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PHH Corporation (NYSE:PHH)

Q2 2011 Earnings Call

July 29, 2011 10:00 am ET

Executives

Jonathan McGrain – SVP, Corporate Communications

Jerry Selito - President and CEO

Glenn Messina - COO

David Coles - Interim EVP and CFO

Luke Hayden - EVP, Mortgage

George Kilroy - EVP, Fleet

Analysts

Bose George – KBW

Kevin Bartner – FBR Capital Markets

Henry Coffey – Stern Agee

Paul Miller– FBR Capital Markets

Operator

Please stand by. Good morning ladies and gentlemen. Welcome to the PHH corporation second quarter 2011 earnings conference call. Your lines will be a listen-only mode during remarks by PHH management. At the conclusion of the company’s remarks we will begin the question and answer session at which time I will give you instructions on entering the queue to ask your questions.

Today’s call is also being webcast and recorded for replay purposes. The audio replay can be accessed either on the company’s website at www.phh.com over telephone at 719-457-0820 or 1-888-203-1112 using conference ID 3624790 beginning shortly after the conclusion of the call.

It will be available until August 13, 2011. This access information is also described in the Company’s earnings release and will be repeated at the end of our session. At this time, Jonathan McGrain Senior Vice President of Corporate Communications will precede with the introduction.

Jonathan McGrain

Good morning and welcome to the PHH Corporation’s second quarter 2011 earnings conference call. On the call today, are Jerry Selioto, President and Chief Executive Officer, Glenn Messina, Chief Operating Officer, David Coles, Interim Executive Vice President and Chief Financial Officer, Luke Hayden, Executive Vice President of Mortgage and George Kilroy, Executive Vice President of Fleet.

Remarks by our management team will be supplemented by a presentation that is posted on our website at www.phh.com. The earnings release we issued yesterday may be accessed from our website or you may request a fax or mail copy by calling our investor hotline at 856-917-7405. Please note that statements made during this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as further described in slide two of the presentation.

We will also be discussing various non-GAAP financial measures including core earnings pre-tax, core earnings after-tax and core earnings per share. Please refer to our earnings release and accompanying investor presentation for description of these non-GAAP financial measures as well as a reconciliation of such measures to their respective most directly comparable GAAP financial measures.

With that, I will now turn the call over to Jerry Selito.

Jerry Selito

Good morning and thank you for joining our second quarter earnings call. I’ll start off with a brief discussion of our strategy and goals for the remainder of 2011 and beyond. David will then review the highlights of our financial results for the quarter and Luke and George will provide perspective on the Mortgage and Fleet businesses. Then we’ll take your questions. But first, I’d like to introduce Glenn Messina, our new Chief Operating Officer of PHH Corporation. Glenn joins us with more than 25 years of management experience including the past 17 at GE, with his leadership roles included serving as CEO and before that CFO of their Mortgage Services businesses as well as CFO of their Equipment Services business.

Glenn’s focus will be on operational excellence building upon the progress we made last year in process improvements, increasing productivity and reducing expenses, while delivering excellent customer service. This aligns with our strategy to be the most efficient provider of process management services in the Mortgage and Fleets businesses, delivering the highest quality and service to our business partners. With Glenn on our team, I’ll be able to focus more of my time and energy on the company’s strategic direction.

As you know, we’re navigating through uncertain times in the mortgage space. We continue to refine our fleet strategy, by strengthening our product offerings and increasing our market focus. Our goal remains to drive consistent earnings growth through the cycle leveraging the unique combined franchise value of both businesses. Welcome Glenn.

Glenn Messina

Thank you, Jerry. I’m very pleased to be part of the PHH team. Both of our businesses are built on solid foundations and have tremendous opportunities for growth. A critical focus of mine will be operationalizing the key initiatives to achieve that growth, while building and maintaining a culture of operational excellence based on Six Sigma best practices.

I’m already working closely with Luke, George and their teams and over the coming months I look forward to meeting and hearing from our investors. Thanks again.

Jerry Selito

Thanks, Glenn. To state the obvious, the first of 2011 has been an interesting time in the mortgage industry. Origination volumes were down and the total market looks like it will come in between $900 billion and millions in the year. And when demand is down, margins are under pressure. Our mortgage market share which is based on closings, declined from 4.3% in the first quarter of 2011 to 3.7% in the second quarter. We expect that this decline and despite it, we remain committed to our full year market share goal of 5%.

Luke will provide additional perspective on our plan to achieve our goal in a moment. Our focus in the mortgage has been on expense control, while continuing to work with our partners to drive profitable volumes. As expected, increased regulatory oversight is driving costs up on the servicing side of the industry. We expect our servicing cost per loan to increase presently 5% to 7% as a result.

Fleet continues to deliver strong earnings and is a key contributor to the company’s results with segment profit of $19 million up from $13 million in the second quarter of 2010. Results were driven by strong growth in the fee-based revenue. We expect to continue to grow the Fleet business and its contribution to earnings through new client signings and a sustained effort to increase profitable business across multiple market segments.

I’m frequently asked about the benefits of a combined Fleet and Mortgage business. It’s during times like this, when the earnings from the Mortgage business are under pressure that the steady earnings of Fleet help offset the volatility of Mortgage earnings.

Our goal is to continue to grow fleet profits and its contribution to our total earnings. We have a unique business model and an incredible franchise in both business segments that when executed well, will allow us to outperform the markets. Our clients view us as product and process experts and look towards the design operate and optimize solutions that integrates seamlessly with their operations and from high quality service.

We’ve remained focused on building sustainable businesses that deliver low to mid-teens returns through the cycle and that can compete effectively across a variety of economic and market conditions. We continue to grow our Mortgage Servicing portfolio, the key driver of earnings in the Mortgage business, while increasing earnings and the less capital-intensive Fleet business, challenging markets, where opportunities are bound and creative and talented people thrive.

Despite the challenges that presents, I’m enthusiastic about our prospects. Our pipeline of new PLF clients has never been stronger. Our Servicing portfolio continues to grow and Fleet is firing on all cylinders.

With that, I’ll turn the call over to David for detailed perspective around our financial results. David?

David Coles

Thank you, Jerry and good morning to everyone. I’ll now take a few minutes to review the results for the quarter. On a GAAP basis, the net loss attributable to PHH Corporation for the quarter, stood at $41 million or $0.73 per share. Core earnings off the tax were $29 million or $0.50 per share.

On the mortgage production side, IRLCs was $7.5 billion, compared to $8.4 billion in the second quarter of last year. On the Servicing side, we continue to build our Mortgage Servicing portfolio which increased to $174 billion this quarter, up from a $156 billion at the end of the prior year quarter and a $171 billion at the end of the prior quarter.

In terms of credit trends, delinquency rates in our Servicing portfolio were relatively steady in the quarter, with 30-day plus and 60-day plus delinquencies up and 90-day plus down from the end of the first quarter. All of these metrics which are detailed on slide 10 of the Investor Presentation remain below the levels at the end of 2010.

Foreclosure costs were $24 million for the second quarter of 2011, versus $20 million in the prior year quarter and we expect that it will remain at an elevated level for at least the balance of 2011, driven by agency reviews. The vast majority of these repurchase request relate to a 2005 through 2008 originations.

On an absolute dollar basis, the UPB at loans in foreclosure and OREO in our servicing portfolio declined during the quarter from $3.9 billion to $3.7 billion. Given the relatively weak demand that we see in the mortgage market, we continue to aggressively manage our headcount while improving customer satisfaction. On the first quarter call, we reported year-to-date reductions in mortgage production staffing of nearly 600 FTEs.

Year-to-date through June 30, our mortgage production staffing is down 924 FTEs inclusive of 169 staffs that were eliminated as a result of the STARS joint venture transaction. Company-wide our FTEs are down over 10% from year-end 2010, reflecting investments we have made in sales personnel to drive our organic sales initiatives, investments in mortgage servicing personnel to proactively conform to anticipated heightened standards in loan servicing and foreclosure practices and growth in our Fleet support staff.

We have also added resources in certain of our corporate functions including risk management. I wanted also to discuss our capital and liquidity positions which remains strong as the result of several transactions we completed during the quarter. At the end of the quarter, we held $212 million in cash and cash equivalents and $530 million of revolving credit facility was undrawn except the $16 million of LCs.

At this point, we believe that we are appropriately capitalized given the growth plans of the businesses, regulatory uncertainties facing the mortgage business and that business had inherent volatility.

And now, Luke will provide some commentary on the Mortgage business.

Luke Hayden

Thank you, David and good morning to everyone. The first half of 2011 has been a tough environment for mortgage businesses. We faced industry originations volume to decline 30% from 2010.

As Jerry mentioned, we declined in our market share in the second quarter based on closings. We believe the first quarter share reflected the closing of the disproportionately large overhang of fourth quarter 2010 applications volume relative to our competitors. While we cannot control the overall size of the market, or the margins offers, there are things we can control.

First, we can manage the share of the market we take. We have launched initiatives to deepen the penetration of selected large PLS clients through a financial advisor outreach campaign, we refer to as boots on the ground. We supported this initiative with refinements in loan processing that have led to significant increases and customer satisfaction scores. I am pleased to report three of our top four PLS clients have exhibited year-over-year growth.

Historically, lower industry originations have led to an increase in Mortgage outsourcing opportunities and this year is no exception. Our pipeline of potential PLS clients is strong. We launched our newest PLS client Barclays late in the second quarter and other new PLS clients should come on-stream this quarter and next.

We remain disciplined in our pricing approach to the correspondent lending channel where margins have compressed significantly and we have shifted our resource allocation accordingly. Our mix of correspondent originations declined from 39% in the fourth quarter of 2010 to 28% in the second quarter of 2011, reflecting the lower profit opportunity and our disciplined approach to pricing.

These actions have driven second quarter application volume growth of 40% versus the first quarter, while the MBA index was up only 10%. Some of our largest competitors reported quarter-over-quarter application growth of only 7% to 8%.

Based on this, we expect meaningful share growth in the third quarter relative to our competitors and we remain committed to achieving our full year market share goal of 5%. The second thing we can control is our expense base.

As David mentioned, we are aggressively managing our headcount to make sure we are properly staffed to meet the opportunities presented. The majority of our staff reductions occurred on the production side of the business. We continue to achieve one of the best servicing replenishment rates in the industry, driven by our market share growth and lower prepayments on our servicing portfolio. Unlike most of our competitors, our portfolio grew by approximately $3 billion in the second quarter and $7.6 billion in the first half of the year.

Our weighted average mortgage coupon in the servicing book has declined to slightly less than 4.8% an historic low for PHH. Our quarterly prepayments average 10%, as compared to the 12% life time prepayment assumption used in the servicing valuation model. We have reviewed the consent orders executed by 14 of our competitors related to mortgage servicing and foreclosure processing activities. While PHH is not a party to any of these agreements, we believe specific aspect of these agreements embody the evolving servicing standards.

We have launched an initiative to conform to these new standards. As Jerry said earlier, we expect the adoption of these standards will modestly increase our servicing expenses. That said, PHH continues to have one of the highest quality servicing books in the industry.

Now, I will turn it over to George.

George Kilroy

Thanks, Luke. Good morning. As Jerry said, the Fleet business is ahead of last year and we feel we are on target to meet our 2011 goals. Our focus continues to be on outstanding customer service for our clients and their drivers gaining market share in the US and Canada in growing our Truck business. Our quarterly unit drivers reflect the results of our continued focus on Fleet Management Services, with strong growth in service unit counts, in maintenance service cards, fuel cards and accident management vehicles for the three and six months ended in June.

Additionally, we are starting to see some favorable indicators in new markets we are exploring such as Fleet Services for state and local government. As you can imagine, most of our corporate clients are feeling the impact of an economy that continues to struggle and as a consequence our relying on PHH to continue to execute on our cost savings and productivity enhancing programs as well as to introduce new solutions.

This has provided opportunities in areas that have not traditionally utilized outsourced fleet management solutions and we intend to continue to capitalize on this need. Our new client sales pipeline is very robust in the US and in Canada and we expect to have decisions from a number of prospective clients in the next 60-days that will continue to grow our service unit count.

Our client retention has been the most successful since 2006. We are confident that this will also continue. Remember that 97% of our lease portfolio is open-end leases and we do not take residual risk. However, the vehicle that we have sold for our account in both this business and our Truck business, have resulted in increased re-marketing gains due to a very strong used vehicle market.

Speaking of trucks, last year we told you we were refocusing our attention on our fair market value heavy truck business which as you recall, is this indication business. As a result, we are ahead of our goals in trucks for the first half of this year and expect to meet or exceed our goals for the full year.

It’s also worth mentioning that PHH bridge funding plan has been very successful and we believe is the most robust in the fleet management industry. This year we have more than sufficient capacity not only for our current requirements, but also for our plan growth. We’ve been very pleased with the market reaction to our offerings and with the ultimate execution.

And with that, I’ll turn it back over to Jerry.

Jerry Selito

Thank you, George. And with that, we are ready to take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) We’ll hear first from Bose George with KBW.

Bose George – KBW

Hey, good morning and good to see strong operating earnings this quarter. I had a couple of questions. First on the headcount reduction. You guys mentioned that headcount reduction continued through June. So can we expect to see more benefits on the expense side in the back half of the year related to that?

David Coles

Yes, as you start to see the full year if there is headcount reductions.

Bose George – KBW

Okay, great and switching to the gain on sales, that was up very nicely for the quarter and it looks like the benefit there came from that net reductions to the gain on sale number and I was wondering if there are any unusual items there or is this kind of a gain on sale margin level that looks reasonable for the third quarter?

Luke Hayden

No George, there actually are some non-frequent individual transactions, most notably the scratching dent sales that produced an $8 million gain and that’s in the 82 basis point reduction to the total margin number that’s presented in the investor presentation.

Bose George – KBW

Okay, so if I pull out that $8 million number then it becomes pretty normalized?

Luke Hayden

Yes I think you need to put on a little more than that. We actually had another small transaction, I’d say more or like $10 million to $12 million.

Bose George – KBW

Okay, great and then just switching to the servicing side that you guys mentioned is 5% to 7% increase in servicing expenses. Is that already incorporated in your MSR mark?

Luke Hayden

It is.

Bose George – KBW

Okay, great. Thanks very much. I’ll come back on.

Operator

We’ll move next to Paul Miller with FBR Capital Markets.

Kevin Bartner – FBR Capital Markets

This is Kevin Bartner filling in for Paul Miller. He had stepped out for a moment. I wonder if you can get a little bit of color around the market share goal of 5% by the year-end from the 3.7%. Is there is something that you’ve seen in the pipeline that really push it and you mentioned more contracts coming on board, but can you give us a little more color around that and pay outs?

Luke Hayden

Sure this is Luke. Basically we have a big focus on increasing our penetration in the financial advisor business and our PLS clients and that’s paying dividend at this point. We also have contracts coming on stream. I would also point to the fact that we believe the total size of the market is probably lower than what most industry analysts felt today.

Kevin Bartner – FBR Capital Markets

Would you think that’s a market going forward to be in line with what MBA is pushing out there and you can get familiar more than on that just because refi really low, like that refi burnout and how we are looking to that?

Jerry Selito

We actually think that we are estimating the size of the second quarter originations to be $260 billion. Most analysts have estimated that to be somewhere between $300 million and $325 million. So we think the actual numbers are going to be south of the MBA expectations.

Kevin Bartner – FBR Capital Markets

Just on agency perspectives or?

Jerry Selito

No total market size.

Kevin Bartner – FBR Capital Markets

Total market. Okay, and then also on the gain on sale margin the 159, are you seeing continued price competition there. I notice that the pricing margin came down just a bit, but not as much as what we expected heavy competition for pricing. Do you see that coming down further, or is that pretty much stabilized and your views?

Jerry Selito

I would point to say, we think the margins are relatively stable at this point in time lower than we’d like but stable.

Luke Hayden

One of the things that we are seeing in the market is, we have mentioned early on and Luke mentioned in his comments, the price compression that we are seeing in the correspondent channel, that’s beginning to abate somewhat. So we really seeing, we saw a slight pickup in pricing margin and we really don’t expect to see continued significant pressure on the margins going forward.

Kevin Bartner – FBR Capital Markets

Okay, thank you very much.

Operator

(Operator Instructions) We’ll hear next from Henry Coffey with Stern, Agee,

Henry Coffey – Stern Agee

Good morning everyone and thanks for sharing so much with us. A couple of questions, one is very just simple. What was your book value and your changeable book value per share at the end of the June quarter?

Jerry Selito

Jon you want to take that?

Operator

You can move to your next question.

Jonathan McGrain

Give us a minute to calculate that. We’ll call it out.

Henry Coffey – Stern Agee

Secondly, little more complex, I’d share this is how previous to this call, I would say I’m confused by the change in the fair value assessment of your MSR and maybe you could go over the inputs with this payment fees are running below estimates, rates are low and obviously given the current disruption in the markets we are not exactly looking at a refi. So we have to assume everything’s IQ higher operating costs. You’ve been running at about what 6.5 to 6.8 basis points. Can you give us a sense of what the cost adjustment is related, I’m assuming to the C&Ds issued to your larger peers. All the other inputs have either been better or stable.

Luke Hayden

Henry, this is Luke. The predominant driver of the lower valuation is in fact rates. So if we take a look at that, a $130 million is a scribe to lower to rates. Embedded in that $130 is a $20 million item that relates to expected increases and servicing expenses on a go forward basis. So $130 million is really rate-driven and a slight increase in expenses, the actual prepayments for the quarter had a value of $29 million and then the new additions had a positive value of roughly $77 million and that gets you to from one balance sheet point to the next balance sheet point. Does that help.

Henry Coffey – Stern Agee

Yes, but which rates were down relative to March 31? So we can get an idea of how to track this going forward.

Luke Hayden

Sure. We look at secondary rates and we look at primary rates. So the secondary rates are changes in the secondary rate for mortgage transactions, that was down roughly 25 basis points.

Henry Coffey – Stern Agee

I don’t want to sign in too many notes, but I don’t even know what that means. Be a little more articulate at least everybody knows I’m kind of new to the story.

Luke Hayden

Okay, the rate at which mortgage securities change hands has declined 25 basis points over the quarter to the yield on mortgage-backed securities. Current coupon mortgage-backed securities declined 25 basis points over the quarter. There is another that we call the primary rate which reflects the rate that we charge consumers and typically the primary rate is a rate that’s over and above the secondary rate. When we have declines in the primary secondary spread, that’s a negative element for the valuation of servicing rights and we did have such decline in this month of roughly five basis points I believe.

Henry Coffey – Stern Agee

Five basis points of price change will equal about $130 million relative to the size of the MSR and that’s how we should track this?

Luke Hayden

No, no. I’m sorry, maybe I’m not being clearing off. It’s a 25 basis point decline in secondary rates plus a five basis point decline in the primary secondary spread. And that’s what …

Henry Coffey – Stern Agee

Okay, I get it now. That’s helpful, thank you. And then I’ll just going to keep pushing on this. Your capitalized excess servicing from the second quarter was how much?

Luke Hayden

It was $1.588 billion is my recollection. I’m saying that from memory.

Henry Coffey – Stern Agee

No, no, from the mortgage origination company.

Luke Hayden

That was a $77 million addition.

Henry Coffey – Stern Agee

Okay. And then a third question before we get back to the book value question. Regardless of how tough things are, you guys are running a portfolio that’s significantly better than the big four or five people in the industry. You’ve got a sixth place, seventh place in the servicing table. You be at five are running delinquencies that are almost twice what you do. What role do you see yourself playing either in the special servicing business or the bulk service being or the transfer of servicing voluntary or otherwise for the major five banks. Is there a role with PHH servicing company in that as someone told me that that X side of your mortgage group is actually fairly involved with Fannie Mae’s efforts on this fronts. I was wondering if you could see that as a – quantify that as a strategic opportunity or is that just…

Jerry Selito

Henry this is Jerry. It’s obviously an opportunity for us and it’s something that we are looking at. I think you know the press has stated that BOA really had to downsize its servicing portfolio and that’s an opportunity that we are looking at. We are, as you noted, I mean our servicing portfolios are the most salaried in the industry. We think we do a very good job on the servicing side of the business. So it is definitely an opportunity. In terms of whether or not we are looking at specialty servicing opportunities, that’s not one of our focuses now. It is something we are exploring and looking into, but we do see some opportunities in the sub-servicing of the business.

Henry Coffey – Stern Agee

You could see yourself stepping in as sub-servicer not necessarily buying assets but earning the same returns you do on your existing portfolio?

Jerry Selito

That’s correct. We see ourselves as a sub-servicer and not so much in buying servicing, but as a sub-servicer. We just don’t feel a need at this point in time to buy servicing but we certainly is sub-servicer.

Henry Coffey – Stern Agee

Can you put any numbers to that for us or?

Jerry Selito

At this time, it’s really kind of speculation. I can’t put a specific number. I can just say that we are looking at opportunities. If those opportunities materialize, we’ll make announcements.

Glenn Messina

And then you can email me the book value stuff maybe we should get on with the Q&A.

Jerry Selito

Yes, Jon are you ready or, we may be ready with that answer.

Jonathan McGrain

Yes I think the question was, what is the tangible book value per share and that’s $27.16.

Henry Coffey – Stern Agee

Thank you.

Operator

(Operator Instructions) We’ll move to a follow-up question from Bose George.

Bose George – KBW

Hey good morning. I had a couple of follow-ups. On credit, I noticed, it looks like there was no charge on Atrium this quarter. And do you think the charges there are largely done or is it just kind of lumpiness in the year-over-year numbers are so good for that?

Luke Hayden

I would attribute it to lumpiness. I don’t think the charges there are largely done. It’s really going to depend on the timing of defaults relative to premium income that with Atrium.

Bose George – KBW

Okay, and then just another credit one. Can you comment just on incremental repurchase requests during the quarter like where they are trending?

Jerry Selito

We are actually seeing heightened repurchase requests coming from the GFEs. We think we are going to continue to see that for the remainder of the year.

Bose George – KBW

And actually turns about, do you think it’s the sight of their, I mean are there vintages that there is still hiding or what’s driving the - I don’t think, this magnitude of increase is still, is it still going up whatever 25% or any color on that would be great too?

Luke Hayden

My sense Bose, is that the – we’ve seen an increase and I expect it to stay at this higher level for the balance of 2011 likely into 2012 as well. The vast majority of the demands that we get today come from vintage years 2005 to 2008.

Bose George – KBW

Okay, and I assume on the private-label side there is still nothing really going on?

Luke Hayden

Nothing significant on the private-label side.

Bose George – KBW

Okay, great, thanks.

Jerry Selito

Thank you Bose.

Operator

(Operator Instructions) We’ll take another follow-up question from Paul Miller.

Paul Miller– FBR Capital Markets

I have a follow-up question on the sub-servicing question you mentioned there. So you mentioned that top thing you can get into that. I know its speculation right now. But do you see that’s something where, you could just pack business or is it something where maybe you pick up a small servicer that has expertise doing that type of work?

Jerry Selito

No it’s more, the former rather than the latter. I mean, we are a servicer, we are a major servicer and it’s just something that we complement our existing business. We have a significant sub-servicing portfolio today.

Paul Miller– FBR Capital Markets

Right, would you go after small and more distressed servicing portfolio?

Jerry Selito

No, it’s more on the procurement side of the business.

Paul Miller– FBR Capital Markets

Okay, thank you.

Jerry Selito

Thank you.

Operator

We’ll move next to Henry Coffey of Stern Agee.

Henry Coffey – Stern Agee

Yes, I just think this is a more interesting part of the discussion. As the market changes, and the larger banks start to sort of – I know BOA specifically say they wanted to download their commitment to MSRs. If you were in – and it sounds like the banks are more interested than selling than sub-servicing, is there a mechanism by which you could fund those acquisitions? I know Aquan is working on a pretty interesting transaction on the origination side do you see any of that I don’t want to be in the mortgage business moving towards it?

Jerry Selito

Yeah, I think on the latte – I’ll answer the latter first, the latter question first. I mean, we are seeing we have a very, very strong private-label client back. I’m sorry, we have a very strong backlog and for the private-label clients today. We are going to be rolling out at some of - over the second half of the year as well as into the first quarter.

The receptivity today, I think a lot of lenders given the heightened sensitivity to mortgage servicing in the mortgage production side of the business, receptivity to our outsource management proposals are really running very, very high. So we have a robust pipeline or what we believe the best that we’ve ever had for the private-label clients and we are continuing to see interest in that regard.

In terms of – with the first part of your question, whether or not we are interested in buying MSR.

Henry Coffey – Stern Agee

Yes, because it made the market may head in that direction.

Jerry Selito

Yeah, more and more are inclined to self-service then we are to actually purchase MSR.

Henry Coffey – Stern Agee

And it’s certainly big enough opportunity that you’ll probably have to choose.

Jerry Selito

I think that, that’s right. So if the right numbers are there, we might be an interested purchaser. But, we are really, we think better positioned at this point in time on a …

Henry Coffey – Stern Agee

That I mentioned the opportunity is big enough that to be the sub-servicer that would probably be a viable option.

Jerry Selito

That’s correct.

Operator

With no further questions in the queue, I’ll turn the conference over to you Mr. Selito for any closing or additional remarks.

Jerry Selito

Thank you very much. To conclude, 2011 has brought new challenges and opportunities. We are demonstrating our ability to grow our and increase core earnings through this business cycle. When the economy in the hazy marking eventually returns to a state of normalcy, our earnings will benefit from the work we are doing today to build our servicing portfolio, grow our Fleet business on a capital efficient basis, and manage expenses.

We look forward to continuing to drive earnings through improved efficiency and enhanced customer satisfaction which will position us to deliver sustainable attractive returns to our shareholders throughout the business cycle. Thank you for your continued interest and support.

Operator

This concludes the PHH Corporation second quarter 2011 earnings conference call. Once again ladies and gentlemen the replay will be available beginning later today at the company’s website at www.phh.com or by dialing 719-457-0820 or 1-888-203-1112 using conference ID, 3624790. It will be archived until August 13, 2011. You may now disconnect.

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