PHH Mortgage Corp.’s parent company has revealed that it is losing another large mortgage subservicing contract. As a result, the subservicing portfolio will be nearly cut in half this year.
In 2012,
the Mount Laurel, New Jersey-based company announced a deal to subservice HSBC Mortgage Corp.’s prime mortgage holdings and third-party mortgage servicing portfolio.
The deal, which didn’t involve any asset transfers, additionally included an arrangement for PHH to manage mortgage processing for New York-based HSBC’s residential loans originations.
In a filing Thursday with the Securities and Exchange Commission, parent-PHH Corp. disclosed that HSBC Bank USA informed PHH that it has reached an agreement to sell the mortgage servicing rights on around 139,000 mortgages that are currently subserviced by PHH.
But the purchaser of the MSRs doesn’t intent to retain PHH as the subservicer.
The servicing is expected to be transferred during the fourth quarter.
PHH indicated that the loans account for around 29 percent of its total subservicing portfolio.
As a result, PHH expected it annual pre-tax earnings to take a $10 million hit.
PHH noted that the
its private-label lending arrangement with HSBC isn’t impacted by the loss of the servicing.
Including the previously announced loss of subservicing from Merrill Lynch Home Loans, PHH expects its total subservicing units to decline by approximately 229,000 by the end of this year.
The lost units represent around 47 percent of PHH’s total subservicing portfolio as of June 30.
PHH reported a primary third-party servicing portfolio of
609,976 mortgages for $93.674 billion as of mid-2016.
There is a good chance PHH will reduce its staffing as a result of the loss of business.
“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,” the filing stated.
