Mortgage Write-Off to Cut Cendant Profit
Residential real estate and travel firm Cendant Corp. said Wednesday that its quarterly earnings would be cut by about $175 million because the mortgage refinancing wave is hurting its loan-servicing business.
Cendant, whose franchises include Coldwell Banker and Century 21, said it expected third-quarter adjusted earnings per share of 28 cents, down from its previous estimate of 42 cents.
The $175-million write-off within the New York company’s mortgage-servicing unit will be slightly offset by strength in its other businesses, including Avis Rent a Car, which has benefited recently from stronger pricing.
Cendant’s stock slumped $1.71, or 13%, to $11.46 on the New York Stock Exchange, a 52-week low.
Companies that provide mortgage services such as billing frequently get pinched during refinancing waves because they must lower the previously booked value of those servicing rights, as loans are paid off at a faster-than-expected pace.
Cendant said it is adopting a more conservative model to evaluate and predict the value of mortgage servicing rights.
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