Fitch Expects to Rate PHH's Senior Unsecured Notes 'BB+'

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign a rating of 'BB+' to PHH Corporation's (PHH) $250 million senior unsecured notes issuance with expected maturity of 2019. Proceeds from the issuance will be primarily used to repay the outstanding principal amount on the company's 2012 convertible notes, due April 2012.

PHH's ratings reflect its competitive position in the mortgage and fleet leasing business, positive core operating performance, improved funding and liquidity profile, and adequate capitalization. Ratings are constrained by the volatility in valuation of mortgage servicing rights (MSRs) associated with its capitalized servicing portfolio and the uncertainty surrounding regulation that could impact the mortgage servicing business.

The company reported a net loss (GAAP) of $148 million for three months ended Sep. 30, 2011, primarily due to $353 million MSR valuation charge (noncash) resulting from declining interest rates, which was within Fitch's expectations. On an adjusted basis, core pre-tax income was $108 million, driven by a surge in mortgage refinancing due to lower interest rates and increased profitability in the fleet leasing segment.

Operating performance on a GAAP basis is expected to remain pressured in the near term due to volatility in the valuation of the MSR portfolio. However, Fitch believes that PHH's demonstrated ability to increase mortgage share and growth in the fleet leasing business should help sustain overall core profitability.

Fitch's currently rates PHH as follows:

--Long-term IDR 'BB+;

--Senior unsecured 'BB+';

--Short-term IDR 'B';

--Commercial paper 'B'.

The Rating Outlook is Stable.

For more information on PHH's ratings, please refer to the recent press release, dated Aug. 1, 2011.

Established in 1946, PHH is the leading outsource provider of mortgage and fleet management services in the U.S. The company conducts its business through three operating segments: mortgage production, mortgage servicing and fleet management services.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Criteria' (Aug. 16, 2011);

--'Finance and Leasing Companies Criteria' (Dec. 30, 2010).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=587245

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Fitch RatingsPrimary AnalystMohak Rao, CFA, +1-212-908-0559DirectorFitch, Inc.One State Street PlazaNew York, NY 10004orMeghan Neenan, CFA, +1-212-908-0121Senior DirectororCommittee ChairpersonThomas Abruzzo, +1-212-368-0793Managing DirectororMedia Relations:Brian Bertsch, +1-212-908-0549Email: [email protected]

Source: Fitch Ratings

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