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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                to
 Commission File No. 1-7797
 
 PHH CORPORATION
 (Exact name of registrant as specified in its charter)
 MARYLAND
    
    52-0551284(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)3000 LEADENHALL ROADMT. LAUREL, NEW JERSEY
    
    08054(Address of principal executive offices)
    
    (Zip Code)
 856-917-1744  (Registrants telephone number, including area code)
 
 þ o
 o þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 Item
    
    Description
    
    PageCautionary Note Regarding Forward-Looking Statements
    
    
    2PART I  FINANCIAL INFORMATION1
    
    
    Financial Statements
    
    
    5Condensed Consolidated Statements of Operations
    
    
    5Condensed Consolidated Balance Sheets
    
    
    6Condensed Consolidated Statement of Changes in Equity
    
    
    7Condensed Consolidated Statements of Cash Flows
    
    
    8Note 1. Summary of Significant Accounting Policies
    
    
    9Note 2. (Loss) Earnings Per Share
    
    
    11Note 3. Restricted Cash, Cash Equivalents and Investments
    
    
    12Note 4. Mortgage Servicing Rights
    
    
    13Note 5. Loan Servicing Portfolio
    
    
    15Note 6. Mortgage Loan Sales
    
    
    16Note 7. Derivatives and Risk Management Activities
    
    
    18Note 8. Vehicle Leasing Activities
    
    
    21Note 9. Debt and Borrowing Arrangements
    
    
    22Note 10. Income Taxes
    
    
    28Note 11. Commitments and Contingencies
    
    
    29Note 12. Accumulated Other Comprehensive Income
    
    
    30Note 13. Fair Value Measurements
    
    
    31Note 14. Variable Interest Entities
    
    
    42Note 15. Segment Information
    
    
    452
    
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    473
    
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    854
    
    
    Controls and Procedures
    
    
    89PART II  OTHER INFORMATION1
    
    
    Legal Proceedings
    
    
    911A
    
    
    Risk Factors
    
    
    912
    
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    963
    
    
    Defaults Upon Senior Securities
    
    
    964
    
    
    (Removed and Reserved)
    
    
    965
    
    
    Other Information
    
    
    966
    
    
    Exhibits
    
    
    96Signatures
    
    
    97Exhibit Index
    
    
    98EX-4.4.3EX-4.4.4EX-4.4.5EX-4.4.6EX-4.4.7EX-4.4.8EX-4.4..9EX-4.4.10EX-4.4.11EX-4.4.12EX-4.4.13EX-10.1.3EX-31.1EX-31.2EX-32.1EX-32.2
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Except as expressly indicated or unless the context otherwise requires, the Company, PHH,
we, our or us means PHH Corporation, a Maryland corporation, and its subsidiaries.
 
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
    §
    
    the effects of environmental, economic or political conditions on the international,
national or regional economy, the outbreak or escalation of hostilities or terrorist
attacks and the impact thereof on our businesses;§
    
    the effects of continued market volatility or continued economic decline on the
availability and cost of our financing arrangements, the value of our assets and the price
of our Common stock;§
    
    the effects of a continued decline in the volume or value of U.S. home sales and home
prices, due to adverse economic changes or otherwise, on our Mortgage Production and
Mortgage Servicing segments;§
    
    the effects of changes in current interest rates on our business and our financing
costs;§
    
    our decisions regarding the use of derivatives related to mortgage servicing rights, if
any, and the resulting potential volatility of the results of operations of our Mortgage
Servicing segment;
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§
    
    the effects of increases in our actual and projected repurchases of, indemnification
given in respect of, or related losses associated with, sold mortgage loans for which we
have provided representations and warranties or other contractual recourse to purchasers
and insurers of such loans, including increases in our loss severity and reserves
associated with such loans;§
    
    the effects of reinsurance claims in excess of projected levels and in excess of
reinsurance premiums we are entitled to receive or amounts currently held in trust to pay
such claims;§
    
    the effects of any significant adverse changes in the underwriting criteria of
government-sponsored entities (GSEs), including the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation, including any changes caused by the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act);§
    
    the ability to maintain our status as a GSE-approved servicer, including the ability to
continue to comply with the GSEs respective selling and servicing guides, including any
changes caused by the Dodd-Frank Act;§
    
    changes in laws and regulations, including changes in mortgage- and real estate-related
laws and regulations (including changes caused by the Dodd-Frank Act) and state, federal
and foreign tax laws and accounting standards;§
    
    the effects of the insolvency of any of the counterparties to our significant customer
contracts or financing arrangements or the inability or unwillingness of such
counterparties to perform their respective obligations under, or to renew on terms
favorable to us, such contracts, or our ability to continue to comply with the terms of our
significant customer contracts, including service level agreements;§
    
    the ability to develop and implement operational, technological and financial systems to
manage our operations and to achieve enhanced earnings or effect cost savings, including
the ability to timely implement and successfully execute our transformation initiatives;§
    
    the effects of competition in our existing and potential future lines of business,
including the impact of consolidation within the industries in which we operate and
competitors with greater financial resources and broader product lines;§
    
    the willingness or ability of automobile manufacturers to make new vehicles available to
us on commercially favorable terms;§
    
    the ability to quickly reduce overhead and infrastructure costs in response to a
reduction in revenue;§
    
    the ability to implement fully integrated disaster recovery technology solutions in the
event of a disaster;§
    
    the ability to obtain financing (including refinancing existing indebtedness) on
acceptable terms, if at all, to finance our operations or growth strategy, to operate
within the limitations imposed by our financing arrangements and to maintain the amount of
cash required to service our indebtedness;§
    
    the ability to maintain our relationships with our existing clients and to establish
relationships with new clients;§
    
    a deterioration in the performance of assets held as collateral for secured borrowings;§
    
    the impact of the failure to maintain our credit ratings;§
    
    any failure to comply with covenants under our financing arrangements;
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§
    
    the effects of the consolidation of financial institutions and the related impact on the
availability of credit; and§
    
    the impact of actions taken or to be taken by the Treasury and the Board of Governors of
the Federal Reserve System on the credit markets and the U.S. economy.
   4




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 (In millions, except per share data)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesMortgage fees
    
    $
    66
    
    
    $
    86
    
    
    $
    118
    
    
    $
    147Fleet management fees
    
    
    40
    
    
    
    38
    
    
    
    78
    
    
    
    75Net fee income
    
    
    106
    
    
    
    124
    
    
    
    196
    
    
    
    222Fleet lease income
    
    
    349
    
    
    
    360
    
    
    
    688
    
    
    
    724Gain on mortgage loans, net
    
    
    139
    
    
    
    147
    
    
    
    244
    
    
    
    335Mortgage interest income
    
    
    22
    
    
    
    25
    
    
    
    40
    
    
    
    50Mortgage interest expense
    
    
    (41
    )
    
    
    (37
    )
    
    
    (79
    )
    
    
    (73
    )Mortgage net finance expense
    
    
    (19
    )
    
    
    (12
    )
    
    
    (39
    )
    
    
    (23
    )Loan servicing income
    
    
    97
    
    
    
    100
    
    
    
    198
    
    
    
    200Change in fair value of mortgage servicing rights
    
    
    (320
    )
    
    
    55
    
    
    
    (372
    )
    
    
    (108
    )Net loan servicing (loss) income
    
    
    (223
    )
    
    
    155
    
    
    
    (174
    )
    
    
    92Other income (expense)
    
    
    19
    
    
    
    (6
    )
    
    
    33
    
    
    
    5Net revenues
    
    
    371
    
    
    
    768
    
    
    
    948
    
    
    
    1,355ExpensesSalaries and related expenses
    
    
    119
    
    
    
    128
    
    
    
    233
    
    
    
    243Occupancy and other office expenses
    
    
    14
    
    
    
    12
    
    
    
    29
    
    
    
    27Depreciation on operating leases
    
    
    306
    
    
    
    322
    
    
    
    614
    
    
    
    647Fleet interest expense
    
    
    25
    
    
    
    21
    
    
    
    48
    
    
    
    51Other depreciation and amortization
    
    
    5
    
    
    
    7
    
    
    
    11
    
    
    
    13Other operating expenses
    
    
    117
    
    
    
    92
    
    
    
    209
    
    
    
    183Total expenses
    
    
    586
    
    
    
    582
    
    
    
    1,144
    
    
    
    1,164(Loss) income before income taxes
    
    
    (215
    )
    
    
    186
    
    
    
    (196
    )
    
    
    191(Benefit from) provision for income taxes
    
    
    (89
    )
    
    
    75
    
    
    
    (78
    )
    
    
    75Net (loss) income
    
    
    (126
    )
    
    
    111
    
    
    
    (118
    )
    
    
    116Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    5
    
    
    
    7
    
    
    
    8Net (loss) income attributable to PHH Corporation
    
    $
    (133
    )
    
    $
    106
    
    
    $
    (125
    )
    
    $
    108Basic (loss) earnings per share attributable to PHH Corporation
    
    $
    (2.40
    )
    
    $
    1.93
    
    
    $
    (2.26
    )
    
    $
    1.98Diluted (loss) earnings per share attributable to PHH Corporation
    
    $
    (2.40
    )
    
    $
    1.91
    
    
    $
    (2.26
    )
    
    $
    1.96
  5




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PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (In millions, except share data)
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    184
    
    
    $
    150Restricted cash, cash equivalents and
investments (including $241 of
available-for-sale securities at fair
value as of June 30, 2010)
    
    
    559
    
    
    
    596Mortgage loans held for sale
    
    
    2,090
    
    
    
    1,218Accounts receivable, net
    
    
    507
    
    
    
    469Net investment in fleet leases
    
    
    3,574
    
    
    
    3,610Mortgage servicing rights
    
    
    1,236
    
    
    
    1,413Property, plant and equipment, net
    
    
    45
    
    
    
    49Goodwill
    
    
    25
    
    
    
    25Other assets
    
    
    658
    
    
    
    593Total assets(1)
    
    $
    8,878
    
    
    $
    8,123LIABILITIES AND EQUITYAccounts payable and accrued expenses
    
    $
    515
    
    
    $
    495Debt
    
    
    5,999
    
    
    
    5,160Deferred income taxes
    
    
    618
    
    
    
    702Other liabilities
    
    
    358
    
    
    
    262Total liabilities(2)
    
    
    7,490
    
    
    
    6,619Commitments and contingencies (Note 11)
    
    
    
    
    
    
    EQUITYPreferred stock, $0.01 par value;
1,090,000 shares authorized at
June 30, 2010 and December 31,
2009; none issued or outstanding at June
30, 2010 or December 31, 2009
    
    
    
    
    
    
    Common stock, $0.01 par value;
273,910,000 shares authorized at
June 30, 2010 and December 31,
2009; 55,492,224 shares issued and
outstanding at June 30, 2010; 54,774,639
shares issued and outstanding at
December 31, 2009
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,064
    
    
    
    1,056Retained earnings
    
    
    291
    
    
    
    416Accumulated other comprehensive income
    
    
    18
    
    
    
    19Total PHH Corporation stockholders equity
    
    
    1,374
    
    
    
    1,492Noncontrolling interest
    
    
    14
    
    
    
    12Total equity
    
    
    1,388
    
    
    
    1,504Total liabilities and equity
    
    $
    8,878
    
    
    $
    8,123
 
 (1)
    
    Our Condensed Consolidated Balance Sheet at June 30, 2010 includes the
following assets of variable interest entities (VIEs) which can be used only to settle the
obligations of the VIEs: Cash and cash equivalents, $26 million; Restricted cash, cash
equivalents and investments, $259 million; Mortgage loans held for sale, $253 million;
Accounts receivable, $39 million; Net investment in fleet leases, $3,358 million; Property,
plant, and equipment, net, $1 million; Other assets, $83 million; and Total assets, $4,019
million.(2)
    
    Our Condensed Consolidated Balance Sheet at June 30, 2010 includes the
following liabilities of VIEs which creditors or beneficial interest holders do not have
recourse to PHH Corporation and Subsidiaries: Accounts payable and accrued expenses, $19
million; Debt, $3,118 million; Other liabilities, $10 million; and Total liabilities, $3,147
million.  6




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PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 Six Months Ended June 30, 2010
 (Unaudited)
 (In millions, except share data)
 PHH Corporation StockholdersAccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Noncontrolling
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Interest
    
    
    EquityBalance at December 31, 2009
    
    
    54,774,639
    
    
    $
    1
    
    
    $
    1,056
    
    
    $
    416
    
    
    $
    19
    
    
    $
    12
    
    
    $
    1,504Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    7
    
    
    
    (118
    )Other comprehensive loss, net of income
taxes of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Stock options exercised, including
excess tax benefit of $0
    
    
    453,562
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Restricted stock award vesting, net of
excess tax benefit of $0
    
    
    264,023
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Balance at June 30, 2010
    
    
    55,492,224
    
    
    $
    1
    
    
    $
    1,064
    
    
    $
    291
    
    
    $
    18
    
    
    $
    14
    
    
    $
    1,388
  7




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PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (In millions)
 Six MonthsEnded June 30,2010
    
    
    2009Cash flows from operating activities:Net (loss) income
    
    $
    (118
    )
    
    $
    116Adjustments to reconcile Net (loss) income to net cash (used in)
provided by operating activities:Capitalization of originated mortgage servicing rights
    
    
    (195
    )
    
    
    (267
    )Net unrealized loss on mortgage servicing rights
    
    
    372
    
    
    
    108Vehicle depreciation
    
    
    614
    
    
    
    647Other depreciation and amortization
    
    
    11
    
    
    
    13Origination of mortgage loans held for sale
    
    
    (13,649
    )
    
    
    (15,920
    )Proceeds on sale of and payments from mortgage loans held for sale
    
    
    13,001
    
    
    
    15,415Net gain on interest rate lock commitments, mortgage loans held
for sale and related derivatives
    
    
    (203
    )
    
    
    (219
    )Deferred income tax (benefit) provision
    
    
    (85
    )
    
    
    71Other adjustments and changes in other assets and liabilities, net
    
    
    55
    
    
    
    118Net cash (used in) provided by operating activities
    
    
    (197
    )
    
    
    82Cash flows from investing activities:Investment in vehicles
    
    
    (797
    )
    
    
    (524
    )Proceeds on sale of investment vehicles
    
    
    192
    
    
    
    220Purchase of mortgage servicing rights
    
    
    
    
    
    
    (1
    )Proceeds on sale of mortgage servicing rights
    
    
    5
    
    
    
    1Purchases of property, plant and equipment
    
    
    (6
    )
    
    
    (5
    )Purchases of restricted investments
    
    
    (288
    )
    
    
    Proceeds from restricted investments
    
    
    48
    
    
    
    Decrease (increase) in Restricted cash and cash equivalents
    
    
    278
    
    
    
    (120
    )Other, net
    
    
    6
    
    
    
    6Net cash used in investing activities
    
    
    (562
    )
    
    
    (423
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    22,125
    
    
    
    24,172Principal payments on borrowings
    
    
    (21,301
    )
    
    
    (23,737
    )Issuances of Company Common stock
    
    
    6
    
    
    
    Cash paid for debt issuance costs
    
    
    (29
    )
    
    
    (42
    )Other, net
    
    
    (8
    )
    
    
    (4
    )Net cash provided by financing activities
    
    
    793
    
    
    
    389Effect of changes in exchange rates on Cash and cash equivalents
    
    
    
    
    
    
    (11
    )Net increase in Cash and cash equivalents
    
    
    34
    
    
    
    37Cash and cash equivalents at beginning of period
    
    
    150
    
    
    
    109Cash and cash equivalents at end of period
    
    $
    184
    
    
    $
    146
  8




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 1. Summary of Significant Accounting Policies
 Basis of Presentation
  §
    
    Mortgage Production provides mortgage loan origination services and sells mortgage
loans.§
    
    Mortgage Servicing performs servicing activities for originated and purchased loans.§
    
    Fleet Management Services provides commercial fleet management services.
    Changes in Accounting Policies
 Transfers of Financial Assets .
 9




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Consolidation of Variable Interest Entities .
 Fair Value Measurements.
 Recently Issued Accounting Pronouncements
 Revenue Recognition.
 10




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Loan Modifications.
 Financing Receivables.
 
 2. (Loss) Earnings Per Share
   11




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions, except share and per share data)Net (loss) income attributable to
PHH Corporation
    
    $
    (133
    )
    
    $
    106
    
    
    $
    (125
    )
    
    $
    108Weighted-average common shares
outstanding  basic
    
    
    55,547,650
    
    
    
    54,502,265
    
    
    
    55,293,111
    
    
    
    54,441,028Effect of potentially dilutive securities:Stock options
    
    
    
    
    
    
    20,857
    
    
    
    
    
    
    
    10,605Restricted stock units
    
    
    
    
    
    
    550,772
    
    
    
    
    
    
    
    356,522Weighted-average common shares
outstanding  diluted
    
    
    55,547,650
    
    
    
    55,073,894
    
    
    
    55,293,111
    
    
    
    54,808,155Basic (loss) earnings per share
attributable to PHH Corporation
    
    $
    (2.40
    )
    
    $
    1.93
    
    
    $
    (2.26
    )
    
    $
    1.98Diluted (loss) earnings per share
attributable to PHH Corporation
    
    $
    (2.40
    )
    
    $
    1.91
    
    
    $
    (2.26
    )
    
    $
    1.96
 
 3. Restricted Cash, Cash Equivalents and Investments
    June 30,
    
    
    December 31,2010
    
    
    2009(In millions)Restricted cash and cash equivalents
    
    $
    318
    
    
    $
    596Restricted investments (at fair value)
    
    
    241
    
    
    
    Restricted cash, cash equivalents and investments
    
    $
    559
    
    
    $
    596
 12




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 June 30, 2010Weighted-averageAmortized
    
    
    Fair
    
    
    Unrealized
    
    
    Unrealized
    
    
    remainingCost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    maturity(In millions)Restricted investments
classified as available-for-sale:Corporate securities
    
    $
    46
    
    
    $
    46
    
    
    $
    
    
    
    $
    
    
    
    31 mos.Agency securities (1)
    
    
    157
    
    
    
    158
    
    
    
    1
    
    
    
    
    
    
    20 mos.Government securities
    
    
    37
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    24 mos.Total available-for-sale securities
    
    $
    240
    
    
    $
    241
    
    
    $
    1
    
    
    $
    
    
    
    23 mos.
 
 (1)
    
    Represents bonds and notes issued by various agencies including, but not
limited to, Federal National Mortgage Association (Fannie Mae), Federal Home Loan
Mortgage Corporation (Freddie Mac) and Federal Home Loan Banks.  
 4. Mortgage Servicing Rights
  Six MonthsEnded June 30,2010
    
    
    2009(In millions)Unpaid principal balance of capitalized loan servicing portfolio:Balance, beginning of period
    
    $
    127,700
    
    
    $
    129,078Additions
    
    
    12,381
    
    
    
    14,050Payoffs, sales and curtailments
    
    
    (9,984
    )
    
    
    (17,141
    )Balance, end of period
    
    $
    130,097
    
    
    $
    125,987
  Six MonthsEnded June 30,2010
    
    
    2009(In millions)Mortgage Servicing Rights:Balance, beginning of period
    
    $
    1,413
    
    
    $
    1,282Additions
    
    
    195
    
    
    
    268Changes in fair value due to:Realization of expected cash flows
    
    
    (110
    )
    
    
    (212
    )Changes in market inputs or assumptions used in the valuation model
    
    
    (262
    )
    
    
    104Sales
    
    
    
    
    
    
    (6
    )Balance, end of period
    
    $
    1,236
    
    
    $
    1,436
 13




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  June 30,2010
    
    2009Weighted-average prepayment speed (CPR)
    
    
    15
    %
    
    
    16
    %Option adjusted spread, in basis points (bps)
    
    
    719
    
    
    
    554Volatility
    
    
    29
    %
    
    
    31
    %
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2010
    
    2009
    
    2010
    
    2009(In millions)Net service fee revenue
    
    $
    99
    
    
    $
    105
    
    
    $
    196
    
    
    $
    212Late fees
    
    
    5
    
    
    
    4
    
    
    
    10
    
    
    
    9Other ancillary servicing revenue
    
    
    8
    
    
    
    11
    
    
    
    18
    
    
    
    16
   Six MonthsEnded June 30,2010
    
    2009Initial capitalization rate of additions to MSRs
    
    
    1.58
    %
    
    
    1.91
    %Weighted-average servicing fee of additions to MSRs (in bps)
    
    
    30
    
    
    
    37
 June 30,2010
    
    2009Capitalized servicing rate
    
    
    0.95
    %
    
    
    1.14
    %Capitalized servicing multiple
    
    
    3.1
    
    
    
    3.5Weighted-average servicing fee (in bps)
    
    
    30
    
    
    
    33
 14




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 5. Loan Servicing Portfolio
  Portfolio Activity
 Six MonthsEnded June 30,2010
    
    
    2009(In millions)Unpaid principal balance of loan servicing portfolio:Balance, beginning of period
    
    $
    151,481
    
    
    $
    149,750Additions
    
    
    16,119
    
    
    
    17,606Payoffs, sales and curtailments
    
    
    (11,633
    )
    
    
    (18,173
    )Balance, end of period
    
    $
    155,967
    
    
    $
    149,183
 Portfolio Composition
 June 30,2010
    
    
    2009(In millions)Owned servicing portfolio
    
    $
    132,774
    
    
    $
    128,670Subserviced portfolio
    
    
    23,193
    
    
    
    20,513Total servicing portfolio
    
    $
    155,967
    
    
    $
    149,183Fixed rate
    
    $
    107,113
    
    
    $
    97,846Adjustable rate
    
    
    48,854
    
    
    
    51,337Total servicing portfolio
    
    $
    155,967
    
    
    $
    149,183Conventional loans
    
    $
    130,969
    
    
    $
    130,378Government loans
    
    
    18,204
    
    
    
    11,936Home equity lines of credit
    
    
    6,794
    
    
    
    6,869Total servicing portfolio
    
    $
    155,967
    
    
    $
    149,183Weighted-average interest rate
    
    
    5.2
    %
    
    
    5.5
    %
 Portfolio Delinquency (1)
 June 30,2010
    
    
    2009Number
    
    
    Unpaid
    
    
    Number
    
    
    Unpaidof Loans
    
    
    Balance
    
    
    of Loans
    
    
    Balance30 days
    
    
    2.38
    %
    
    
    2.09
    %
    
    
    2.50
    %
    
    
    2.22
    %60 days
    
    
    0.57
    %
    
    
    0.54
    %
    
    
    0.72
    %
    
    
    0.68
    %90 or more days
    
    
    1.75
    %
    
    
    1.86
    %
    
    
    0.89
    %
    
    
    0.93
    %Total delinquency
    
    
    4.70
    %
    
    
    4.49
    %
    
    
    4.11
    %
    
    
    3.83
    %Foreclosure/real estate owned/bankruptcies
    
    
    2.66
    %
    
    
    2.73
    %
    
    
    2.62
    %
    
    
    2.72
    %
 
 (1)
    
    Represents the loan servicing portfolio delinquencies as a percentage of the
total number of loans and the total unpaid balance of the portfolio. 15




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  
 6. Mortgage Loan Sales
   MSRs(In millions)Fair value of retained interests
    
    $
    1,236Weighted-average life (in years)
    
    
    4.7Weighted-average servicing fee (in bps)
    
    
    30Weighted-average prepayment speed (annual rate)
    
    
    15
    %Impact on fair value of 10% adverse change
    
    $
    (79
    )Impact on fair value of 20% adverse change
    
    
    (151
    )Option adjusted spread (in bps)
    
    
    719Impact on fair value of 10% adverse change
    
    $
    (46
    )Impact on fair value of 20% adverse change
    
    
    (90
    )Volatility (annual rate)
    
    
    29
    %Impact on fair value of 10% adverse change
    
    $
    (12
    )Impact on fair value of 20% adverse change
    
    
    (24
    )
  16




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Six Months EndedJune 30,2010
    
    2009(In millions)Proceeds from new loan sales or securitizations
    
    $
    12,599
    
    
    $
    14,139Servicing fees received (1)
    
    
    196
    
    
    
    212Other cash flows received on retained interests (2)
    
    
    1
    
    
    
    4Purchases of delinquent or foreclosed loans
    
    
    (50
    )
    
    
    (52
    )Servicing advances
    
    
    (846
    )
    
    
    (483
    )Repayment of servicing advances
    
    
    829
    
    
    
    489
 
 (1)
    
    Excludes late fees and other ancillary servicing revenue.(2)
    
    Represents cash flows received on retained interests other than servicing fees.   17




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 7. Derivatives and Risk Management Activities
  June 30, 2010Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Fair
    
    
    Notional
    
    
    Sheet
    
    Fair
    
    
    NotionalPresentation
    
    Value
    
    
    Amount
    
    
    Presentation
    
    Value
    
    
    Amount(In millions)Interest rate lock commitments (IRLCs)
    
    Other assets
    
    $
    148
    
    
    $
    5,336
    
    
    Other liabilities
    
    $
    6
    
    
    $
    76Option contracts related to interest rate and
price risk for MLHS and IRLCs
    
    Other assets
    
    
    3
    
    
    
    1,670
    
    
    N/A
    
    
    
    
    
    
    Forward delivery commitments not subject to master
netting arrangements:Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    15
    
    
    
    1,226
    
    
    Other liabilities
    
    
    38
    
    
    
    2,616Forward delivery commitments subject to master
netting arrangements(1):Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    15
    
    
    
    1,405
    
    
    Other assets
    
    
    34
    
    
    
    1,814Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other liabilities
    
    
    18
    
    
    
    1,355
    
    
    Other liabilities
    
    
    61
    
    
    
    3,125Contracts related to interest rate risk for
variable-rate debt arrangements and fixed-rate
leases
    
    Other assets
    
    
    3
    
    
    
    666
    
    
    N/A
    
    
    
    
    
    
    Derivative instruments related to the issuance of
the 2014 Convertible Notes(2)
    
    Other assets
    
    
    44
    
    
    
    
    
    
    Other liabilities
    
    
    44
    
    
    
    Foreign exchange contracts
    
    Other assets
    
    
    4
    
    
    
    99
    
    
    Other liabilities
    
    
    
    
    
    
    42Total derivative instruments
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    183Impact of master netting arrangements(1)
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    (52
    )Cash collateral
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    (10
    )Net fair value of derivative instruments
    
    
    
    $
    221
    
    
    
    
    
    
    
    
    $
    121
 18




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 December 31, 2009Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Fair
    
    
    Notional
    
    
    Sheet
    
    Fair
    
    
    NotionalPresentation
    
    Value
    
    
    Amount
    
    
    Presentation
    
    Value
    
    
    Amount(In millions)IRLCs
    
    Other assets
    
    $
    31
    
    
    $
    3,507
    
    
    Other liabilities
    
    $
    5
    
    
    $
    934Forward delivery commitments not subject to master
netting arrangements:Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    44
    
    
    
    3,121
    
    
    Other liabilities
    
    
    9
    
    
    
    855Forward delivery commitments subject to master
netting arrangements(1):Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    34
    
    
    
    2,415
    
    
    Other assets
    
    
    4
    
    
    
    483Contracts related to interest rate risk for
variable-rate debt arrangements and fixed-rate
leases
    
    Other assets
    
    
    8
    
    
    
    911
    
    
    N/A
    
    
    
    
    
    
    Derivative instruments related to the issuance of
the 2014 Convertible Notes(2)
    
    Other assets
    
    
    37
    
    
    
    
    
    
    Other liabilities
    
    
    37
    
    
    
    Foreign exchange contracts
    
    N/A
    
    
    
    
    
    
    
    
    
    Other liabilities
    
    
    2
    
    
    
    285Total derivative instruments
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    57Impact of master netting arrangements(1)
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    (4
    )Cash collateral
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    (1
    )Net fair value of derivative instruments
    
    
    
    $
    144
    
    
    
    
    
    
    
    
    $
    52
 
 (1)
    
    Represents derivative instruments that are executed with the same
counterparties and subject to master netting arrangements between the Company and its
counterparties.(2)
    
    The notional amount of the derivative instruments related to the issuance of the
2014 Convertible Notes represents 9.6881 million shares of the Companys Common stock as of
both June 30, 2010 and December 31, 2009. 19




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Statement of
    
    Three Months Ended
    
    
    Six Months EndedOperations
    
    June 30,
    
    
    June 30,Presentation
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)IRLCs
    
    Gain on mortgage loans, net
    
    $
    379
    
    
    $
    108
    
    
    $
    581
    
    
    $
    277Option contracts related to interest rate and price risk for MLHS and IRLCs
    
    Gain on mortgage loans, net
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )
    
    
    Forward delivery commitments related to interest rate and price risk for MLHS and IRLCs
    
    Gain on mortgage loans, net
    
    
    (189
    )
    
    
    9
    
    
    
    (246
    )
    
    
    (37
    )Contracts related to interest rate risk for variable-rate debt arrangements and fixed-rate leases
    
    Fleet interest expense
    
    
    (3
    )
    
    
    
    
    
    
    (6
    )
    
    
    (1
    )Foreign exchange contracts
    
    Fleet interest expense
    
    
    6
    
    
    
    (19
    )
    
    
    5
    
    
    
    (15
    )Total derivative instruments
    
    
    
    $
    181
    
    
    $
    98
    
    
    $
    322
    
    
    $
    224
  Foreign Exchange.
 20




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 8. Vehicle Leasing Activities
  June 30,
    
    
    December 31,2010
    
    
    2009(In millions)Operating Leases:Vehicles under open-end operating leases
    
    $
    7,445
    
    
    $
    7,446Vehicles under closed-end operating leases
    
    
    235
    
    
    
    263Vehicles under operating leases
    
    
    7,680
    
    
    
    7,709Less: Accumulated depreciation
    
    
    (4,471
    )
    
    
    (4,382
    )Net investment in operating leases
    
    
    3,209
    
    
    
    3,327Direct Financing Leases:Lease payments receivable
    
    
    117
    
    
    
    121Less: Unearned income
    
    
    (3
    )
    
    
    (4
    )Net investment in direct financing leases
    
    
    114
    
    
    
    117Off-Lease Vehicles:Vehicles not yet subject to a lease
    
    
    249
    
    
    
    164Vehicles held for sale
    
    
    8
    
    
    
    9Less: Accumulated depreciation
    
    
    (6
    )
    
    
    (7
    )Net investment in off-lease vehicles
    
    
    251
    
    
    
    166Net investment in fleet leases
    
    $
    3,574
    
    
    $
    3,610
 June 30,
    
    December 31,2010
    
    2009Vehicles under open-end leases
    
    
    96
    %
    
    
    95
    %Vehicles under closed-end leases
    
    
    4
    %
    
    
    5
    %Vehicles under variable-rate leases
    
    
    77
    %
    
    
    76
    %Vehicles under fixed-rate leases
    
    
    23
    %
    
    
    24
    %
 21




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 9. Debt and Borrowing Arrangements
  June 30, 2010Assets Held as Collateral(1)Mortgage
    
    
    NetMaturity/
    
    
    
    
    
    
    
    
    
    
    Loans
    
    
    InvestmentInterest
    
    
    Expiry
    
    
    Accounts
    
    
    Restricted
    
    
    Held for
    
    
    in FleetBalance
    
    
    Capacity(2)
    
    
    Rate(3)
    
    
    Date
    
    
    Receivable
    
    
    Cash
    
    
    Sale
    
    
    Leases(Dollars in millions)Chesapeake Series 2009-1 Term Notes
    
    $
    1,000
    
    
    $
    1,000
    
    
    
    
    
    
    
    5/20/2010Chesapeake Series 2009-2 Term Notes
    
    
    903
    
    
    
    903
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-3 Term Notes
    
    
    50
    
    
    
    50
    
    
    
    
    
    
    
    10/20/2011Chesapeake Series 2009-4 Term Notes
    
    
    222
    
    
    
    222
    
    
    
    
    
    
    
    2/18/2010Chesapeake Series 2010-1 Variable Funding Notes
    
    
    500
    
    
    
    1,000
    
    
    
    
    
    
    
    5/31/2011FLRT Series 2010-1 Notes
    
    
    284
    
    
    
    284
    
    
    
    
    
    
    
    2/201111/2013Other
    
    
    42
    
    
    
    42
    
    
    
    
    
    
    
    11/20106/2016Total Vehicle Management Asset-Backed Debt
    
    
    3,001
    
    
    
    3,501
    
    
    
    2.1
    %(4)
    
    
    
    
    
    $
    34
    
    
    $
    259
    
    
    $
    
    
    
    $
    3,332RBS Repurchase Facility
    
    
    502
    
    
    
    800
    
    
    
    3.0
    %
    
    
    6/24/2011
    
    
    
    
    
    
    
    
    
    
    
    523
    
    
    
    CSFB Mortgage Repurchase Facility
    
    
    334
    
    
    
    350
    
    
    
    2.9
    %
    
    
    5/25/2011
    
    
    
    
    
    
    
    
    
    
    
    351
    
    
    
    CSFB Mortgage Venture Repurchase Facility
    
    
    68
    
    
    
    150
    
    
    
    2.9
    %
    
    
    5/25/2011
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    Ally Bank Mortgage Venture Repurchase Facility
    
    
    52
    
    
    
    150
    
    
    
    4.2
    %
    
    
    3/30/2011
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    Fannie Mae Repurchase Facilities
    
    
    722
    
    
    
    722
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    722
    
    
    
    Other
    
    
    58
    
    
    
    84
    
    
    
    2.9%4.2
    %
    
    
    9/2010  10/2010
    
    
    
    63
    
    
    
    
    
    
    
    5
    
    
    
    Total Mortgage Warehouse and Other Asset-Backed Debt
    
    
    1,736
    
    
    
    2,256
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    1,737
    
    
    
    Term Notes
    
    
    433
    
    
    
    433
    
    
    
    7.2%-7.9
    %(5)
    
    
    3/2013-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities
    
    
    379
    
    
    
    810
    
    
    
    1.0%-4.2
    %(6)
    
    
    1//2011-2/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012
    
    
    229
    
    
    
    229
    
    
    
    4.0
    %(7)
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2014
    
    
    186
    
    
    
    186
    
    
    
    4.0
    %(8)
    
    
    9/1/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,227
    
    
    
    1,658
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage Loan Securitization Debt Certificates, at Fair Value(9)
    
    
    35
    
    
    
    35
    
    
    
    7.0
    %(10)
    
    
    12/2027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,999
    
    
    $
    7,450
    
    
    
    
    
    
    
    
    
    
    $
    97
    
    
    $
    259
    
    
    $
    1,737
    
    
    $
    3,332
 22




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 December 31, 2009Assets Held as Collateral(1)Mortgage
    
    
    NetMaturity/
    
    
    
    
    
    
    
    
    
    
    Loans
    
    
    InvestmentInterest
    
    
    Expiry
    
    
    Accounts
    
    
    Restricted
    
    
    Held for
    
    
    in FleetBalance
    
    
    Capacity(2)
    
    
    Rate(3)
    
    
    Date
    
    
    Receivable
    
    
    Cash
    
    
    Sale
    
    
    Leases(Dollars in millions)Chesapeake Series 2006-2 Variable Funding
Notes
    
    $
    657
    
    
    $
    657
    
    
    
    
    
    
    
    2/26/2009Chesapeake Series 2009-1 Term Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    5/20/2010Chesapeake Series 2009-2 Term Notes
    
    
    902
    
    
    
    902
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-3 Term Notes
    
    
    50
    
    
    
    50
    
    
    
    
    
    
    
    10/20/2011Chesapeake Series 2009-4 Term Notes
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    2/18/2010Other
    
    
    33
    
    
    
    33
    
    
    
    
    
    
    
    3/2010 6/2016Total Vehicle Management Asset-Backed Debt
    
    
    2,892
    
    
    
    2,892
    
    
    
    2.0
    %(4)
    
    
    
    
    
    $
    21
    
    
    $
    297
    
    
    $
    
    
    
    $
    3,082RBS Repurchase Facility
    
    
    622
    
    
    
    1,500
    
    
    
    3.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    1
    
    
    
    667
    
    
    
    Fannie Mae Repurchase Facilities
    
    
    325
    
    
    
    325
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    Other
    
    
    49
    
    
    
    60
    
    
    
    2.7%- 3.1
    %
    
    
    9/2010- 10/2010
    
    
    
    52
    
    
    
    
    
    
    
    5
    
    
    
    Total Mortgage Warehouse and Other
Asset-Backed Debt
    
    
    996
    
    
    
    1,885
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    1
    
    
    
    1,005
    
    
    
    Term Notes
    
    
    439
    
    
    
    439
    
    
    
    6.5%- 7.9
    %(5)
    
    
    4/2010- 4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities
    
    
    432
    
    
    
    1,305
    
    
    
    1.0
    %(6)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012
    
    
    221
    
    
    
    221
    
    
    
    4.0
    %(7)
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2014
    
    
    180
    
    
    
    180
    
    
    
    4.0
    %(8)
    
    
    9/1/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,272
    
    
    
    2,145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,160
    
    
    $
    6,922
    
    
    
    
    
    
    
    
    
    
    $
    73
    
    
    $
    298
    
    
    $
    1,005
    
    
    $
    3,082
 
 (1)
    
    Assets held as collateral are not available to pay the Companys
general obligations.(2)
    
    Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the
terms, conditions and covenants of the respective agreements. With respect to asset-backed
funding arrangements, capacity may be further limited by the availability of asset eligibility
requirements under the respective agreements. The Series 2009-1, Series 2009-2, Series 2009-3
and Series 2009-4 notes (the Chesapeake Term Notes) (as defined below) have revolving
periods during which time the pro-rata share of lease cash flows pledged to Chesapeake, will
create availability to fund the acquisition of vehicles to be leased to customers of the
Companys Fleet Management Services segment. See Asset-Backed DebtVehicle Management
Asset-Backed Debt below for additional information.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of Total Vehicle Management Asset-Backed Debt, Term Notes, the 2012 Convertible Notes, the
2014 Convertible Notes and the Mortgage Loan Securitization Debt Certificates.(4)
    
    Represents the weighted-average interest rate of the Companys vehicle management
asset-backed debt arrangements as of June 30, 2010 and December 31, 2009, respectively.(5)
    
    Represents the range of stated interest rates of the MTNs outstanding as of June 30,
2010 and December 31, 2009, respectively. The effective rate of interest of the outstanding
MTNs was 7.2% as of both June 30, 2010 and December 31, 2009.(6)
    
    Represents the range of stated interest rates on the Amended Credit Facility as of
June 30, 2010 and December 31, 2009, respectively, excluding per annum utilization and
facility fees. The effective interest rate of the Credit Facilities was 2.9% and 1.0% as of
June 30, 2010 and December 31, 2009, respectively.(7)
    
    The effective rate of interest of the 2012 Convertible Notes was 12.4% as of both
June 30, 2010 and December 31, 2009, which represents the 4.0% semiannual cash payment and the
non-cash accretion of discount and issuance costs. 23




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (8)
    
    The effective rate of interest of the 2014 Convertible Notes was 13.0% as of both
June 30, 2010 and December 31, 2009, which represents the 4.0% semiannual cash payment and the
non-cash accretion of discount and issuance costs.(9)
    
    The Mortgage Loan Securitization Debt Certificates were consolidated by the Company
as a result of the adoption of updates to ASC 810 with $47 million of Securitized Mortgage
Loans, included in Other Assets. (See Note 1, Summary of Significant Accounting Policies
for additional information). The cashflows of the Securitized Mortgage Loans support payment
of the debt certificates and creditors of the securitization trust do not have recourse to the
Company.(10)
    
    The Mortgage Loan Securitization Debt Certificates are fixed rate.  Asset-Backed Debt
 Vehicle Management Asset-Backed Debt.
     24




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Mortgage Warehouse and Other Asset-Backed Debt.
      25




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Unsecured Debt
 Term Notes
  Credit Facilities
    Convertible Notes
  26




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Debt Maturities
  Asset-Backed
    
    
    Unsecured
    
    
    Total(In millions)Within one year
    
    $
    2,571
    
    
    $
    137
    
    
    $
    2,708Between one and two years
    
    
    1,036
    
    
    
    512
    
    
    
    1,548Between two and three years
    
    
    629
    
    
    
    426
    
    
    
    1,055Between three and four years
    
    
    392
    
    
    
    2
    
    
    
    394Between four and five years
    
    
    112
    
    
    
    252
    
    
    
    364Thereafter
    
    
    5
    
    
    
    18
    
    
    
    23$
    4,745
    
    
    $
    1,347
    
    
    $
    6,092
  Utilized
    
    AvailableCapacity(1)
    
    Capacity
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    3,501
    
    
    $
    3,001
    
    
    $
    500Mortgage warehouse and other(3)
    
    
    2,256
    
    
    
    1,833
    
    
    
    423Unsecured Committed Credit Facilities(4)
    
    
    810
    
    
    
    395
    
    
    
    415
 
 (1)
    
    Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the
terms, conditions and covenants of the respective agreements. With respect to asset-backed
funding arrangements, capacity may be further limited by the asset eligibility requirements
under the respective agreements.(2)
    
    The Chesapeake 2009-1 Term Notes and the 2009-4 Term Notes have entered their
respective Amortization Periods. See Asset-Backed DebtVehicle Management Asset-Backed
Debt above for additional information on the revolving and amortization periods of these
facilities.(3)
    
    Capacity does not reflect $2.3 billion undrawn under the $3.0 billion Fannie Mae
Repurchase Facilities, as these facilities are uncommitted. Utilized capacity reflects $97
million of mortgage loans sold to RBS under the terms of the RBS Repurchase Facility. The
mortgage loans and related debt are not included in the Companys Condensed Consolidated
Balance Sheet as of June 30, 2010.(4)
    
    Utilized capacity reflects $16 million of letters of credit issued under the Amended
Credit Facility, which are not included in Debt in the Companys Condensed Consolidated
Balance Sheet. 27




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Debt Covenants
   
 10. Income Taxes
     28




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   
 11. Commitments and Contingencies
 Legal Contingencies
  Loan Recourse
   Mortgage Reinsurance
  29




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three MonthsEnded June 30,2010
    
    
    2009(In millions)Reinsurance-related reserves, April 1,
    
    $
    117
    
    
    $
    97Realized reinsurance losses
    
    
    (4
    )
    
    
    (1
    )Increase in reinsurance reserves
    
    
    15
    
    
    
    12Reinsurance-related reserves, June 30,
    
    $
    128
    
    
    $
    108
 Six MonthsEnded June 30,2010
    
    
    2009(In millions)Reinsurance-related reserves, January 1,
    
    $
    108
    
    
    $
    83Realized reinsurance losses
    
    
    (6
    )
    
    
    (1
    )Increase in reinsurance reserves
    
    
    26
    
    
    
    26Reinsurance-related reserves, June 30,
    
    $
    128
    
    
    $
    108
 
 12. Accumulated Other Comprehensive Income
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)Net (loss) income attributable to PHH Corporation
    
    $
    (133
    )
    
    $
    106
    
    
    $
    (125
    )
    
    $
    108Other comprehensive (loss) income:Currency translation adjustments
    
    
    (8
    )
    
    
    10
    
    
    
    (2
    )
    
    
    6Unrealized gains on available-for-sale securities
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Total other comprehensive (loss) income
    
    
    (7
    )
    
    
    10
    
    
    
    (1
    )
    
    
    6Total comprehensive (loss) income
    
    $
    (140
    )
    
    $
    116
    
    
    $
    (126
    )
    
    $
    114
  UnrealizedGains on
    
    
    
    
    
    
    AccumulatedCurrency
    
    
    Available-
    
    
    
    
    
    
    OtherTranslation
    
    
    for-Sale
    
    
    Pension
    
    
    ComprehensiveAdjustment
    
    
    Securities
    
    
    Adjustment
    
    
    Income(In millions)Balance at December 31, 2009
    
    $
    27
    
    
    $
    
    
    
    $
    (8
    )
    
    $
    19Change during 2010
    
    
    (2
    )
    
    
    1
    
    
    
    
    
    
    
    (1
    )Balance at June 30, 2010
    
    $
    25
    
    
    $
    1
    
    
    $
    (8
    )
    
    $
    18
  30




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 13. Fair Value Measurements
  Level One .
 Level Two .
 Level Three .
   Restricted Investments.
  Mortgage Loans Held for Sale.
  31




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    AggregateUnpaidPrincipalBalanceAggregate
    
    (Under)Unpaid
    
    OverCarrying
    
    Principal
    
    CarryingAmount
    
    Balance
    
    Amount(In millions)Mortgage loans held for sale:Total
    
    $
    2,090
    
    
    $
    2,049
    
    
    $
    (41
    )Loans 90 or more days past due and on non-accrual status
    
    
    13
    
    
    
    23
    
    
    
    10
  June 30,2010(In millions)First mortgages:Conforming(1)
    
    $
    1,984Non-conforming
    
    
    38Alt-A(2)
    
    
    1Construction loans
    
    
    13Total first mortgages
    
    
    2,036Second lien
    
    
    12Scratch and Dent(3)
    
    
    40Other
    
    
    2Total
    
    $
    2,090
 
 (1)
    
    Represents mortgage loans that conform to the standards of the GSEs.(2)
    
    Represents mortgage loans that are made to borrowers with prime credit histories,
but do not meet the documentation requirements of a conforming loan.(3)
    
    Represents mortgage loans with origination flaws or performance issues. 32




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Securitized Mortgage Loans.
   Derivative Instruments .
 Forward Delivery Commitments
  Interest Rate Lock Commitments
  Option Contracts
  33




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Interest Rate Contracts
  Foreign Exchange Contracts
  Mortgage Servicing Rights
 Mortgage Loan Securitization Debt Certificates.
  34




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  June 30, 2010CashLevel
    
    Level
    
    Level
    
    CollateralOne
    
    Two
    
    Three
    
    and Netting(1)
    
    Total(In millions)Assets:Restricted investments
    
    $
    
    
    
    $
    241
    
    
    $
    
    
    
    $
    
    
    
    $
    241Mortgage loans held for sale
    
    
    
    
    
    
    1,987
    
    
    
    103
    
    
    
    
    
    
    
    2,090Mortgage servicing rights
    
    
    
    
    
    
    
    
    
    
    1,236
    
    
    
    
    
    
    
    1,236Other assets:Derivative assets:IRLCs
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    148Option contracts related to interest rate and price risk for MLHS and IRLCs
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Forward delivery commitments related to interest rate and price risk for
MLHS and IRLCs
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    (29
    )
    
    
    19Contracts related to interest rate risk for variable-rate
debt arrangements and fixed-rate leases
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Foreign exchange contracts
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Derivative instruments related to the issuance of the 2014 Convertible Notes
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    44Securitized mortgage loans
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    47Liabilities:Other liabilities:Derivative liabilities:IRLCs
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Forward delivery commitments related to interest rate and price risk for
MLHS and IRLCs
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    (62
    )
    
    
    71Derivative instruments related to the issuance
of the 2014 Convertible Notes
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    44Debt:Mortgage loan securitization debt certificates
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35
 35




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 December 31, 2009Level
    
    Level
    
    Level
    
    Cash Collateral 
andOne
    
    Two
    
    Three
    
    Netting(1)
    
    Total(In millions)Assets:Mortgage loans held for sale
    
    $
    
    
    
    $
    1,107
    
    
    $
    111
    
    
    $
    
    
    
    $
    1,218Mortgage servicing rights
    
    
    
    
    
    
    
    
    
    
    1,413
    
    
    
    
    
    
    
    1,413Investment securities
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Other assets:Derivative assets
    
    
    
    
    
    
    86
    
    
    
    68
    
    
    
    (10
    )
    
    
    144Liabilities:Other liabilities:Derivative liabilities
    
    
    
    
    
    
    15
    
    
    
    42
    
    
    
    (5
    )
    
    
    52
 
 (1)
    
    Adjustments to arrive at the carrying amounts of assets and liabilities presented in
the Condensed Consolidated Balance Sheets which represent the effect of netting the payable or
receivable and cash collateral held or placed with the same counterparties under master
netting arrangements between the Company and its counterparties.  Three Months Ended June 30, 2010Realized
    
    Purchases,Balance,
    
    and
    
    Issuances
    
    Transfers
    
    Transfers
    
    Balance,Beginning
    
    Unrealized
    
    and
    
    Into
    
    Out of
    
    Endof
    
    (Losses)
    
    Settlements,
    
    Level
    
    Level
    
    ofPeriod
    
    Gains
    
    net
    
    Three(1)
    
    Three(2)
    
    Period(In millions)Assets:Mortgage loans held for sale
    
    $
    92
    
    
    $
    (3
    )
    
    $
    13
    
    
    $
    8
    
    
    $
    (7
    )
    
    $
    103Mortgage servicing rights
    
    
    1,458
    
    
    
    (320
    )(4)
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    1,236Other assets:Investment securities
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    IRLCs, net
    
    
    51
    
    
    
    379
    
    
    
    (288
    )
    
    
    
    
    
    
    
    
    
    
    142Securitized mortgage loans
    
    
    49
    
    
    
    2
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    47Balance,
    
    Realized
    
    
    
    
    
    Transfers
    
    Transfers
    
    Balance,Beginning
    
    and
    
    
    
    
    
    Into
    
    Out of
    
    Endof
    
    Unrealized
    
    
    
    
    
    Level
    
    Level
    
    ofPeriod
    
    Losses
    
    Settlements
    
    Three
    
    Three
    
    PeriodLiabilities:Debt:Mortgage loan securitization debt
certificates
    
    $
    37
    
    
    $
    1
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    
    
    
    $
    35
 36




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Six Months Ended June 30, 2010Realized
    
    Purchases,Balance,
    
    and
    
    Issuances
    
    Transfers
    
    Transfers
    
    
    
    
    
    Balance,Beginning
    
    Unrealized
    
    and
    
    Into
    
    Out of
    
    
    
    
    
    Endof
    
    (Losses)
    
    Settlements,
    
    Level
    
    Level
    
    Transition
    
    ofPeriod
    
    Gains
    
    net
    
    Three(1)
    
    Three(2)
    
    Adjustment(3)
    
    Period(In millions)Assets:Mortgage loans held for sale
    
    $
    111
    
    
    $
    (4
    )
    
    $
    (9
    )
    
    $
    26
    
    
    $
    (21
    )
    
    $
    
    
    
    $
    103Mortgage servicing rights
    
    
    1,413
    
    
    
    (372
    )(4)
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236Other assets:Investment securities
    
    
    12
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    IRLCs, net
    
    
    26
    
    
    
    581
    
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142Securitized mortgage loans
    
    
    
    
    
    
    4
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    47Balance,
    
    Realized
    
    
    
    
    
    Transfers
    
    Transfers
    
    
    
    
    
    Balance,Beginning
    
    and
    
    
    
    
    
    Into
    
    Out of
    
    
    
    
    
    Endof
    
    Unrealized
    
    
    
    
    
    Level
    
    Level
    
    Transition
    
    ofPeriod
    
    Losses
    
    Settlements
    
    Three
    
    Three
    
    Adjustment(3)
    
    PeriodLiabilities:Debt:Mortgage loan securitization
debt certificates
    
    $
    
    
    
    $
    2
    
    
    $
    (7
    )
    
    $
    
    
    
    $
    
    
    
    $
    40
    
    
    $
    35
 Three Months Ended June 30, 2009Realized
    
    Purchases,
    
    TransfersBalance,
    
    and
    
    Issuances
    
    Out of
    
    Balance,Beginning
    
    Unrealized
    
    and
    
    Level
    
    Endof
    
    (Losses)
    
    Settlements,
    
    Three,
    
    ofPeriod
    
    Gains
    
    net
    
    net
    
    Period(In millions)Mortgage loans held for sale
    
    $
    125
    
    
    $
    (5
    )
    
    $
    (4
    )
    
    $
    (6
    )(5)
    
    $
    110Mortgage servicing rights
    
    
    1,223
    
    
    
    55
    (4)
    
    
    158
    
    
    
    
    
    
    
    1,436Investment securities
    
    
    32
    
    
    
    (19
    )
    
    
    (1
    )
    
    
    
    
    
    
    12Derivatives, net
    
    
    121
    
    
    
    108
    
    
    
    (162
    )
    
    
    
    
    
    
    67
 37




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Six Months Ended June 30, 2009Realized
    
    Purchases,
    
    TransfersBalance,
    
    and
    
    Issuances
    
    Out of
    
    Balance,Beginning
    
    Unrealized
    
    and
    
    Level
    
    Endof
    
    (Losses)
    
    Settlements,
    
    Three,
    
    ofPeriod
    
    Gains
    
    net
    
    net
    
    Period(In millions)Mortgage loans held for sale
    
    $
    177
    
    
    $
    (22
    )
    
    $
    (33
    )
    
    $
    (12
    )(5)
    
    $
    110Mortgage servicing rights
    
    
    1,282
    
    
    
    (108
    )(4)
    
    
    262
    
    
    
    
    
    
    
    1,436Investment securities
    
    
    37
    
    
    
    (21
    )
    
    
    (4
    )
    
    
    
    
    
    
    12Derivatives, net
    
    
    70
    
    
    
    277
    
    
    
    (280
    )
    
    
    
    
    
    
    67
 
 (1)
    
    Represents transfers to Scratch and Dent loans from conforming loans during the
three and six months ended June 30, 2010.(2)
    
    Represents Scratch and Dent and construction loans that were foreclosed upon,
construction loans that converted to first mortgages and Scratch and Dent loans that were
corrected during the three and six months ended June 30, 2010. The Companys mortgage loans in
foreclosure are measured at fair value on a non-recurring basis, as discussed in further
detail below.(3)
    
    Represents the transition adjustment related to the adoption of updates to ASC 810
and ASC 860 resulting in the consolidation of a mortgage loan securitization trust (See Note
1, Summary of Significant Accounting Policies and Note 14, Variable Interest Entities for
additional information).(4)
    
    Represents the change in the fair value of MSRs due to the realization of expected
cash flows and changes in market inputs and assumptions used in the MSR valuation model.(5)
    
    Represents Scratch and Dent loans that were foreclosed upon and construction loans
that converted to first mortgages, net of transfers into the Scratch and Dent population from
the conforming or foreclosure populations during the three and six months ended June 30, 2009.
The Companys mortgage loans in foreclosure are measured at fair value on a non-recurring
basis, as discussed in further detail below.  Three Months Ended June 30, 2010MortgageMortgage
    
    
    
    
    
    
    
    
    
    LoanLoans
    
    Mortgage
    
    
    
    
    
    Securitized
    
    SecuritizationHeld for
    
    Servicing
    
    
    
    
    
    Mortgage
    
    DebtSale
    
    Rights
    
    IRLCs
    
    Loans
    
    Certificates(In millions)Gain on mortgage loans, net
    
    $
    (5
    )
    
    $
    
    
    
    $
    379
    
    
    $
    
    
    
    $
    Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    Mortgage interest income
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Mortgage interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
 38




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Six Months Ended June 30, 2010MortgageMortgage
    
    
    
    
    
    
    
    
    
    LoanLoans
    
    Mortgage
    
    
    
    
    
    Securitized
    
    SecuritizationHeld for
    
    Servicing
    
    
    
    
    
    Mortgage
    
    DebtSale
    
    Rights
    
    IRLCs
    
    Loans
    
    Certificates(In millions)Gain on mortgage loans, net
    
    $
    (9
    )
    
    $
    
    
    
    $
    581
    
    
    $
    
    
    
    $
    Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (372
    )
    
    
    
    
    
    
    
    
    
    
    Mortgage interest income
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    Mortgage interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
 Three Months Ended June 30, 2009MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (6
    )
    
    $
    
    
    
    $
    
    
    
    $
    108Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    Mortgage interest income
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other expense
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
 Six Months Ended June 30, 2009MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (25
    )
    
    $
    
    
    
    $
    
    
    
    $
    277Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (108
    )
    
    
    
    
    
    
    Mortgage interest income
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Other expense
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
 39




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended June 30, 2010Change inFair ValueGain on
    
    of Mortgage
    
    MortgageMortgage
    
    Servicing
    
    Interest
    
    OtherLoans, net
    
    Rights
    
    Income
    
    Income(In millions)Unrealized gain (loss)
    
    $
    133
    
    
    $
    (273
    )
    
    $
    
    
    
    $
    
 Six Months Ended June 30, 2010Change inFair ValueGain on
    
    of Mortgage
    
    MortgageMortgage
    
    Servicing
    
    Interest
    
    OtherLoans, net
    
    Rights
    
    Income
    
    Income(In millions)Unrealized gain (loss)
    
    $
    130
    
    
    $
    (262
    )
    
    $
    
    
    
    $
    1
 Three Months Ended June 30, 2009Change inFair ValueGain on
    
    of Mortgage
    
    MortgageMortgage
    
    Servicing
    
    Interest
    
    OtherLoans, net
    
    Rights
    
    Income
    
    Expense(In millions)Unrealized gain (loss)
    
    $
    59
    
    
    $
    175
    
    
    $
    1
    
    
    $
    (19
    )
 Six Months Ended June 30, 2009Change inFair ValueGain on
    
    of Mortgage
    
    MortgageMortgage
    
    Servicing
    
    Interest
    
    OtherLoans, net
    
    Rights
    
    Income
    
    Expense(In millions)Unrealized gain (loss)
    
    $
    61
    
    
    $
    104
    
    
    $
    1
    
    
    $
    (21
    )
   40




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   June 30,
    
    
    December 31,2010
    
    
    2009(In millions)Mortgage loans in foreclosure
    
    $
    116
    
    
    $
    113Allowance for probable losses
    
    
    (21
    )
    
    
    (20
    )Mortgage loans in foreclosure, net
    
    $
    95
    
    
    $
    93REO
    
    $
    44
    
    
    $
    51Adjustment to estimated net realizable value
    
    
    (15
    )
    
    
    (15
    )REO, net
    
    $
    29
    
    
    $
    36
  41




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 14. Variable Interest Entities
  Mortgage Venture
   42




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  June 30,
    
    
    December 31,2010
    
    
    2009(In millions)ASSETSCash
    
    $
    21
    
    
    $
    40Mortgage loans held for sale
    
    
    248
    
    
    
    60Accounts receivable, net
    
    
    5
    
    
    
    2Property, plant and equipment, net
    
    
    1
    
    
    
    1Other assets
    
    
    15
    
    
    
    6Total assets(1)
    
    $
    290
    
    
    $
    109LIABILITIESAccounts payable and accrued expenses
    
    $
    15
    
    
    $
    14Debt(2)
    
    
    120
    
    
    
    Other liabilities
    
    
    9
    
    
    
    2Total liabilities(3)
    
    $
    144
    
    
    $
    16
 
 (1)
    
    See Note 9, Debt and Borrowing Arrangements for assets held as collateral
related to the Mortgage Ventures borrowing arrangements, which are not available to pay the
Companys general obligations.(2)
    
    See Note 9, Debt and Borrowing Arrangements for additional information regarding
the Mortgage Ventures borrowing arrangements.(3)
    
    Total liabilities exclude $61 million and $15 million of intercompany payables as of
June 30, 2010 and December 31, 2009, respectively.   Mortgage Loan Securitization Trust
  43




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Chesapeake and D.L. Peterson Trust
  June 30,
    
    
    December 31,2010
    
    
    2009(In millions)ASSETSCash and cash equivalents
    
    $
    3
    
    
    $
    3Restricted cash(1)
    
    
    233
    
    
    
    297Accounts receivable
    
    
    34
    
    
    
    21Net investment in fleet leases
    
    
    2,980
    
    
    
    3,046Other assets
    
    
    17
    
    
    
    22Total assets(2)
    
    $
    3,267
    
    
    $
    3,389LIABILITIESAccounts payable and accrued expenses
    
    $
    3
    
    
    $
    3Debt(3)
    
    
    2,675
    
    
    
    2,859Total liabilities
    
    $
    2,678
    
    
    $
    2,862
 
 (1)
    
    Restricted cash primarily relates to amounts specifically designated to purchase
assets, to repay debt and/or to provide over-collateralization related to the Companys
vehicle management asset-backed debt arrangements.(2)
    
    See Note 9, Debt and Borrowing Arrangements for assets held as collateral related
to the Companys vehicle management asset-backed debt arrangements, which are not available to
pay the Companys general obligations.(3)
    
    See Note 9, Debt and Borrowing Arrangements for additional information regarding
the variable funding and term notes issued by Chesapeake. Fleet Leasing Receivables Trust
   44




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  June 30,2010(In millions)ASSETSRestricted cash(1)
    
    $
    26Net investment in fleet leases
    
    
    377Other assets
    
    
    4Total assets(2)
    
    $
    407LIABILITIESDebt(3)
    
    $
    284Total liabilities
    
    $
    284
 
 (1)
    
    Restricted cash primarily relates to amounts specifically designated to repay debt
and/or to provide over-collateralization related to the Companys vehicle management
asset-backed debt arrangements.(2)
    
    See Note 9, Debt and Borrowing Arrangements for assets held as collateral related
to the Companys vehicle management asset-backed debt arrangements, which are not available to
pay the Companys general obligations.(3)
    
    See Note 9, Debt and Borrowing Arrangements for additional information regarding
the term notes issued by FLRT. 
 15. Segment Information
   45




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Net Revenues
    
    
    Segment Profit (Loss) (1)Three Months
    
    
    
    
    
    
    Three MonthsEnded June 30,
    
    
    
    
    
    
    Ended June 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In millions)Mortgage Production segment
    
    $
    202
    
    
    $
    232
    
    
    $
    (30
    )
    
    $
    49
    
    
    $
    82
    
    
    $
    (33
    )Mortgage Servicing segment
    
    
    (238
    )
    
    
    124
    
    
    
    (362
    )
    
    
    (284
    )
    
    
    86
    
    
    
    (370
    )Combined Mortgage Services segments
    
    
    (36
    )
    
    
    356
    
    
    
    (392
    )
    
    
    (235
    )
    
    
    168
    
    
    
    (403
    )Fleet Management Services segment
    
    
    407
    
    
    
    413
    
    
    
    (6
    )
    
    
    13
    
    
    
    18
    
    
    
    (5
    )Total reportable segments
    
    
    371
    
    
    
    769
    
    
    
    (398
    )
    
    
    (222
    )
    
    
    186
    
    
    
    (408
    )Other (2)
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    (5
    )
    
    
    5Total Company
    
    $
    371
    
    
    $
    768
    
    
    $
    (397
    )
    
    $
    (222
    )
    
    $
    181
    
    
    $
    (403
    )
 Net Revenues
    
    

Segment Profit (Loss) (1)Six Months
    
    
    
    
    
    
    Six MonthsEnded June 30,
    
    
    
    
    
    
    Ended June 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In millions)Mortgage Production segment
    
    $
    354
    
    
    $
    480
    
    
    $
    (126
    )
    
    $
    74
    
    
    $
    195
    
    
    $
    (121
    )Mortgage Servicing segment
    
    
    (202
    )
    
    
    50
    
    
    
    (252
    )
    
    
    (297
    )
    
    
    (32
    )
    
    
    (265
    )Combined Mortgage Services segments
    
    
    152
    
    
    
    530
    
    
    
    (378
    )
    
    
    (223
    )
    
    
    163
    
    
    
    (386
    )Fleet Management Services segment
    
    
    797
    
    
    
    827
    
    
    
    (30
    )
    
    
    21
    
    
    
    25
    
    
    
    (4
    )Total reportable segments
    
    
    949
    
    
    
    1,357
    
    
    
    (408
    )
    
    
    (202
    )
    
    
    188
    
    
    
    (390
    )Other (2)
    
    
    (1
    )
    
    
    (2
    )
    
    
    1
    
    
    
    (1
    )
    
    
    (5
    )
    
    
    4Total Company
    
    $
    948
    
    
    $
    1,355
    
    
    $
    (407
    )
    
    $
    (203
    )
    
    $
    183
    
    
    $
    (386
    )
 
 (1)
    
    The following is a reconciliation of (Loss) income before income taxes to segment
(loss) profit: Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)(Loss) income before income taxes
    
    $
    (215
    )
    
    $
    186
    
    
    $
    (196
    )
    
    $
    191Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    5
    
    
    
    7
    
    
    
    8Segment (loss) profit
    
    $
    (222
    )
    
    $
    181
    
    
    $
    (203
    )
    
    $
    183
 
 (2)
    
    Amounts included under the heading Other represent intersegment eliminations and
amounts not allocated to the Companys reportable segments. Segment loss of $1 million
included under the heading Other for six months ended June 30, 2010 represents severance costs
for the Companys former chief executive officer. Segment loss of $5 million reported under
the heading Other for the three and six months ended June 30, 2009 represents expenses not
allocated to the Companys reportable segments, approximately $3 million of which represents
accrued severance for the Companys former chief executive officer. 46




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Except as expressly indicated or unless the context otherwise requires, the Company, PHH,
we, our or us means PHH Corporation, a Maryland corporation, and its subsidiaries. This Item
2 should be read in conjunction with the Cautionary Note Regarding Forward-Looking Statements,
Item 1A. Risk Factors and our Condensed Consolidated Financial Statements and notes thereto
included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (the Form
10-Q) and Item 1. Business, Item 1A. Risk Factors, Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations and our Consolidated Financial
Statements and the notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2009 (our2009 Form 10-K).
 Overview
  Executive Summary
  Three Months EndedJune 30,2010
    
    2009(In millions)Net (loss) income attributable to PHH Corporation
    
    $
    (133
    )
    
    $
    106Basic (loss) earnings per share attributable to PHH Corporation
    
    
    (2.40
    )
    
    
    1.93Diluted (loss) earnings per share attributable to PHH Corporation
    
    
    (2.40
    )
    
    
    1.91
  §
    
    Combined Mortgage Services Segments of $(235) Million vs. $168 Million:an
unfavorable change in the fair value of MSRs primarily resulting from a decline in
mortgage interest rates during the second quarter of 2010 compared to an increase in
mortgage interests rates during the second quarter of 2009 coupled with lower margins
on mortgage loans and a decrease in mortgage loans closed that were partially offset by
an increase in the volume of interest rate lock commitments (IRLCs) expected to
close.
 §
    
    Mortgage Production Segment of $49 Million vs. $82 Million:lower margins on
mortgage loans and lower volumes of more profitable first mortgage retail
originations partially offset by an increase in IRLCs expected to close.
 47




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§
    
    Mortgage Servicing Segment of $(284) Million vs. $86 Million: an unfavorable
change in the fair value of MSRs primarily resulting from a decline in mortgage
interest rates during the second quarter of 2010 compared to an increase in
mortgage interests rates during the second quarter of 2009 partially offset by
lower reductions in the value of MSRs due to prepayments and credit-related
adjustments.
 §
    
    Fleet Management Services Segment of $13 Million vs. $18 Million:a $4 million unfavorable impact of the segment recapitalization and acceleration of costs associated with the execution of the
transformation plan.
  Six Months EndedJune 30,2010
    
    2009(In millions)Net (loss) income attributable to PHH Corporation
    
    $
    (125
    )
    
    $
    108Basic (loss) earnings per share attributable to PHH Corporation
    
    
    (2.26
    )
    
    
    1.98Diluted (loss) earnings per share attributable to PHH Corporation
    
    
    (2.26
    )
    
    
    1.96
  §
    
    Combined Mortgage Services Segments of $(223) Million vs. $163 Million:an
unfavorable change in the fair value of MSRs primarily resulting from a decline in
mortgage interest rates during the six months ended June 30, 2010 compared to an
increase in mortgage interests rates during the six months ended June 30, 2009 coupled
with lower margins on mortgage loans and a decrease in mortgage loans closed that were
partially offset by an increase in the volume of IRLCs expected to close.
 §
    
    Mortgage Production Segment of $74 Million vs. $195 Million:lower margins
on mortgage loans and lower volumes of more profitable first mortgage retail
originations partially offset by an increase in IRLCs expected to close.§
    
    Mortgage Servicing Segment of $(297) Million vs. $(32) Million: an
unfavorable change in the fair value of MSRs primarily resulting from a decline
in mortgage interest rates during the six months ended June 30, 2010 compared
to an increase in mortgage interests rates during the six months ended June 30,
2009 partially offset by lower reductions in the value of MSRs due to
prepayments and credit-related adjustments.
 §
    
    Fleet Management Services Segment of $21 Million vs. $25 Million:a $7 million
unfavorable impact of the segment recapitalization and acceleration of costs associated with the execution of the
transformation plan.
 48




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Regulatory Trends
    49




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##### Table of Contents



Mortgage Production and Mortgage Servicing Segments
 Mortgage Industry Trends
 Overall Trends
   50




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Economics and Mortgage Market Analysis
  Mortgage Production Trends
 Economics and Mortgage Market Analysis
     Mortgage Servicing Trends
  51




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Three MonthsEnded June 30,2010
    
    
    2009(In millions)Foreclosure-related reserves, April 1,
    
    $
    96
    
    
    $
    88Realized foreclosure losses(1)
    
    
    (16
    )
    
    
    (24
    )Increase in foreclosure reserves
    
    
    24
    
    
    
    16Foreclosure-related reserves, June 30,
    
    $
    104
    
    
    $
    80
 Six MonthsEnded June 30,2010
    
    
    2009(In millions)Foreclosure-related reserves, January 1,
    
    $
    86
    
    
    $
    81Realized foreclosure losses(1)
    
    
    (32
    )
    
    
    (39
    )Increase in foreclosure reserves
    
    
    50
    
    
    
    38Foreclosure-related reserves, June 30,
    
    $
    104
    
    
    $
    80
 
 (1)
    
    Realized foreclosure losses for both the three and six months ended June 30,
2009 include an $11 million settlement with an individual investor for all future potential
repurchase liabilities.    Three MonthsEnded June 30,2010
    
    
    2009(In millions)Reinsurance-related reserves, April 1,
    
    $
    117
    
    
    $
    97Realized reinsurance losses
    
    
    (4
    )
    
    
    (1
    )Increase in reinsurance reserves
    
    
    15
    
    
    
    12Reinsurance-related reserves, June 30,
    
    $
    128
    
    
    $
    108
 52




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Six MonthsEnded June 30,2010
    
    
    2009(In millions)Reinsurance-related reserves, January 1,
    
    $
    108
    
    
    $
    83Realized reinsurance losses
    
    
    (6
    )
    
    
    (1
    )Increase in reinsurance reserves
    
    
    26
    
    
    
    26Reinsurance-related reserves, June 30,
    
    $
    128
    
    
    $
    108
   Fleet Management Services Segment
 Fleet Industry Trends
 Automotive Fleet
 Market and Credit Risk
  
 53




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##### Table of Contents



Results of OperationsSecond Quarter 2010 vs. Second Quarter 2009
 Consolidated Results
  Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change(In millions)Net fee income
    
    $
    106
    
    
    $
    124
    
    
    $
    (18
    )Fleet lease income
    
    
    349
    
    
    
    360
    
    
    
    (11
    )Gain on mortgage loans, net
    
    
    139
    
    
    
    147
    
    
    
    (8
    )Mortgage net finance expense
    
    
    (19
    )
    
    
    (12
    )
    
    
    (7
    )Loan servicing income
    
    
    97
    
    
    
    100
    
    
    
    (3
    )Change in fair value of mortgage servicing rights
    
    
    (320
    )
    
    
    55
    
    
    
    (375
    )Other income (expense)
    
    
    19
    
    
    
    (6
    )
    
    
    25Net revenues
    
    
    371
    
    
    
    768
    
    
    
    (397
    )Depreciation on operating leases
    
    
    306
    
    
    
    322
    
    
    
    (16
    )Fleet interest expense
    
    
    25
    
    
    
    21
    
    
    
    4Total other expenses
    
    
    255
    
    
    
    239
    
    
    
    16Total expenses
    
    
    586
    
    
    
    582
    
    
    
    4(Loss) income before income taxes
    
    
    (215
    )
    
    
    186
    
    
    
    (401
    )(Benefit from) provision for income taxes
    
    
    (89
    )
    
    
    75
    
    
    
    164Net (loss) income
    
    
    (126
    )
    
    
    111
    
    
    
    (237
    )Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    5
    
    
    
    2Net (loss) income attributable to PHH Corporation
    
    $
    (133
    )
    
    $
    106
    
    
    $
    (239
    )
     54




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##### Table of Contents



Segment Results
   Mortgage Services
    Three Months EndedJune 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Production-related expenses(1)
    
    $
    112
    
    
    $
    122
    
    
    $
    (10
    )
    
    
    (8
    )%Servicing-related expenses
    
    
    20
    
    
    
    18
    
    
    
    2
    
    
    
    11
    %Foreclosure costs
    
    
    20
    
    
    
    13
    
    
    
    7
    
    
    
    54
    %Other expenses
    
    
    40
    
    
    
    30
    
    
    
    10
    
    
    
    33
    %Total expenses
    
    $
    192
    
    
    $
    183
    
    
    $
    9
    
    
    
    5
    %
 
 (1)
    
    Approximately 80% of production-related expenses for the second quarter of 2010
are scalable with origination volumes.  55




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##### Table of Contents



Three Months EndedJune 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    66
    
    
    $
    86
    
    
    $
    (20
    )
    
    
    (23
    )%Gain on mortgage loans, net
    
    
    139
    
    
    
    147
    
    
    
    (8
    )
    
    
    (5
    )%Mortgage interest income
    
    
    22
    
    
    
    26
    
    
    
    (4
    )
    
    
    (15
    )%Mortgage interest expense
    
    
    (41
    )
    
    
    (40
    )
    
    
    (1
    )
    
    
    (3
    )%Mortgage net finance expense
    
    
    (19
    )
    
    
    (14
    )
    
    
    (5
    )
    
    
    (36
    )%Loan servicing income
    
    
    97
    
    
    
    100
    
    
    
    (3
    )
    
    
    (3
    )%Change in fair value of mortgage servicing rights
    
    
    (320
    )
    
    
    55
    
    
    
    (375
    )
    
    
    n/m
    (1)Net loan servicing (loss) income
    
    
    (223
    )
    
    
    155
    
    
    
    (378
    )
    
    
    n/m
    (1)Other income (expense)
    
    
    1
    
    
    
    (18
    )
    
    
    19
    
    
    
    n/m
    (1)Net revenues
    
    
    (36
    )
    
    
    356
    
    
    
    (392
    )
    
    
    n/m
    (1)Salaries and related expenses
    
    
    95
    
    
    
    101
    
    
    
    (6
    )
    
    
    (6
    )%Occupancy and other office expenses
    
    
    10
    
    
    
    7
    
    
    
    3
    
    
    
    43
    %Other depreciation and amortization
    
    
    3
    
    
    
    4
    
    
    
    (1
    )
    
    
    (25
    )%Other operating expenses
    
    
    84
    
    
    
    71
    
    
    
    13
    
    
    
    18
    %Total expenses
    
    
    192
    
    
    
    183
    
    
    
    9
    
    
    
    5
    %(Loss) income before income taxes
    
    
    (228
    )
    
    
    173
    
    
    
    (401
    )
    
    
    n/m
    (1)Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    5
    
    
    
    2
    
    
    
    40
    %Combined
Mortgage Services segments (loss) profit
    
    $
    (235
    )
    
    $
    168
    
    
    $
    (403
    )
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. 56




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##### Table of Contents



Mortgage Production Segment
  Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    7,660
    
    
    $
    8,980
    
    
    $
    (1,320
    )
    
    
    (15
    )%Fee-based closings
    
    
    2,397
    
    
    
    1,983
    
    
    
    414
    
    
    
    21
    %Total closings
    
    $
    10,057
    
    
    $
    10,963
    
    
    $
    (906
    )
    
    
    (8
    )%Purchase closings
    
    $
    6,175
    
    
    $
    3,870
    
    
    $
    2,305
    
    
    
    60
    %Refinance closings
    
    
    3,882
    
    
    
    7,093
    
    
    
    (3,211
    )
    
    
    (45
    )%Total closings
    
    $
    10,057
    
    
    $
    10,963
    
    
    $
    (906
    )
    
    
    (8
    )%Fixed rate
    
    $
    7,957
    
    
    $
    9,324
    
    
    $
    (1,367
    )
    
    
    (15
    )%Adjustable rate
    
    
    2,100
    
    
    
    1,639
    
    
    
    461
    
    
    
    28
    %Total closings
    
    $
    10,057
    
    
    $
    10,963
    
    
    $
    (906
    )
    
    
    (8
    )%First mortgage closings (units)
    
    
    41,681
    
    
    
    45,626
    
    
    
    (3,945
    )
    
    
    (9
    )%Second-lien closings (units)
    
    
    2,262
    
    
    
    2,594
    
    
    
    (332
    )
    
    
    (13
    )%Number of loans closed (units)
    
    
    43,943
    
    
    
    48,220
    
    
    
    (4,277
    )
    
    
    (9
    )%Retail closings (units)
    
    
    29,357
    
    
    
    40,042
    
    
    
    (10,685
    )
    
    
    (27
    )%Wholesale/correspondent closings (units)
    
    
    14,586
    
    
    
    8,178
    
    
    
    6,408
    
    
    
    78
    %Number of loans closed (units)
    
    
    43,943
    
    
    
    48,220
    
    
    
    (4,277
    )
    
    
    (9
    )%Average loan amount
    
    $
    228,865
    
    
    $
    227,363
    
    
    $
    1,502
    
    
    
    1
    %Loans sold
    
    $
    6,897
    
    
    $
    9,205
    
    
    $
    (2,308
    )
    
    
    (25
    )%Applications
    
    $
    15,958
    
    
    $
    14,819
    
    
    $
    1,139
    
    
    
    8
    %IRLCs expected to close
    
    $
    8,425
    
    
    $
    6,930
    
    
    $
    1,495
    
    
    
    22
    %
 Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    66
    
    
    $
    86
    
    
    $
    (20
    )
    
    
    (23
    )%Gain on mortgage loans, net
    
    
    139
    
    
    
    147
    
    
    
    (8
    )
    
    
    (5
    )%Mortgage interest income
    
    
    18
    
    
    
    22
    
    
    
    (4
    )
    
    
    (18
    )%Mortgage interest expense
    
    
    (22
    )
    
    
    (24
    )
    
    
    2
    
    
    
    8
    %Mortgage net finance expense
    
    
    (4
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (100
    )%Other income
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Net revenues
    
    
    202
    
    
    
    232
    
    
    
    (30
    )
    
    
    (13
    )%Salaries and related expenses
    
    
    85
    
    
    
    92
    
    
    
    (7
    )
    
    
    (8
    )%Occupancy and other office expenses
    
    
    8
    
    
    
    6
    
    
    
    2
    
    
    
    33
    %Other depreciation and amortization
    
    
    3
    
    
    
    4
    
    
    
    (1
    )
    
    
    (25
    )%Other operating expenses
    
    
    50
    
    
    
    43
    
    
    
    7
    
    
    
    16
    %Total expenses
    
    
    146
    
    
    
    145
    
    
    
    1
    
    
    
    1
    %Income before income taxes
    
    
    56
    
    
    
    87
    
    
    
    (31
    )
    
    
    (36
    )%Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    5
    
    
    
    2
    
    
    
    40
    %Segment profit
    
    $
    49
    
    
    $
    82
    
    
    $
    (33
    )
    
    
    (40
    )%
 57




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##### Table of Contents



Mortgage Production Statistics
   Mortgage Fees
   Gain on Mortgage Loans, Net
   Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    140
    
    
    $
    148
    
    
    $
    (8
    )
    
    
    (5
    )%Change in fair value of Scratch and Dent and
certain non-conforming mortgage loans
    
    
    (3
    )
    
    
    (4
    )
    
    
    1
    
    
    
    25
    %Economic hedge results
    
    
    2
    
    
    
    3
    
    
    
    (1
    )
    
    
    (33
    )%Total change in fair value of MLHS and related
derivatives
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    Gain on mortgage loans, net
    
    $
    139
    
    
    $
    147
    
    
    $
    (8
    )
    
    
    (5
    )%
 58




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##### Table of Contents



Mortgage Net Finance Expense
  Salaries and Related Expenses
 .
 Other Operating Expenses
  59




---



##### Table of Contents



Mortgage Servicing Segment
  Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    154,392
    
    
    $
    148,971
    
    
    $
    5,421
    
    
    
    4
    %
 Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    4
    
    
    $
    4
    
    
    $
    
    
    
    
    Mortgage interest expense
    
    
    (19
    )
    
    
    (16
    )
    
    
    (3
    )
    
    
    (19
    )%Mortgage net finance expense
    
    
    (15
    )
    
    
    (12
    )
    
    
    (3
    )
    
    
    (25
    )%Loan servicing income
    
    
    97
    
    
    
    100
    
    
    
    (3
    )
    
    
    (3
    )%Change in fair value of mortgage servicing rights
    
    
    (320
    )
    
    
    55
    
    
    
    (375
    )
    
    
    n/m
    (1)Net loan servicing (loss) income
    
    
    (223
    )
    
    
    155
    
    
    
    (378
    )
    
    
    n/m
    (1)Other income (expense)
    
    
    
    
    
    
    (19
    )
    
    
    19
    
    
    
    100
    %Net revenues
    
    
    (238
    )
    
    
    124
    
    
    
    (362
    )
    
    
    n/m
    (1)Salaries and related expenses
    
    
    10
    
    
    
    9
    
    
    
    1
    
    
    
    11
    %Occupancy and other office expenses
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    100
    %Other operating expenses
    
    
    34
    
    
    
    28
    
    
    
    6
    
    
    
    21
    %Total expenses
    
    
    46
    
    
    
    38
    
    
    
    8
    
    
    
    21
    %Segment (loss) profit
    
    $
    (284
    )
    
    $
    86
    
    
    $
    (370
    )
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance Expense
   60




---



##### Table of Contents



Loan Servicing Income
   Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    99
    
    
    $
    105
    
    
    $
    (6
    )
    
    
    (6
    )%Late fees and other ancillary servicing revenue
    
    
    13
    
    
    
    15
    
    
    
    (2
    )
    
    
    (13
    )%Curtailment interest paid to investors
    
    
    (6
    )
    
    
    (15
    )
    
    
    9
    
    
    
    60
    %Net reinsurance loss
    
    
    (9
    )
    
    
    (5
    )
    
    
    (4
    )
    
    
    (80
    )%Loan servicing income
    
    $
    97
    
    
    $
    100
    
    
    $
    (3
    )
    
    
    (3
    )%
  Change in Fair Value of Mortgage Servicing Rights
   Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Actual prepayments of the underlying mortgage loans
    
    $
    (35
    )
    
    $
    (85
    )
    
    $
    50
    
    
    
    59
    %Actual receipts of recurring cash flows
    
    
    (11
    )
    
    
    (13
    )
    
    
    2
    
    
    
    15
    %Credit-related fair value adjustments(1)
    
    
    (1
    )
    
    
    (22
    )
    
    
    21
    
    
    
    95
    %Market-related fair value adjustments(2)
    
    
    (273
    )
    
    
    175
    
    
    
    (448
    )
    
    
    n/m
    (3)Change in fair value of mortgage servicing rights
    
    $
    (320
    )
    
    $
    55
    
    
    $
    (375
    )
    
    
    n/m
    (3)
 
 (1)
    
    Represents the change in fair value of MSRs primarily due to changes in
portfolio delinquencies and foreclosures.(2)
    
    Represents the change in fair value of MSRs due to changes in market inputs and
assumptions used in the valuation model.(3)
    
    n/m  Not meaningful. 61




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##### Table of Contents



Other Income (Expense)
  Other Operating Expenses
  Fleet Management Services Segment
   62




---



##### Table of Contents



Average for theThree MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In thousands of units)Leased vehicles
    
    
    291
    
    
    
    318
    
    
    
    (27
    )
    
    
    (8
    )%Maintenance service cards
    
    
    275
    
    
    
    277
    
    
    
    (2
    )
    
    
    (1
    )%Fuel cards
    
    
    275
    
    
    
    285
    
    
    
    (10
    )
    
    
    (4
    )%Accident management vehicles
    
    
    291
    
    
    
    313
    
    
    
    (22
    )
    
    
    (7
    )%
 Three MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    40
    
    
    $
    38
    
    
    $
    2
    
    
    
    5
    %Fleet lease income
    
    
    349
    
    
    
    360
    
    
    
    (11
    )
    
    
    (3
    )%Other income
    
    
    18
    
    
    
    15
    
    
    
    3
    
    
    
    20
    %Net revenues
    
    
    407
    
    
    
    413
    
    
    
    (6
    )
    
    
    (1
    )%Salaries and related expenses
    
    
    19
    
    
    
    20
    
    
    
    (1
    )
    
    
    (5
    )%Occupancy and other office expenses
    
    
    4
    
    
    
    5
    
    
    
    (1
    )
    
    
    (20
    )%Depreciation on operating leases
    
    
    306
    
    
    
    322
    
    
    
    (16
    )
    
    
    (5
    )%Fleet interest expense
    
    
    25
    
    
    
    22
    
    
    
    3
    
    
    
    14
    %Other depreciation and amortization
    
    
    2
    
    
    
    3
    
    
    
    (1
    )
    
    
    (33
    )%Other operating expenses
    
    
    38
    
    
    
    23
    
    
    
    15
    
    
    
    65
    %Total expenses
    
    
    394
    
    
    
    395
    
    
    
    (1
    )
    
    
    Segment profit
    
    $
    13
    
    
    $
    18
    
    
    $
    (5
    )
    
    
    (28
    )%
 Fleet Management Fees
  Fleet Lease Income
  Other Income
  Depreciation on Operating Leases
  63




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##### Table of Contents



Fleet Interest Expense
  Other Operating Expenses
  Results of OperationsSix Months Ended June 30, 2010 vs. Six Months Ended June 30, 2009
 Consolidated Results
  Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change(In millions)Net fee income
    
    $
    196
    
    
    $
    222
    
    
    $
    (26
    )Fleet lease income
    
    
    688
    
    
    
    724
    
    
    
    (36
    )Gain on mortgage loans, net
    
    
    244
    
    
    
    335
    
    
    
    (91
    )Mortgage net finance expense
    
    
    (39
    )
    
    
    (23
    )
    
    
    (16
    )Loan servicing income
    
    
    198
    
    
    
    200
    
    
    
    (2
    )Change in fair value of mortgage servicing rights
    
    
    (372
    )
    
    
    (108
    )
    
    
    (264
    )Other income
    
    
    33
    
    
    
    5
    
    
    
    28Net revenues
    
    
    948
    
    
    
    1,355
    
    
    
    (407
    )Depreciation on operating leases
    
    
    614
    
    
    
    647
    
    
    
    (33
    )Fleet interest expense
    
    
    48
    
    
    
    51
    
    
    
    (3
    )Total other expenses
    
    
    482
    
    
    
    466
    
    
    
    16Total expenses
    
    
    1,144
    
    
    
    1,164
    
    
    
    (20
    )(Loss) income before income taxes
    
    
    (196
    )
    
    
    191
    
    
    
    (387
    )(Benefit from) provision for income taxes
    
    
    (78
    )
    
    
    75
    
    
    
    (153
    )Net (loss) income
    
    
    (118
    )
    
    
    116
    
    
    
    (234
    )Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    8
    
    
    
    (1
    )Net (loss) income attributable to PHH Corporation
    
    $
    (125
    )
    
    $
    108
    
    
    $
    (233
    )
  64




---



##### Table of Contents



Segment Results
   Mortgage Services
   65




---



##### Table of Contents



Six Months EndedJune 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Production-related expenses(1)
    
    $
    206
    
    
    $
    223
    
    
    $
    (17
    )
    
    
    (8
    )%Servicing-related expenses
    
    
    39
    
    
    
    35
    
    
    
    4
    
    
    
    11
    %Foreclosure costs
    
    
    43
    
    
    
    34
    
    
    
    9
    
    
    
    26
    %Other expenses
    
    
    80
    
    
    
    67
    
    
    
    13
    
    
    
    19
    %Total expenses
    
    $
    368
    
    
    $
    359
    
    
    $
    9
    
    
    
    3
    %
 
 (1)
    
    Approximately 79% of production-related expenses for the six months ended June
30, 2010 are scalable with origination volumes.  66




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##### Table of Contents



Six Months EndedJune 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    118
    
    
    $
    147
    
    
    $
    (29
    )
    
    
    (20
    )%Gain on mortgage loans, net
    
    
    244
    
    
    
    335
    
    
    
    (91
    )
    
    
    (27
    )%Mortgage interest income
    
    
    41
    
    
    
    51
    
    
    
    (10
    )
    
    
    (20
    )%Mortgage interest expense
    
    
    (79
    )
    
    
    (76
    )
    
    
    (3
    )
    
    
    (4
    )%Mortgage net finance expense
    
    
    (38
    )
    
    
    (25
    )
    
    
    (13
    )
    
    
    (52
    )%Loan servicing income
    
    
    198
    
    
    
    200
    
    
    
    (2
    )
    
    
    (1
    )%Change in fair value of mortgage servicing rights
    
    
    (372
    )
    
    
    (108
    )
    
    
    (264
    )
    
    
    (244
    )%Net loan servicing (loss) income
    
    
    (174
    )
    
    
    92
    
    
    
    (266
    )
    
    
    n/m
    (1)Other income (expense)
    
    
    2
    
    
    
    (19
    )
    
    
    21
    
    
    
    n/m
    (1)Net revenues
    
    
    152
    
    
    
    530
    
    
    
    (378
    )
    
    
    (71
    )%Salaries and related expenses
    
    
    181
    
    
    
    190
    
    
    
    (9
    )
    
    
    (5
    )%Occupancy and other office expenses
    
    
    21
    
    
    
    18
    
    
    
    3
    
    
    
    17
    %Other depreciation and amortization
    
    
    6
    
    
    
    7
    
    
    
    (1
    )
    
    
    (14
    )%Other operating expenses
    
    
    160
    
    
    
    144
    
    
    
    16
    
    
    
    11
    %Total expenses
    
    
    368
    
    
    
    359
    
    
    
    9
    
    
    
    3
    %(Loss) income before income taxes
    
    
    (216
    )
    
    
    171
    
    
    
    (387
    )
    
    
    n/m
    (1)Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    8
    
    
    
    (1
    )
    
    
    (13
    )%Combined Mortgage Services segments (loss) profit
    
    $
    (223
    )
    
    $
    163
    
    
    $
    (386
    )
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. 67




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##### Table of Contents



Mortgage Production Segment
  Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    13,333
    
    
    $
    16,287
    
    
    $
    (2,954
    )
    
    
    (18
    )%Fee-based closings
    
    
    4,549
    
    
    
    3,572
    
    
    
    977
    
    
    
    27
    %Total closings
    
    $
    17,882
    
    
    $
    19,859
    
    
    $
    (1,977
    )
    
    
    (10
    )%Purchase closings
    
    $
    9,593
    
    
    $
    6,456
    
    
    $
    3,137
    
    
    
    49
    %Refinance closings
    
    
    8,289
    
    
    
    13,403
    
    
    
    (5,114
    )
    
    
    (38
    )%Total closings
    
    $
    17,882
    
    
    $
    19,859
    
    
    $
    (1,977
    )
    
    
    (10
    )%Fixed rate
    
    $
    13,882
    
    
    $
    16,939
    
    
    $
    (3,057
    )
    
    
    (18
    )%Adjustable rate
    
    
    4,000
    
    
    
    2,920
    
    
    
    1,080
    
    
    
    37
    %Total closings
    
    $
    17,882
    
    
    $
    19,859
    
    
    $
    (1,977
    )
    
    
    (10
    )%First mortgage closings (units)
    
    
    72,068
    
    
    
    81,951
    
    
    
    (9,883
    )
    
    
    (12
    )%Second-lien closings (units)
    
    
    4,494
    
    
    
    5,617
    
    
    
    (1,123
    )
    
    
    (20
    )%Number of loans closed (units)
    
    
    76,562
    
    
    
    87,568
    
    
    
    (11,006
    )
    
    
    (13
    )%Retail closings (units)
    
    
    52,344
    
    
    
    72,824
    
    
    
    (20,480
    )
    
    
    (28
    )%Wholesale/correspondent closings (units)
    
    
    24,218
    
    
    
    14,744
    
    
    
    9,474
    
    
    
    64
    %Number of loans closed (units)
    
    
    76,562
    
    
    
    87,568
    
    
    
    (11,006
    )
    
    
    (13
    )%Average loan amount
    
    $
    233,566
    
    
    $
    226,787
    
    
    $
    6,779
    
    
    
    3
    %Loans sold
    
    $
    12,659
    
    
    $
    15,130
    
    
    $
    (2,471
    )
    
    
    (16
    )%Applications
    
    $
    28,157
    
    
    $
    30,543
    
    
    $
    (2,386
    )
    
    
    (8
    )%IRLCs expected to close
    
    $
    14,799
    
    
    $
    14,485
    
    
    $
    314
    
    
    
    2
    %
 Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    118
    
    
    $
    147
    
    
    $
    (29
    )
    
    
    (20
    )%Gain on mortgage loans, net
    
    
    244
    
    
    
    335
    
    
    
    (91
    )
    
    
    (27
    )%Mortgage interest income
    
    
    34
    
    
    
    44
    
    
    
    (10
    )
    
    
    (23
    )%Mortgage interest expense
    
    
    (43
    )
    
    
    (48
    )
    
    
    5
    
    
    
    10
    %Mortgage net finance expense
    
    
    (9
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    (125
    )%Other income
    
    
    1
    
    
    
    2
    
    
    
    (1
    )
    
    
    (50
    )%Net revenues
    
    
    354
    
    
    
    480
    
    
    
    (126
    )
    
    
    (26
    )%Salaries and related expenses
    
    
    161
    
    
    
    171
    
    
    
    (10
    )
    
    
    (6
    )%Occupancy and other office expenses
    
    
    16
    
    
    
    14
    
    
    
    2
    
    
    
    14
    %Other depreciation and amortization
    
    
    6
    
    
    
    7
    
    
    
    (1
    )
    
    
    (14
    )%Other operating expenses
    
    
    90
    
    
    
    85
    
    
    
    5
    
    
    
    6
    %Total expenses
    
    
    273
    
    
    
    277
    
    
    
    (4
    )
    
    
    (1
    )%Income before income taxes
    
    
    81
    
    
    
    203
    
    
    
    (122
    )
    
    
    (60
    )%Less: net income attributable to noncontrolling interest
    
    
    7
    
    
    
    8
    
    
    
    (1
    )
    
    
    (13
    )%Segment profit
    
    $
    74
    
    
    $
    195
    
    
    $
    (121
    )
    
    
    (62
    )%
 68




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##### Table of Contents



Mortgage Production Statistics
   Mortgage Fees
   Gain on Mortgage Loans, Net
  69




---



##### Table of Contents



Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    234
    
    
    $
    347
    
    
    $
    (113
    )
    
    
    (33
    )%Change in fair value of Scratch and Dent and
certain non-conforming mortgage loans
    
    
    (4
    )
    
    
    (14
    )
    
    
    10
    
    
    
    71
    %Economic hedge results
    
    
    14
    
    
    
    2
    
    
    
    12
    
    
    
    600
    %Total change in fair value of MLHS and related
derivatives
    
    
    10
    
    
    
    (12
    )
    
    
    22
    
    
    
    n/m
    (1)Gain on mortgage loans, net
    
    $
    244
    
    
    $
    335
    
    
    $
    (91
    )
    
    
    (27
    )%
 
 (1)
    
    n/m  Not meaningful.    Mortgage Net Finance Expense
   70




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##### Table of Contents



Salaries and Related Expenses
 .
 Other Operating Expenses
  71




---



##### Table of Contents



Mortgage Servicing Segment
  Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    153,381
    
    
    $
    149,117
    
    
    $
    4,264
    
    
    
    3
    %
 Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    
    Mortgage interest expense
    
    
    (36
    )
    
    
    (28
    )
    
    
    (8
    )
    
    
    (29
    )%Mortgage net finance expense
    
    
    (29
    )
    
    
    (21
    )
    
    
    (8
    )
    
    
    (38
    )%Loan servicing income
    
    
    198
    
    
    
    200
    
    
    
    (2
    )
    
    
    (1
    )%Change in fair value of mortgage servicing rights
    
    
    (372
    )
    
    
    (108
    )
    
    
    (264
    )
    
    
    (244
    )%Net loan servicing (loss) income
    
    
    (174
    )
    
    
    92
    
    
    
    (266
    )
    
    
    n/m
    (1)Other income (expense)
    
    
    1
    
    
    
    (21
    )
    
    
    22
    
    
    
    n/m
    (1)Net revenues
    
    
    (202
    )
    
    
    50
    
    
    
    (252
    )
    
    
    n/m
    (1)Salaries and related expenses
    
    
    20
    
    
    
    19
    
    
    
    1
    
    
    
    5
    %Occupancy and other office expenses
    
    
    5
    
    
    
    4
    
    
    
    1
    
    
    
    25
    %Other operating expenses
    
    
    70
    
    
    
    59
    
    
    
    11
    
    
    
    19
    %Total expenses
    
    
    95
    
    
    
    82
    
    
    
    13
    
    
    
    16
    %Segment loss
    
    $
    (297
    )
    
    $
    (32
    )
    
    $
    (265
    )
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance Expense
   72




---



##### Table of Contents



Loan Servicing Income
   Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    196
    
    
    $
    212
    
    
    $
    (16
    )
    
    
    (8
    )%Late fees and other ancillary servicing revenue
    
    
    28
    
    
    
    25
    
    
    
    3
    
    
    
    12
    %Curtailment interest paid to investors
    
    
    (13
    )
    
    
    (27
    )
    
    
    14
    
    
    
    (52
    )%Net reinsurance loss
    
    
    (13
    )
    
    
    (10
    )
    
    
    (3
    )
    
    
    30
    %Loan servicing income
    
    $
    198
    
    
    $
    200
    
    
    $
    (2
    )
    
    
    (1
    )%
  Change in Fair Value of Mortgage Servicing Rights
   Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Actual prepayments of the underlying mortgage loans
    
    $
    (69
    )
    
    $
    (150
    )
    
    $
    81
    
    
    
    54
    %Actual receipts of recurring cash flows
    
    
    (22
    )
    
    
    (27
    )
    
    
    5
    
    
    
    19
    %Credit-related fair value adjustments(1)
    
    
    (19
    )
    
    
    (35
    )
    
    
    16
    
    
    
    46
    %Market-related fair value adjustments(2)
    
    
    (262
    )
    
    
    104
    
    
    
    (366
    )
    
    
    n/m
    (3)Change in fair value of mortgage servicing rights
    
    $
    (372
    )
    
    $
    (108
    )
    
    $
    (264
    )
    
    
    (244
    )%
 
 (1)
    
    Represents the change in fair value of MSRs primarily due to changes in
portfolio delinquencies and foreclosures.(2)
    
    Represents the change in fair value of MSRs due to changes in market inputs and
assumptions used in the valuation model.(3)
    
    n/m  Not meaningful. 73




---



##### Table of Contents



Other Income (Expense)
  Other Operating Expenses
  Fleet Management Services Segment
   74




---



##### Table of Contents



Average for theSix MonthsEnded June 30,2010
    
    2009
    
    Change
    
    % Change(In thousands of units)Leased vehicles
    
    
    294
    
    
    
    323
    
    
    
    (29
    )
    
    
    (9
    )%Maintenance service cards
    
    
    273
    
    
    
    279
    
    
    
    (6
    )
    
    
    (2
    )%Fuel cards
    
    
    273
    
    
    
    285
    
    
    
    (12
    )
    
    
    (4
    )%Accident management vehicles
    
    
    289
    
    
    
    316
    
    
    
    (27
    )
    
    
    (9
    )%
 Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    78
    
    
    $
    75
    
    
    $
    3
    
    
    
    4
    %Fleet lease income
    
    
    688
    
    
    
    724
    
    
    
    (36
    )
    
    
    (5
    )%Other income
    
    
    31
    
    
    
    28
    
    
    
    3
    
    
    
    11
    %Net revenues
    
    
    797
    
    
    
    827
    
    
    
    (30
    )
    
    
    (4
    )%Salaries and related expenses
    
    
    41
    
    
    
    42
    
    
    
    (1
    )
    
    
    (2
    )%Occupancy and other office expenses
    
    
    8
    
    
    
    9
    
    
    
    (1
    )
    
    
    (11
    )%Depreciation on operating leases
    
    
    614
    
    
    
    647
    
    
    
    (33
    )
    
    
    (5
    )%Fleet interest expense
    
    
    49
    
    
    
    54
    
    
    
    (5
    )
    
    
    (9
    )%Other depreciation and amortization
    
    
    5
    
    
    
    6
    
    
    
    (1
    )
    
    
    (17
    )%Other operating expenses
    
    
    59
    
    
    
    44
    
    
    
    15
    
    
    
    34
    %Total expenses
    
    
    776
    
    
    
    802
    
    
    
    (26
    )
    
    
    (3
    )%Segment profit
    
    $
    21
    
    
    $
    25
    
    
    $
    (4
    )
    
    
    (16
    )%
 Fleet Management Fees
  Fleet Lease Income
  Other Income
  75




---



##### Table of Contents



Depreciation on Operating Leases
  Fleet Interest Expense
  Other Operating Expenses
  Liquidity and Capital Resources
 General
     76




---



##### Table of Contents



Cash Flows
  Six MonthsEnded June 30,2010
    
    
    2009
    
    
    Change(In millions)Cash (used in) provided by:Operating activities
    
    $
    (197
    )
    
    $
    82
    
    
    $
    (279
    )Investing activities
    
    
    (562
    )
    
    
    (423
    )
    
    
    (139
    )Financing activities
    
    
    793
    
    
    
    389
    
    
    
    404Effect of changes in exchange rates on Cash and cash equivalents
    
    
    
    
    
    
    (11
    )
    
    
    11Net increase in Cash and cash equivalents
    
    $
    34
    
    
    $
    37
    
    
    $
    (3
    )
 Operating Activities
  Investing Activities
  Financing Activities
  Secondary Mortgage Market
  77




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##### Table of Contents



Indebtedness
  June 30,
    
    
    December 31,2010
    
    
    2009(In millions)Restricted cash, cash equivalents and investments
    
    $
    559
    
    
    $
    596Mortgage loans held for sale
    
    
    2,090
    
    
    
    1,218Net investment in fleet leases
    
    
    3,574
    
    
    
    3,610Mortgage servicing rights
    
    
    1,236
    
    
    
    1,413Assets under management programs
    
    $
    7,459
    
    
    $
    6,837
 78




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##### Table of Contents



June 30, 2010Assets Held as Collateral(1)Mortgage
    
    
    NetMaturity/
    
    
    
    
    
    
    
    
    
    Loans
    
    
    InvestmentInterest
    
    Expiry
    
    Accounts
    
    
    Restricted
    
    
    Held for
    
    
    in FleetBalance
    
    
    Capacity(2)
    
    
    Rate(3)
    
    Date
    
    Receivable
    
    
    Cash
    
    
    Sale
    
    
    Leases(Dollars in millions)Chesapeake Series 2009-1 Term Notes
    
    $
    1,000
    
    
    $
    1,000
    
    
    
    
    5/20/2010Chesapeake Series 2009-2 Term Notes
    
    
    903
    
    
    
    903
    
    
    
    
    2/17/2011Chesapeake Series 2009-3 Term Notes
    
    
    50
    
    
    
    50
    
    
    
    
    10/20/2011Chesapeake Series 2009-4 Term Notes
    
    
    222
    
    
    
    222
    
    
    
    
    2/18/2010Chesapeake Series 2010-1 Variable Funding Notes
    
    
    500
    
    
    
    1,000
    
    
    
    
    5/31/2011FLRT Series 2010-1 Notes
    
    
    284
    
    
    
    284
    
    
    
    
    2/2011 11/2013Other
    
    
    42
    
    
    
    42
    
    
    
    
    11/2010 6/2016Total Vehicle Management Asset-Backed Debt
    
    
    3,001
    
    
    
    3,501
    
    
    2.1%(4)
    
    
    
    $
    34
    
    
    $
    259
    
    
    $
    
    
    
    $
    3,332RBS Repurchase Facility
    
    
    502
    
    
    
    800
    
    
    3.0%
    
    6/24/2011
    
    
    
    
    
    
    
    
    
    
    523
    
    
    
    CSFB Mortgage Repurchase Facility
    
    
    334
    
    
    
    350
    
    
    2.9%
    
    5/25/2011
    
    
    
    
    
    
    
    
    
    
    351
    
    
    
    CSFB Mortgage Venture Repurchase Facility
    
    
    68
    
    
    
    150
    
    
    2.9%
    
    5/25/2011
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    Ally Bank Mortgage Venture Repurchase Facility
    
    
    52
    
    
    
    150
    
    
    4.2%
    
    3/30/2011
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    Fannie Mae Repurchase Facilities
    
    
    722
    
    
    
    722
    
    
    1.0%
    
    N/A
    
    
    
    
    
    
    
    
    
    
    722
    
    
    
    Other
    
    
    58
    
    
    
    84
    
    
    2.9%- 4.2%
    
    9/2010  10/2010
    
    
    63
    
    
    
    
    
    
    
    5
    
    
    
    Total Mortgage Warehouse and Other Asset-Backed Debt
    
    
    1,736
    
    
    
    2,256
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    1,737
    
    
    
    Term Notes
    
    
    433
    
    
    
    433
    
    
    7.2%-7.9%(5)
    
    3/2013-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities
    
    
    379
    
    
    
    810
    
    
    1.0%-4.2%(6)
    
    1//2011-2/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012
    
    
    229
    
    
    
    229
    
    
    4.0%(7)
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2014
    
    
    186
    
    
    
    186
    
    
    4.0%(8)
    
    9/1/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,227
    
    
    
    1,658
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage Loan Securitization Debt Certificates, at Fair Value(9)
    
    
    35
    
    
    
    35
    
    
    7.0%(10)
    
    12/2027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,999
    
    
    $
    7,450
    
    
    
    
    
    
    $
    97
    
    
    $
    259
    
    
    $
    1,737
    
    
    $
    3,332
 
 (1)
    
    Assets held as collateral are not available to pay our general
obligations.(2)
    
    Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the
terms, conditions and covenants of the respective agreements. With respect to asset-backed
funding arrangements, capacity may be further limited by the availability of asset eligibility
requirements under the respective agreements. The Series 2009-1, Series 2009-2, Series 2009-3
and Series 2009-4 notes (the Chesapeake Term Notes) (as defined below) have revolving
periods during which time the pro-rata share of lease cash flows pledged to Chesapeake will
create availability to fund the acquisition of vehicles to be leased to customers of our Fleet
Management Services segment. See Asset-Backed DebtVehicle Management Asset-Backed Debt
below for additional information.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of Total Vehicle Management Asset-Backed Debt, Term Notes, the 2012 Convertible Notes, the
2014 Convertible Notes and the Mortgage Loan Securitization Debt Certificates.(4)
    
    Represents the weighted-average interest rate of our vehicle management asset-backed
debt arrangements as of June 30, 2010. 79




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(5)
    
    Represents the range of stated interest rates of the MTNs outstanding as of June 30,
2010. The effective rate of interest of the outstanding MTNs was 7.2% as of June 30, 2010.(6)
    
    Represents the range of stated interest rates on the Amended Credit Facility as of
June 30, 2010, excluding per annum utilization and facility fees. The effective interest rate
of the Credit Facilities was 2.9% as of June 30, 2010.(7)
    
    The effective rate of interest of the 2012 Convertible Notes was 12.4% as of
June 30, 2010, which represents the 4.0% semiannual cash payment and the non-cash accretion of
discount and issuance costs.(8)
    
    The effective rate of interest of the 2014 Convertible Notes was 13.0% as of June
30, 2010, which represents the 4.0% semiannual cash payment and the non-cash accretion of
discount and issuance costs.(9)
    
    The Mortgage Loan Securitization Debt Certificates were consolidated as a
result of the adoption of updates to ASC 810 with $47 million of Securitized Mortgage Loans,
included in Other Assets. See Note 1, Summary of Significant Accounting Policies in the
accompanying Notes to Condensed Consolidated Financial Statements included in this form 10-Q
for additional information. The cashflows of the Securitized Mortgage Loans support payment
of the debt certificates and creditors of the Securitization trust do not have recourse to us.(10)
    
    The Mortgage Loan Securitization Debt Certificates are fixed rate. Asset-Backed Debt
 Vehicle Management Asset-Backed Debt
     80




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Mortgage Warehouse and Other Asset-Backed Debt
     81




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##### Table of Contents



Unsecured Debt
   MoodysInvestors
    
    Standard
    
    FitchService
    
    & Poors
    
    RatingsSenior debt
    
    Ba2
    
    BB+
    
    BB+Short-term debt
    
    NP
    
    B
    
    B
    82




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Term Notes
  Credit Facilities
    Convertible Notes
   83




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##### Table of Contents



Debt Maturities
  Asset-Backed
    
    
    Unsecured
    
    
    Total(In millions)Within one year
    
    $
    2,571
    
    
    $
    137
    
    
    $
    2,708Between one and two years
    
    
    1,036
    
    
    
    512
    
    
    
    1,548Between two and three years
    
    
    629
    
    
    
    426
    
    
    
    1,055Between three and four years
    
    
    392
    
    
    
    2
    
    
    
    394Between four and five years
    
    
    112
    
    
    
    252
    
    
    
    364Thereafter
    
    
    5
    
    
    
    18
    
    
    
    23$
    4,745
    
    
    $
    1,347
    
    
    $
    6,092
  Utilized
    
    AvailableCapacity(1)
    
    Capacity
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    3,501
    
    
    $
    3,001
    
    
    $
    500Mortgage warehouse and other(3)
    
    
    2,256
    
    
    
    1,833
    
    
    
    423Unsecured Committed Credit Facilities(4)
    
    
    810
    
    
    
    395
    
    
    
    415
 
 (1)
    
    Capacity is dependent upon maintaining compliance with, or obtaining waivers of,
the terms, conditions and covenants of the respective agreements. With respect to asset-backed
funding arrangements, capacity may be further limited by the asset eligibility requirements
under the respective agreements.(2)
    
    The Chesapeake 2009-1 Term Notes and the 2009-4 Term Notes have entered
their respective Amortization Periods. See Asset-Backed DebtVehicle Management Asset-Backed
Debt above for additional information on the revolving and amortization periods of these
facilities.(3)
    
    Capacity does not reflect $2.3 billion undrawn under the $3.0 billion
Fannie Mae Repurchase Facilities, as these facilities are uncommitted. Utilized capacity
reflects $97 million of mortgage loans sold to RBS under the terms of the RBS Repurchase
Facility. The mortgage loans and related debt are not included in our Condensed Consolidated
Balance Sheet as of June 30, 2010.(4)
    
    Utilized capacity reflects $16 million of letters of credit issued under
the Amended Credit Facility, which are not included in Debt in our Condensed Consolidated
Balance Sheet. Debt Covenants
  84




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Critical Accounting Policies
  Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
 Mortgage Servicing Rights
  85




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Other Mortgage-Related Assets
  Indebtedness
  Consumer Credit Risk
 Loan Recourse
  Mortgage Loans in Foreclosure
  86




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Real Estate Owned
  Mortgage Reinsurance
   Year of Origination2003andPrior
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Total(Dollars in millions)Unpaid principal
balance
    
    $
    1,900
    
    
    $
    1,101
    
    
    $
    1,050
    
    
    $
    706
    
    
    $
    1,430
    
    
    $
    2,504
    
    
    $
    487
    
    
    $
    9,178Unpaid principal balance
as a percentage of
original unpaid principal
balance
    
    
    10
    %
    
    
    30
    %
    
    
    50
    %
    
    
    59
    %
    
    
    77
    %
    
    
    83
    %
    
    
    97
    %
    
    
    N/AMaximum potential exposure
to reinsurance losses
    
    $
    284
    
    
    $
    104
    
    
    $
    60
    
    
    $
    30
    
    
    $
    49
    
    
    $
    63
    
    
    $
    7
    
    
    $
    597Average FICO score
    
    
    696
    
    
    
    693
    
    
    
    695
    
    
    
    692
    
    
    
    701
    
    
    
    727
    
    
    
    758
    
    
    
    708Delinquencies(1)
    
    
    6.61
    %
    
    
    5.51
    %
    
    
    6.35
    %
    
    
    9.02
    %
    
    
    7.93
    %
    
    
    4.88
    %
    
    
    0.07
    %
    
    
    6.09
    %Foreclosures/
REO/
bankruptcies(2)
    
    
    5.40
    %
    
    
    9.26
    %
    
    
    12.35
    %
    
    
    15.88
    %
    
    
    13.89
    %
    
    
    3.30
    %
    
    
    0.00
    %
    
    
    8.06
    %
 
 (1)
    
    Represents delinquent mortgage loans for which payments are 60 days or more
outstanding as a percentage of the total unpaid principal balance.(2)
    
    Calculated as a percentage of the total unpaid principal balance. 87




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Counterparty Credit Risk
   Fair Value Measurements
  Sensitivity Analysis
    88




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##### Table of Contents



Change in fair valueDown
    
    
    Down
    
    
    Down
    
    
    Up
    
    
    Up
    
    
    Up100 bps
    
    
    50 bps
    
    
    25 bps
    
    
    25 bps
    
    
    50 bps
    
    
    100 bps(In millions)Mortgage assets:Mortgage loans held for sale
    
    $
    34
    
    
    $
    20
    
    
    $
    11
    
    
    $
    (15
    )
    
    $
    (33
    )
    
    $
    (78
    )Interest rate lock commitments
    
    
    55
    
    
    
    34
    
    
    
    20
    
    
    
    (33
    )
    
    
    (76
    )
    
    
    (194
    )Forward loan sale commitments
    
    
    (83
    )
    
    
    (52
    )
    
    
    (29
    )
    
    
    39
    
    
    
    84
    
    
    
    189Option contracts
    
    
    (3
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    6
    
    
    
    17
    
    
    
    65Total Mortgage loans held
for sale, interest rate
lock commitments and
related derivatives
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (8
    )
    
    
    (18
    )Mortgage servicing rights
    
    
    (383
    )
    
    
    (177
    )
    
    
    (83
    )
    
    
    84
    
    
    
    168
    
    
    
    319Other assets
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Total mortgage assets
    
    
    (379
    )
    
    
    (176
    )
    
    
    (83
    )
    
    
    81
    
    
    
    159
    
    
    
    300Total vehicle assets
    
    
    14
    
    
    
    7
    
    
    
    3
    
    
    
    (3
    )
    
    
    (7
    )
    
    
    (14
    )Total liabilities
    
    
    (26
    )
    
    
    (13
    )
    
    
    (6
    )
    
    
    6
    
    
    
    13
    
    
    
    25Total, net
    
    $
    (391
    )
    
    $
    (182
    )
    
    $
    (86
    )
    
    $
    84
    
    
    $
    165
    
    
    $
    311
 
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  89




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Changes in Internal Control Over Financial Reporting
  90




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Risks Related to our Business
 We are highly dependent upon programs administered by GSEs such as Fannie Mae, Freddie Mac and
Ginnie Mae to generate revenues through mortgage loan sales to institutional investors and for our
mortgage servicing business. Changes in existing U.S. government-sponsored mortgage programs or
servicing eligibility standards could materially and adversely affect our business, financial
position, results of operations or cash flows.
  We are exposed to counterparty risk and the insolvency of one or more of our significant
counterparties or the unwillingness or inability of a significant counterparty to perform its
obligations under, or to renew on commercially reasonable terms, their respective contractual
relationships with us, including, without limitation, as a result of the rejection of an agreement
or transaction by a counterparty in bankruptcy proceedings, could have a material adverse effect on
our business, financial position, results of operations or cash flows.
  91




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The businesses in which we engage are complex and heavily regulated, and changes in the
regulatory environment affecting our businesses could have a material adverse effect on our
business, financial position, results of operations or cash flows.
   92




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93




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We may be unable to fully or successfully execute or implement our business strategies or
achieve our objectives, including our transformation initiatives and goals, and we may be unable to
effectively manage the inherent risks of our businesses, including market, credit, operational, and
legal and compliance risks, any failure of which could have a material adverse effect on our
business, financial position, results of operations or cash flows.
   94




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##### Table of Contents



Continued or worsening conditions in the real estate market could adversely impact our
business, financial position, results of operations or cash flows.
    Risks Related to our Common Stock
 Provisions in our charter and bylaws, the Maryland General Corporation Law (the MGCL), and
the indentures for the 2012 Convertible Notes and 2014 Convertible Notes may delay or prevent our
acquisition by a third party.
  95




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
    
    The business combinations statute which prohibits transactions between a Maryland
corporation and an interested stockholder or an affiliate of an interested stockholder
for five years after the most recent date on which the interested stockholder becomes an
interested stockholder and
    
    The control share acquisition statute which provides that control shares of a
Maryland corporation acquired in a control share acquisition have no voting rights except
to the extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter.
   
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
  96




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SIGNATURES
  PHH CORPORATIONBy:
    /s/ Jerome J. SelittoJerome J. SelittoDate: August 3, 2010
    
    President and Chief Executive OfficerBy:
    /s/ Sandra E. BellSandra E. BellExecutive Vice President and Chief Financial Officer(Principal Financial Officer and Principal
Accounting Officer)  97




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EXHIBIT INDEX
 ExhibitNo.
    
    Description
    
    Incorporation by Reference3.1
    
    Amended and Restated Articles of Incorporation.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on February 1, 2005.3.2
    
    Articles Supplementary.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on March 27, 2008.3.3
    
    Articles of Amendment to the Charter of PHH
Corporation effective as of June 12, 2009.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on June 16, 2009.3.4
    
    Amended and Restated By-Laws.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on April 2, 2009.4.1
    
    Specimen common stock certificate.
    
    Incorporated by reference to Exhibit 4.1 to our Annual
Report on Form 10-K for the year ended December 31, 2004
filed on March 15, 2005.4.2
    
    See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
of the Amended and Restated Articles of
Incorporation, as amended, and Amended and
Restated By-laws of the registrant defining the
rights of holders of common stock of the
registrant.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Reports on Form 8-K filed on February 1, 2005, March 27,
2008, June 16, 2009 and April 2, 2009, respectively.4.3
    
    Indenture dated as of November 6, 2000 between PHH
Corporation and The Bank of New York Mellon
(formerly known as The Bank of New York, as
successor in interest to Bank One Trust Company,
N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.3 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.4.3.1
    
    Supplemental Indenture No. 1 dated as of November
6, 2000 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.4 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.4.3.2
    
    Supplemental Indenture No. 2 dated as of January
30, 2001 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on February 8, 2001.4.3.3
    
    Supplemental Indenture No. 3 dated as of May 30,
2002 between PHH Corporation and The Bank of New
York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.5 to our Quarterly
Report on Form 10-Q for the quarterly period ended June
30, 2007 filed on August 8, 2007.
 98




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.3.4
    
    Supplemental Indenture No. 4 dated as of August
31, 2006 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 1, 2006.4.3.5
    
    Form of PHH Corporation Internotes.
    
    Incorporated by reference to Exhibit 4.6 to our Quarterly
Report on Form 10-Q for the quarterly period ended March
31, 2008 filed on May 9, 2008.4.3.6
    
    Form of 7.125% Note due 2013.
    
    Incorporated by reference to Exhibit 4.5 to our Current
Report on Form 8-K filed on February 24, 2003.4.4
    
    Amended and Restated Base Indenture dated as of
December 17, 2008 among Chesapeake Finance
Holdings LLC, as Issuer, and JP Morgan Chase Bank,
N.A., as indenture trustee.
    
    Incorporated by reference to Exhibit 10.76 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.4.4.1
    
    Series 2009-1 Indenture Supplement, dated as of
June 9, 2009, among Chesapeake Funding LLC, as
issuer, and The Bank of New York Mellon, as
indenture trustee.
    
    Incorporated by reference to Exhibit 4.5.11 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2009 filed on November 5, 2009.4.4.2
    
    Series 2009-2 Indenture Supplement, dated as of
September 11, 2009, among Chesapeake Funding LLC,
as issuer, and The Bank of New York Mellon, as
indenture trustee.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 16, 2009.4.4.3
    
    Series 2009-3 Indenture Supplement, dated as of
November 18, 2009, among Chesapeake Funding, LLC
as issuer and The Bank of New York Mellon, as
indenture trustee.
    
    Filed herewith.4.4.4
    
    Form of Series 2009-3 Class A Investor Note
    
    Filed herewith.4.4.5
    
    Form of Series 2009-3 Class B Investor Note
    
    Filed herewith.4.4.6
    
    Form of Series 2009-3 Class C Investor Note
    
    Filed herewith.4.4.7
    
    Series 2009-4 Indenture Supplement, dated as of
December 18, 2009 among Chesapeake Funding, LLC as
issuer and The Bank of New York Mellon, as
indenture trustee.
    
    Filed herewith.4.4.8
    
    Form of Series 2009-4 Class A Investor Note
    
    Filed herewith.4.4.9
    
    Form of Series 2009-4 Class B Investor Note
    
    Filed herewith.4.4.10
    
    Form of Series 2009-4 Class C Investor Note
    
    Filed herewith.
 99




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.4.11
    
    Series 2010-1 Indenture Supplement, dated as of
June 1, 2010 among Chesapeake Funding, LLC as
issuer and The Bank of New York Mellon, as
indenture trustee.
    
    Filed herewith.4.4.12
    
    Form of Series 2010-1 Floating Rate Asset Backed
Variable Funding Investor Notes, Class A.
    
    Filed herewith.4.4.13
    
    Form of Series 2010-1 Floating Rate Asset Backed
Investor Notes, Class B.
    
    Filed herewith4.5
    
    Indenture dated as of April 2, 2008, by and
between PHH Corporation and The Bank of New York,
as Trustee.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on April 4, 2008.4.5.1
    
    Form of Global Note 4.00% Convertible Senior Note
Due 2012.
    
    Incorporated by reference to Exhibit 4.2 to our Current
Report on Form 8-K filed on April 4, 2008.4.6
    
    Indenture dated as of September 29, 2009, by and
between PHH Corporation and The Bank of New York
Mellon, as Trustee.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on October 1, 2009.4.6.1
    
    Form of Global Note 4.00% Convertible Senior Note
Due 2014.
    
    Incorporated by reference to Exhibit A of Exhibit 4.1 to
our Current Report on Form 8-K filed on October 1, 2009.4.7
    
    Trust Indenture dated as of November 16, 2009,
between BNY Trust Company of Canada as issuer
trustee of Fleet Leasing Receivables Trust and
ComputerShare Trust Company Of Canada, as
indenture trustee.
    
    Incorporated by reference to Exhibit 4.8 to our Annual
Report on Form 10-K for the year ended December 31, 2009
filed on March 1, 2010.4.7.1
    
    Series 2010-1 Supplemental Indenture dated as of
January 27, 2010, between BNY Trust Company of
Canada as issuer trustee of Fleet Leasing
Receivables Trust and ComputerShare Trust Company
Of Canada, as indenture trustee.
    
    Incorporated by reference to Exhibit 4.8.1 to our Annual
Report on Form 10-K for the year ended December 31, 2009
filed on March 1, 2010.4.7.2
    
    Fleet Leasing Receivables Trust Series 2010-1
Class A-1a Asset-Backed Note.
    
    Incorporated by reference to Schedule A-1a of Exhibit
4.8.1 to our Annual Report on Form 10-K for the year ended
December 31, 2009 filed on March 1, 2010.4.7.3
    
    Fleet Leasing Receivables Trust Series 2010-1
Class A-1b Asset-Backed Note.
    
    Incorporated by reference to Schedule A-1b of Exhibit
4.8.1 to our Annual Report on Form 10-K for the year ended
December 31, 2009 filed on March 1, 2010.
 100




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ExhibitNo.
    
    Description
    
    Incorporation by Reference4.7.4
    
    Fleet Leasing Receivables Trust Series 2010-1
Class A-2a Asset-Backed Note.
    
    Incorporated by reference to Schedule A-2a of Exhibit
4.8.1 to our Annual Report on Form 10-K for the year ended
December 31, 2009 filed on March 1, 2010.4.7.5
    
    Fleet Leasing Receivables Trust Series 2010-1
Class A-2b Asset-Backed Note.
    
    Incorporated by reference to Schedule A-2b of Exhibit
4.8.1 to our Annual Report on Form 10-K for the year ended
December 31, 2009 filed on March 1, 2010.4.7.6
    
    Fleet Leasing Receivables Trust Series 2010-1
Class B Asset-Backed Note.
    
    Incorporated by reference to Schedule B of Exhibit 4.8.1
to our Annual Report on Form 10-K for the year ended
December 31, 2009 filed on March 1, 2010.10.1
    
    Amended and Restated Competitive Advance and
Revolving Credit Agreement, dated as of January 6,
2006, by and among PHH Corporation and PHH Vehicle
Management Services, Inc., as Borrowers, J.P.
Morgan Securities, Inc. and Citigroup Global
Markets, Inc., as Joint Lead Arrangers, the
Lenders referred to therein (the Lenders), and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Incorporated by reference to Exhibit 10.47 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.1.1
    
    Second Amendment, dated as of November 2, 2007, to
the Amended and Restated Competitive Advance and
Revolving Credit Agreement, as amended, dated as
of January 6, 2006, by and among PHH Corporation
and PHH Vehicle Management Services, Inc., as
Borrowers, J.P. Morgan Securities, Inc. and
Citigroup Global Markets, Inc., as Joint Lead
Arrangers, the Lenders referred to therein, and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on November 2, 2007.10.1.2
    
    Third Amendment, dated as of March 27, 2008, to
the Amended and Restated Competitive Advance and
Revolving Credit Agreement, as amended, dated as
of January 6, 2006, by and among PHH Corporation
and PHH Vehicle Management Services, Inc., as
Borrowers, J.P. Morgan Securities, Inc. and
Citigroup Global Markets, Inc., as Joint Lead
Arrangers, the Lenders referred to therein, and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Incorporated by reference to Exhibit 10.1.2 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2009 filed on November 5, 2009.
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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.1.3
    
    Fourth Amendment, dated as of June 25, 2010, to
the Amended and Restated Competitive Advance and
Revolving Credit Agreement, as amended, dated as
of January 6, 2006, by and among PHH Corporation
and PHH Vehicle Management Services, Inc., as
Borrowers, J.P. Morgan Securities, Inc. and
Citigroup Global Markets, Inc., as Joint Lead
Arrangers, the Lenders referred to therein and JP
Morgan Chase Bank, N.A. as a Lender and as a
Administrative Agent for the lenders.
    
    Filed herewith.10.2
    
    Separation Agreement, dated as of January 31,
2005, by and between Cendant Corporation and PHH
Corporation.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report on Form 8-K filed on February 1, 2005.10.3
    
    Amended and Restated Tax Sharing Agreement dated
as of December 21, 2005 between PHH Corporation
and Cendant Corporation.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on December 28, 2005.10.4
    
    Amended and Restated Limited Liability Company
Operating Agreement, dated as of January 31, 2005,
of PHH Home Loans, LLC, by and between PHH Broker
Partner Corporation and Cendant Real Estate
Services Venture Partner, Inc.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.1
    
    Amendment No. 1 to the Amended and Restated
Limited Liability Company Operating Agreement of
PHH Home Loans, LLC, dated May 12, 2005, by and
between PHH Broker Partner Corporation and Cendant
Real Estate Services Venture Partner, Inc.
    
    Incorporated by reference to Exhibit 3.3.1 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2005 filed on November 14, 2005.10.4.2
    
    Amendment No. 2, dated as of March 31, 2006 to the
Amended and Restated Limited Liability Company
Operating Agreement of PHH Home Loans, LLC, dated
as of January 31, 2005, as amended.
    
    Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of Cendant Corporation (now known as
Avis Budget Group, Inc.) filed on April 4, 2006.10.4.3
    
    Strategic Relationship Agreement, dated as of
January 31, 2005, by and among Cendant Real Estate
Services Group, LLC, Cendant Real Estate Services
Venture Partner, Inc., PHH Corporation, Cendant
Mortgage Corporation, PHH Broker Partner
Corporation and PHH Home Loans, LLC.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.4
    
    Trademark License Agreement, dated as of January
31, 2005, by and among TM Acquisition Corp.,
Coldwell Banker Real Estate Corporation, ERA
Franchise Systems, Inc. and Cendant Mortgage
Corporation.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.5
    
    Marketing Agreement, dated as of January 31, 2005,
by and between Coldwell Banker Real Estate
Corporation, Century 21 Real Estate LLC, ERA
Franchise Systems, Inc., Sothebys International
Affiliates, Inc. and Cendant Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on February 1, 2005.
 102




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.4.6
    
    Management Services Agreement, dated as of March
31, 2006, between PHH Home Loans, LLC and PHH
Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on April 6, 2006.10.4.7
    
    Trademark License Agreement, dated as of January
31, 2005, by and between Cendant Real Estate
Services Venture Partner, Inc., and PHH Home
Loans, LLC.
    
    Incorporated by reference to Exhibit 10.66 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5
    
    Origination Assistance Agreement, dated as of
December 15, 2000, as amended through March 24,
2006, by and between Merrill Lynch Credit
Corporation and Cendant Mortgage Corporation
(renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.67 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.1
    
    Portfolio Servicing Agreement, dated as of January
28, 2000, as amended through October 27, 2004, by
and between Merrill Lynch Credit Corporation and
Cendant Mortgage Corporation (renamed PHH Mortgage
Corporation).
    
    Incorporated by reference to Exhibit 10.68 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.2
    
    Loan Purchase and Sale Agreement, dated as of
December 15, 2000, as amended through March 24,
2006, by and between Merrill Lynch Credit
Corporation and Cendant Mortgage Corporation
(renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.69 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.3
    
    Equity Access® and OmegaSM Loan
Subservicing Agreement, dated as of June 6, 2002,
as amended through March 14, 2006, by and between
Merrill Lynch Credit Corporation, as servicer, and
Cendant Mortgage Corporation (renamed PHH Mortgage
Corporation), as subservicer.
    
    Incorporated by reference to Exhibit 10.70 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.4
    
    Servicing Rights Purchase and Sale Agreement,
dated as of January 28, 2000, as amended through
March 29, 2005, by and between Merrill Lynch
Credit Corporation and Cendant Mortgage
Corporation (renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.71 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.5
    
    Letter Agreement dated August 8, 2008 by and
between PHH Mortgage Corporation and Merrill Lynch
Credit Corporation relating to the Servicing
Rights Purchase and Sale Agreement dated January
28, 2000, as amended.
    
    Incorporated by reference to Exhibit 10.69 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2008 filed on November 10, 2008.10.5.6
    
    Mortgage Loan Subservicing Agreement by and
between Merrill Lynch Credit Corporation and PHH
Mortgage Corporation dated as of August 8, 2008.
    
    Incorporated by reference to Exhibit 10.70 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2008 filed on November 10, 2008.10.6
    
    Master Exchange Agreement, dated as of March 7,
2006, by and among PHH Funding, LLC, Chesapeake
Finance Holdings LLC (f/k/a Chesapeake Funding
LLC) and D.L. Peterson Trust.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on March 13, 2006.
 103




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.7
    
    Purchase Agreement dated March 27, 2008 by and
between PHH Corporation, Citigroup Global Markets
Inc., J.P. Morgan Securities Inc. and Wachovia
Capital Markets, LLC, as representatives of the
Initial Purchasers.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.1
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated March 27, 2008 by and
between PHH Corporation and J.P. Morgan Chase
Bank, N.A.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.2
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation and
J.P. Morgan Chase Bank, N.A.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.3
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and J.P. Morgan Chase Bank, N.A.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.4
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and J.P. Morgan Chase
Bank, N.A.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.5
    
    Master Terms and Conditions for Convertible Debt
Bond Hedging Transactions dated March 27, 2008 by
and between PHH Corporation and Wachovia Bank,
N.A.
    
    Incorporated by reference to Exhibit 10.6 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.6
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation and
Wachovia Bank, N.A.
    
    Incorporated by reference to Exhibit 10.7 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.7
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and Wachovia Bank, N.A.
    
    Incorporated by reference to Exhibit 10.8 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.8
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and Wachovia Bank,
N.A.
    
    Incorporated by reference to Exhibit 10.9 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.9
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated March 27, 2008 by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.10 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.10
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation and
Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.11 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.11
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.12 to our Current
Report of Form 8-K filed on April 4, 2008.10.7.12
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.13 to our Current
Report of Form 8-K filed on April 4, 2008.
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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.8
    
    Second Amended and Restated Master Repurchase
Agreement dated as of June 18, 2010, between The
Royal Bank of Scotland PLC, as Buyer, PHH Mortgage
Corporation, as Seller.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on June 23, 2010.10.8.1
    
    Third Amended and Restated Guaranty dated as of
June 18, 2010, made by PHH Corporation in favor of
The Royal Bank of Scotland, PLC.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on June 23, 2010.10.9
    
    Purchase Agreement dated June 2, 2009 by and among
PHH Corporation, PHH Vehicle Management Services,
LLC, Chesapeake Funding LLC and J.P. Morgan
Securities, Inc, Banc of America Securities LLC
and Citigroup Global Markets, Inc., as
representatives of several initial purchasers.
    
    Incorporated by reference to Exhibit 10.11 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2009 filed on November 5, 2009.10.10
    
    Purchase Agreement dated September 2, 2009 by and
among PHH Corporation, PHH Vehicle Management
Services, LLC, Chesapeake Funding LLC and J.P.
Morgan Securities, Inc, Banc of America Securities
LLC and Citigroup Global Markets, Inc., as
representatives of several initial purchasers.
    
    Incorporated by reference to Exhibit 10.12 to our
Quarterly Report on Form 10-Q/A for the quarterly period
ended September 30, 2009 filed on January 12, 2010.10.11
    
    Purchase Agreement dated September 23, 2009, by
and between PHH Corporation, Citigroup Global
Markets Inc., J.P. Morgan Securities Inc. and
Wells Fargo Securities, LLC, as representatives of
the Initial Purchasers.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.1
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009, by
and between PHH Corporation and JPMorgan Chase
Bank, National Association, London Branch.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.2
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH Corporation
and JPMorgan Chase Bank, National Association,
London Branch.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.3
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and JPMorgan Chase Bank,
National Association, London Branch.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.4
    
    Confirmation of Warrants dated September 23, 2009,
by and between PHH Corporation and JPMorgan Chase
Bank, National Association, London Branch.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.5
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009, by
and between PHH Corporation and Wachovia Bank,
National Association.
    
    Incorporated by reference to Exhibit 10.6 to our Current
Report on Form 8-K filed on September 29, 2009.
 105




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.11.6
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH Corporation
and Wachovia Bank, National Association.
    
    Incorporated by reference to Exhibit 10.7 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.7
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and Wachovia Bank,
National Association.
    
    Incorporated by reference to Exhibit 10.8 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.8
    
    Confirmation of Warrants dated September 23, 2009,
by and between PHH Corporation and Wachovia Bank,
National Association.
    
    Incorporated by reference to Exhibit 10.9 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.9
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009, by
and between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.10 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.10
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH Corporation
and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.11 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.11
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.12 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.12
    
    Confirmation of Warrants dated September 23, 2009,
by and between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.13 to our Current
Report on Form 8-K filed on September 29, 2009.10.11.13
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and JPMorgan Chase Bank,
National Association, London Branch.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 1, 2009.10.11.14
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and JPMorgan Chase Bank, National Association,
London Branch.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on October 1, 2009.10.11.15
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and Wachovia Bank,
National Association.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on October 1, 2009.10.11.16
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and Wachovia Bank, National Association.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on October 1, 2009.10.11.17
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report on Form 8-K filed on October 1, 2009.
 106




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.11.18
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.6 to our Current
Report on Form 8-K filed on October 1, 2009.10.12
    
    PHH Corporation Non-Employee Directors Deferred
Compensation Plan.
    
    Incorporated by reference to Exhibit 10.10 to our Current
Report on Form 8-K filed on February 1, 2005.10.12.1
    
    PHH Corporation Officer Deferred Compensation Plan.
    
    Incorporated by reference to Exhibit 10.11 to our Current
Report on Form 8-K filed on February 1, 2005.10.12.2
    
    PHH Corporation Savings Restoration Plan.
    
    Incorporated by reference to Exhibit 10.12 to our Current
Report on Form 8-K filed on February 1, 2005.10.12.3
    
    PHH Corporation 2005 Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.9 to our Current
Report on Form 8-K filed on February 1, 2005.10.12.4
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Agreement, as
amended.
    
    Incorporated by reference to Exhibit 10.28 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.12.5
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Conversion Award
Agreement.
    
    Incorporated by reference to Exhibit 10.29 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.12.6
    
    Resolution of the PHH Corporation Board of
Directors dated March 31, 2005, adopting
non-employee director compensation arrangements.
    
    Incorporated by reference to Exhibit 10.32 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.12.7
    
    Amendment Number One to the PHH Corporation 2005
Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.35 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.12.8
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Award Agreement,
as revised June 28, 2005.
    
    Incorporated by reference to Exhibit 10.36 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.12.9
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Restricted Stock Unit Award Agreement, as
revised June 28, 2005.
    
    Incorporated by reference to Exhibit 10.37 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.12.10
    
    Form of PHH Corporation Amended and Restated
Severance Agreement for Certain Executive Officers
as approved by the PHH Corporation Compensation
Committee on January 10, 2008.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on January 14, 2008.10.12.11
    
    PHH Corporation Change in Control Severance
Agreement by and between the Company and Sandra
Bell dated as of October 13, 2008.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 14, 2008.
 107




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.12.12
    
    Form of 2009 Performance Unit Award Notice and
Agreement for Certain Executive Officers, as
approved by the Compensation Committee on March
25, 2009.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on March 31, 2009.10.12.13
    
    Amended and Restated 2005 Equity and Incentive
Plan (as amended and restated through June 17,
2009).
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on June 22, 2009.10.12.14
    
    Transition Services and Separation Agreement by
and between PHH Corporation and Terence W. Edwards
dated August 5, 2009.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on August 5, 2009.10.12.15
    
    Amendment to the Transition Services and
Separation Agreement by and between PHH
Corporation and Terence W. Edwards dated as of
September 11, 2009.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on September 16, 2009.10.12.16
    
    Release by and between PHH Corporation and Terence
W. Edwards dated as of September 11, 2009.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on September 16, 2009.10.12.17
    
    Employment Agreement dated as of October 26, 2009,
between Jerome J. Selitto and PHH Corporation.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 30, 2009.10.12.18
    
    PHH Corporation Management Incentive Plan.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on April 6, 2010.10.12.19
    
    Form of PHH Corporation Management Incentive Plan
Award Notice.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on April 6, 2010.10.13
    
    Trust Purchase Agreement dated January 27, 2010
between Fleet Leasing Receivables Trust, as
purchaser, PHH Fleet Lease Receivables L.P., as
seller, PHH Vehicle Management Services Inc., as
servicer and PHH Corporation, as performance
guarantor.
    
    Incorporated by reference to Exhibit 10.15 to our Annual
Report on Form 10-K for the year ended December 31, 2009
filed on March 1, 2010.10.13.1
    
    Agency Agreement dated as of January 25, 2010,
between BNY Trust Company of Canada as trustee of
Fleet Leasing Receivables Trust, PHH Vehicle
Management Services Inc., as financial services
agent of Fleet Leasing Receivables Trust and as
originator, PHH Fleet Lease Receivables L.P., as
seller and Merrill Lynch Canada Inc., CIBC World
Markets Inc., RBC Dominion Securities Inc. and
Scotia Capital Inc., as agents.
    
    Incorporated by reference to Exhibit 10.15.1 to our Annual
Report on Form 10-K for the year ended December 31, 2009
filed on March 1, 2010.
 108




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.13.2
    
    Agency Agreement dated as of January 25, 2010,
between BNY Trust Company of Canada as trustee of
Fleet Leasing Receivables Trust, PHH Vehicle
Management Services Inc., as financial services
agent of Fleet Leasing Receivables Trust and as
originator, PHH Fleet Lease Receivables L.P., as
seller and Merrill Lynch Canada Inc. and Banc of
America Securities LLC, as agents.
    
    Incorporated by reference to Exhibit 10.15.2 to our Annual
Report on Form 10-K for the year ended December 31, 2009
filed on March 1, 2010.10.14
    
    Mortgage Loan Participation Purchase and Sale
Agreement dated as of July 23, 2010, between PHH
Mortgage Corporation, as seller, and Bank of
America, N.A., as purchaser.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on July 29, 2010.31.1
    
    Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.31.2
    
    Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.32.1
    
    Certification of Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.32.2
    
    Certification of Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.
 
 
    
    Confidential treatment has been requested for certain portions of this Exhibit pursuant to
Rule 24b-2 of the Exchange Act which portions have been omitted and filed separately with the
Commission.
    
    Confidential treatment has been granted for certain portions of this Exhibit pursuant to an
order under the Exchange Act which portions have been omitted and filed separately with the
Commission.
    
    Confidential treatment has been granted for certain portions of this Exhibit which was filed
as Exhibit 10.79 to the registrants Quarterly Report on Form 10-Q filed with the Commission
on August 4, 2009. This Exhibit was re-filed with fewer redactions as Exhibit 10.11 to the
registrants Quarterly Report on Form 10-Q filed with the Commission on November 5, 2009. The
redacted portions of this Exhibit have been filed separately with the Commission.
    
    Management or compensatory plan or arrangement required to be filed pursuant to Item
601(b)(10) of Regulation S-K. 109