PHH Corp., the nation's seventh largest mortgage banking firm, posted an $8 million loss in the third quarter, after marking down the fair value of its mortgage servicing portfolio by $191 million.

The company, however, said its residential origination arm earned $161 million during the period. (But because of the servicing hit, it had an after-tax loss. Before taxes, it lost $2 million.)

Despite the MSR charge, the Mt. Laurel, N.J.-based company, reported what it called a "surge" in mortgage applications and interest rate locks during the period.

PHH Mortgage originated $12.7 billion in home mortgages during 3Q, a 26% jump from the second quarter. Citing strong application volume, the nonbank lender increased its 2010 origination forecast to $45 billion from $39 billion.

PHH Mortgage ranks seventh among residential funders, and ninth in servicing, according to figures compiled by National Mortgage News and the Quarterly Data Report.

Analysts who follow the stock expected a large MSR charge for the quarter. Besides mortgage banking and a private label origination/servicing business, PHH is a fleet operator.

In a statement company president Jerry Selitto said, "By increasing penetration of new and existing clients, we have profitably grown market share without compromising our high credit standards, and we have increased fee income in Fleet."

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