Industry News

H&R Block enters deal to sell Option One Mortgage

Tax preparation firm also closing its own home-loan shop

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H&R Block Inc. said it's reached an agreement to sell its subprime lending subsidiary, Option One Mortgage Corp., by Oct. 31, and plans to shut down its retail loan origination business, H&R Block Mortgage, before the sale closes. About 600 H&R Block Mortgage employees will reportedly receive severance packages. H&R Block will continue to provide prime residential mortgage loans through H&R Block Bank, which began operations in May 2006. H&R Block said it's agreed sell Option One to an affiliate of Cerberus Capital Management L.P. for $300 million less than the company's book value at the time the sale closes. H&R Block could recoup some or all of the discounted sales price through a post-sale "earnout" entitling it to half the net income from Option One's origination business for 18 months after the sale. With $40 billion in originations, Option One was one of the 10 largest subprime lenders in 2006, H&R Block said. Irvine, Calif.-based...