Buyback request hurting H&R Block stock
Shares of H&R Block (HRB) are trading down about 10% this week, after a group of investors sent a repurchase request to Option One Mortgage Corp., a former subsidiary of the company, regarding residential mortgage-backed securities with loans Option One originated. The investors allege Option One's loans were "improperly originated or documented and sold into securitization trusts." The Dallas law firm of Talcott Franklin represents the investors, who hold more than 25% of the voting rights in at least 64 trusts containing Option One Loans, the law firm said. In 2007, Option One was the No. 37 mortgage lender in the country originating $11.88 billion of loans. The company stopped issuing new loans in December of that year. H&R Block sold the servicing assets of Option One in 2008, but kept a share of the liability and renamed the company Sand Canyon Corp. No one at the law firm was immediately available to comment on the size of the repurchase requests, but the principal attorney said in a statement the asking price may not be enough. "As with many of these transactions, the damages may exceed the available funds for recovery," according to Talcott Franklin, principal of his eponymous firm. H&R Block appointed a new chief executive officer, William Cobb, who assumes his position Monday May 16. Cobb replaces Alan Bennett who was appointed to the position in July 2010. Cobb previously served as president of eBay Marketplaces, eBay's flagship division. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.