PHH Corp. (PHH) Announces Sale of Mortgage Servicing Rights by HSBC Bank USA
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PHH Corp. (NYSE: PHH) was informed by HSBC Bank USA (“HSBC”) on August 19, 2016 that on such date, HSBC entered into an agreement to sell the mortgage servicing rights with respect to approximately 139,000 mortgage loans currently subserviced on behalf of HSBC by PHH Mortgage Corporation, a wholly-owned subsidiary of the Company. The Company was also advised that the purchaser of the mortgage servicing rights does not intend to retain PHH Mortgage Corporation as subservicer. While the sale and transfer is subject to investor and other approvals, the Company expects the servicing responsibilities with respect to the subject mortgage loans to be transferred to the purchaser or its designee in the fourth quarter of 2016. As of June 30, 2016, the units expected to transfer accounted for approximately 29% of the Company’s total subservicing portfolio units. The Company estimates that this represents a reduction in pre-tax earnings of approximately $10 million on an annualized basis, exclusive of any offsetting management actions.
The above-described sale of mortgage servicing rights does not impact HSBC’s origination activity with the Company or the portion of the HSBC subservicing portfolio not subject to the sale.
As a result of Merrill Lynch’s previously disclosed intent to insource its subservicing portfolio and HSBC’s pending sale of mortgage servicing rights described above, by December 31, 2016 the Company expects total subservicing units to decline by approximately 229,000, or approximately 47% of total subservicing units as of June 30, 2016. The Company is taking actions intended to realign direct operating costs to match client-driven reductions in subservicing and production volume, including actions to re-engineer facilities and overhead costs.
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