KANSAS CITY, Mo. — H&R Block Inc. said Tuesday that a deal to sell its troubled mortgage lending arm has fallen through, forcing it to scrap most of the $1 billion business.
The Kansas City-based tax preparer and Cerberus Capital Management LP said that they have terminated their agreement, announced in April, for a Cerberus subsidiary to buy Option One Mortgage Corp.
H&R Block is accepting no new mortgage applications and will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down operations, the company said.
The company said it will honor $30 million worth of existing commitments. Most will be eligible for sale to government- subsidized Fannie Mae or Freddie Mac, H&R Block said, with the rest sold to investors.
H&R Block also said it will sell its servicing business, which will result in another asset-impairment charge for the quarter ended Oct. 31 of no more than $125 million.
Kathleen Shanley, an analyst for corporate bond research firm Gimme Credit, said in a note to clients that Option One had a net book value of $1.1 billion as of July, according to the latest available figures.
