Profile: PHH Corporation (PHH)

PHH Corporation (PHH) is an outsource provider of mortgage and fleet management services. The Company operates in three segments: Mortgage Production, Mortgage Servicing and Fleet Management Services. PHH's Mortgage Production segment originates, purchases and sells mortgage loans through its wholly owned subsidiary, PHH Mortgage Corporation and its subsidiaries (collectively, PHH Mortgage), which is inclusive of PHH Home Loans and STARS. The Company's Mortgage Servicing segment services mortgage loans that either PHH Mortgage or PHH Home Loans originated, or for which PHH Mortgage purchased the mortgage servicing rights. PHH's Fleet Management Services segment provides commercial fleet management services to corporate clients and government agencies throughout the United States and Canada through its wholly owned subsidiary, PHH Vehicle Management Services Group LLC, doing business as PHH Arval.

Mortgage Production

The Company's Mortgage Production segment focuses on providing mortgage services, including private-label mortgage services, to financial institutions and real estate brokers through PHH Mortgage and PHH Home Loans, which conduct business throughout the United States. PHH's Mortgage Production segment generated approximately 22% of its net revenues during the year ended December 31, 2008. The Mortgage Production segment principally generates revenue through fee-based mortgage loan origination services and sales of originated and purchased mortgage loans into the secondary market. PHH Mortgage generally sells all mortgage loans that it originates to investors (which include a variety of institutional investors) within 60 days of origination.

PHH originates mortgage loans through three principal business channels: financial institutions (on a private-label basis), real estate brokers (including brokers associated with brokerages owned or franchised by Realogy Corporation (Realogy) and third-party brokers) and relocation (mortgage services for clients of Cartus Corporation (Cartus)). The Company is a provider of private-label mortgage loan originations for financial institutions and other entities throughout the United States. In this channel, PHH offers outsourcing solutions, from processing applications through funding for clients. Representative clients include Merrill Lynch Credit Corporation (Merrill Lynch), TD Banknorth, N.A. and Charles Schwab Bank. Approximately 16% of the Company's mortgage loan originations in 2008, were from Merrill Lynch.

The Company works with real estate brokers to provide their customers with mortgage loans. Through its affiliations with real estate brokers, the Company has access to homebuyers at the time of purchase. In this channel, the Company works with brokers associated with NRT Incorporated (NRT), Realogy's owned real estate brokerage business, brokers associated with Realogy's franchised brokerages (Realogy franchisees) and brokers that are not affiliated with Realogy (third-party brokers). In the relocation channel, the Company works with Cartus, Realogy's relocation business, to provide mortgage loans to employees of Cartus' clients. All of the Company's mortgage loan originations from this channel were from Cartus.

PHH owns 50.1% of the Mortgage Venture through its wholly owned subsidiary, PHH Broker Partner Corporation and Realogy owns the remaining 49.9% through its wholly owned subsidiary, Realogy Services Venture Partner Inc. The Company's mortgage loan origination channels are supported by three platforms: teleservices, field sales professionals and closed mortgage loan purchases. PHH operates a teleservices operation (also known as its Phone In, Move In program) that provides centralized processing along with customer service. The Company utilizes Phone In, Move In for all its three origination channels. PHH also maintains multiple Internet sites that provide online mortgage application capabilities for its customers. The Company purchases closed mortgage loans from community banks, credit unions and mortgage brokers and mortgage bankers. PHH also acquires mortgage loans from mortgage brokers that receive applications from and qualify the borrowers. PHH's Mortgage Production segment includes its appraisal services business, STARS, which provides appraisal services utilizing a network of approximately 2,240 third-party professional licensed appraisers offering local coverage throughout the United States and also provides credit research, flood certification and tax services.

Mortgage Servicing

The Company's Mortgage Servicing segment consists of collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for the payment of mortgage-related expenses such as taxes and insurance and otherwise administering our mortgage loan servicing portfolio. PHH principally generates revenue for its Mortgage Servicing segment through fees earned for servicing mortgage loans held by investors. The Company also generates revenue from reinsurance income from its wholly owned subsidiary, Atrium Insurance Corporation (Atrium).

PHH's Mortgage Servicing segment includes its reinsurance business, which it conducts through Atrium, a New York domiciled monoline mortgage guaranty insurance corporation. The Company provides mortgage reinsurance to certain third-party insurance companies that provide primary mortgage insurance (PMI) on loans originated in its Mortgage Production segment, which generally includes conventional loans with an original loan amount in excess of 80% of the property’s original appraised value. While PHH does not underwrite PMI directly, it provides reinsurance that covers losses in excess of a specified percentage of the principal balance of a given pool of mortgage loans, subject to a contractual limit. In exchange for assuming a portion of the risk of loss related to the reinsured loans, Atrium receives premiums from the third-party insurance companies.

Fleet Management Services

The Company provides fleet management services to corporate clients and government agencies through PHH Arval throughout the United States and Canada. PHH is an integrated provider of these services with a range of product offerings. The Company is focused on clients with fleets of greater than 75 vehicles. As of December 31, 2008, we had more than 331,000 vehicles leased, primarily consisting of cars and light trucks and, to a lesser extent medium and heavy trucks, trailers and equipment and approximately 270,000 additional vehicles serviced under fuel cards, maintenance cards, accident management services arrangements and/or similar arrangements. It purchases more than 75,000 vehicles annually.

PHH provides corporate clients and government agencies with a number of services and products, including fleet leasing and fleet management services, maintenance services, accident management services and fuel card services. Fleet leasing and fleet management services include vehicle leasing, fleet policy analysis and recommendations, benchmarking, vehicle recommendations, ordering and purchasing vehicles, arranging for vehicle delivery and administration of the title and registration process, as well as tax and insurance requirements, pursuing warranty claims and remarketing used vehicles. The Company also offers various leasing plans, financed primarily through the issuance of floating-rate notes and borrowings through an asset-backed structure.

The Company offers clients vehicle maintenance service cards that are used to facilitate payment for repairs and maintenance. It maintains a network of third-party service providers in the United States and Canada. In 2008, PHH averaged 299,000 maintenance service cards outstanding in the United States and Canada. The Company provides its clients with accident management services, such as immediate assistance upon receiving the initial accident report from the driver (facilitating emergency towing services and car rental assistance), an organized vehicle appraisal and repair process through a network of third-party preferred repair and body shops, and coordination and negotiation of potential accident claims. The Company receives fees from its clients for these services, as well as additional fees from service providers in its third-party network for individual incident services.

PHH provides its clients with fuel card programs that facilitate the payment, monitoring and control of fuel purchases through PHH Arval. The Company's fuel card offered through a relationship with Wright Express in the United States and through a card in Canada offers expanded fuel management capabilities on one service card. In 2008, PHH averaged 296,000 fuel cards outstanding in the United States and Canada. The Company receives both monthly fees from its fuel card clients and additional fees from fuel providers.

The Company competes with Countrywide Financial, Wells Fargo Home Mortgage, Chase Home Finance, CitiMortgage, Bank of America, GE Commercial Finance Fleet Services, Wheels Inc., Automotive Resources International and Lease Plan International.