2.2.0.25falsefalse0201 - Disclosure - Summary of Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
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<b><font style="font-family: 'Times New Roman', Times">1. </font></b>
</td>
<td>
<b><font style="font-family: 'Times New Roman', Times">Summary
of Significant Accounting Policies</font></b>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Basis
of Presentation</font></b>
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PHH Corporation and subsidiaries (collectively, “PHH”
or the “Company”) is a leading outsource provider of
mortgage and fleet management services operating in the
following business segments:
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<td> </td>
<td> <font style="font-family:wingdings">§</font>  
</td>
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<b>Mortgage Production </b>— provides mortgage loan
origination services and sells mortgage loans.
</td>
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<td> </td>
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<td> </td>
<td> <font style="font-family:wingdings">§</font>  
</td>
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<b>Mortgage Servicing </b>— performs servicing
activities for originated and purchased loans.
</td>
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<td> </td>
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<td> </td>
<td> <font style="font-family:wingdings">§</font>  
</td>
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<b>Fleet Management Services </b>— provides commercial
fleet management services.
</td>
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The Consolidated Financial Statements include the accounts and
transactions of PHH and its subsidiaries, as well as entities in
which the Company directly or indirectly has a controlling
interest and variable interest entities of which the Company is
the primary beneficiary. PHH Home Loans, LLC and its
subsidiaries are consolidated within the Consolidated Financial
Statements, and Realogy Corporation’s ownership interest is
presented as a noncontrolling interest.
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The preparation of financial statements in conformity with
accounting principles generally accepted in the United States,
which is commonly referred to as GAAP, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. These estimates and assumptions include, but are not
limited to, those related to the valuation of mortgage servicing
rights, mortgage loans held for sale, other financial
instruments and goodwill, the estimation of liabilities for
mortgage loan repurchases and indemnifications and reinsurance
losses, and the determination of certain income tax assets and
liabilities and associated valuation allowances. Actual results
could differ from those estimates.
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Unless otherwise noted and except for share and per share data,
dollar amounts presented within these Notes to Consolidated
Financial Statements are in millions.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Changes
In Accounting Policies</font></b>
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<b><i>Financing Receivables.</i></b> In July 2010, the
Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”)
<font style="white-space: nowrap">No. 2010-20,</font>
“Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses” an update
to ASC 310. This update enhances the disclosure
requirements of ASC 310 regarding the credit quality of
financing receivables and the allowance for credit losses and
requires entities to provide a greater level of disaggregated
information about the credit quality of financing receivables
and the allowance for credit losses. In addition, ASU
<font style="white-space: nowrap">No. 2010-20</font>
requires disclosure of credit quality indicators, past due
information, and modifications of financing receivables. The
disclosure provisions of the updates to
<font style="white-space: nowrap">ASU 2010-20</font>
for end of period disclosure requirements were adopted effective
December 31, 2010 and were included in Note 14,
“Credit Risk” and discussion below. Further updates to
ASU <font style="white-space: nowrap">2010-20</font>
relate to disclosures about activity that occurs during a
reporting period, and are effective for interim and annual
reporting periods beginning on or after December 15, 2010.
These updates enhance the disclosure requirements for financing
receivables and credit losses, but will not impact the
Company’s financial position, results of operations or cash
flows.
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</font>
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<b><i>Transfers of Financial Assets.</i></b> In June 2009,
the FASB updated Accounting Standards Codification
(“ASC”) 860, “Transfers and Servicing”
to eliminate the concept of a qualifying special-purpose entity,
modify the criteria for applying sale accounting to transfers of
financial assets or portions of financial assets, differentiate
between the initial measurement of an interest held in
connection with the transfer of an entire financial asset
recognized as a sale and participating interests recognized as a
sale and remove the provision allowing classification of
interests received in a guaranteed mortgage securitization
transaction that does not qualify as a sale as
<font style="white-space: nowrap">available-for-sale</font>
or trading securities. The updates to ASC 860 clarify
(i) that an entity must consider all arrangements or
agreements made contemporaneously or in contemplation of a
transfer, (ii) the isolation analysis related to the
transferor and its consolidated subsidiaries and (iii) the
principle of effective control over the transferred financial
asset. The updates also enhance financial statement disclosures.
Revised recognition and measurement provisions are to be applied
to transfers occurring on or after the effective date and the
disclosure provisions are to be applied to transfers that
occurred both before and after the effective date. The updates
to this standard were adopted effective January 1, 2010.
Except for the elimination of qualifying special-purpose
entities addressed in the updates to ASC 810,
“Consolidation” below, the adoption of the updates to
ASC 860 did not impact the Consolidated Financial
Statements.
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<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Consolidation of Variable Interest
Entities.</i></b> In June 2009, the FASB updated
Consolidation guidance in ASC 810 to modify certain
characteristics that identify a variable interest entity
(“VIE”), revise the criteria for determining the
primary beneficiary of a VIE, add an additional reconsideration
event to determining whether an entity is a VIE, eliminating
troubled debt restructurings as an excluded reconsideration
event and enhance disclosures regarding involvement with a VIE.
Additionally, with the elimination of the concept of qualifying
special-purpose entities (“QSPEs”) in the updates to
ASC 860, entities previously considered QSPEs are now
within the scope of ASC 810. Entities required to
consolidate or deconsolidate a VIE will recognize a cumulative
effect in retained earnings for any difference in the carrying
amount of the interest recognized. The Company adopted the
updates to ASC 810 effective January 1, 2010. As a
result of the adoption of updates to ASC 810, assets of
consolidated VIEs that can be used only to settle the
obligations of the VIE and liabilities of consolidated VIEs for
which creditors or beneficial interest holders do not have
recourse to the general credit of the Company are presented
separately on the face of the Consolidated Balance Sheets. As a
result of the updates to ASC 860 eliminating the concept of
QSPEs, the Company was required to consolidate a mortgage loan
securitization trust that previously met the QSPE scope
exception. Upon consolidation, the fair value option of
measuring the assets and liabilities of the mortgage loan
securitization trust at fair value was elected under
ASC 825, “Financial Instruments.” See
Note 19, “Fair Value Measurements” for the
transition adjustment related to the adoption of the updates to
ASC 810 and ASC 860, which had no impact on Retained
earnings, and Note 20, “Variable Interest
Entities” for further discussion.
</div>
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<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Fair Value Measurements.</i></b> In September 2006,
the Financial Accounting Standards Board issued ASC 820,
“Fair Value Measurements and Disclosures” ASC 820
defines fair value, establishes a framework for measuring fair
value in GAAP and expands disclosures about fair value
measurements. ASC 820 defines fair value as the price that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants.
ASC 820 also prioritizes the use of market-based
assumptions, or observable inputs, over entity-specific
assumptions or unobservable inputs when measuring fair value and
establishes a three-level hierarchy based upon the relative
reliability and availability of the inputs to market
participants for the valuation of an asset or liability as of
the measurement date. The fair value hierarchy designates quoted
prices in active markets for identical assets or liabilities at
the highest level and unobservable inputs at the lowest level.
(See below for additional information regarding the fair value
hierarchy.) ASC 820 also nullified the guidance which
required the deferral of gains and losses at the inception of a
transaction involving a derivative financial instrument in the
absence of observable data supporting the valuation technique.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The provisions of ASC 820 were adopted for assets and
liabilities that are measured at fair value on a recurring basis
effective January 1, 2008. As a result of the adoption of
ASC 820 for assets and liabilities that are measured at
fair value on a recurring basis, a $9 million decrease in
Retained earnings was recorded as of January 1, 2008. This
amount represents the transition adjustment, net of income
taxes, resulting from recognizing gains and losses related to
interest rate lock commitments (“IRLCs”) that were
previously deferred. The fair value of IRLCs, as
determined for
the January 1, 2008 transition adjustment, excluded the
value attributable to servicing rights, in accordance with the transition provisions of updates to
ASC 815, “Derivatives and Hedging.” The fair
value associated with the servicing rights is included in the
fair value measurement of all written loan commitments issued
after January 1, 2008.
</div>
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The following table summarizes the transition adjustment at the
date of adoption of ASC 820:
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</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Balance<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Balance<br />
</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>January 1, 2008<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Transition<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>January 1, 2008<br />
</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>Prior to Adoption</b>
</div>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>Adjustment</b>
</div>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>After Adoption</b>
</div>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="10" align="center" valign="bottom">
<b>(In millions)</b>
</td>
<td>
 
</td>
</tr>
<tr style="line-height: 3pt; font-size: 1pt">
<td> 
</td>
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<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Derivative assets
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
          177
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
          (3
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
          174
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Derivative liabilities
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
121
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
(12
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
133
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Income tax benefit
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
6
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Cumulative-effect adjustment, net of income taxes
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
(9
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
</tr>
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In February 2008, the FASB updated ASC 820 to delay the
effective date for one year for nonfinancial assets and
nonfinancial liabilities, except for those that are recognized
or disclosed at fair value on a recurring basis. The deferral
for nonfinancial assets and nonfinancial liabilities was elected
and provisions of ASC 820 were adopted for the assessment
of impairment of Goodwill, other intangible assets, net
investment in operating leases, net investment in off-lease
vehicles, real estate owned and Property, plant and equipment,
net effective January 1, 2009. The measurement of fair
value for nonfinancial assets incorporates the assumptions
market participants would use in pricing the asset considering
its highest and best use, where available, which may differ from
the intended use of such assets and related assumptions and
therefore may result in a different fair value than the fair
value measured on a basis prior to the application of
ASC 820. There were no events or circumstances resulting in
the measurement of fair value for any significant nonfinancial
assets other than real estate owned during 2009 and 2010. See
Note 19, “Fair Value Measurements” for additional
information.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
In January 2010, the FASB updated ASC 820, “Fair Value
Measurements and Disclosures” to add disclosures for
transfers in and out of level one and level two of the valuation
hierarchy and to present separately information about purchases,
sales, issuances and settlements in the reconciliation for
assets and liabilities classified within level three of the
valuation hierarchy. The updates to this standard also clarify
existing disclosure requirements about the level of
disaggregation and about inputs and valuation techniques used to
measure fair value. Effective January 1, 2010, the
disclosure provisions of the updates to ASC 820 were
adopted for transfers in and out of level one and level two,
level of disaggregation and inputs and valuation techniques used
to measure fair value and are included in Note 19,
“Fair Value Measurements”. Certain other updates to
disclosures about the reconciliation of level three activity are
effective for fiscal years and interim periods beginning after
December 15, 2010, which will enhance the disclosure
requirements and will not impact the Company’s financial
position, results of operations or cash flows.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Fair Value Option.</i></b> In February 2007, the FASB
issued ASC 825, “Financial Instruments”.
ASC 825 permits entities to choose, at specified election
dates, to measure eligible items at fair value (the “Fair
Value Option”). Unrealized gains and losses on items for
which the Fair Value Option has been elected are reported in
earnings. Additionally, fees and costs associated with
instruments for which the Fair Value Option is elected are
recognized as earned and expensed as incurred, rather than
deferred. The Fair Value Option is applied instrument by
instrument (with certain exceptions), is irrevocable (unless a
new election date occurs) and is applied only to an entire
instrument.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Effective January 1, 2008, the provisions of ASC 825
were adopted and upon adoption, the election was made to measure
certain eligible items at fair value, including all Mortgage
loans held for sale (“MLHS”) and Investment securities
existing at the date of adoption. An automatic election was also
made to record future MLHS and retained interests in the sale or
securitization of mortgage loans at fair value. The fair value
election for MLHS is intended to better reflect the underlying
economics of, and eliminate the operational complexities of,
risk management activities related to MLHS and applying hedge
accounting pursuant to ASC 815 “Derivatives and
Hedging”. The fair value election for Investment securities
enables all gains and losses on the investments to be recorded
through the Consolidated Statements of Operations.
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
With the election of the Fair Value Option for MLHS, fees and
costs associated with the origination and acquisition of MLHS
are no longer deferred, which was the policy prior to this
election. Prior to the election of the Fair Value Option,
interest receivable related to MLHS was included in Accounts
receivable, net in the Consolidated Balance Sheets; however,
subsequent to the election, interest receivable is recorded as a
component of the fair value of the underlying MLHS and is
included in Mortgage loans held for sale in the Consolidated
Balance Sheet. Investment securities were classified as either
<font style="white-space: nowrap">available-for-sale</font>
or trading securities or hybrid financial instruments prior to
the election of the Fair Value Option for these securities. The
recognition of unrealized gains and losses in earnings related
to investments classified as trading securities and hybrid
financial instruments is consistent with the recognition prior
to the election of the Fair Value Option. However, prior to this
election,
<font style="white-space: nowrap">available-for-sale</font>
securities were carried at fair value with unrealized gains and
losses reported net of income taxes as a separate component of
Equity. Unrealized gains or losses included in Equity as of
January 1, 2008, prior to the election of the Fair Value
Option, were not significant. As a result of the election of the
Fair Value Option, a $5 million decrease in Retained
earnings was recorded as of January 1, 2008, which
represents the transition adjustment, net of income taxes,
resulting from the recognition of fees and costs, net associated
with the origination and acquisition of MLHS that were
previously deferred. See Note 19, “Fair Value
Measurements” for additional information.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The following table summarizes the transition adjustment at the
date of adoption of ASC 825:
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="53%"> </td> <!-- colindex=01 type=maindata -->
<td width="2%"> </td> <!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td> <!-- colindex=02 type=lead -->
<td width="11%" align="right"> </td> <!-- colindex=02 type=body -->
<td width="1%" align="left"> </td> <!-- colindex=02 type=hang1 -->
<td width="3%"> </td> <!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td> <!-- colindex=03 type=lead -->
<td width="11%" align="right"> </td> <!-- colindex=03 type=body -->
<td width="1%" align="left"> </td> <!-- colindex=03 type=hang1 -->
<td width="3%"> </td> <!-- colindex=04 type=gutter -->
<td width="1%" align="right"> </td> <!-- colindex=04 type=lead -->
<td width="11%" align="right"> </td> <!-- colindex=04 type=body -->
<td width="1%" align="left"> </td> <!-- colindex=04 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Balance<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Balance<br />
</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>January 1, 2008<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Transition<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>January 1, 2008<br />
</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>Prior to Adoption</b>
</div>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>Adjustment</b>
</div>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<div style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
<b>After Adoption</b>
</div>
</td>
<td>
 
</td>
</tr>
<tr style="line-height: 3pt; font-size: 1pt">
<td> 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Mortgage loans held for sale
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
      1,564
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
       (4
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
       1,560
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Accounts receivable, net
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
686
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
(5
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
681
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Income tax benefit
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
4
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Cumulative-effect adjustment, net of income taxes
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
(5
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
<td>
 
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Written Loan Commitments.</i></b> In November 2007,
the Securities and Exchange Commission (the “SEC”)
issued updates to ASC 815 “Derivatives and
Hedging”. Updates to ASC 815 express the view of the
SEC staff that, consistent with the guidance in ASC 860,
“Transfers and Servicing” and ASC 825, the
expected net future cash flows related to the associated
servicing of a loan should be included in the measurement of all
written loan commitments that are accounted for at fair value
through earnings. Updates to ASC 815 also retain the view
of the SEC staff that internally developed intangible assets
should not be recorded as part of the fair value of a derivative
loan commitment and broadens its application to all written loan
commitments that are accounted for at fair value through
earnings. The provisions of updates to ASC 815 were adopted
effective January 1, 2008. Updates to ASC 815 require
prospective application to derivative loan commitments issued or
modified after the date of adoption. Upon adoption of updates to
ASC 815 on January 1, 2008, the expected net future
cash flows related to the servicing of mortgage loans associated
with IRLCs issued from the adoption date forward are included in
the fair value measurement of the IRLCs at the date of issuance.
Prior to the adoption of updates to ASC 815, the net future
cash flows related to the servicing of mortgage loans associated
with the IRLCs were not included in their fair value. This
change in accounting policy results in the recognition of
earnings on the date the IRLCs are issued rather than when the
mortgage loans are sold or securitized. Pursuant to the
transition provisions of updates to ASC 815, a benefit to
Gain on mortgage loans, net was recognized in the Consolidated
Statement of Operations for the year ended December 31,
2008 of approximately $30 million, as the value
attributable to servicing rights related to IRLCs as of
January 1, 2008 was excluded from the transition adjustment
for the adoption of ASC 820.
</div>
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Recently
Issued Accounting Pronouncements</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Receivables.</i></b> In January 2011, the FASB issued
ASU
<font style="white-space: nowrap">No. 2011-01,</font>
“Deferral of the Effective Date of Disclosures about
Trouble Debt Restructurings in Update
<font style="white-space: nowrap">No. 2010-20”,</font>
an update to ASC 310, “Receivables”. Under the
existing effective date in ASU
<font style="white-space: nowrap">No. 2010-20,</font>
companies would have provided disclosures about troubled debt
restructurings for periods beginning on or after
December 15, 2010. The amendments in this update
temporarily defer that effective date, enabling public entity
creditors to provide those disclosures after the FASB clarifies
the guidance for determining what constitutes a troubled debt
restructuring. This amendment does not defer the effective date
of the other disclosure requirements in ASU
<font style="white-space: nowrap">No. 2010-20</font>
as discussed above. This update is effective immediately. The
Company does not expect the adoption of ASU
<font style="white-space: nowrap">No. 2011-01</font>
to have an impact on the Consolidated Financial Statements.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Goodwill.</i></b> In December 2010, the FASB issued
ASU
<font style="white-space: nowrap">No. 2010-28,</font>
“When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts”, an
update to ASC 350, “Intangibles—Goodwill and
Other”. ASC 350 requires that entities perform a
two-step test when evaluating goodwill impairment by first
assessing whether the carrying value of the reporting unit
exceeds the fair value (Step 1) and, if it does,
perform additional procedures to determine if goodwill has been
impaired (Step 2). This update amends ASC 350 to require
entities performing the goodwill impairment test to perform Step
2 of the test for reporting units with zero or negative carrying
amounts if it is more likely than not that a goodwill impairment
exists based on qualitative considerations. ASU
<font style="white-space: nowrap">No. 2010-28</font>
is effective for fiscal years and interim periods beginning
after December 15, 2010. Early adoption is not permitted.
The Company does not expect the adoption of ASU
<font style="white-space: nowrap">No. 2010-28</font>
to have an impact on the Consolidated Financial Statements.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Business Combinations.</i></b> In December 2010, the
FASB issued ASU
<font style="white-space: nowrap">No. 2010-29,</font>
“Disclosure of Supplementary Pro Forma Information for
Business Combinations”, an update to ASC 805,
“Business Combinations”. This update amends
ASC 805 to require a public entity that presents
comparative financial statements to disclose revenue and
earnings of the combined entity as though the business
combination that occurred during the current year had occurred
as of the beginning of the comparable prior annual reporting
period only. The amendments in this update also expand the
supplemental pro-forma disclosures under ASC 805 to include
a description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and
earnings. ASU
<font style="white-space: nowrap">No. 2010-29</font>
is effective prospectively for business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010. Early adoption is permitted. The Company does not expect
the adoption of ASU
<font style="white-space: nowrap">No. 2010-29</font>
to have a significant impact on the Consolidated Financial
Statements.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Revenue Recognition.</i></b> In October 2009, the
FASB issued ASU
<font style="white-space: nowrap">No. 2009-13,</font>
“Multiple Deliverable Arrangements”, an update to
ASC 605, “Revenue Recognition”. This update
amends ASC 605 for how to determine whether an arrangement
involving multiple deliverables (i) contains more than one
unit of accounting and (ii) how the arrangement
consideration should be measured and allocated to the separate
units of accounting. ASU
<font style="white-space: nowrap">No. 2009-13</font>
is effective prospectively for arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010. The Company is currently evaluating the
impact of adopting ASU
<font style="white-space: nowrap">No. 2009-13.</font>
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Revenue
Recognition</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<b><i>Mortgage Production.</i></b> Mortgage production
includes the origination and sale of residential mortgage loans.
Mortgage loans are originated through various channels,
including relationships with financial institutions, real estate
brokerage firms, and corporate clients. The Company also
purchases mortgage loans originated by third party financial
institutions. Mortgage fees consist of fee income earned on all
loan originations, including loans closed to be sold and
fee-based closings. Fee income consists of amounts earned
related to application and underwriting fees, fees on cancelled
loans and appraisal and other income generated by the appraisal
services business. Fee income also consists of amounts earned
from financial institutions related to brokered loan fees and
origination assistance fees resulting from private-label
mortgage outsourcing activities.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Gain on mortgage loans, net includes the realized and unrealized
gains and losses on Mortgage loans held for sale, as well as the
changes in fair value of all loan-related derivatives, including
interest rate lock commitments and freestanding loan-related
derivatives.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Originated mortgage loans are principally sold directly to
government-sponsored entities and other investors. Each type of
mortgage loan transfer is evaluated for sales treatment through
a review that includes both an accounting and a legal analysis
to determine whether or not the transferred assets have been
isolated from the transferor. To the extent the transfer of
assets qualifies as a sale, the asset is derecognized and the
gain or loss is recorded on the sale date. In the event the
transfer of assets does not qualify as a sale, the transfer
would be treated as a secured borrowing.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Loans are placed on non-accrual status when any portion of the
principal or interest is 90 days past due or earlier if
factors indicate that the ultimate collectability of the
principal or interest is not probable. Interest received from
loans on non-accrual status is recorded as income when
collected. Loans return to accrual status when the principal and
interest become current and it is probable that the amounts are
fully collectible.
</div>
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</div>
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<b><i>Mortgage Servicing.</i></b> Mortgage servicing
involves the servicing of residential mortgage loans on behalf
of the investor. Loan servicing income represents recurring
servicing and other ancillary fees earned for servicing mortgage
loans owned by investors as well as net reinsurance income or
loss resulting from mortgage reinsurance contracts. Servicing
fees received for servicing mortgage loans owned by investors
are based on a stipulated percentage of the outstanding monthly
principal balance on such loans, or the difference between the
weighted-average yield received on the mortgage loans and the
amount paid to the investor, less guaranty fees, expenses
associated with business relationships and interest on
curtailments. Loan servicing income is receivable only out of
interest collected from mortgagors, and is recorded as income
when collected. Late charges and other miscellaneous fees
collected from mortgagors are also recorded as income when
collected. Costs associated with loan servicing are charged to
expense as incurred.
</div>
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<b><i>Fleet Management and Leasing.</i></b> Fleet
management services are provided to corporate clients and
government agencies and include management and leasing of
vehicles and other fee-based services for clients’ vehicle
fleets. Vehicles are leased primarily to corporate fleet users
under open-end operating and direct financing lease arrangements
where the client bears substantially all of the vehicle’s
residual value risk. The lease term under the open-end lease
agreements provides for a minimum lease term of 12 months
and after the minimum term, the leases may be continued at the
lessees’ election for successive monthly renewals. In
limited circumstances, vehicles are leased under closed-end
leases where the Company bears all of the vehicle’s
residual value risk. Gains or losses on the sales of vehicles
under closed-end leases are recorded in Other income in the
period of sale.
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Lease revenues for operating leases, which contain a
depreciation component, an interest component and a management
fee component, are recognized over the lease term of the
vehicle, which encompasses the minimum lease term and the
<font style="white-space: nowrap">month-to-month</font>
renewals. Lease revenues for direct financing leases contain an
interest component and a management fee component. The interest
component is recognized using the effective interest method over
the lease term of the vehicle, which encompasses the minimum
lease term and the
<font style="white-space: nowrap">month-to-month</font>
renewals. Direct finance leases are placed on non-accrual status
when it is determined that the value of past due lease
receivables will not be recoverable.
</div>
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The interest component of lease revenue is determined in
accordance with the pricing supplement to the respective lease
agreement. The interest component of lease revenue is generally
calculated on a variable-rate basis that fluctuates in
accordance with changes in the variable-rate index; however, in
certain circumstances, the lease may contain a fixed rate that
would remain constant for the life of the lease. The
depreciation component of lease revenue is based on the
straight-line depreciation of the vehicle over its expected
lease term. The management fee component of lease revenue is
recognized on a straight-line basis over the life of the lease.
</div>
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Revenue for other fleet management services is recognized as
earned when such services are provided to the lessee. These
services include fuel cards, accident management services and
maintenance services, and revenue for these services based on a
negotiated percentage of the purchase price for the underlying
products or services provided by certain third-party suppliers
and is recognized when the service is provided by the supplier.
</div>
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An allowance for uncollectible receivables is recorded when it
becomes probable, based on the age of outstanding receivables,
that the receivables will not be collected. For clients that
file for bankruptcy protection, pre-petition balances are fully
reserved and post-petition balances are reserved if the leases
are rejected from the bankruptcy petition or if the client
enters into liquidation.
</div>
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Certain truck and equipment leases are originated with the
intention of syndicating to banks and other financial
institutions. When operating leases are sold, the underlying
assets are transferred and any rights to the leases and their
future leasing revenues are assigned to the banks or financial
institutions. Upon the transfer and assignment of the rights
associated with the operating leases, the proceeds from the sale
are recorded as revenue and an expense for the undepreciated
cost of the asset sold is recognized. Upon the sale or transfer
of rights to direct financing leases, the net gain or loss is
recorded in Other income. Under certain of these sales
agreements, a portion of residual risk in connection with the
fair value of the asset at lease termination is retained and a
liability is recorded for the retention of this risk.
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Income
Taxes</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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The Company is subject to the income tax laws of the various
jurisdictions in which it operates, including U.S federal,
state, local and Canadian jurisdictions. Consolidated federal
and state income tax returns are filed.
</div>
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Income tax expense consists of two components: current and
deferred. Current tax expense represents the amount of taxes
currently payable to or receivable from a taxing authority plus
amounts accrued for income tax contingencies (including tax,
penalty and interest). Deferred tax expense generally represents
the net change in the deferred tax asset or liability balance
during the year plus any change in the valuation allowance.
Income tax expense excludes the tax effects related to
adjustments recorded to Accumulated other comprehensive income
(loss) as well as the tax effects of cumulative effects of
changes in accounting principles. Interest and penalties related
to income tax contingencies are recognized in Income tax expense
(benefit) in the Consolidated Statements of Operations.
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</b>
</div>
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</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Deferred income taxes are determined using the balance sheet
method. This method requires that income taxes reflect the
expected future tax consequences of temporary differences
between the carrying amounts of assets or liabilities for book
and tax purposes. Deferred tax assets and liabilities are
regularly reviewed to assess their potential realization and to
establish a valuation allowance when it is “more likely
than not” that some portion will not be realized.
Generally, any change in the valuation allowance is recorded in
income tax expense; however, if the valuation allowance is
adjusted in connection with an acquisition, such adjustment is
recorded concurrently through Goodwill rather than Income tax
expense (benefit).
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The Company must presume that an uncertain income tax position
will be examined by the relevant taxing authority and must
determine whether it is more likely than not that the position
will be sustained upon examination based on its technical merit.
An uncertain income tax position that meets the “more
likely than not” recognition threshold is then measured to
determine the amount of the benefit to recognize in the
financial statements. A liability is recorded for the amount of
the unrecognized income tax benefit included in:
(i) previously filed income tax returns and
(ii) financial results expected to be included in income
tax returns to be filed for periods through the date of the
Consolidated Financial Statements.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Cash
and Cash Equivalents</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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Marketable securities with original maturities of three months
or less are included in Cash and cash equivalents.
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Restricted
Cash, Cash Equivalents and Investments</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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Restricted cash, cash equivalents and investments primarily
relates to (i) amounts specifically designated to purchase
assets, repay debt
<font style="white-space: nowrap">and/or</font>
provide over-collateralization within asset-backed debt
arrangements, (ii) funds collected and held for pending
mortgage closings and (iii) accounts held in trust for the
capital fund requirements of and potential claims related to
mortgage reinsurance activities.
</div>
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Restricted cash and cash equivalents include marketable
securities with original maturities of three months or less.
Restricted investments are recorded at fair value and classified
as
<font style="white-space: nowrap">available-for-sale.</font>
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Mortgage
Loans Held for Sale</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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Mortgage loans held for sale represent loans originated or
purchased and held until sold to secondary market investors.
Mortgage loans are typically warehoused for a period of up to
60 days after origination or purchase before sale into the
secondary market. The servicing rights and servicing obligations
of mortgage loans are generally retained upon sale in the
secondary market.
</div>
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</div>
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Mortgage loans held for sale are measured at fair value on a
recurring basis.
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Net
Investment in Fleet Leases </font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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Net investment in fleet leases includes vehicles under operating
leases and direct financing lease receivables, as well as
vehicles that are in transit awaiting delivery to clients or
sale. From time to time, certain direct financing lease funding
structures are utilized, which include the receipt of
substantial lease prepayments for lease originations by the
Canadian fleet management operations.
</div>
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Vehicles under operating leases are stated at cost, net of
accumulated depreciation. The initial cost of the vehicles is
recorded net of incentives and allowances from vehicle
manufacturers. Leased vehicles are depreciated on a
straight-line basis over a term that generally ranges from 3 to
6 years. Direct finance leases are stated at the net
present value of future expected cash flows.
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
An allowance for uncollectible lease receivables is recorded as
a reduction to Net investment in fleet leases when it is
determined that the value of past due lease receivables will not
be recoverable upon sale of the underlying asset. The exposure
to losses typically arises from clients that file for bankruptcy
protection, as pre-petition receivables are fully reserved and
post-petition balances are reserved if the leases are rejected
from the bankruptcy petition or if the client enters into
liquidation. Charge offs are recorded after the leased vehicles
have been disposed and final shortfall has been determined.
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Mortgage
Servicing Rights</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
A mortgage servicing right is the right to receive a portion of
the interest coupon and fees collected from the mortgagor for
performing specified mortgage servicing activities, which
consist of collecting loan payments, remitting principal and
interest payments to investors, managing escrow funds for the
payment of mortgage-related expenses such as taxes and insurance
and otherwise administering the mortgage loan servicing
portfolio. Mortgage servicing rights are created through either
the direct purchase of servicing from a third party or through
the sale of an originated mortgage loan. Residential mortgage
loans represent the single class of servicing rights which are
measured at fair value on a recurring basis.
</div>
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</div>
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The initial value of capitalized mortgage servicing rights is
recorded as an addition to Mortgage servicing rights in the
Consolidated Balance Sheets and within Gain on mortgage loans,
net in the Consolidated Statements of Operations. Valuation
changes adjust the carrying amount of Mortgage servicing rights
in the Consolidated Balance Sheets and are recognized in Change
in fair value of mortgage servicing rights in the Consolidated
Statements of Operations.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Property,
Plant and Equipment</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Property, plant and equipment (including leasehold improvements)
are recorded at cost, net of accumulated depreciation and
amortization. Depreciation, recorded as a component of Other
depreciation and amortization in the Consolidated Statements of
Operations, is computed utilizing the straight-line method over
the estimated useful lives of the related assets. Amortization
of leasehold improvements, also recorded as a component of Other
depreciation and amortization, is computed utilizing the
straight-line method over the estimated benefit period of the
related assets or the lease term, if shorter. Estimated useful
lives are 30 years for buildings and range from 3 to
5 years for capitalized software, 1 to 20 years for
leasehold improvements and 3 to 10 years for furniture,
fixtures and equipment.
</div>
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</div>
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Internal software development costs are capitalized during the
application development stage. The costs capitalized relate to
external direct costs of materials and services and employee
costs related to the time spent on the project during the
capitalization period. Capitalized software is evaluated for
impairment annually or when changing circumstances indicate that
amounts capitalized may be impaired. Impaired items are written
down to their estimated fair values at the date of evaluation.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Goodwill
and Other Intangible Assets</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The carrying value of Goodwill and indefinite-lived intangible
assets is assessed for impairment annually, or more frequently
if circumstances indicate impairment may have occurred. Goodwill
is assessed for impairment by comparing the carrying value of
reporting units to their fair value. The Company’s
reporting units are the Fleet Management Services segment, PHH
Home Loans, the Mortgage Production segment excluding PHH Home
Loans and the Mortgage Servicing segment. The fair value of
reporting units may be determined using an income approach,
discounted cash flows or a combination of an income approach and
a market approach, wherein comparative market multiples are used.
</div>
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</div>
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Indefinite-lived intangible assets are comprised entirely of
trademarks for all periods presented. Fair value of trademarks
is determined by discounting cash flows determined from applying
a hypothetical royalty rate to projected revenues associated
with these trademarks.
</div>
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<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Intangible assets subject to amortization are evaluated for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Amortizable
intangible assets included on the Consolidated Balance Sheets
consist primarily of customer lists that are amortized on a
straight-line basis over a
<font style="white-space: nowrap">20-year</font>
period.
</div>
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</div>
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Costs to renew or extend recognized intangible assets are
expensed as the costs are incurred.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Derivative
Instruments</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Derivative instruments are used as part of the overall strategy
to manage exposure to market risks primarily associated with
fluctuations in interest rates. As a matter of policy,
derivatives are not used for speculative purposes. Derivative
instruments that are measured at fair value on a recurring basis
are included in Other assets or Other liabilities in the
Consolidated Balance Sheets.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Fair
Value</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
A three-level valuation hierarchy is used to classify inputs
into the measurement of assets and liabilities at fair value.
The valuation hierarchy is based upon the relative reliability
and availability to market participants of inputs for the
valuation of an asset or liability as of the measurement date.
When the valuation technique used in determining fair value of
an asset or liability utilizes inputs from different levels of
the hierarchy, the level within which the measurement in its
entirety is categorized is based upon the lowest level input
that is significant to the measurement in its entirety. The
valuation hierarchy consists of the following levels:
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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<b><i>Level One.</i></b> Level One inputs are
unadjusted, quoted prices in active markets for identical assets
or liabilities which the Company has the ability to access at
the measurement date.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
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<b><i>Level Two.</i></b> Level Two inputs are
observable for that asset or liability, either directly or
indirectly, and include quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active,
observable inputs for the asset or liability other than quoted
prices and inputs derived principally from or corroborated by
observable market data by correlation or other means. If the
asset or liability has a specified contractual term, the inputs
must be observable for substantially the full term of the asset
or liability.
</div>
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<b><i>Level Three.</i></b> Level Three inputs are
unobservable inputs for the asset or liability that reflect the
Company’s assessment of the assumptions that market
participants would use in pricing the asset or liability,
including assumptions about risk, and are developed based on the
best information available.
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Fair value is based on quoted market prices, where available. If
quoted prices are not available, fair value is estimated based
upon other observable inputs. Unobservable inputs are used when
observable inputs are not available and are based upon judgments
and assumptions, which are the Company’s assessment of the
assumptions market participants would use in pricing the asset
or liability, which may include assumptions about risk,
counterparty credit quality, the Company’s creditworthiness
and liquidity and are developed based on the best information
available.
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When a determination is made to classify an asset or liability
within Level Three of the valuation hierarchy, the
determination is based upon the significance of the unobservable
factors to the overall fair value measurement of the asset or
liability. The fair value of assets and liabilities classified
within Level Three of the valuation hierarchy also
typically includes observable factors. In the event that certain
inputs to the valuation of assets and liabilities are actively
quoted and can be validated to external sources, the realized
and unrealized gains and losses included in the tables above
include changes in fair value determined by observable factors.
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Changes in the availability of observable inputs may result in
the reclassification of certain assets or liabilities. Such
reclassifications are reported as transfers in or out of
Level Three as of the beginning of the period that the
change occurs.
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Mortgage
Loan Repurchase and Indemnification Liability</font></b>
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The Company has exposure to potential mortgage loan repurchase
and indemnifications in its capacity as a loan originator and
servicer. The estimation of the liability for probable losses
related to repurchase and indemnification obligations considers
both (i) specific, non-performing loans currently in
foreclosure where the Company believes it will be required to
indemnify the investor for any losses and (ii) an estimate
of probable future repurchase or indemnification obligations.
The liability related to specific non-performing loans is based
on a loan-level analysis considering the current collateral
value, estimated sales proceeds and selling cost. The liability
related to probable future repurchase or indemnification
obligations is estimated based upon recent and historical
repurchase and indemnification trends segregated by year of
origination. An estimated loss severity, based on current loss
rates for similar loans, is then applied to probable repurchases
and indemnifications to estimate the liability for loan
repurchases and indemnifications. The liability for mortgage
loan repurchases and indemnifications is included within Other
Liabilities in the Consolidated Balance Sheets.
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Liability
for Reinsurance Losses</font></b>
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The liability for reinsurance losses is determined based upon an
actuarial analysis of loans subject to mortgage reinsurance that
considers current and projected delinquency rates, home prices
and the credit characteristics of the underlying loans including
credit score and
<font style="white-space: nowrap">loan-to-value</font>
ratios. This actuarial analysis is updated on a quarterly basis
and projects the future reinsurance losses over the term of the
reinsurance contract as well as the estimated incurred and
incurred but not reported losses as of the end of each reporting
period. In addition to the actuarial analysis, the incurred and
incurred but not reported losses provided by the primary
mortgage insurance companies for loans subject to reinsurance
are evaluated to assess the estimate of the actuarial-based
reserve. The liability for reinsurance losses is included within
Other Liabilities in the Consolidated Balance Sheets.
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Custodial
Accounts</font></b>
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The Company has a fiduciary responsibility for servicing
accounts related to customer escrow funds and custodial funds
due to investors aggregating approximately $3.0 billion and
$2.3 billion as of December 31, 2010 and 2009,
respectively. These funds are maintained in segregated bank
accounts, and these amounts are not included in the assets and
liabilities presented in the Consolidated Balance Sheets. The
Company receives certain benefits from these deposits, as
allowable under federal and state laws and regulations. Income
earned on these escrow accounts is recorded in Mortgage interest
income in the Consolidated Statements of Operations.
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<b><font style="font-family: 'Times New Roman', Times; font-variant: small-caps">Subsequent
Events</font></b>
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Subsequent events are evaluated through the date of filing with
the Securities and Exchange Commission.
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<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 22
-Paragraph 8
falsefalse12Summary of Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue