The subprime mortgage meltdown at Irvine’s Option One Mortgage Corp. has claimed a high-profile causality: the chief executive of parent company H & R; Block Inc.
The Kansas City-based tax and accounting services company said Tuesday Mark Ernst had resigned as its chairman, chief executive and president amid rising bad loans at Option One.
Alan Bennett, a former chief financial officer at Aetna Inc., was named interim chief executive as H & R; Block searches for a permanent replacement.
Richard Breeden, a former Securities and Exchange Commission chairman who won three H & R; Block board seats in September after a proxy fight, was named chairman.
Breeden has pushed for H & R; Block to get out of mortgages and to focus solely on tax preparation.
H & R; Block is trying to save a deal to sell part of Option One to private equity firm Cerberus Capital Management LP.
In October, H & R; Block said Option One couldn’t meet the original terms of a deal, estimated at $800 million, and now is looking to rework the sale to include just Option One’s business servicing mortgages.
Option One’s business of making mortgages to borrowers with imperfect credit could be shut down. Some sources familiar with the company speculate that Option One’s founders could buy back the operation, which has dramatically contracted in the past year.
Option One led a $193 million loss at H & R; Block’s mortgage unit in the quarter ended July 31. Option One has laid off hundreds of workers and seen banks pull lines of credit.
In 2006, Option One was the No. 6 maker of subprime loans.
In 2003, at the height of the housing and mortgage boom, Option One was the biggest source of profits for H & R; Block.
