H&R Block Inc., based in Kansas City, Mo., has agreed to terminate the purchase agreement entered into in April 2007 under which an affiliate of Cerberus Capital Management LP would have acquired Option One Mortgage Corp. (OOMC), a wholly owned subsidiary of H&R Block.
Throughout recent months, H&R Block and Cerberus worked to identify mutually acceptable alternatives for restructuring the earlier agreement in light of the widespread changes in mortgage market conditions and the substantial reduction in new lending by OOMC. These discussions did not lead to a mutually acceptable agreement, H&R Block reports.
In addition, effective immediately, OOMC has ceased accepting new mortgage loan applications. However, it will honor existing loan commitments in its loan pipeline, consisting of approximately $30 million in principal loan amount. OOMC believes that the majority of these pipeline loans will be eligible for sale to Fannie Mae or Freddie Mac, with the bulk of the remainder being prime loans eligible for sale in the ordinary course. Upon funding loan commitments in process, OOMC will complete its exit from all mortgage origination activities.
The bulk of the company's servicing activities are carried out with respect to loans owned by third parties. OOMC adds that it has retained the investment banking firm Lazard for advice in connection with the ultimate sale of its servicing activities.