Moody's on April 11 placed the Ba3 long-term corporate familyand senior unsecured ratings of PHHCorp. on review for downgrades.
The rating agency's action comes after PHH that private-label client MerrillLynch Home Loans intends to move the origination of new applications for certainmortgage loan products to its internal operations and to insource its sub-servicingportfolio by year-end by an amount equal to 18% of PHH's total servicing portfolioas of Dec. 31, 2015. PHH also announced that Morgan Stanley Private Bank NA extendedits contract by one year to Oct. 31, 2017, but will be reassessing its mortgageorigination services arrangement with the company.
Moody's will assess the impact of the lost business on PHH'sprofitability, liquidity and capital along with the potential loss of other customersduring the review.
The rating agency said the changes to private label contractscould affect the company's ability to achieve adequate profitability which continuesto be weak due to insufficient origination volumes and high compliance and regulatorycosts. PHH's strong capital position and solid liquidity profile, including a highunrestricted cash balance, offset its weak profitability, Moody's noted.