PHH Corp., which controls the nation's eighth largest servicer, is likely to take a $100 million writedown on the value of its mortgage servicing rights in the third quarter, according to a new research report from FBR Capital Markets.

"PHH has indicated that every 10 basis point change in primary rates will drive a decline in the fair value of the MSR of roughly $40 million," FBR says. "Estimating the exact write-down is nearly impossible, and we use $100 million for modeling purposes. Note that widening spreads and the flattening yield curve will likely drive a higher MSR write-down."

A spokesman for PHH declined to comment, noting that the company is in a "quiet period" before it releases third quarter earnings.

Despite the anticipated writedown on MSRs, FBR still likes the company, calling it an "outperform." The research firm expects PHH to earn $1.06 a share in the third quarter, compared to $0.50 in the second quarter, citing higher residential funding volumes, and strong gain-on-sale margins.

FBR projects that PHH will fund $11 billion in the third quarter, compared to $10 billion in the second.

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