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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
 Commission File No. 1-7797
 
 PHH CORPORATION
 (Exact name of registrant as specified in its charter)
 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
    

Smaller reporting company o(Do not check if a smaller reporting company)
 o o
 o þ




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##### 



TABLE OF CONTENTS
 Item
    
    Description
    
    Page
 Cautionary 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. (Loss) 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
    
    
    31Note 10. Commitments and Contingencies
    
    
    31Note 11. Stock-Related Matters
    
    
    34Note 12. Accumulated Other Comprehensive Income (Loss)
    
    
    34Note 13. Fair Value Measurements
    
    
    35Note 14. Variable Interest Entities
    
    
    42Note 15. Segment Information
    
    
    44Note 16. Subsequent Events
    
    
    462
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    473
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    874
    
    Controls and Procedures
    
    
    92PART II1
    
    Legal Proceedings
    
    
    921A
    
    Risk Factors
    
    
    932
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    973
    
    Defaults Upon Senior Securities
    
    
    974
    
    Submission of Matters to a Vote of Security Holders
    
    
    975
    
    Other Information
    
    
    976
    
    Exhibits
    
    
    97Signatures
    
    
    98Exhibit Index
    
    
    99EX-4.5.11EX-10.1.2EX-10.11EX-10.12EX-31.1EX-31.2EX-32.1EX-32.2
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Except as expressly indicated or unless the context otherwise requires, the Company, PHH,
we, our or us means PHH Corporation, a Maryland corporation, and its subsidiaries.
 
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
   2




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
    
    the effects of environmental, economic or political conditions on the international,
national or regional economy, the outbreak or escalation of hostilities or terrorist
attacks and the impact thereof on our businesses;
    
    the effects of continued market volatility or continued economic decline on the
availability and cost of our financing arrangements, the value of our assets and the price
of our Common stock;
    
    the effects of a continued decline in the volume or value of U.S. home sales and home
prices, due to adverse economic changes or otherwise, on our Mortgage Production and
Mortgage Servicing segments;
    
    the effects of changes in current interest rates on our business and our financing
costs;
    
    our decisions regarding the use of derivatives related to mortgage servicing rights, if
any, and the resulting potential volatility of the results of operations of our Mortgage
Servicing segment;
    
    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;
 3




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
    
    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;
    
    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




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 (In millions, except per share data)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesMortgage fees
    
    $
    69
    
    
    $
    50
    
    
    $
    216
    
    
    $
    172Fleet management fees
    
    
    37
    
    
    
    40
    
    
    
    112
    
    
    
    123Net fee income
    
    
    106
    
    
    
    90
    
    
    
    328
    
    
    
    295Fleet lease income
    
    
    363
    
    
    
    401
    
    
    
    1,087
    
    
    
    1,191Gain on mortgage loans, net
    
    
    115
    
    
    
    49
    
    
    
    450
    
    
    
    177Mortgage interest income
    
    
    20
    
    
    
    38
    
    
    
    70
    
    
    
    138Mortgage interest expense
    
    
    (36
    )
    
    
    (44
    )
    
    
    (109
    )
    
    
    (128
    )Mortgage net finance (expense) income
    
    
    (16
    )
    
    
    (6
    )
    
    
    (39
    )
    
    
    10Loan servicing income
    
    
    109
    
    
    
    111
    
    
    
    309
    
    
    
    330Change in fair value of mortgage servicing rights
    
    
    (186
    )
    
    
    (77
    )
    
    
    (294
    )
    
    
    (109
    )Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    (179
    )Valuation adjustments related to mortgage servicing rights
    
    
    (186
    )
    
    
    (139
    )
    
    
    (294
    )
    
    
    (288
    )Net loan servicing (loss) income
    
    
    (77
    )
    
    
    (28
    )
    
    
    15
    
    
    
    42Other income
    
    
    16
    
    
    
    27
    
    
    
    21
    
    
    
    123Net revenues
    
    
    507
    
    
    
    533
    
    
    
    1,862
    
    
    
    1,838ExpensesSalaries and related expenses
    
    
    114
    
    
    
    108
    
    
    
    357
    
    
    
    341Occupancy and other office expenses
    
    
    16
    
    
    
    19
    
    
    
    43
    
    
    
    55Depreciation on operating leases
    
    
    315
    
    
    
    325
    
    
    
    962
    
    
    
    971Fleet interest expense
    
    
    21
    
    
    
    37
    
    
    
    72
    
    
    
    119Other depreciation and amortization
    
    
    7
    
    
    
    7
    
    
    
    20
    
    
    
    19Other operating expenses
    
    
    114
    
    
    
    117
    
    
    
    297
    
    
    
    337Goodwill impairment
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Total expenses
    
    
    587
    
    
    
    674
    
    
    
    1,751
    
    
    
    1,903(Loss) income before income taxes
    
    
    (80
    )
    
    
    (141
    )
    
    
    111
    
    
    
    (65
    )(Benefit from) provision for income taxes
    
    
    (32
    )
    
    
    (28
    )
    
    
    43
    
    
    
    (1
    )Net (loss) income
    
    
    (48
    )
    
    
    (113
    )
    
    
    68
    
    
    
    (64
    )Less: net income (loss) attributable to noncontrolling interest
    
    
    4
    
    
    
    (29
    )
    
    
    12
    
    
    
    (26
    )Net (loss) income attributable to PHH Corporation
    
    $
    (52
    )
    
    $
    (84
    )
    
    $
    56
    
    
    $
    (38
    )Basic (loss) earnings per share attributable to PHH Corporation
    
    $
    (0.94
    )
    
    $
    (1.56
    )
    
    $
    1.03
    
    
    $
    (0.70
    )Diluted (loss) earnings per share attributable to PHH
Corporation
    
    $
    (0.94
    )
    
    $
    (1.56
    )
    
    $
    1.02
    
    
    $
    (0.70
    )
  5




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PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 (In millions, except share data)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    140
    
    
    $
    109Restricted cash
    
    
    641
    
    
    
    614Mortgage loans held for sale
    
    
    1,256
    
    
    
    1,006Accounts receivable, net
    
    
    496
    
    
    
    468Net investment in fleet leases
    
    
    3,698
    
    
    
    4,204Mortgage servicing rights
    
    
    1,367
    
    
    
    1,282Investment securities
    
    
    12
    
    
    
    37Property, plant and equipment, net
    
    
    51
    
    
    
    63Goodwill
    
    
    25
    
    
    
    25Other assets
    
    
    601
    
    
    
    465Total assets
    
    $
    8,287
    
    
    $
    8,273LIABILITIES AND EQUITYAccounts payable and accrued expenses
    
    $
    508
    
    
    $
    451Debt
    
    
    5,455
    
    
    
    5,764Deferred income taxes
    
    
    620
    
    
    
    579Other liabilities
    
    
    311
    
    
    
    212Total liabilities
    
    
    6,894
    
    
    
    7,006Commitments and contingencies (Note 10)
    
    
    
    
    
    
    EQUITYPreferred stock, $0.01 par value; 1,090,000
shares authorized at
September 30, 2009 and December 31, 2008;
none issued or outstanding at September 30,
2009 or December 31, 2008
    
    
    
    
    
    
    Common stock, $0.01 par value; 273,910,000
and 108,910,000 shares authorized at
September 30, 2009 and December 31, 2008,
respectively; 54,743,740 shares issued and
outstanding at September 30, 2009;
54,256,294 shares issued and outstanding at
December 31, 2008
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,053
    
    
    
    1,005Retained earnings
    
    
    319
    
    
    
    263Accumulated other comprehensive income (loss)
    
    
    15
    
    
    
    (3
    )Total PHH Corporation stockholders equity
    
    
    1,388
    
    
    
    1,266Noncontrolling interest
    
    
    5
    
    
    
    1Total equity
    
    
    1,393
    
    
    
    1,267Total liabilities and equity
    
    $
    8,287
    
    
    $
    8,273
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PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Nine Months Ended September 30, 2009
(Unaudited)
(In millions, except share data)
 PHH Corporation StockholdersAccumulatedAdditional
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    12
    
    
    
    68Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Other comprehensive income, net of income
taxes of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Proceeds on the sale of Sold Warrants (Note 8)
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Stock options exercised, including excess tax
benefit of $0
    
    
    302,760
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Restricted stock award vesting, net of excess tax benefit of $0
    
    
    184,686
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance at September 30, 2009
    
    
    54,743,740
    
    
    $
    1
    
    
    $
    1,053
    
    
    $
    319
    
    
    $
    15
    
    
    $
    5
    
    
    $
    1,393
  7




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PHH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 Nine MonthsEnded September 30,2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    68
    
    
    $
    (64
    )Adjustments to reconcile Net income (loss) to net cash provided by operating
activities:Goodwill impairment charge
    
    
    
    
    
    
    61Capitalization of originated mortgage servicing rights
    
    
    (384
    )
    
    
    (272
    )Net unrealized loss on mortgage servicing rights and related derivatives
    
    
    294
    
    
    
    288Vehicle depreciation
    
    
    962
    
    
    
    971Other depreciation and amortization
    
    
    20
    
    
    
    19Origination of mortgage loans held for sale
    
    
    (23,056
    )
    
    
    (17,235
    )Proceeds on sale of and payments from mortgage loans held for sale
    
    
    23,208
    
    
    
    17,706Net gain on interest rate lock commitments, mortgage loans held for sale and
related derivatives
    
    
    (443
    )
    
    
    (142
    )Deferred income tax provision
    
    
    37
    
    
    
    11Other adjustments and changes in other assets and liabilities, net
    
    
    172
    
    
    
    5Net cash provided by operating activities
    
    
    878
    
    
    
    1,348Cash flows from investing activities:Investment in vehicles
    
    
    (741
    )
    
    
    (1,463
    )Proceeds on sale of investment vehicles
    
    
    309
    
    
    
    414Purchase of mortgage servicing rights
    
    
    (1
    )
    
    
    (6
    )Proceeds on sale of mortgage servicing rights
    
    
    1
    
    
    
    175Cash paid on derivatives related to mortgage servicing rights
    
    
    
    
    
    
    (129
    )Net settlement proceeds from derivatives related to mortgage servicing rights
    
    
    
    
    
    
    26Purchases of property, plant and equipment
    
    
    (8
    )
    
    
    (16
    )Increase in Restricted cash
    
    
    (27
    )
    
    
    (79
    )Other, net
    
    
    6
    
    
    
    10Net cash used in investing activities
    
    
    (461
    )
    
    
    (1,068
    )Cash flows from financing activities:Net decrease in short-term borrowings
    
    
    
    
    
    
    (73
    )Proceeds from borrowings
    
    
    35,116
    
    
    
    24,601Principal payments on borrowings
    
    
    (35,378
    )
    
    
    (24,777
    )Issuances of Company Common stock
    
    
    
    
    
    
    1Proceeds from the sale of Sold Warrants
    
    
    35
    
    
    
    24Cash paid for Purchased Options
    
    
    (66
    )
    
    
    (51
    )Cash paid for debt issuance costs
    
    
    (51
    )
    
    
    (52
    )Other, net
    
    
    (9
    )
    
    
    (5
    )Net cash used in financing activities
    
    
    (353
    )
    
    
    (332
    )Effect of changes in exchange rates on Cash and cash equivalents
    
    
    (33
    )
    
    
    8Net increase (decrease) in Cash and cash equivalents
    
    
    31
    
    
    
    (44
    )Cash and cash equivalents at beginning of period
    
    
    109
    
    
    
    149Cash and cash equivalents at end of period
    
    $
    140
    
    
    $
    105
  8




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




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




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Financial Guarantee Insurance Contracts.
 Intangible Assets.
 Convertible Debt Instruments.
 Participating Securities.
 Instruments Indexed to Stock.
 11




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Fair Value Measurements.
 Disclosures about Fair Value of Financial Instruments.
 Subsequent Events .
 Accounting Standards Codification .
 Income Taxes.
 Recently Issued Accounting Pronouncements
 Transfers of Financial Assets .
 12




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Consolidation of Variable Interest Entities .
 Fair Value Measurements and Disclosures.
 Revenue Recognition.
 
 2. (Loss) Earnings Per Share
  13




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions, except share and per share data)Net (loss) income attributable to
PHH Corporation
    
    $
    (52
    )
    
    $
    (84
    )
    
    $
    56
    
    
    $
    (38
    )Weighted-average common shares
outstanding  basic
    
    
    54,744,366
    
    
    
    54,331,664
    
    
    
    54,542,681
    
    
    
    54,265,271Effect of potentially dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    59,500
    
    
    
    Restricted stock units
    
    
    
    
    
    
    
    
    
    
    491,151
    
    
    
    Weighted-average common shares
outstanding  diluted
    
    
    54,744,366
    
    
    
    54,331,664
    
    
    
    55,093,332
    
    
    
    54,265,271Basic (loss) earnings per share
attributable to PHH Corporation
    
    $
    (0.94
    )
    
    $
    (1.56
    )
    
    $
    1.03
    
    
    $
    (0.70
    )Diluted (loss) earnings per share
attributable to PHH Corporation
    
    $
    (0.94
    )
    
    $
    (1.56
    )
    
    $
    1.02
    
    
    $
    (0.70
    )
 
 3. Mortgage Servicing Rights
  Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Balance, beginning of period
    
    $
    129,078
    
    
    $
    126,540Additions
    
    
    21,379
    
    
    
    17,044Payoffs, sales and curtailments
    
    
    (23,417
    )
    
    
    (14,318
    )Balance, end of period
    
    $
    127,040
    
    
    $
    129,266
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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Nine Months EndedSeptember 30,2009
    
    
    2008(In millions)Mortgage Servicing Rights:Balance, beginning of period
    
    $
    1,282
    
    
    $
    1,502Additions
    
    
    385
    
    
    
    278Changes in fair value due to:Realization of expected cash flows
    
    
    (309
    )
    
    
    (212
    )Changes in market inputs or assumptions used in the valuation model
    
    
    15
    
    
    
    103Sales
    
    
    (6
    )
    
    
    Balance, end of period
    
    $
    1,367
    
    
    $
    1,671
  September 30,2009
    
    2008Prepayment speed (CPR)
    
    
    17
    %
    
    
    17
    %Option adjusted spread (in basis points)
    
    
    596
    
    
    
    493Volatility
    
    
    32
    %
    
    
    22
    %
  Three Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2009
    
    2008
    
    2009
    
    2008(In millions)Net service fee revenue
    
    $
    104
    
    
    $
    109
    
    
    $
    316
    
    
    $
    324Late fees
    
    
    5
    
    
    
    5
    
    
    
    14
    
    
    
    16Other ancillary servicing revenue
    
    
    12
    
    
    
    5
    
    
    
    28
    
    
    
    18
   Nine MonthsEnded September 30,2009
    
    
    2008Initial capitalization rate of additions to MSRs
    
    
    1.80
    %
    
    
    1.63
    %Weighted-average servicing fee of additions to MSRs (in basis points)
    
    
    34
    
    
    
    34
 15




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 September 30,2009
    
    2008Capitalized servicing rate
    
    
    1.08
    %
    
    
    1.29
    %Capitalized servicing multiple
    
    
    3.3
    
    
    
    4.0Weighted-average servicing fee (in basis points)
    
    
    33
    
    
    
    32
 
 4. Loan Servicing Portfolio
  Portfolio Activity
 Nine Months EndedSeptember 30,2009
    
    
    2008(In millions)Balance, beginning of period
    
    $
    149,750
    
    
    $
    159,183Additions
    
    
    25,799
    
    
    
    24,428Payoffs, sales and curtailments(1)
    
    
    (25,815
    )
    
    
    (34,897
    )Balance, end of period
    
    $
    149,734
    
    
    $
    148,714
 Portfolio Composition
 September 30,2009
    
    
    2008(In millions)Owned servicing portfolio
    
    $
    128,846
    
    
    $
    133,135Subserviced portfolio
    
    
    20,888
    
    
    
    15,579Total servicing portfolio
    
    $
    149,734
    
    
    $
    148,714Fixed rate
    
    $
    99,672
    
    
    $
    93,075Adjustable rate
    
    
    50,062
    
    
    
    55,639Total servicing portfolio
    
    $
    149,734
    
    
    $
    148,714Conventional loans
    
    $
    129,915
    
    
    $
    132,963Government loans
    
    
    13,125
    
    
    
    10,127Home equity lines of credit
    
    
    6,694
    
    
    
    5,624Total servicing portfolio
    
    $
    149,734
    
    
    $
    148,714Weighted-average interest rate
    
    
    5.4
    %
    
    
    5.8
    %
 16




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Portfolio Delinquency(2)
 September 30,2009
    
    
    2008Number
    
    
    Unpaid
    
    
    Number
    
    
    Unpaidof Loans
    
    
    Balance
    
    
    of Loans
    
    
    Balance30 days
    
    
    2.57
    %
    
    
    2.28
    %
    
    
    2.33
    %
    
    
    2.03
    %60 days
    
    
    0.82
    %
    
    
    0.79
    %
    
    
    0.60
    %
    
    
    0.55
    %90 or more days
    
    
    1.39
    %
    
    
    1.47
    %
    
    
    0.58
    %
    
    
    0.53
    %Total delinquency
    
    
    4.78
    %
    
    
    4.54
    %
    
    
    3.51
    %
    
    
    3.11
    %Foreclosure/real estate owned/bankruptcies
    
    
    2.65
    %
    
    
    2.72
    %
    
    
    1.72
    %
    
    
    1.63
    %
 
 (1)
    
    Payoffs, sales and curtailments for the nine months ended September 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




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  InvestmentSecurities
    
    
    MSRs(Dollars in millions)Fair value of retained interests
    
    $
    12
    
    
    $
    1,367Weighted-average life (in years)
    
    
    8.1
    
    
    
    4.7Weighted-average servicing fee (in basis points)
    
    
    N/A
    
    
    
    33Prepayment speed (annual rate)
    
    
    9-26
    %
    
    
    17
    %Impact on fair value of 10% adverse change
    
    $
    
    
    
    $
    (84
    )Impact on fair value of 20% adverse change
    
    
    (1
    )
    
    
    (160
    )Discount rate/Option adjusted spread (annual rate and basis points, respectively)
    
    
    4-30
    %
    
    
    596Impact on fair value of 10% adverse change
    
    $
    (1
    )
    
    $
    (50
    )Impact on fair value of 20% adverse change
    
    
    (2
    )
    
    
    (97
    )Volatility (annual rate)
    
    
    N/A
    
    
    
    32
    %Impact on fair value of 10% adverse change
    
    
    N/A
    
    
    $
    (28
    )Impact on fair value of 20% adverse change
    
    
    N/A
    
    
    
    (55
    )Credit losses (cumulative rate)
    
    
    8-11
    %
    
    
    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)
    
    $
    923
    
    
    $
    228
    
    
    $
    23
 
 (1)
    
    Amounts are based on total sold or securitized assets at September 30, 2009 for
which the Company has a retained interest as of September 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




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Nine MonthsEndedSeptember 30,2009(In millions)Proceeds from new loan sales or securitizations
    
    $
    21,515Servicing fees received (1)
    
    
    316Other cash flows received on retained interests (2)
    
    
    4Purchases of delinquent or foreclosed loans
    
    
    (81
    )Servicing advances
    
    
    (767
    )Repayment of servicing advances
    
    
    757
 
 (1)
    
    Excludes late fees and other ancillary servicing revenue.(2)
    
    Represents cash flows received on retained interests other than servicing
fees.  19




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##### 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
    
    $
    77
    
    
    $
    4,349
    
    
    Other liabilities
    
    $
    1
    
    
    $
    43Forward delivery commitments not subject to master netting arrangements:Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other assets
    
    
    6
    
    
    
    657
    
    
    Other liabilities
    
    
    17
    
    
    
    1,970Forward delivery commitments subject to master netting arrangements(1):Related to interest rate and
price risk for MLHS and
IRLCs
    
    Other liabilities
    
    
    3
    
    
    
    414
    
    
    Other liabilities
    
    
    16
    
    
    
    1,737Contracts related to interest rate risk for debt arrangements and variable-rate leases
    
    Other assets
    
    
    7
    
    
    
    884
    
    

    N/A
    
    
    
    
    
    
    
    Derivative instruments related to the issuance of the 2014 Convertible Notes
    
    Other assets
    
    
    67
    
    
    
    10
    
    
    Other liabilities
    
    
    67
    
    
    
    10Foreign exchange contracts
    

    N/A
    
    
    
    
    
    
    
    
    
    
    Other liabilities
    
    
    3
    
    
    
    266Total derivative instruments
    
    
    
    
    
    
    160
    
    
    $
    6,314
    
    
    
    
    
    
    
    104
    
    
    $
    4,026Impact of master netting arrangements(1)
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Cash collateral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Net fair value of derivative instruments
    
    
    
    
    
    $
    157
    
    
    
    
    
    
    
    
    
    
    $
    100
 
 (1)
    
    Represents derivative instruments that are executed with the same
counterparties and subject to master netting arrangements between the Company and its
counterparties. 20




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Statement of
    
    
    
    
    
    
    Statement ofOperations
    
    
    Gain
    
    
    Operations
    
    
    GainPresentation
    
    
    (Loss)
    
    
    Presentation
    
    
    (Loss)(In millions)Interest rate lock commitments
    
    Gain on mortgage loans, net
    
    $
    209
    
    
    Gain on mortgage loans, net
    
    $
    486Forward delivery commitments
related to interest rate and price
risk for MLHS and IRLCs
    
    Gain on mortgage loans, net
    
    
    (13
    )
    
    Gain on mortgage loans, net
    
    
    (50
    )Contracts related to interest rate
risk for debt arrangements and
variable-rate leases
    
    Fleet interest expense
    
    
    (2
    )
    
    Fleet interest expense
    
    
    (3
    )Foreign exchange contracts
    
    Fleet interest expense
    
    
    24
    
    
    Fleet interest expense
    
    
    39Total derivative instruments
    
    
    
    
    
    $
    218
    
    
    
    
    
    
    $
    472
   Interest Rate Lock Commitments .
 Mortgage Loans Held for Sale.
 21




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##### Table of Contents



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




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Foreign Exchange.
 
 7. Vehicle Leasing Activities
  September 30,
    
    
    December 31,2009
    
    
    2008(In millions)Operating Leases:Vehicles under open-end operating leases
    
    $
    7,549
    
    
    $
    7,542Vehicles under closed-end operating leases
    
    
    264
    
    
    
    266Vehicles under operating leases
    
    
    7,813
    
    
    
    7,808Less: Accumulated depreciation
    
    
    (4,326
    )
    
    
    (3,999
    )Net investment in operating leases
    
    
    3,487
    
    
    
    3,809Direct Financing Leases:Lease payments receivable
    
    
    107
    
    
    
    141Less: Unearned income
    
    
    (5
    )
    
    
    (7
    )Net investment in direct financing leases
    
    
    102
    
    
    
    134Off-Lease Vehicles:Vehicles not yet subject to a lease
    
    
    108
    
    
    
    254Vehicles held for sale
    
    
    3
    
    
    
    18Less: Accumulated depreciation
    
    
    (2
    )
    
    
    (11
    )Net investment in off-lease vehicles
    
    
    109
    
    
    
    261Net investment in fleet leases
    
    $
    3,698
    
    
    $
    4,204
 23




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008Vehicles under open-end leases
    
    
    95
    %
    
    
    94
    %Vehicles under closed-end leases
    
    
    5
    %
    
    
    6
    %Vehicles under variable-rate leases
    
    
    75
    %
    
    
    73
    %Vehicles under fixed-rate leases
    
    
    25
    %
    
    
    27
    %
 
 8. Debt and Borrowing Arrangements
  September 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
    
    $
    154
    
    
    $
    154
    
    
    
    
    
    
    
    3/27/2009
    (5)Chesapeake Series 2006-2 Variable
Funding Notes
    
    
    768
    
    
    
    768
    
    
    
    
    
    
    
    2/26/2009
    (5)Chesapeake Series 2009-1 Term Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    5/20/2010Chesapeake Series 2009-2 Class A Term Notes
    
    
    850
    
    
    
    850
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-2 Class B Term
Notes(6)
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-2 Class C Term
Notes(6)
    
    
    24
    
    
    
    24
    
    
    
    
    
    
    
    2/17/2011Other
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    3/2010  6/2016Total Vehicle Management Asset-Backed Debt
    
    
    2,857
    
    
    
    2,857
    
    
    
    2.2
    %(7)
    
    
    
    
    
    $
    30
    
    
    $
    361
    
    
    $
    
    
    
    $
    3,130RBS Repurchase Facility(8)
    
    
    552
    
    
    
    1,500
    
    
    
    3.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    599
    
    
    
    Fannie Mae Repurchase
Facilities(9)
    
    
    418
    
    
    
    418
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    423
    
    
    
    Other
    
    
    4
    
    
    
    4
    
    
    
    3.1
    %
    
    
    10/29/2009
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Total Mortgage Warehouse Asset-Backed Debt
    
    
    974
    
    
    
    1,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,026
    
    
    
    Term Notes(10)
    
    
    440
    
    
    
    440
    
    
    
    6.5%7.9
    %(11)
    
    
    4/20104/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(12)
    
    
    789
    
    
    
    1,305
    
    
    
    1.0
    %(13)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012(14)
    
    
    218
    
    
    
    218
    
    
    
    4.0
    %
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2014(15)
    
    
    177
    
    
    
    177
    
    
    
    4.0
    %
    
    
    9/1/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,624
    
    
    
    2,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,455
    
    
    $
    6,919
    
    
    
    
    
    
    
    
    
    
    $
    30
    
    
    $
    361
    
    
    $
    1,026
    
    
    $
    3,130
 24




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##### 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
    %(7)
    
    
    
    
    
    $
    22
    
    
    $
    320
    
    
    $
    
    
    
    $
    3,692RBS Repurchase Facility(8)
    
    
    411
    
    
    
    1,500
    
    
    
    4.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    Citigroup Repurchase Facility(16)
    
    
    10
    
    
    
    500
    
    
    
    1.7
    %
    
    
    2/26/2009
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    Fannie Mae Repurchase
Facilities(9)
    
    
    149
    
    
    
    149
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    Mortgage Venture Repurchase
Facility(17)
    
    
    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(10)
    
    
    441
    
    
    
    441
    
    
    
    6.5%7.9
    %(11)
    
    
    4/2010 4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(12)
    
    
    1,035
    
    
    
    1,303
    
    
    
    1.3
    %(13)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012(14)
    
    
    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. The Series 2009-1 and Series 2009-2 notes have revolving
periods during which time the pro-rata share of lease cash flows pledged to Chesapeake will
create availability to fund the acquisition of vehicles to be leased to customers of the
Companys Fleet Management Services segment. See Asset-Backed DebtVehicle Management
Asset-Backed Debt below for additional information.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of total vehicle management asset-backed debt, term notes, the 2014 Convertible Notes and the
2012 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 Scheduled Expiry Dates (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 below
for additional information.(6)
    
    The carrying amount of the Chesapeake Series 2009-2 Series B and Series C term notes
as of September 30, 2009 is net of an unamortized discount of $4 million and $5 million,
respectively. See Asset-Backed DebtVehicle Management Asset-Backed Debt below for
additional information.(7)
    
    Represents the weighted-average interest rate of the Companys vehicle management
asset-backed debt arrangements as of September 30, 2009 and December 31, 2008, respectively. 25




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (8)
    
    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.(9)
    
    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 $2.8 billion and
$1.5 billion as of September 30, 2009 and December 31, 2008, respectively.(10)
    
    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.(11)
    
    Represents the range of stated interest rates of the MTNs outstanding as of
September 30, 2009 and December 31, 2008, respectively. The effective rate of interest of the
Companys outstanding MTNs was 7.2% as of both September 30, 2009 and December 31, 2008.(12)
    
    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.(13)
    
    Represents the interest rate on the Amended Credit Facility as of September 30,
2009 and December 31, 2008, respectively, excluding per annum utilization and facility fees.
The outstanding balance as of September 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 1.4% and 2.8%, respectively. See Unsecured DebtCredit Facilities
below for additional information.(14)
    
    On April 2, 2008, the Company completed a private offering of the 4.0% Convertible
Notes due 2012 (the 2012 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 September 30, 2009 and December 31, 2008 is net of an unamortized
discount of $32 million and $42 million, respectively. The effective rate of interest of the
2012 Convertible Notes was 12.4% as of September 30, 2009 and December 31, 2008, which
represents the 4.0% semiannual cash payment and the non-cash accretion of discount and
issuance costs. There were no conversions of the 2012 Convertible Notes during the nine months
ended September 30, 2009.(15)
    
    On September 29, 2009, the Company completed a private offering of the 4.0%
Convertible Senior Notes due 2014 (the 2014 Convertible Notes) with an aggregate principal
balance of $250 million and a maturity date of September 1, 2014 to certain qualified
institutional buyers. The carrying amount as of September 30, 2009 is net of an unamortized
discount of $73 million. The effective rate of interest of the 2014 Convertible Notes was
13.0% as of September 30, 2009, which represents the 4.0% semiannual cash payment and the
non-cash accretion of discount and issuance costs. There were no conversions of the 2014
Convertible Notes during the nine months ended September 30, 2009.(16)
    
    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.(17)
    
    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




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##### Table of Contents



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




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Unsecured Debt
 Credit Facilities
  Convertible Notes
    28




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 st st
  Debt Maturities
  Asset-Backed
    
    
    Unsecured
    
    
    Total(In millions)Within one year
    
    $
    1,572
    
    
    $
    6
    
    
    $
    1,578Between one and two years
    
    
    873
    
    
    
    788
    
    
    
    1,661Between two and three years
    
    
    705
    
    
    
    250
    
    
    
    955Between three and four years
    
    
    429
    
    
    
    421
    
    
    
    850Between four and five years
    
    
    252
    
    
    
    250
    
    
    
    502Thereafter
    
    
    9
    
    
    
    9
    
    
    
    18$
    3,840
    
    
    $
    1,724
    
    
    $
    5,564
 29




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Utilized
    
    
    AvailableCapacity(1)
    
    
    Capacity
    
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    2,857
    
    
    $
    2,857
    
    
    $
    Mortgage warehouse(3)
    
    
    1,922
    
    
    
    974
    
    
    
    948Unsecured Committed Credit Facilities(4)
    
    
    1,305
    
    
    
    804
    
    
    
    501
 
 (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 $768 million and $154 million, respectively, as of
September 30, 2009. The Series 2009-1 and Series 2009-2 notes have revolving periods during
which time the pro-rata share of lease cash flows pledged to Chesapeake will create
availability to fund the acquisition of vehicles to be leased by customers of the Companys
Fleet Management Services segment. See Asset-Backed DebtVehicle Management Asset-Backed
Debt above for additional information.(3)
    
    Capacity does not reflect $2.4 billion undrawn under the $2.8 billion
Fannie Mae Repurchase Facilities, as these facilities are uncommitted.(4)
    
    Utilized capacity reflects $16 million of letters of credit issued under
the Amended Credit Facility, which are not included in Debt in the Companys Condensed
Consolidated Balance Sheet. Debt Covenants
   30




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 9. Income Taxes
      
 10. Commitments and Contingencies
 Tax Contingencies
  31




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    Loan Recourse
  32




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    Mortgage Reinsurance
   Three MonthsEnded September 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, July 1,
    
    $
    108
    
    
    $
    50Realized reinsurance losses(1)
    
    
    (5
    )
    
    
    Increase in reinsurance reserves
    
    
    10
    
    
    
    11Reinsurance-related reserves, September 30,
    
    $
    113
    
    
    $
    61
 33




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, January 1,
    
    $
    83
    
    
    $
    32Realized reinsurance losses(1)
    
    
    (6
    )
    
    
    Increase in reinsurance reserves
    
    
    36
    
    
    
    29Reinsurance-related reserves, September 30,
    
    $
    113
    
    
    $
    61
 
 (1)
    
    Realized reinsurance losses for the three and nine months ended September 30,
2009 include a $4 million payment associated with the termination of a reinsurance agreement. 
 11. Stock-Related Matters
  
 12. Accumulated Other Comprehensive Income (Loss)
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Net (loss) income attributable to PHH Corporation
    
    $
    (52
    )
    
    $
    (84
    )
    
    $
    56
    
    
    $
    (38
    )Other comprehensive income (loss):Currency translation adjustments
    
    
    12
    
    
    
    (6
    )
    
    
    18
    
    
    
    (9
    )Total other comprehensive income (loss)
    
    
    12
    
    
    
    (6
    )
    
    
    18
    
    
    
    (9
    )Total comprehensive (loss) income
    
    $
    (40
    )
    
    $
    (90
    )
    
    $
    74
    
    
    $
    (47
    )
  Currency
    
    
    
    
    
    
    AccumulatedTranslation
    
    
    Pension
    
    
    Other ComprehensiveAdjustment
    
    
    Adjustment
    
    
    (Loss) Income(In millions)Balance at December 31, 2008
    
    $
    6
    
    
    $
    (9
    )
    
    $
    (3
    )Change during 2009
    
    
    18
    
    
    
    
    
    
    
    18Balance at September 30, 2009
    
    $
    24
    
    
    $
    (9
    )
    
    $
    15
  34




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
 13. Fair Value Measurements
  Level One .
 Level Two .
 Level Three .
   Mortgage Loans Held for Sale.
 35




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##### 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
    
    $
    1,256
    
    
    $
    1,267
    
    
    $
    11Loans 90 or more days past due and on non-accrual status
    
    
    14
    
    
    
    25
    
    
    
    11
  September 30,2009(In millions)First mortgages:Conforming(1)
    
    $
    1,145Non-conforming
    
    
    23Alt-A(2)
    
    
    2Construction loans
    
    
    20Total first mortgages
    
    
    1,190Second lien
    
    
    24Scratch and Dent(3)
    
    
    39Other
    
    
    3Total
    
    $
    1,256
 
 (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 .
 36




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Mortgage Servicing Rights
  September 30, 2009CashLevel
    
    
    Level
    
    
    Level
    
    
    CollateralandOne
    
    
    Two
    
    
    Three
    
    
    Netting(1)
    
    
    Total(In millions)Assets:Mortgage loans held for sale
    
    $
    
    
    
    $
    1,147
    
    
    $
    109
    
    
    $
    
    
    
    $
    1,256Mortgage servicing rights
    
    
    
    
    
    
    
    
    
    
    1,367
    
    
    
    
    
    
    
    1,367Investment securities
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Other assets:Derivative assets
    
    
    
    
    
    
    16
    
    
    
    144
    
    
    
    (3
    )
    
    
    157Other assets
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Liabilities:Other liabilities:Derivative liabilities
    
    
    
    
    
    
    36
    
    
    
    68
    
    
    
    (4
    )
    
    
    100December 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. 37




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended September 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
    
    $
    110
    
    
    $
    
    
    
    $
    
    
    
    $
    (1
    )(1)
    
    $
    109Mortgage servicing rights
    
    
    1,436
    
    
    
    (186
    )(2)
    
    
    117
    
    
    
    
    
    
    
    1,367Investment securities
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Derivatives, net
    
    
    67
    
    
    
    209
    
    
    
    (200
    )
    
    
    
    
    
    
    76
 Nine Months Ended September 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
    )
    
    $
    (13
    )(1)
    
    $
    109Mortgage servicing rights
    
    
    1,282
    
    
    
    (294
    )(2)
    
    
    379
    
    
    
    
    
    
    
    1,367Investment securities
    
    
    37
    
    
    
    (21
    )
    
    
    (4
    )
    
    
    
    
    
    
    12Derivatives, net
    
    
    70
    
    
    
    486
    
    
    
    (480
    )
    
    
    
    
    
    
    76
 Three Months Ended September 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
    
    $
    81
    
    
    $
    1
    
    
    $
    2
    
    
    $
    98
    (3)
    
    $
    182Mortgage servicing rights
    
    
    1,673
    
    
    
    (77
    )(2)
    
    
    75
    
    
    
    
    
    
    
    1,671Investment securities
    
    
    37
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    37Derivatives, net
    
    
    20
    
    
    
    30
    
    
    
    (34
    )
    
    
    
    
    
    
    16
 38




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Nine Months Ended September 30, 2008Purchases,
    
    TransfersBalance,
    
    Realized
    
    Issuances
    
    Into
    
    Balance,Beginning
    
    and Unrealized
    
    and
    
    Level
    
    Endof
    
    Gains
    
    Settlements,
    
    Three,
    
    ofPeriod
    
    (Losses)
    
    net
    
    net
    
    Period(In millions)Mortgage loans held for sale
    
    $
    59
    
    
    $
    2
    
    
    $
    11
    
    
    $
    110
    (3)
    
    $
    182Mortgage servicing rights
    
    
    1,502
    
    
    
    (109
    )(2)
    
    
    278
    
    
    
    
    
    
    
    1,671Investment securities
    
    
    34
    
    
    
    12
    
    
    
    (9
    )
    
    
    
    
    
    
    37Derivatives, net
    
    
    (9
    )
    
    
    132
    
    
    
    (107
    )
    
    
    
    
    
    
    16
 
 (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 nine months ended
September 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 Scratch and Dent, second-lien and other non-conforming mortgage
loans 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
nine months ended September 30, 2008.  Three Months Ended September 30, 2009MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Derivatives,Sale
    
    Rights
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (2
    )
    
    $
    
    
    
    $
    209Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (186
    )
    
    
    Mortgage interest income
    
    
    2
    
    
    
    
    
    
    
    
 39




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Nine Months Ended September 30, 2009MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (27
    )
    
    $
    
    
    
    $
    
    
    
    $
    486Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (294
    )
    
    
    
    
    
    
    Mortgage interest income
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
 Three Months Ended September 30, 2008MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    Mortgage interest income
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
 Nine Months Ended September 30, 2008MortgageLoans
    
    MortgageHeld for
    
    Servicing
    
    Investment
    
    Derivatives,Sale
    
    Rights
    
    Securities
    
    net(In millions)Gain on mortgage loans, net
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    132Change in fair value of mortgage servicing rights
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    Mortgage interest income
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
 40




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended September 30, 2009Change inFair Value ofGain on
    
    Mortgage
    
    MortgageMortgage
    
    Servicing
    
    InterestLoans, net
    
    Rights
    
    Income(In millions)Unrealized gain (loss)
    
    $
    65
    
    
    $
    (89
    )
    
    $
    1
 Nine Months Ended September 30, 2009Change inFair ValueGain on
    
    of Mortgage
    
    MortgageMortgage
    
    Servicing
    
    Interest
    
    OtherLoans, net
    
    Rights
    
    Income
    
    Expense(In millions)Unrealized gain (loss)
    
    $
    46
    
    
    $
    15
    
    
    $
    2
    
    
    $
    (21
    )
 Three Months Ended September 30, 2008Change inFair Value ofGain on
    
    MortgageMortgage
    
    Servicing
    
    OtherLoans, net
    
    Rights
    
    Income(In millions)Unrealized gain (loss)
    
    $
    15
    
    
    $
    (1
    )
    
    $
    5
 Nine Months Ended September 30, 2008Change inFair Value ofGain on
    
    MortgageMortgage
    
    Servicing
    
    OtherLoans, net
    
    Rights
    
    Income(In millions)Unrealized gain
    
    $
    15
    
    
    $
    103
    
    
    $
    12
  41




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    September 30,
    
    
    December 31,2009
    
    
    2008(In millions)Mortgage loans in foreclosure
    
    $
    113
    
    
    $
    113Allowance for probable losses
    
    
    (22
    )
    
    
    (24
    )Mortgage loans in foreclosure, net
    
    $
    91
    
    
    $
    89REO
    
    $
    47
    
    
    $
    55Adjustment to estimated net realizable value
    
    
    (18
    )
    
    
    (25
    )REO, net
    
    $
    29
    
    
    $
    30
  
 14. Variable Interest Entities
  Mortgage Venture
  42




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    September 30,2009(In millions)ASSETSCash
    
    $
    35Mortgage loans held for sale
    
    
    54Accounts receivable, net
    
    
    3Property, plant and equipment, net
    
    
    1Other assets
    
    
    6Total assets
    
    $
    99LIABILITIESAccounts payable and accrued expenses
    
    $
    13Debt
    
    
    1Other liabilities
    
    
    4Total liabilities(1)
    
    $
    18
 
 (1)
    
    Total liabilities excludes $15 million of intercompany payables.  43




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##### Table of Contents



PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Chesapeake and D.L. Peterson Trust
  September 30,2009(In millions)ASSETSCash and cash equivalents
    
    $
    5Restricted cash(1)
    
    
    361Accounts receivable
    
    
    30Net investment in fleet leases
    
    
    3,093Other assets
    
    
    22Total assets(2)
    
    $
    3,511LIABILITIESDebt(3)
    
    $
    2,823Other liabilities
    
    
    5Total liabilities
    
    $
    2,828
 
 (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
   44




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Net Revenues
    
    
    Segment Profit (Loss)(1)Three Months
    
    
    
    
    
    Three MonthsEnded September 30,
    
    
    
    
    
    
    Ended September 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008(2)
    
    
    Change(In millions)Mortgage Production segment
    
    $
    185
    
    
    $
    98
    
    
    $
    87
    
    
    $
    46
    
    
    $
    (63
    )
    
    $
    109Mortgage Servicing segment
    
    
    (90
    )
    
    
    (25
    )
    
    
    (65
    )
    
    
    (139
    )
    
    
    (66
    )
    
    
    (73
    )Total Mortgage Services
    
    
    95
    
    
    
    73
    
    
    
    22
    
    
    
    (93
    )
    
    
    (129
    )
    
    
    36Fleet Management Services segment
    
    
    414
    
    
    
    463
    
    
    
    (49
    )
    
    
    14
    
    
    
    17
    
    
    
    (3
    )Total reportable segments
    
    
    509
    
    
    
    536
    
    
    
    (27
    )
    
    
    (79
    )
    
    
    (112
    )
    
    
    33Other (3)
    
    
    (2
    )
    
    
    (3
    )
    
    
    1
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Total Company
    
    $
    507
    
    
    $
    533
    
    
    $
    (26
    )
    
    $
    (84
    )
    
    $
    (112
    )
    
    $
    28
 Net Revenues
    
    
    Segment Profit (Loss)(1)Nine Months
    
    
    
    
    
    
    Nine MonthsEnded September 30,
    
    
    
    
    
    
    Ended September 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008(2)
    
    
    Change(In millions)Mortgage Production segment
    
    $
    665
    
    
    $
    349
    
    
    $
    316
    
    
    $
    241
    
    
    $
    (90
    )
    
    $
    331Mortgage Servicing segment
    
    
    (40
    )
    
    
    68
    
    
    
    (108
    )
    
    
    (171
    )
    
    
    (48
    )
    
    
    (123
    )Total Mortgage Services
    
    
    625
    
    
    
    417
    
    
    
    208
    
    
    
    70
    
    
    
    (138
    )
    
    
    208Fleet Management Services segment
    
    
    1,241
    
    
    
    1,376
    
    
    
    (135
    )
    
    
    39
    
    
    
    57
    
    
    
    (18
    )Total reportable segments
    
    
    1,866
    
    
    
    1,793
    
    
    
    73
    
    
    
    109
    
    
    
    (81
    )
    
    
    190Other (3)
    
    
    (4
    )
    
    
    45
    
    
    
    (49
    )
    
    
    (10
    )
    
    
    42
    
    
    
    (52
    )Total Company
    
    $
    1,862
    
    
    $
    1,838
    
    
    $
    24
    
    
    $
    99
    
    
    $
    (39
    )
    
    $
    138
 
 (1)
    
    The following is a reconciliation of (Loss) income before income taxes to
segment (loss) profit: Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)(Loss) income before income taxes
    
    $
    (80
    )
    
    $
    (141
    )
    
    $
    111
    
    
    $
    (65
    )Less: net income (loss) attributable to noncontrolling interest
    
    
    4
    
    
    
    (29
    )
    
    
    12
    
    
    
    (26
    )Segment (loss) profit
    
    $
    (84
    )
    
    $
    (112
    )
    
    $
    99
    
    
    $
    (39
    )
 
 (2)
    
    During the three and nine months ended September 30, 2008, the Company recorded a
non-cash Goodwill impairment of $61 million, $56 million net of a $5 million income tax
benefit, related to the PHH Home Loans reporting unit, which is included in the Mortgage
Production segment. Net loss attributable to noncontrolling interest for the three and nine
months ended September 30, 2008 was impacted by $30 million as a result of the Goodwill
impairment. Segment loss for the three and nine months ended September 30, 2008 was impacted
by $31 million as a result of the Goodwill impairment.(3)
    
    Net revenues reported under the heading Other for the three months ended September
30, 2009 and 2008 and the nine months ended September 30, 2009 represent intersegment
eliminations. Net revenues reported under the heading Other for the nine months ended
September 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
and $10 million reported under the heading Other for the three and nine months ended September 30,
2009, respectively, represents expenses not allocated to the Companys reportable segments, approximately $3 million of which represents severance for the Companys
former chief executive officer. Segment profit of $42 million reported under the heading Other
for the nine months ended September 30, 2008 represents income related to the Terminated Merger
Agreement. 45




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PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  FleetMortgage
    
    
    Mortgage
    
    
    Total
    
    
    ManagementProduction
    
    
    Servicing
    
    
    Mortgage
    
    
    ServicesSegment
    
    
    Segment
    
    
    Services
    
    
    Segment
    
    
    Other
    
    
    Total(In millions)Assets at
September 30, 2009
    
    $
    1,459
    
    
    $
    2,197
    
    
    $
    3,656
    
    
    $
    4,506
    
    
    $
    125
    
    
    $
    8,287Assets at December
31, 2008
    
    
    1,228
    
    
    
    2,056
    
    
    
    3,284
    
    
    
    4,956
    
    
    
    33
    
    
    
    8,273
 
 16. Subsequent Events
  46




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Except as expressly indicated or unless the context otherwise requires, the Company, PHH,
we, our or us means PHH Corporation, a Maryland corporation, and its subsidiaries. This Item
2 should be read in conjunction with the Cautionary Note Regarding Forward-Looking Statements,
and our Condensed Consolidated Financial Statements and notes thereto included in this Quarterly
Report on Form 10-Q for the quarter ended September 30, 2009 (this Form 10-Q), Part II Item 1A.
Risk Factors in this Form 10-Q and our Quarterly Report on Form 10-Q for the quarters ended March
31, 2009 (our Q1 Form 10-Q) and June 30, 2009 (our Q2 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
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Net (loss) income attributable to PHH Corporation
    
    $
    (52
    )
    
    $
    (84
    )
    
    $
    56
    
    
    $
    (38
    )Basic (loss) earnings per share
    
    
    (0.94
    )
    
    
    (1.56
    )
    
    
    1.03
    
    
    
    (0.70
    )Diluted (loss) earnings per share
    
    
    (0.94
    )
    
    
    (1.56
    )
    
    
    1.02
    
    
    
    (0.70
    )
  
    
    Mortgage Production Segment of $46 Million vs. $(63) 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. Segment loss for the third quarter of 2008 included
the net impact of the PHH Home Loans Goodwill impairment of $31 million.
    
    Mortgage Servicing Segment of $(139) Million vs. $(66) Million: a greater reduction
in the value of MSRs due to prepayments and changes in portfolio delinquencies and foreclosures, as well as a greater
decrease in the market value of MSRs resulting from the decline in mortgage interest
rates observed at the end of the third quarter of 2009. Lower earnings from escrow
balances resulting from historically low short-term interest rates caused further
deterioration in the segments results. Foreclosure-related and reinsurance-related
charges also continued to negatively impact segment results.
 47




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##### Table of Contents




    
    Fleet Management Services Segment of $14 Million vs. $17 Million:
during   the third quarter of 2008 we recognized a gain of $7 million  on the early termination of a technology
development and licensing arrangement.
Additionally, segment profit during the third quarter of 2009 compared to the third quarter of
2008 was driven by improved lease margins and the impact of ongoing cost reduction initiatives
partially offset by an increase in debt fees and volume declines.
  
    
    Mortgage Production Segment of $241 Million vs. $(90) 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.
Segment loss for the nine months ended September 30, 2008 included the net impact of
the PHH Home Loans Goodwill impairment of $31 million.
    
    Mortgage Servicing Segment of $(171) Million vs. $(48) Million:a greater reduction
in the value of MSRs due to prepayments and  changes in portfolio delinquencies and foreclosures, as well as a greater
decrease in the market value of MSRs resulting from the decline in mortgage interest
rates observed at the end of the third quarter of 2009. Lower earnings from escrow
balances resulting from historically low short-term interest rates caused further
deterioration in the segments results. Foreclosure-related and reinsurance-related
charges also continued to negatively impact segment results.
    
    Fleet Management Services Segment of $39 Million vs. $57 Million:

 an increase in debt fees and volume declines
partially offset by improved lease margins and the impact of ongoing cost reduction
initiatives.
Additionally, during the nine months ended September 30, 2008, we recognized a gain of $7 million
on the early termination of a technology development and licensing arrangement.
  Mortgage Production and Mortgage Servicing Segments
 Regulatory Trends
   
    
    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 certain existing mortgages which are delinquent, or are at risk of becoming delinquent. Some key elements of these programs, which have
impacted and we
 48




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##### Table of Contents



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).
  
    
    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.
    
    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 the GSE,
the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA)
loans through December 31, 2009.
    
    Public-Private Investment Program (PPIP):On March 23, 2009, the U.S. Department of
the Treasury (the Treasury), in conjunction with the Federal Deposit Insurance
Corporation (FDIC) 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.
   49




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##### Table of Contents




    
    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, 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.
 Mortgage Industry Trends
 Overall Trends
  Economics and Mortgage Market Analysis
   Mortgage Production Trends
  50




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##### Table of Contents



September 30,2009(In millions)First mortgages:Conforming(1)
    
    $
    1,145Non-conforming
    
    
    23Alt-A(2)
    
    
    2Construction loans
    
    
    20Total first mortgages
    
    
    1,190Second lien
    
    
    24Scratch and Dent(3)
    
    
    39Other
    
    
    3Total
    
    $
    1,256
 
 (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
  51




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##### Table of Contents



Three MonthsEnded September 30,2009
    
    
    2008(In millions)Foreclosure-related reserves, July 1,
    
    $
    80
    
    
    $
    68Realized foreclosure losses
    
    
    (18
    )
    
    
    (12
    )Increase in foreclosure reserves
    
    
    26
    
    
    
    21Foreclosure-related reserves, September 30,
    
    $
    88
    
    
    $
    77
 Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Foreclosure-related reserves, January 1,
    
    $
    81
    
    
    $
    49Realized foreclosure losses(1)
    
    
    (57
    )
    
    
    (26
    )Increase in foreclosure reserves
    
    
    64
    
    
    
    54Foreclosure-related reserves, September 30,
    
    $
    88
    
    
    $
    77
 
 (1)
    
    Realized foreclosure losses for the nine months ended September 30, 2009 include
an $11 million settlement with an individual investor for all future potential repurchase
liabilities.    52




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##### Table of Contents



Three MonthsEnded September 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, July 1,
    
    $
    108
    
    
    $
    50Realized reinsurance losses(1)
    
    
    (5
    )
    
    
    Increase in reinsurance reserves
    
    
    10
    
    
    
    11Reinsurance-related reserves, September 30,
    
    $
    113
    
    
    $
    61
 Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Reinsurance-related reserves, January 1,
    
    $
    83
    
    
    $
    32Realized reinsurance losses(1)
    
    
    (6
    )
    
    
    Increase in reinsurance reserves
    
    
    36
    
    
    
    29Reinsurance-related reserves, September 30,
    
    $
    113
    
    
    $
    61
 
 (1)
    
    Realized reinsurance losses for the third quarter and nine months ended
September 30, 2009 include a $4 million payment associated with the termination of a
reinsurance agreement during the third quarter of 2009.  Fleet Management Services Segment
 Fleet Industry Trends
 Automotive Fleet 2009, 2008 and 2007 Fact Books
  53




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54




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##### Table of Contents



Results of OperationsThird Quarter 2009 vs. Third Quarter 2008
 Consolidated Results
  Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change(In millions)Net fee income
    
    $
    106
    
    
    $
    90
    
    
    $
    16Fleet lease income
    
    
    363
    
    
    
    401
    
    
    
    (38
    )Gain on mortgage loans, net
    
    
    115
    
    
    
    49
    
    
    
    66Mortgage net finance expense
    
    
    (16
    )
    
    
    (6
    )
    
    
    (10
    )Loan servicing income
    
    
    109
    
    
    
    111
    
    
    
    (2
    )Valuation adjustments related to mortgage servicing rights
    
    
    (186
    )
    
    
    (139
    )
    
    
    (47
    )Other income
    
    
    16
    
    
    
    27
    
    
    
    (11
    )Net revenues
    
    
    507
    
    
    
    533
    
    
    
    (26
    )Depreciation on operating leases
    
    
    315
    
    
    
    325
    
    
    
    (10
    )Fleet interest expense
    
    
    21
    
    
    
    37
    
    
    
    (16
    )Goodwill impairment
    
    
    
    
    
    
    61
    
    
    
    (61
    )Total other expenses
    
    
    251
    
    
    
    251
    
    
    
    Total expenses
    
    
    587
    
    
    
    674
    
    
    
    (87
    )Loss before income taxes
    
    
    (80
    )
    
    
    (141
    )
    
    
    61Benefit from income taxes
    
    
    (32
    )
    
    
    (28
    )
    
    
    (4
    )Net loss
    
    
    (48
    )
    
    
    (113
    )
    
    
    65Less: net income (loss) attributable to noncontrolling interest
    
    
    4
    
    
    
    (29
    )
    
    
    33Net loss attributable to PHH Corporation
    
    $
    (52
    )
    
    $
    (84
    )
    
    $
    32
    55




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Segment Results
  Mortgage Production Segment
    Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    6,630
    
    
    $
    4,320
    
    
    $
    2,310
    
    
    
    53
    %Fee-based closings
    
    
    2,383
    
    
    
    3,532
    
    
    
    (1,149
    )
    
    
    (33
    )%Total closings
    
    $
    9,013
    
    
    $
    7,852
    
    
    $
    1,161
    
    
    
    15
    %Purchase closings
    
    $
    4,481
    
    
    $
    6,198
    
    
    $
    (1,717
    )
    
    
    (28
    )%Refinance closings
    
    
    4,532
    
    
    
    1,654
    
    
    
    2,878
    
    
    
    174
    %Total closings
    
    $
    9,013
    
    
    $
    7,852
    
    
    $
    1,161
    
    
    
    15
    %Fixed rate
    
    $
    6,870
    
    
    $
    4,372
    
    
    $
    2,498
    
    
    
    57
    %Adjustable rate
    
    
    2,143
    
    
    
    3,480
    
    
    
    (1,337
    )
    
    
    (38
    )%Total closings
    
    $
    9,013
    
    
    $
    7,852
    
    
    $
    1,161
    
    
    
    15
    %Number of loans closed (units)
    
    
    39,161
    
    
    
    34,499
    
    
    
    4,662
    
    
    
    14
    %Average loan amount
    
    $
    230,151
    
    
    $
    227,599
    
    
    $
    2,552
    
    
    
    1
    %Loans sold
    
    $
    7,428
    
    
    $
    5,059
    
    
    $
    2,369
    
    
    
    47
    %Applications
    
    $
    11,264
    
    
    $
    9,524
    
    
    $
    1,740
    
    
    
    18
    %IRLCs expected to close
    
    $
    5,514
    
    
    $
    3,538
    
    
    $
    1,976
    
    
    
    56
    %
 56




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##### Table of Contents



Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    69
    
    
    $
    50
    
    
    $
    19
    
    
    
    38
    %Gain on mortgage loans, net
    
    
    115
    
    
    
    49
    
    
    
    66
    
    
    
    135
    %Mortgage interest income
    
    
    17
    
    
    
    22
    
    
    
    (5
    )
    
    
    (23
    )%Mortgage interest expense
    
    
    (19
    )
    
    
    (25
    )
    
    
    6
    
    
    
    24
    %Mortgage net finance expense
    
    
    (2
    )
    
    
    (3
    )
    
    
    1
    
    
    
    33
    %Other income
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    50
    %Net revenues
    
    
    185
    
    
    
    98
    
    
    
    87
    
    
    
    89
    %Salaries and related expenses
    
    
    80
    
    
    
    74
    
    
    
    6
    
    
    
    8
    %Occupancy and other office expenses
    
    
    9
    
    
    
    11
    
    
    
    (2
    )
    
    
    (18
    )%Other depreciation and amortization
    
    
    3
    
    
    
    4
    
    
    
    (1
    )
    
    
    (25
    )%Other operating expenses
    
    
    43
    
    
    
    40
    
    
    
    3
    
    
    
    8
    %Goodwill impairment
    
    
    
    
    
    
    61
    
    
    
    (61
    )
    
    
    (100
    )%Total expenses
    
    
    135
    
    
    
    190
    
    
    
    (55
    )
    
    
    (29
    )%Income (loss) before income taxes
    
    
    50
    
    
    
    (92
    )
    
    
    142
    
    
    
    n/m
    (1)Less: net income (loss)
attributable to noncontrolling
interest
    
    
    4
    
    
    
    (29
    )
    
    
    33
    
    
    
    n/m
    (1)Segment profit (loss)
    
    $
    46
    
    
    $
    (63
    )
    
    $
    109
    
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Fees
     57




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##### Table of Contents



Gain on Mortgage Loans, Net
   Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    80
    
    
    $
    72
    
    
    $
    8
    
    
    
    11
    %Change in fair value of MLHS and related derivatives:ARMs
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    100
    %Scratch and Dent and Alt-A loans
    
    
    
    
    
    
    (4
    )
    
    
    4
    
    
    
    100
    %Second-lien loans
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    Jumbo loans
    
    
    (1
    )
    
    
    (4
    )
    
    
    3
    
    
    
    75
    %Economic hedge results
    
    
    38
    
    
    
    (12
    )
    
    
    50
    
    
    
    n/m
    (1)Total change in fair value of MLHS and related
derivatives
    
    
    35
    
    
    
    (23
    )
    
    
    58
    
    
    
    n/m
    (1)Gain on mortgage loans, net
    
    $
    115
    
    
    $
    49
    
    
    $
    66
    
    
    
    135
    %
 
 (1)
    
    n/m  Not meaningful.    58




---



##### Table of Contents



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




---



##### Table of Contents



Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    149,526
    
    
    $
    147,452
    
    
    $
    2,074
    
    
    
    1
    %
 Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    3
    
    
    $
    16
    
    
    $
    (13
    )
    
    
    (81
    )%Mortgage interest expense
    
    
    (17
    )
    
    
    (17
    )
    
    
    
    
    
    
    Mortgage net finance expense
    
    
    (14
    )
    
    
    (1
    )
    
    
    (13
    )
    
    
    n/m
    (1)Loan servicing income
    
    
    109
    
    
    
    111
    
    
    
    (2
    )
    
    
    (2
    )%Change in fair value of mortgage servicing rights
    
    
    (186
    )
    
    
    (77
    )
    
    
    (109
    )
    
    
    (142
    )%Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (62
    )
    
    
    62
    
    
    
    100
    %Valuation adjustments related to mortgage servicing
rights
    
    
    (186
    )
    
    
    (139
    )
    
    
    (47
    )
    
    
    (34
    )%Net loan servicing loss
    
    
    (77
    )
    
    
    (28
    )
    
    
    (49
    )
    
    
    (175
    )%Other income
    
    
    1
    
    
    
    4
    
    
    
    (3
    )
    
    
    (75
    )%Net revenues
    
    
    (90
    )
    
    
    (25
    )
    
    
    (65
    )
    
    
    (260
    )%Salaries and related expenses
    
    
    9
    
    
    
    8
    
    
    
    1
    
    
    
    13
    %Occupancy and other office expenses
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Other depreciation and amortization
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    n/m
    (1)Other operating expenses
    
    
    36
    
    
    
    30
    
    
    
    6
    
    
    
    20
    %Total expenses
    
    
    49
    
    
    
    41
    
    
    
    8
    
    
    
    20
    %Segment loss
    
    $
    (139
    )
    
    $
    (66
    )
    
    $
    (73
    )
    
    
    (111
    )%
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance Expense
  Loan Servicing Income
  60




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##### Table of Contents



Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    104
    
    
    $
    109
    
    
    $
    (5
    )
    
    
    (5
    )%Late fees and other ancillary servicing revenue
    
    
    17
    
    
    
    10
    
    
    
    7
    
    
    
    70
    %Curtailment interest paid to investors
    
    
    (9
    )
    
    
    (6
    )
    
    
    (3
    )
    
    
    (50
    )%Net reinsurance loss
    
    
    (3
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    (50
    )%Loan servicing income
    
    $
    109
    
    
    $
    111
    
    
    $
    (2
    )
    
    
    (2
    )%
  Valuation Adjustments Related to Mortgage Servicing Rights
  Change in Fair Value of Mortgage Servicing Rights:
  Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Actual prepayments of the underlying mortgage loans
    
    $
    (50
    )
    
    $
    (33
    )
    
    $
    (17
    )
    
    
    (52
    )%Actual receipts of recurring cash flows
    
    
    (16
    )
    
    
    (18
    )
    
    
    2
    
    
    
    11
    %Changes in portfolio delinquencies and foreclosures
    
    
    (31
    )
    
    
    (25
    )
    
    
    (6
    )
    
    
    (24
    )%Changes in market inputs or assumptions used in
the valuation model
    
    
    (89
    )
    
    
    (1
    )
    
    
    (88
    )
    
    
    n/m
    (1)Change in fair value of mortgage servicing rights
    
    $
    (186
    )
    
    $
    (77
    )
    
    $
    (109
    )
    
    
    (142
    )%
 
 (1)
    
    n/m  Not meaningful. 61




---



##### Table of Contents



Net Derivative Loss Related to Mortgage Servicing Rights:
  62




---



##### Table of Contents



Three MonthsEnded September 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
    
    $
    (89
    )
    
    $
    (1
    )Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (62
    )Net loss on MSRs risk management activities
    
    $
    (89
    )
    
    $
    (63
    )
 Other Income
  Salaries and Related Expenses
  Other Operating Expenses
  Fleet Management Services Segment
    63




---



##### Table of Contents



Average for theThree MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In thousands of units)Leased vehicles
    
    
    310
    
    
    
    333
    
    
    
    (23
    )
    
    
    (7
    )%Maintenance service cards
    
    
    273
    
    
    
    294
    
    
    
    (21
    )
    
    
    (7
    )%Fuel cards
    
    
    281
    
    
    
    289
    
    
    
    (8
    )
    
    
    (3
    )%Accident management vehicles
    
    
    301
    
    
    
    321
    
    
    
    (20
    )
    
    
    (6
    )%
 Three MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    37
    
    
    $
    40
    
    
    $
    (3
    )
    
    
    (8
    )%Fleet lease income
    
    
    363
    
    
    
    401
    
    
    
    (38
    )
    
    
    (9
    )%Other income
    
    
    14
    
    
    
    22
    
    
    
    (8
    )
    
    
    (36
    )%Net revenues
    
    
    414
    
    
    
    463
    
    
    
    (49
    )
    
    
    (11
    )%Salaries and related expenses
    
    
    21
    
    
    
    23
    
    
    
    (2
    )
    
    
    (9
    )%Occupancy and other office expenses
    
    
    4
    
    
    
    5
    
    
    
    (1
    )
    
    
    (20
    )%Depreciation on operating leases
    
    
    315
    
    
    
    325
    
    
    
    (10
    )
    
    
    (3
    )%Fleet interest expense
    
    
    22
    
    
    
    40
    
    
    
    (18
    )
    
    
    (45
    )%Other depreciation and amortization
    
    
    2
    
    
    
    3
    
    
    
    (1
    )
    
    
    (33
    )%Other operating expenses
    
    
    36
    
    
    
    50
    
    
    
    (14
    )
    
    
    (28
    )%Total expenses
    
    
    400
    
    
    
    446
    
    
    
    (46
    )
    
    
    (10
    )%Segment profit
    
    $
    14
    
    
    $
    17
    
    
    $
    (3
    )
    
    
    (18
    )%
 Fleet Management Fees
  Fleet Lease Income
  Other Income
  64




---



##### Table of Contents



Salaries and Related Expenses
  Depreciation on Operating Leases
  Fleet Interest Expense
  Other Operating Expenses
  Results of OperationsNine Months Ended September 30, 2009 vs. Nine Months Ended September 30,
2008
 Consolidated Results
  Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change(In millions)Net fee income
    
    $
    328
    
    
    $
    295
    
    
    $
    33Fleet lease income
    
    
    1,087
    
    
    
    1,191
    
    
    
    (104
    )Gain on mortgage loans, net
    
    
    450
    
    
    
    177
    
    
    
    273Mortgage net finance (expense) income
    
    
    (39
    )
    
    
    10
    
    
    
    (49
    )Loan servicing income
    
    
    309
    
    
    
    330
    
    
    
    (21
    )Valuation adjustments related to mortgage servicing rights
    
    
    (294
    )
    
    
    (288
    )
    
    
    (6
    )Other income
    
    
    21
    
    
    
    123
    
    
    
    (102
    )Net revenues
    
    
    1,862
    
    
    
    1,838
    
    
    
    24Depreciation on operating leases
    
    
    962
    
    
    
    971
    
    
    
    (9
    )Fleet interest expense
    
    
    72
    
    
    
    119
    
    
    
    (47
    )Goodwill impairment
    
    
    
    
    
    
    61
    
    
    
    (61
    )Total other expenses
    
    
    717
    
    
    
    752
    
    
    
    (35
    )Total expenses
    
    
    1,751
    
    
    
    1,903
    
    
    
    (152
    )Income (loss) before income taxes
    
    
    111
    
    
    
    (65
    )
    
    
    176Provision for (benefit from) income taxes
    
    
    43
    
    
    
    (1
    )
    
    
    44Net income (loss)
    
    
    68
    
    
    
    (64
    )
    
    
    132Less: net income (loss) attributable to noncontrolling interest
    
    
    12
    
    
    
    (26
    )
    
    
    38Net income (loss) attributable to PHH Corporation
    
    $
    56
    
    
    $
    (38
    )
    
    $
    94
 65




---



##### Table of Contents



Segment Results
  Mortgage Production Segment
   66




---



##### Table of Contents



Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(Dollars in millions, exceptaverage loan amount)Loans closed to be sold
    
    $
    22,917
    
    
    $
    17,416
    
    
    $
    5,501
    
    
    
    32
    %Fee-based closings
    
    
    5,955
    
    
    
    11,140
    
    
    
    (5,185
    )
    
    
    (47
    )%Total closings
    
    $
    28,872
    
    
    $
    28,556
    
    
    $
    316
    
    
    
    1
    %Purchase closings
    
    $
    10,937
    
    
    $
    17,335
    
    
    $
    (6,398
    )
    
    
    (37
    )%Refinance closings
    
    
    17,935
    
    
    
    11,221
    
    
    
    6,714
    
    
    
    60
    %Total closings
    
    $
    28,872
    
    
    $
    28,556
    
    
    $
    316
    
    
    
    1
    %Fixed rate
    
    $
    23,809
    
    
    $
    16,442
    
    
    $
    7,367
    
    
    
    45
    %Adjustable rate
    
    
    5,063
    
    
    
    12,114
    
    
    
    (7,051
    )
    
    
    (58
    )%Total closings
    
    $
    28,872
    
    
    $
    28,556
    
    
    $
    316
    
    
    
    1
    %Number of loans closed (units)
    
    
    126,729
    
    
    
    121,002
    
    
    
    5,727
    
    
    
    5
    %Average loan amount
    
    $
    227,827
    
    
    $
    235,997
    
    
    $
    (8,170
    )
    
    
    (3
    )%Loans sold
    
    $
    22,558
    
    
    $
    17,543
    
    
    $
    5,015
    
    
    
    29
    %Applications
    
    $
    41,807
    
    
    $
    39,433
    
    
    $
    2,374
    
    
    
    6
    %IRLCs expected to close
    
    $
    19,999
    
    
    $
    15,799
    
    
    $
    4,200
    
    
    
    27
    %
 67




---



##### Table of Contents



Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage fees
    
    $
    216
    
    
    $
    172
    
    
    $
    44
    
    
    
    26
    %Gain on mortgage loans, net
    
    
    450
    
    
    
    177
    
    
    
    273
    
    
    
    154
    %Mortgage interest income
    
    
    61
    
    
    
    71
    
    
    
    (10
    )
    
    
    (14
    )%Mortgage interest expense
    
    
    (67
    )
    
    
    (74
    )
    
    
    7
    
    
    
    9
    %Mortgage net finance expense
    
    
    (6
    )
    
    
    (3
    )
    
    
    (3
    )
    
    
    (100
    )%Other income
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    67
    %Net revenues
    
    
    665
    
    
    
    349
    
    
    
    316
    
    
    
    91
    %Salaries and related expenses
    
    
    251
    
    
    
    235
    
    
    
    16
    
    
    
    7
    %Occupancy and other office expenses
    
    
    23
    
    
    
    32
    
    
    
    (9
    )
    
    
    (28
    )%Other depreciation and amortization
    
    
    10
    
    
    
    10
    
    
    
    
    
    
    
    Other operating expenses
    
    
    128
    
    
    
    127
    
    
    
    1
    
    
    
    1
    %Goodwill impairment
    
    
    
    
    
    
    61
    
    
    
    (61
    )
    
    
    (100
    )%Total expenses
    
    
    412
    
    
    
    465
    
    
    
    (53
    )
    
    
    (11
    )%Income (loss) before income taxes
    
    
    253
    
    
    
    (116
    )
    
    
    369
    
    
    
    n/m
    (1)Less: net income (loss)
attributable to noncontrolling
interest
    
    
    12
    
    
    
    (26
    )
    
    
    38
    
    
    
    n/m
    (1)Segment profit (loss)
    
    $
    241
    
    
    $
    (90
    )
    
    $
    331
    
    
    
    n/m
    (1)
 
 (1)
    
    n/m  Not meaningful. Mortgage Fees
     68




---



##### Table of Contents



Gain on Mortgage Loans, Net
    Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Gain on loans
    
    $
    427
    
    
    $
    258
    
    
    $
    169
    
    
    
    66
    %Change in fair value of MLHS and related derivatives:ARMs
    
    
    
    
    
    
    (20
    )
    
    
    20
    
    
    
    100
    %Scratch and Dent and Alt-A loans
    
    
    (6
    )
    
    
    (20
    )
    
    
    14
    
    
    
    70
    %Second-lien loans
    
    
    (6
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (200
    )%Construction loans
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )
    
    
    n/m
    (1)Jumbo loans
    
    
    (1
    )
    
    
    (15
    )
    
    
    14
    
    
    
    93
    %Economic hedge results
    
    
    40
    
    
    
    (54
    )
    
    
    94
    
    
    
    n/m
    (1)Total change in fair value of MLHS and related
derivatives
    
    
    23
    
    
    
    (111
    )
    
    
    134
    
    
    
    n/m
    (1)Benefit of transition provision of updates to ASC 815
    
    
    
    
    
    
    30
    
    
    
    (30
    )
    
    
    (100
    )%Gain on mortgage loans, net
    
    $
    450
    
    
    $
    177
    
    
    $
    273
    
    
    
    154
    %
 
 (1)
    
    n/m  Not meaningful.   69




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##### Table of Contents



Mortgage Net Finance Expense
  Salaries and Related Expenses
 .
 Occupancy and Other Office Expenses
  70




---



##### Table of Contents



Other Operating Expenses
  Mortgage Servicing Segment
   71




---



##### Table of Contents



Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Average loan servicing portfolio
    
    $
    149,274
    
    
    $
    153,671
    
    
    $
    (4,397
    )
    
    
    (3
    )%
 Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Mortgage interest income
    
    $
    10
    
    
    $
    68
    
    
    $
    (58
    )
    
    
    (85
    )%Mortgage interest expense
    
    
    (45
    )
    
    
    (54
    )
    
    
    9
    
    
    
    17
    %Mortgage net finance (expense) income
    
    
    (35
    )
    
    
    14
    
    
    
    (49
    )
    
    
    n/m
    (1)Loan servicing income
    
    
    309
    
    
    
    330
    
    
    
    (21
    )
    
    
    (6
    )%Change in fair value of mortgage servicing rights
    
    
    (294
    )
    
    
    (109
    )
    
    
    (185
    )
    
    
    (170
    )%Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (179
    )
    
    
    179
    
    
    
    100
    %Valuation adjustments related to mortgage servicing
rights
    
    
    (294
    )
    
    
    (288
    )
    
    
    (6
    )
    
    
    (2
    )%Net loan servicing income
    
    
    15
    
    
    
    42
    
    
    
    (27
    )
    
    
    (64
    )%Other (expense) income
    
    
    (20
    )
    
    
    12
    
    
    
    (32
    )
    
    
    n/m
    (1)Net revenues
    
    
    (40
    )
    
    
    68
    
    
    
    (108
    )
    
    
    n/m
    (1)Salaries and related expenses
    
    
    28
    
    
    
    24
    
    
    
    4
    
    
    
    17
    %Occupancy and other office expenses
    
    
    7
    
    
    
    8
    
    
    
    (1
    )
    
    
    (13
    )%Other depreciation and amortization
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Other operating expenses
    
    
    95
    
    
    
    83
    
    
    
    12
    
    
    
    14
    %Total expenses
    
    
    131
    
    
    
    116
    
    
    
    15
    
    
    
    13
    %Segment loss
    
    $
    (171
    )
    
    $
    (48
    )
    
    $
    (123
    )
    
    
    (256
    )%
 
 (1)
    
    n/m  Not meaningful. Mortgage Net Finance (Expense) Income
  72




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##### Table of Contents



Loan Servicing Income
   Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Net service fee revenue
    
    $
    316
    
    
    $
    324
    
    
    $
    (8
    )
    
    
    (2
    )%Late fees and other ancillary servicing revenue
    
    
    42
    
    
    
    34
    
    
    
    8
    
    
    
    24
    %Curtailment interest paid to investors
    
    
    (36
    )
    
    
    (24
    )
    
    
    (12
    )
    
    
    (50
    )%Net reinsurance loss
    
    
    (13
    )
    
    
    (4
    )
    
    
    (9
    )
    
    
    (225
    )%Loan servicing income
    
    $
    309
    
    
    $
    330
    
    
    $
    (21
    )
    
    
    (6
    )%
  Valuation Adjustments Related to Mortgage Servicing Rights
  Change in Fair Value of Mortgage Servicing Rights:
 73




---



##### Table of Contents



Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Actual prepayments of the underlying mortgage loans
    
    $
    (200
    )
    
    $
    (122
    )
    
    $
    (78
    )
    
    
    (64
    )%Actual receipts of  recurring cash flows
    
    
    (43
    )
    
    
    (49
    )
    
    
    6
    
    
    
    12
    %Changes in portfolio delinquencies and
foreclosures
    
    
    (66
    )
    
    
    (41
    )
    
    
    (25
    )
    
    
    (61
    )%Changes in market inputs or assumptions used in
the valuation model
    
    
    15
    
    
    
    103
    
    
    
    (88
    )
    
    
    (85
    )%Change in fair value of mortgage servicing rights
    
    $
    (294
    )
    
    $
    (109
    )
    
    $
    (185
    )
    
    
    (170
    )%
    Net Derivative Loss Related to Mortgage Servicing Rights:
 74




---



##### Table of Contents



Nine MonthsEnded September 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
    
    $
    15
    
    
    $
    103Net derivative loss related to mortgage servicing rights
    
    
    
    
    
    
    (179
    )Net gain (loss) on MSRs risk management activities
    
    $
    15
    
    
    $
    (76
    )
 Other (Expense) Income
  Salaries and Related Expenses
  Other Operating Expenses
  75




---



##### Table of Contents



Fleet Management Services Segment
     Average for theNine MonthsEnded September 30,2009
    
    2008
    
    Change
    
    % Change(In thousands of units)Leased vehicles
    
    
    318
    
    
    
    337
    
    
    
    (19
    )
    
    
    (6
    )%Maintenance service cards
    
    
    277
    
    
    
    302
    
    
    
    (25
    )
    
    
    (8
    )%Fuel cards
    
    
    284
    
    
    
    299
    
    
    
    (15
    )
    
    
    (5
    )%Accident management vehicles
    
    
    311
    
    
    
    324
    
    
    
    (13
    )
    
    
    (4
    )%
 Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change
    
    
    % Change(In millions)Fleet management fees
    
    $
    112
    
    
    $
    123
    
    
    $
    (11
    )
    
    
    (9
    )%Fleet lease income
    
    
    1,087
    
    
    
    1,191
    
    
    
    (104
    )
    
    
    (9
    )%Other income
    
    
    42
    
    
    
    62
    
    
    
    (20
    )
    
    
    (32
    )%Net revenues
    
    
    1,241
    
    
    
    1,376
    
    
    
    (135
    )
    
    
    (10
    )%Salaries and related expenses
    
    
    63
    
    
    
    73
    
    
    
    (10
    )
    
    
    (14
    )%Occupancy and other office expenses
    
    
    13
    
    
    
    15
    
    
    
    (2
    )
    
    
    (13
    )%Depreciation on operating leases
    
    
    962
    
    
    
    971
    
    
    
    (9
    )
    
    
    (1
    )%Fleet interest expense
    
    
    76
    
    
    
    124
    
    
    
    (48
    )
    
    
    (39
    )%Other depreciation and amortization
    
    
    8
    
    
    
    8
    
    
    
    
    
    
    
    Other operating expenses
    
    
    80
    
    
    
    128
    
    
    
    (48
    )
    
    
    (38
    )%Total expenses
    
    
    1,202
    
    
    
    1,319
    
    
    
    (117
    )
    
    
    (9
    )%Segment profit
    
    $
    39
    
    
    $
    57
    
    
    $
    (18
    )
    
    
    (32
    )%
 76




---



##### Table of Contents



Fleet Management Fees
  Fleet Lease Income
  Other Income
  Salaries and Related Expenses
  Depreciation on Operating Leases
  Fleet Interest Expense
  Other Operating Expenses
  77




---



##### Table of Contents



Liquidity and Capital Resources
 General
      78




---



##### Table of Contents



Cash Flows
  Nine MonthsEnded September 30,2009
    
    
    2008
    
    
    Change(In millions)Cash provided by (used in):Operating activities
    
    $
    878
    
    
    $
    1,348
    
    
    $
    (470
    )Investing activities
    
    
    (461
    )
    
    
    (1,068
    )
    
    
    607Financing activities
    
    
    (353
    )
    
    
    (332
    )
    
    
    (21
    )Effect of changes in exchange rates on Cash and cash equivalents
    
    
    (33
    )
    
    
    8
    
    
    
    (41
    )Net increase (decrease) in Cash and cash equivalents
    
    $
    31
    
    
    $
    (44
    )
    
    $
    75
 Operating Activities
  Investing Activities
  Financing Activities
  Secondary Mortgage Market
  79




---



##### Table of Contents



Indebtedness
  September 30,
    
    
    December 31,2009
    
    
    2008(In millions)Restricted cash
    
    $
    641
    
    
    $
    614Mortgage loans held for sale
    
    
    1,256
    
    
    
    1,006Net investment in fleet leases
    
    
    3,698
    
    
    
    4,204Mortgage servicing rights
    
    
    1,367
    
    
    
    1,282Investment securities
    
    
    12
    
    
    
    37Assets under management programs
    
    $
    6,974
    
    
    $
    7,143
 80




---



##### Table of Contents



September 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
    
    $
    154
    
    
    $
    154
    
    
    
    
    
    
    
    3/27/2009
    (5)Chesapeake Series 2006-2 Variable
Funding Notes
    
    
    768
    
    
    
    768
    
    
    
    
    
    
    
    2/26/2009
    (5)Chesapeake Series 2009-1 Term Notes
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    5/20/2010Chesapeake Series 2009-2 Class A Term
Notes
    
    
    850
    
    
    
    850
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-2 Class B Term
Notes(6)
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    2/17/2011Chesapeake Series 2009-2 Class C Term
Notes(6)
    
    
    24
    
    
    
    24
    
    
    
    
    
    
    
    2/17/2011Other
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    3/2010-6/2016Total Vehicle Management Asset-Backed
Debt
    
    
    2,857
    
    
    
    2,857
    
    
    
    2.2
    %(7)
    
    
    
    
    
    $
    30
    
    
    $
    361
    
    
    $
    
    
    
    $
    3,130RBS Repurchase Facility(8)
    
    
    552
    
    
    
    1,500
    
    
    
    3.0
    %
    
    
    6/24/2010
    
    
    
    
    
    
    
    
    
    
    
    599
    
    
    
    Fannie Mae Repurchase
Facilities(9)
    
    
    418
    
    
    
    418
    
    
    
    1.0
    %
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    423
    
    
    
    Other
    
    
    4
    
    
    
    4
    
    
    
    3.1
    %
    
    
    10/29/2009
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Total Mortgage Warehouse Asset-Backed
Debt
    
    
    974
    
    
    
    1,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,026
    
    
    
    Term Notes(10)
    
    
    440
    
    
    
    440
    
    
    
    6.5%-7.9
    %(11)
    
    
    4/2010-4/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Facilities(12)
    
    
    789
    
    
    
    1,305
    
    
    
    1.0
    %(13)
    
    
    1/6/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2012(14)
    
    
    218
    
    
    
    218
    
    
    
    4.0
    %
    
    
    4/15/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes due 2014(15)
    
    
    177
    
    
    
    177
    
    
    
    4.0
    %
    
    
    9/1/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Unsecured Debt
    
    
    1,624
    
    
    
    2,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Debt
    
    $
    5,455
    
    
    $
    6,919
    
    
    
    
    
    
    
    
    
    
    $
    30
    
    
    $
    361
    
    
    $
    1,026
    
    
    $
    3,130
 
 (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. The Series 2009-1 and Series 2009-2 notes have revolving
periods during which time the pro-rata share of lease cash flows pledged to Chesapeake will
create availability to fund the acquisition of vehicles to be leased to customers of our Fleet
Management Services segment. See Asset-Backed DebtVehicle Management Asset-Backed Debt
below for additional information.(3)
    
    Represents the variable interest rate as of the respective date, with the exception
of total vehicle management asset-backed debt, term notes, the 2012 Convertible Notes and the
2014 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 their Scheduled Expiry Dates (as defined below). 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 below for
additional information.(6)
    
    The carrying amount of the Chesapeake Series 2009-2 Series B and Series C term notes
as of September 30, 2009 is net of an unamortized discount of $4 million and $5 million,
respectively. See Asset-Backed DebtVehicle Management Asset-Backed Debt below for
additional information.(7)
    
    Represents the weighted-average interest rate of our vehicle management asset-backed
debt arrangements as of September 30, 2009.(8)
    
    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. 81




---



##### Table of Contents



(9)
    
    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 $2.8 billion as of September 30,
2009.(10)
    
    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.(11)
    
    Represents the range of stated interest rates of the MTNs outstanding as of
September 30, 2009. The effective rate of interest of our outstanding MTNs was 7.2% as of
September 30, 2009.(12)
    
    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.(13)
    
    Represents the interest rate on the Amended Credit Facility as of September 30,
2009, excluding per annum utilization and facility fees. The outstanding balance as of
September 30, 2009 also includes $73 million outstanding under another variable-rate credit
facility that bore interest at 1.4%. See Unsecured DebtCredit Facilities below for
additional information.(14)
    
    On April 2, 2008, we completed a private offering of our 4.0% Convertible Senior
Notes due 2012 (the 2012 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 September 30, 2009 is net of an unamortized discount of $32 million. The
effective rate of interest of the 2012 Convertible Notes was 12.4% as of September 30, 2009,
which represents the 4.0% semiannual cash payment and the non-cash accretion of discount and
issuance costs. There were no conversions of the 2012 Convertible Notes during the nine months
ended September 30, 2009.(15)
    
    On September 29, 2009, we completed a private offering of our 4.0% Convertible
Senior Notes due 2014 (the 2014 Convertible Notes) with an aggregate principal balance of
$250 million and a maturity date of September 1, 2014 to certain qualified institutional
buyers. The carrying amount as of September 30, 2009 is net of an unamortized discount of $73
million. The effective rate of interest of the 2014 Convertible Notes was 13.0% as of
September 30, 2009, which represents the 4.0% semiannual cash payment and the non-cash
accretion of discount and issuance costs. There were no conversions of the 2014 Convertible
Notes during the nine months ended September 30, 2009. Asset-Backed Debt
 Vehicle Management Asset-Backed Debt
    82




---



##### Table of Contents



Mortgage Warehouse Asset-Backed Debt
   83




---



##### Table of Contents



Unsecured Debt
   MoodysInvestors
    
    Standard
    
    FitchService
    
    & Poors
    
    RatingsSenior debt
    
    Ba2
    
    BB+
    
    BB+Short-term debt
    
    NP
    
    B
    
    B
    84




---



##### Table of Contents



Credit Facilities
  Convertible Notes
    st st
  85




---



##### Table of Contents



Debt Maturities
  Asset-Backed
    
    
    Unsecured
    
    
    Total(In millions)Within one year
    
    $
    1,572
    
    
    $
    6
    
    
    $
    1,578Between one and two years
    
    
    873
    
    
    
    788
    
    
    
    1,661Between two and three years
    
    
    705
    
    
    
    250
    
    
    
    955Between three and four years
    
    
    429
    
    
    
    421
    
    
    
    850Between four and five years
    
    
    252
    
    
    
    250
    
    
    
    502Thereafter
    
    
    9
    
    
    
    9
    
    
    
    18$
    3,840
    
    
    $
    1,724
    
    
    $
    5,564
  Utilized
    
    AvailableCapacity(1)
    
    Capacity
    
    Capacity(In millions)Asset-Backed Funding ArrangementsVehicle management(2)
    
    $
    2,857
    
    
    $
    2,857
    
    
    $
    Mortgage warehouse(3)
    
    
    1,922
    
    
    
    974
    
    
    
    948Unsecured Committed Credit Facilities(4)
    
    
    1,305
    
    
    
    804
    
    
    
    501
 
 (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 $768 million and $154 million, respectively, as of September 30, 2009. The
Series 2009-1 and Series 2009-2 notes have revolving periods during which time the pro-rata
share of lease cash flows pledged to Chesapeake will create availability to fund the
acquisition of vehicles to be leased to customers of our Fleet Management Services segment.
See Asset-Backed DebtVehicle Management Asset-Backed Debt above for additional
information.(3)
    
    Capacity does not reflect $2.4 billion undrawn under the $2.8 billion Fannie Mae
Repurchase Facilities, as these facilities are uncommitted.(4)
    
    Utilized capacity reflects $16 million of letters of credit issued under the Amended
Credit Facility, which are not included in Debt in our accompanying Condensed Consolidated
Balance Sheet. 86




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##### Table of Contents



Debt Covenants
   Critical Accounting Policies
  Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
 Mortgage Servicing Rights
  87




---



##### Table of Contents



Other Mortgage-Related Assets
  Indebtedness
   Consumer Credit Risk
 Loan Recourse
    88




---



##### Table of Contents



Mortgage Loans in Foreclosure
  Real Estate Owned
  Mortgage Reinsurance
  89




---



##### Table of Contents



Year of Origination2003andPrior
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Total(Dollars in millions)Unpaid principal
balance
    
    $
    2,228
    
    
    $
    1,237
    
    
    $
    1,160
    
    
    $
    779
    
    
    $
    1,546
    
    
    $
    2,729
    
    
    $
    185
    
    
    $
    9,864Unpaid principal balance
as a percentage of
original unpaid principal
balance
    
    
    11
    %
    
    
    34
    %
    
    
    55
    %
    
    
    65
    %
    
    
    83
    %
    
    
    91
    %
    
    
    100
    %
    
    
    N/AMaximum potential exposure
to reinsurance losses
    
    $
    325
    
    
    $
    104
    
    
    $
    62
    
    
    $
    32
    
    
    $
    49
    
    
    $
    63
    
    
    $
    3
    
    
    $
    638Average FICO score
    
    
    698
    
    
    
    694
    
    
    
    696
    
    
    
    694
    
    
    
    701
    
    
    
    728
    
    
    
    757
    
    
    
    707Delinquencies(1)
    
    
    5.27
    %
    
    
    5.83
    %
    
    
    7.10
    %
    
    
    8.25
    %
    
    
    6.62
    %
    
    
    2.38
    %
    
    
    
    
    
    
    5.19
    %Foreclosures/
REO/
bankruptcies(2)
    
    
    3.27
    %
    
    
    4.71
    %
    
    
    7.09
    %
    
    
    9.78
    %
    
    
    6.49
    %
    
    
    1.30
    %
    
    
    
    
    
    
    4.38
    %
 
 (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
  90




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Counterparty Credit Risk
   Fair Value Measurements
  Sensitivity Analysis
     91




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##### Table of Contents



Change in Fair ValueDown
    
    
    Down
    
    
    Down
    
    
    Up
    
    
    Up
    
    
    Up100 bps
    
    
    50 bps
    
    
    25 bps
    
    
    25 bps
    
    
    50 bps
    
    
    100 bps(In millions)Mortgage assets:Mortgage loans held for sale
    
    $
    23
    
    
    $
    14
    
    
    $
    8
    
    
    $
    (10
    )
    
    $
    (21
    )
    
    $
    (48
    )Interest rate lock commitments
    
    
    29
    
    
    
    19
    
    
    
    11
    
    
    
    (17
    )
    
    
    (39
    )
    
    
    (99
    )Forward loan sale commitments
    
    
    (74
    )
    
    
    (43
    )
    
    
    (23
    )
    
    
    29
    
    
    
    62
    
    
    
    139Total Mortgage loans held
for sale, interest rate
lock commitments and
related derivatives
    
    
    (22
    )
    
    
    (10
    )
    
    
    (4
    )
    
    
    2
    
    
    
    2
    
    
    
    (8
    )Mortgage servicing rights
    
    
    (467
    )
    
    
    (221
    )
    
    
    (104
    )
    
    
    94
    
    
    
    177
    
    
    
    438Total mortgage assets
    
    
    (489
    )
    
    
    (231
    )
    
    
    (108
    )
    
    
    96
    
    
    
    179
    
    
    
    430Total vehicle assets
    
    
    16
    
    
    
    8
    
    
    
    4
    
    
    
    (4
    )
    
    
    (8
    )
    
    
    (16
    )Total liabilities
    
    
    (25
    )
    
    
    (12
    )
    
    
    (6
    )
    
    
    6
    
    
    
    12
    
    
    
    24Total, net
    
    $
    (498
    )
    
    $
    (235
    )
    
    $
    (110
    )
    
    $
    98
    
    
    $
    183
    
    
    $
    438
 
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  92




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##### Table of Contents



Item 1A. Risk Factors
  Losses incurred in connection with actual or projected repurchases and indemnification payments may
exceed our financial statement reserves and we may be required to increase such reserves in the
future. Increases to our reserves and losses incurred in connection with actual loan repurchases
and indemnification payments could have a material adverse effect on our business, financial
position, results of operation or cash flows.
  Changes in interest rates could reduce the value of a substantial portion of our assets, including
our MSRs, and could have a material adverse effect on our business, financial position, results of
operations or cash flows.
  The values of a substantial portion of our assets, including our MSRs, are determined based upon
significant estimates and assumptions made by our management that, if subsequently proven incorrect
or inaccurate, could have a material adverse effect on our business, financial position, results of
operations or cash flows.
  93




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The businesses in which we engage are complex and heavily regulated, and changes in the regulatory
environment affecting our businesses could have a material adverse effect on our business,
financial position, results of operations or cash flows.
        94




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
    
    Housing and Economic Recovery Act of 2008:Enacted in July 2008, this legislation,
among other things: (i) addressed, on a permanent basis, the temporary changes in the
GSEs, FHA and VA single-family loan limits established in February 2008 under the
Economic Stimulus Act of 2008, (ii) increased the regulation of Fannie Mae, Freddie Mac
and the Federal Home Loan Banks by creating an independent regulator, the Federal
Housing Finance Agency (the FHFA), and regulatory requirements, (iii) established
several new powers and authorities to stabilize the GSEs in the event of financial
crisis, (iv) authorized a FHA Hope for Homeowners Program, effective October 1, 2008,
to refinance existing borrowers meeting eligibility requirements into fixed-rate FHA
mortgage products and encouraged a nationwide licensing and registry system for loan
originators by setting minimum qualifications and (v) assigned the U.S. Department of
Housing and Urban Development the responsibility for establishing requirements for
those states not enacting licensing laws.
    
    Conservatorship of Fannie Mae and Freddie Mac:In September 2008, the FHFA was
appointed as conservator of Fannie Mae and Freddie Mac, which granted the FHFA control
and oversight of Fannie Mae and Freddie Mac. In conjunction with this announcement, the
Treasury announced several financing and investing arrangements intended to provide
support to Fannie Mae and Freddie Mac, as well as to increase liquidity in the mortgage
market.
    
    Emergency Economic Stabilization Act of 2008:Enacted in October 2008, the EESA,
amongst other things, authorized the Treasury to create the Troubled Asset Relief
Program (TARP) to provide liquidity and capital to financial institutions. Under the
EESA, the Treasury is authorized to utilize up to $700 billion in its efforts to
stabilize the financial system of the U.S. The EESA also contains homeownership
protection provisions that require the Treasury to modify distressed loans, where
possible, to provide homeowners relief from potential foreclosure. Companies that
participate in TARP, or the governments equity purchase program, may be subject to the
requirements in the EESA, which establishes certain corporate governance standards,
including limitations on executive compensation and incentive payments.
    
    Homeowner Affordability and Stability Plan:On February 18, 2009, the federal
government announced 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
certain existing mortgages which are delinquent, or are at risk of becoming delinquent.
Some key elements of these programs, which have impacted and we believe will continue
to impact the mortgage industry are as follows:
 
    
    Initially, the maximum 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 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
 95




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
    
    HAMP 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.
 
    
    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 MBS. The
Federal Reserve specifically targeted the maintenance of low mortgage interest rates in an
attempt to support the housing market.
    
    American Recovery and Reinvestment Act of 2009: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 the GSEs, FHA and VA loans through December
31, 2009.
    
    Public-Private Investment Program:On March 23, 2009, the Treasury, in conjunction with
the FDIC 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, 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.
 96




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Given the nature of the industries in which we operate, our businesses are, and in the future may
become, involved in various legal proceedings, the ultimate resolution of which is inherently
unpredictable and could have a material adverse effect on our business, financial position, results
of operations or cash flows.
  
 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
  
 Item 5. Other Information
  
 Item 6. Exhibits
  97




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##### Table of Contents



SIGNATURES
  PHH CORPORATIONBy:
    /s/ Jerome J. SelittoJerome J. SelittoPresident and Chief Executive Officer  By:
    /s/ Sandra E. BellSandra E. BellExecutive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)  98




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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, 2005.3.2
    
    Articles Supplementary.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on March 27, 2008.3.3
    
    Articles of Amendment to the Charter of PHH
Corporation effective as of June 12, 2009.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on June 16, 2009.3.4
    
    Amended and Restated By-Laws.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on April 2, 2009.4.1
    
    Specimen common stock certificate.
    
    Incorporated by reference to Exhibit 4.1 to our Annual
Report on Form 10-K for the year ended December 31, 2004
filed on March 15, 2005.4.2
    
    See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
of the Amended and Restated Articles of
Incorporation, as amended, and Amended and
Restated By-laws of the registrant defining the
rights of holders of common stock of the
registrant.
    
    Incorporated by reference to Exhibit 3.1 to our Current
Reports on Form 8-K filed on February 1, 2005, March 27,
2008, June 16, 2009 and April 2, 2009, respectively.4.3
    
    Rights Agreement, dated as of January 28, 2005, by
and between PHH Corporation and The Bank of New
York Mellon (formerly known as The Bank of New
York).
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on February 1, 2005.4.4
    
    Indenture dated as of November 6, 2000 between PHH
Corporation and The Bank of New York Mellon
(formerly known as The Bank of New York, as
successor in interest to Bank One Trust Company,
N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.3 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.4.4.1
    
    Supplemental Indenture No. 1 dated as of November
6, 2000 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.4 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.
 99




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.4.2
    
    Supplemental Indenture No. 2 dated as of January
30, 2001 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on February 8, 2001.4.4.3
    
    Supplemental Indenture No. 3 dated as of May 30,
2002 between PHH Corporation and The Bank of New
York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 4.5 to our Quarterly
Report on Form 10-Q for the quarterly period ended June
30, 2007 filed on August 8, 2007.4.4.4
    
    Supplemental Indenture No. 4 dated as of August
31, 2006 between PHH Corporation and The Bank of
New York Mellon (formerly known as The Bank of New
York, as successor in interest to Bank One Trust
Company, N.A.), as Trustee.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 1, 2006.4.4.5
    
    Form of PHH Corporation Internotes.
    
    Incorporated by reference to Exhibit 4.6 to our Quarterly
Report on Form 10-Q for the quarterly period ended March
31, 2008 filed on May 9, 2008.4.4.6
    
    Form of 7.125% Note due 2013.
    
    Incorporated by reference to Exhibit 4.5 to our Current
Report on Form 8-K filed on February 24, 2003.4.5
    
    Amended and Restated Base Indenture dated as of
December 17, 2008 among Chesapeake Finance
Holdings LLC, as Issuer, and JP Morgan Chase Bank,
N.A., as Indenture Trustee.
    
    Incorporated by reference to Exhibit 10.76 to our Annual
Report on Form 10-K for the year ended December 31, 2008
filed on March 2, 2009.4.5.1
    
    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.
 100




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.5.2
    
    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, 2006.4.5.3
    
    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 CP 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, 2006.4.5.4
    
    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 CP 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, 2007.4.5.5
    
    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 CP 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.
 101




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.5.6
    
    Second Amendment, dated as of November 30, 2007,
to the Amended and Restated Series 2006-2
Indenture Supplement, dated as of December 1,
2006, as amended as of March 6, 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 10.1 to our Current
Report on Form 8-K filed on December 6, 2007.4.5.7
    
    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 CP 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, 2008.4.5.8
    
    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.
 102




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference4.5.9
    
    Third Amendment, dated as of December 17, 2008, to
the Amended and Restated 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, 2009.4.5.10
    
    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, 2009.4.5.11
    
    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.
    
    Filed herewith.4.5.12
    
    Series 2009-2 Indenture Supplement, dated as of
September 11, 2009, among Chesapeake Funding LLC,
as issuer, and The Bank of New York Mellon, as
indenture trustee.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 16, 2009.4.6
    
    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, 2008.4.6.1
    
    Form of Global Note 4.00% Convertible Senior Note
Due 2012 (included as part of Exhibit 4.6).
    
    Incorporated by reference to Exhibit 4.2 to our Current
Report on Form 8-K filed on April 4, 2008.
 103




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ExhibitNo.
    
    Description
    
    Incorporation by Reference4.7
    
    Indenture dated as of September 29, 2009, by and
between PHH Corporation and The Bank of New York
Mellon, as Trustee.
    
    Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on October 1, 2009.4.7.1
    
    Form of Global Note 4.00% Convertible Senior Note
Due 2014 (included as part of Exhibit 4.7).
    
    Incorporated by reference to Exhibit A of Exhibit 4.1 to
our Current Report on Form 8-K filed on October 1, 2009.10.1
    
    Amended and Restated Competitive Advance and
Revolving Credit Agreement, dated as of January 6,
2006, by and among PHH Corporation and PHH Vehicle
Management Services, Inc., as Borrowers, J.P.
Morgan Securities, Inc. and Citigroup Global
Markets, Inc., as Joint Lead Arrangers, the
Lenders referred to therein (the Lenders), and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Incorporated by reference to Exhibit 10.47 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.1.1
    
    Second Amendment, dated as of November 2, 2007, to
the Amended and Restated Competitive Advance and
Revolving Credit Agreement, as amended, dated as
of January 6, 2006, by and among PHH Corporation
and PHH Vehicle Management Services, Inc., as
Borrowers, J.P. Morgan Securities, Inc. and
Citigroup Global Markets, Inc., as Joint Lead
Arrangers, the Lenders referred to therein, and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on November 2, 2007.10.1.2
    
    Third Amendment, dated as of March 27, 2008, to
the Amended and Restated Competitive Advance and
Revolving Credit Agreement, as amended, dated as
of January 6, 2006, by and among PHH Corporation
and PHH Vehicle Management Services, Inc., as
Borrowers, J.P. Morgan Securities, Inc. and
Citigroup Global Markets, Inc., as Joint Lead
Arrangers, the Lenders referred to therein, and
JPMorgan Chase Bank, N.A., as a Lender and
Administrative Agent for the Lenders.
    
    Filed herewith.10.2
    
    Separation Agreement, dated as of January 31,
2005, by and between Cendant Corporation and PHH
Corporation.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report on Form 8-K filed on February 1, 2005.10.3
    
    Amended and Restated Tax Sharing Agreement dated
as of December 21, 2005 between PHH Corporation
and Cendant Corporation.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on December 28, 2005.
 104




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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.4
    
    Amended and Restated Limited Liability Company
Operating Agreement, dated as of January 31, 2005,
of PHH Home Loans, LLC, by and between PHH Broker
Partner Corporation and Cendant Real Estate
Services Venture Partner, Inc.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.1
    
    Amendment No. 1 to the Amended and Restated
Limited Liability Company Operating Agreement of
PHH Home Loans, LLC, dated May 12, 2005, by and
between PHH Broker Partner Corporation and Cendant
Real Estate Services Venture Partner, Inc.
    
    Incorporated by reference to Exhibit 3.3.1 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2005 filed on November 14, 2005.10.4.2
    
    Amendment No. 2, dated as of March 31, 2006 to the
Amended and Restated Limited Liability Company
Operating Agreement of PHH Home Loans, LLC, dated
as of January 31, 2005, as amended.
    
    Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of Cendant Corporation (now known as
Avis Budget Group, Inc.) filed on April 4, 2006.10.4.3
    
    Strategic Relationship Agreement, dated as of
January 31, 2005, by and among Cendant Real Estate
Services Group, LLC, Cendant Real Estate Services
Venture Partner, Inc., PHH Corporation, Cendant
Mortgage Corporation, PHH Broker Partner
Corporation and PHH Home Loans, LLC.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.4
    
    Trademark License Agreement, dated as of January
31, 2005, by and among TM Acquisition Corp.,
Coldwell Banker Real Estate Corporation, ERA
Franchise Systems, Inc. and Cendant Mortgage
Corporation.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.5
    
    Marketing Agreement, dated as of January 31, 2005,
by and between Coldwell Banker Real Estate
Corporation, Century 21 Real Estate LLC, ERA
Franchise Systems, Inc., Sothebys International
Affiliates, Inc. and Cendant Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on February 1, 2005.10.4.6
    
    Management Services Agreement, dated as of March
31, 2006, between PHH Home Loans, LLC and PHH
Mortgage Corporation.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on April 6, 2006.10.4.7
    
    Trademark License Agreement, dated as of January
31, 2005, by and between Cendant Real Estate
Services Venture Partner, Inc., and PHH Home
Loans, LLC.
    
    Incorporated by reference to Exhibit 10.66 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5
    
    Origination Assistance Agreement, dated as of
December 15, 2000, as amended through March 24,
2006, by and between Merrill Lynch Credit
Corporation and Cendant Mortgage Corporation
(renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.67 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.
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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.5.1
    
    Portfolio Servicing Agreement, dated as of January
28, 2000, as amended through October 27, 2004, by
and between Merrill Lynch Credit Corporation and
Cendant Mortgage Corporation (renamed PHH Mortgage
Corporation).
    
    Incorporated by reference to Exhibit 10.68 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.2
    
    Loan Purchase and Sale Agreement, dated as of
December 15, 2000, as amended through March 24,
2006, by and between Merrill Lynch Credit
Corporation and Cendant Mortgage Corporation
(renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.69 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.3
    
    Equity Access® and OmegaSM Loan
Subservicing Agreement, dated as of June 6, 2002,
as amended through March 14, 2006, by and between
Merrill Lynch Credit Corporation, as servicer, and
Cendant Mortgage Corporation (renamed PHH Mortgage
Corporation), as subservicer.
    
    Incorporated by reference to Exhibit 10.70 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.4
    
    Servicing Rights Purchase and Sale Agreement,
dated as of January 28, 2000, as amended through
March 29, 2005, by and between Merrill Lynch
Credit Corporation and Cendant Mortgage
Corporation (renamed PHH Mortgage Corporation).
    
    Incorporated by reference to Exhibit 10.71 to our Annual
Report on Form 10-K for the year ended December 31, 2005
filed on November 22, 2006.10.5.5
    
    Letter Agreement dated August 8, 2008 by and
between PHH Mortgage Corporation and Merrill Lynch
Credit Corporation relating to the Servicing
Rights Purchase and Sale Agreement dated January
28, 2000, as amended.
    
    Incorporated by reference to Exhibit 10.69 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2008 filed on November 10, 2008.10.5.6
    
    Mortgage Loan Subservicing Agreement by and
between Merrill Lynch Credit Corporation and PHH
Mortgage Corporation dated as of August 8, 2008.
    
    Incorporated by reference to Exhibit 10.70 to our
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2008 filed on November 10, 2008.10.6
    
    Master Exchange Agreement, dated as of March 7,
2006, by and among PHH Funding, LLC, Chesapeake
Finance Holdings LLC (f/k/a Chesapeake Funding
LLC) and D.L. Peterson Trust.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on March 13, 2006.10.7
    
    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, 2008.10.8
    
    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.
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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.8.1
    
    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, 2008.10.9
    
    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, 2008.10.9.1
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated March 27, 2008 by and
between PHH Corporation and J.P. Morgan Chase
Bank, N.A.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.2
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation and
J.P. Morgan Chase Bank, N.A.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.3
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and J.P. Morgan Chase Bank, N.A.
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.4
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and J.P. Morgan Chase
Bank, N.A.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.5
    
    Master Terms and Conditions for Convertible Debt
Bond Hedging Transactions dated March 27, 2008 by
and between PHH Corporation and Wachovia Bank,
N.A.
    
    Incorporated by reference to Exhibit 10.6 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.6
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation and
Wachovia Bank, N.A.
    
    Incorporated by reference to Exhibit 10.7 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.7
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and Wachovia Bank, N.A.
    
    Incorporated by reference to Exhibit 10.8 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.8
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and Wachovia Bank,
N.A.
    
    Incorporated by reference to Exhibit 10.9 to our Current
Report of Form 8-K filed on April 4, 2008.10.9.9
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated March 27, 2008 by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.10 to our Current
Report of Form 8-K filed on April 4, 2008.
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ExhibitNo.
    
    Description
    
    Incorporation by Reference10.9.10
    
    Master Terms and Conditions for Warrants dated
March 27, 2008 by and between PHH Corporation
and Citibank, N.A.
    
    Incorporated by reference to Exhibit
10.11 to our Current Report of Form 8-K
filed on April 4, 2008.10.9.11
    
    Confirmation of Convertible Bond Hedging
Transactions dated March 27, 2008 by and between
PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit
10.12 to our Current Report of Form 8-K
filed on April 4, 2008.10.9.12
    
    Confirmation of Warrant dated March 27, 2008 by
and between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit
10.13 to our Current Report of Form 8-K
filed on April 4, 2008.10.10
    
    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, 2008.10.10.1
    
    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, 2008.10.11
    
    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.
    
    Filed herewith.10.12
    
    Purchase Agreement dated September 2, 2009 by
and among PHH Corporation, PHH Vehicle
Management Services, LLC, Chesapeake Funding LLC
and J.P. Morgan Securities, Inc, Banc of America
Securities LLC and Citigroup Global Markets,
Inc., as representatives of several initial
purchasers.
    
    Filed herewith.10.13
    
    Purchase Agreement dated September 23, 2009, by
and between PHH Corporation, Citigroup Global
Markets Inc., J.P. Morgan Securities Inc. and
Wells Fargo Securities, LLC, as representatives
of the Initial Purchasers
    
    Incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.1
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009,
by and between PHH Corporation and JPMorgan
Chase Bank, National Association, London Branch
    
    Incorporated by reference to Exhibit
10.2 to our Current Report on Form 8-K
filed on September 29, 2009.
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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.13.2
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH
Corporation and JPMorgan Chase Bank, National
Association, London Branch
    
    Incorporated by reference to Exhibit
10.3 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.3
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and JPMorgan Chase Bank,
National Association, London Branch
    
    Incorporated by reference to Exhibit
10.4 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.4
    
    Confirmation of Warrants dated September 23,
2009, by and between PHH Corporation and
JPMorgan Chase Bank, National Association,
London Branch
    
    Incorporated by reference to Exhibit
10.5 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.5
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009,
by and between PHH Corporation and Wachovia
Bank, National Association
    
    Incorporated by reference to Exhibit
10.6 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.6
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH
Corporation and Wachovia Bank, National
Association
    
    Incorporated by reference to Exhibit
10.7 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.7
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and Wachovia Bank,
National Association
    
    Incorporated by reference to Exhibit
10.8 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.8
    
    Confirmation of Warrants dated September 23,
2009, by and between PHH Corporation and
Wachovia Bank, National Association
    
    Incorporated by reference to Exhibit
10.9 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.9
    
    Master Terms and Conditions for Convertible Bond
Hedging Transactions dated September 23, 2009,
by and between PHH Corporation and Citibank,
N.A.
    
    Incorporated by reference to Exhibit
10.10 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.10
    
    Master Terms and Conditions for Warrants dated
September 23, 2009, by and between PHH
Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit
10.11 to our Current Report on Form 8-K
filed on September 29, 2009.10.13.11
    
    Confirmation of Convertible Bond Hedging
Transactions dated September 23, 2009, by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit
10.12 to our Current Report on Form 8-K
filed on September 29, 2009.
 109




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.13.12
    
    Confirmation of Warrants dated September 23, 2009,
by and between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.13 to our Current
Report on Form 8-K filed on September 29, 2009.10.13.13
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and JPMorgan Chase Bank,
National Association, London Branch
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 1, 2009.10.13.14
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and JPMorgan Chase Bank, National Association,
London Branch
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on October 1, 2009.10.13.15
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and Wachovia Bank,
National Association
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on October 1, 2009.10.13.16
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and Wachovia Bank, National Association
    
    Incorporated by reference to Exhibit 10.4 to our Current
Report on Form 8-K filed on October 1, 2009.10.13.17
    
    Amendment to Convertible Bond Hedging Transaction
Confirmation dated September 29, 2009, by and
between PHH Corporation and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.5 to our Current
Report on Form 8-K filed on October 1, 2009.10.13.18
    
    Confirmation of Additional Warrants dated
September 29, 2009, by and between PHH Corporation
and Citibank, N.A.
    
    Incorporated by reference to Exhibit 10.6 to our Current
Report on Form 8-K filed on October 1, 2009.10.14
    
    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, 2005.10.14.1
    
    PHH Corporation Officer Deferred Compensation Plan.
    
    Incorporated by reference to Exhibit 10.11 to our Current
Report on Form 8-K filed on February 1, 2005.10.14.2
    
    PHH Corporation Savings Restoration Plan.
    
    Incorporated by reference to Exhibit 10.12 to our Current
Report on Form 8-K filed on February 1, 2005.10.14.3
    
    PHH Corporation 2005 Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.9 to our Current
Report on Form 8-K filed on February 1, 2005.
 110




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.14.4
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Agreement, as
amended.
    
    Incorporated by reference to Exhibit 10.28 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.14.5
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Conversion Award
Agreement.
    
    Incorporated by reference to Exhibit 10.29 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.14.6
    
    Resolution of the PHH Corporation Board of
Directors dated March 31, 2005, adopting
non-employee director compensation arrangements.
    
    Incorporated by reference to Exhibit 10.32 to our
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 filed on May 16, 2005.10.14.7
    
    Amendment Number One to the PHH Corporation 2005
Equity and Incentive Plan.
    
    Incorporated by reference to Exhibit 10.35 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.14.8
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Non-Qualified Stock Option Award Agreement,
as revised June 28, 2005.
    
    Incorporated by reference to Exhibit 10.36 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.14.9
    
    Form of PHH Corporation 2005 Equity and Incentive
Plan Restricted Stock Unit Award Agreement, as
revised June 28, 2005.
    
    Incorporated by reference to Exhibit 10.37 to our
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2005 filed on August 12, 2005.10.14.10
    
    Form of PHH Corporation Amended and Restated
Severance Agreement for Certain Executive Officers
as approved by the PHH Corporation Compensation
Committee on January 10, 2008.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on January 14, 2008.10.14.11
    
    PHH Corporation Change in Control Severance
Agreement by and between the Company and Sandra
Bell dated as of October 13, 2008.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 14, 2008.10.14.12
    
    Form of 2009 Performance Unit Award Notice and
Agreement for Certain Executive Officers, as
approved by the Compensation Committee on March
25, 2009.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on March 31, 2009.10.14.13
    
    Amended and Restated 2005 Equity and Incentive
Plan (as amended and restated through June 17,
2009).
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on June 22, 2009.10.14.14
    
    Transition Services and Separation Agreement by
and between PHH Corporation and Terence W. Edwards
dated August 5, 2009.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on August 5, 2009.
 111




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporation by Reference10.14.15
    
    Amendment to the Transition Services and
Separation Agreement by and between PHH
Corporation and Terence W. Edwards dated as of
September 11, 2009.
    
    Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on September 16, 2009.10.14.16
    
    Release by and between PHH Corporation and Terence
W. Edwards dated as of September 11, 2009.
    
    Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on September 16, 2009.10.14.17
    
    Employment Agreement dated as of October 26, 2009,
between Jerome J. Selitto and PHH Corporation.
    
    Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on October 30, 2009.31.1
    
    Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.31.2
    
    Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.32.1
    
    Certification of Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.32.2
    
    Certification of Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith.
 
 *
    
    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. 112