Summary Consolidated Results

(In millions, except per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2016

2015

2016

2015

GAAP Results

Net revenues

$

196

$

237

$

353

$

498

Loss before income taxes

(20)

(74)

(69)

(43)

Net loss attributable to PHH Corporation

(12)

(62)

(42)

(41)

Basic & diluted loss per share attributable to PHH Corporation

$

(0.22)

$

(1.20)

$

(0.78)

$

(0.80)

Weighted-average common shares outstanding — basic & diluted shares

53.568

51.135

53.636

51.154

Net increase (decrease) in Cash and cash equivalents

$

68

$

(311)

$

99

$

(301)

Non-GAAP Results*

Core loss (pre-tax)

$

(11)

$

(100)

$

(50)

$

(136)

Core loss (after-tax)

(4)

(73)

(28)

(93)

Core loss per share

$

(0.08)

$

(1.43)

$

(0.53)

$

(1.81)

Adjusted cash flow

$

68

$

(68)

$

122

$

(60)

Notable items in each respective period included the following:

Three Months Ended June 30,

2016

2015

Pre-Tax

Post-Tax

Pre-Tax

Post-Tax

$

Per Share

$

Per Share

Legal and regulatory reserves

$

—

$

—

$

(34)

$

(0.41)

Re-engineering and growth investments

(6)

(0.07)

(15)

(0.18)

Strategic review investments

(4)

(0.04)

—

—

Early debt retirement

—

—

(30)

(0.36)

Severance

(5)

(0.06)

(2)

(0.02)

Market-related MSR fair value adjustment, net of related derivatives

(12)

(0.14)

20

0.23

In addition to the notable items presented above, our results for the three and six months ended June 30, 2015 include $5 million and $13 million of expenses, respectively, associated with the sale and separation of our Fleet business, net of transition services revenue.

* Non-GAAP Financial Measures

Core earnings or loss (pre-tax), core earnings or loss (after-tax), core earnings or loss per share, and adjusted cash flow are financial measures that are not in accordance with U.S. generally accepted accounting principles (GAAP).  See the “Note Regarding Non-GAAP Financial Measures” below for a detailed description and reconciliation of such Non-GAAP financial measures to their most directly comparable GAAP financial measures, as required by Regulation G.

Mortgage Production

Segment Results

Mortgage Production segment profit in the second quarter of 2016 was $13 million, compared to a segment loss of $26 million in the first quarter of 2016 and a segment profit of $3 million in the second quarter of 2015.  The $39 million favorable change in segment results for the second quarter of 2016 compared to the first quarter of 2016 was due to a $49 million increase in Net revenues that was partially offset by a $7 million increase in Total expenses.  The improvement in Total revenues was due to a $29 million increase in Gain on loans held for sale, net driven by a 24% increase in loans sold and a 48 basis point increase in average total loan margins, as well as an $18 million increase in Origination and other loan fees caused by a 26% increase in total retail closing units.  The $7 million increase in expenses was primarily driven from the increase in total applications and closings between first and second quarter.

The $10 million increase in segment profit in the second quarter of 2016 compared to the second quarter of 2015 was primarily due to a $19 million decrease in Total expenses that was partially offset by a $12 million decrease in Net revenue.  The decline in revenue was primarily driven from lower volumes of IRLCs and closings that was partially offset by lower allocated unsecured interest expense. The decline in total expenses was primarily driven by decreases in Commissions and Loan origination expenses from lower overall closing and application volumes in the second quarter of 2016.

Statistics

Total second quarter of 2016 mortgage closings were $10.4 billion, up 30% from the first quarter of 2016 and down 14% from the second quarter of 2015.  The increase in total closings compared to the first quarter of 2016 was primarily attributable to seasonal improvement in our purchase volume.  The decrease in total closings compared to the second quarter of 2015 was driven by declines in both purchase and refinance volumes.

Fee-based closings as a percentage of total closings continued to remain high in the second quarter of 2016, representing 73% of total closing dollars, an increase from 66% in the second quarter of 2015.

IRLCs expected to close of $1.3 billion in the second quarter of 2016 increased by 13% as compared to the first quarter of 2016 but decreased by 39% from the second quarter of 2015.  Total loan margin on IRLCs expected to close for the second quarter of 2016 was 343 bps, a 48 bps increase from the first quarter of 2016 and a 44 bps increase from the second quarter of 2015.  The increase in margins is consistent with the decline in interest rates experienced during the second quarter of 2016 as loan margins tend to widen in periods of declining interest rates as industry participants attempt to balance origination volume with operational capacity.

Mortgage Servicing

Segment Results

Mortgage Servicing segment loss in the second quarter of 2016 was $33 million, compared to a segment loss of $21 million in the first quarter of 2016 and a segment loss of $46 million in the second quarter of 2015.  The $12 million decline in segment results for the second quarter of 2016 compared to the first quarter of 2016 was primarily due to higher realized cash flows and prepayments of MSRs during the second quarter of 2016.  Total expenses increased by $2 million for the second quarter of 2016 compared to the first quarter of 2016 as Repurchase and foreclosure-related charges increased by $7 million, while Legal and regulatory reserves decreased by $5 million.

The $13 million favorable change in segment results in the second quarter of 2016 compared to the second quarter of 2015 includes a $39 million decrease in expenses partially offset by a $26 million decrease in Net revenues. Net revenues declined compared to the prior year quarter primarily driven by unfavorable comparisons in the fair value of our MSRs, net of related derivatives of $16 million and a $9 million decline in loan servicing income that was primarily due to declines our average capitalized loan servicing portfolio.  Total expenses for the second quarter of 2016 declined compared to the second quarter of 2015 primarily from a $34 million provision for legal and regulatory matters and a $6 million provision for certain non-recoverable fees associated with foreclosure activities that were both incurred during the second quarter of 2015.

Statistics

At June 30, 2016, the unpaid principal balance (“UPB”) of our capitalized servicing portfolio was $92.7 billion, down 6% from December 31, 2015, and 11% from June 30, 2015.  Our capitalized servicing portfolio continues to decline due to a low interest rate environment leading to high prepayment activity that have exceeded our additions from our new loan production.  In 2016, we have reduced sales under our MSR flow sale arrangements and sales were 14% of our new additions during second quarter of 2016, compared to 46% during the prior year quarter (based on UPB).

At June 30, 2016, the UPB of our total loan servicing portfolio was $231.7 billion, which has marginally improved from both December 31, 2015 and June 30, 2015.  Activity in our total loan servicing portfolio since the end of 2015 includes an increase in our subservicing UPB driven by the addition of a subservicing portfolio of approximately 35,000 loans during the first quarter of 2016 that was partially offset by declines in our capitalized servicing portfolio.

Mortgage Servicing Rights

At June 30, 2016, the book value of our MSR was $679 million, representing a 73 bps capitalized servicing rate.  The MSR book value and capitalized servicing rate at December 31, 2015 were $880 million and 89 bps of the capitalized loan servicing portfolio.  The MSR book value at June 30, 2015 was $1.0 billion, representing a 97 bps capitalized servicing rate.  During the second quarter of 2016, there was a $70 million decrease from market-related fair value adjustments, a $35 million decrease related to prepayments and the receipt of recurring cash flows and a $3 million decrease from MSR sales that was partially offset by $17 million in MSR book value added from loan sales.

Liquidity and Capital Update

Liquidity at June 30, 2016 included $949 million in unrestricted Cash and cash equivalents, excluding cash held in variable interest entities.  As of June 30, 2016, we had $615 million total principal of unsecured debt outstanding with our next maturity date in September 2019.

We have authorizations from our Board of Directors to repurchase up to an additional $150 million of common shares through December 31, 2016.  We have not completed our strategic and capital review process, and we continue to believe it is important to retain maximum financial flexibility to ensure that we can pursue all available options to maximize value for our shareholders.  As previously announced, we do not expect to engage in any further share repurchase activity until we have greater clarity into the best path forward and its requirements.  There can be no assurances that we will complete further share repurchases.

Conference Call/Webcast

The Company will host a conference call at 10:00 a.m. (Eastern Time) on Tuesday, August 9, 2016, to discuss its second quarter 2016 results. All interested parties are welcome to participate. An investor presentation with an appendix of supplemental schedules will accompany the conference call and be available by visiting the Investor Relations page of PHH’s website at www.phh.com on Tuesday, August 9, 2016, prior to the start of the conference call.

You can access the conference call by dialing (800) 768-6570 or (785) 830-1942 and using the conference ID 5132604 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations page of PHH’s website at www.phh.com under webcasts and presentations.

A replay will be available beginning shortly after the end of the call through August 24, 2016, by dialing (888) 203-1112 or (719) 457-0820 and using conference ID 5132604, or by visiting the Investor Relations page of PHH’s website at www.phh.com.

About PHH Corporation

Headquartered in Mount Laurel, New Jersey, PHH Corporation is a leading provider of end-to-end mortgage solutions through its subsidiary, PHH Mortgage.  Its outsourcing model and proven expertise, combined with a strong commitment to operational excellence and customer service, has enabled PHH Mortgage to become one of the largest non-bank originators and servicers of residential mortgages in the United States.  PHH Mortgage provides mortgage solutions for the real estate market and financial institutions, and offers home financing directly to consumers.  For additional information, please visit www.phh.com.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Generally, forward looking-statements are not based on historical facts but instead represent only our current beliefs regarding future events.  All forward-looking statements are, by their nature, subject to risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied in such forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements.  Such statements may be identified by words such as “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.”

You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature. You should consider the areas of risk described under the heading “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our periodic reports filed with the U.S. Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, in connection with any forward-looking statements that may be made by us or our businesses generally. Such periodic reports are available in the “Investors” section of our website at http://www.phh.com and are also available at http://www.sec.gov.  Except for our ongoing obligations to disclose material information under the federal securities laws, applicable stock exchange listing standards and unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any forward-looking statements or to report the occurrence or non-occurrence of anticipated or unanticipated events.

Contact Information:

Investors

Media

Hugo Arias

Dico Akseraylian

hugo.arias@phh.com

dico.akseraylian@phh.com

856-917-0108

856-917-0066

Three Months Ended
June 30,

Six Months Ended
June 30,

2016

2015

2016

2015

REVENUES

Origination and other loan fees

$

79

$

87

$

140

$

145

Gain on loans held for sale, net

77

86

125

168

Net loan servicing income:

Loan servicing income

91

100

182

204

Change in fair value of mortgage servicing rights

(105)

18

(226)

(8)

Net derivative gain (loss) related to mortgage servicing rights

58

(49)

143

4

Net loan servicing income

44

69

99

200

Net interest expense:

Interest income

12

13

21

22

Secured interest expense

(8)

(9)

(16)

(18)

Unsecured interest expense

(11)

(16)

(21)

(33)

Net interest expense

(7)

(12)

(16)

(29)

Other income

3

7

5

14

Net revenues

196

237

353

498

EXPENSES

Salaries and related expenses

92

85

182

172

Commissions

18

27

30

46

Loan origination expenses

18

25

34

49

Foreclosure and repossession expenses

9

15

16

30

Professional and third-party service fees

37

45

76

87

Technology equipment and software expenses

10

9

20

19

Occupancy and other office expenses

11

12

24

24

Depreciation and amortization

5

4

9

9

Other operating expenses

16

89

31

105

Total expenses

216

311

422

541

Loss before income taxes

(20)

(74)

(69)

(43)

Income tax benefit

(11)

(18)

(30)

(10)

Net loss

(9)

(56)

(39)

(33)

Less: net income attributable to noncontrolling interest

3

6

3

8

Net loss attributable to PHH Corporation

$

(12)

$

(62)

$

(42)

$

(41)

Basic and Diluted loss per share attributable to PHH Corporation

$

(0.22)

$

(1.20)

$

(0.78)

$

(0.80)

June 30,

December 31,

2016

2015

ASSETS

Cash and cash equivalents

$

1,005

$

906

Restricted cash

54

47

Mortgage loans held for sale

922

743

Accounts receivable, net

82

81

Servicing advances, net

657

691

Mortgage servicing rights

679

880

Property and equipment, net

50

47

Other assets

182

247

Total assets

$

3,631

$

3,642

LIABILITIES

Accounts payable and accrued expenses

$

225

$

251

Subservicing advance liabilities

316

314

Debt

1,471

1,348

Deferred taxes

125

182

Loan repurchase and indemnification liability

62

62

Other liabilities

151

137

Total liabilities

2,350

2,294

Commitments and contingencies

Total PHH Corporation stockholders’ equity

1,248

1,318

Noncontrolling interest

33

30

Total equity

1,281

1,348

Total liabilities and equity

$

3,631

$

3,642

Second Quarter 2016

Second
Quarter
2015

Mortgage
Production

Mortgage
Servicing

Other

Total PHH
Corporation

Total PHH
Corporation

Origination and other loan fees

$

79

$

—

$

—

$

79

$

87

Gain on loans held for sale, net

77

—

—

77

86

Loan servicing income

—

91

—

91

100

MSR fair value adjustments:

Prepayments and receipts of recurring cash flows

—

(35)

—

(35)

(51)

Market-related

—

(70)

—

(70)

69

Net derivative gain (loss) related to MSRs

—

58

—

58

(49)

Net interest expense:

Interest income

9

3

—

12

13

Secured interest expense

(6)

(2)

—

(8)

(9)

Unsecured interest expense

—

(11)

—

(11)

(16)

Other income

3

—

—

3

7

Net revenues

162

34

—

196

237

Salaries and related expenses

57

19

16

92

85

Commissions

18

—

—

18

27

Loan origination expenses

18

—

—

18

25

Foreclosure and repossession expenses

—

9

—

9

15

Professional and third-party service fees

6

9

22

37

45

Technology equipment and software expenses

1

4

5

10

9

Occupancy and other office expenses

7

4

—

11

12

Depreciation and amortization

3

1

1

5

4

Other operating expenses:

Repurchase and foreclosure-related charges

—

5

—

5

4

Loss on early debt retirement

—

—

—

—

30

Legal and regulatory reserves

—

—

—

—

34

Overhead Allocation - IT

16

7

(23)

—

—

Overhead Allocation - Other

14

6

(20)

—

—

Other

6

3

2

11

21

Total expenses

146

67

3

216

311

Income (loss) before income taxes

16

(33)

(3)

$

(20)

$

(74)

Less: net income attributable to noncontrolling interest

3

—

—

Segment profit (loss)

$

13

$

(33)

$

(3)

Six Months Ended June 30, 2016

Six Months
Ended June
30, 2015

Mortgage
Production

Mortgage
Servicing

Other

Total PHH
Corporation

Total PHH
Corporation

Origination and other loan fees

$

140

$

—

$

—

$

140

$

145

Gain on loans held for sale, net

125

—

—

125

168

Loan servicing income

—

182

—

182

204

MSR fair value adjustments:

Prepayments and receipt of recurring cash flows

—

(61)

—

(61)

(89)

Market-related

—

(165)

—

(165)

81

Net derivative gain related to MSRs

—

143

—

143

4

Net interest expense:

Interest income

16

5

—

21

22

Secured interest expense

(11)

(5)

—

(16)

(18)

Unsecured interest expense

—

(21)

—

(21)

(33)

Other income

5

—

—

5

14

Net revenues

275

78

—

353

498

Salaries and related expenses

114

37

31

182

172

Commissions

30

—

—

30

46

Loan origination expenses

34

—

—

34

49

Foreclosure and repossession expenses

—

16

—

16

30

Professional and third-party service fees

11

18

47

76

87

Technology equipment and software expenses

2

8

10

20

19

Occupancy and other office expenses

14

9

1

24

24

Depreciation and amortization

5

2

2

9

9

Other operating expenses:

Repurchase and foreclosure-related charges

—

3

—

3

6

Loss on early debt retirement

—

—

—

—

30

Legal and regulatory reserves

—

5

—

5

34

Overhead Allocation - IT

37

16

(53)

—

—

Overhead Allocation - Other

27

11

(38)

—

—

Other

11

7

5

23

35

Total expenses

285

132

5

422

541

Loss before income taxes

(10)

(54)

(5)

$

(69)

$

(43)

Less: net income attributable to noncontrolling interest

3

—

—

Segment loss

$

(13)

$

(54)

$

(5)

Three Months Ended
June 30,

Six Months Ended
June 30,

2016

2015

Change

2016

2015

Change

Closings:

Saleable to investors

$

2,847

$

4,121

(31)%

$

4,835

$

7,223

(33)%

Fee-based

7,525

7,952

(5)%

13,492

14,202

(5)%

Total

$

10,372

$

12,073

(14)%

$

18,327

$

21,425

(14)%

Purchase

$

4,953

$

6,107

(19)%

$

8,327

$

9,923

(16)%

Refinance

5,419

5,966

(9)%

10,000

11,502

(13)%

Total

$

10,372

$

12,073

(14)%

$

18,327

$

21,425

(14)%

Retail - PLS

$

7,955

$

8,889

(11)%

$

14,308

$

15,936

(10)%

Retail - Real Estate

2,120

2,803

(24)%

3,461

4,822

(28)%

Total retail

10,075

11,692

(14)%

17,769

20,758

(14)%

Wholesale/correspondent

297

381

(22)%

558

667

(16)%

Total

$

10,372

$

12,073

(14)%

$

18,327

$

21,425

(14)%

Retail - PLS (units)

13,439

16,658

(19)%

25,128

30,283

(17)%

Retail - Real Estate (units)

7,581

10,176

(26)%

12,549

17,784

(29)%

Total retail (units)

21,020

26,834

(22)%

37,677

48,067

(22)%

Wholesale/correspondent (units)

1,180

1,632

(28)%

2,191

2,939

(25)%

Total (units)

22,200

28,466

(22)%

39,868

51,006

(22)%

Applications:

Saleable to investors

$

4,132

$

5,445

(24)%

$

7,444

$

10,813

(31)%

Fee-based

8,512

8,574

(1)%

17,503

18,382

(5)%

Total

$

12,644

$

14,019

(10)%

$

24,947

$

29,195

(15)%

Retail - PLS

$

9,742

$

9,994

(3)%

$

19,450

$

21,424

(9)%

Retail - Real Estate

2,729

3,424

(20)%

4,806

6,566

(27)%

Total retail

12,471

13,418

(7)%

24,256

27,990

(13)%

Wholesale/correspondent

173

601

(71)%

691

1,205

(43)%

Total

$

12,644

$

14,019

(10)%

$

24,947

$

29,195

(15)%

Retail - PLS (units)

18,214

19,856

(8)%

34,777

41,782

(17)%

Retail - Real Estate (units)

9,620

12,350

(22)%

17,173

24,056

(29)%

Total retail (units)

27,834

32,206

(14)%

51,950

65,838

(21)%

Wholesale/correspondent (units)