H&R Block Still in Unit Sale Talks

Option One negotiations continue.
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H&R Block (HRB) - Get Report conceded Friday that it won't be able to meet a self-imposed deadline to sell its subprime lending unit by the end of the month.

The Kansas City, Mo., tax company said it "remains in negotiations to sell its Option One Mortgage Corporation subsidiary.Though the company announced in November it would explore alternatives for its mortgage business and expected to conclude that process in March, recent events in the subprime mortgage industry have affected the process."

Indeed, the business of lending to homebuyers with poor credit histories has practically ground to a halt following a spike in defaults and delinquencies on loans made in 2005 and 2006. Mortgage companies such as

New Century

(NEWC)

and

NovaStar

(NFI)

have seen their shares hammered by losses tied to loans gone bad, and Wall Street has cut off funding to lenders including New Century.

Bear Stearns

(BSC)

said Thursday it expects to cut subprime lending to less than a third of its mortgage business in 2007 from half last year.

Even so, H&R Block chief Mark Ernst said earlier this month that the company hoped to sell Option One for its book value of around $1.3 billion. Analysts are skeptical the company will get a number even approaching that figure.

TheStreet.com

reported Thursday that the company is cutting back at its other mortgage operation, its H&R Block Mortgage retail lending outfit.