http://www.streetinsider.com/Credit+Ratings/Moodys+Puts+PHH+Corp.+(PHH)+on+Watch+for+Downgrade+Following+Fleet+Deal/9552397.html
"The sale of the Fleet Management business weakens the company's franchise strength and results in a more concentrated monoline business solely focused on residential mortgage banking. The mortgage business has significant reliance on the company's Realology, Merrill Lynch and Morgan Stanley relationships which account for more than 60% of origination volume. In selling the operationally and financially more stable and more profitable fleet business, PHH becomes a cyclical, low margin, lower franchise strength prime mortgage banking business.
The company has indicated that it will use the sale proceeds to invest in its mortgage banking business, de-leverage its balance sheet, and return capital to shareholders. Nonetheless, it is likely that it will take several years before the company can reestablish acceptable levels of profitability. This is due in part to the low origination volumes and gain-on-sale margins that Moody's projects over the next several years.
The company's mortgage business profitability has been constrained by a changing business mix in which its private label clients are electing to keep an increasing percentage of their mortgage originations. As a result, PHH is increasingly responsible for administering the mortgage origination and servicing process while its clients retain the more profitable mortgage and mortgage servicing assets. According to the company, approximately 75% of its private label mortgage contracts, or half of its mortgage originations, are currently unprofitable on a fully allocated basis."