##### Table of Contents



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, 2009
 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
  MARYLAND(State or other jurisdiction of 
incorporation or organization)
    
    52-0551284(I.R.S. Employer
Identification Number)3000 LEADENHALL ROAD 
MT. LAUREL, NEW JERSEY(Address of principal executive offices)
    
    08054(Zip Code)
 856-917-1744  (Registrants telephone number, including area code)
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o o
 o þ




---



##### 



TABLE OF CONTENTS
 Item
    
    Description
    
    PageCautionary Note Regarding Forward-Looking Statements
    
    
    2PART I1
    
    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. Earnings Per Share
    
    
    13Note 3. Mortgage Servicing Rights
    
    
    14Note 4. Loan Servicing Portfolio
    
    
    16Note 5. Mortgage Loan Sales
    
    
    17Note 6. Derivatives and Risk Management Activities
    
    
    20Note 7. Vehicle Leasing Activities
    
    
    23Note 8. Debt and Borrowing Arrangements
    
    
    24Note 9. Income Taxes
    
    
    29Note 10. Commitments and Contingencies
    
    
    30Note 11. Stock-Related Matters
    
    
    32Note 12. Accumulated Other Comprehensive Income (Loss)
    
    
    32Note 13. Fair Value Measurements
    
    
    33Note 14. Variable Interest Entities
    
    
    40Note 15. Segment Information
    
    
    422
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    453
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    814
    
    Controls and Procedures
    
    
    85PART II1
    
    Legal Proceedings
    
    
    851A
    
    Risk Factors
    
    
    862
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    863
    
    Defaults Upon Senior Securities
    
    
    864
    
    Submission of Matters to a Vote of Security Holders
    
    
    865
    
    Other Information
    
    
    876
    
    Exhibits
    
    
    87Signatures
    
    
    88Exhibit Index
    
    
    89EX-10.79EX-31.I.1EX-31.I.2EX-32.1EX-32.2
  1




---



##### Table of Contents



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
   2




---



##### Table of Contents



§
    
    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 levels, if any, of our derivatives related to mortgage
servicing rights and the resulting potential volatility of the results of operations of our
Mortgage Servicing segment;§
    
    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, including the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation;§
    
    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 such contracts;§
    
    the ability to develop and implement operational, technological and financial systems to
manage our operations and to achieve enhanced earnings or effect cost savings;§
    
    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 effects of the decline in the results of operations or financial condition of
automobile manufacturers and/or their willingness or ability to make new vehicles available
to us on commercially favorable terms, if at all;§
    
    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 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;
 3




---



##### Table of Contents



§
    
    the ability to maintain our relationships with our existing 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 certain financial covenants under our financing arrangements;§
    
    the effects of the declining health of the U.S. and global banking systems, the
consolidation of financial institutions and the related impact on the availability of
credit;§
    
    the impact of the Emergency Economic Stabilization Act of 2008 enacted by the U.S.
government on the securities markets and valuations of mortgage-backed securities;§
    
    the impact of actions taken or to be taken by the Treasury and the Federal Reserve Bank
on the credit markets and the U.S. economy;§
    
    the impact of the adverse conditions in the North American automotive industry; and§
    
    changes in laws and regulations, including changes in accounting standards, mortgage-
and real estate-related regulations and state, federal and foreign tax laws.
   4




---



##### Table of Contents



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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesMortgage fees
    
    $
    86
    
    
    $
    67
    
    
    $
    147
    
    
    $
    122Fleet management fees
    
    
    38
    
    
    
    41
    
    
    
    75
    
    
    
    83Net fee income
    
    
    124
    
    
    
    108
    
    
    
    222
    
    
    
    205Fleet lease income
    
    
    360
    
    
    
    406
    
    
    
    724
    
    
    
    790Gain on mortgage loans, net
    
    
    147
    
    
    
    56
    
    
    
    335
    
    
    
    128Mortgage interest income
    
    
    25
    
    
    
    47
    
    
    
    50
    
    
    
    100Mortgage interest expense
    
    
    (37
    )
    
    
    (42
    )
    
    
    (73
    )
    
    
    (84
    )Mortgage net finance (expense) income
    
    
    (12
    )
    
    
    5
    
    
    
    (23
    )
    
    
    16Loan servicing income
    
    
    100
    
    
    
    107
    
    
    
    200
    
    
    
    219Change in fair value of mortgage servicing rights
    
    
    55
    
    
    
    104
    
    
    
    (108
    )
    
    
    (32
    )Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (143
    )
    
    
    
    
    
    
    (117
    )Valuation adjustments related to mortgage servicing rights
    
    
    55
    
    
    
    (39
    )
    
    
    (108
    )
    
    
    (149
    )Net loan servicing income
    
    
    155
    
    
    
    68
    
    
    
    92
    
    
    
    70Other (expense) income
    
    
    (6
    )
    
    
    20
    
    
    
    5
    
    
    
    96Net revenues
    
    
    768
    
    
    
    663
    
    
    
    1,355
    
    
    
    1,305ExpensesSalaries and related expenses
    
    
    128
    
    
    
    117
    
    
    
    243
    
    
    
    233Occupancy and other office expenses
    
    
    12
    
    
    
    17
    
    
    
    27
    
    
    
    36Depreciation on operating leases
    
    
    322
    
    
    
    324
    
    
    
    647
    
    
    
    646Fleet interest expense
    
    
    21
    
    
    
    38
    
    
    
    51
    
    
    
    82Other depreciation and amortization
    
    
    7
    
    
    
    5
    
    
    
    13
    
    
    
    12Other operating expenses
    
    
    92
    
    
    
    130
    
    
    
    183
    
    
    
    220Total expenses
    
    
    582
    
    
    
    631
    
    
    
    1,164
    
    
    
    1,229Income before income taxes
    
    
    186
    
    
    
    32
    
    
    
    191
    
    
    
    76Provision for income taxes
    
    
    75
    
    
    
    17
    
    
    
    75
    
    
    
    27Net income
    
    
    111
    
    
    
    15
    
    
    
    116
    
    
    
    49Less: net income (loss) attributable to noncontrolling interest
    
    
    5
    
    
    
    (1
    )
    
    
    8
    
    
    
    3Net income attributable to PHH Corporation
    
    $
    106
    
    
    $
    16
    
    
    $
    108
    
    
    $
    46Basic earnings per share attributable to PHH Corporation
    
    $
    1.93
    
    
    $
    0.31
    
    
    $
    1.98
    
    
    $
    0.85Diluted earnings per share attributable to PHH Corporation
    
    $
    1.91
    
    
    $
    0.30
    
    
    $
    1.96
    
    
    $
    0.85
  5




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share data)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    146
    
    
    $
    109Restricted cash
    
    
    734
    
    
    
    614Mortgage loans held for sale
    
    
    1,682
    
    
    
    1,006Accounts receivable, net
    
    
    486
    
    
    
    468Net investment in fleet leases
    
    
    3,858
    
    
    
    4,204Mortgage servicing rights
    
    
    1,436
    
    
    
    1,282Investment securities
    
    
    12
    
    
    
    37Property, plant and equipment, net
    
    
    54
    
    
    
    63Goodwill
    
    
    25
    
    
    
    25Other assets
    
    
    502
    
    
    
    465Total assets
    
    $
    8,935
    
    
    $
    8,273LIABILITIES AND EQUITYAccounts payable and accrued expenses
    
    $
    460
    
    
    $
    451Debt
    
    
    6,210
    
    
    
    5,764Deferred income taxes
    
    
    651
    
    
    
    579Other liabilities
    
    
    223
    
    
    
    212Total liabilities
    
    
    7,544
    
    
    
    7,006Commitments and contingencies (Note 10)
    
    
    
    
    
    
    EQUITYPreferred stock, $0.01 par value; 1,090,000
shares authorized at June 30,
2009 and December 31, 2008; none issued or
outstanding at June 30, 2009 or December 31,
2008
    
    
    
    
    
    
    Common stock, $0.01 par value; 273,910,000
and 108,910,000 shares authorized at June
30, 2009 and December 31, 2008,
respectively; 54,447,356 shares issued and
outstanding at June 30, 2009; 54,256,294
shares issued and outstanding at
December 31, 2008
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,011
    
    
    
    1,005Retained earnings
    
    
    371
    
    
    
    263Accumulated other comprehensive income (loss)
    
    
    3
    
    
    
    (3
    )Total PHH Corporation stockholders equity
    
    
    1,386
    
    
    
    1,266Noncontrolling interest
    
    
    5
    
    
    
    1Total equity
    
    
    1,391
    
    
    
    1,267Total liabilities and equity
    
    $
    8,935
    
    
    $
    8,273
  6




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six Months Ended June 30, 2009
(Unaudited)
(In millions, except share data)
 PHH Corporation ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Noncontrolling
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    (Loss) Income
    
    
    Interest
    
    
    EquityBalance at December 31, 2008
    
    
    54,256,294
    
    
    $
    1
    
    
    $
    1,005
    
    
    $
    263
    
    
    $
    (3
    )
    
    $
    1
    
    
    $
    1,267Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    8
    
    
    
    116Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Other comprehensive income, net of
income taxes of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Stock options exercised, including
excess tax benefit of $0
    
    
    6,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock award vesting, net of
excess tax benefit of $0
    
    
    184,768
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance at June 30, 2009
    
    
    54,447,356
    
    
    $
    1
    
    
    $
    1,011
    
    
    $
    371
    
    
    $
    3
    
    
    $
    5
    
    
    $
    1,391
  7




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 Six MonthsEnded June 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    116
    
    
    $
    49Adjustments to reconcile Net income to net cash provided by operating activities:Capitalization of originated mortgage servicing rights
    
    
    (267
    )
    
    
    (197
    )Net unrealized loss on mortgage servicing rights and related derivatives
    
    
    108
    
    
    
    149Vehicle depreciation
    
    
    647
    
    
    
    646Other depreciation and amortization
    
    
    13
    
    
    
    12Origination of mortgage loans held for sale
    
    
    (15,920
    )
    
    
    (12,830
    )Proceeds on sale of and payments from mortgage loans held for sale
    
    
    15,415
    
    
    
    12,634Net gain on interest rate lock commitments, mortgage loans held for sale and
related derivatives
    
    
    (219
    )
    
    
    (135
    )Deferred income tax provision
    
    
    71
    
    
    
    36Other adjustments and changes in other assets and liabilities, net
    
    
    118
    
    
    
    (52
    )Net cash provided by operating activities
    
    
    82
    
    
    
    312Cash flows from investing activities:Investment in vehicles
    
    
    (524
    )
    
    
    (1,076
    )Proceeds on sale of investment vehicles
    
    
    220
    
    
    
    296Purchase of mortgage servicing rights
    
    
    (1
    )
    
    
    (6
    )Proceeds on sale of mortgage servicing rights
    
    
    1
    
    
    
    166Cash paid on derivatives related to mortgage servicing rights
    
    
    
    
    
    
    (258
    )Net settlement proceeds from derivatives related to mortgage servicing rights
    
    
    
    
    
    
    258Purchases of property, plant and equipment
    
    
    (5
    )
    
    
    (11
    )Increase in Restricted cash
    
    
    (120
    )
    
    
    (97
    )Other, net
    
    
    6
    
    
    
    3Net cash used in investing activities
    
    
    (423
    )
    
    
    (725
    )Cash flows from financing activities:Net decrease in short-term borrowings
    
    
    
    
    
    
    (71
    )Proceeds from borrowings
    
    
    24,172
    
    
    
    18,154Principal payments on borrowings
    
    
    (23,737
    )
    
    
    (17,632
    )Issuances of Company Common stock
    
    
    
    
    
    
    1Proceeds from the sale of Sold Warrants
    
    
    
    
    
    
    24Cash paid for Purchased Options
    
    
    
    
    
    
    (51
    )Cash paid for debt issuance costs
    
    
    (42
    )
    
    
    (51
    )Other, net
    
    
    (4
    )
    
    
    (5
    )Net cash provided by financing activities
    
    
    389
    
    
    
    369Effect of changes in exchange rates on Cash and cash equivalents
    
    
    (11
    )
    
    
    2Net increase (decrease) in Cash and cash equivalents
    
    
    37
    
    
    
    (42
    )Cash and cash equivalents at beginning of period
    
    
    109
    
    
    
    149Cash and cash equivalents at end of period
    
    $
    146
    
    
    $
    107
  8




---



##### Table of Contents



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
 Fair Value Measurements.
 9




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Business Combinations.
 Noncontrolling Interests.
 Transfers of Financial Assets and Repurchase Financing Transactions.
 10




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Disclosures about Derivative Instruments and Hedging Activities.
 Financial Guarantee Insurance Contracts.
 Intangible Assets.
 Convertible Debt Instruments.
 11




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Participating Securities.
 Instruments Indexed to Stock.
 Fair Value Measurements.
 Disclosures about Fair Value of Financial Instruments.
 Subsequent Events
 12




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Recently Issued Accounting Pronouncements
 Transfers of Financial Assets
 Consolidation of Variable Interest Entities
 Accounting Standards Codification
 
 2. Earnings Per Share
  13




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions, except share and per share data)Net income attributable to PHH Corporation
    
    $
    106
    
    
    $
    16
    
    
    $
    108
    
    
    $
    46Weighted-average common shares
outstanding  basic
    
    
    54,502,265
    
    
    
    54,271,286
    
    
    
    54,441,028
    
    
    
    54,231,894Effect of potentially dilutive securities:Stock options
    
    
    20,857
    
    
    
    91,665
    
    
    
    10,605
    
    
    
    95,014Restricted stock units
    
    
    550,772
    
    
    
    417,207
    
    
    
    356,522
    
    
    
    371,881Weighted-average common shares
outstanding  diluted
    
    
    55,073,894
    
    
    
    54,780,158
    
    
    
    54,808,155
    
    
    
    54,698,789Basic earnings per share attributable to PHH
Corporation
    
    $
    1.93
    
    
    $
    0.31
    
    
    $
    1.98
    
    
    $
    0.85Diluted earnings per share attributable to PHH
Corporation
    
    $
    1.91
    
    
    $
    0.30
    
    
    $
    1.96
    
    
    $
    0.85
 
 3. Mortgage Servicing Rights
  Six MonthsEnded June 30,2009
    
    
    2008(In millions)Balance, beginning of period
    
    $
    129,078
    
    
    $
    126,540Additions
    
    
    14,050
    
    
    
    12,530Payoffs, sales and curtailments
    
    
    (17,141
    )
    
    
    (10,427
    )Balance, end of period
    
    $
    125,987
    
    
    $
    128,643
 14




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Six MonthsEnded June 30,2009
    
    
    2008(In millions)Mortgage Servicing Rights:Balance, beginning of period
    
    $
    1,282
    
    
    $
    1,502Additions
    
    
    268
    
    
    
    203Changes in fair value due to:Realization of expected cash flows
    
    
    (212
    )
    
    
    (136
    )Changes in market inputs or assumptions used in the valuation model
    
    
    104
    
    
    
    104Sales
    
    
    (6
    )
    
    
    Balance, end of period
    
    $
    1,436
    
    
    $
    1,673
  June 30,2009
    
    2008Prepayment speed (CPR)
    
    
    17
    %
    
    
    17
    %Option adjusted spread (in basis points)
    
    
    554
    
    
    
    481Volatility
    
    
    31
    %
    
    
    21
    %
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008(In millions)Net service fee revenue
    
    $
    105
    
    
    $
    108
    
    
    $
    212
    
    
    $
    215Late fees
    
    
    4
    
    
    
    4
    
    
    
    9
    
    
    
    11Other ancillary servicing revenue
    
    
    11
    
    
    
    8
    
    
    
    16
    
    
    
    13
   Six MonthsEnded June 30,2009
    
    2008Initial capitalization rate of additions to MSRs
    
    
    1.91
    %
    
    
    1.62
    %Weighted-average servicing fee of additions to MSRs (in basis points)
    
    
    37
    
    
    
    34
 15




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 June 30,2009
    
    2008Capitalized servicing rate
    
    
    1.14
    %
    
    
    1.30
    %Capitalized servicing multiple
    
    
    3.5
    
    
    
    4.0Weighted-average servicing fee (in basis points)
    
    
    33
    
    
    
    33
 
 4. Loan Servicing Portfolio
  Portfolio Activity
 Six MonthsEnded June 30,2009
    
    
    2008(In millions)Balance, beginning of period
    
    $
    149,750
    
    
    $
    159,183Additions
    
    
    17,606
    
    
    
    16,908Payoffs, sales and curtailments(1)
    
    
    (18,173
    )
    
    
    (30,917
    )Balance, end of period
    
    $
    149,183
    
    
    $
    145,174
 Portfolio Composition
 June 30,2009
    
    
    2008(In millions)Owned servicing portfolio
    
    $
    128,670
    
    
    $
    132,494Subserviced portfolio
    
    
    20,513
    
    
    
    12,680Total servicing portfolio
    
    $
    149,183
    
    
    $
    145,174Fixed rate
    
    $
    97,846
    
    
    $
    92,283Adjustable rate
    
    
    51,337
    
    
    
    52,891Total servicing portfolio
    
    $
    149,183
    
    
    $
    145,174Conventional loans
    
    $
    130,378
    
    
    $
    130,993Government loans
    
    
    11,936
    
    
    
    9,319Home equity lines of credit
    
    
    6,869
    
    
    
    4,862Total servicing portfolio
    
    $
    149,183
    
    
    $
    145,174Weighted-average interest rate
    
    
    5.5
    %
    
    
    5.9
    %
 16




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Portfolio Delinquency (2)
 June 30,2009
    
    2008Number
    
    Unpaid
    
    Number
    
    Unpaidof Loans
    
    Balance
    
    of Loans
    
    Balance30 days
    
    
    2.50
    %
    
    
    2.22
    %
    
    
    2.15
    %
    
    
    1.87
    %60 days
    
    
    0.72
    %
    
    
    0.68
    %
    
    
    0.47
    %
    
    
    0.43
    %90 or more days
    
    
    0.89
    %
    
    
    0.93
    %
    
    
    0.48
    %
    
    
    0.42
    %Total delinquency
    
    
    4.11
    %
    
    
    3.83
    %
    
    
    3.10
    %
    
    
    2.72
    %Foreclosure/real estate owned/bankruptcies
    
    
    2.62
    %
    
    
    2.72
    %
    
    
    1.52
    %
    
    
    1.40
    %
 
 (1)
    
    Payoffs, sales and curtailments for the six months ended June 30, 2008 includes
$18.3 billion of the unpaid principal balance of the underlying mortgage loans for which the
associated MSRs were sold during the year ended December 31, 2007, but the Company subserviced
these loans until the MSRs were transferred from the Companys systems to the purchasers
systems during the three months ended June 30, 2008.(2)
    
    Represents the loan servicing portfolio delinquencies as a percentage of the total
number of loans and the total unpaid balance of the portfolio.  
 5. Mortgage Loan Sales
  17




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  InvestmentSecurities

    
    MSRs(Dollars in millions)Fair value of retained interests
    
    $
    12
    
    
    $
    1,436Weighted-average life (in years)
    
    
    9.2
    
    
    
    4.8Annual servicing fee (in basis points)
    
    
    N/A
    
    
    
    33Prepayment speed (annual rate)
    
    
    7-26
    %
    
    
    17
    %Impact on fair value of 10% adverse change
    
    $
    
    
    
    $
    (87
    )Impact on fair value of 20% adverse change
    
    
    
    
    
    
    (167
    )Discount rate/Option adjusted spread (annual rate and basis points, respectively)
    
    
    4-30
    %
    
    
    554Impact on fair value of 10% adverse change
    
    $
    (1
    )
    
    $
    (53
    )Impact on fair value of 20% adverse change
    
    
    (2
    )
    
    
    (103
    )Volatility (annual rate)
    
    
    N/A
    
    
    
    31
    %Impact on fair value of 10% adverse change
    
    
    N/A
    
    
    $
    (29
    )Impact on fair value of 20% adverse change
    
    
    N/A
    
    
    
    (58
    )Credit losses (cumulative rate)
    
    
    7-9
    %
    
    
    N/AImpact on fair value of 10% adverse change
    
    $
    (1
    )
    
    
    N/AImpact on fair value of 20% adverse change
    
    
    (2
    )
    
    
    N/A
   PrincipalTotal

    
    Amount 60Principal

    
    Days or More

    
    Net CreditAmount

    
    Past Due(1)

    
    Losses(In millions)Residential mortgage loans (2)
    
    $
    965
    
    
    $
    219
    
    
    $
    12
 
 (1)
    
    Amounts are based on total sold or securitized assets at June 30, 2009 for which
the Company has a retained interest as of June 30, 2009.(2)
    
    Excludes sold or securitized mortgage loans that the Company continues to
service but to which it has no other continuing involvement. 18




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Six MonthsEndedJune 30,2009(In millions)Proceeds from new loan sales or securitizations
    
    $
    14,139Servicing fees received (1)
    
    
    212Other cash flows received on retained interests (2)
    
    
    4Purchases of delinquent or foreclosed loans
    
    
    (52
    )Servicing advances
    
    
    (483
    )Repayment of servicing advances
    
    
    489
 
 (1)
    
    Excludes late fees and other ancillary servicing revenue.(2)
    
    Represents cash flows received on retained interests other than servicing
fees.  19




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 
 6. Derivatives and Risk Management Activities
  Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Fair
    
    
    Notional
    
    
    Sheet
    
    Fair
    
    
    NotionalPresentation
    
    Value
    
    
    Amount
    
    
    Presentation
    
    Value
    
    
    Amount(In millions)Interest rate lock
commitments (IRLCs)
    
    Other assets
    
    $
    69
    
    
    $
    5,041
    
    
    Other liabilities
    
    $
    2
    
    
    $
    296Forward delivery commitments
not subject to master netting
arrangements:Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    22
    
    
    
    1,751
    
    
    Other liabilities
    
    
    16
    
    
    
    1,762Forward delivery commitments
subject to master netting
arrangements:Related to interest rate and
price risk for MLHS and
IRLCs(1)
    
    Other liabilities
    
    
    32
    
    
    
    2,388
    
    
    Other liabilities
    
    
    41
    
    
    
    2,979Related to interest rate and
price risk for MLHS and
IRLCs(1)
    
    Other assets
    
    
    1
    
    
    
    66
    
    
    Other assets
    
    
    1
    
    
    
    37Contracts related to interest
rate risk for debt arrangements
and variable-rate leases
    
    Other assets
    
    
    9
    
    
    
    867
    
    
    N/A
    
    
    
    
    
    
    Foreign exchange contracts
    
    Other assets
    
    
    9
    
    
    
    245
    
    
    N/A
    
    
    
    
    
    
    Total derivative instruments
    
    
    
    
    142
    
    
    $
    10,358
    
    
    
    
    
    60
    
    
    $
    5,074Impact of master netting
arrangements(1)
    
    
    
    
    (33
    )
    
    
    
    
    
    
    
    
    (33
    )Net fair value of derivative
instruments
    
    
    
    $
    109
    
    
    
    
    
    
    
    
    $
    27
 
 (1)
    
    Represents derivative instruments that are executed with the same
counterparties and subject to master netting arrangements between the Company and its
counterparties. 20




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Three Months
    
    
    Six MonthsEnded June 30, 2009
    
    
    Ended June 30, 2009Statement of
    
    
    
    
    
    Statement ofOperations
    
    
    
    
    Operations
    
    GainPresentation
    
    Gain
    
    
    Presentation
    
    (Loss)(In millions)Interest rate lock commitments
    
    Gain on mortgage loans, net
    
    $
    108
    
    
    Gain on mortgage loans, net
    
    $
    277Forward delivery commitments
related to interest rate and price
risk for MLHS and IRLCs
    
    Gain on mortgage loans, net
    
    
    9
    
    
    Gain on mortgage loans, net
    
    
    (37
    )Contracts related to interest rate
risk for debt arrangements and
variable-rate leases
    
    Fleet interest
 expense
    
    
    
    
    
    Fleet interest
 expense
    
    
    (1
    )Foreign exchange contracts
    
    Fleet interest expense
    
    
    19
    
    
    Fleet interest expense
    
    
    15Total derivative instruments
    
    
    
    $
    136
    
    
    
    
    $
    254
   Interest Rate Lock Commitments .
 Mortgage Loans Held for Sale.
 21




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Mortgage Servicing Rights.
   Debt.
 22




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Foreign Exchange.
 
 7. Vehicle Leasing Activities
  June 30,
    
    
    December 31,2009
    
    
    2008(In millions)Operating Leases:Vehicles under open-end operating leases
    
    $
    7,531
    
    
    $
    7,542Vehicles under closed-end operating leases
    
    
    279
    
    
    
    266Vehicles under operating leases
    
    
    7,810
    
    
    
    7,808Less: Accumulated depreciation
    
    
    (4,165
    )
    
    
    (3,999
    )Net investment in operating leases
    
    
    3,645
    
    
    
    3,809Direct Financing Leases:Lease payments receivable
    
    
    123
    
    
    
    141Less: Unearned income
    
    
    (6
    )
    
    
    (7
    )Net investment in direct financing leases
    
    
    117
    
    
    
    134Off-Lease Vehicles:Vehicles not yet subject to a lease
    
    
    94
    
    
    
    254Vehicles held for sale
    
    
    5
    
    
    
    18Less: Accumulated depreciation
    
    
    (3
    )
    
    
    (11
    )Net investment in off-lease vehicles
    
    
    96
    
    
    
    261Net investment in fleet leases
    
    $
    3,858
    
    
    $
    4,204
 June 30,
    
    December 31,2009
    
    2008Vehicles under open-end leases
    
    
    94
    %
    
    
    94
    %Vehicles under closed-end leases
    
    
    6
    %
    
    
    6
    %Vehicles under variable-rate leases
    
    
    74
    %
    
    
    73
    %Vehicles under fixed-rate leases
    
    
    26
    %
    
    
    27
    %
 23




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 
 8. Debt and Borrowing Arrangements
  June 30, 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(4)(Dollars in millions)Chesapeake Series 2006-1 Variable
Funding Notes
    
    $
    1,262
    
    
    $
    1,262
    
    
    
    
    
    
    
    3/27/2009
    (5)Chesapeake Series 2006-2 Variable
Funding Notes
    
    
    879
    
    
    
    879
    
    
    
    
    
    
    
    2/26/2009
    (5)Chesapeake Series 2009-1 Term Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    5/20/2010Other
    
    
    35
    
    
    
    35
    
    
    
    
    
    
    
    3/20106/2016Total Vehicle Management Asset-Backed
Debt
    
    
    3,176
    
    
    
    3,176
    
    
    
    2.4
    %(6)
    
    
    
    
    
    $
    27
    
    
    $
    457
    
    
    $
    
    
    
    $
    3,313RBS Repurchase Facility(7)
    
    
    709
    
    
    
    1,500
    
    
    
    4.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Fannie Mae Repurchase
Facilities(8)
    
    
    623
    
    
    
    623
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    Other
    
    
    8
    
    
    
    8
    
    
    
    3.2
    %
    
    
    10/29/2009
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Total Mortgage Warehouse Asset-Backed
Debt
    
    
    1,340
    
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,439
    
    
    
    Term Notes(9)
    
    
    440
    
    
    
    440
    
    
    
    6.5%-7.9
    %(10)
    
    
    4/2010-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(11)
    
    
    1,039
    
    
    
    1,305
    
    
    
    1.0
    %(12)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes(13)
    
    
    215
    
    
    
    215
    
    
    
    4.0
    %
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,694
    
    
    
    1,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    6,210
    
    
    $
    7,267
    
    
    
    
    
    
    
    
    
    
    $
    27
    
    
    $
    457
    
    
    $
    1,439
    
    
    $
    3,313
 24




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 December 31, 2008Assets Held as Collateral(1)Mortgage
    
    
    NetMaturity/
    
    
    
    
    
    
    
    
    Loans
    
    
    InvestmentInterest
    
    
    Expiry
    
    
    Accounts
    
    

    Restricted
    
    
    Held for
    
    
    in FleetBalance
    
    
    Capacity(2)
    
    
    Rate(3)
    
    
    Date
    
    
    Receivable
    
    
    Cash
    
    
    Sale
    
    
    Leases(4)(Dollars in millions)Chesapeake Series 2006-1 Variable Funding
Notes
    
    $
    2,371
    
    
    $
    2,500
    
    
    
    
    
    
    
    2/26/2009Chesapeake Series 2006-2 Variable Funding Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    2/26/2009Other
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    3/20105/2014Total Vehicle Management Asset-Backed Debt
    
    
    3,376
    
    
    
    3,505
    
    
    
    3.6
    %(6)
    
    
    
    
    
    $
    22
    
    
    $
    320
    
    
    $
    
    
    
    $
    3,692RBS Repurchase Facility(7)
    
    
    411
    
    
    
    1,500
    
    
    
    4.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    Citigroup Repurchase Facility(14)
    
    
    10
    
    
    
    500
    
    
    
    1.7
    %
    
    
    2/26/2009
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    Fannie Mae Repurchase
Facilities(8)
    
    
    149
    
    
    
    149
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    Mortgage Venture Repurchase
Facility(15)
    
    
    115
    
    
    
    225
    
    
    
    1.7
    %
    
    
    5/28/2009
    
    
    
    
    
    
    
    25
    
    
    
    128
    
    
    
    Other
    
    
    7
    
    
    
    7
    
    
    
    5.3
    %
    
    
    10/29/2009
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Total Mortgage Warehouse Asset-Backed Debt
    
    
    692
    
    
    
    2,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    752
    
    
    
    Term Notes(9)
    
    
    441
    
    
    
    441
    
    
    
    6.5%-7.9
    %(10)
    
    
    4/2010-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(11)
    
    
    1,035
    
    
    
    1,303
    
    
    
    1.3
    %(12)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes(13)
    
    
    208
    
    
    
    208
    
    
    
    4.0
    %
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,696
    
    
    
    1,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,764
    
    
    $
    7,850
    
    
    
    
    
    
    
    
    
    
    $
    22
    
    
    $
    345
    
    
    $
    752
    
    
    $
    3,692
 
 (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 asset eligibility requirements
under the respective agreements.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of total vehicle management asset-backed debt, term notes and the Convertible Notes.(4)
    
    The titles to all the vehicles collateralizing the debt issued by Chesapeake Funding
LLC (Chesapeake) are held in a bankruptcy remote trust and the Company acts as a servicer of
all such leases. The bankruptcy remote trust also acts as a lessor under both operating and
direct financing lease agreements.(5)
    
    The Company elected to allow the Series 2006-2 notes and Series 2006-1 notes to
amortize in accordance with their terms on their respective Scheduled Expiry Date (as defined
below). During the Amortization Periods (as defined below), the Company is unable to borrow
additional amounts under these notes. See Asset-Backed DebtVehicle Management Asset-Backed
Debt for additional information.(6)
    
    Represents the weighted-average interest rate of the Companys vehicle management
asset-backed debt arrangements as of June 30, 2009 and December 31, 2008, respectively.(7)
    
    The Company maintains a variable-rate committed mortgage repurchase facility (the
RBS Repurchase Facility) with The Royal Bank of Scotland plc (RBS). At the Companys
election, subject to compliance with the terms of the Amended Repurchase Agreement and payment
of renewal fees, the RBS Repurchase Facility was renewed for an additional 364-day term on
June 25, 2009. 25




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 (8)
    
    The balance and capacity represents amounts outstanding under the Companys
variable-rate uncommitted mortgage repurchase facilities (the Fannie Mae Repurchase
Facilities) with Fannie Mae. Total uncommitted capacity was approximately $2.9 billion and
$1.5 billion as of June 30, 2009 and December 31, 2008, respectively.(9)
    
    Represents medium-term notes (the MTNs) publicly issued under the indenture,
dated as of November 6, 2000 (as amended and supplemented, the MTN Indenture) by and between
PHH and The Bank of New York, as successor trustee for Bank One Trust Company, N.A.(10)
    
    Represents the range of stated interest rates of the MTNs outstanding as of June
30, 2009 and December 31, 2008, respectively. The effective rate of interest of the Companys
outstanding MTNs was 7.2% as of both June 30, 2009 and December 31, 2008.(11)
    
    Credit facilities primarily represents a $1.3 billion Amended and Restated
Competitive Advance and Revolving Credit Agreement (the Amended Credit Facility), dated as
of January 6, 2006, among PHH, a group of lenders and JPMorgan Chase Bank, N.A., as
administrative agent.(12)
    
    Represents the interest rate on the Amended Credit Facility as of June 30, 2009 and
December 31, 2008, respectively, excluding per annum utilization and facility fees. The
outstanding balance as of June 30, 2009 and December 31, 2008 also includes $73 million and
$78 million, respectively, outstanding under another variable-rate credit facility that bore
interest at 1.3% and 2.8%, respectively. See Unsecured DebtCredit Facilities below for
additional information.(13)
    
    On April 2, 2008, the Company completed a private offering of the 4.0% Convertible
Notes with an aggregate principal amount of $250 million and a maturity date of April 15, 2012
to certain qualified institutional buyers. The carrying amount as of June 30, 2009 and
December 31, 2008 is net of an unamortized discount of $35 million and $42 million,
respectively. The effective rate of interest of the Convertible Notes was 12.4% as of June 30,
2009 and December 31, 2008. There were no conversions of the Convertible Notes during the six
months ended June 30, 2009.(14)
    
    The Company maintained a 364-day $500 million variable-rate committed mortgage
repurchase facility with Citigroup Global Markets Realty Corp. (the Citigroup Repurchase
Facility). The Company repaid all outstanding obligations under the Citigroup Repurchase
Facility as of February 26, 2009.(15)
    
    The Mortgage Venture maintained a variable-rate committed repurchase facility (the
Mortgage Venture Repurchase Facility) with Bank of Montreal and Barclays Bank PLC as Bank
Principals and Fairway Finance Company, LLC and Sheffield Receivables Corporation as Conduit
Principals. The balance as of December 31, 2008 represents variable-funding notes outstanding
under the facility. See Asset-Backed DebtMortgage Warehouse Asset-Backed Debt below for
additional information.  Asset-Backed Debt
 Vehicle Management Asset-Backed Debt
   26




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   Mortgage Warehouse Asset-Backed Debt
  Unsecured Debt
 Credit Facilities
  27




---



##### 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
    
    $
    2,209
    
    
    $
    5
    
    
    $
    2,214Between one and two years
    
    
    947
    
    
    
    1,039
    
    
    
    1,986Between two and three years
    
    
    639
    
    
    
    250
    
    
    
    889Between three and four years
    
    
    386
    
    
    
    421
    
    
    
    807Between four and five years
    
    
    233
    
    
    
    
    
    
    
    233Thereafter
    
    
    102
    
    
    
    8
    
    
    
    110$
    4,516
    
    
    $
    1,723
    
    
    $
    6,239
  Utilized
    
    AvailableCapacity(1)
    
    Capacity
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    3,176
    
    
    $
    3,176
    
    
    $
    Mortgage warehouse(3)
    
    
    2,131
    
    
    
    1,340
    
    
    
    791Unsecured Committed Credit Facilities(4)
    
    
    1,305
    
    
    
    1,053
    
    
    
    252
 
 (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)
    
    On February 27, 2009 and March 30, 2009, the Amortization Period of the
Series 2006-2 and Series 2006-1 notes, respectively, began, during which time the Company is
unable to borrow additional amounts under these notes. Amounts outstanding under the Series
2006-2 and Series 2006-1 notes were $879 million and $1.3 billion, respectively, as of June
30, 2009. See Asset-Backed DebtVehicle Management Asset-Backed Debt above for discussion
regarding the amortization of the Chesapeake Series 2006-2 and Series 2006-1 notes.(3)
    
    Capacity does not reflect $2.3 billion undrawn under the $2.9 billion
Fannie Mae Facilities, as this amount is uncommitted.(4)
    
    Utilized capacity reflects $14 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. Debt Covenants
  28




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   
 9. Income Taxes
      29




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  
 10. Commitments and Contingencies
 Tax Contingencies
    30




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Loan Recourse
    Mortgage Reinsurance
  31




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Three MonthsEnded June 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, March 31,
    
    $
    97
    
    
    $
    39Realized reinsurance losses
    
    
    (1
    )
    
    
    Increase in reinsurance reserves
    
    
    12
    
    
    
    11Reinsurance-related reserves, June 30,
    
    $
    108
    
    
    $
    50
 Six MonthsEnded June 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, January 1,
    
    $
    83
    
    
    $
    32Realized reinsurance losses
    
    
    (1
    )
    
    
    Increase in reinsurance reserves
    
    
    26
    
    
    
    18Reinsurance-related reserves, June 30,
    
    $
    108
    
    
    $
    50
 
 11. Stock-Related Matters
  
 12. Accumulated Other Comprehensive Income (Loss)
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Net income attributable to PHH Corporation
    
    $
    106
    
    
    $
    16
    
    
    $
    108
    
    
    $
    46Other comprehensive income (loss):Currency translation adjustments
    
    
    10
    
    
    
    1
    
    
    
    6
    
    
    
    (3
    )Total other comprehensive income (loss)
    
    
    10
    
    
    
    1
    
    
    
    6
    
    
    
    (3
    )Total comprehensive income
    
    $
    116
    
    
    $
    17
    
    
    $
    114
    
    
    $
    43
  AccumulatedCurrency
    
    
    
    
    
    
    OtherTranslation
    
    
    Pension
    
    
    ComprehensiveAdjustment
    
    
    Adjustment
    
    
    (Loss) Income(In millions)Balance at December 31, 2008
    
    $
    6
    
    
    $
    (9
    )
    
    $
    (3
    )Change during 2009
    
    
    6
    
    
    
    
    
    
    
    6Balance at June 30, 2009
    
    $
    12
    
    
    $
    (9
    )
    
    $
    3
 32




---



##### 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 .
   Mortgage Loans Held for Sale.
 33




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  AggregateUnpaidPrincipalAggregate
    
    BalanceUnpaid
    
    OverCarrying
    
    Principal
    
    CarryingAmount
    
    Balance
    
    Amount(In millions)Mortgage loans held for sale:Total
    
    $
    1,682
    
    
    $
    1,710
    
    
    $
    28Loans 90 or more days past due and on non-accrual status
    
    
    13
    
    
    
    24
    
    
    
    11
  June 30,2009(In millions)First mortgages:Conforming(1)
    
    $
    1,570Non-conforming
    
    
    17Alt-A(2)
    
    
    2Construction loans
    
    
    23Total first mortgages
    
    
    1,612Second lien
    
    
    28Scratch and Dent(3)
    
    
    39Other
    
    
    3Total
    
    $
    1,682
 
 (1)
    
    Represents mortgages that conform to the standards of the GSEs.(2)
    
    Represents mortgages that are made to borrowers with prime credit
histories, but do not meet the documentation requirements of a conforming loan.(3)
    
    Represents mortgages with origination flaws or performance issues. Investment Securities
 Derivative Instruments .
 Mortgage Servicing Rights
 34




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  June 30, 2009Level
    
    Level
    
    LevelOne
    
    Two
    
    Three
    
    Netting(1)
    
    Total(In millions)Assets:Mortgage loans held for sale
    
    $
    
    
    
    $
    1,572
    
    
    $
    110
    
    
    $
    
    
    
    $
    1,682Mortgage servicing rights
    
    
    
    
    
    
    
    
    
    
    1,436
    
    
    
    
    
    
    
    1,436Investment securities
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Other assets:Derivative
assets
    
    
    
    
    
    
    73
    
    
    
    69
    
    
    
    (33
    )
    
    
    109Other assets
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Liabilities:Other liabilities:Derivative
liabilities
    
    
    
    
    
    
    58
    
    
    
    2
    
    
    
    (33
    )
    
    
    27
 December 31, 2008Level
    
    Level
    
    LevelOne
    
    Two
    
    Three
    
    Netting(1)
    
    Total(In millions)Assets:Mortgage loans held for sale
    
    $
    
    
    
    $
    829
    
    
    $
    177
    
    
    $
    
    
    
    $
    1,006Mortgage servicing rights
    
    
    
    
    
    
    
    
    
    
    1,282
    
    
    
    
    
    
    
    1,282Investment securities
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    37Other assets:Derivative
assets
    
    
    
    
    
    
    18
    
    
    
    71
    
    
    
    (2
    )
    
    
    87Other assets
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Liabilities:Other liabilities:Derivative
liabilities
    
    
    
    
    
    
    36
    
    
    
    1
    
    
    
    (2
    )
    
    
    35
 
 (1)
    
    Adjustments to arrive at the carrying amounts of assets and liabilities
presented in the Condensed Consolidated Balance Sheet, which represent the effect of netting
the payable or receivable with the same counterparties under master netting arrangements
between the Company and its counterparties. 35




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  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
    )(1)
    
    $
    110Mortgage servicing rights
    
    
    1,223
    
    
    
    55
    (2)
    
    
    158
    
    
    
    
    
    
    
    1,436Investment securities
    
    
    32
    
    
    
    (19
    )
    
    
    (1
    )
    
    
    
    
    
    
    12Derivatives, net
    
    
    121
    
    
    
    108
    
    
    
    (162
    )
    
    
    
    
    
    
    67
 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
    )(1)
    
    $
    110Mortgage servicing rights
    
    
    1,282
    
    
    
    (108
    )(2)
    
    
    262
    
    
    
    
    
    
    
    1,436Investment securities
    
    
    37
    
    
    
    (21
    )
    
    
    (4
    )
    
    
    
    
    
    
    12Derivatives, net
    
    
    70
    
    
    
    277
    
    
    
    (280
    )
    
    
    
    
    
    
    67
 Three Months Ended June 30, 2008Purchases,
    
    TransfersBalance,
    
    Realized
    
    Issuances
    
    Into
    
    Balance,Beginning
    
    and
    
    and
    
    Level
    
    Endof
    
    Unrealized
    
    Settlements,
    
    Three,
    
    ofPeriod
    
    Gains
    
    net
    
    net
    
    Period(In millions)Mortgage loans held for sale
    
    $
    56
    
    
    $
    
    
    
    $
    2
    
    
    $
    23
    (3)
    
    $
    81Mortgage servicing rights
    
    
    1,466
    
    
    
    104
    (2)
    
    
    103
    
    
    
    
    
    
    
    1,673Investment securities
    
    
    39
    
    
    
    1
    
    
    
    (3
    )
    
    
    
    
    
    
    37Derivatives, net
    
    
    35
    
    
    
    24
    
    
    
    (39
    )
    
    
    
    
    
    
    20
 36




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Six Months Ended June 30, 2008Realized
    
    Purchases,
    
    TransfersBalance,
    
    and
    
    Issuances
    
    Into
    
    Balance,Beginning
    
    Unrealized
    
    and
    
    Level
    
    Endof
    
    Gains
    
    Settlements,
    
    Three,
    
    ofPeriod
    
    (Losses)
    
    net
    
    net
    
    Period(In millions)Mortgage loans held for sale
    
    $
    59
    
    
    $
    1
    
    
    $
    9
    
    
    $
    12
    (3)
    
    $
    81Mortgage servicing rights
    
    
    1,502
    
    
    
    (32
    )(2)
    
    
    203
    
    
    
    
    
    
    
    1,673Investment securities
    
    
    34
    
    
    
    7
    
    
    
    (4
    )
    
    
    
    
    
    
    37Derivatives, net
    
    
    (9
    )
    
    
    102
    
    
    
    (73
    )
    
    
    
    
    
    
    20
 
 (1)
    
    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.(2)
    
    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.(3)
    
    Represents home equity lines of credit that were reclassified from Level
Two to Level Three due to the lack of observable market data net of construction loans that
converted to first mortgages during the three and six months ended June 30, 2008.  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
    )
    
    
    
 37




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 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
    )
    
    
    
 Three Months Ended June 30, 2008MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    24Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    Mortgage interest income
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
 Six Months Ended June 30, 2008MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    102Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    Mortgage interest income
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
 38




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  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
    )
 Three Months Ended June 30, 2008Change inFair Value ofGain on
    
    MortgageMortgage
    
    Servicing
    
    OtherLoans, net
    
    Rights
    
    Income(In millions)Unrealized gains
    
    $
    18
    
    
    $
    180
    
    
    $
    1
 Six Months Ended June 30, 2008Change inFair Value ofGain on
    
    MortgageMortgage
    
    Servicing
    
    OtherLoans, net
    
    Rights
    
    Income(In millions)Unrealized gains
    
    $
    19
    
    
    $
    104
    
    
    $
    7
   39




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   
 14. Variable Interest Entities
  Mortgage Venture
   40




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  June 30,2009(In millions)ASSETSCash
    
    $
    35Mortgage loans held for sale
    
    
    58Accounts receivable, net
    
    
    4Property, plant and equipment, net
    
    
    1Other assets
    
    
    7Total assets
    
    $
    105LIABILITIESAccounts payable and accrued expenses
    
    $
    16Debt
    
    
    1Other liabilities
    
    
    5Total liabilities(1)
    
    $
    22
 
 (1)
    
    Total liabilities excludes $18 million of intercompany payables.  41




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Chesapeake and D.L. Peterson Trust
  June 30,2009(In millions)ASSETSCash and cash equivalents
    
    $
    5Restricted cash(1)
    
    
    457Accounts receivable
    
    
    27Net investment in fleet leases
    
    
    3,275Other assets
    
    
    17Total assets(2)
    
    $
    3,781LIABILITIESDebt(3)
    
    $
    3,141Other liabilities
    
    
    5Total liabilities
    
    $
    3,146
 
 (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 8, Debt and Borrowing Arrangements for assets held as collateral related
to Chesapeakes borrowing arrangements, which are not available to pay the Companys general
obligations.(3)
    
    See Note 8, Debt and Borrowing Arrangements for additional information regarding
the variable funding and term notes issued by Chesapeake. 
 15. Segment Information
   42




---



##### Table of Contents



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 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(In millions)Mortgage Production segment
    
    $
    232
    
    
    $
    125
    
    
    $
    107
    
    
    $
    82
    
    
    $
    (17
    )
    
    $
    99Mortgage Servicing segment
    
    
    124
    
    
    
    74
    
    
    
    50
    
    
    
    86
    
    
    
    34
    
    
    
    52Total Mortgage Services
    
    
    356
    
    
    
    199
    
    
    
    157
    
    
    
    168
    
    
    
    17
    
    
    
    151Fleet Management Services segment
    
    
    413
    
    
    
    465
    
    
    
    (52
    )
    
    
    18
    
    
    
    16
    
    
    
    2Total reportable segments
    
    
    769
    
    
    
    664
    
    
    
    105
    
    
    
    186
    
    
    
    33
    
    
    
    153Other (2)
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Total Company
    
    $
    768
    
    
    $
    663
    
    
    $
    105
    
    
    $
    181
    
    
    $
    33
    
    
    $
    148
 Net Revenues
    
    
    Segment Profit (Loss)(1)Six Months
    
    
    
    
    
    
    Six MonthsEnded June 30,
    
    
    
    
    
    
    Ended June 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(In millions)Mortgage Production segment
    
    $
    480
    
    
    $
    251
    
    
    $
    229
    
    
    $
    195
    
    
    $
    (27
    )
    
    $
    222Mortgage Servicing segment
    
    
    50
    
    
    
    93
    
    
    
    (43
    )
    
    
    (32
    )
    
    
    18
    
    
    
    (50
    )Total Mortgage Services
    
    
    530
    
    
    
    344
    
    
    
    186
    
    
    
    163
    
    
    
    (9
    )
    
    
    172Fleet Management Services segment
    
    
    827
    
    
    
    913
    
    
    
    (86
    )
    
    
    25
    
    
    
    40
    
    
    
    (15
    )Total reportable segments
    
    
    1,357
    
    
    
    1,257
    
    
    
    100
    
    
    
    188
    
    
    
    31
    
    
    
    157Other (2)
    
    
    (2
    )
    
    
    48
    
    
    
    (50
    )
    
    
    (5
    )
    
    
    42
    
    
    
    (47
    )Total Company
    
    $
    1,355
    
    
    $
    1,305
    
    
    $
    50
    
    
    $
    183
    
    
    $
    73
    
    
    $
    110
 
 (1)
    
    The following is a reconciliation of Income before income taxes to segment
profit: Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Income before income taxes
    
    $
    186
    
    
    $
    32
    
    
    $
    191
    
    
    $
    76Less: net income (loss) attributable to noncontrolling interest
    
    
    5
    
    
    
    (1
    )
    
    
    8
    
    
    
    3Segment profit
    
    $
    181
    
    
    $
    33
    
    
    $
    183
    
    
    $
    73
 
 (2)
    
    Net revenues reported under the heading Other for the three months ended June 30,
2009 and 2008 and the six months ended June 30, 2009 represent intersegment eliminations. Net
revenues reported under the heading Other for the six months ended June 30, 2008 represent
amounts not allocated to the Companys reportable segments, primarily related to a terminated
merger agreement with General Electric Capital Corporation (the Terminated Merger
Agreement), and intersegment eliminations. 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. Segment profit of $42
million reported under the heading Other for the six months ended June 30, 2008 represents
income related to the Terminated Merger Agreement. 43




---



##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Mortgage
    
    Mortgage
    
    Total
    
    Fleet
ManagementProduction
    
    Servicing
    
    Mortgage
    
    ServicesSegment
    
    Segment
    
    Services
    
    Segment
    
    Other
    
    Total(In millions)Assets at June 30, 2009
    
    $
    1,941
    
    
    $
    2,222
    
    
    $
    4,163
    
    
    $
    4,759
    
    
    $
    13
    
    
    $
    8,935Assets at December 31, 2008
    
    
    1,228
    
    
    
    2,056
    
    
    
    3,284
    
    
    
    4,956
    
    
    
    33
    
    
    
    8,273
 44




---



##### Table of Contents



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,
and our Condensed Consolidated Financial Statements and notes thereto included in this Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009 (this  Form 10-Q ), Part II Item 1A. Risk
Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (our Q1 Form
10-Q) and Part I Item 1. Business, Part I Item 1A. Risk Factors, Part II 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, 2008 (our2008 Form 10-K ).
 Overview
  Executive Summary
   §
    
    Mortgage Production Segment of $82 Million vs. $(17) Million:higher margins on
mortgage loans, higher volumes of more profitable first mortgage
retail originations and interest rate lock
commitments (IRLCs) expected to close and the impact of ongoing cost reduction
initiatives.§
    
    Mortgage Servicing Segment of $86 Million vs. $34 Million:a greater increase in
the fair value of the MSR asset predominantly due to the increase in mortgage rates
during the second quarter of 2009 partially offset by a greater reduction in the value
of MSRs due to prepayments and portfolio decay.§
    
    Fleet Management Services Segment of $18 Million vs. $16 Million:
 the impact of ongoing cost reduction initiatives
partially offset by volume
declines.
 
 45




---



##### Table of Contents



§
    
    Mortgage Production Segment of $195 Million vs. $(27) Million:higher margins on
mortgage loans, higher volumes of more profitable first mortgage
retail originations and IRLCs expected to
close and the impact of ongoing cost reduction initiatives.§
    
    Mortgage Servicing Segment of $(32) Million vs. $18
Million:a greater reduction in
the value of MSRs due to prepayments and portfolio decay that was partially offset by
a greater increase in the fair value of the MSR asset predominantly due to the
increase in mortgage rates during the second quarter of 2009.§
    
    Fleet Management Services Segment of $25 Million vs. $40 Million:
an increase in  debt fees and volume declines partially offset by the impact of ongoing cost reduction initiatives.
  Mortgage Production and Mortgage Servicing Segments
 Regulatory Trends
   §
    
    Expansion of the Federal Reserves Purchase of the Direct Obligations of GSEs:On
March 18, 2009, the Federal Reserve further increased its prior commitment, announced on
November 25, 2008, to purchase up to $500 billion in GSE direct obligations under the
program with the Federal Reserves primary dealers through a series of competitive
auctions and to utilize the Federal Reserves Balance Sheet to purchase up to $1.25
trillion in mortgage-backed securities (MBS). The Federal Reserve specifically
targeted the maintenance of low mortgage interest rates in an attempt to support the
housing market.§
    
    Homeowner Affordability and Stability Plan (HASP):On February 18, 2009, the
federal government announced new programs intended to stem home foreclosures and to
provide low cost mortgage refinancing opportunities for certain homeowners suffering
from declining home prices through a variety of different measures including, but not
limited to, the creation of financial incentives for homeowners, investors and servicers
to refinance or modify certain
existing mortgages which are delinquent, or are at risk of becoming delinquent. Some key
elements of these programs, which have
 46




---



##### Table of Contents



impacted and we believe will continue to impact the
mortgage industry are as follows:
 §
    
    Initially, the maximum loan-to-value ratio (LTV) for refinances of
existing Fannie Mae loans increased to 105% of the unpaid principal balance;
however, on July 1, 2009 the maximum LTV eligible under this program was
increased to 125%,§
    
    Elimination of the requirement to obtain mortgage insurance (MI) on a
refinanced loan if the original LTV of the existing loan does not currently
have MI regardless of the LTV at the time of refinance, and§
    
    Streamlined loan modification program for Fannie Mae loans for qualified
borrowers and enhanced economic incentive compensation for mortgage loan
servicers to modify qualified loans with additional incentives for loans that
continue to perform for a period of time following modification (HAMP).
  §
    
    American Recovery and Reinvestment Act of 2009 (ARRA):Enacted on February 17,
2009, the ARRA, among other things, created tax incentives for first time home buyers
for the purchase of a principal residence on or after January 1, 2009 and before
December 1, 2009 and further extended the 2008 single family loan limits for GSE, the
Federal Housing Administration and the Department of Veterans Affairs loans through
December 31, 2009.§
    
    Public-Private Investment Program (PPIP):On March 23, 2009, the U.S. Department of
Treasury (the Treasury), in conjunction with the Federal Deposit Insurance Corporation
and the Federal Reserve, announced the PPIP, which is intended to recreate a market for,
among other things, certain types of illiquid residential mortgage loans and securities
through a number of joint public and private investment funds. By drawing new private
capital into the market for such loans and securities through government equity
co-investment programs and public financing, the PPIP is intended to draw $500 billion
to $1 trillion in new liquidity into the mortgage loan and securities purchase programs.
   §
    
    Financial Regulatory Reform Initiative:On June 17, 2009, the Treasury issued a
report recommending the adoption of sweeping financial regulatory reform legislation.
While we are continuing to evaluate the proposed legislation and it is too early to tell
when or if any of the
provisions will be enacted and what impact any such provisions could have on the mortgage
industry, if enacted as proposed this legislation could materially affect the manner in
which we conduct our businesses and result in federal regulation and oversight of our
business activities.
 47




---



##### Table of Contents



Mortgage Industry Trends
 Overall Trends
  Economics and Mortgage Market Analysis
   Mortgage Production Trends
   48




---



##### Table of Contents



June 30,2009(In millions)First mortgages:Conforming(1)
    
    $
    1,570Non-conforming
    
    
    17Alt-A(2)
    
    
    2Construction loans
    
    
    23Total first mortgages
    
    
    1,612Second lien
    
    
    28Scratch and Dent(3)
    
    
    39Other
    
    
    3Total
    
    $
    1,682
 
 (1)
    
    Represents mortgages that conform to the standards of the GSEs.(2)
    
    Represents mortgages that are made to borrowers with prime credit histories, but do
not meet the documentation requirements of a conforming loan.(3)
    
    Represents mortgages with origination flaws or performance issues. Mortgage Servicing Trends
   Three MonthsEnded June 30,2009
    
    
    2008(In millions)Foreclosure-related reserves, March 31,
    
    $
    88
    
    
    $
    54Realized foreclosure losses(1)
    
    
    (24
    )
    
    
    (8
    )Increase in foreclosure reserves
    
    
    16
    
    
    
    22Foreclosure-related reserves, June 30,
    
    $
    80
    
    
    $
    68
 49




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008(In millions)Foreclosure-related reserves, January 1,
    
    $
    81
    
    
    $
    49Realized foreclosure losses(1)
    
    
    (39
    )
    
    
    (14
    )Increase in foreclosure reserves
    
    
    38
    
    
    
    33Foreclosure-related reserves, June 30,
    
    $
    80
    
    
    $
    68
 
 (1)
    
    Realized foreclosure losses include an $11 million settlement with an individual
investor for all future potential repurchase liabilities.      Three MonthsEnded June 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, March 31,
    
    $
    97
    
    
    $
    39Realized reinsurance losses
    
    
    (1
    )
    
    
    Increase in reinsurance reserves
    
    
    12
    
    
    
    11Reinsurance-related reserves, June 30,
    
    $
    108
    
    
    $
    50
 50




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, January 1,
    
    $
    83
    
    
    $
    32Realized reinsurance losses
    
    
    (1
    )
    
    
    Increase in reinsurance reserves
    
    
    26
    
    
    
    18Reinsurance-related reserves, June 30,
    
    $
    108
    
    
    $
    50
  Fleet Management Services Segment
 Fleet Industry Trends
 Automotive Fleet 2009, 2008 and 2007 Fact Books
   51




---



##### Table of Contents



Results of OperationsSecond Quarter 2009 vs. Second Quarter 2008
 Consolidated Results
  Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change(In millions)Net fee income
    
    $
    124
    
    
    $
    108
    
    
    $
    16Fleet lease income
    
    
    360
    
    
    
    406
    
    
    
    (46
    )Gain on mortgage loans, net
    
    
    147
    
    
    
    56
    
    
    
    91Mortgage net finance (expense) income
    
    
    (12
    )
    
    
    5
    
    
    
    (17
    )Loan servicing income
    
    
    100
    
    
    
    107
    
    
    
    (7
    )Valuation adjustments related to mortgage servicing rights
    
    
    55
    
    
    
    (39
    )
    
    
    94Other (expense) income
    
    
    (6
    )
    
    
    20
    
    
    
    (26
    )Net revenues
    
    
    768
    
    
    
    663
    
    
    
    105Depreciation on operating leases
    
    
    322
    
    
    
    324
    
    
    
    (2
    )Fleet interest expense
    
    
    21
    
    
    
    38
    
    
    
    (17
    )Total other expenses
    
    
    239
    
    
    
    269
    
    
    
    (30
    )Total expenses
    
    
    582
    
    
    
    631
    
    
    
    (49
    )Income before income taxes
    
    
    186
    
    
    
    32
    
    
    
    154Provision for income taxes
    
    
    75
    
    
    
    17
    
    
    
    58Net income
    
    
    111
    
    
    
    15
    
    
    
    96Less: net income (loss) attributable to noncontrolling interest
    
    
    5
    
    
    
    (1
    )
    
    
    6Net income attributable to PHH Corporation
    
    $
    106
    
    
    $
    16
    
    
    $
    90
  52




---



##### Table of Contents



Segment Results
  Mortgage Production Segment
   53




---



##### Table of Contents



Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    8,980
    
    
    $
    5,996
    
    
    $
    2,984
    
    
    
    50
    %Fee-based closings
    
    
    1,983
    
    
    
    4,758
    
    
    
    (2,775
    )
    
    
    (58
    )%Total closings
    
    $
    10,963
    
    
    $
    10,754
    
    
    $
    209
    
    
    
    2
    %Purchase closings
    
    $
    3,870
    
    
    $
    6,388
    
    
    $
    (2,518
    )
    
    
    (39
    )%Refinance closings
    
    
    7,093
    
    
    
    4,366
    
    
    
    2,727
    
    
    
    62
    %Total closings
    
    $
    10,963
    
    
    $
    10,754
    
    
    $
    209
    
    
    
    2
    %Fixed rate
    
    $
    9,324
    
    
    $
    5,877
    
    
    $
    3,447
    
    
    
    59
    %Adjustable rate
    
    
    1,639
    
    
    
    4,877
    
    
    
    (3,238
    )
    
    
    (66
    )%Total closings
    
    $
    10,963
    
    
    $
    10,754
    
    
    $
    209
    
    
    
    2
    %Number of loans closed (units)
    
    
    48,220
    
    
    
    44,380
    
    
    
    3,840
    
    
    
    9
    %Average loan amount
    
    $
    227,363
    
    
    $
    242,310
    
    
    $
    (14,947
    )
    
    
    (6
    )%Loans sold
    
    $
    9,205
    
    
    $
    6,064
    
    
    $
    3,141
    
    
    
    52
    %Applications
    
    $
    14,819
    
    
    $
    12,145
    
    
    $
    2,674
    
    
    
    22
    %IRLCs expected to close
    
    $
    6,930
    
    
    $
    4,635
    
    
    $
    2,295
    
    
    
    50
    %
 Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    86
    
    
    $
    67
    
    
    $
    19
    
    
    
    28
    %Gain on mortgage loans, net
    
    
    147
    
    
    
    56
    
    
    
    91
    
    
    
    163
    %Mortgage interest income
    
    
    22
    
    
    
    24
    
    
    
    (2
    )
    
    
    (8
    )%Mortgage interest expense
    
    
    (24
    )
    
    
    (23
    )
    
    
    (1
    )
    
    
    (4
    )%Mortgage net finance (expense) income
    
    
    (2
    )
    
    
    1
    
    
    
    (3
    )
    
    
    n/m
    (1)Other income
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Net revenues
    
    
    232
    
    
    
    125
    
    
    
    107
    
    
    
    86
    %Salaries and related expenses
    
    
    92
    
    
    
    83
    
    
    
    9
    
    
    
    11
    %Occupancy and other office expenses
    
    
    6
    
    
    
    10
    
    
    
    (4
    )
    
    
    (40
    )%Other depreciation and amortization
    
    
    4
    
    
    
    2
    
    
    
    2
    
    
    
    100
    %Other operating expenses
    
    
    43
    
    
    
    48
    
    
    
    (5
    )
    
    
    (10
    )%Total expenses
    
    
    145
    
    
    
    143
    
    
    
    2
    
    
    
    1
    %Income (loss) before income taxes
    
    
    87
    
    
    
    (18
    )
    
    
    105
    
    
    
    n/m
    (1)Less: net income (loss) attributable
to noncontrolling interest
    
    
    5
    
    
    
    (1
    )
    
    
    6
    
    
    
    n/m
    (1)Segment profit (loss)
    
    $
    82
    
    
    $
    (17
    )
    
    $
    99
    
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Fees
  54




---



##### Table of Contents



Gain on Mortgage Loans, Net
   Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    148
    
    
    $
    76
    
    
    $
    72
    
    
    
    95
    %Change in fair value of MLHS and related derivatives:Scratch and Dent and Alt-A loans
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    n/m
    (1)Second-lien loans
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    n/m
    (1)Jumbo loans
    
    
    
    
    
    
    (4
    )
    
    
    4
    
    
    
    100
    %Economic hedge results
    
    
    3
    
    
    
    (16
    )
    
    
    19
    
    
    
    n/m
    (1)Total change in fair value of MLHS and related
derivatives
    
    
    (1
    )
    
    
    (20
    )
    
    
    19
    
    
    
    95
    %Gain on mortgage loans, net
    
    $
    147
    
    
    $
    56
    
    
    $
    91
    
    
    
    163
    %
 
 (1)
    
    n/m  Not meaningful.  55




---



##### Table of Contents



Mortgage Net Finance (Expense) Income
  Salaries and Related Expenses
 .
 Other Operating Expenses
  56




---



##### Table of Contents



Mortgage Servicing Segment
    Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    148,971
    
    
    $
    153,277
    
    
    $
    (4,306
    )
    
    
    (3
    )%
 Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    4
    
    
    $
    24
    
    
    $
    (20
    )
    
    
    (83
    )%Mortgage interest expense
    
    
    (16
    )
    
    
    (19
    )
    
    
    3
    
    
    
    16
    %Mortgage net finance (expense) income
    
    
    (12
    )
    
    
    5
    
    
    
    (17
    )
    
    
    n/m
    (1)Loan servicing income
    
    
    100
    
    
    
    107
    
    
    
    (7
    )
    
    
    (7
    )%Change in fair value of mortgage servicing rights
    
    
    55
    
    
    
    104
    
    
    
    (49
    )
    
    
    (47
    )%Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (143
    )
    
    
    143
    
    
    
    100
    %Valuation adjustments related to mortgage servicing
rights
    
    
    55
    
    
    
    (39
    )
    
    
    94
    
    
    
    n/m
    (1)Net loan servicing income
    
    
    155
    
    
    
    68
    
    
    
    87
    
    
    
    128
    %Other (expense) income
    
    
    (19
    )
    
    
    1
    
    
    
    (20
    )
    
    
    n/m
    (1)Net revenues
    
    
    124
    
    
    
    74
    
    
    
    50
    
    
    
    68
    %Salaries and related expenses
    
    
    9
    
    
    
    8
    
    
    
    1
    
    
    
    13
    %Occupancy and other office expenses
    
    
    1
    
    
    
    2
    
    
    
    (1
    )
    
    
    (50
    )%Other depreciation and amortization
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    (100
    )%Other operating expenses
    
    
    28
    
    
    
    29
    
    
    
    (1
    )
    
    
    (3
    )%Total expenses
    
    
    38
    
    
    
    40
    
    
    
    (2
    )
    
    
    (5
    )%Segment profit
    
    $
    86
    
    
    $
    34
    
    
    $
    52
    
    
    
    153
    %
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance (Expense) Income
  57




---



##### Table of Contents



Loan Servicing Income
   Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    105
    
    
    $
    108
    
    
    $
    (3
    )
    
    
    (3
    )%Late fees and other ancillary servicing revenue
    
    
    15
    
    
    
    12
    
    
    
    3
    
    
    
    25
    %Curtailment interest paid to investors
    
    
    (15
    )
    
    
    (9
    )
    
    
    (6
    )
    
    
    (67
    )%Net reinsurance loss
    
    
    (5
    )
    
    
    (4
    )
    
    
    (1
    )
    
    
    (25
    )%Loan servicing income
    
    $
    100
    
    
    $
    107
    
    
    $
    (7
    )
    
    
    (7
    )%
  Valuation Adjustments Related to Mortgage Servicing Rights
  Change in Fair Value of Mortgage Servicing Rights:
 58




---



##### Table of Contents



Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Realization of expected cash flows
    
    $
    (120
    )
    
    $
    (76
    )
    
    $
    (44
    )
    
    
    (58
    )%Changes in market inputs or assumptions used in
the valuation model
    
    
    175
    
    
    
    180
    
    
    
    (5
    )
    
    
    (3
    )%Change in fair value of mortgage servicing rights
    
    $
    55
    
    
    $
    104
    
    
    $
    (49
    )
    
    
    (47
    )%
 Realization of Expected Cash Flows:
   Changes in market inputs or assumptions used in the valuation model:
 Net Derivative Loss Related to Mortgage Servicing Rights:
 59




---



##### Table of Contents



Three MonthsEnded June 30,2009
    
    
    2008(In millions)Change in fair value of mortgage servicing rights due
to changes in market inputs or assumptions used in the
valuation model
    
    $
    175
    
    
    $
    180Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (143
    )Net gain on MSRs risk management activities
    
    $
    175
    
    
    $
    37
 Other (Expense) Income
  Salaries and Related Expenses
  Fleet Management Services Segment
    60




---



##### Table of Contents



Average for theThree MonthsEnded June 30,2009
    
    2008
    
    Change
    
    % Change(In thousands of units)Leased vehicles
    
    
    318
    
    
    
    337
    
    
    
    (19
    )
    
    
    (6
    )%Maintenance service cards
    
    
    277
    
    
    
    303
    
    
    
    (26
    )
    
    
    (9
    )%Fuel cards
    
    
    285
    
    
    
    298
    
    
    
    (13
    )
    
    
    (4
    )%Accident management vehicles
    
    
    313
    
    
    
    324
    
    
    
    (11
    )
    
    
    (3
    )%
 Three MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    38
    
    
    $
    41
    
    
    $
    (3
    )
    
    
    (7
    )%Fleet lease income
    
    
    360
    
    
    
    406
    
    
    
    (46
    )
    
    
    (11
    )%Other income
    
    
    15
    
    
    
    18
    
    
    
    (3
    )
    
    
    (17
    )%Net revenues
    
    
    413
    
    
    
    465
    
    
    
    (52
    )
    
    
    (11
    )%Salaries and related expenses
    
    
    20
    
    
    
    23
    
    
    
    (3
    )
    
    
    (13
    )%Occupancy and other office expenses
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    Depreciation on operating leases
    
    
    322
    
    
    
    324
    
    
    
    (2
    )
    
    
    (1
    )%Fleet interest expense
    
    
    22
    
    
    
    39
    
    
    
    (17
    )
    
    
    (44
    )%Other depreciation and amortization
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    50
    %Other operating expenses
    
    
    23
    
    
    
    56
    
    
    
    (33
    )
    
    
    (59
    )%Total expenses
    
    
    395
    
    
    
    449
    
    
    
    (54
    )
    
    
    (12
    )%Segment profit
    
    $
    18
    
    
    $
    16
    
    
    $
    2
    
    
    
    13
    %
 Fleet Management Fees
  Fleet Lease Income
  Other Income
  61




---



##### Table of Contents



Salaries and Related Expenses
  Depreciation on Operating Leases
  Fleet Interest Expense
  Other Operating Expenses
  Results of OperationsSix Months Ended June 30, 2009 vs. Six Months Ended June 30, 2008
 Consolidated Results
  Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change(In millions)Net fee income
    
    $
    222
    
    
    $
    205
    
    
    $
    17Fleet lease income
    
    
    724
    
    
    
    790
    
    
    
    (66
    )Gain on mortgage loans, net
    
    
    335
    
    
    
    128
    
    
    
    207Mortgage net finance (expense) income
    
    
    (23
    )
    
    
    16
    
    
    
    (39
    )Loan servicing income
    
    
    200
    
    
    
    219
    
    
    
    (19
    )Valuation adjustments related to mortgage servicing rights
    
    
    (108
    )
    
    
    (149
    )
    
    
    41Other income
    
    
    5
    
    
    
    96
    
    
    
    (91
    )Net revenues
    
    
    1,355
    
    
    
    1,305
    
    
    
    50Depreciation on operating leases
    
    
    647
    
    
    
    646
    
    
    
    1Fleet interest expense
    
    
    51
    
    
    
    82
    
    
    
    (31
    )Total other expenses
    
    
    466
    
    
    
    501
    
    
    
    (35
    )Total expenses
    
    
    1,164
    
    
    
    1,229
    
    
    
    (65
    )Income before income taxes
    
    
    191
    
    
    
    76
    
    
    
    115Provision for income taxes
    
    
    75
    
    
    
    27
    
    
    
    48Net income
    
    
    116
    
    
    
    49
    
    
    
    67Less: net income attributable to noncontrolling interest
    
    
    8
    
    
    
    3
    
    
    
    5Net income attributable to PHH Corporation
    
    $
    108
    
    
    $
    46
    
    
    $
    62
 62




---



##### Table of Contents



Segment Results
  Mortgage Production Segment
   63




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    16,287
    
    
    $
    13,096
    
    
    $
    3,191
    
    
    
    24
    %Fee-based closings
    
    
    3,572
    
    
    
    7,608
    
    
    
    (4,036
    )
    
    
    (53
    )%Total closings
    
    $
    19,859
    
    
    $
    20,704
    
    
    $
    (845
    )
    
    
    (4
    )%Purchase closings
    
    $
    6,456
    
    
    $
    11,137
    
    
    $
    (4,681
    )
    
    
    (42
    )%Refinance closings
    
    
    13,403
    
    
    
    9,567
    
    
    
    3,836
    
    
    
    40
    %Total closings
    
    $
    19,859
    
    
    $
    20,704
    
    
    $
    (845
    )
    
    
    (4
    )%Fixed rate
    
    $
    16,939
    
    
    $
    12,070
    
    
    $
    4,869
    
    
    
    40
    %Adjustable rate
    
    
    2,920
    
    
    
    8,634
    
    
    
    (5,714
    )
    
    
    (66
    )%Total closings
    
    $
    19,859
    
    
    $
    20,704
    
    
    $
    (845
    )
    
    
    (4
    )%Number of loans closed (units)
    
    
    87,568
    
    
    
    86,503
    
    
    
    1,065
    
    
    
    1
    %Average loan amount
    
    $
    226,787
    
    
    $
    239,347
    
    
    $
    (12,560
    )
    
    
    (5
    )%Loans sold
    
    $
    15,130
    
    
    $
    12,484
    
    
    $
    2,646
    
    
    
    21
    %Applications
    
    $
    30,543
    
    
    $
    29,909
    
    
    $
    634
    
    
    
    2
    %IRLCs expected to close
    
    $
    14,485
    
    
    $
    12,261
    
    
    $
    2,224
    
    
    
    18
    %
 Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    147
    
    
    $
    122
    
    
    $
    25
    
    
    
    20
    %Gain on mortgage loans, net
    
    
    335
    
    
    
    128
    
    
    
    207
    
    
    
    162
    %Mortgage interest income
    
    
    44
    
    
    
    49
    
    
    
    (5
    )
    
    
    (10
    )%Mortgage interest expense
    
    
    (48
    )
    
    
    (49
    )
    
    
    1
    
    
    
    2
    %Mortgage net finance expense
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )
    
    
    n/m
    (1)Other income
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    100
    %Net revenues
    
    
    480
    
    
    
    251
    
    
    
    229
    
    
    
    91
    %Salaries and related expenses
    
    
    171
    
    
    
    161
    
    
    
    10
    
    
    
    6
    %Occupancy and other office expenses
    
    
    14
    
    
    
    21
    
    
    
    (7
    )
    
    
    (33
    )%Other depreciation and amortization
    
    
    7
    
    
    
    6
    
    
    
    1
    
    
    
    17
    %Other operating expenses
    
    
    85
    
    
    
    87
    
    
    
    (2
    )
    
    
    (2
    )%Total expenses
    
    
    277
    
    
    
    275
    
    
    
    2
    
    
    
    1
    %Income (loss) before income taxes
    
    
    203
    
    
    
    (24
    )
    
    
    227
    
    
    
    n/m
    (1)Less: net income attributable to noncontrolling interest
    
    
    8
    
    
    
    3
    
    
    
    5
    
    
    
    167
    %Segment profit (loss)
    
    $
    195
    
    
    $
    (27
    )
    
    $
    222
    
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Fees
  64




---



##### Table of Contents



Gain on Mortgage Loans, Net
   65




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    347
    
    
    $
    186
    
    
    $
    161
    
    
    
    87
    %Change in fair value of MLHS and related derivatives:ARMs
    
    
    
    
    
    
    (19
    )
    
    
    19
    
    
    
    100
    %Scratch and Dent and Alt-A loans
    
    
    (6
    )
    
    
    (16
    )
    
    
    10
    
    
    
    63
    %Second-lien loans
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )
    
    
    n/m
    (1)Construction loans
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )
    
    
    n/m
    (1)Jumbo loans
    
    
    
    
    
    
    (11
    )
    
    
    11
    
    
    
    100
    %Economic hedge results
    
    
    2
    
    
    
    (42
    )
    
    
    44
    
    
    
    105
    %Total change in fair value of MLHS and related
derivatives
    
    
    (12
    )
    
    
    (88
    )
    
    
    76
    
    
    
    86
    %Benefit of transition provision of SAB 109
    
    
    
    
    
    
    30
    
    
    
    (30
    )
    
    
    (100
    )%Gain on mortgage loans, net
    
    $
    335
    
    
    $
    128
    
    
    $
    207
    
    
    
    162
    %
 
 (1)
    
    n/m  Not meaningful.    Mortgage Net Finance Expense
  66




---



##### Table of Contents



Salaries and Related Expenses
 .
 Other Operating Expenses
  Mortgage Servicing Segment
   67




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    149,117
    
    
    $
    156,011
    
    
    $
    (6,894
    )
    
    
    (4
    )%
 Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    7
    
    
    $
    52
    
    
    $
    (45
    )
    
    
    (87
    )%Mortgage interest expense
    
    
    (28
    )
    
    
    (37
    )
    
    
    9
    
    
    
    24
    %Mortgage net finance (expense) income
    
    
    (21
    )
    
    
    15
    
    
    
    (36
    )
    
    
    n/m
    (1)Loan servicing income
    
    
    200
    
    
    
    219
    
    
    
    (19
    )
    
    
    (9
    )%Change in fair value of mortgage servicing rights
    
    
    (108
    )
    
    
    (32
    )
    
    
    (76
    )
    
    
    (238
    )%Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (117
    )
    
    
    117
    
    
    
    100
    %Valuation adjustments related to mortgage servicing
rights
    
    
    (108
    )
    
    
    (149
    )
    
    
    41
    
    
    
    28
    %Net loan servicing income
    
    
    92
    
    
    
    70
    
    
    
    22
    
    
    
    31
    %Other (expense) income
    
    
    (21
    )
    
    
    8
    
    
    
    (29
    )
    
    
    n/m
    (1)Net revenues
    
    
    50
    
    
    
    93
    
    
    
    (43
    )
    
    
    (46
    )%Salaries and related expenses
    
    
    19
    
    
    
    16
    
    
    
    3
    
    
    
    19
    %Occupancy and other office expenses
    
    
    4
    
    
    
    5
    
    
    
    (1
    )
    
    
    (20
    )%Other depreciation and amortization
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    (100
    )%Other operating expenses
    
    
    59
    
    
    
    53
    
    
    
    6
    
    
    
    11
    %Total expenses
    
    
    82
    
    
    
    75
    
    
    
    7
    
    
    
    9
    %Segment (loss) profit
    
    $
    (32
    )
    
    $
    18
    
    
    $
    (50
    )
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance (Expense) Income
  68




---



##### Table of Contents



Loan Servicing Income
   Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    212
    
    
    $
    215
    
    
    $
    (3
    )
    
    
    (1
    )%Late fees and other ancillary servicing revenue
    
    
    25
    
    
    
    24
    
    
    
    1
    
    
    
    4
    %Curtailment interest paid to investors
    
    
    (27
    )
    
    
    (18
    )
    
    
    (9
    )
    
    
    (50
    )%Net reinsurance loss
    
    
    (10
    )
    
    
    (2
    )
    
    
    (8
    )
    
    
    (400
    )%Loan servicing income
    
    $
    200
    
    
    $
    219
    
    
    $
    (19
    )
    
    
    (9
    )%
  Valuation Adjustments Related to Mortgage Servicing Rights
  Change in Fair Value of Mortgage Servicing Rights:
  Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Realization of expected cash flows
    
    $
    (212
    )
    
    $
    (136
    )
    
    $
    (76
    )
    
    
    (56
    )%Changes in market inputs or assumptions used in
the valuation model
    
    
    104
    
    
    
    104
    
    
    
    
    
    
    
    Change in fair value of mortgage servicing rights
    
    $
    (108
    )
    
    $
    (32
    )
    
    $
    (76
    )
    
    
    (238
    )%
 69




---



##### Table of Contents



Realization of Expected Cash Flows:
   Changes in market inputs or assumptions used in the valuation model:
 Net Derivative Loss Related to Mortgage Servicing Rights:
 70




---



##### Table of Contents



Six MonthsEnded June 30,2009
    
    
    2008(In millions)Change in fair value of mortgage servicing rights due
to changes in market inputs or assumptions used in the
valuation model
    
    $
    104
    
    
    $
    104Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (117
    )Net gain (loss) on MSRs risk management activities
    
    $
    104
    
    
    $
    (13
    )
 Other (Expense) Income
  Salaries and Related Expenses
  Other Operating Expenses
  Fleet Management Services Segment
   71




---



##### Table of Contents



Average for theSix MonthsEnded June 30,2009
    
    2008
    
    Change
    
    % Change(In thousands of units)Leased vehicles
    
    
    323
    
    
    
    338
    
    
    
    (15
    )
    
    
    (4
    )%Maintenance service cards
    
    
    279
    
    
    
    306
    
    
    
    (27
    )
    
    
    (9
    )%Fuel cards
    
    
    285
    
    
    
    304
    
    
    
    (19
    )
    
    
    (6
    )%Accident management vehicles
    
    
    316
    
    
    
    325
    
    
    
    (9
    )
    
    
    (3
    )%
 Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    75
    
    
    $
    83
    
    
    $
    (8
    )
    
    
    (10
    )%Fleet lease income
    
    
    724
    
    
    
    790
    
    
    
    (66
    )
    
    
    (8
    )%Other income
    
    
    28
    
    
    
    40
    
    
    
    (12
    )
    
    
    (30
    )%Net revenues
    
    
    827
    
    
    
    913
    
    
    
    (86
    )
    
    
    (9
    )%Salaries and related expenses
    
    
    42
    
    
    
    50
    
    
    
    (8
    )
    
    
    (16
    )%Occupancy and other office expenses
    
    
    9
    
    
    
    10
    
    
    
    (1
    )
    
    
    (10
    )%Depreciation on operating leases
    
    
    647
    
    
    
    646
    
    
    
    1
    
    
    
    Fleet interest expense
    
    
    54
    
    
    
    84
    
    
    
    (30
    )
    
    
    (36
    )%Other depreciation and amortization
    
    
    6
    
    
    
    5
    
    
    
    1
    
    
    
    20
    %Other operating expenses
    
    
    44
    
    
    
    78
    
    
    
    (34
    )
    
    
    (44
    )%Total expenses
    
    
    802
    
    
    
    873
    
    
    
    (71
    )
    
    
    (8
    )%Segment profit
    
    $
    25
    
    
    $
    40
    
    
    $
    (15
    )
    
    
    (38
    )%
 Fleet Management Fees
  Fleet Lease Income
  72




---



##### Table of Contents



Other Income
  Salaries and Related Expenses
  Depreciation on Operating Leases
  Fleet Interest Expense
  Other Operating Expenses
  Liquidity and Capital Resources
 General
   73




---



##### Table of Contents



Cash Flows
  Six MonthsEnded June 30,2009
    
    
    2008
    
    
    Change(In millions)Cash provided by (used in):Operating activities
    
    $
    82
    
    
    $
    312
    
    
    $
    (230
    )Investing activities
    
    
    (423
    )
    
    
    (725
    )
    
    
    302Financing activities
    
    
    389
    
    
    
    369
    
    
    
    20Effect of changes in exchange rates on Cash and cash equivalents
    
    
    (11
    )
    
    
    2
    
    
    
    (13
    )Net increase (decrease) in Cash and cash equivalents
    
    $
    37
    
    
    $
    (42
    )
    
    $
    79
 74




---



##### Table of Contents



Operating Activities
  Investing Activities
  Financing Activities
  Secondary Mortgage Market
    75




---



##### Table of Contents



Indebtedness
  June 30,
    
    
    December 31,2009
    
    
    2008(In millions)Restricted cash
    
    $
    734
    
    
    $
    614Mortgage loans held for sale
    
    
    1,682
    
    
    
    1,006Net investment in fleet leases
    
    
    3,858
    
    
    
    4,204Mortgage servicing rights
    
    
    1,436
    
    
    
    1,282Investment securities
    
    
    12
    
    
    
    37Assets under management programs
    
    $
    7,722
    
    
    $
    7,143
  June 30, 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(4)(Dollars in millions)Chesapeake Series 2006-1 Variable
Funding Notes
    
    $
    1,262
    
    
    $
    1,262
    
    
    
    
    
    
    
    3/27/2009
    (5)Chesapeake Series 2006-2 Variable
Funding Notes
    
    
    879
    
    
    
    879
    
    
    
    
    
    
    
    2/26/2009
    (5)Chesapeake Series 2009-1 Term Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    5/20/2010Other
    
    
    35
    
    
    
    35
    
    
    
    
    
    
    
    3/2010-6/2016Total Vehicle Management
Asset-Backed Debt
    
    
    3,176
    
    
    
    3,176
    
    
    
    2.4
    %(6)
    
    
    
    
    
    $
    27
    
    
    $
    457
    
    
    $
    
    
    
    $
    3,313RBS Repurchase Facility(7)
    
    
    709
    
    
    
    1,500
    
    
    
    4.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Fannie Mae Repurchase
Facilities(8)
    
    
    623
    
    
    
    623
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    Other
    
    
    8
    
    
    
    8
    
    
    
    3.2
    %
    
    
    10/29/2009
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Total Mortgage Warehouse
Asset-Backed Debt
    
    
    1,340
    
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,439
    
    
    
    Term Notes(9)
    
    
    440
    
    
    
    440
    
    
    
    6.5%-7.9
    %(10)
    
    
    4/2010-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(11)
    
    
    1,039
    
    
    
    1,305
    
    
    
    1.0
    %(12)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes(13)
    
    
    215
    
    
    
    215
    
    
    
    4.0
    %
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,694
    
    
    
    1,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    6,210
    
    
    $
    7,267
    
    
    
    
    
    
    
    
    
    
    $
    27
    
    
    $
    457
    
    
    $
    1,439
    
    
    $
    3,313
 
 (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 asset eligibility requirements
under the respective agreements.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of total vehicle management asset-backed debt, term notes and the Convertible Notes.(4)
    
    The titles to all the vehicles collateralizing the debt issued by Chesapeake are
held in a bankruptcy remote trust and we act as a servicer of all such leases. The bankruptcy
remote trust also acts as a lessor under both operating and direct financing lease agreements.(5)
    
    We elected to allow the Series 2006-2 notes and Series 2006-1 notes to amortize in
accordance with their terms on February 26, 2009 and March 27, 2009, respectively (the
Scheduled Expiry Dates). During the Amortization Periods (as defined below), we are unable
to borrow additional amounts under these notes. See Asset-Backed DebtVehicle Management
Asset Backed Debt for additional information. 76




---



##### Table of Contents



(6)
    
    Represents the weighted-average interest rate of our vehicle management asset-backed
debt arrangements as of June 30, 2009.(7)
    
    We maintain a variable-rate committed mortgage repurchase facility (the RBS
Repurchase Facility) with The Royal Bank of Scotland plc (RBS). At our election, subject to
compliance with the terms of the Amended Repurchase Agreement and payment of renewal fees, the
RBS Repurchase Facility was renewed for an additional 364-day term on June 25, 2009.(8)
    
    The balance and capacity represents amounts outstanding under our variable-rate
uncommitted mortgage repurchase facilities (the Fannie Mae Repurchase Facilities) with
Fannie Mae. Total uncommitted capacity was approximately $2.9 billion as of June 30, 2009.(9)
    
    Represents medium-term notes (the MTNs) publicly issued under the indenture, dated
as of November 6, 2000 (as amended and supplemented, the MTN Indenture) by and between PHH
and The Bank of New York, as successor trustee for Bank One Trust Company, N.A.(10)
    
    Represents the range of stated interest rates of the MTNs outstanding as of June
30, 2009. The effective rate of interest of our outstanding MTNs was 7.2% as of June 30, 2009.(11)
    
    Credit facilities primarily represents a $1.3 billion Amended and Restated
Competitive Advance and Revolving Credit Agreement (the Amended Credit Facility), dated as
of January 6, 2006, among PHH, a group of lenders and JPMorgan Chase Bank, N.A., as
administrative agent.(12)
    
    Represents the interest rate on the Amended Credit Facility as of June 30, 2009,
excluding per annum utilization and facility fees. The outstanding balance as of June 30, 2009
also includes $73 million, outstanding under another variable-rate credit facility that bore
interest at 1.3%. See Unsecured DebtCredit Facilities below for additional information.(13)
    
    On April 2, 2008, we completed a private offering of our 4.0% Convertible Senior
Notes due 2012 (the Convertible Notes) with an aggregate principal amount of $250 million
and a maturity date of April 15, 2012 to certain qualified institutional buyers. The carrying
amount as of June 30, 2009 is net of an unamortized discount of $35 million. The effective
rate of interest of the Convertible Notes was 12.4% as of June 30, 2009. There were no
conversions of the Convertible Notes during the six months ended June 30, 2009. Asset-Backed Debt
 Vehicle Management Asset-Backed Debt
    77




---



##### Table of Contents



Mortgage Warehouse Asset-Backed Debt
    78




---



##### Table of Contents



Unsecured Debt
   MoodysInvestors
    
    Standard
    
    FitchService
    
    & Poors
    
    RatingsSenior debt
    
    Ba2
    
    BB+
    
    BB+Short-term debt
    
    NP
    
    B
    
    B
    Credit Facilities
  79




---



##### Table of Contents



Debt Maturities
  Asset-Backed
    
    
    Unsecured
    
    
    Total(In millions)Within one year
    
    $
    2,209
    
    
    $
    5
    
    
    $
    2,214Between one and two years
    
    
    947
    
    
    
    1,039
    
    
    
    1,986Between two and three years
    
    
    639
    
    
    
    250
    
    
    
    889Between three and four years
    
    
    386
    
    
    
    421
    
    
    
    807Between four
and five years
    
    
    233
    
    
    
    
    
    
    
    233Thereafter
    
    
    102
    
    
    
    8
    
    
    
    110$
    4,516
    
    
    $
    1,723
    
    
    $
    6,239
  Utilized
    
    AvailableCapacity(1)
    
    Capacity
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    3,176
    
    
    $
    3,176
    
    
    $
    Mortgage warehouse(3)
    
    
    2,131
    
    
    
    1,340
    
    
    
    791Unsecured Committed Credit Facilities(4)
    
    
    1,305
    
    
    
    1,053
    
    
    
    252
 
 (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)
    
    On February 27, 2009 and March 30, 2009, the Amortization Period of the Series
2006-2 and Series 2006-1 notes, respectively, began, during which time we are unable to borrow
additional amounts under these notes. Amounts outstanding under the Series 2006-2 and Series
2006-1 notes were $879 million and $1.3 billion, respectively, as of June 30, 2009. See
"Asset-Backed DebtVehicle Management Asset-Backed Debt above for discussion regarding the
amortization of the Chesapeake Series 2006-2 and Series 2006-1 notes.(3)
    
    Capacity does not reflect $2.3 billion undrawn under the $2.9 billion Fannie Mae
Repurchase Facilities, as this amount is uncommitted.(4)
    
    Utilized capacity reflects $14 million of letters of credit issued under the Amended
Credit Facility, which are not included in Debt in our accompanying Condensed Consolidated
Balance Sheet. Debt Covenants
  80




---



##### Table of Contents



Critical Accounting Policies
  Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
 Mortgage Servicing Rights
  Other Mortgage-Related Assets
  81




---



##### Table of Contents



Indebtedness
   Consumer Credit Risk
 Loan Recourse
    Mortgage Loans in Foreclosure
  Real Estate Owned
  82




---



##### Table of Contents



Mortgage Reinsurance
   Year of Origination2003andPrior
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    Total(Dollars in millions)Unpaid principal balance
    
    $
    2,495
    
    
    $
    1,331
    
    
    $
    1,306
    
    
    $
    1,165
    
    
    $
    2,079
    
    
    $
    3,059
    
    
    $
    11,435Unpaid principal balance as a
percentage of original
unpaid principal balance
    
    
    10
    %
    
    
    36
    %
    
    
    57
    %
    
    
    74
    %
    
    
    88
    %
    
    
    94
    %
    
    
    N/AMaximum potential exposure
to reinsurance losses
    
    $
    369
    
    
    $
    107
    
    
    $
    66
    
    
    $
    39
    
    
    $
    57
    
    
    $
    66
    
    
    $
    704Average FICO score
    
    
    698
    
    
    
    694
    
    
    
    697
    
    
    
    694
    
    
    
    702
    
    
    
    728
    
    
    
    706Delinquencies(1)
    
    
    4.54
    %
    
    
    4.79
    %
    
    
    6.24
    %
    
    
    7.15
    %
    
    
    5.70
    %
    
    
    1.88
    %
    
    
    4.59
    %Foreclosures/REO/
Bankruptcies(2)
    
    
    3.00
    %
    
    
    4.23
    %
    
    
    5.95
    %
    
    
    6.71
    %
    
    
    4.10
    %
    
    
    0.80
    %
    
    
    3.54
    %
 
 (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.   Commercial Credit Risk
  83




---



##### Table of Contents



Counterparty Credit Risk
   Fair Value Measurements
  Sensitivity Analysis
    84




---



##### 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
    
    $
    61
    
    
    $
    37
    
    
    $
    20
    
    
    $
    (25
    )
    
    $
    (53
    )
    
    $
    (111
    )Interest rate lock commitments
    
    
    54
    
    
    
    37
    
    
    
    21
    
    
    
    (30
    )
    
    
    (64
    )
    
    
    (145
    )Forward loan sale commitments
    
    
    (116
    )
    
    
    (69
    )
    
    
    (37
    )
    
    
    45
    
    
    
    93
    
    
    
    195Total Mortgage loans held
for sale, interest rate
lock commitments and
related derivatives
    
    
    (1
    )
    
    
    5
    
    
    
    4
    
    
    
    (10
    )
    
    
    (24
    )
    
    
    (61
    )Mortgage servicing rights
    
    
    (447
    )
    
    
    (205
    )
    
    
    (94
    )
    
    
    83
    
    
    
    157
    
    
    
    273Total mortgage assets
    
    
    (448
    )
    
    
    (200
    )
    
    
    (90
    )
    
    
    73
    
    
    
    133
    
    
    
    212Total vehicle assets
    
    
    19
    
    
    
    10
    
    
    
    5
    
    
    
    (5
    )
    
    
    (10
    )
    
    
    (19
    )Total liabilities
    
    
    (16
    )
    
    
    (8
    )
    
    
    (4
    )
    
    
    4
    
    
    
    8
    
    
    
    15Total, net
    
    $
    (445
    )
    
    $
    (198
    )
    
    $
    (89
    )
    
    $
    72
    
    
    $
    131
    
    
    $
    208
 
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  85




---



##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Director Election Proposal:
 Number of
    
    Number ofVotes Cast For
    
    Votes WithheldA.B. Krongard
    
    
    18,210,666
    
    
    
    303,855Terence W. Edwards
    
    
    18,391,254
    
    
    
    123,267James O. Egan
    
    
    44,362,581
    
    
    
    243,926Allan Z. Loren
    
    
    25,918,027
    
    
    
    173,959Gregory J. Parseghian
    
    
    25,924,544
    
    
    
    167,442
 Number of
    
    Number of
    
    Number ofVotes
    
    Votes
    
    SharesCast For
    
    Cast Against
    
    AbstainRatification of Auditors Proposal
    
    
    44,300,521
    
    
    
    196,987
    
    
    
    108,999Equity and Incentive Plan Proposal
    
    
    37,244,934
    
    
    
    7,231,934
    
    
    
    129,639Charter Amendment Proposal
    
    
    27,229,701
    
    
    
    19,126,266
    
    
    
    132,233
  86




---



##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
  87




---



##### Table of Contents



SIGNATURES
  PHH CORPORATIONBy:
    /s/ George J. KilroyGeorge J. KilroyActing Chief Executive Officer and President  By:
    /s/ Sandra E. BellSandra E. BellExecutive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)  88




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description
    
    Incorporation by Reference2.1*
    
    Agreement and Plan of Merger dated as of March 15, 2007 by and
among General Electric Capital Corporation, a Delaware
corporation, Jade Merger Sub, Inc., a Maryland corporation, and
PHH Corporation, a Maryland corporation.
    
    Incorporated by reference to Exhibit 2.1 to our Current
Report on Form 8-K filed on March 15, 2007.3.1
    
    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, 2005.3.1.1
    
    Articles Supplementary
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on March 27, 2008.3.2
    
    Amended and Restated By-Laws.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on April 2, 2009.3.3
    
    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, 2005.3.3.1
    
    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, 2005.3.3.2
    
    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, 2006.3.4
    
    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, 2009.4.1
    
    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, 2005.4.1.2
    
    See Exhibits 3.1 and 3.2 for provisions of the Amended and
Restated Articles of Incorporation and Amended and Restated
By-laws of the registrant defining the rights of holders of
common stock of the registrant.
    
    Incorporated by reference to Exhibits 3.1 and 3.2,
respectively, to our Current Report on Form 8-K filed on
February 1, 2005.
 89




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.2
    
    Rights Agreement, dated as of January 28, 2005, by and between
PHH Corporation and The Bank of New York.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on February 1, 2005.4.3
    
    Indenture dated as of November 6, 2000 between PHH Corporation
and 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, 2006.4.4
    
    Supplemental Indenture No. 1 dated as of November 6, 2000
between PHH Corporation and 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, 2006.4.5
    
    Supplemental Indenture No. 3 dated as of May 30, 2002 to the
Indenture dated as of November 6, 2000 between PHH Corporation
and Bank One Trust Company, N.A., as Trustee (pursuant to which
the Internotes, 6.000% Notes due 2008 and 7.125% Notes due 2013
were issued).
    
    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, 2007.4.6
    
    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, 2008.4.7
    
    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,
2008.4.8
    
    Form of Global Note 4.00%
Convertible Senior Note Due 2012
(included as part of Exhibit 4.7).
    
    Incorporated by
reference to Exhibit
4.2 to our Current
Report on Form 8-K
filed on April 4,
2008.10.1
    
    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,
2005.10.2
    
    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,
2005.10.3
    
    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.
 90




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.4
    
    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, 2005.10.5
    
    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, 2005.10.6
    
    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, 2005.10.7
    
    PHH Corporation Savings Restoration Plan.
    
    Incorporated by reference to Exhibit 10.12 to our Current
Report on Form 8-K filed on February 1, 2005.10.8
    
    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, 2005.10.9
    
    Form of PHH Corporation 2005 Equity Incentive Plan
Non-Qualified Stock Option Agreement.
    
    Incorporated by reference to Exhibit 10.29 to our Annual
Report on Form 10-K for the year ended December 31, 2004
filed on March 15, 2005.10.10
    
    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, 2005.10.11
    
    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
    
    Form of PHH Corporation 2003 Restricted Stock Unit
Conversion Award Agreement.
    
    Incorporated by reference to Exhibit 10.30 to our Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
2005 filed on May 16, 2005.10.13
    
    Form of PHH Corporation 2004 Restricted Stock Unit
Conversion Award Agreement.
    
    Incorporated by reference to Exhibit 10.31 to our Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
2005 filed on May 16, 2005.10.14
    
    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, 2005.10.15
    
    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.
 91




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.16
    
    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, 2005.10.17
    
    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, 2005.10.18
    
    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, 2005.10.19
    
    Resolution of the PHH
Corporation Compensation
Committee dated
December 21, 2005 modifying
fiscal 2006 through 2008
performance targets for
equity awards under the 2005
Equity and Incentive Plan.
    
    Incorporated by reference to
Exhibit 10.2 to our Current
Report on Form 8-K filed on
December 28, 2005.10.20
    
    Form of Vesting Schedule
Modification for PHH
Corporation Restricted Stock
Unit Conversion Award
Agreement.
    
    Incorporated by reference to
Exhibit 10.25 to our
Quarterly Report on Form
10-Q for the quarterly
period ended on March 31,
2008 filed on May 9, 2008.10.21
    
    Form of Accelerated Vesting
Schedule Modification for
PHH Corporation Restricted
Stock Unit Award Agreement.
    
    Incorporated by reference to
Exhibit 10.26 to our
Quarterly Report on Form
10-Q for the quarterly
period ended on March 31,
2008 filed on May 9, 2008.10.22
    
    Form of Accelerated Vesting
Schedule Modification for
PHH Corporation
Non-Qualified Stock Option
Award Agreement.
    
    Incorporated by reference to
Exhibit 10.27 to our
Quarterly Report on Form
10-Q for the quarterly
period ended on March 31,
2008 filed on May 9, 2008.10.23
    
    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.
 92




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.24
    
    Series 2006-1 Indenture Supplement, dated as of March 7,
2006, among Chesapeake Funding LLC (now known as
Chesapeake Finance Holdings LLC), as issuer, PHH Vehicle
Management Services, LLC, as Administrator, JPMorgan Chase
Bank, N.A., as Administrative Agent, Certain CP Conduit
Purchasers, Certain APA Banks, Certain Funding Agents, and
JPMorgan Chase Bank, N.A., as Indenture Trustee.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on March 13, 2006.10.25
    
    Series 2006-2 Indenture
Supplement, dated as of March
7, 2006, among Chesapeake
Funding LLC (now known as
Chesapeake Finance Holdings
LLC), as Issuer, PHH Vehicle
Management Services, LLC, as
Administrator, JPMorgan Chase
Bank, N.A., as Administrative
Agent, Certain CP Conduit
Purchasers, Certain APA
Banks, Certain Funding
Agents, and JPMorgan Chase
Bank, N.A., as Indenture
Trustee.
    
    Incorporated by reference to
Exhibit 10.3 to our Current
Report on Form 8-K filed on
March 13, 2006.10.26
    
    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, 2006.10.27
    
    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, 2006.10.28
    
    Supplemental Indenture No. 4,
dated as of August 31, 2006,
by and between PHH
Corporation and 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, 2006.10.29
    
    Release and Restrictive
Covenants Agreement, dated
September 20, 2006, by and
between PHH Corporation and
Neil J. Cashen.
    
    Incorporated by reference
to Exhibit 10.1 to our
Current Report on Form 8-K
filed on September 26,
2006.10.30
    
    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.
 93




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.31
    
    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, 2006.10.32
    
    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, 2006.10.33
    
    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, 2006.10.34
    
    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, 2006.10.35
    
    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, 2006.10.36
    
    Amended and Restated Series
2006-2 Indenture Supplement,
dated as of
December 1, 2006, among
Chesapeake Funding LLC, as
Issuer, PHH Vehicle
Management Services, LLC, as
Administrator, JPMorgan
Chase Bank, N.A., as
Administrative Agent,
Certain Commercial Paper
Conduit Purchasers, Certain
APA Banks, Certain Funding
Agents as set forth therein,
and The Bank of New York as
successor to JPMorgan Chase
Bank, N.A., as indenture
trustee.
    
    Incorporated by reference to
Exhibit 10.1 to our Current
Report on Form 8-K filed on
December 7, 2006.
 94




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.37
    
    First Amendment, dated as of March
6, 2007, to the Series 2006-1
Indenture Supplement, dated as of
March 7, 2006, among Chesapeake
Funding LLC, as Issuer, PHH Vehicle
Management Services, LLC, as
Administrator, JPMorgan Chase Bank,
N.A., as Administrative Agent,
Certain Commercial Paper Conduit
Purchasers, Certain Banks, Certain
Funding Agents as set forth therein,
and The Bank of New York as
Successor to JPMorgan Chase Bank,
N.A., as Indenture Trustee.
    
    Incorporated by reference to Exhibit 10.1
to our Current Report on Form 8-K filed on
March 8, 2007.10.38
    
    First Amendment, dated as of March
6, 2007, to the Amended and Restated
Series 2006-2 Indenture Supplement,
dated as of December 1, 2006, among
Chesapeake Funding LLC, as Issuer,
PHH Vehicle Management Services,
LLC, as Administrator, JPMorgan
Chase Bank, N.A., as Administrative
Agent, Certain Commercial Paper
Conduit Purchasers, Certain Banks,
Certain Funding Agents as set forth
therein, and The Bank of New York as
Successor to JPMorgan Chase Bank,
N.A., as Indenture Trustee.
    
    Incorporated by reference to Exhibit 10.2
to our Current Report on Form 8-K filed on
March 8, 2007.10.39
    
    Resolution of the PHH Corporation
Compensation Committee, dated
June 7, 2007, approving the fiscal
2007 performance targets for cash
bonuses under the PHH Corporation
2005 Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.1
to our Current Report on Form 8-K filed on
June 13, 2007.10.40
    
    Resolution of the PHH Corporation
Compensation Committee, dated
June 27, 2007, approving the fiscal
2007 performance target for equity
awards under the PHH Corporation
2005 Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.87
to our Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2007
filed on June 28, 2007.10.41
    
    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.
 95




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.42
    
    Settlement Agreement, dated as of January 4, 2008, by, between
and among PHH Corporation, Pearl Mortgage Acquisition 2 L.L.C.
and Blackstone Capital Partners V L.P.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on January 7, 2008.10.43
    
    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, 2008.10.44
    
    Second Amendment, dated as of February 28, 2008, to the Series
2006-1 Indenture Supplement, dated as of March 7, 2006, as
amended as of March 6, 2007, among Chesapeake Funding LLC, as
Issuer, PHH Vehicle Management Services, LLC, as Administrator,
JPMorgan Chase Bank, N.A., as Administrative Agent, Certain
Commercial Paper Conduit Purchasers, Certain Banks, Certain
Funding Agents as set forth therein, and The Bank of New York
as Successor to JPMorgan Chase Bank, N.A., as Indenture
Trustee.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on March 4, 2008.10.45
    
    Master Repurchase Agreement, dated as of February 28, 2008,
among PHH Mortgage Corporation, as Seller, and Citigroup Global
Markets Realty Corp., as Buyer.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on March 4, 2008.10.46
    
    Guaranty, dated as of February 28, 2008, by PHH Corporation in
favor of Citigroup Global Markets Realty, Corp., party to the
Master Repurchase Agreement, dated as of February 28, 2008,
among PHH Mortgage Corporation, as Seller, and Citigroup Global
Markets Realty Corp., as Buyer.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on March 4, 2008.10.47
    
    Resolution of the PHH Corporation Compensation Committee, dated
March 18, 2008, approving performance targets for 2008
Management Incentive Plans under the PHH Corporation 2005
Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on March 24, 2008.10.48
    
    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, 2008.10.49
    
    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.
 96




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.50
    
    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, 2008.10.51
    
    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, 2008.10.52
    
    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, 2008.10.53
    
    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, 2008.10.54
    
    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, 2008.10.55
    
    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, 2008.10.56
    
    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, 2008.10.57
    
    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, 2008.10.58
    
    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, 2008.10.59
    
    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, 2008.10.60
    
    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, 2008.10.61
    
    Amended and Restated Master Repurchase Agreement, dated as of
June 26, 2008, between PHH Mortgage Corporation, as seller, and
The Royal Bank of Scotland plc, as buyer and agent.
    
    Incorporated by reference to Exhibit 10.65 to our Quarterly
Report of Form 10-Q for the quarterly period ended on
September 30, 2008 filed on November 10, 2008.
 97




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.62
    
    Second Amended and Restated Guaranty, dated as of June 26,
2008, by PHH Corporation in favor of The Royal Bank of Scotland
plc and Greenwich Capital Financial Products, Inc.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on July 1, 200810.63
    
    Loan Purchase and Sale Agreement Amendment No. 13, dated as of
January 1, 2008, by and between Merrill Lynch Credit
Corporation and PHH Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.69 to our Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
2008 filed on August 8, 2008.10.64
    
    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, 2008.10.65
    
    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, 2008.10.66
    
    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, 2008.10.67
    
    Loan Purchase and Sale Agreement Amendment No. 11, dated
January 1, 2007, by and between Merrill Lynch Credit
Corporation and PHH Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.71 to our Quarterly
Report on Form 10-Q for the quarterly period ended September
30, 2008 filed on November 10, 2008.10.68
    
    Loan Purchase and Sale Agreement Amendment No. 12, dated July
1, 2007, by and between Merrill Lynch Credit Corporation and
PHH Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.72 to our Quarterly
Report on Form 10-Q for the quarterly period ended September
30, 2008 filed on November 10, 2008.10.69
    
    Amendment No. 2, dated December 19, 2008, to the Amended and
Restated Master Repurchase Agreement, dated as of June 26,
2008, between PHH Mortgage Corporation, as seller, and The
Royal Bank of Scotland plc, as buyer and agent.
    
    Incorporated by reference to Exhibit 10.73 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.
 98




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.70
    
    Third Amendment, dated as of December 17, 2008, to the Series
2006-1 Indenture Supplement, dated as of March 7, 2006, as
amended as of March 6, 2007 and as of February 28, 2008, among
Chesapeake, as issuer, PHH Vehicle Management Services, LLC, as
administrator, The Bank of New York Mellon (formerly known as
The Bank of New York), as successor to JPMorgan Chase Bank, N.
A., as indenture trustee, certain commercial paper conduit
purchasers, certain banks and certain funding agents as set
forth therein, and JPMorgan Chase Bank, N. A., in its capacity
as administrative agent for the CP Conduit Purchasers, the APA
Banks and the Funding Agents.
    
    Incorporated by reference to Exhibit 10.74 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.10.71
    
    Third Amendment, dated as of December 17, 2008, to the Series
2006-2 Indenture Supplement, dated as of December 1, 2006, as
amended as of March 6, 2007 and as of November 30, 2007, among
Chesapeake, as issuer, PHH Vehicle Management Services, LLC, as
administrator, The Bank of New York Mellon (formerly known as
The Bank of New York), as successor to JP Morgan Chase Bank, N.
A., as indenture trustee, certain commercial paper conduit
purchasers, certain banks and certain funding agents as set
forth therein, and JPMorgan Chase Bank, N. A., in its capacity
as administrative agent for the CP Conduit Purchasers, the APA
Banks and the Funding Agents.
    
    Incorporated by reference to Exhibit 10.75 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.10.72
    
    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, 2009.10.73
    
    Amendment No. 3 dated as of December 30, 2008 to the Amended
and Restated Master Repurchase Agreement, dated as of June 26,
2008 by and between PHH Mortgage Corporation, as seller, and
The Royal Bank of Scotland PLC, as buyer and agent.
    
    Incorporated by reference to Exhibit 10.77 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.
 99




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.74
    
    Fourth Amendment, dated as of February 26, 2009, to the Series
2006-1 Indenture Supplement, dated as of March 7, 2006, as
amended as of March 6, 2007, February 28, 2008 and December 17,
2008, among Chesapeake, as issuer, PHH Vehicle Management
Services, LLC, as administrator, The Bank of New York Mellon
(formerly known as The Bank of New York) as successor to JP
Morgan Chase Bank N.A., as indenture trustee, certain
commercial paper conduit purchasers , certain banks and certain
funding agents as set forth therein, and JP Morgan Chase Bank,
N.A., in its capacity as administrative agent for the CP
Conduit Purchasers, the APA Banks and the Funding Agents
    
    Incorporated by reference to Exhibit 10.78 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.10.75
    
    Amendment No. 4 dated as of March 13, 2009 to the Amended and
Restated Master Repurchase Agreement, dated as of June 26, 2008
by and between PHH Mortgage Corporation, as seller, and The
Royal Bank of Scotland PLC, as buyer and agent.
    
    Incorporated by reference to Exhibit 10.75 to our Quarterly
Report on Form 10-Q for the quarterly period ended on March
31, 2009 filed on May 1, 2009.10.76
    
    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, 2009.10.77
    
    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 10.1 to our Current
Report on Form 8-K filed on June 12, 2009.10.78
    
    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, 2009.10.79
    
    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.31(i).1
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
 100




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference31(i).2
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Schedules and exhibits of this Exhibit have been omitted pursuant to Item 601(b)(2) of
Regulation S-K which portions will be furnished upon the request of the Commission.
    
    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.
    
    Management or compensatory plan or arrangement required to be filed pursuant to Item
601(b)(10) of Regulation S-K. 101