New Option: H&R Block Completes Sale of Subprime Servicer
The freakish experiment of tax-preparer-as-subprime-servicer is finally over. H&R Block Inc. (HRB) said Thursday it successfully closed on its $1.3 billion deal to send Option One Mortgage Corp.'s servicing business to an affiliate of WL Ross & Co. LLC, the company run by billionaire investor Wilbur Ross. Ross also purchased the servicing platform of now-bankrupt American Home Mortgage late last year, creating American Home Mortgage Servicing, Inc. The American Home servicing operation will assume Option One's servicing portfolio and personnel, H&R Block said in a press statement. "The closing of the Option One sale is a significant milestone in the transformation and refocusing of H&R Block," said Richard C. Breeden, H&R Block's chairman. "Today's transaction reduces risks and distractions from doing what we do best, which is serving the tax preparation needs of tens of millions of clients." Ross essentially paid only for the servicing advances due to American Home; H&R Block said that $980 million of the $1.3 billion purchase price will repay all of its outstanding servicing advances tied to Option One, and that the company will net roughly $230 million out of the deal. Which means that the entire Option One platform -- including its employees -- went for $230 million. When the deal was originally announced in March, both companies said that "a substantial number" of employees would keep their jobs. Disclosure: The author owned no positions in HRB when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.