H & R; Block Inc. has completed the sale of its Irvine-based Option One Mortgage Corp. for $1.3 billion, with most of the proceeds going to pay off debt.
The Kansas City-based tax preparer sold the onetime subprime mortgage lender to an affiliate of billionaire investor Wilbur Ross.
Option One had been among the nation’s top lenders to borrowers with imperfect credit but suffered amid the sector’s downfall last year.
The company now services loans it made during the boom. It services about $50 billion of subprime mortgages.
H & R; Block is using money from the sale to repay about $980 million in debt with net cash proceeds of about $230 million.
The move closes a chapter for H & R; Block. During the mortgage boom, Option One and related mortgage businesses were the most profitable part of the company’s business.
Once the slowdown hit, Option One drove big losses at H & R; Block. Last year, the company tried to sell Option One’s loan origination and servicing business in a deal with private equity firm Cerberus Capital Management LP.
After that deal fell through, H & R; Block shut down Option One’s loan making business. The unit laid off workers as it focused on servicing loans.
Billionaire investor Ross is known for buying left-for-dead businesses such as steel mills, textile mills and Appalachian coal mines and restructuring them.
