PHH Corporation Announces Fourth Quarter and Full-Year 2012 Results

  PHH Corporation Announces Fourth Quarter and Full-Year 2012 Results

 4Q12 Net Income Attributable to PHH Corporation of $58 million or $1.01 per
                                 basic share

 Full-Year 2012 Net Income Attributable to PHH Corporation of $34 million or
                            $0.60 per basic share

4Q12 Core Earnings (after-tax)* of $46 million and Core Earnings per Share* of
                                    $0.81

 Full-Year 2012 Core Earnings (after-tax)* of $168 million and Core Earnings
                             per Share* of $2.96

  *Full-year total retail mortgage loan closings of $45.5 billion, up 28%
    from 2011. Full-year total mortgage loan closings of $55.6 billion, up 7%
    from 2011
  *4Q12 total loan margin of 406 bps, a 14 bps decrease from 3Q12 but a 120
    bps increase from 4Q11
  *Total loan servicing portfolio at December 31, 2012, of $183.7 billion in
    unpaid principal balance (UPB), up 1% from $182.4 billion in UPB at the
    end of 2011
  *2012 Fleet segment profit growth of 16%, continuing a 3-year track record
    of double-digit segment profit growth
  *$829 million in unrestricted cash and cash equivalents at year-end 2012,
    up from $414 million at year-end 2011, and no outstanding balances on our
    $431 million in total revolving credit facilities at December 31, 2012

Business Wire

MT. LAUREL, N.J. -- February 6, 2013

PHH Corporation (NYSE: PHH) (“PHH” or the “Company”) today announced financial
results for the quarter and year ended December 31, 2012.

For the quarter ended December 31, 2012, the Company reported net income
attributable to PHH Corporation of $58 million or $1.01 per basic share. Core
earnings (after-tax)* and core earnings per share* for the quarter ended
December 31, 2012, were $46 million and $0.81, respectively. For the year
ended December 31, 2012, the Company reported net income attributable to PHH
Corporation of $34 million or $0.60 per basic share. Core earnings
(after-tax)* and core earnings per share* for the year ended December 31,
2012, were $168 million and $2.96, respectively. The results for the year
ended December 31, 2012, include a $13 million pre-tax loss ($0.13 per share
after tax) related to the early repayment of our 2013 medium term notes and a
$16 million pre-tax loss (or $0.18 per share after tax) associated with the
termination of an inactive mortgage reinsurance agreement. Tangible book value
per share* was $25.80 at December 31, 2012, up 5% from $24.56 at year-end
2011.

Glen A. Messina, president and CEO of PHH Corporation, said, “Our fourth
quarter performance was a solid ending to a year in which we made significant
progress from both an operating and financing standpoint. We demonstrated
strong growth in our franchise platforms, made significant investments in
operational excellence and customer service, and enhanced our financial
flexibility with our focus on cash flow and liquidity. We continue to believe
our business model is well-designed to respond to change and opportunities in
the mortgage and fleet industries, and we see significant growth potential
through both increased penetration of our existing clients and expansion of
our client base.”

Messina added, “Continued execution on our four key strategies positions us
well for further success in 2013. We believe the expectation of both modest
macroeconomic improvement and increased clarity for the mortgage industry,
along with the value proposition we offer our Fleet and Mortgage clients,
position us well to create long-term value for our borrowers, clients and
shareholders.”


Summary Consolidated Results
(In millions, except per share data)


                           Three Months Ended      Year Ended
                             December 31,              December 31,
                             2012       2011         2012       2011
Net revenues                 $ 783        $ 649        $ 2,743      $ 2,214
Income (loss) before           99           21           87           (202   )
income taxes
Net income (loss)
attributable to PHH            58           13           34           (127   )
Corporation
                                                                             
Basic earnings (loss)
per share attributable       $ 1.01       $ 0.22       $ 0.60       $ (2.26  )
to PHH Corporation
Diluted earnings (loss)
per share attributable         0.89         0.22         0.56         (2.26  )
to PHH Corporation
                                                                             
Weighted-average common
shares outstanding:
Basic shares (in               56.957       56.504       56.815       56.349
millions)
Diluted shares (in             65.082       56.847       61.601       56.349
millions)
                                                                             
Non-GAAP Results*
Core earnings (pre-tax)      $ 65         $ 85         $ 256        $ 297
Core earnings                  46           55           168          182
(after-tax)
                                                                             
Core earnings per share      $ 0.81       $ 0.98       $ 2.96       $ 3.23
                                                                             
Adjusted cash flow           $ 148        $ 311        $ 563        $ 112
                                                                             

* Non-GAAP Financial Measures

Core earnings (pre-tax), core earnings (after-tax), core earnings per share,
adjusted cash flow, tangible book value and tangible book value per share 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 of these and certain other Non-GAAP
financial measures and reconciliations of such Non-GAAP financial measures to
their most directly comparable GAAP financial measures as required by
Regulation G.

Mortgage Production and Mortgage Servicing

Mortgage Production Segment Profit

Mortgage Production segment profit in the fourth quarter of 2012 was $99
million, up 15% from $86 million in the fourth quarter of 2011 but down 19%
from the third quarter of 2012. Growth over the fourth quarter 2011 was driven
primarily by significantly wider total loan margins and growth in Mortgage
fees as a result of greater volumes of Total retail closings and Fee-based
closings, which were partially offset by a decline in interest rate lock
commitments expected to close. The sequential quarter segment profit decline
was primarily driven by total loan margins that were slightly lower but still
at an elevated level compared to historical periods, lower interest rate lock
commitments expected to close, and increased investment in customer service
and quality-related initiatives.

Mortgage Servicing Segment Loss

Mortgage Servicing segment loss in the fourth quarter of 2012 was $35 million,
primarily driven by a $56 million net decrease in the book value of our MSR
and related derivatives and $37 million in repurchase and foreclosure-related
charges. The changes in the book value of our MSR and related derivatives
included $75 million in prepayments and receipts of recurring cash flows,
primarily attributable to continued high prepayment speeds from low mortgage
interest rates, partially offset by $29 million in market-related positive
fair value adjustments on our mortgage servicing rights and $10 million in net
derivative losses. Repurchase and foreclosure-related charges during the
fourth quarter of 2012 decreased slightly from $41 million in the third
quarter of 2012. The continued elevated levels of repurchase and
foreclosure-related charges were reflective of elevated repurchase requests,
which are estimated to continue through the end of 2013.

Interest Rate Lock Commitments

IRLCs expected to close of $6.2 billion in the fourth quarter of 2012
decreased from $6.8 billion in the third quarter of 2012, reflecting
seasonality, planned lower correspondent activity, and a continued shift in
mix toward fee-based closings. IRLCs expected to close declined from the
fourth quarter 2011, reflecting our strategy of growth in our retail channels
and narrowing our focus in our wholesale/correspondent channel to business
partners we believe will consistently deliver high-quality loans. Retail IRLCs
expected to close grew 10% in 2012 compared to 2011.

Total Loan Margin

Total loan margin on IRLCs expected to close for the fourth quarter of 2012
was 406 bps, a 14 bps decrease from the third quarter of 2012 but 120 bps
greater than the fourth quarter of 2011. Wider margins throughout 2012 reflect
higher consumer demand, especially for refinancing, primarily due to a
reduction in mortgage interest rates. Although we expect priced-in margins to
eventually decline from the levels experienced during 2012, we believe margins
could remain elevated in 2013 when compared to historical experience,
reflecting a longer-term industry view of the returns required to manage the
underlying risk of a mortgage production and servicing business.

Mortgage Closing Volume

Total fourth quarter 2012 mortgage closings were $14.4 billion of which 87%
were retail and 13% were wholesale/correspondent, consistent with third
quarter closings and reflecting our strategy of growth in our retail channels
and narrowing our focus in our wholesale/correspondent channel to business
partners we believe will consistently deliver high-quality loans. Fee-based
closings increased to 41% of total closings in the quarter, compared to 39% of
total closings in the third quarter 2012 and 24% of total closings in the
fourth quarter of 2011.

Unpaid Principal Balance of Mortgage Servicing Portfolio

At December 31, 2012, the UPB of our capitalized servicing portfolio was
$140.4 billion, down 3% from the UPB at September 30, 2012, and a 5% decrease
from the UPB at the end of 2011. These decreases reflect prepayments that were
not fully offset by additions from new loan production.

At December 31, 2012, the UPB of our total loan servicing portfolio was $183.7
billion, a 1% increase over the UPB at the end of 2011, and a 1% decrease from
the UPB at the end of the third quarter of 2012. The sequential quarter and
year-over-year changes in our total loan servicing portfolio reflect the
aforementioned declines in the UPB of our capitalized servicing portfolio
offset by increases in our subservicing UPB. We anticipate adding
approximately $50 billion of subservicing UPB related to our private label
agreement with HSBC.

Mortgage Servicing Rights

At December 31, 2012, the book value of our mortgage servicing rights was $1.0
billion, consistent with the end of the third quarter of 2012. During the
fourth quarter of 2012, $66 million in book value of MSR was added from the
capitalization of new servicing rights from new loans sold in the quarter. In
addition, during the fourth quarter of 2012, our MSR book value increased by
$29 million due to market-related fair value adjustments, which partially
offset a decrease in our MSR book value of $75 million related to prepayments
and the receipt of recurring cash flows.

Repurchase and Foreclosure-related Charges

Repurchase and foreclosure-related charges in the fourth quarter of 2012 were
$37 million, down from $41 million in the third quarter of 2012, reflecting a
continued high level of repurchase requests. Total repurchase and
foreclosure-related reserves were $191 million at the end of 2012, compared to
$176 million at the end of the third quarter of 2012. As of December 31, 2012,
the estimated amount of reasonably possible losses in excess of the total
repurchase and foreclosure-related reserve was $40 million, down from $70
million at the end of the third quarter of 2012. The reasonably possible
estimate assumes that repurchases and indemnifications remain at an elevated
level through the year ended December 31, 2013, our success rate in defending
against requests declines, and loss severities remain at current levels.

Fleet Management Services

Segment Profit

In 2012, Fleet Management Services segment profit grew 16% over 2011,
continuing a 3-year track record of double-digit segment profit growth. These
results were driven by growth in average units enrolled in maintenance, fuel
and accident management programs as well as a 3% increase in net investment in
fleet leases and lower debt costs. Fleet fourth quarter 2012 segment profit
was $20 million, down $1 million from the third quarter of 2012, but up $1
million from the fourth quarter of 2011.

Fleet Leasing

Net investment in fleet leases at December 31, 2012, represented a 3% increase
compared to the end of 2011, despite a 3% decline in average leased vehicle
units. Higher-capitalized units continue to replace lower cost vehicles as our
penetration into service fleets continues.

Fleet Management Fees

In the fourth quarter of 2012, Fleet management fees decreased to $43 million
from $45 million in the fourth quarter of 2011, primarily resulting from the
loss of volume from certain service-only clients, partially offset by new
client additions.

Liquidity Update

Liquidity at December 31, 2012, included $829 million in unrestricted cash and
cash equivalents.

As of December 31, 2012, we had no outstanding balances on our $305 million in
total unsecured revolving credit facilities or our $126 million Canadian
secured revolving credit facility.

Conference Call/Webcast

The Company will host a conference call at 10:00 a.m. (Eastern Time) on
Thursday, February 7, 2013, to discuss its fourth quarter and full-year 2012
results. All interested parties are welcome to participate. You can access the
conference call by dialing (866) 454-4204 or (913) 312-0725 and using the
conference ID 9254161 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/invest under webcasts and
presentations.

An investor presentation of supplemental schedules will be available by
visiting the Investor Relations page of PHH's website at www.phh.com/invest on
Thursday, February 7, 2013, prior to the start of the conference call.

A replay will be available beginning shortly after the end of the call through
February 22, 2013, by dialing (888) 203-1112 or (719) 457-0820 and using
conference ID 9254161, or by visiting the Investor Relations page of PHH's
website at www.phh.com/invest.

About PHH Corporation

Headquartered in Mount Laurel, New Jersey, PHH Corporation (NYSE: PHH) is a
leading provider of business process management services for the mortgage and
fleet industries. Its subsidiary, PHH Mortgage, is one of the largest
originators and servicers of residential mortgages in the United States^1, and
its subsidiary, PHH Arval, is a leading fleet management services provider in
the United States and Canada. PHH is dedicated to delivering premier customer
service and providing value-added solutions to its clients. For additional
information about PHH and its subsidiaries, please visit the Company’s website
at www.phh.com.

^1 Inside Mortgage Finance, Copyright 2012

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.


PHH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
                             Three Months Ended        Year Ended
                                                  
                             December 31,              December 31,
                             2012       2011         2012        2011
REVENUES
Mortgage fees                $ 92         $ 85         $ 346         $ 295
Fleet management fees         43         45         180         173   
Net fee income                135        130        526         468   
Fleet lease income            350        350        1,364       1,400 
Gain on mortgage loans,       247        186        942         567   
net
Mortgage interest income       21           32           91            114
Mortgage interest             (50  )      (52  )      (212  )      (202  )
expense
Mortgage net finance          (29  )      (20  )      (121  )      (88   )
expense
Loan servicing income         116        119        449         456   
Change in fair value of
mortgage servicing             (46  )       (132 )       (497  )       (733  )
rights
Net derivative loss
related to mortgage           (10  )      (4   )      (5    )      (3    )
servicing rights
Valuation adjustments
related to mortgage           (56  )      (136 )      (502  )      (736  )
servicing rights, net
Net loan servicing            60         (17  )      (53   )      (280  )
income (loss)
Other income                  20         20         85          147   
Net revenues                  783        649        2,743       2,214 
EXPENSES
Salaries and related           157          132          595           507
expenses
Occupancy and other            16           15           59            59
office expenses
Depreciation on                304          301          1,212         1,223
operating leases
Fleet interest expense         16           19           68            79
Other depreciation and         6            6            25            25
amortization
Other operating expenses      185        155        697         523   
Total expenses                684        628        2,656       2,416 
Income (loss) before           99           21           87            (202  )
income taxes
Income tax expense            26         ―          (6    )      (100  )
(benefit)
Net income (loss)              73           21           93            (102  )
Less: net income
attributable to               15         8          59          25    
noncontrolling interest
Net income (loss)
attributable to PHH          $ 58        $ 13        $ 34         $ (127  )
Corporation
Basic earnings (loss)
per share attributable       $ 1.01      $ 0.22      $ 0.60       $ (2.26 )
to PHH Corporation
Diluted earnings (loss)
per share attributable       $ 0.89      $ 0.22      $ 0.56       $ (2.26 )
to PHH Corporation
                                                                             


PHH CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)


                                                    December 31,
                                                      2012      2011
                                                                    
ASSETS
Cash and cash equivalents                             $ 829       $ 414
Restricted cash, cash equivalents and investments       425         574
Mortgage loans held for sale                            2,174       2,658
Accounts receivable, net                                797         700
Net investment in fleet leases                          3,636       3,515
Mortgage servicing rights                               1,022       1,209
Property, plant and equipment, net                      79          64
Goodwill                                                25          25
Other assets ^(1)                                      616        618
Total assets                                          $ 9,603     $ 9,777
                                                                    
LIABILITIES AND EQUITY
Accounts payable and accrued expenses                 $ 562       $ 504
Debt                                                    6,554       6,914
Deferred taxes                                          622         626
Other liabilities                                      303        272
Total liabilities                                      8,041      8,316
Commitments and contingencies                          ―          ―
Total PHH Corporation stockholders’ equity              1,526       1,442
Noncontrolling interest                                36         19
Total equity                                           1,562      1,461
Total liabilities and equity                          $ 9,603     $ 9,777
____________________

^(1)  Includes intangible assets of $31 million and $33 million as of
       December 31, 2012 and 2011, respectively.
       


Segment Results
(In millions)
                                                                                   
                                                                                                Fourth

                         Fourth Quarter 2012                                                    Quarter

                                                                                                2011
                                                      Fleet
                         Mortgage       Mortgage                                Total           Total
                                                      Management
                         Production     Servicing                    Other      PHH             PHH
                                                      Services
                         Segment        Segment                                 Corporation     Corporation
                                                      Segment
Net fee income           $  92          $  ―          $    43        $ ―        $   135         $   130
Fleet lease income          ―              ―               350         ―            350             350
Gain on mortgage            247            ―               ―           ―            247             186
loans
Mortgage net finance        (17  )         (11  )          ―           (1 )         (29  )          (20  )
expense
Loan servicing              ―              116             ―           ―            116             119
income ^(1)
MSR fair value
adjustments:
Prepayments and
receipt of recurring        ―              (75  )          ―           ―            (75  )          (64  )
cash flows
Market-related ^(2)         ―              29              ―           ―            29              (68  )
Net derivative loss         ―              (10  )          ―           ―            (10  )          (4   )
related to MSRs
Other income               3            ―             17         ―          20            20   
Net revenues               325          49            410        (1 )        783           649  
Depreciation on             ―              ―               304         ―            304             301
operating leases
Fleet interest              ―              ―               17          (1 )         16              19
expense
Repurchase and
foreclosure-related         ―              37              ―           ―            37              21
charges
Other expenses             211          47            69         ―          327           287  
Total expenses             211          84            390        (1 )        684           628  
Income (loss) before        114            (35  )          20          ―        $   99         $   21   
income taxes
Less: income
attributable to            15           ―             ―          ―  
noncontrolling
interest
Segment profit           $  99         $  (35  )     $    20        $ ―  
(loss)
____________________

       Net reinsurance results for the three months ended December 31, 2012
^(1)  were not significant. Loan servicing income includes net reinsurance
       loss of $1 million for the three months ended December 31, 2011.

       Represents the Change in fair value of mortgage servicing rights due to
       changes in market inputs and assumptions used in the valuation model.
       The fair value of our MSRs is estimated based upon projections of
^(2)   expected future cash flows from our MSRs considering prepayment
       estimates, our historical prepayment rates, portfolio characteristics,
       interest rates based on interest rate yield curves, implied volatility
       and other economic factors.
       


Segment Results
(In millions)
                                                                                    
                                                                                                 Year Ended

                         Year Ended December 31, 2012                                            December

                                                                                                 31, 2011
                                                      Fleet
                         Mortgage       Mortgage                                 Total           Total
                                                      Management
                         Production     Servicing                    Other       PHH             PHH
                                                      Services
                         Segment        Segment                                  Corporation     Corporation
                                                      Segment
Net fee income           $  346         $  ―          $   180        $ ―         $  526          $   468
Fleet lease income          ―              ―              1,364        ―            1,364            1,400
Gain on mortgage            942            ―              ―            ―            942              567
loans
Mortgage net finance        (66   )        (53  )         ―            (2  )        (121   )         (88   )
expense
Loan servicing              ―              449            ―            ―            449              456
income ^(1)
MSR fair value
adjustments:
Prepayments and
receipt of recurring        ―              (274 )         ―            ―            (274   )         (212  )
cash flows
Market-related ^(2)         ―              (223 )         ―            ―            (223   )         (521  )
Net derivative loss         ―              (5   )         ―            ―            (5     )         (3    )
related to MSRs
Other income               12           ―            73          ―          85             147   
Net revenues               1,234        (106 )        1,617       (2  )       2,743          2,214 
Depreciation on             ―              ―              1,212        ―            1,212            1,223
operating leases
Fleet interest              ―              ―              70           (2  )        68               79
expense
Repurchase and
foreclosure-related         ―              182            ―            ―            182              80
charges
Other expenses             759          174          248         13         1,194          1,034 
Total expenses             759          356          1,530       11         2,656          2,416 
Income (loss) before        475            (462 )         87           (13 )     $  87          $   (202  )
income taxes
Less: income
attributable to            59           ―            ―           ―   
noncontrolling
interest
Segment profit           $  416        $  (462 )     $   87         $ (13 )
(loss)
____________________

       Includes net reinsurance loss of $19 million and $16 million for the
       years ended December 31, 2012 and 2011, respectively. The net
^(1)  reinsurance loss for the year ended December 31, 2012 includes a $16
       million loss on the termination of one our inactive reinsurance
       agreements.

       Represents the Change in fair value of mortgage servicing rights due to
       changes in market inputs and assumptions used in the valuation model.
       The fair value of our MSRs is estimated based upon projections of
^(2)   expected future cash flows from our MSRs considering prepayment
       estimates, our historical prepayment rates, portfolio characteristics,
       interest rates based on interest rate yield curves, implied volatility
       and other economic factors.
       


Mortgage Production Segment
($ In millions)
                                                                                
                   Three Months Ended                        Year Ended
                   December 31,                              December 31,
                   2012           2011           Change      2012            2011            Change
Mortgage fees      $ 92           $ 85           8    %      $ 346           $ 295           17   %
Gain on
mortgage             247            186          33   %        942             567           66   %
loans, net
Mortgage net
finance              (17    )       (6     )     (183 )%       (66     )       (24     )     (175 )%
expense
Other income        3            2           50   %       12            76           (84  )%
Net revenues        325          267         22   %       1,234         914          35   %
Total expenses      211          173         22   %       759           631          20   %
Income before        114            94           21   %        475             283           68   %
income taxes
Less: net
income
attributable        15           8           88   %       59            25           136  %
to
noncontrolling
interest
Segment profit     $ 99          $ 86          15   %      $ 416          $ 258          61   %
                                                                                                  
                                                                                                  
                   Three Months Ended                        Year Ended
                   December 31,                              December 31,
                   2012           2011           Change      2012            2011            Change
Loans closed       $ 8,493        $ 11,807       (28  )%     $ 36,022        $ 37,889        (5   )%
to be sold
Fee-based           5,920        3,812       55   %       19,562        14,056       39   %
closings
Total closings     $ 14,413      $ 15,619      (8   )%     $ 55,584       $ 51,945       7    %
Purchase           $ 3,958        $ 4,326        (9   )%     $ 17,549        $ 20,404        (14  )%
closings
Refinance           10,455       11,293      (7   )%      38,035        31,541       21   %
closings
Total closings     $ 14,413      $ 15,619      (8   )%     $ 55,584       $ 51,945       7    %
Retail - PLS       $ 8,802        $ 6,969        26   %      $ 31,239        $ 24,162        29   %
Retail - Real       3,705        3,250       14   %       14,280        11,430       25   %
Estate
Total retail         12,507         10,219       22   %        45,519          35,592        28   %
closings
Wholesale /         1,906        5,400       (65  )%      10,065        16,353       (38  )%
correspondent
Total closings     $ 14,413      $ 15,619      (8   )%     $ 55,584       $ 51,945       7    %
Retail - PLS         23,379         22,155       6    %        89,980          76,023        18   %
(in units)
Retail - Real
Estate (in          14,499       13,325      9    %       57,033        47,037       21   %
units)
Total retail         37,878         35,480       7    %        147,013         123,060       19   %
closings
Wholesale /
correspondent       8,752        24,212      (64  )%      47,462        77,992       (39  )%
(in units)
Total closings      46,630       59,692      (22  )%      194,475       201,052      (3   )%
(in units)
Loans sold         $ 8,297        $ 11,728       (29  )%     $ 36,582        $ 40,035        (9   )%
Applications       $ 17,302       $ 18,580       (7   )%     $ 72,390        $ 67,586        7    %
IRLCs expected     $ 6,205        $ 9,743        (36  )%     $ 26,599        $ 33,717        (21  )%
to close
Total loan
margin (in           406            286          42   %        392             271           45   %
bps)
                                                                                                  

                                                                              
Mortgage Servicing Segment
($ In millions)
                       Three Months Ended                       Year Ended
                         December 31,                               December 31,
                         2012          2011          Change     2012          2011          Change
Mortgage net finance     $ (11     )     $ (13     )     15  %      $ (53     )     $ (61     )     13  %
expense
Loan servicing             116             119           (3  )%       449             456           (2  )%
income
Valuation
adjustments related
to mortgage                (56     )       (136    )     59  %        (502    )       (736    )     32  %
servicing rights,
net
Other income              ―             ―            ―          ―             (2      )     100 %
(expense)
Net revenues              49            (30     )     n/m         (106    )      (343    )     69  %
                                                         ^(1)
Repurchase and
foreclosure-related        37              21            76  %        182             80            128 %
charges
Other expenses            47            39           21  %       174           134          30  %
Total expenses            84            60           40  %       356           214          66  %
Segment loss             $ (35     )     $ (90     )     61  %      $ (462    )     $ (557    )     17  %
____________________
^(1) n/m ― Not meaningful.
                                                                              
                         Three Months Ended                         Year Ended
                         December 31,                               December 31,
                         2012            2011            Change     2012            2011            Change
Average total            $ 184,521       $ 180,366       2   %      $ 185,859       $ 174,332       7   %
servicing portfolio
Average capitalized        142,623         145,711       (2  )%       146,379         142,128       3   %
servicing portfolio
Payoffs and
principal
curtailments of            11,212          8,188         37  %        38,314          25,168        52  %
capitalized
portfolio
                                                                                                        

                                                              
                                December 31,
                                2012                2011                Change
Total loan servicing            $ 183,730           $ 182,387           1   %
portfolio
Number of loans serviced          1,015,286           1,063,884         (5  )%
Capitalized loan                $ 140,381           $ 147,088           (5  )%
servicing portfolio
Capitalized servicing             0.73      %         0.82      %
rate
Capitalized servicing             2.4                 2.7
multiple
Weighted-average
servicing fee (in basis           30                  31
points)
                                                                        

                        
                            December 31,
                            2012                      2011
                            Number         Unpaid        Number        Unpaid
                            of                        of        
                                           Balance                     Balance
                            Loans                        Loans
Portfolio
Delinquency^(1)
30 days                     2.45  %        1.93  %       2.24  %       1.83  %
60 days                     0.64  %        0.52  %       0.60  %       0.51  %
90 or more days             0.80  %        0.70  %       0.98  %       0.95  %
Total                       3.89  %        3.15  %       3.82  %       3.29  %
Foreclosure/real            2.05  %        1.92  %       1.83  %       1.85  %
estate owned^(2)
____________________

^(1)  Represents portfolio delinquencies as a percentage of the total number
       of loans and the total unpaid balance of the portfolio.
       
       As of December 31, 2012 and 2011, there were 17,329 and 15,689 of loans
^(2)   in foreclosure with an unpaid principal balance of $3.0 billion and
       $2.8 billion, respectively.
       

                                                                            
Fleet Management Services Segment
                                                           
                 Three Months                   Year Ended
                 Ended
                 December 31,               December 31,             
                 2012      2011      Change     2012        2011        Change
                 (In millions)
Fleet
management       $ 43      $ 45      (4  )%     $ 180       $ 173       4   %
fees
Fleet lease        350       350     ―            1,364       1,400     (3  )%
income
Other income      17       18      (6  )%      73         73        ―
Net revenues      410      413     (1  )%      1,617      1,646     (2  )%
Depreciation
on operating       304       301     1   %        1,212       1,223     (1  )%
leases
Fleet
interest           17        19      (11 )%       70          82        (15 )%
expense
Other             69       74      (7  )%      248        266       (7  )%
expenses
Total             390      394     (1  )%      1,530      1,571     (3  )%
expenses
Segment          $ 20      $ 19      5   %      $ 87        $ 75        16  %
profit
                                                                            
                                                                            
                                                                            
                 Average for the                Average for the
                 Three Months                   Year Ended
                 Ended
                 December 31,               December 31,             
                 2012      2011      Change     2012        2011        Change
                 (In thousands of units)
Leased             260       270     (4  )%       265         274       (3  )%
vehicles
Maintenance
service            322       336     (4  )%       338         324       4   %
cards
Fuel cards         309       300     3   %        304         295       3   %
Accident
management         295       308     (4  )%       307         298       3   %
vehicles
                                                                            


DEBT AND BORROWING ARRANGEMENTS

The following table summarizes the components of Debt:

                               December 31, 2012      December 31, 2011
                                           Wt. Avg-               Wt. Avg-
                                             Interest                 Interest
                                 Balance     Rate^(1)     Balance     Rate^(1)
                                 (In millions)
Term notes, in amortization      $ 424       2.2  %       $ 1,196     2.1   %
Term notes, in revolving           1,593     1.0  %         374       1.6   %
period
Variable-funding notes             1,415     1.6  %         1,516     1.4   %
Other                             25        5.1  %        32        5.1   %
Vehicle Management                3,457                   3,118
Asset-Backed Debt
Secured Canadian Credit           ―         ―    %        ―         ―     %
facility
Committed warehouse                1,875     2.0  %         2,313     2.0   %
facilities
Uncommitted warehouse              ―         ―    %         44        1.2   %
facilities
Servicing advance facility        66        2.7  %        79        2.8   %
Mortgage Asset-Backed Debt        1,941                   2,436
Term notes                         732       8.5  %       879         8.2   %
Convertible notes                  424       5.0  %         460       4.0   %
Unsecured Credit facilities       ―         ―    %        ―         ―     %
Unsecured Debt                    1,156                   1,339
Mortgage loan securitization
debt certificates, at fair        ―         ―    %        21        7.0   %
value
Total                            $ 6,554                  $ 6,914
____________________

       Represents the weighted-average stated interest rate of outstanding
       debt as of the respective date, which may be different from the
^(1)  effective rate due to the amortization of premiums, discounts and
       issuance costs. Facilities are variable-rate, except for the Unsecured
       Term notes, Convertible notes, and Mortgage loan securitization debt
       certificates which are fixed-rate.
       


AVAILABLE FUNDING AND BORROWING CAPACITY

Capacity under all borrowing agreements is dependent upon maintaining
compliance with, or obtaining waivers of, the terms, conditions and covenants
of the respective agreements. Available capacity under asset-backed funding
arrangements may be further limited by asset eligibility requirements.
Available capacity under committed borrowing arrangements as of December 31,
2012 consisted of:


                                                             
                                                       Utilized     Available
                                          Capacity     Capacity     Capacity
                                          (In millions)
Vehicle Management Asset-Backed Debt:
Term notes, in revolving period           $  1,593     $  1,593     $  ―
Variable-funding notes                       2,322        1,415        907
Secured Canadian Credit facility^(1)         126          4            122
Mortgage Asset-Backed Debt:
Committed warehouse facilities               3,393        1,875        1,518
Servicing advance facility                   120          66           54
Unsecured Credit facilities                  305          ―            305
____________________

       Utilized capacity reflects $4 million of letters of credit issued under
^(1)  the Secured Canadian Credit facility, which are not included in Debt in
       the Consolidated Balance Sheet.
       

Capacity for Mortgage asset-backed debt shown above excludes $2.0 billion not
drawn under uncommitted facilities, and $337 million available under committed
off-balance sheet gestation facilities.

* NOTE REGARDING NON-GAAP FINANCIAL MEASURES

Core earnings (loss) (pre-tax and after-tax), core earnings (loss) per share,
adjusted cash flow, tangible book value and tangible book value per share are
financial measures that are not in accordance with GAAP. See Non-GAAP
Reconciliations below for a reconciliation of these measures to the most
directly comparable GAAP financial measures as required by Regulation G.

Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per
share involves differences from Segment profit (loss), Income (loss) before
income taxes, Net income (loss) attributable to PHH Corporation and Basic
earnings (loss) per share attributable to PHH Corporation computed in
accordance with GAAP. Core earnings (loss) (pre-tax and after-tax) and core
earnings (loss) per share should be considered as supplementary to, and not as
a substitute for, Segment profit (loss), Income (loss) before income taxes,
Net income (loss) attributable to PHH Corporation or Basic earnings (loss) per
share attributable to PHH Corporation computed in accordance with GAAP as a
measure of the Company’s financial performance.

Adjusted cash flow involves differences from Net increase (decrease) in cash
and cash equivalents computed in accordance with GAAP. Adjusted cash flow
should be considered as supplementary to, and not as a substitute for, Net
increase (decrease) in cash and cash equivalents computed in accordance with
GAAP as a measure of the Company’s net increase or decrease in cash and cash
equivalents.

Tangible book value and tangible book value per share involve differences from
Total PHH Corporation stockholders’ equity computed in accordance with GAAP.
Tangible book value and tangible book value per share should be considered as
supplementary to, and not as a substitute for, Total PHH Corporation
stockholders’ equity computed in accordance with GAAP as a measure of the
Company’s financial position.

The Company believes that these Non-GAAP Financial Measures can be useful to
investors because they provide a means by which investors can evaluate the
Company’s underlying key drivers and operating performance of the business,
exclusive of certain adjustments and activities that investors may consider to
be unrelated to the underlying economic performance of the business for a
given period.

The Company also believes that any meaningful analysis of the Company’s
financial performance by investors requires an understanding of the factors
that drive the Company’s underlying operating performance which can be
obscured by significant unrealized changes in value of the Company’s mortgage
servicing rights, as well as any gain or loss on derivatives that are intended
to offset market-related fair value adjustments on the Company’s mortgage
servicing rights, in a given period that are included in Segment profit
(loss), Income (loss) before income taxes, Net income (loss) attributable to
PHH Corporation and Basic earnings (loss) per share attributable to PHH
Corporation in accordance with GAAP.

Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per
share

Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per
share measure the Company’s financial performance excluding unrealized changes
in fair value of the Company’s mortgage servicing rights that are based upon
projections of expected future cash flows and prepayments as well as realized
and unrealized changes in the fair value of derivatives that are intended to
offset changes in the fair value of mortgage servicing rights. The changes in
fair value of mortgage servicing rights and related derivatives are highly
sensitive to changes in interest rates and are dependent upon the level of
current and projected interest rates at the end of each reporting period.

Value lost from actual prepayments and recurring cash flows are recorded when
actual cash payments or prepayments of the underlying loans are received, and
are included in core earnings based on the current fair value of the mortgage
servicing rights at the time the payments are received.

The presentation of core earnings is designed to more closely align the timing
of recognizing the actual value lost from prepayments in the mortgage
servicing segment with the associated value created through new originations
in the mortgage production segment. The Company believes that it will likely
replenish most, if not all, realized value lost from changes in value from
actual prepayments through new loan originations and actively manages and
monitors economic replenishment rates to measure its ability to continue to do
so. Therefore, management does not believe the unrealized change in value of
the mortgage servicing rights is representative of the economic change in
value of the business as a whole.

Core earnings metrics are used in managing the Company’s mortgage business.
The Company has also designed certain management incentives based upon the
achievement of core earnings targets, subject to potential adjustments that
may be made at the discretion of the Human Capital and Compensation Committee
of the Company’s Board of Directors.

Limitations on the use of Core Earnings

Since core earnings (loss) (pre-tax and after-tax) and core earnings (loss)
per share measure the Company’s financial performance excluding unrealized
changes in value of mortgage servicing rights, such measures may not
appropriately reflect the rate of value lost on subsequent actual payments or
prepayments over time. As such, core earnings (loss) (pre-tax and after-tax)
and core earnings (loss) per share may tend to overstate operating results in
a declining interest rate environment and understate operating results in a
rising interest rate environment, absent the effect of any offsetting gains or
losses on derivatives that are intended to offset changes in fair value on the
Company’s mortgage servicing rights.

Due to changes in the Company’s mortgage servicing rights valuation model that
became effective January 1, 2012, the Company no longer reports
“Credit-related fair value adjustments” to MSRs as a discrete component of the
change in value of MSRs. For periods ending after December 31, 2011,
“Market-related fair value adjustments” in the accompanying Regulation G
reconciliation include changes in MSR value due to the impact of estimated
portfolio delinquencies and foreclosures. Accordingly, amounts previously
classified as “Credit-related fair value adjustments” have been reclassified
to “Market-related fair value adjustments” for periods ending on or before
December 31, 2011.

Adjusted cash flow

Adjusted cash flow measures the Company’s Net increase (decrease) in cash and
cash equivalents for a given period excluding changes resulting from the
issuance of equity, the purchase of derivative securities related to the
Company’s stock or the issuance or repayment of unsecured or other debt by PHH
Corporation. The Company believes that Adjusted cash flow is a useful measure
for investors because the Company’s ability to repay future unsecured debt
maturities or return capital to equity holders is highly dependent on a
demonstrated ability to generate cash. Accordingly, the Company believes that
Adjusted cash flow may assist investors in determining the amount of cash and
cash equivalents generated from business activities during a period that is
available to repay unsecured debt or distribute to holders of the Company’s
equity.

Adjusted cash flow can be generated through a combination of earnings, more
efficient utilization of asset-backed funding facilities, or an improved
working capital position. Adjusted cash flow can vary significantly between
periods based upon a variety of potential factors including, but not limited
to, timing related to cash collateral postings, mortgage origination volumes
and margins, fleet vehicle purchases, sales, and related securitizations.

Adjusted cash flow is not a substitute for the Net increase (decrease) in cash
and cash equivalents for a period and is not intended to provide the Company’s
total sources and uses of cash or measure its change in liquidity. As such, it
is important that investors review the Company’s consolidated statement of
cash flows for a more detailed understanding of the drivers of net cash
provided by (used in) operating activities, investing activities, and
financing activities.

Adjusted cash flow metrics are used in managing the Company’s mortgage and
fleet businesses. The Company has also designed certain management incentives
based upon the achievement of adjusted cash flow targets, subject to potential
adjustments that may be made at the discretion of the Human Capital and
Compensation Committee of the Company’s Board of Directors.

Tangible book value and Tangible book value per share

Tangible book value is a measure of Total PHH Corporation stockholders’ equity
computed in accordance with GAAP excluding the value of goodwill and other
intangible assets. Tangible book value per share is a measure of tangible book
value, on a per share basis, using the number of shares of outstanding PHH
Corporation common stock as of the applicable measurement date. Certain of the
Company’s debt agreements contain indebtedness-to-tangible net worth ratio
covenants, and such ratios are calculated using a measure of tangible net
worth that is calculated on a basis similar to the Company’s calculation of
tangible book value. Accordingly, the Company believes that tangible book
value and tangible book value per share provide useful supplementary
information to investors.

NON-GAAP RECONCILIATIONS – CORE EARNINGS
(In millions, except per share data)

See “Note Regarding Non-GAAP Financial Measures” above in this press release
for a description of the uses and limitations of the Non-GAAP Financial
Measures.



Regulation G Reconciliation
                               Three Months Ended     Year Ended
                                 December 31,             December 31,
                                 2012        2011       2012     2011
Income (loss) before income      $ 99          $ 21       $ 87       $ (202  )
taxes ― as reported
Less: net income
attributable to                   15          8         59        25    
noncontrolling interest
Segment profit (loss)              84            13         28         (227  )
Market-related fair value          (29   )       68         223        521
adjustments ^(1)
Net derivative loss related       10          4         5         3     
to MSRs
Core earnings (pre-tax)          $ 65         $ 85       $ 256      $ 297   
                                                                       
Net income (loss)
attributable to PHH              $ 58          $ 13       $ 34       $ (127  )
Corporation― as reported
Market-related fair value
adjustments, net of taxes          (18   )       40         131        307
^(1)(2)
Net derivative loss related       6           2         3         2     
to MSRs, net of taxes ^(2)
Core earnings (after-tax)        $ 46         $ 55       $ 168      $ 182   
                                                                       
Basic earnings (loss) per
share attributable to PHH        $ 1.01        $ 0.22     $ 0.60     $ (2.26 )
Corporation ― as reported
Market-related fair value
adjustments, net of taxes          (0.31 )       0.72       2.31       5.46
^(1)(3)
Net derivative loss related       0.11        0.04      0.05      0.03  
to MSRs, net of taxes^(3)
Core earnings per share          $ 0.81       $ 0.98     $ 2.96     $ 3.23  
___________________

^(1)  Represents the Change in fair value of MSRs due to changes in market
       inputs and assumptions used in the valuation model.

^(2)   An incremental effective tax rate of 41% was applied to the MSRs
       valuation adjustments to arrive at the net of taxes amounts.

       Basic weighted-average shares outstanding of 56.957 million and 56.504
       million for the three months ended December 31, 2012 and 2011,
^(3)   respectively and 56.815 million and 56.349 million for the years ended
       December 31, 2012 and 2011, respectively, were used to calculate per
       share amounts.
       


NON-GAAP RECONCILIATIONS – CORE EARNINGS BY SEGMENT
(In millions)

See “Note Regarding Non-GAAP Financial Measures” above in this press release
for a description of the uses and limitations of the Non-GAAP Financial
Measures.



Regulation G Reconciliation
                                                               
                            Fourth Quarter 2012
                                                         Fleet
                            Mortgage       Mortgage      Management
                            Production     Servicing     Services
                            Segment        Segment       Segment        Other
Segment profit (loss)       $     99       $   (35 )     $     20       $ ―
Market-related fair               ―            (29 )           ―          ―
value adjustments^(1)
Net derivative loss              ―           10            ―         ―
related to MSRs
Core earnings (loss)        $     99       $   (54 )     $     20       $ ―
                                                                          
                                                                          
                            Fourth Quarter 2011
                                                         Fleet
                            Mortgage       Mortgage      Management
                            Production     Servicing     Services
                            Segment        Segment       Segment        Other
Segment profit (loss)       $     86       $   (90 )     $     19       $ (2 )
Market-related fair               ―            68              ―          ―
value adjustments^(1)
Net derivative loss              ―           4             ―         ―
related to MSRs
Core earnings (loss)        $     86       $   (18 )     $     19       $ (2 )
____________________

^(1)  Represents the Change in fair value of MSRs due to changes in market
       inputs and assumptions used in the valuation model.
       




NON-GAAP RECONCILIATIONS – CORE EARNINGS BY SEGMENT
(In millions)

See “Note Regarding Non-GAAP Financial Measures” above in this press release
for a description of the uses and limitations of the Non-GAAP Financial
Measures.



Regulation G Reconciliation
                                                              
                           Year Ended December 31, 2012
                                                        Fleet
                           Mortgage       Mortgage      Management
                           Production     Servicing     Services
                           Segment        Segment       Segment        Other
Segment profit (loss)      $    416       $  (462 )     $     87       $ (13 )
Market-related fair             ―            223              ―          ―
value adjustments^(1)
Net derivative loss            ―           5              ―         ―
related to MSRs
Core earnings (loss)       $    416       $  (234 )     $     87       $ (13 )
                                                                         
                                                                         
                           Year Ended December 31, 2011
                                                        Fleet
                           Mortgage       Mortgage      Management
                           Production     Servicing     Services
                           Segment        Segment       Segment        Other
Segment profit (loss)      $    258       $  (557 )     $     75       $ (3  )
Market-related fair             ―            521              ―          ―
value adjustments^(1)
Net derivative loss            ―           3              ―         ―
related to MSRs
Core earnings (loss)       $    258       $  (33  )     $     75       $ (3  )
____________________

^(1)  Represents the Change in fair value of MSRs due to changes in market
       inputs and assumptions used in the valuation model.
       


NON-GAAP RECONCILIATIONS – ADJUSTED CASH FLOW
(In millions)

See “Note Regarding Non-GAAP Financial Measures” above in this press release
for a description of the uses and limitations of the Non-GAAP Financial
Measures.


                                                     
Regulation G Reconciliation
                                 Three Months Ended    Year Ended
                                   December 31,            December 31,
                                   2012      2011        2012      2011
Net increase in Cash and cash      $ 152       $ 330       $ 415       $ 219
equivalents
Adjustments:
(Increase) decrease in               ―           (19 )       153         (99 )
unsecured borrowings
Issuances of common stock           (4  )      ―         (5  )      (8  )
Adjusted cash flow                 $ 148      $ 311      $ 563      $ 112 
                                                                             


NON-GAAP RECONCILIATIONS ― TANGIBLE BOOK VALUE
(in millions except share and per share data)

See “Note Regarding Non-GAAP Financial Measures” above in this press release
for a description of the uses and limitations of the Non-GAAP Financial
Measures.



Regulation G Reconciliation
                                                           
                                               December 31,
                                               2012               2011
PHH Corporation stockholders' equity ―         $   1,526          $   1,442
as reported
Goodwill                                           (25    )           (25    )
Intangible assets                                 (31    )          (33    )
Tangible book value                            $   1,470         $   1,384  
Common shares issued and outstanding           56,975,991        56,361,155 
Tangible book value per share                  $   25.80         $   24.56  
                                                                             

Contact:

PHH Corporation
Investors
Jim Ballan, 856-917-4311
jim.ballan@phh.com
or
Media
Dico Akseraylian, 410-771-2038
dico.akseraylian@phh.com