
1
|
|
||||
Derivative assets subject to netting
|
69
|
|
|
(66
|
)
|
|
15
|
|
|
18
|
|
||||
Total derivative liabilities
|
$
|
69
|
|
|
$
|
(66
|
)
|
|
$
|
15
|
|
|
$
|
18
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net:
|
|
|
|
|
|
|
|
||||||||
Interest rate lock commitments
|
$
|
64
|
|
|
$
|
101
|
|
|
$
|
113
|
|
|
$
|
178
|
|
Forward delivery commitments
|
(3
|
)
|
|
(14
|
)
|
|
(5
|
)
|
|
(35
|
)
|
||||
Option contracts
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Loan servicing income, net:
|
|
|
|
|
|
|
|
|
|
||||||
MSR-related agreements
|
—
|
|
|
58
|
|
|
—
|
|
|
143
|
|
6. Other Assets
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
Derivatives (Note 5)
|
$
|
18
|
|
|
$
|
21
|
|
Mortgage loans in foreclosure, net
(1)
|
16
|
|
|
21
|
|
||
Real estate owned, net
(2)
|
16
|
|
|
16
|
|
||
Prepaid expenses
|
13
|
|
|
11
|
|
||
Equity method investments
|
7
|
|
|
10
|
|
||
Repurchase eligible loans
(3)
|
3
|
|
|
13
|
|
||
Income taxes receivable
(4)
|
—
|
|
|
14
|
|
||
Other
|
2
|
|
|
3
|
|
||
Total
|
$
|
75
|
|
|
$
|
109
|
|
(1)
|
As of
June 30, 2017
and
December 31, 2016
, Mortgage loans in foreclosure is net of Allowance for probable foreclosure losses of
$8 million
and
$10 million
, respectively.
|
(2)
|
As of both
June 30, 2017
and
December 31, 2016
, Real estate owned is net of Adjustment to value for real estate owned of
$14 million
.
|
(3)
|
Repurchase eligible loans represent certain mortgage loans sold pursuant to GNMA 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
.
|
(4)
|
As of
June 30, 2017
,
$9 million
of Income taxes payable is recorded within Accounts payable and accrued expenses.
|
7. Other Liabilities
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
Legal and regulatory matters (Note 10)
|
$
|
134
|
|
|
$
|
114
|
|
Pension and other post-employment benefits
|
11
|
|
|
11
|
|
||
Income tax contingencies
|
8
|
|
|
8
|
|
||
Derivatives (Note 5)
|
—
|
|
|
18
|
|
||
Other
|
7
|
|
|
6
|
|
||
Total
|
$
|
160
|
|
|
$
|
157
|
|
8. Debt and Borrowing Arrangements
|
|
June 30, 2017
|
|
December 31,
2016 |
|||||||||||
|
Balance
|
|
Interest
Rate (1) |
|
Available
Capacity
(2)
|
|
Balance
|
|||||||
|
(In millions)
|
|||||||||||||
Committed warehouse facilities
|
$
|
515
|
|
|
3.4
|
%
|
|
$
|
135
|
|
|
$
|
556
|
|
Uncommitted warehouse facilities
|
4
|
|
|
2.6
|
%
|
|
296
|
|
|
—
|
|
|||
Servicing advance facility
|
65
|
|
|
3.2
|
%
|
|
35
|
|
|
99
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Term notes due in 2019
(3)
|
275
|
|
|
7.375
|
%
|
|
n/a
|
|
|
275
|
|
|||
Term notes due in 2021
(3)
|
340
|
|
|
6.375
|
%
|
|
n/a
|
|
|
340
|
|
|||
Unsecured credit facilities
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|||
Unsecured debt, face value
|
615
|
|
|
|
|
|
|
|
|
615
|
|
|||
Debt issuance costs
|
(7
|
)
|
|
|
|
|
|
(8
|
)
|
|||||
Unsecured debt, net
|
608
|
|
|
|
|
|
|
607
|
|
|||||
Total
|
$
|
1,192
|
|
|
|
|
|
|
|
|
$
|
1,262
|
|
(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)
|
On June 19, 2017, the Company commenced tender offers to purchase for cash any and all of the Senior Notes due in 2019 and 2021. Refer to "Unsecured Debt" below.
|
|
Warehouse
Facilities
|
|
Servicing
Advance
Facility
|
|
Subservicing Advance Liabilities
(1)
|
|
MSRs Secured Liability
(2)
|
||||||||
|
(In millions)
|
||||||||||||||
Restricted cash
|
$
|
9
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Servicing advances
|
—
|
|
|
116
|
|
|
205
|
|
|
—
|
|
||||
Mortgage loans held for sale (unpaid principal balance)
|
535
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
—
|
|
|
114
|
|
||||
Total
|
$
|
544
|
|
|
$
|
141
|
|
|
$
|
205
|
|
|
$
|
114
|
|
(1)
|
Under the terms of certain subservicing arrangements, the subservicing counterparty is required to fund servicing advances for their respective portfolios of subserviced loans. A subservicing advance liability is recorded for cash received from the counterparty to fund advances and is repaid to the counterparty upon the collection of the mortgage servicing advance receivables.
|
(2)
|
Represents MSRs that are accounted for as a secured borrowing arrangement. Refer to
Note 1, 'Summary of Significant Accounting Policies'
for additional information.
|
|
Warehouse
Facilities
|
|
Servicing
Advance
Facility
|
|
Unsecured
Debt
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Within one year
|
$
|
519
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
584
|
|
Between one and two years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Between two and three years
|
—
|
|
|
—
|
|
|
275
|
|
|
275
|
|
||||
Between three and four years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Between four and five years
|
—
|
|
|
—
|
|
|
340
|
|
|
340
|
|
||||
Thereafter
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
519
|
|
|
$
|
65
|
|
|
$
|
615
|
|
|
$
|
1,199
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Interest income
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
20
|
|
|
$
|
21
|
|
Secured interest expense
|
(7
|
)
|
|
(8
|
)
|
|
(13
|
)
|
|
(16
|
)
|
||||
MSRs secured interest expense
(1)
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Unsecured interest expense
|
(9
|
)
|
|
(11
|
)
|
|
(19
|
)
|
|
(21
|
)
|
||||
Net interest expense
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
$
|
(13
|
)
|
|
$
|
(16
|
)
|
(1)
|
MSRs secured interest expense
is the estimated yield on the
MSRs secured liability
as a result of the secured borrowing arrangement, as discussed in
Note 4, 'Servicing Activities'
.
MSRs secured interest expense
fully offsets the estimated yield on capitalized MSRs treated as a secured borrowing arrangement, which is included within Loan servicing income, net.
|
9. Income Taxes
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
Deferred tax assets:
|
|
|
|
|
|
||
Federal loss carryforwards
|
$
|
23
|
|
|
$
|
23
|
|
State loss carryforwards and credits
|
37
|
|
|
39
|
|
||
Accrued legal and regulatory matters
|
53
|
|
|
46
|
|
||
Reserves and allowances
|
33
|
|
|
36
|
|
||
Exit cost liability
|
27
|
|
|
10
|
|
||
Other accrued liabilities
|
20
|
|
|
24
|
|
||
Gross deferred tax assets
|
193
|
|
|
178
|
|
||
Valuation allowance
|
(47
|
)
|
|
(44
|
)
|
||
Deferred tax assets, net of valuation allowance
|
146
|
|
|
134
|
|
||
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
|
|
||
Mortgage servicing rights
|
152
|
|
|
234
|
|
||
Other
|
5
|
|
|
1
|
|
||
Deferred tax liabilities
|
157
|
|
|
235
|
|
||
Net deferred tax liability
|
$
|
11
|
|
|
$
|
101
|
|
(i)
|
state and local income taxes determined by the mix of income or loss from the operations by entity and state income tax jurisdiction;
|
(ii)
|
for the
six months ended June 30, 2017
, the net increase in the valuation allowance was driven by certain cumulative non net operating loss deferred tax assets for which state and federal valuation allowance is warranted partially offset by a decrease in the valuation allowance due to state taxable income generated during the second quarter of 2017; while for the
three months ended June 30, 2017
, the net decrease in valuation allowance was due to state taxable income generated; and
|
(iii)
|
tax expense related to Net loss attributable to noncontrolling interests for which no tax benefit is provided.
|
10. Commitments and Contingencies
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Balance, beginning of period
|
$
|
73
|
|
|
$
|
89
|
|
Realized losses
|
(13
|
)
|
|
(12
|
)
|
||
Increase in reserves due to:
|
|
|
|
|
|
||
Changes in assumptions
|
2
|
|
|
3
|
|
||
New loan sales
|
1
|
|
|
4
|
|
||
Balance, end of period
|
$
|
63
|
|
|
$
|
84
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
Loan repurchase and indemnification liability
|
$
|
41
|
|
|
$
|
49
|
|
Adjustment to value for real estate owned
|
14
|
|
|
14
|
|
||
Allowance for probable foreclosure losses
|
8
|
|
|
10
|
|
||
Total
|
$
|
63
|
|
|
$
|
73
|
|
11. Fair Value Measurements
|
|
June 30, 2017
|
||||||||||||||||||
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Cash
Collateral
and Netting
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans held for sale
|
$
|
—
|
|
|
$
|
593
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
625
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
555
|
|
|
—
|
|
|
555
|
|
|||||
Other assets—Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||
Forward delivery commitments
|
—
|
|
|
3
|
|
|
—
|
|
|
(1
|
)
|
|
2
|
|
|||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage servicing rights secured liability
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
114
|
|
|
$
|
—
|
|
|
114
|
|
|
Other liabilities—Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forward delivery commitments
|
—
|
|
|
2
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
December 31, 2016
|
||||||||||||||||||
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Cash
Collateral
and Netting
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans held for sale
|
$
|
—
|
|
|
$
|
636
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
683
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
690
|
|
|
—
|
|
|
690
|
|
|||||
Other assets—Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|||||
Forward delivery commitments
|
—
|
|
|
14
|
|
|
—
|
|
|
(12
|
)
|
|
2
|
|
|||||
MSR-related agreements
|
—
|
|
|
19
|
|
|
—
|
|
|
(18
|
)
|
|
1
|
|
|||||
Option contracts
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other liabilities—Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forward delivery commitments
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
5
|
|
MSR-related agreements
|
—
|
|
|
65
|
|
|
—
|
|
|
(53
|
)
|
|
12
|
|
|||||
Option contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
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
|
$
|
625
|
|
|
$
|
7
|
|
|
$
|
683
|
|
|
$
|
7
|
|
Aggregate unpaid principal balance
|
622
|
|
|
9
|
|
|
687
|
|
|
10
|
|
||||
Difference
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
(In millions)
|
||||||
First mortgages:
|
|
|
|
|
|
||
Conforming
|
$
|
507
|
|
|
$
|
531
|
|
Non-conforming
|
86
|
|
|
105
|
|
||
Total first mortgages
|
593
|
|
|
636
|
|
||
Second lien
|
3
|
|
|
3
|
|
||
Scratch and Dent
|
29
|
|
|
44
|
|
||
Total
|
$
|
625
|
|
|
$
|
683
|
|
|
Six Months Ended
June 30, |
||||
|
2017
|
|
2016
|
||
Initial capitalization rate of additions to MSRs
|
1.14
|
%
|
|
1.02
|
%
|
|
June 30,
2017 |
|
December 31,
2016 |
||
Capitalization servicing rate
|
0.83
|
%
|
|
0.82
|
%
|
Capitalization servicing multiple
|
3.0
|
|
|
2.9
|
|
Weighted-average servicing fee (in basis points)
|
27
|
|
|
28
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||
Weighted-average prepayment speed (CPR)
|
9.7
|
%
|
|
9.2
|
%
|
Option adjusted spread, in basis points (OAS)
|
964
|
|
|
1,430
|
|
Weighted-average delinquency rate
|
4.2
|
%
|
|
5.1
|
%
|
|
June 30, 2017
|
||||||||||
|
Weighted-
Average
Prepayment
Speed
|
|
Option
Adjusted
Spread
|
|
Weighted-
Average
Delinquency
Rate
|
||||||
|
(In millions)
|
||||||||||
Impact on fair value of 10% adverse change
|
$
|
(20
|
)
|
|
$
|
(25
|
)
|
|
$
|
(12
|
)
|
Impact on fair value of 20% adverse change
|
(39
|
)
|
|
(48
|
)
|
|
(23
|
)
|
|
June 30,
2017 |
|
Weighted-average prepayment speed (CPR)
|
10.0
|
%
|
Option adjusted spread, in basis points (OAS)
|
1,126
|
|
Weighted-average delinquency rate
|
2.6
|
%
|
|
Three Months Ended
June 30, 2017 |
|
Three Months Ended
June 30, 2016 |
||||||||||||||||||||||||
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
|
MSRs Secured Liability
|
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Balance, beginning of period
|
$
|
32
|
|
|
$
|
596
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
770
|
|
|
$
|
28
|
|
Purchases, Issuances, Sales and Settlements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Purchases
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|||||||
Issuances
|
2
|
|
|
7
|
|
|
—
|
|
|
(113
|
)
|
|
2
|
|
|
17
|
|
|
—
|
|
|||||||
Sales
|
(1
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(3
|
)
|
|
—
|
|
|||||||
Settlements
|
(6
|
)
|
|
—
|
|
|
(65
|
)
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
|
(90
|
)
|
|||||||
|
(2
|
)
|
|
(12
|
)
|
|
(65
|
)
|
|
(112
|
)
|
|
(5
|
)
|
|
14
|
|
|
(90
|
)
|
|||||||
Realized and unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gain on loans held for sale, net
|
—
|
|
|
—
|
|
|
64
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101
|
|
|||||||
Loan servicing income, net
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(105
|
)
|
|
—
|
|
|||||||
Net interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|||||||
|
—
|
|
|
(29
|
)
|
|
64
|
|
|
(2
|
)
|
|
1
|
|
|
(105
|
)
|
|
101
|
|
|||||||
Transfers into Level Three
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|||||||
Transfers out of Level Three
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||||||
Balance, end of period
|
$
|
32
|
|
|
$
|
555
|
|
|
$
|
16
|
|
|
$
|
(114
|
)
|
|
$
|
42
|
|
|
$
|
679
|
|
|
$
|
39
|
|
|
Six Months Ended
June 30, 2017 |
|
Six Months Ended
June 30, 2016 |
||||||||||||||||||||||||
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
|
MSRs Secured Liability
|
|
MLHS
|
|
MSRs
|
|
IRLCs,
net
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Balance, beginning of period
|
$
|
47
|
|
|
$
|
690
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
880
|
|
|
$
|
21
|
|
Purchases, Issuances, Sales and Settlements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Purchases
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|||||||
Issuances
|
3
|
|
|
18
|
|
|
—
|
|
|
(113
|
)
|
|
3
|
|
|
30
|
|
|
—
|
|
|||||||
Sales
|
(17
|
)
|
|
(95
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(5
|
)
|
|
—
|
|
|||||||
Settlements
|
(9
|
)
|
|
—
|
|
|
(115
|
)
|
|
1
|
|
|
(5
|
)
|
|
—
|
|
|
(160
|
)
|
|||||||
|
(18
|
)
|
|
(77
|
)
|
|
(115
|
)
|
|
(112
|
)
|
|
(8
|
)
|
|
25
|
|
|
(160
|
)
|
|||||||
Realized and unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gain on loans held for sale, net
|
—
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
178
|
|
|||||||
Loan servicing income, net
|
—
|
|
|
(58
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(226
|
)
|
|
—
|
|
|||||||
Net interest expense
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|||||||
|
1
|
|
|
(58
|
)
|
|
113
|
|
|
(2
|
)
|
|
2
|
|
|
(226
|
)
|
|
178
|
|
|||||||
Transfers into Level Three
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|||||||
Transfers out of Level Three
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|||||||
Balance, end of period
|
$
|
32
|
|
|
$
|
555
|
|
|
$
|
16
|
|
|
$
|
(114
|
)
|
|
$
|
42
|
|
|
$
|
679
|
|
|
$
|
39
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net
|
$
|
14
|
|
|
$
|
35
|
|
|
$
|
14
|
|
|
$
|
35
|
|
Loan servicing income, net
|
(4
|
)
|
|
(70
|
)
|
|
(6
|
)
|
|
(165
|
)
|
12. Variable Interest Entities
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
PHH Home
Loans
|
|
Servicing
Advance
Receivables
Trust
|
|
PHH Home
Loans
|
|
Servicing
Advance
Receivables
Trust
|
||||||||
|
(In millions)
|
||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
67
|
|
|
$
|
—
|
|
Restricted cash
|
6
|
|
|
25
|
|
|
5
|
|
|
19
|
|
||||
Mortgage loans held for sale
|
327
|
|
|
—
|
|
|
350
|
|
|
—
|
|
||||
Accounts receivable, net
|
13
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
Servicing advances, net
|
—
|
|
|
116
|
|
|
—
|
|
|
150
|
|
||||
Property and equipment, net
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Other assets
|
10
|
|
|
—
|
|
|
11
|
|
|
1
|
|
||||
Total assets
|
$
|
418
|
|
|
$
|
141
|
|
|
$
|
443
|
|
|
$
|
170
|
|
Assets held as collateral
|
$
|
290
|
|
|
$
|
141
|
|
|
$
|
320
|
|
|
$
|
169
|
|
|
|
|
|
|
|
|
|
||||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
Debt
|
275
|
|
|
66
|
|
|
300
|
|
|
99
|
|
||||
Other liabilities
|
6
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total liabilities
(1)
|
$
|
293
|
|
|
$
|
66
|
|
|
$
|
316
|
|
|
$
|
99
|
|
(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 the Company 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,
2017 |
|
December 31, 2016
|
||||
|
(In millions)
|
||||||
Mortgage Production segment
|
$
|
847
|
|
|
$
|
913
|
|
Mortgage Servicing segment
|
1,122
|
|
|
1,428
|
|
||
Other
|
937
|
|
|
834
|
|
||
Total
|
$
|
2,906
|
|
|
$
|
3,175
|
|
|
Net Revenues
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Mortgage Production segment
|
$
|
91
|
|
|
$
|
162
|
|
|
$
|
178
|
|
|
$
|
275
|
|
Mortgage Servicing segment
|
21
|
|
|
34
|
|
|
48
|
|
|
78
|
|
||||
Total
|
$
|
112
|
|
|
$
|
196
|
|
|
$
|
226
|
|
|
$
|
353
|
|
|
Segment (Loss) Profit
(2)
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Mortgage Production segment
|
$
|
(25
|
)
|
|
$
|
13
|
|
|
$
|
(66
|
)
|
|
$
|
(13
|
)
|
Mortgage Servicing segment
|
(43
|
)
|
|
(33
|
)
|
|
(77
|
)
|
|
(54
|
)
|
||||
Other
(1)
|
(11
|
)
|
|
(3
|
)
|
|
(37
|
)
|
|
(5
|
)
|
||||
Total
|
$
|
(79
|
)
|
|
$
|
(23
|
)
|
|
$
|
(180
|
)
|
|
$
|
(72
|
)
|
(1)
|
For the
three and six
months ended
June 30, 2017
, the results for Other include both Exit and disposal costs related to the exit of the PLS business and reorganization of operations and Professional and third-party service fees related to the strategic review that are not allocated to the Mortgage Production and Servicing segments.
|
(2)
|
The following is a reconciliation of Loss before income taxes to Segment loss:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Loss before income taxes
|
$
|
(83
|
)
|
|
$
|
(20
|
)
|
|
$
|
(188
|
)
|
|
$
|
(69
|
)
|
Less: net (loss) income attributable to noncontrolling interest
|
(4
|
)
|
|
3
|
|
|
(8
|
)
|
|
3
|
|
||||
Segment loss
|
$
|
(79
|
)
|
|
$
|
(23
|
)
|
|
$
|
(180
|
)
|
|
$
|
(72
|
)
|
14. Subsequent Event
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
▪
|
Executive Summary
|
▪
|
Asset Sales and Exit Programs
|
▪
|
Results of Operations
|
▪
|
Risk Management
|
▪
|
Liquidity and Capital Resources
|
▪
|
Critical Accounting Policies and Estimates
|
▪
|
Recently Issued Accounting Pronouncements
|
EXECUTIVE SUMMARY
|
ASSET SALES AND EXIT PROGRAMS
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||
|
MSR Fair Value
|
|
UPB
|
|
Servicing Advances
|
|
MSR Fair Value
|
|
UPB
|
||||||||||
|
(In millions)
|
||||||||||||||||||
MSR Commitments
|
|
|
|
|
|
|
|
|
|
||||||||||
New Residential
|
$
|
403
|
|
|
$
|
49,118
|
|
|
$
|
218
|
|
|
$
|
579
|
|
|
$
|
69,937
|
|
Lakeview
|
12
|
|
|
1,989
|
|
|
2
|
|
|
97
|
|
|
13,369
|
|
|||||
Other counterparties
|
12
|
|
|
1,240
|
|
|
—
|
|
|
2
|
|
|
158
|
|
|||||
Total
|
$
|
427
|
|
|
$
|
52,347
|
|
|
$
|
220
|
|
|
$
|
678
|
|
|
$
|
83,464
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Transactions executed since June 30, 2017
(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
New Residential
|
$
|
342
|
|
|
$
|
39,526
|
|
|
$
|
24
|
|
|
|
|
|
||||
Lakeview
|
12
|
|
|
1,973
|
|
|
2
|
|
|
|
|
|
|||||||
Other counterparties
|
12
|
|
|
1,233
|
|
|
—
|
|
|
|
|
|
|||||||
Remaining commitments
|
$
|
61
|
|
|
$
|
9,615
|
|
|
$
|
194
|
|
|
|
|
|
(1)
|
On July 3, 2017 we executed the delivery of a portfolio of FNMA MSRs with New Residential. On August 2, 2017, we executed the final transfer under our sale agreement with Lakeview. We received
$358 million
of cash proceeds to-date from these subsequent transfers, excluding holdbacks receivable.
|
•
|
Subservicing Agreement.
We entered into a subservicing agreement with New Residential in connection with our MSR Sale Agreement, which covers all units sold to New Residential for an initial period of three years, subject to certain early transfer and termination provisions. This subservicing relationship became effective upon the initial delivery of MSRs to New Residential on June 16, 2017. As of
June 30, 2017
,
81,000
units were being subserviced on behalf of New Residential. Further, on July 3, 2017, we transferred
301,000
additional units to New Residential.
|
•
|
Portfolio Defense Agreement.
In connection with the initial delivery of MSRs to New Residential on June 16, 2017, we entered into the MSR Portfolio Defense Agreement with New Residential, pursuant to which we will be entitled, subject to compliance with the terms of the agreement, to seek to refinance loans subserviced on behalf of New Residential as part of our Portfolio Retention services. Under this agreement, we have agreed to sell the MSR with respect to loans originated under this program to New Residential. No significant activity occurred under this Portfolio Retention agreement for the
three and six months ended
June 30, 2017
.
|
•
|
Secured Borrowing Accounting.
Our accounting evaluation of the New Residential MSR Sale agreement and related agreements concluded that New Residential has not acquired all ownership rewards since the terms of the subservicing contract limit New Residential's ability to terminate the contract within the first three years. Therefore, our transfer of MSRs to New Residential did not qualify for sale accounting under GAAP and we will record the transactions as a secured borrowing. Upon the receipt of cash for MSRs transferred to New Residential, we recognized a
Mortgage servicing rights secured liability
on our balance sheet, and we continued to recognize the MSR asset. Future changes in the
Mortgage servicing rights secured liability
are expected to fully offset future changes in the related MSR asset, including changes in fair value. See further information about the presentation in the 'Selected Income Statement Data' tables within "Results of Operations
—
Mortgage Servicing Segment".
|
|
Exit Program Costs
|
|
Cash Outflows
|
||||||||||||||||
|
PLS Exit
|
|
Reorganization
|
|
Total
|
|
Payments To Date
|
|
Future Outflows
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Cash Exit Costs by Segment - Q2 2017:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage Production segment
|
$
|
11
|
|
|
$
|
1
|
|
|
$
|
12
|
|
|
|
|
|
||||
Mortgage Servicing segment
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|||||||
Other
|
1
|
|
|
5
|
|
|
6
|
|
|
|
|
|
|||||||
Recognized in Q2 2017
|
$
|
12
|
|
|
$
|
6
|
|
|
$
|
18
|
|
|
|
|
|
||||
Recognized in Q1 2017
|
8
|
|
|
17
|
|
|
25
|
|
|
|
|
|
|||||||
Recognized in Q4 2016
|
26
|
|
|
—
|
|
|
26
|
|
|
|
|
|
|||||||
Estimate of remaining costs
|
43
|
|
|
13
|
|
|
56
|
|
|
|
|
|
|||||||
Cash exit program expenditures
|
$
|
89
|
|
|
$
|
36
|
|
|
$
|
125
|
|
|
$
|
(8
|
)
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-cash charges and impairments
|
11
|
|
|
4
|
|
|
|
|
|
|
|
||||||||
Exit costs attributed to Noncontrolling interest
|
—
|
|
|
(8
|
)
|
|
|
|
|
|
|
||||||||
Total
|
$
|
100
|
|
|
$
|
32
|
|
|
|
|
|
|
|
(1)
|
Cash outflows as presented above exclude the transfer of $7 million to Restricted cash related to a letter of credit posted in connection with the March 31, 2017 transaction with LenderLive.
|
RESULTS OF OPERATIONS
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
Net revenues
|
$
|
112
|
|
|
$
|
196
|
|
|
$
|
226
|
|
|
$
|
353
|
|
Total expenses
|
195
|
|
|
216
|
|
|
414
|
|
|
422
|
|
||||
Loss before income taxes
|
(83
|
)
|
|
(20
|
)
|
|
(188
|
)
|
|
(69
|
)
|
||||
Income tax benefit
|
(33
|
)
|
|
(11
|
)
|
|
(67
|
)
|
|
(30
|
)
|
||||
Net loss
|
(50
|
)
|
|
(9
|
)
|
|
(121
|
)
|
|
(39
|
)
|
||||
Less: net (loss) income attributable to noncontrolling interest
|
(4
|
)
|
|
3
|
|
|
(8
|
)
|
|
3
|
|
||||
Net loss attributable to PHH Corporation
|
$
|
(46
|
)
|
|
$
|
(12
|
)
|
|
$
|
(113
|
)
|
|
$
|
(42
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted loss per share attributable to PHH Corporation
|
$
|
(0.86
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(2.11
|
)
|
|
$
|
(0.78
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
37
|
|
|
$
|
79
|
|
|
$
|
81
|
|
|
$
|
140
|
|
Gain on loans held for sale, net
|
52
|
|
|
77
|
|
|
94
|
|
|
125
|
|
||||
Loan servicing income
|
58
|
|
|
91
|
|
|
120
|
|
|
182
|
|
||||
Change in fair value of MSRs asset and secured liability, net of related derivatives
|
(30
|
)
|
|
(47
|
)
|
|
(59
|
)
|
|
(83
|
)
|
||||
Net interest expense
|
(6
|
)
|
|
(7
|
)
|
|
(13
|
)
|
|
(16
|
)
|
||||
Other income
|
1
|
|
|
3
|
|
|
3
|
|
|
5
|
|
||||
Net revenues
|
$
|
112
|
|
|
$
|
196
|
|
|
$
|
226
|
|
|
$
|
353
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Salaries and related expenses
|
$
|
75
|
|
|
$
|
92
|
|
|
$
|
161
|
|
|
$
|
182
|
|
Commissions
|
14
|
|
|
18
|
|
|
25
|
|
|
30
|
|
||||
Loan origination expenses
|
9
|
|
|
18
|
|
|
18
|
|
|
34
|
|
||||
Foreclosure and repossession expenses
|
5
|
|
|
9
|
|
|
12
|
|
|
16
|
|
||||
Professional and third-party service fees
|
30
|
|
|
37
|
|
|
67
|
|
|
76
|
|
||||
Technology equipment and software expenses
|
9
|
|
|
10
|
|
|
18
|
|
|
20
|
|
||||
Occupancy and other office expenses
|
9
|
|
|
11
|
|
|
18
|
|
|
24
|
|
||||
Depreciation and amortization
|
3
|
|
|
5
|
|
|
7
|
|
|
9
|
|
||||
Exit and disposal costs
|
16
|
|
|
—
|
|
|
41
|
|
|
—
|
|
||||
Other operating expenses:
|
|
|
|
|
|
|
|
||||||||
Legal and regulatory reserves
|
13
|
|
|
—
|
|
|
22
|
|
|
5
|
|
||||
Other
|
12
|
|
|
16
|
|
|
25
|
|
|
26
|
|
||||
Total expenses
|
$
|
195
|
|
|
$
|
216
|
|
|
$
|
414
|
|
|
$
|
422
|
|
Mortgage Production Segment
|
|
Six Months Ended June 30, 2017
|
||||||||||||||
|
Exiting
|
|
Remaining
|
|
|
||||||||||
|
PLS
(1)
|
|
Real Estate
|
|
Portfolio Retention
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
65
|
|
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
81
|
|
Gain on loans held for sale, net
|
(2
|
)
|
|
75
|
|
|
21
|
|
|
94
|
|
||||
Net interest income
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Other income
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Net revenues
|
$
|
64
|
|
|
$
|
91
|
|
|
$
|
23
|
|
|
$
|
178
|
|
|
|
|
|
|
|
|
|
||||||||
Total Closings
|
$
|
7,696
|
|
|
$
|
3,062
|
|
|
$
|
593
|
|
|
$
|
11,351
|
|
|
Six Months Ended June 30, 2016
|
||||||||||||||
|
Exiting
|
|
Remaining
|
|
|
||||||||||
|
PLS & Wholesale
(1)
|
|
Real Estate
|
|
Portfolio Retention
|
|
Total
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
122
|
|
|
$
|
17
|
|
|
$
|
1
|
|
|
$
|
140
|
|
Gain on loans held for sale, net
|
10
|
|
|
92
|
|
|
23
|
|
|
125
|
|
||||
Net interest income
|
2
|
|
|
2
|
|
|
1
|
|
|
5
|
|
||||
Other income
|
4
|
|
|
1
|
|
|
—
|
|
|
5
|
|
||||
Net revenues
|
$
|
138
|
|
|
$
|
112
|
|
|
$
|
25
|
|
|
$
|
275
|
|
|
|
|
|
|
|
|
|
||||||||
Total Closings
|
$
|
14,514
|
|
|
$
|
3,461
|
|
|
$
|
352
|
|
|
$
|
18,327
|
|
(1)
|
Portfolio Retention has historically been included in our disclosed PLS channel data. These amounts exclude Portfolio Retention, which is displayed separately. Also, Wholesale was included in the six months ended June 30, 2016; however, we exited the platform during the second quarter of 2016.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
($ In millions)
|
||||||||||||||
Closings:
|
|
|
|
|
|
|
|
|
|
||||||
Saleable to investors
|
$
|
2,061
|
|
|
$
|
2,847
|
|
|
$
|
3,769
|
|
|
$
|
4,835
|
|
Fee-based
|
3,421
|
|
|
7,525
|
|
|
7,582
|
|
|
13,492
|
|
||||
Total
|
$
|
5,482
|
|
|
$
|
10,372
|
|
|
$
|
11,351
|
|
|
$
|
18,327
|
|
|
|
|
|
|
|
|
|
||||||||
Purchase
|
$
|
3,560
|
|
|
$
|
4,953
|
|
|
$
|
6,224
|
|
|
$
|
8,327
|
|
Refinance
|
1,922
|
|
|
5,419
|
|
|
5,127
|
|
|
10,000
|
|
||||
Total
|
$
|
5,482
|
|
|
$
|
10,372
|
|
|
$
|
11,351
|
|
|
$
|
18,327
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS
|
$
|
3,617
|
|
|
$
|
7,955
|
|
|
$
|
8,289
|
|
|
$
|
14,308
|
|
Retail - Real Estate
|
1,865
|
|
|
2,120
|
|
|
3,062
|
|
|
3,461
|
|
||||
Total retail
|
5,482
|
|
|
10,075
|
|
|
11,351
|
|
|
17,769
|
|
||||
Wholesale/correspondent
|
—
|
|
|
297
|
|
|
—
|
|
|
558
|
|
||||
Total
|
$
|
5,482
|
|
|
$
|
10,372
|
|
|
$
|
11,351
|
|
|
$
|
18,327
|
|
|
|
|
|
|
|
|
|
||||||||
Retail - PLS (units)
|
5,723
|
|
|
13,439
|
|
|
14,002
|
|
|
25,128
|
|
||||
Retail - Real Estate (units)
|
6,218
|
|
|
7,581
|
|
|
10,426
|
|
|
12,549
|
|
||||
Total retail (units)
|
11,941
|
|
|
21,020
|
|
|
24,428
|
|
|
37,677
|
|
||||
Wholesale/correspondent (units)
|
—
|
|
|
1,180
|
|
|
—
|
|
|
2,191
|
|
||||
Total (units)
|
11,941
|
|
|
22,200
|
|
|
24,428
|
|
|
39,868
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Applications:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Saleable to investors
|
$
|
2,978
|
|
|
$
|
4,132
|
|
|
$
|
5,517
|
|
|
$
|
7,444
|
|
Fee-based
|
4,041
|
|
|
8,512
|
|
|
8,382
|
|
|
17,503
|
|
||||
Total
|
$
|
7,019
|
|
|
$
|
12,644
|
|
|
$
|
13,899
|
|
|
$
|
24,947
|
|
|
|
|
|
|
|
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
|
|
|
|
||||
IRLCs expected to close
|
$
|
795
|
|
|
$
|
1,318
|
|
|
$
|
1,289
|
|
|
$
|
2,486
|
|
Total loan margin on IRLCs (in basis points)
|
284
|
|
|
343
|
|
|
311
|
|
|
321
|
|
||||
Loans sold
|
$
|
1,899
|
|
|
$
|
2,687
|
|
|
$
|
3,842
|
|
|
$
|
4,850
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Origination and other loan fees
|
$
|
37
|
|
|
$
|
79
|
|
|
$
|
81
|
|
|
$
|
140
|
|
Gain on loans held for sale, net
|
52
|
|
|
77
|
|
|
94
|
|
|
125
|
|
||||
Net interest income
|
1
|
|
|
3
|
|
|
2
|
|
|
5
|
|
||||
Other income
|
1
|
|
|
3
|
|
|
1
|
|
|
5
|
|
||||
Net revenues
|
91
|
|
|
162
|
|
|
178
|
|
|
275
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses
|
43
|
|
|
57
|
|
|
96
|
|
|
114
|
|
||||
Commissions
|
14
|
|
|
18
|
|
|
25
|
|
|
30
|
|
||||
Loan origination expenses
|
9
|
|
|
18
|
|
|
18
|
|
|
34
|
|
||||
Professional and third-party service fees
|
8
|
|
|
6
|
|
|
12
|
|
|
11
|
|
||||
Technology equipment and software expenses
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Occupancy and other office expenses
|
5
|
|
|
7
|
|
|
11
|
|
|
14
|
|
||||
Depreciation and amortization
|
1
|
|
|
3
|
|
|
3
|
|
|
5
|
|
||||
Exit and disposal costs
|
10
|
|
|
—
|
|
|
23
|
|
|
—
|
|
||||
Other operating expenses
|
29
|
|
|
36
|
|
|
62
|
|
|
75
|
|
||||
Total expenses
|
120
|
|
|
146
|
|
|
252
|
|
|
285
|
|
||||
|
|
|
|
|
|
|
|
||||||||
(Loss) income before income taxes
|
(29
|
)
|
|
16
|
|
|
(74
|
)
|
|
(10
|
)
|
||||
Less: net (loss) income attributable to noncontrolling interest
|
(4
|
)
|
|
3
|
|
|
(8
|
)
|
|
3
|
|
||||
Segment (loss) profit
|
$
|
(25
|
)
|
|
$
|
13
|
|
|
$
|
(66
|
)
|
|
$
|
(13
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Gain on loans held for sale, net:
|
|
|
|
|
|
|
|
|
|
||||||
Gain on loans
|
$
|
44
|
|
|
$
|
66
|
|
|
$
|
85
|
|
|
$
|
106
|
|
Change in fair value of Scratch and Dent and certain non-conforming mortgage loans
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Economic hedge results
|
7
|
|
|
12
|
|
|
9
|
|
|
22
|
|
||||
Total change in fair value of mortgage loans and related derivatives
|
8
|
|
|
11
|
|
|
9
|
|
|
19
|
|
||||
Total
|
$
|
52
|
|
|
$
|
77
|
|
|
$
|
94
|
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
||||||||
Net interest income:
|
|
|
|
|
|
|
|
||||||||
Interest income
|
$
|
6
|
|
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
16
|
|
Secured interest expense
|
(5
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
(11
|
)
|
||||
Total
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, benefits and incentives
|
$
|
42
|
|
|
$
|
52
|
|
|
$
|
93
|
|
|
$
|
105
|
|
Contract labor and overtime
|
1
|
|
|
5
|
|
|
3
|
|
|
9
|
|
||||
Total
|
$
|
43
|
|
|
$
|
57
|
|
|
$
|
96
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
||||||||
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate overhead allocation
|
$
|
26
|
|
|
$
|
30
|
|
|
$
|
51
|
|
|
$
|
64
|
|
Other expenses
|
3
|
|
|
6
|
|
|
11
|
|
|
11
|
|
||||
Total
|
$
|
29
|
|
|
$
|
36
|
|
|
$
|
62
|
|
|
$
|
75
|
|
Mortgage Servicing Segment
|
|
June 30,
|
||||||
|
2017
|
|
2016
|
||||
|
($ In millions)
|
||||||
Total Loan Servicing Portfolio:
|
|
|
|
||||
Conventional loans
|
$
|
147,043
|
|
|
$
|
204,208
|
|
Government loans
|
11,001
|
|
|
23,521
|
|
||
Home equity lines of credit
|
1,719
|
|
|
4,012
|
|
||
Total Unpaid Principal Balance
|
$
|
159,763
|
|
|
$
|
231,741
|
|
|
|
|
|
||||
Number of loans in owned portfolio (units)
|
379,231
|
|
|
609,976
|
|
||
Number of subserviced loans (units)
(1)
|
351,109
|
|
|
486,596
|
|
||
Total number of loans serviced (units)
|
730,340
|
|
|
1,096,572
|
|
||
|
|
|
|
||||
Weighted-average interest rate
|
3.8
|
%
|
|
3.8
|
%
|
||
|
|
|
|
||||
Portfolio delinquency
|
|
|
|
||||
% of UPB - 30 days or more past due
|
1.98
|
%
|
|
2.21
|
%
|
||
% of UPB - Foreclosure, REO and Bankruptcy
|
1.61
|
%
|
|
1.78
|
%
|
||
Units - 30 days or more past due
|
2.83
|
%
|
|
3.11
|
%
|
||
Units - Foreclosure, REO and Bankruptcy
|
2.12
|
%
|
|
2.19
|
%
|
||
|
|
|
|
||||
Capitalized Servicing Portfolio:
|
|
|
|
||||
Unpaid Principal Balance of capitalized MSRs owned
|
$
|
53,933
|
|
|
$
|
92,687
|
|
Unpaid Principal Balance of capitalized MSRs in secured borrowing arrangement
(2)
|
13,084
|
|
|
—
|
|
||
Total Unpaid Principal Balance of capitalized servicing portfolio
|
$
|
67,017
|
|
|
$
|
92,687
|
|
|
|
|
|
||||
Capitalized servicing rate
|
0.83
|
%
|
|
0.73
|
%
|
||
Capitalized servicing multiple
|
3.0
|
|
|
2.6
|
|
||
Weighted-average servicing fee (in basis points)
|
27
|
|
|
29
|
|
(1)
|
Subserviced units include
80,519
units of servicing sold to New Residential in June 2017 that was accounted for as a secured borrowing arrangement. Refer to "Asset Sales and Exit Programs" for additional information.
|
(2)
|
Represents MSRs sold to New Residential in June 2017 that were accounted for as a secured borrowing arrangement. Refer to "
—
Asset Sales and Exit Programs" for additional information.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Total Loan Servicing Portfolio:
|
|
|
|
|
|
|
|
||||||||
Average Portfolio UPB
|
$
|
161,645
|
|
|
$
|
232,529
|
|
|
$
|
165,652
|
|
|
$
|
230,951
|
|
|
|
|
|
|
|
|
|
||||||||
Capitalized Servicing Portfolio:
|
|
|
|
|
|
|
|
||||||||
Average Portfolio UPB
|
$
|
69,619
|
|
|
$
|
94,431
|
|
|
$
|
74,184
|
|
|
$
|
96,028
|
|
Payoffs and principal curtailments
|
3,270
|
|
|
4,812
|
|
|
6,729
|
|
|
8,767
|
|
||||
Sales
|
2,200
|
|
|
224
|
|
|
12,516
|
|
|
496
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Loan servicing income, net
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
61
|
|
|
$
|
99
|
|
Net interest expense
|
(7
|
)
|
|
(10
|
)
|
|
(15
|
)
|
|
(21
|
)
|
||||
Other income
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Net revenues
|
21
|
|
|
34
|
|
|
48
|
|
|
78
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Salaries and related expenses
|
15
|
|
|
19
|
|
|
32
|
|
|
37
|
|
||||
Foreclosure and repossession expenses
|
5
|
|
|
9
|
|
|
12
|
|
|
16
|
|
||||
Professional and third-party service fees
|
8
|
|
|
9
|
|
|
15
|
|
|
18
|
|
||||
Technology equipment and software expenses
|
4
|
|
|
4
|
|
|
7
|
|
|
8
|
|
||||
Occupancy and other office expenses
|
3
|
|
|
4
|
|
|
6
|
|
|
9
|
|
||||
Depreciation and amortization
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Exit and disposal costs
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Other operating expenses
|
29
|
|
|
21
|
|
|
50
|
|
|
42
|
|
||||
Total expenses
|
64
|
|
|
67
|
|
|
125
|
|
|
132
|
|
||||
Segment loss
|
$
|
(43
|
)
|
|
$
|
(33
|
)
|
|
$
|
(77
|
)
|
|
$
|
(54
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Loan servicing income, net:
|
|
|
|
|
|
|
|
||||||||
Loan servicing income:
|
|
|
|
|
|
|
|
|
|
||||||
Servicing fees from capitalized portfolio
|
$
|
48
|
|
|
$
|
67
|
|
|
$
|
102
|
|
|
$
|
137
|
|
Subservicing fees
|
10
|
|
|
18
|
|
|
21
|
|
|
36
|
|
||||
MSR yield on secured asset
(1)
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Late fees and other ancillary servicing revenue
|
6
|
|
|
10
|
|
|
15
|
|
|
18
|
|
||||
Loss on sale of MSRs
|
(4
|
)
|
|
—
|
|
|
(13
|
)
|
|
(2
|
)
|
||||
Curtailment interest paid to investors
|
(3
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
(7
|
)
|
||||
Loan servicing income
|
$
|
58
|
|
|
$
|
91
|
|
|
$
|
120
|
|
|
$
|
182
|
|
Changes in fair value of mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|||||||
Actual prepayments of the underlying mortgage loans
|
$
|
(18
|
)
|
|
$
|
(27
|
)
|
|
$
|
(37
|
)
|
|
$
|
(48
|
)
|
Actual receipts of recurring cash flows
|
(8
|
)
|
|
(8
|
)
|
|
(16
|
)
|
|
(13
|
)
|
||||
Market-related fair value adjustments
(2)
|
(3
|
)
|
|
(70
|
)
|
|
(5
|
)
|
|
(165
|
)
|
||||
Changes in fair value of MSR asset
(2)
|
(29
|
)
|
|
(105
|
)
|
|
(58
|
)
|
|
(226
|
)
|
||||
Change in fair value of MSRs secured liability
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Net derivative gain related to MSRs
|
—
|
|
|
58
|
|
|
—
|
|
|
143
|
|
||||
Total
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
61
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
||||||||
Net interest expense:
|
|
|
|
|
|
|
|
||||||||
Interest income
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
$
|
5
|
|
Secured interest expense
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(5
|
)
|
||||
MSRs secured interest expense
(2)
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Unsecured interest expense
|
(9
|
)
|
|
(11
|
)
|
|
(19
|
)
|
|
(21
|
)
|
||||
Total
|
$
|
(7
|
)
|
|
$
|
(10
|
)
|
|
$
|
(15
|
)
|
|
$
|
(21
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Corporate overhead allocation
|
$
|
10
|
|
|
$
|
13
|
|
|
$
|
19
|
|
|
$
|
27
|
|
Repurchase and foreclosure-related charges
|
3
|
|
|
5
|
|
|
2
|
|
|
3
|
|
||||
Legal and regulatory reserves
|
13
|
|
|
—
|
|
|
22
|
|
|
5
|
|
||||
Other expenses
|
3
|
|
|
3
|
|
|
7
|
|
|
7
|
|
||||
Total
|
$
|
29
|
|
|
$
|
21
|
|
|
$
|
50
|
|
|
$
|
42
|
|
(1)
|
Related to the secured borrowing treatment of the June 2017 sale of MSRs to New Residential, income in MSR yield on secured asset fully offsets the expense in
MSRs secured interest expense
.
|
(2)
|
Related to the secured borrowing treatment of the June 2017 sale of MSRs to New Residential, Market-related fair value adjustments include a $1 million increase to change in fair value for MSRs under secured borrowing arrangements, which fully offsets the decrease to
Change in fair value of MSRs secured liability
.
|
Other
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In millions)
|
||||||||||||||
Salaries and related expenses
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
33
|
|
|
$
|
31
|
|
Professional and third-party service fees
|
14
|
|
|
22
|
|
|
40
|
|
|
47
|
|
||||
Technology equipment and software expenses
|
4
|
|
|
5
|
|
|
9
|
|
|
10
|
|
||||
Occupancy and other office expenses
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Depreciation and amortization
|
2
|
|
|
1
|
|
|
3
|
|
|
2
|
|
||||
Exit and disposal costs
|
6
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||
Other
|
3
|
|
|
2
|
|
|
5
|
|
|
5
|
|
||||
Total expenses before allocation
|
47
|
|
|
46
|
|
|
107
|
|
|
96
|
|
||||
Corporate overhead allocation:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage Production segment
|
(26
|
)
|
|
(30
|
)
|
|
(51
|
)
|
|
(64
|
)
|
||||
Mortgage Servicing segment
|
(10
|
)
|
|
(13
|
)
|
|
(19
|
)
|
|
(27
|
)
|
||||
Total expenses
|
11
|
|
|
3
|
|
|
37
|
|
|
5
|
|
||||
Net loss before income taxes
|
$
|
(11
|
)
|
|
$
|
(3
|
)
|
|
$
|
(37
|
)
|
|
$
|
(5
|
)
|
RISK MANAGEMENT
|
Interest Rate Risk
|
Consumer Credit Risk
|
Counterparty and Concentration Risk
|
•
|
27%
through our PLS relationship with Morgan Stanley Private Bank, N.A. ("Morgan Stanley");
|
•
|
27%
through the Real Estate channel, from our relationships with Realogy and its affiliates;
|
•
|
12%
through our PLS relationship with HSBC Bank USA ("HSBC"); and
|
•
|
8%
through our PLS relationship with Merrill Lynch Home Loans, a division of Bank of America, N.A. ("Merrill Lynch").
|
LIQUIDITY AND CAPITAL RESOURCES
|
•
|
$146 million
related to the exit of the PLS business, including expected operating losses and costs to complete the exit;
|
•
|
$29 million
for costs associated with re-engineering and transitioning our business;
|
•
|
$524 million
to retire a portion of our senior unsecured notes in July 2017, including the early tender premium paid; and
|
•
|
$24 million
for payment of MSR transaction costs and strategic review advisory, legal and professional fees.
|
|
Total Assets
|
|
Collateral for Asset-backed borrowing arrangements
|
|
Sale
Commitments
(1)
|
|
Other
(2)
|
|
Unencumbered Assets
|
|||||||||||
|
(In millions)
|
|||||||||||||||||||
Cash and cash equivalents
|
$
|
1,001
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,001
|
|
|
Restricted cash
|
75
|
|
|
34
|
|
|
—
|
|
|
41
|
|
|
—
|
|
||||||
Mortgage loans held for sale
|
625
|
|
|
535
|
|
|
—
|
|
|
—
|
|
|
90
|
|
||||||
Accounts receivable, net
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
||||||
Servicing advances, net
|
473
|
|
|
116
|
|
|
104
|
|
|
205
|
|
|
48
|
|
||||||
Mortgage servicing rights
|
555
|
|
|
—
|
|
|
427
|
|
|
114
|
|
|
14
|
|
||||||
Property and equipment, net
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
||||||
Other assets
|
75
|
|
|
—
|
|
|
—
|
|
|
3
|
|
—
|
|
72
|
|
|||||
Total assets
|
$
|
2,906
|
|
|
$
|
685
|
|
|
$
|
531
|
|
|
$
|
363
|
|
|
$
|
1,327
|
|
(1)
|
Total Servicing advances committed to be transferred under our MSR sale agreements of
$220 million
as of June 30, 2017 includes both advances that are presently collateral for asset-backed borrowing arrangements and amounts that are self-funded. Therefore, the Servicing advances committed under MSR sale agreements appears in both columns of the table above.
|
(2)
|
Other restrictions and encumbrances include the following:
|
•
|
Restricted cash represents letters of credit, funds received for pending mortgage closings, and other contractual arrangements.
|
•
|
Servicing advances represent the balance of Servicing advance liabilities for advances funded by our subservicing clients, as discussed below under "
—
Debt
—
Servicing Advance Funding Arrangements".
|
•
|
MSRs represent amounts under secured borrowing arrangements where we have recognized a liability for MSRs transferred to a third party that does not meet the criteria for sale accounting. See further discussion in
Note 1, 'Summary of Significant Accounting Policies' in the accompanying Notes to Condensed Consolidated Financial Statements
.
|
Cash Flows
|
|
Six Months Ended
June 30, |
|
|
||||||||
|
2017
|
|
2016
|
|
Change
|
||||||
|
(In millions)
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
$
|
50
|
|
|
$
|
(136
|
)
|
|
$
|
186
|
|
Investing activities
|
39
|
|
|
139
|
|
|
(100
|
)
|
|||
Financing activities
|
6
|
|
|
96
|
|
|
(90
|
)
|
|||
Net increase in Cash and cash equivalents
|
$
|
95
|
|
|
$
|
99
|
|
|
$
|
(4
|
)
|
Debt
|
|
Outstanding Balance
|
|
Collateral
(1)
|
||||
|
(In millions)
|
||||||
Warehouse facilities
|
$
|
519
|
|
|
$
|
544
|
|
Servicing advance facility
|
65
|
|
|
141
|
|
||
Unsecured debt, net
|
608
|
|
|
—
|
|
||
Total
|
$
|
1,192
|
|
|
$
|
685
|
|
(1)
|
Assets held as collateral are not available to pay our general obligations.
|
|
Total
Capacity
|
|
Outstanding Balance
|
|
Available
Capacity
(1)
|
|
Maturity
Date
|
||||||
|
(In millions)
|
|
|
||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|||
Committed facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Wells Fargo Bank, N.A.
|
$
|
350
|
|
|
$
|
260
|
|
|
$
|
90
|
|
|
12/1/2017
|
Bank of America, N.A.
|
200
|
|
|
166
|
|
|
34
|
|
|
9/29/2017
|
|||
Barclays Bank PLC
(2)
|
100
|
|
|
89
|
|
|
11
|
|
|
7/31/2017
|
|||
Committed warehouse facilities
|
650
|
|
|
515
|
|
|
135
|
|
|
|
|||
Uncommitted facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Fannie Mae
|
200
|
|
|
4
|
|
|
196
|
|
|
n/a
|
|||
Barclays Bank PLC
|
100
|
|
|
—
|
|
|
100
|
|
|
n/a
|
|||
Total
|
$
|
950
|
|
|
$
|
519
|
|
|
$
|
431
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Off-Balance Sheet Gestation Facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Uncommitted facilities:
|
|
|
|
|
|
|
|
|
|
|
|||
JP Morgan Chase Bank, N.A.
|
$
|
150
|
|
|
$
|
—
|
|
|
$
|
150
|
|
|
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.
|
(2)
|
On July 31, 2017, the maturity of this facility was extended to January 31, 2018.
|
|
Total
Capacity
|
|
Outstanding Balance
|
|
Available
Capacity
(1)
|
|
Maturity
Date
|
||||||
|
(In millions)
|
|
|
||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|||
Servicing Advance Receivables Trust
(2)
|
$
|
100
|
|
|
$
|
65
|
|
|
$
|
35
|
|
|
3/15/2018
|
Subservicing advance liabilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Client-funded amounts
|
n/a
|
|
|
205
|
|
|
n/a
|
|
|
n/a
|
|||
Total
|
|
|
|
$
|
270
|
|
|
|
|
|
|
(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)
|
On June 15, 2017, the facility's revolving period was extended and the final maturity date was revised to March 15, 2018. At our request, the aggregate maximum principal amount of the facility was also reduced by
$55 million
to
$100 million
.
|
|
Balance
at Maturity (1) |
|
Outstanding Balance
|
|
Maturity
Date
|
|||||
|
(In millions)
|
|
|
|
||||||
7.375% Term notes due in 2019
|
$
|
275
|
|
|
$
|
273
|
|
|
9/1/2019
|
|
6.375% Term notes due in 2021
|
340
|
|
|
335
|
|
|
8/15/2021
|
|
||
Total
|
$
|
615
|
|
|
$
|
608
|
|
|
0
|
|
(1)
|
On June 19, 2017, we commenced tender offers to purchase for cash any and all of the Senior Notes due in 2019 and 2021. On July 3, 2017, we repaid
$178 million
of the 2019 Notes and
$318 million
of the 2021 Notes for an aggregate
$524 million
in cash, plus accrued interest. On July 17, 2017, upon expiration of the tender offer, the amount of notes repaid was not significant. At the completion of the tender,
$119 million
of note principal remains outstanding, representing
$97 million
of the 2019 Notes and
$22 million
of the 2021 Notes. We expect we will recognize a loss of
$35 million
in Other Operating Expenses in the
Condensed Consolidated Statements of Operations
related to this debt retirement during the three months ended September 30, 2017.
|
|
Senior
Debt
|
|
Short-Term
Debt
|
Moody’s Investors Service
|
B1
|
|
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
|
$
|
12
|
|
|
$
|
7
|
|
|
$
|
4
|
|
|
$
|
(4
|
)
|
|
$
|
(9
|
)
|
|
$
|
(19
|
)
|
Interest rate lock commitments
(1)
|
11
|
|
|
7
|
|
|
4
|
|
|
(5
|
)
|
|
(10
|
)
|
|
(24
|
)
|
||||||
Forward delivery commitments
(1)
|
(25
|
)
|
|
(14
|
)
|
|
(8
|
)
|
|
9
|
|
|
18
|
|
|
39
|
|
||||||
Option contracts
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
5
|
|
||||||
Total Mortgage pipeline
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
MSRs and related secured liability
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage servicing rights owned
(2)
|
(122
|
)
|
|
(58
|
)
|
|
(28
|
)
|
|
26
|
|
|
49
|
|
|
88
|
|
||||||
Mortgage servicing rights secured asset
(3)
|
(32
|
)
|
|
(15
|
)
|
|
(7
|
)
|
|
6
|
|
|
12
|
|
|
21
|
|
||||||
MSRs secured liability
(3)
|
32
|
|
|
15
|
|
|
7
|
|
|
(6
|
)
|
|
(12
|
)
|
|
(21
|
)
|
||||||
Total MSRs and related secured liability
|
(122
|
)
|
|
(58
|
)
|
|
(28
|
)
|
|
26
|
|
|
49
|
|
|
88
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unsecured term debt
|
(19
|
)
|
|
(9
|
)
|
|
(5
|
)
|
|
5
|
|
|
9
|
|
|
18
|
|
||||||
Total, net
|
$
|
(143
|
)
|
|
$
|
(67
|
)
|
|
$
|
(33
|
)
|
|
$
|
31
|
|
|
$
|
59
|
|
|
$
|
107
|
|
(1)
|
Included in Other assets or Other liabilities in the
Condensed Consolidated Balance Sheets
.
|
(2)
|
During 2017, we ended our MSR-related derivative hedge coverage as a result of our sale agreement with New Residential that fixes the prices we expect to realize at future transfer dates. We do not expect changes in interest rates to substantially impact the fair value of owned MSRs since our determination of fair value at
June 30, 2017
considers the committed pricing of MSR sale agreements, which is for the substantial majority of our remaining owned MSRs. For further discussion of those agreements and other requirements that must be met to complete such sales, see
Note 4, 'Servicing Activities' in the accompanying Notes to Condensed Consolidated Financial Statements
.
|
(3)
|
During June 2017, we sold
$13.2 billion
in unpaid principal balance of MSRs to New Residential, which has a fair value of
$114 million
as of
June 30, 2017
. This transfer was accounted for as a secured borrowing, and accordingly, the MSR remained on the balance sheet with the proceeds from sale recognized as
MSRs secured liability
. The interest rate sensitivity of this secured borrowing is reflected within Mortgage servicing rights secured asset and
MSRs secured liability
, and any changes in fair value are expected to fully offset.
|
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 Common Stock
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total number of shares purchased
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs
(1)
|
|
Approximate dollar value of shares that may yet be purchased under the plan or program
|
||||||
April 1, 2017 to April 30, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
100,000,000
|
|
May 1, 2017 to May 31, 2017
|
|
526,964
|
|
|
13.54
|
|
|
526,964
|
|
|
92,866,872
|
|
||
June 1, 2017 to June 30, 2017
|
|
1,234,000
|
|
|
13.63
|
|
|
1,234,000
|
|
|
76,043,105
|
|
||
Total
|
|
1,760,964
|
|
|
$
|
13.60
|
|
|
1,760,964
|
|
|
$
|
76,043,105
|
|
(1)
|
On May 3, 2017, our Board of Directors authorized up to
$100 million
in open market purchases, and this authorization does not have a defined expiration date.
|
Item 3. Defaults Upon Senior Securities
|
Item 4. Mine Safety Disclosures
|
Item 5. Other Information
|
Item 6. Exhibits
|
|
PHH CORPORATION
|
|
|
|
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
President and Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Michael R. Bogansky
|
|
|
Michael R. Bogansky
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Senior Vice President and Chief Financial Officer
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(Principal Financial Officer and Principal Accounting Officer)
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Exhibit No.
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Description
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Incorporation by Reference
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4.1
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Fourth Supplemental Indenture, dated as of July 3, 2017, among PHH Corporation, as issuer and The Bank of New York Mellon Trust Company, N.A., as trustee.
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Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on July 5, 2017.
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4.2
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Fifth Supplemental Indenture, dated as of July 3, 2017, among PHH Corporation, as issuer and The Bank of New York Mellon Trust Company, N.A., as trustee.
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Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on July 5, 2017.
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10.1
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Letter Agreement among PHH Corporation, EJF Capital LLC, EJF Debt Opportunities Master Fund, L.P. and EJF Debt Opportunities GP, LLC dated April 28, 2017.
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Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 28, 2017.
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10.2
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Amendment Number One dated as of June 16, 2017 to the Flow Mortgage Loan Subservicing Agreement between New Residential Mortgage LLC, as Servicing Rights Owner, and PHH Mortgage Corporation, as Servicer.
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Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 19, 2017.
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10.3*
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MSR Portfolio Defense Agreement, dated as of June 16, 2017, by and between PHH Mortgage Corporation, as subservicer, and New Residential Mortgage LLC, as the MSR owner.
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Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on June 19, 2017.
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10.4†
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Consulting Agreement by and between PHH Corporation and Glen A. Messina dated June 28, 2017.
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Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 29, 2017.
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10.5†
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Separation and General Release Agreement dated June 28, 2017 by and between Glen A. Messina and PHH Corporation.
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Filed herewith.
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10.6†
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Separation and General Release Agreement dated June 30, 2017 by and between Kathryn Ruggieri and PHH Corporation.
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Filed herewith.
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith.
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith.
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Furnished herewith.
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Furnished herewith.
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101.INS
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XBRL Instance Document.
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Filed herewith.
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101.SCH
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XBRL Taxonomy Extension Schema Document.
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Filed herewith.
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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Filed herewith.
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101.LAB
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XBRL Taxonomy Extension Labels Linkbase Document.
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Filed herewith.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.
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Filed herewith.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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Filed herewith.
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†
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Management or compensatory plan or arrangement required to be filed pursuant to Item 601(b)(10) of Regulation S-K.
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**
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Confidential treatment has been granted 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.
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I.
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Last Day of Employment
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II.
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Consideration and Acknowledgement of Certain Obligations
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(a)
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Employee is bound by the provisions of the Restrictive Covenant Agreement attached hereto as
Exhibit A
.
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(b)
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Consistent with the Letter, Company shall pay Employee in an amount equal to the cost of premiums for COBRA coverage upon loss of coverage under the Company’s group health plan due to his termination on the Termination Date for a period of 24 months from the Termination Date. The Company will impute the amount of this payment as taxable income to Employee.
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(c)
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Consistent with the Letter, Company shall pay Employee severance in an amount equal to 24 months of Employee’s annual base salary as of the effective date of the Letter ($950,000.00). Such severance payments shall be subject to applicable withholding taxes. Employee’s severance shall be payable in bi-weekly installments in accordance with the Company’s normal payroll practices, with the first payment commencing the first payroll period after the date on which the Release becomes irrevocable following the Termination Date.
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(d)
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Consistent with the Letter, Company shall pay Employee one hundred percent (100%) of the target amount of Employee’s 2017 Management Incentive Plan Award in substantially equal installments no less frequently than monthly during the 24 month period following Employee’s termination from employment.
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(e)
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The Company shall provide Employee with certain payments, if any, in accordance with outstanding long term incentive and other awards, as listed on
Exhibit C
, subject to all terms and conditions of the applicable awards and plans, consistent with a termination without cause and the Letter Agreement, effective on the Termination Date;
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(f)
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Consistent with the Letter, Company shall provide Employee with up to $18,000 in reasonable outplacement services by a provider selected by the Company to be used within 24 months of the Termination Date;
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(g)
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None of the foregoing payments or benefits will be made or provided if this Agreement and the Release have not been signed by Employee, and the Release has not become irrevocable, on or before August 23, 2017. Payment and provision of the foregoing benefits are conditioned on Employee’s continued compliance with the restrictive covenants in this Agreement, and other post-employment obligations that survive Employee’s termination.
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III.
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General Release of Claims
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(a)
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Employee without limitation hereby irrevocably and unconditionally releases and forever discharges the Company, its subsidiaries, divisions, affiliates, related entities, officers, agents, directors, supervisors, employees, representatives, successors and assigns, and all persons acting by, through, under, or in concert with any of them (collectively, “Released Parties”) from any and all charges, complaints, claims, causes of action, demands, controversies, agreements, promises, damages and liabilities of any kind or nature whatsoever, both at law and equity, known or unknown, suspected or unsuspected, anticipated or unanticipated (hereinafter referred to as “claim” or “claims”), arising from conduct occurring on or before the effective date of this Agreement and General Release, including without limitation any claims incidental to or arising out of Employee’s employment with the Company or the termination thereof with respect to all applicable federal, state or local fair employment practices laws, under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq. (“ADEA “),the New Jersey Law Against Discrimination, N.J. Stat. Ann. § 10:5-1 et seq., and the New Jersey Equal Pay Act, N.J. Stat. Ann. § 34:11-56.1 et seq., the New Jersey Family Leave Act, N.J. Stat. Ann. § 34:11B-1 et seq., the New Jersey Conscientious Employee Protection Act, N.J. Stat. Ann. § 34:19-1 et seq., the Millville Dallas Airmotive Plant Job Loss Notification Act, P.L. 2007, c.212, C.34:21-2, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2101 et seq. (“WARN”), all as amended, any other alleged violation of any local, state or federal law, regulation, ordinance, public policy, and/or any contract, tort, or fraud related claim arising under common law. This provision is intended by the parties to be all encompassing and to act as a full and total release of any claim, that Employee might have or has had, that exists or ever has existed on or to the effective date of this Agreement and General Release. In this regard, Employee agrees that by signing this Agreement and General Release and by acceptance of the payment described above, Employee gives up any and all rights EMPLOYEE may have to file any claim or action which Employee may now have, has ever had, or may in the future have, with respect to any matter pertaining to or arising from Employee’s employment with the Company. In this regard, Employee agrees that this Agreement and General Release covers both known and unknown claims and actions.
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(b)
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The parties hereby acknowledge and agree that nothing in the Agreement and General Release shall be construed as a release of Employee’s non-waivable statutory rights under applicable federal and state law or rights to seek the enforcement of the Company’s obligations under this Agreement and General Release.
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(c)
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Older Worker Benefit Protection Act
. As may be applicable to Employee under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.), (“ADEA”), Employee understands and agrees that:
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i.
|
Rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.) are being waived, except as provided herein.
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ii.
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He has had the opportunity of a full 45 days within which to consider this Agreement and release provided herein before signing it, and if he has not taken the full time period, he has done so knowingly and voluntarily, thereby expressly waiving this time period and agreeing
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iii.
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He has carefully read and fully understands all of the provisions of this Agreement and general release provided herein and is knowingly and voluntarily agreeing to be legally bound by all of the terms set forth in this Agreement.
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iv.
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He is, through this Agreement and the general release provided herein, releasing the Released Parties from any and all claims he may have against the Company or such individuals.
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v.
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He is hereby advised in writing to consider the terms of this Agreement and the general release provided herein and consult with an attorney of his choice prior to signing this Agreement.
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vi.
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He has a full 7 days following the execution of this Agreement to revoke this Agreement and the general release provided herein, and has been and hereby is advised in writing that this Agreement and general release shall not become effective or enforceable until the revocation period has expired. Revocation of this Agreement and the general release provided herein must be made in writing and must be received by the William Brown, General Counsel of PHH Corporation, 3000 Leadenhall Road, Mail Stop LGL, Mt. Laurel, NJ 08054 no later than close of business on the seventh full day after the execution of this Agreement and General Release.
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vii.
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He understands that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.) that may arise after the date this Agreement and General Release is signed are not waived.
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viii.
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He hereby acknowledges receipt of the “Notice of Information Required under the Older Workers Benefit Protection Act” which is attached hereto and incorporated herein as
Exhibit D.
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(d)
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Employee, for himself, his heirs, administrators, representatives, executors, successors and to the maximum extent permitted by law, agrees that he has not filed, nor will file, a lawsuit asserting any claims which are released by this general release, or to accept any benefit from any lawsuit which might be filed by another person or government entity based in whole or in part on any event, act, or omission which is the subject of this Release. Employee understands that nothing in this Agreement and General Release (including but not limited to the release of claims, promise not to sue, and confidentiality, cooperation, non-disparagement, and return of property provisions) (a) limits or affects his right to challenge the validity of this Release under the ADEA or the Older Worker Protection Act (“OWBPA”) or (b) prevents Employee from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), the Securities and Exchange Commission (“SEC”), or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information, or (c) prevents Employee from exercising his rights under Section 7 of the National Labor Relations Act (“NLRA”) to engage in protected, concerted activity with other employees. Although by signing this Agreement and General Release Employee is waiving his right to recover any individual relief (including backpay, frontpay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by Employee or on his behalf by any third party, except for any right Employee may have to receive a payment or award from a government agency (and not the Company) for information provided to the government agency.
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(e)
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This General Release specifically excludes Employee’s indemnification as an officer and employee of the Company or any affiliate thereof, coverage under any officers’ and directors’ liability insurance policies, and rights of defense (or the cost thereof) or indemnification under the Company’s bylaws or charter or resolution of the Company’s Board of Directors. This General Release also specifically excludes Employee’s rights to his vested employee benefits. Nothing contained in this Release shall release Employee from his obligations, including any obligations to abide by the restrictive covenants in the Restrictive Covenant Agreement that continue or are to be performed following termination of employment.
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(f)
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Nothing contained in this Agreement is intended to restrict Employee’s right and responsibility to give truthful testimony under oath or precludes Employee from participating in an investigation, filing a charge, or otherwise communicating with the EEOC, the SEC, the NLRB, or other federal, state or local government agency.
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(g)
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The provisions of this general release of claims are severable, and if any part or portion of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This general release shall become effective and enforceable on the eighth day following execution by Employee, provided he does not exercise his right of revocation as described above. If Employee fails to sign this Agreement or revokes his signature, this Agreement will be without force or effect.
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(h)
|
Nothing in this Agreement prohibits Employee from reporting an event that Employee reasonably and in good faith believes is a violation of law to the relevant law-enforcement agency (such as the SEC, EEOC, NLRB or Department of Labor), or from cooperating in an investigation conducted by such a government agency. This may include disclosure of trade secret or confidential information within the limitations permitted by the 2016 Defend Trade Secrets Act (DTSA). Employee is hereby provided notice that under the DTSA, (1) no individual will be held criminally or civilly liable under Federal or State trade secret law for the disclosure of a trade secret (as defined in the Economic Espionage Act) that (A) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or, (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; and, (2) an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order.
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IV.
|
Non-Disparagement
|
(a)
|
Employee further agrees that, subject to reimbursement of reasonable expenses, he will cooperate fully with the Company and its counsel with respect to any matter (including any pending or future litigation, investigations, or governmental proceedings) which relates to matters with which Employee was involved during his employment with the Company. Employee will render such cooperation in a timely manner upon reasonable notice from the Company.
|
(b)
|
Employee further agrees that within five (5) business days after the Termination Date, Employee will update his professional profiles on any social media or other social networking sites to delete any references to his status as an officer of the Company and remove PHH Corporation as his current employer.
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VII.
|
Arbitration
|
VIII.
|
Miscellaneous
|
(a)
|
No Admission of Liability
. This Agreement is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company or any other person to Employee, or by Employee or any other person to the Company.
|
(b)
|
Absence of Reliance
. Employee acknowledges that in agreeing to this Agreement, she has not relied in any way upon representations or statements of the Company other than those representations or statements set forth in this Agreement.
|
(c)
|
No Reinstatement
. Employee agrees that he will not apply for reinstatement with the Company or any other member of the Company or seek in any way to be reinstated, re-employed or hired by the Company or any other member of the Company in the future.
|
(d)
|
Section Headings
. The section headings are solely for convenience of reference and shall not in any way affect the interpretation of this Agreement.
|
(e)
|
409A Compliance
. With the exception of the terms of any outstanding long term incentive awards, the parties agree that the payments and benefits under Section II of this Agreement will, to the maximum extent possible, not be subject to the 6 month delay in payment described in Section 409A of the Internal Revenue Code and the Treasury Regulations thereunder (“
Section 409A
”) due to application of exemptions under Section 409A, including without limitation Treasury Regulations Section 1.409A-1(b)(9)(iii) (the “two times, two year rule”). However, Employee agrees that if Employee is a “specified employee” under Section 409A, then any amounts that are considered deferred compensation subject to Section 409A will, to the extent necessary to comply with Section 409A, be subject to a 6-month delay provided in Section 409A. For purposes of Section 409Athe right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, that are not exempt from Section 409A, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
|
(f)
|
Notice
. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States certified mail, return receipt requested, or by overnight courier, postage prepaid, to the Company at its corporate headquarters address, to the attention of the Secretary of the Company, or to Employee at the home address most recently communicated by Employee to the Company in writing.
|
(g)
|
Successors and Assigns
. This Agreement will inure to the benefit of and be binding upon the Company and Employee and their respective successors, executors, administrators and heirs. Employee may not make any assignment of this Agreement or any interest herein, by operation of law or otherwise. The Company may assign this Agreement to any successor and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, without the written consent of Employee.
|
(h)
|
Severability
. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Agreement will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.
|
(i)
|
Entire Agreement; Amendments
. Except as otherwise expressly provided herein and in the Agreements attached hereto as
Exhibits A, B, D and E,
this Agreement contains the entire agreement and understanding of the Parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter hereof. Except as otherwise expressly provided herein and in the Agreement attached hereto as
Exhibits A and B
and in outstanding long term and other incentive award agreements listed on
Exhibit C,
this Agreement shall control in the event of a conflict with any other agreement or document. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the Parties hereto.
|
1.
|
Following completion of the review of strategic alternatives and the Company’s decision to reduce costs in 2017, PHH Corporation (“PHH”) has decided to eliminate certain members of the executive leadership team.
|
2.
|
For purposes of this Group Disclosure Statement, all executives who report directly to the Chief Executive Officer (with the exception of the SVP, Communications) and the Chief Executive Officer were eligible for selection and were considered for this layoff. This group of individuals is referred to as the “decisional unit.”
|
3.
|
All individuals selected for termination are eligible to receive severance payments consistent with the terms of March 29, 2017 Severance Letters, in exchange for an irrecovable Agreement and General Release (“Agreement”), which must be signed and returned no later than 45 calendar days
after
their termination date. Once the valid Agreement is signed, individuals have 7 calendar days to revoke the Agreement.
|
4.
|
All individuals within the decisional unit were selected to exit the organization in 2017, commencing June 28, 2017. Consistent with the requirements of the Age Discrimination in Employment Act (“ADEA”), set forth below is a list of the ages and job titles of all individuals within the decisional unit who were considered and selected for termination and who are eligible to receive the Consideration set forth in the Severance Letters.
|
5.
|
Neither one’s age, sex, race, creed, national origin, religion nor any other protected characteristic was considered in selecting an individual to be terminated or to receive Consideration as described above.
|
Job Title
|
Age
|
Selected
|
Not Selected
|
Chief Executive Officer,
PHH Corporation
|
55
|
X
|
|
Chief Human Resources Officer,
PHH Corporation
|
63
|
x
|
|
Chief Information Officer,
PHH Corporation
|
45
|
x
|
|
Chief Compliance and Risk Officer,
PHH Corporation
|
47
|
x
|
|
General Counsel, PHH Corporation
|
59
|
x
|
|
Head, Financial Institutions
|
48
|
x
|
|
I.
|
Last Day of Employment
|
II.
|
Consideration and Acknowledgement of Certain Obligations
|
(a)
|
Employee is bound by the provisions of the Restrictive Covenant Agreement attached hereto as
Exhibit A
.
|
(b)
|
Consistent with the Letter, Company shall pay Employee in an amount equal to the cost of premiums for COBRA coverage upon loss of coverage under the Company’s group health plan due to her termination on the Termination Date for a period of 12 months from the Termination Date. The Company will impute the amount of this payment as taxable income to Employee.
|
(c)
|
Consistent with the Letter, Company shall pay Employee severance in an amount equal to 12 months of Employee’s annual base salary as of the effective date of the Letter ($355,000.00). Such severance payments shall be subject to applicable withholding taxes. Employee’s severance shall be payable in bi-weekly installments in accordance with the Company’s normal payroll practices, with the first payment commencing the first payroll period after the date on which the Release becomes irrevocable following the Termination Date.
|
(d)
|
Consistent with the Letter, Company shall pay Employee one hundred percent (100%) of the target amount of Employee’s 2017 Management Incentive Plan Award in substantially equal installments no less frequently than monthly during the 12 month period following Employee’s termination from employment.
|
(e)
|
The Company shall provide Employee with certain payments, if any, in accordance with outstanding long term incentive and other awards, as listed on
Exhibit C
, subject to all terms and conditions of the applicable awards and plans, consistent with a termination without cause and the Letter Agreement, effective on the Termination Date;
|
(f)
|
Consistent with the Letter, Company shall provide Employee with up to $18,000 in reasonable outplacement services by a provider selected by the Company to be used within 24 months of the Termination Date;
|
(g)
|
None of the foregoing payments or benefits will be made or provided if this Agreement and the Release have not been signed by Employee, and the Release has not become irrevocable, on or before August 23, 2017. Payment and provision of the foregoing benefits are conditioned on Employee’s continued compliance with the restrictive covenants in this Agreement, and other post-employment obligations that survive Employee’s termination.
|
III.
|
General Release of Claims
|
(a)
|
Employee without limitation hereby irrevocably and unconditionally releases and forever discharges the Company, its subsidiaries, divisions, affiliates, related entities, officers, agents, directors, supervisors, employees, representatives, successors and assigns, and all persons acting by, through, under, or in concert with any of them (collectively, “Released Parties”) from any and all charges, complaints, claims, causes of action, demands, controversies, agreements, promises, damages and liabilities of any kind or nature whatsoever, both at law and equity, known or unknown, suspected or unsuspected, anticipated or unanticipated (hereinafter referred to as “claim” or “claims”), arising from conduct occurring on or before the effective date of this Agreement and General Release, including without limitation any claims incidental to or arising out of Employee’s employment with the Company or the termination thereof with respect to all applicable federal, state or local fair employment practices laws, under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq. (“ADEA “),the New Jersey Law Against Discrimination, N.J. Stat. Ann. § 10:5-1 et seq., and the New Jersey Equal Pay Act, N.J. Stat. Ann. § 34:11-56.1 et seq., the New Jersey Family Leave Act, N.J. Stat. Ann. § 34:11B-1 et seq., the New Jersey Conscientious Employee Protection Act, N.J. Stat. Ann. § 34:19-1 et seq., the Millville Dallas Airmotive Plant Job Loss Notification Act, P.L. 2007, c.212, C.34:21-2, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2101 et seq. (“WARN”), all as amended, any other alleged violation of any local, state or federal law, regulation, ordinance, public policy, and/or any contract, tort, or fraud related claim arising under common law. This provision is intended by the parties to be all encompassing and to act as a full and total release of any claim, that Employee might have or has had, that exists or ever has existed on or to the effective date of this Agreement and General Release. In this regard, Employee agrees that by signing this Agreement and General Release and by acceptance of the payment described above, Employee gives up any and all rights EMPLOYEE may have to file any claim or action which Employee may now have, has ever had, or may in the future have, with respect to any matter pertaining to or arising from Employee’s employment with the Company. In this regard, Employee agrees that this Agreement and General Release covers both known and unknown claims and actions.
|
(b)
|
The parties hereby acknowledge and agree that nothing in the Agreement and General Release shall be construed as a release of Employee’s non-waivable statutory rights under applicable federal and state law or rights to seek the enforcement of the Company’s obligations under this Agreement and General Release.
|
(c)
|
Older Worker Benefit Protection Act
. As may be applicable to Employee under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.), (“ADEA”), Employee understands and agrees that:
|
i.
|
Rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.) are being waived, except as provided herein.
|
ii.
|
She has had the opportunity of a full 45 days within which to consider this Agreement and release provided herein before signing it, and if she has not taken the full time period, she has done so knowingly and voluntarily, thereby expressly waiving this time period and agreeing not to assert the invalidity of this Agreement and the general release provided herein or any portion thereof on this basis.
|
iii.
|
She has carefully read and fully understands all of the provisions of this Agreement and general release provided herein and is knowingly and voluntarily agreeing to be legally bound by all of the terms set forth in this Agreement.
|
iv.
|
She is, through this Agreement and the general release provided herein, releasing the Released Parties from any and all claims she may have against the Company or such individuals.
|
v.
|
She is hereby advised in writing to consider the terms of this Agreement and the general release provided herein and consult with an attorney of her choice prior to signing this Agreement.
|
vi.
|
She has a full 7 days following the execution of this Agreement to revoke this Agreement and the general release provided herein, and has been and hereby is advised in writing that this Agreement and general release shall not become effective or enforceable until the revocation period has expired. Revocation of this Agreement and the general release provided herein must be made in writing and must be received by the William Brown, General Counsel of PHH Corporation, 3000 Leadenhall Road, Mail Stop LGL, Mt. Laurel, NJ 08054 no later than close of business on the seventh full day after the execution of this Agreement and General Release.
|
vii.
|
She understands that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621,
et
seq
.) that may arise after the date this Agreement and General Release is signed are not waived.
|
viii.
|
She hereby acknowledges receipt of the “Notice of Information Required under the Older Workers Benefit Protection Act” which is attached hereto and incorporated herein as
Exhibit D.
|
(d)
|
Employee, for herself, her heirs, administrators, representatives, executors, successors and to the maximum extent permitted by law, agrees that she has not filed, nor will file, a lawsuit asserting any claims which are released by this general release, or to accept any benefit from any lawsuit which might be filed by another person or government entity based in whole or in part on any event, act, or omission which is the subject of this Release. Employee understands that nothing in this Agreement and General Release (including but not limited to the release of claims, promise not to sue, and confidentiality, cooperation, non-disparagement, and return of property provisions) (a) limits or affects her right to challenge the validity of this Release under the ADEA or the Older Worker Protection Act (“OWBPA”) or (b) prevents Employee from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), the Securities and Exchange Commission (“SEC”), or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information, or (c) prevents Employee from exercising her rights under Section 7 of the National Labor Relations Act (“NLRA”) to engage in protected, concerted activity with other employees, Although by signing this Agreement and General Release Employee is waiving her right to recover any individual relief (including backpay, frontpay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by Employee or on her behalf by any third party, except for any right Employee may have to receive a payment or award from a government agency (and not the Company) for information provided to the government agency.
|
(e)
|
This General Release specifically excludes Employee’s indemnification as an officer and employee of the Company or any affiliate thereof, coverage under any officers’ and directors’ liability insurance policies, and rights of defense (or the cost thereof) or indemnification under the Company’s bylaws or charter or resolution of the Company’s Board of Directors. This General Release also specifically excludes Employee’s rights to her vested employee benefits. Nothing contained in this Release shall release Employee from her obligations, including any obligations to abide by the restrictive covenants in the Restrictive Covenant Agreement that continue or are to be performed following termination of employment.
|
(f)
|
Nothing contained in this Agreement is intended to restrict Employee’s right and responsibility to give truthful testimony under oath or precludes Employee from participating in an investigation, filing a charge, or otherwise communicating with the EEOC, the SEC, the NLRB, or other federal, state or local government agency.
|
(g)
|
The provisions of this general release of claims are severable, and if any part or portion of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This general release shall become effective and enforceable on the eighth day following execution by Employee, provided he does not exercise her right of revocation as described above. If Employee fails to sign this Agreement or revokes her signature, this Agreement will be without force or effect.
|
(h)
|
Nothing in this Agreement prohibits Employee from reporting an event that Employee reasonably and in good faith believes is a violation of law to the relevant law-enforcement agency (such as the SEC, EEOC, NLRB or Department of
|
IV.
|
Non-Disparagement
|
(a)
|
Employee further agrees that, subject to reimbursement of reasonable expenses, she will cooperate fully with the Company and its counsel with respect to any matter (including any pending or future litigation, investigations, or governmental proceedings) which relates to matters with which Employee was involved during her employment with the Company. Employee will render such cooperation in a timely manner upon reasonable notice from the Company.
|
(b)
|
Employee further agrees that within five (5) business days after the Termination Date, Employee will update her professional profiles on any social media or other social networking sites to delete any references to her status as an officer of the Company and remove PHH Corporation as her current employer.
|
VI.
|
Return of Company Property
.
|
VII.
|
Arbitration
|
VIII.
|
Miscellaneous
|
(a)
|
No Admission of Liability
. This Agreement is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company or any other person to Employee, or by Employee or any other person to the Company.
|
(b)
|
Absence of Reliance
. Employee acknowledges that in agreeing to this Agreement, she has not relied in any way upon representations or statements of the Company other than those representations or statements set forth in this Agreement.
|
(c)
|
No Reinstatement
. Employee agrees that she will not apply for reinstatement with the Company or any other member of the Company or seek in any way to be reinstated, re-employed or hired by the Company or any other member of the Company in the future.
|
(d)
|
Section Headings
. The section headings are solely for convenience of reference and shall not in any way affect the interpretation of this Agreement.
|
(e)
|
409A Compliance
. With the exception of the terms of any outstanding long term incentive awards, the parties agree that the payments and benefits under Section II of this Agreement will, to the maximum extent possible, not be subject to the 6 month delay in payment described in Section 409A of the Internal Revenue Code and the Treasury Regulations thereunder (“
Section 409A
”) due to application of exemptions under Section 409A, including without limitation Treasury Regulations Section 1.409A-1(b)(9)(iii) (the “two times, two year rule”). However, Employee agrees that if Employee is a “specified employee” under Section 409A, then any amounts that are considered deferred compensation subject to Section 409A will, to the extent necessary to comply with Section 409A, be subject to a 6-month delay provided in Section 409A. For purposes of Section 409Athe right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, that are not exempt from Section 409A, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
|
(f)
|
Notice
. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States certified mail, return receipt requested, or by overnight courier, postage prepaid, to the Company at its corporate headquarters address, to the attention of the Secretary of the Company, or to Employee at the home address most recently communicated by Employee to the Company in writing.
|
(g)
|
Successors and Assigns
. This Agreement will inure to the benefit of and be binding upon the Company and Employee and their respective successors, executors, administrators and heirs. Employee may not make any assignment of this Agreement or any interest herein, by operation of law or otherwise. The Company may assign this Agreement to any successor and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, without the written consent of Employee.
|
(h)
|
Severability
. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Agreement will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.
|
(i)
|
Entire Agreement; Amendments
. Except as otherwise expressly provided herein and in the Agreements attached hereto as
Exhibits A, B and D
this Agreement contains the entire agreement and understanding of the Parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter hereof. Except as otherwise expressly provided herein and in the Agreement attached hereto as
Exhibits A and B
and in outstanding long term and other incentive award agreements listed on
Exhibit C,
this Agreement shall control in the event of a conflict with any other agreement or document. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the Parties hereto.
|
(j)
|
Governing Law
. This Agreement will be governed by, and enforced in accordance with, the laws of the State of New Jersey without regard to the application of the principles of conflicts of laws.
|
(k)
|
Counterparts and Facsimiles
. This Agreement may be executed, including execution by facsimile signature, in multiple counterparts, each of which will be deemed an original, and all of which together will be deemed to be one and the same instrument.
|
1.
|
Following completion of the review of strategic alternatives and the Company’s decision to reduce costs in 2017, PHH Corporation (“PHH”) has decided to eliminate certain members of the executive leadership team.
|
2.
|
For purposes of this Group Disclosure Statement, all executives who report directly to the Chief Executive Officer (with the exception of the SVP, Communications) and the Chief Executive Officer were eligible for selection and were considered for this layoff. This group of individuals is referred to as the “decisional unit.”
|
3.
|
All individuals selected for termination are eligible to receive severance payments consistent with the terms of March 29, 2017 Severance Letters, in exchange for an irrecovable Agreement and General Release (“Agreement”), which must be signed and returned no later than 45 calendar days
after
their termination date. Once the valid Agreement is signed, individuals have 7 calendar days to revoke the Agreement.
|
4.
|
All individuals within the decisional unit were selected to exit the organization in 2017, commencing June 28, 2017. Consistent with the requirements of the Age Discrimination in Employment Act (“ADEA”), set forth below is a list of the ages and job titles of all individuals within the decisional unit who were considered and selected for termination and who are eligible to receive the Consideration set forth in the Severance Letters.
|
5.
|
Neither one’s age, sex, race, creed, national origin, religion nor any other protected characteristic was considered in selecting an individual to be terminated or to receive Consideration as described above.
|
Job Title
|
Age
|
Selected
|
Not Selected
|
Chief Executive Officer,
PHH Corporation
|
55
|
X
|
|
Chief Human Resources Officer,
PHH Corporation
|
63
|
x
|
|
Chief Information Officer,
PHH Corporation
|
45
|
x
|
|
Chief Compliance and Risk Officer,
PHH Corporation
|
47
|
x
|
|
General Counsel, PHH Corporation
|
59
|
x
|
|
Head, Financial Institutions
|
48
|
x
|
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
President and Chief Executive Officer
|
|
By:
|
/s/ Michael R. Bogansky
|
|
|
Michael R. Bogansky
|
|
|
Senior Vice President and Chief Financial Officer
|
|
By:
|
/s/ Robert B. Crowl
|
|
|
Robert B. Crowl
|
|
|
President and Chief Executive Officer
|
|
By:
|
/s/ Michael R. Bogansky
|
|
|
Michael R. Bogansky
|
|
|
Senior Vice President and Chief Financial Officer
|