University Bancorp 2H2013 Profit $1,774,791 $0.38 per Share

 University Bancorp, Inc. (OTCQB: UNIB) announced that it had unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the first half of 2013 of $1,774,791, $0.38 per share on average shares outstanding of 4,667,598 for the first six months. Year-to-date, the pre-tax profit of the Company's wholly-owned subsidiary, University Bank, was $3,373,850, above the budget by $1,187,657, and consolidated after-tax net income before minority interest was $2,229,700, above the budget by $786,815. For the first six months of 2013 minority interest of $399,864 and preferred stock dividends of $48,388 were incurred.

After deducting minority interest of $650,616 and preferred stock dividends of $44,300, net income attributable to University Bancorp, Inc. common stock shareholders in the first half of 2012 was $1,400,444 or $0.301 per share on average shares outstanding for the period of 4,655,098.

President Stephen Lange Ranzini noted, "The budget for 2013 calls for the company to have net income attributable to University Bancorp, Inc. common stock shareholders of $2,708,857 after-tax, $0.58 per share, the bank to earn $6.36 million pre-tax and $4.2 million after-tax before minority interest. We are on track to exceed that. The first three months of the first half of the year are expected to be the least profitable period of each year because residential purchase transactions are typically slow in the winter season."

For the trailing 12 months ended June 30, 2013, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $2,290,206 or $0.491 per share on average shares outstanding of 4,667,598 and our return on equity attributable to common stock shareholders was 32.6% on initial equity of $7,030,506. Annualized return on equity for the first half of 2013 was 47.0% on initial equity of $7,545,921.

Tier 1 Capital rose to 12.45% or $13,384,000 on average assets of $107.5 million at 6/30/2013, was 11.25% at 3/31/2013 or $11,966,000 on average assets of $106.4 million, was 9.69% at 12/31/2012 on average assets of $117.4 million, and is projected to be 14.18% at 12/31/2013 if we achieve our 2013 budget goal. Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders rose to $9,320,712 or $2.00 per share, based on shares outstanding at June 30, 2013 of 4,667,598. Tier 1 Capital includes common stock equity from investors that own 20% of the bank's operating subsidiaries Midwest Loan Services and University Islamic Financial. As a result of a pending sale of half the bank's mortgage servicing rights to Nationstar Mortgage Holding Inc., the current values on half the bank's investment in mortgage servicing rights will be locked in via a cash sale. "Unless the bank initiates a dividend, in the fourth quarter of 2013 the bank may reach its target of 14% Tier 1 Capital Ratio," noted President Stephen Lange Ranzini.

Michigan and the Ann Arbor MSA continue to increase employment and as a result, the performance of our portfolio loans and our overall asset quality continues to improve and we are experiencing low loan delinquencies. Total classified loans on our watch list at 6/30/2013 number 13 for $1,715,106 (with 3 of those fully reserved) and ORE numbered 4 for $370,262 for a total of 17 substandard assets carried at $2,085,368, or 15.58% of Tier 1 Capital. The Allowance for Loan Losses stands at $1,176,900, or 2.29% of the amount of portfolio loans excluding the loans held for sale, which have their own separate reserve of $689,600 at June 30, 2013. We are in the middle of the process of exploring a sale of substandard loans through DebtX and if the sale occurs as DebtX believes it will, we will be left with under $700,000 of substandard loans for a cost expected to be about $145,000.

In the first six months of 2013, our residential mortgage origination groups originated $340.9 million of mortgages sold to the secondary market, of which $206.3 million were originated by our retail origination group, University Lending Group, LLC, $72.6 million were originated by our Islamic banking unit, University Islamic Financial, and the remainder originated by our credit union origination group. 72% of our retail originations and 51% of our Islamic originations financed purchase transactions. We have been focused on our objective of building a sustainable mortgage origination business not dependent upon refinancing. 

Liquidity remains excellent and we manage an additional $70 million of deposits in an off-balance sheet sweep arrangement through a series of deposit accounts at the Federal Home Loan Bank of Indianapolis, which are available to us to meet any withdraws in just a few minutes.

Other key statistics:

5-year annual average revenue growth*, 45.7% 1-year annual revenue growth*, 107.7% Debt to equity ratio+, 10.8% Current Ratio,#  1.50x Trailing 12 Months P-E Ratiox, 5.6x

*Using Trailing 12 month 2Q2013 sales which were $44,206,337, 2011 sales which were $21,280,296 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock including accrued dividends of $1,126,635 and total Company equity capital (including common stock $9,320,712 plus preferred stock of $1,126,635) for total equity capital of $10,447,347.
#Parent company only current assets and investment securities of $25,639 divided by 12 month projected cash expenses of $17,141.
xBased on last sale price of $2.75 per share.

President Stephen Lange Ranzini noted, "While the results for the past 6 months are very encouraging, we remain focused on and concerned about our ability to fully comply with highly complex compliance rules and the tremendous amount of work that these will require of us to succeed in future regulatory examinations. Recent successes by our compliance team include the completion of work to prepare our residential mortgage subservicing business for its first CFPB examination and work to enhance internal controls around accounts payable and reimbursable business expenses incurred by staff. Current areas of major focus and follow-up include enhancements to internal audit for which we doubled our 2013 budget to $700,000 a year and preparation for our first CFPB examinations expected later in 2013 or early 2014."

The bank's 1Q2013 Capital Stress Test from our outside vendor projects that in two years, the bank would have 14.8% Tier 1 Capital in a Recession Scenario (Adverse Case) and 12.9% Tier 1 Capital in a Depression Scenario (Severely Adverse Case). The Depression scenario also models a 50% decline in mortgage originations. The initial Tier 1 Capital used for the stress test was the 11.25% ratio the bank had as of 3/31/2013.

With the end of the latest refinancing boom and recent regulatory changes, we expect many competitors to exit the mortgage lending business, which will improve the long run profitability of our mortgage origination business. We took advantage of the turmoil among some of our competitors to hire some outstanding originators who focus on Realtor® referred purchase transactions and continue to recruit additional ones. Closings in July are tracking higher than June and may end the month slightly above budgeted levels and margins have decreased slightly from budgeted levels as we react to some recent competitive pressure from those competitors who were overly reliant on refinancing.

Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: http://www.university-bank.com/Bancorp.html.

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its subsidiaries, holds and manages a total of over $13.3 billion in loans and assets and our 328 employees make us the 9th largest bank based in Michigan. University Bank is an
FDIC-insured, locally owned and managed community bank, and meets the financial needs of its community through its creative and innovative services. Founded in 1890, University Bank® is proud to have been selected as the "Community Bankers of the Year" by American Banker magazine and as the recipient of the American Bankers Association's Community Bank Award. University Bank is a Member FDIC. The operating subsidiaries of University Bank which are members of our corporate family, ranked by their size of revenues .

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PHH Corporation Announces Second Quarter 2013 Results

 

For the quarter ended June 30, 2013, the Company reported net income attributable to PHH Corporation of $90 million or $1.58 per basic share. Core loss (after-tax)* and core loss per share* for the quarter ended June 30, 2013, were $2 million and $0.03, respectively. These results include a $21 million pre-tax loss ($0.24 per basic share after tax) related to the termination of an inactive mortgage reinsurance agreement. This transaction generated $69 million of unrestricted cash of which $30 million was received in the second quarter of 2013 and $39 million was received in the third quarter of 2013.

Tangible book value per share* was $28.14 at June 30, 2013, up 6% from $26.62 at March 31, 2013.

Glen A. Messina, president and CEO of PHH Corporation, said, “Over the past year and a half, through the execution of our strategic priorities, PHH has made significant progress in placing the company in a position of strength to deal with the cyclical and dynamic nature of the mortgage industry. In the second quarter, our financial performance reflected the impact of a rising interest rate environment, which drove an increase in the value of our mortgage servicing rights and negatively impacted our mortgage origination volume. I’m pleased with the progress the company is making in managing through this transition period to a rising interest rate environment. Our results were also impacted by a charge related to the commutation of our remaining Atrium reinsurance contract. The Fleet business continued to provide solid profitability.”

Messina added, “We are taking the necessary actions to reposition our mortgage businesses for the current interest rate and regulatory environment. We are scaling expenses to be consistent with lower expected mortgage production volumes, while maintaining our commitment to high customer service levels and accommodating the demands of the rapidly-changing regulatory environment. In part due to recent regulatory changes, we also are seeking to amend certain private label contracts to address the fundamental changes in the industry and ensure our programs are meeting our mutual objectives. Further, we are working to ensure that we have access to multiple funding sources aimed at lowering our capital needs and overall cost of capital.”

* Non-GAAP Financial Measures

Core earnings or loss (pre-tax), core earnings or loss (after-tax), core earnings or loss per share, adjusted cash flow, tangible book value and tangible book value per share are financial measures that are not in accordance with U.S. generally accepted accounting principles (GAAP). See the “Note Regarding Non-GAAP Financial Measures” below for a detailed description of these and certain other Non-GAAP financial measures and reconciliations of such Non-GAAP financial measures to their most directly comparable GAAP financial measures as required by Regulation G.

Mortgage Production and Mortgage Servicing

Mortgage Production Segment Profit

Mortgage Production segment profit in the second quarter of 2013 was $44 million, down 44% from $78 million in the second quarter of 2012 and down $1 million from the first quarter of 2013. Segment profit declined from the second quarter 2012 primarily due to a 20% decline in IRLCs expected to close, a 33 bps decline in total loan margin and greater operating expenses as a result of higher retail origination volume. A slight decline in sequential quarter segment profit reflected the impact of narrower total loan margin offset by 9% growth in IRLCs expected to close.

Mortgage Servicing Segment Profit

Mortgage Servicing segment profit in the second quarter of 2013 was $81 million, which included a favorable $155 million market-related fair value adjustment to our MSR, primarily from an increase in mortgage interest rates, which was offset slightly by $1 million in hedge losses. The MSR fair value adjustment for prepayments and recurring cash flows was an unfavorable $80 million in the second quarter of 2013, compared to an unfavorable $77 million in the first quarter of 2013. Loan servicing income includes losses associated with the termination of reinsurance agreements of $21 million and $16 million in the second quarters of 2013 and 2012, respectively.

Repurchase and foreclosure-related charges during the second quarter of 2013 decreased to $11 million from $39 million in the second quarter of 2012 and $15 million in the first quarter of 2013. Repurchase and foreclosure-related charges were reflective of the continued decrease in repurchase requests as the Agencies have continued to focus on reviewing loans from pre-2009 origination years.

Interest Rate Lock Commitments

IRLCs expected to close of $5.4 billion in the second quarter of 2013 declined 20% from the second quarter of 2012, primarily reflecting declining demand for refinancings attributable to rising interest rates, a decline in wholesale/correspondent volume as we remain focused on cash usage and the relative profitability of wholesale/correspondent originations, and a continued shift in mix toward fee-based production. IRLCs expected to close increased 9% from $5.0 billion in the first quarter of 2013, driven by sequential quarter growth in home purchase volume and the addition of HSBC as a private label client, partially offset by a greater portion of our production done on a fee-for-service basis.

Total Loan Margin

Total loan margin on IRLCs expected to close for the second quarter of 2013 was 348 bps, a 24 bps decrease from the first quarter of 2013 and 33 bps less than the second quarter of 2012. Margins narrowed in the second quarter of 2013, primarily due to rising mortgage interest rates. Margins generally widen when mortgage interest rates decline and tighten when mortgage interest rates increase, as loan originators attempt to balance origination volume with operational capacity.

Mortgage Closing Volume

Total second quarter 2013 mortgage closings were $14.8 billion, a 15% increase from the second quarter of 2012. Retail closings increased 21% in the second quarter of 2013 compared to the second quarter of 2012 and 16% compared to the first quarter of 2013, reflecting our strategy of growth in our retail channels. Retail closings represented 91% of our total closings during the second quarter of 2013. Fee-based closings continued to trend higher in the second quarter of 2013, increasing to 51% of total retail closings. This was up from 43% of total retail closings in the second quarter of 2012 and 47% of total retail closings in the first quarter of 2013. Our private label agreement with HSBC that was launched in the second quarter of 2013 did not meaningfully contribute to closing volume in the quarter.

Unpaid Principal Balance of Mortgage Servicing Portfolio

At June 30, 2013, the UPB of our capitalized servicing portfolio was $133.1 billion, down 3% from March 31, 2013, and 10% from June 30, 2012. These decreases reflect prepayments that were not fully offset by additions from new loan production.

At June 30, 2013, the UPB of our total loan servicing portfolio was $228.6 billion, a 26% increase from March 31, 2013, and a 19% increase from June 30, 2012. The sequential quarter and year-over-year increases in our total loan servicing portfolio primarily reflect approximately $47 billion of subservicing UPB that we assumed from HSBC in the second quarter of 2013, partially offset by the aforementioned declines in the UPB of our capitalized servicing portfolio.

Mortgage Servicing Rights

At June 30, 2013, the book value of our mortgage servicing rights was $1.2 billion, up 22% from the end of 2012. During the second quarter of 2013, $71 million in MSR value was added from the capitalization of new servicing rights from new loans sold in the quarter, and our MSR value increased by $155 million due to market-related fair value adjustments. Our MSR value decreased $80 million in the second quarter of 2013 related to prepayments and the receipt of recurring cash flows, primarily attributable to continued high prepayment speeds from refinances driven by low mortgage interest rates. We also incurred $1 million in MSR hedge losses in the second quarter of 2013.

Repurchase and Foreclosure-related Charges

Repurchase and foreclosure-related charges in the second quarter of 2013 were $11 million, down from $15 million in the first quarter of 2013, reflecting a continued downward trend of repurchase requests. Total repurchase and foreclosure-related reserves were $191 million at the end of the second quarter of 2013, compared to $194 million at the end of the first quarter of 2013. As of June 30, 2013, the estimated amount of reasonably possible losses in excess of total repurchase and foreclosure-related reserves was $45 million, unchanged from the end of the first quarter of 2013. Although Fannie Mae and Freddie Mac are still expected to be complete with repurchase requests for pre-2009 origination years by the end of 2013, losses associated with government insured loan foreclosures could persist into 2014 and beyond as loans continue to work through the foreclosure process and we evaluate loans and expenses that are not eligible for insurance reimbursement.

Fleet Management Services

Segment Profit

In the second quarter of 2013, Fleet Management Services segment profit was $21 million, unchanged from the first quarter of 2013 and down from $22 million in the second quarter of 2012. Sequential quarter segment profit remained unchanged as growth in our fleet lease income was offset by greater operating expenses.

Fleet Leasing

Net investment in fleet leases at June 30, 2013, increased 2% compared to March 31, 2013, while average leased vehicle units remained unchanged during the second quarter of 2013. This was the result of higher-capitalized units continuing to replace lower-cost vehicles, consistent with our emphasis on service fleets.

Fleet Management Fees

In the second quarter of 2013, Fleet management fees decreased to $44 million from $45 million in the second quarter of 2012, primarily driven by lower client participation in driver safety training services. Fleet management fees increased by $1 million compared to the first quarter of 2013 primarily attributable to sequential quarter average unit growth in our key fleet service offerings.

Liquidity Update

Liquidity at June 30, 2013, included $1.0 billion in unrestricted cash and cash equivalents.

As of June 30, 2013, we had no outstanding balances on our $305 million in total unsecured revolving credit facilities or our $119 million Canadian secured revolving credit facility.

On July 29, 2013, we amended our U.S. revolving credit agreement to increase our flexibility to repay or refinance our 2016 and 2017 unsecured notes prior to the maturity of our revolving credit facility.

Conference Call/Webcast

The Company will host a conference call at 10:00 a.m. (Eastern Time) on Thursday, August 1, 2013, to discuss its second quarter 2013 results. All interested parties are welcome to participate. You can access the conference call by dialing (800) 344-6491 or (785) 830-7988 and using the conference ID 7283605 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations page of PHH’s website at www.phh.com/invest under webcasts and presentations.

An investor presentation of supplemental schedules will be available by visiting the Investor Relations page of PHH's website at www.phh.com/invest on Thursday, August 1, 2013, prior to the start of the conference call.

A replay will be available beginning shortly after the end of the call through August 15, 2013, by dialing (888) 203-1112 or (719) 457-0820 and using conference ID 7283605, or by visiting the Investor Relations page of PHH's website at www.phh.com/invest.

About PHH Corporation

Headquartered in Mount Laurel, New Jersey, PHH Corporation (PHH) is a leading provider of business process management services for the mortgage and fleet industries. Its subsidiary, PHH Mortgage, is one of the largest originators and servicers of residential mortgages in the United States1, and its subsidiary, PHH Arval, is a leading fleet management services provider in the United States and Canada. PHH is dedicated to delivering premier customer service and providing value-added solutions to its clients. For additional information about PHH and its subsidiaries, please visit the Company’s website at www.phh.com.

1 Inside Mortgage Finance, Copyright 2013

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward looking-statements are not based on historical facts but instead represent only our current beliefs regarding future events. All forward-looking statements are, by their nature, subject to risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied in such forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements. Such statements may be identified by words such as “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.”

You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature. You should consider the areas of risk described under the heading “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our periodic reports filed with the U.S. Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, in connection with any forward-looking statements that may be made by us or our businesses generally. Such periodic reports are available in the “Investors” section of our website at http://www.phh.com and are also available at http://www.sec.gov. Except for our ongoing obligations to disclose material information under the federal securities laws, applicable stock exchange listing standards and unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any forward-looking statements or to report the occurrence or non-occurrence of anticipated or unanticipated events.

Capacity for Mortgage asset-backed debt shown above excludes $2.3 billion not drawn under uncommitted facilities, and $380 million available under committed off-balance sheet gestation facilities.

* NOTE REGARDING NON-GAAP FINANCIAL MEASURES

Core earnings or loss (pre-tax and after-tax), core earnings or loss per share, adjusted cash flow, tangible book value and tangible book value per share are financial measures that are not in accordance with GAAP. See Non-GAAP Reconciliations below for a reconciliation of these measures to the most directly comparable GAAP financial measures as required by Regulation G.

Core earnings or loss (pre-tax and after-tax) and core earnings or loss per share involves differences from Segment profit or loss, Income or loss before income taxes, Net income or loss attributable to PHH Corporation and Basic earnings or loss per share attributable to PHH Corporation computed in accordance with GAAP. Core earnings or loss (pre-tax and after-tax) and core earnings or loss per share should be considered as supplementary to, and not as a substitute for, Segment profit (loss), Income (loss) before income taxes, Net income (loss) attributable to PHH Corporation or Basic earnings (loss) per share attributable to PHH Corporation computed in accordance with GAAP as a measure of the Company’s financial performance.

Adjusted cash flow involves differences from Net increase or decrease in cash and cash equivalents computed in accordance with GAAP. Adjusted cash flow should be considered as supplementary to, and not as a substitute for, Net increase or decrease in cash and cash equivalents computed in accordance with GAAP as a measure of the Company’s net increase or decrease in cash and cash equivalents.

Tangible book value and tangible book value per share involve differences from Total PHH Corporation stockholders’ equity computed in accordance with GAAP. Tangible book value and tangible book value per share should be considered as supplementary to, and not as a substitute for, Total PHH Corporation stockholders’ equity computed in accordance with GAAP as a measure of the Company’s financial position.

The Company believes that these Non-GAAP Financial Measures can be useful to investors because they provide a means by which investors can evaluate the Company’s underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business for a given period.

The Company also believes that any meaningful analysis of the Company’s financial performance by investors requires an understanding of the factors that drive the Company’s underlying operating performance which can be obscured by significant unrealized changes in value of the Company’s mortgage servicing rights, as well as any gain or loss on derivatives that are intended to offset market-related fair value adjustments on the Company’s mortgage servicing rights, in a given period that are included in Segment profit (loss), Income (loss) before income taxes, Net income (loss) attributable to PHH Corporation and Basic earnings (loss) per share attributable to PHH Corporation in accordance with GAAP.

Core earnings or loss (pre-tax and after-tax) and core earnings or loss per share

Core earnings or loss (pre-tax and after-tax) and core earnings or loss per share measure the Company’s financial performance excluding unrealized changes in fair value of the Company’s mortgage servicing rights that are based upon projections of expected future cash flows and prepayments as well as realized and unrealized changes in the fair value of derivatives that are intended to offset changes in the fair value of mortgage servicing rights. The changes in fair value of mortgage servicing rights and related derivatives are highly sensitive to changes in interest rates and are dependent upon the level of current and projected interest rates at the end of each reporting period.

Value lost from actual prepayments and recurring cash flows are recorded when actual cash payments or prepayments of the underlying loans are received, and are included in core earnings based on the current fair value of the mortgage servicing rights at the time the payments are received.

The presentation of core earnings is designed to more closely align the timing of recognizing the actual value lost from prepayments in the mortgage servicing segment with the associated value created through new originations in the mortgage production segment. The Company believes that it will likely replenish most, if not all, realized value lost from changes in value from actual prepayments through new loan originations and actively manages and monitors economic replenishment rates to measure its ability to continue to do so. Therefore, management does not believe the unrealized change in value of the mortgage servicing rights is representative of the economic change in value of the business as a whole.

Core earnings metrics are used in managing the Company’s mortgage business. The Company has also designed certain management incentives based upon the achievement of core earnings targets, subject to potential adjustments that may be made at the discretion of the Human Capital and Compensation Committee of the Company’s Board of Directors.

Limitations on the use of Core Earnings

Since core earnings or loss (pre-tax and after-tax) and core earnings or loss per share measure the Company’s financial performance excluding unrealized changes in value of mortgage servicing rights, such measures may not appropriately reflect the rate of value lost on subsequent actual payments or prepayments over time. As such, core earnings or loss (pre-tax and after-tax) and core earnings or loss per share may tend to overstate operating results in a declining interest rate environment and understate operating results in a rising interest rate environment, absent the effect of any offsetting gains or losses on derivatives that are intended to offset changes in fair value on the Company’s mortgage servicing rights.

Adjusted cash flow

Adjusted cash flow measures the Company’s Net increase or decrease in cash and cash equivalents for a given period excluding changes resulting from the issuance of equity, the purchase of derivative securities related to the Company’s stock or the issuance or repayment of unsecured or other debt by PHH Corporation. The Company believes that Adjusted cash flow is a useful measure for investors because the Company’s ability to repay future unsecured debt maturities or return capital to equity holders is highly dependent on a demonstrated ability to generate cash. Accordingly, the Company believes that Adjusted cash flow may assist investors in determining the amount of cash and cash equivalents generated from business activities during a period that is available to repay unsecured debt or distribute to holders of the Company’s equity.

Adjusted cash flow can be generated through a combination of earnings, more efficient utilization of asset-backed funding facilities, or an improved working capital position. Adjusted cash flow can vary significantly between periods based upon a variety of potential factors including, but not limited to, timing related to cash collateral postings, mortgage origination volumes and margins, fleet vehicle purchases, sales, and related securitizations.

Adjusted cash flow is not a substitute for the Net increase or decrease in cash and cash equivalents for a period and is not intended to provide the Company’s total sources and uses of cash or measure its change in liquidity. As such, it is important that investors review the Company’s consolidated statement of cash flows for a more detailed understanding of the drivers of net cash provided by (used in) operating activities, investing activities, and financing activities.

Adjusted cash flow metrics are used in managing the Company’s mortgage and fleet businesses. The Company has also designed certain management incentives based upon the achievement of adjusted cash flow targets, subject to potential adjustments that may be made at the discretion of the Human Capital and Compensation Committee of the Company’s Board of Directors.

Tangible book value and Tangible book value per share

Tangible book value is a measure of Total PHH Corporation stockholders’ equity computed in accordance with GAAP excluding the value of goodwill and other intangible assets. Tangible book value per share is a measure of tangible book value, on a per share basis, using the number of shares of outstanding PHH Corporation common stock as of the applicable measurement date. Certain of the Company’s debt agreements contain indebtedness-to-tangible net worth ratio covenants, and such ratios are calculated using a measure of tangible net worth that is calculated on a basis similar to the Company’s calculation of tangible book value. Accordingly, the Company believes that tangible book value and tangible book value per share provide useful supplementary information to investors.

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Starwood Property Trust's European Commercial Real Estate Loan Servicer, Hatfield Philips International, Receives Special Servicer Rating Upgrade To 'CSS2' From Fitch Ratings

 

"Fitch's upgrade is a strong affirmation of our continuous efforts to enhance operational capabilities as well as our industry leadership in improving transparency in the marketplace," said Matthias Schlueter, Managing Director and Chief Operating Officer of Hatfield Philips. "We understand our reputation as one of the most trusted names in European loan servicing is our greatest asset and will continue to invest in areas that allow us to best serve our clients and continue to set the standard for the industry."

In announcing the upgrade of Hatfield's Special Servicer rating Fitch noted the Company's efforts over the past year to further enhance its already robust servicing capabilities. A key initiative recognized by Fitch is Hatfield's consolidation of its primary and special servicing teams into one loan asset management team. The change effectively streamlines the transfer process and creates case ownership by assigning one asset manager responsible for overseeing a loan from boarding to resolution.

Furthermore, Fitch's upgrade acknowledges Hatfield's commitment to providing maximum transparency and commends its comprehensive and detailed communication with investors on performing and non-performing loans. Fitch also credited the Company's efforts to develop an online portal that will enable investors to access comprehensive data and information on all loans that are currently in Special Servicing with Hatfield.

"With this positive upgrade, Hatfield Philips continues to establish itself as Europe's pre-eminent commercial real estate loan servicer," said Andrew Sossen, Chief Operating Officer of Starwood Property Trust. "Our focus remains on providing Hatfield Philips with the resources necessary to enhance its industry leading platform, support its transparency initiative and position the enterprise for future growth."

In examining its organizational structure, Fitch highlights that Hatfield's team of experienced professionals, consisting of in-house lawyers and specialists with broad finance and real estate expertise, ensures a consistent service standard. The Company currently employs over 120 commercial real estate servicing professionals located throughout Europe providing it with the local market knowledge and scale to best serve its diverse Pan-European client base.

In its review, Fitch notes Hatfield's investment in technology and infrastructure development as a key strength affording the Company robust compliance and monitoring systems that support an already strong governance framework. To ensure an optimal client experience, Hatfield plans to continually refine its innovative approach to loan servicing to evolve with the changing regulatory environment.

Highlighting Hatfield's practical special servicing experience, Fitch cited the Company's success resolving four UK loans and 11 EU loans in 2012.

About Starwood Property Trust, Inc.
Starwood Property Trust, Inc. is focused on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities ("CMBS"), and other commercial real estate-related debt investments. The Company through its 2013 acquisition of LNR Property LLC ("LNR") now also operates as special servicer in the United States and a primary and special servicer in Europe and has expanded its product offering to include fixed rate conduit loans. Starwood Property Trust, Inc. also invests in residential mortgage-backed securities ("RMBS") and residential real estate owned, and may invest in non-performing loans, commercial properties subject to net leases and residential mortgage loans. The Company is externally managed and advised by SPT Management, LLC, an affiliate of Starwood Capital Group, and has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.

About Hatfield Philips International Ltd:
Hatfield Philips International is one of Europe's largest primary and special servicer with approximately £18.5 billion assets under management. Since its inception in 1997, the Company has established itself as a full-service loan servicer, offering a complete suite of products and services to a wide range of clients that issue, own or invest in commercial mortgage backed securities and loan portfolios. Hatfield Philips is a subsidiary of LNR Property, a United States-based real estate investment, finance, management and development firm, which was acquired by Starwood Property Trust (STWD) in January 2013.

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QuickLoansBadCredit.org Develops New Loan Finder Process

 

QuickLoansBadCredit.org, the U.S. based consumer finance site for people with bad credit, announces the launch of a new loan finder process. Individuals in need of quick loans with plenty of choice and minimal bureaucracy can now approach the site and complete a fast and easy online application to access a secure database of specially selected finance and loan companies.

The site has built strong relationships with a high number of well-regarded and reputable online lenders and hopes to connect many consumers with firms able to grant loans for bad credit. The number of U.S. consumers with so-called "sub-prime" credit scores continues to increase and the site has created the finder process in order to simplify and aggregate the options that exist for these individuals.

The new process works by initiating contact with dozens of lenders after the applicant completes the secure online application form. According to the details input by the consumer, the site's intelligent algorithm selects lenders that are in the best position to consider the loan request.  It takes only a few minutes to complete the application form and decisions from lenders can be displayed on screen within a few seconds of clicking on submit.

Sam Milo, spokesperson for QuickLoansBadCredit.org, made the announcement of the new loan finder process in the following statement that was released to the press.

"Consumer with bad credit or no credit at all can look forward to using our free loans for bad credit finder and introduction service. It has been created to help consumers find reliable, professional and well regarded lenders that can consider loan applications fast ad pay out quickly. It is free to use and there is no pressure or obligation to accept any loan offer that might be made."

Upon clicking on the submit button, the application form is immediately scanned by lenders. If a loan is approved and accepted, the borrower is can expect to receive the loan within 24 hours, directly into their checking account.

QuickLoansBadCredit.org is not a lender. It is an independent loan comparison specialist and consumer finance website. The site features a range of informational articles and tips on improving bad credit and making responsible borrowing decisions. Learn more at: http://www.quickloansbadcredit.org/loans/online-loans/

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Financial Opposites in a Life Together

And boy, did Ms. Bartone, a 32-year-old legal recruiter, and Mr. Bartone, a 43-year-old bartender, have a lot to talk about. I was in their living room, in North Bergen, N.J., to witness it all as part of a “fiscal health day” exercise, where I promised to spend several hours helping readers organize their financial life.

The goal of our meeting was to try to reconcile their different money philosophies before they opened a joint bank account to handle their household expenses. They needed to figure out a way to track Mr. Bartone’s earnings, most of them in cash, which they were not entirely sure of. She also wanted a better way to track their spending (and overspending). And both of them had accumulated significant credit card debt, which had to be tackled before they could begin to think about saving for a house.

“Financially, we are opposites,” said Mr. Bartone, who has a sleeve of colorful tattoos that climb from each wrist to his elbows. “Total, total, total opposites.”

Both of them were honest about their financial behavior: Mr. Bartone acknowledged that he was the spender. Ms. Bartone described herself as determined and goal-oriented, and said she had saved significant sums in the past. But they now owe more than $30,000 on credit cards, a topic that Ms. Bartone said she had avoided broaching. So they had not had the tough talk about how best to stanch the bleeding and work on a joint plan to get out of debt. “I have been really cautious about not stepping on his pride,” she added.

But they volunteered to put it all on the table for their personal fiscal health day, the brainchild of my colleague Ron Lieber, which involves setting aside a full day to fine-tune finances and make headway on the money-related tasks that never seem to get done. I asked readers on the Bucks blog to submit their pleas, with the promise that I would meet with the candidate with the most compelling story.

Nearly 100 readers responded, many of them needing something more like an overhaul than a financial tuneup. There were tales of paralyzing student loan and credit card debts and crushing medical bills, as well as pleas from single people and young families hoping to do better than live paycheck to paycheck. Some lost their jobs in the recession, and had gotten new, lower-paying work and were trying to figure out how to live on less.

I chose the Bartones in part because their financial issues are all too common. Ms. Bartone, who has curly brown hair and a contagious smile, wanted to make sure she and her husband were on the same financial page and to set priorities on their financial to-do list. She also felt it would help to have a neutral third party to walk them through the process given that they are financial opposites. She calls herself neurotic and keeps spreadsheets. He puts his cash tips in a kitchen drawer.

Here is what we managed to get done in one afternoon:

MONEY TALK  The biggest accomplishment, by far, was having the newlyweds sit down at their dining room table to actually talk about their financial life, their differing outlooks and how their views were influenced by their upbringings. This was a huge step. My suggestion, unromantic as it may sound, was to make the money talk a weekly ritual, at least until they learned more about their income and spending patterns and made progress on paying down their debts.  

CREDIT CARD DEBT The couple have lived together for several years, yet each still did not know exactly how much debt the other had. So Ms. Bartone created two lists of each of their credit cards, along with the outstanding balances and interest rates. She has already started to pay down the cards with the highest rates first, and she said she would help her husband set up his own plan of attack. But she had a good question: since the interest rates on Mr. Bartone’s cards were more than twice as high as hers, should she focus on paying down his debt first?

I told her she could not enable his behavior, particularly if he did not start to control his spending. But I also contacted an expert after I left — Kristin Harad, of VitaVie Financial Planning, who had seen this situation many times before.

“Creating healthy habits as a unit is paramount,” she said, since they are building a future together. So yes, they should focus on paying down Mr. Bartone’s debt first. But that also means Mr. Bartone needs to remove the plastic from his wallet (and frankly, the financial planner said, so does Ms. Bartone). They should use only cash and debit cards and stow the rest of the cards away. (We will talk about how they managed to accumulate their debt below.)

 

 

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Student Debt and the Economy

The Federal Reserve Bank of New York recently released a study showing just why many young people are being strangled by student loans. It found that 43 percent of 25-year-olds had student debt in 2012, an increase from 27 percent in 2004.

Unemployment and the collapse of household income in the recession only made the borrowing problem worse.

According to the new study, student debt almost tripled between 2004 and 2012, and is approaching $1 trillion, while the percentage of borrowers who were more than 90 days delinquent had risen to 17 percent, from 10 percent in 2004. In addition, student loan debt was the only kind of household debt that continued to rise through the Great Recession, and it is now the second largest after mortgage debt.

The student debt crisis has its roots in state cuts to higher education that began in the 1980s. By savaging support to the public colleges and universities that educate about 70 percent of the nation’s students, the states forced up tuition, causing students to borrow steadily more. The Federal Reserve study estimates that nearly 18 percent of borrowers now have student loan debts of $25,000 to $50,000, and nearly 4 percent have balances greater than $100,000.

Distressed borrowers who financed their educations with federal student loans can get relief through the federal Income-Based Repayment program, which allows them to reduce their monthly payments based on their income. Another program, called Pay As You Earn, is limited to people who started borrowing during the recession. It also allows for lower payments, and borrowers who adhere to the payment arrangement can have their loans forgiven after 20 years — or 10 years if they hold public service jobs.

But students who have taken out private loans from banks or other institutions are often stuck with high interest rates, high payments and few consumer protections. For example, one federal analysis of student payments in 2009 found that 10 percent of borrowers with private loans were spending more than 25 percent of their incomes in monthly payments.

Because private loans offer little flexibility, borrowers in bad straits have few options except default, which makes it difficult for them to get jobs or credit, or even to rent apartments. Refinancing a private student loan at a lower rate is rarely possible.

To get a handle on the student debt problem, the federal government needs to provide relief programs for private loan borrowers too. The federal Consumer Financial Protection Bureau announced last month that it was soliciting ideas from policy makers and others for a plan that would give private loan borrowers some relief. Such a plan, which would most likely involve a public-private partnership that freed up capital for refinancing, would have to be part of any solution to the student debt crisis.

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Program Links Loans to Future Earnings

He needs $80,000, even after scholarships and grants. Mr. Toole wants to finance a big chunk of that through a new company called Pave, which connects people like him with “backers.” If he reaches his goal and raises $30,000 from Pave investors, he will pay them 7 percent of his projected annual salary for 10 years.

“If I decide to go into the Peace Corps or do something like work for a major firm that didn’t pay well for the first couple years out of school, the percentage of total income would be quite a bit lower than standard 10-year loan paybacks,” said Mr. Toole, who has commitments for nearly $11,000 so far.

The program comes with other perks: the investors, who clearly want to see their human investments succeed, often double as mentors.

“This is me reaching out and seeing if I can get access to people who can guide me through my career and push me around through their own networks,” Mr. Toole added. “I need solid financial mentorship. I am not great with money, and my parents cannot provide that for me.”

This alternative form of financing is unlikely to put even a tiny dent in the vast market for federal and private student loans. But with student debt approaching more than $1.2 trillion, particularly at a time when young graduates are facing high unemployment, it’s not that surprising that some people find the idea alluring. Viewed through another prism, critics call it a form of indentured servitude.

The program enrollees I spoke with found the whole idea liberating. They said they preferred to pay back a living being who took a risk instead of a faceless institution; it felt less like a loan, they said, and more like an opportunity. If a borrower wants to take a year to start a new company, for instance, or their income drops below, say, the poverty level, they aren’t required to make payments. The risk is shouldered by the investor.

The whole notion of using a portion of your future income to pay for higher education recently made headlines in Oregon. The state Legislature there approved a bill that would create a pilot program: instead of tuition, all students enrolled in state colleges would pay, say, 3 percent of their future income for about 20 years into a state-administered fund. That means some would pay more for their education than others; the program’s supporters say people should think about it as a social insurance program, like Social Security.

Pave and its competitors, including a company called Upstart, operate differently. Upstart, for instance, tries to estimate what you are likely to earn, based on factors including the college attended, the field of study and grade point average, among other things. “Harvard M.B.A.’s have a very high earning potential,” said Dave Girouard, the founder of Upstart and a former Google executive, “and that means they can raise more money for a lower portion of income.”

Among its small crop of first users, individuals have raised about $25,000 on average, though Rachel Honeth Kim, a Harvard graduate with an M.B.A., recently raised $100,000 from 37 investors, including Mr. Girouard.

Many of the people enrolled with companies like Pave and Upstart use the money to finance their own companies and ideas, or, like Mr. Toole, to further their education or pay off existing student debt. A freshman seeking to bankroll an entire college education isn’t the type of candidate these sites are seeking, at least not now.

The companies are also ushering the most promising candidates onto their programs, often with big entrepreneurial plans or causes that are likely to catch investors’ attention. But nobody is guaranteed to raise enough money to meet their goals.

There are other risks, too. If a person is wildly or even moderately successful, they may pay far more than they would owe using a traditional loan. And people with big dreams in lower-paying professions may not necessarily raise enough to cover their education costs.

Of course, if borrowers have enough income to pay their obligations but fail to, the whole experience will begin to feel more like a traditional loan. Delinquencies will be reported to the big credit bureaus. Collection agencies will get involved. (Borrowers will be held to their contracts. Pave and Upstart also had discussions with the Consumer Financial Protection Bureau, a federal regulator that oversees financial products and services.)

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