PHH Corp. could have to write down the value of its mortgage servicing rights by between $150 million and $200 million in the second quarter of 2010, according to an analyst's report from FBR Capital Markets.

Because of that, FBR is dropping its GAAP earnings per share estimate to a loss of $1.81. It is still projecting profitable operating EPS of $0.25.

The report said the MSR write-down "could cause weakness in PHH shares. We would use any weakness as an opportunity to take a position in PHH.

Additionally, we would point out that MSR write-downs are solely accounting losses and do not represent true economic value, particularly given the refi burnout that we are currently seeing in the market."

On a GAAP basis, FBR is now projecting PHH to lose $0.21 per share for the year. Separately, PHH said it has entered into an agreement with JPMorgan Chase Bank  that immediately reduces PHH's maximum borrowing capacity on an unsecured credit facility to $805 million.

That will be further cut to $525 million, effective Jan. 6, 2011. However, the line is extended until Feb. 29, 2012 and there is an option for an additional one year term at PHH's request.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.