UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

COMMISSION FILE NO. 1-7797

PHH CORPORATION

(Exact name of registrant as specified in its charter)

856-917-1744

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes o No x

      State the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter: As of June 30, 2004, all of our common stock, par value $0.01 per share (our “common stock”), was owned by Cendant Corporation. As of February 28, 2005, following our Spin-Off from Cendant Corporation as discussed in this Annual Report on Form 10-K, the aggregate market value of our voting and non-voting common equity (consisting solely of our common stock) held by non-affiliates was approximately $1,094,880,000.

      As of February 28, 2005, 52,684,398 shares of common stock were outstanding.

      The following documents have been incorporated by reference into the parts of the Form 10-K as indicated:

None.

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements

      Forward-looking statements in this Annual Report on Form 10-K and our other public filings and statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “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” are generally forward-looking in nature and not historical facts. For example, forward-looking statements in this Annual Report on Form 10-K include (a) our expectation that we will drive incremental volume through our origination platform and improve profitability, (b) our cost estimates under the transition services agreement, (c) our estimate of the fees for services to be provided by us to Cendant under the transition services agreement, (d) our expectation that PHH Home Loans will commence operations in mid-2005, (e) our statements about projected levels of mortgage loan originations and housing market purchase activity in 2005, (f) the statement of our belief that we maintain adequate allowances to cover any probable losses related to exposure to retained credit risk related to loans sold with limited recourse, (g) our expectation that we will be able to continue to meet our liquidity and financing needs by relying on the secondary market for mortgage loans, use of the public and private debt markets, securitization and asset-backed securities markets and through committed and uncommitted bank credit facilities, as well as the public equity markets in the future, (h) our expectations about the level of capital expenditures for 2005, (i) our belief that our sources of liquidity and capital resources are adequate for the next twelve months and (j) our expectations about the amount of the goodwill write-off in connection with the recent change of our reporting unit structure in connection with our spin-off from Cendant.

      You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

      Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.

      You should consider that the factors and assumptions discussed above may have an impact on the continued accuracy of any forward-looking statements that we make, and you should also consider the risks and uncertainties described in Exhibit 99 to this Annual Report on Form 10-K entitled “Risk Factors Affecting Our Business and Future Results” when evaluating any forward-looking statements that we make. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I

      Except as expressly indicated or unless the context otherwise requires, the “company”, “PHH”, “we”, “our” or “us” means PHH Corporation, a Maryland corporation, and its subsidiaries. The information presented in “Item 1. Business” of this Annual Report on Form 10-K describes our business as conducted after the Spin-Off (as defined below), unless otherwise indicated or required by the context of such presentation. Because our business has changed substantially due to the reorganization in connection with the Spin-Off and we are conducting our business going forward as an independent, publicly-traded company, our historical financial information presented in this Annual Report on Form 10-K does not reflect what our results of operations, financial position or cash flows would have been had we been an independent, publicly-traded company during the periods presented. Therefore, the historical financial information presented herein is not indicative of what our results of operations, financial position or cash flows will be in the future. For a pro forma presentation of our consolidated financial statements as of September 30, 2004 reflecting the effects of the Spin-Off as of that date, see the “Unaudited Pro Forma Financial Information” included in the information statement attached as Exhibit 99.2 to our Current Report on Form 8-K dated January 19, 2005.

OVERVIEW

      We are a leading outsource provider of mortgage and fleet management services:

      Our principal offices are located at 3000 Leadenhall Road, Mt. Laurel, NJ 08054. Our telephone number is (856) 917-1744. Our corporate website is located at http://www.phh.com, and our filings pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available through this site. The information contained on our corporate website is not a part of this Annual Report on Form 10-K.

Recent Developments

The Reorganization and Spin-Off

      On October 12, 2004, we and Cendant announced that Cendant, then our parent corporation, intended to distribute the mortgage and fleet operations of PHH to Cendant shareholders in a transaction to be structured as a tax-free distribution of the common stock of PHH Corporation.

      On January 5, 2005, the board of directors of Cendant approved the distribution of shares of our common stock held by Cendant to the holders of Cendant common stock at a distribution rate of one share of our common stock for every twenty (20) shares of Cendant common stock issued and outstanding on the record date for the

distribution. The distribution was paid on January 31, 2005, to holders of record of Cendant common stock at the close of business on January 19, 2005 (the “Spin-Off”).

      In connection with and prior to the Spin-Off, we underwent an internal reorganization after which we continued to own Cendant Mortgage Corporation (subsequently renamed PHH Mortgage Corporation (“PHH Mortgage”)), PHH Vehicle Management Services, LLC (d/b/a PHH Arval (“PHH Arval”)) and our other subsidiaries that engage in the mortgage and fleet management services businesses. Pursuant to this internal reorganization, Cendant Mobility, Wright Express LLC and other subsidiaries that engaged in the relocation and fuel card businesses were separated from us and distributed to Cendant. In addition, in January 2005, Cendant contributed to us Speedy Title and Appraisal Review Services, LLC (“STARS”), its appraisal services business, which provides appraisal review services through a network of approximately 4,000 third-party professional licensed appraisers, providing local coverage throughout the United States, as well as credit research, flood certification and tax services. The appraisal services business is closely linked to the processes by which our mortgage operations originate mortgage loans and derives substantially all of its business from us. Effective January 5, 2005, the appraisal services business became part of our mortgage services segment. For the year ended December 31, 2004, revenue generated by the appraisal services business was approximately $90 million.

      In connection with the Spin-Off, we have entered into various agreements with Cendant. For a discussion of these agreements, please see “—Arrangements with Cendant Corporation” in this Annual Report on Form 10-K.

Goodwill Write-Off

      Our reporting unit structure within the fleet management services segment changed in connection with the internal reorganization and Spin-Off. We believe that this change will likely result in an impairment to our goodwill in the first quarter of 2005. Although we have not yet completed our final analysis, we currently expect, based upon information available to us, this impairment will be in the range of $225 million to $250 million.

Repurchase of Senior Notes

      On February 9, 2005, we announced the prepayment of $443 million aggregate principal amount of our outstanding senior notes in cash at an aggregate prepayment price of $497 million, including $10 million of accrued and unpaid interest. The prepayment price included an aggregate make-whole amount of $44 million.

      This prepayment was funded with proceeds from the $100 million cash contribution from Cendant in connection with the Spin-Off and lower cost, short term borrowings under our revolving credit and commercial paper facilities.

Our Strategy

      We seek to achieve growth in revenues and income derived from our mortgage and fleet management services businesses. The key aspects of our business strategy are to:

OUR BUSINESS

Mortgage Services Segment

      PHH Mortgage is a centralized mortgage lender conducting business throughout the United States. We focus on retail mortgage originations in which we provide mortgages directly to consumers. Our mortgage services segment generated approximately 24%, 34% and 23% of our total revenues for the years ended December 31, 2004, 2003 and 2002, respectively.

      We generate revenue through mortgage loan sales, fee-based origination services and mortgage loan servicing. Mortgage loan servicing consists of collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for payment of mortgage-related expenses such as taxes and insurance, and administering our mortgage loan servicing portfolio. For the year ended December 31, 2004, PHH Mortgage was the sixth largest retail originator of residential mortgages and the 12th largest overall residential mortgage originator, according to Inside Mortgage Finance. We are a leading outsource provider of mortgage origination services to financial institutions and the only mortgage company authorized to harness the power of the Coldwell Banker, Century 21 and ERA brand names, through the mortgage venture and other arrangements that we established with Cendant in connection with the Spin-Off. See “—Arrangements with Cendant Corporation— Mortgage Venture Formed by Cendant and PHH.” Our mortgage origination volume has grown from approximately $1.5 billion in 1990 to approximately $53 billion for the year ended December 31, 2004.

      We originate mortgage loans through three principal business channels: financial institutions (on a private label or co-branded basis), real estate brokers (including brokers associated with brokerages owned or franchised by Cendant and independent brokers) and relocation (mortgage services for clients of Cendant Mobility).

      In connection with the Spin-Off, we and Cendant, in November 2004, formed a mortgage venture, PHH Home Loans, LLC, for the purpose of originating and selling mortgage loans primarily sourced through NRT and Cendant Mobility. Through the mortgage venture, we are the exclusive recommended provider of mortgages for NRT and Cendant Mobility. For the year ended December 31, 2004, approximately 30% of loans originated by our mortgage services segment were derived from these sources. We own 50.1% of the mortgage venture, and Cendant owns the remaining 49.9% of the mortgage venture. The mortgage venture is consolidated within our financial statements, and Cendant’s ownership interest in the mortgage venture is reflected in our financial statements as a minority interest. The material terms of the mortgage venture are described below under “—Arrangements with Cendant Corporation— Mortgage Venture Formed Between Cendant and PHH.”

      We will contribute certain of our assets and employees that have historically supported originations from NRT and Cendant Mobility to the mortgage venture. All mortgage loans originated by PHH Home Loans will be sold to us or other third party investors on a servicing-released basis. PHH Home Loans will not hold any mortgage loans for investment purposes or perform servicing functions for any loans it originates.

      We expect that the mortgage venture will commence operations in mid-2005, once it is fully licensed to conduct mortgage banking activities. As discussed below under “—Arrangements with Cendant Corporation— Marketing Agreements,” PHH Mortgage currently has interim marketing agreements with NRT and Cendant Mobility pursuant to which Cendant, NRT and Cendant Mobility have agreed that PHH Mortgage will be the exclusive recommended provider of mortgage products and services promoted by NRT to its independent contractor sales associates and by Cendant Mobility to its customers and clients. The interim marketing services agreements will remain in place until the mortgage venture is fully licensed. At that point, these interim agreements will terminate and the provisions of the strategic relationship agreement and PHH Home Loans operating agreement described below under “—Arrangements with Cendant Corporation” will govern the manner in which the mortgage venture is recommended by Cendant’s real estate division to such groups.

      We originate mortgages on three distinct mortgage platforms:

      The following table sets forth the composition of our mortgage loan originations by channel and platform for each of the years ended December 31, 2004, 2003 and 2002:

      The following table sets forth the composition of our mortgage loan originations by product type for each of the years ended December 31, 2004, 2003 and 2002:

     PHH Mortgage customarily sells all mortgages it originates to investors (which include a variety of institutional investors) generally within 60 days of origination. Loans are typically sold as individual loans, mortgage-backed securities or participation certificates issued or guaranteed by Fannie Mae, Freddie Mac or

Ginnie Mae. We generally retain the mortgage servicing rights on loans we sell. PHH Mortgage earns revenue from the sale of the mortgage loans to investors, as well as from the servicing of the loans for investors.

      The following table sets forth summary data of our mortgage servicing activities as of December 31, 2004, 2003 and 2002:

Appraisal Services Business

      In January 2005, Cendant contributed STARS, its appraisal services business, to us which provides appraisals through a network of approximately 4,000 third-party professional licensed appraisers offering local coverage throughout the United States, as well as credit research, flood certification and tax services. The appraisal services business is closely linked to the processes by which our mortgage operations originate mortgage loans and derives substantially all of its business from us. Effective January 5, 2005, the appraisal services business became part of our mortgage services segment. For the year ended December 31, 2004, revenue generated by the appraisal services business was approximately $90 million.

Atrium Insurance Corporation

      Our mortgage services segment includes Atrium Insurance Corporation, our wholly-owned subsidiary and a New York domiciled monoline mortgage guaranty insurance corporation. Atrium provides reinsurance solely in respect of primary mortgage insurance issued by certain insurance companies to borrowers of PHH Mortgage, where the primary mortgage insurer is indemnified by Atrium, subject to a specified limit, against losses in excess of a predetermined threshold.

Competition

      The principal factors for competition for our mortgage services segment are service, quality, products, and price. Competitive conditions also can be impacted by shifts in consumer preference for variable-rate mortgages from fixed-rate mortgages, depending on the interest-rate environment. We focus on retail mortgage originations, in which we provide mortgages directly to consumers, and mortgage loan servicing, which consists of collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for payment of mortgage-related expenses and administering our mortgage loan servicing portfolio.

      According to Inside Mortgage Finance, PHH Mortgage was the sixth largest retail mortgage originator in the United States with a 4.1% market share and the tenth largest mortgage loan servicer with a 1.9% market share as

of September 30, 2004. Some of our largest competitors include Countrywide Financial, Wells Fargo Home Mortgage, Washington Mutual, Chase Home Finance, CitiMortgage, Bank of America, and GMAC Mortgage Corporation. Many of our competitors are larger than we are and may have access to greater financial resources than we do.

Seasonality

      Our mortgage services segment is generally subject to seasonal trends. These seasonal trends reflect the pattern in the national housing market. Home sales typically rise during the spring and summer seasons and decline during the fall and winter seasons. Seasonality has less of an effect on mortgage refinancing activity, which is primarily driven by prevailing mortgage rates. In addition, mortgage delinquency rates typically rise temporarily in the winter months, driven by mortgagor payment patterns.

Trademarks and Intellectual Property

      Our financial institution clients license the use of their names to us in connection with our “private label” business, and Cendant licenses its real estate brands to us in connection with mortgage loan originations for customers of both Cendant’s owned real estate brokerages and its franchisees. In connection with the Spin-Off, TM Acquisition Corp., Coldwell Banker Real Estate Corporation, ERA Franchise Systems, Inc. and PHH Mortgage entered into a trademark license agreement pursuant to which PHH Mortgage was granted a license to use certain of the Cendant real estate brand names in connection with the operation of their businesses in order to permit us to originate mortgage loans on behalf of customers of Cendant’s owned and franchised real estate brokerage business on a co-branded basis. See “—Arrangements with Cendant Corporation— Trademark License Agreement.”

Employees

      As of December 31, 2004, the operations that make up our mortgage services segment employed approximately 6,000 persons. Management considers our employee relations to be satisfactory. None of our mortgage services segment employees is covered under collective bargaining agreements.

Fleet Management Services Segment

      We are a fully integrated provider of fleet management services with a broad range of product offerings. We are the second largest provider of outsourced commercial fleet management services in both the United States and Canada according to a nationally-recognized industry publication. We focus on clients with fleets of greater than 500 vehicles (the “large fleet sector”) and clients with fleets of between 75 and 500 vehicles (the “national fleet sector”). As of December 31, 2004, we had more than 320,000 vehicles leased and approximately 300,000 additional vehicles serviced under fuel, maintenance, accident and/or similar management arrangements. We purchase more than 80,000 vehicles annually. We serve nearly one-third of the Fortune 500 and more than 100 corporations have been our clients for 20 years or more. Including the operations of our former fuel card business, our fleet management services segment generated approximately 60%, 51% and 60% of our revenue for the years ended December 31, 2004, 2003 and 2002, respectively. As described below, our former fuel card business was distributed to Cendant in connection with the Spin-Off and will not be part of our operations going forward.

      We offer fully integrated services that provide solutions to clients subject to their business objectives. We place an emphasis on customer service and focus on a consultative approach with our clients. Our employees support each client in achieving the full benefits of outsourcing fleet management, including lower costs and better operations. We offer 24-hour customer service for the end-users of our products and services. We believe we have developed one of the industry’s most advanced technology infrastructures. Our data warehousing, information management and online systems provides clients access to download sophisticated, customized reports to better monitor and manage their corporate fleets.

      We provide corporate clients and government agencies the following services and products:

      Prior to the Spin-Off, we provided payment processing and information management services to the vehicle fleet industry through our former subsidiary, Wright Express LLC. We earned revenue by processing payments to major oil companies, fuel retailers and vehicle maintenance providers on behalf of our customers and the customers of our strategic relationships. We entered into agreements with the major oil companies, fuel retailers and vehicle maintenance providers for the acceptance or purchases of products and services by the customers serviced by us, and the terms and conditions of the fees assessed by us for processing these payments. The fee charged to the major oil company, fuel retailer or vehicle maintenance provider was generally based upon a percentage of the amount purchased by the customers serviced by us; however, it may be based on a fixed amount

charged per transaction or a combination of both. The processing fee was deducted from our payment to the major oil company, fuel retailer or vehicle maintenance provider or for the amount purchased by our customer or the customer of our strategic relationships and recorded as payment processing revenue at the time the transaction was captured. Revenue for other services was generally recognized as we fulfilled our contractual service obligations.

      In connection with the Spin-Off, our former fuel card business was distributed to Cendant, and these operations will not be part of our operations going forward.

Competition

      Our competitors in the United States include GE Capital Fleet Services, Wheels Inc., Automotive Resources International, Lease Plan International and hundreds of local and regional competitors, including numerous competitors who focus on one or two products. We differentiate ourselves from our competitors primarily on three factors: the completeness of our product offering, customer service and technology. Unlike certain of our competitors that focus on selected elements of the fleet management process, we offer fully ’integrated services. In this manner, we are able to offer customized solutions to clients regardless of their needs. We have developed one of the industry’s most advanced technology infrastructures. Our state-of-the-art data warehousing, information management and online systems enable clients to download sophisticated, customized reports to better monitor and manage their corporate fleets. Some of our competitors are larger than we are and may have access to greater financial resources than we do.

Trademarks and Intellectual Property

      The service mark “PHH” and related trademarks and logos are material to our fleet management services segment. All of the material marks used by us are registered (or have applications pending for registration) with the United States Patent and Trademark Office. All of the material marks used by us are also registered in Canada, and the “PHH” mark and logo are registered (or have applications pending) in those major countries where we have strategic partnerships with local providers of fleet management services. Except for the Arval mark, which we license from a third party so that we can do business as PHH Arval, we own the material marks used by us in our business.

Seasonality

      The revenues generated by our fleet management services segment are generally not seasonal.

Employees

      As of December 31, 2004, the operations that make up our fleet management services business, exclusive of our former fuel card business, employed approximately 1,300 persons. Management considers our employee relations to be satisfactory. None of these employees is covered under collective bargaining agreements.

Regulation

Mortgage Services Regulation

      The federal Real Estate Settlement Procedures Act (“RESPA”) and state real estate brokerage laws restrict the payment of fees or other things of value in consideration for the referral of real estate settlement services. Our mortgage services segment is subject to numerous federal, state and local laws and regulations, including those relating to real estate settlement procedures, fair lending, fair credit reporting, truth in lending, federal and state disclosure and licensing. The establishment of PHH Home Loans and the continuing relationship between and among PHH Home Loans, Cendant and us will be subject to the anti-kickback requirements of RESPA.

Commercial Fleet Leasing Regulation

      We are subject to federal, state and local laws and regulations including those relating to taxing and licensing of vehicles, certain consumer credit and environmental protection. Our fleet management services segment could

be liable for damages in connection with motor vehicle accidents under the theory of vicarious liability. Under this theory, companies that lease motor vehicles may be subject to liability for the tortious acts of their lessees, even in situations where the leasing company has not been negligent.

Insurance Regulation

      Our wholly-owned insurance subsidiary, Atrium Insurance Corporation, a New York domiciled monoline mortgage guaranty insurance company, is subject to insurance regulations in the State of New York relating to, among other things, standards of solvency that must be met and maintained; the licensing of insurers and their agents; the nature of and limitations on investments; premium rates; restrictions on the size of risks that may be insured under a single policy; reserves and provisions for unearned premiums, losses and other obligations; deposits of securities for the benefit of policyholders; approval of policy forms and the regulation of market conduct, including the use of credit information in underwriting; as well as other underwriting and claims practices. The New York Department of Insurance also conducts periodic examinations and requires the filing of annual and other reports relating to the financial condition of companies and other matters. Financial examinations completed in the past three years have not resulted in any adjustments to statutory surplus and pending financial and market conduct examinations have not identified any material findings to date.

      As a result of our ownership of Atrium, we are subject to New York’s insurance holding company statute, as well as certain other laws, which, among other things, limit Atrium’s ability to declare and pay dividends except from undivided profits remaining on hand above the aggregate of our paid-in capital, paid-in surplus and contingency reserve. Additionally, anyone seeking to acquire, directly or indirectly, 10% or more of Atrium’s outstanding common stock, or otherwise proposing to engage in a transaction involving a change in control of Atrium, will be required to obtain the prior approval of the New York Superintendent of Insurance.

ARRANGEMENTS WITH CENDANT CORPORATION

Mortgage Venture Formed by Cendant and PHH

      In connection with the Spin-Off, we and Cendant’s subsidiary, Cendant Real Estate Services Venture Partner, Inc., formed a mortgage venture, PHH Home Loans, LLC, for the purpose of originating and selling mortgage loans primarily sourced through Cendant’s owned residential real estate brokerage and corporate relocation businesses, NRT and Cendant Mobility, respectively. For the year ended December 31, 2004, approximately 30% of all loans originated by our mortgage services segment were derived from these sources. We will contribute certain of our assets and employees that supported originations from NRT and Cendant Mobility to the mortgage venture. The mortgage venture has a 50-year term, subject to earlier termination as described below under “—Termination” or non-renewal by us after 25 years subject to delivery of notice. In the event that we do not deliver a non-renewal notice after year 25, the mortgage venture will be renewed for an additional 25-year term. The PHH Homes Loans operating agreement is filed as an exhibit to this Annual Report on Form 10-K.

      We expect that the mortgage venture will commence operations in mid-2005, once it is fully licensed to conduct mortgage banking activities. As discussed in “Item 1. Business— Arrangements with Cendant Corporation— Marketing Agreements,” PHH Mortgage currently has interim marketing agreements with NRT and Cendant Mobility pursuant to which Cendant, NRT and Cendant Mobility have agreed that PHH Mortgage will be the exclusive recommended provider of mortgage products and services promoted by NRT to its independent contractor sales associates and by Cendant Mobility to its customers and clients. The interim marketing services agreements will remain in place until the mortgage venture is fully licensed. At that point, these interim agreements will terminate and the provisions of the strategic relationship agreement and PHH Home Loans operating agreement described above will govern the manner in which the mortgage venture is recommended by Cendant’s real estate division to such groups. All mortgage loans originated by the mortgage venture will be sold to us or to unaffiliated third party investors on a servicing-released basis, and the mortgage venture will not hold any mortgage loans for investment purposes or perform servicing functions for any loans it originates.

      We are in the process of causing the mortgage venture to make application and seek approval for all licenses and regulatory approvals necessary to conduct its loan origination, loan sales and related operations in all 50 states and the District of Columbia.

Ownership and Distributions

      We own 50.1% of the mortgage venture, and Cendant owns the remaining 49.9% of the mortgage venture. Although the mortgage venture is consolidated within our financial statements, and Cendant’s ownership interest in the mortgage venture is reflected on our financial statements as a minority interest, the mortgage venture did not materially impact our results of operations for the year ended December 31, 2004. Net income generated by the mortgage venture will be distributed quarterly to its members pro rata based upon their respective ownership interests, less any amounts to be retained (as necessary) to meet regulatory capital requirements.

Management

      The managing member of the mortgage venture is PHH Broker Partner Corporation, a wholly-owned subsidiary of PHH. The managing member is responsible for managing all aspects of the business of the mortgage venture. However, certain specified actions proposed to be taken by the mortgage venture are subject to approval by Cendant. The mortgage venture has a board of advisors consisting of representatives of Cendant and PHH. The board of advisors has no managerial authority, and its primary purpose is to provide a means for Cendant to exercise its approval rights over those specified actions of the mortgage venture for which Cendant’s approval is required.

Termination

      Pursuant to the PHH Home Loans operating agreement, Cendant has the right to terminate the strategic relationship agreement and terminate the mortgage venture in the event of: