$62B on the Market

H&R Block is actively marketing the subprime servicing operation of its wholly owned mortgage subsidiary, Option One Mortgage Corp., Irvine, Calif., the nation's fourth largest servicer of A- to D loans.

Up for grabs is OOMC's portfolio of receivables as well as the platform itself. "Block wants to sell the thing in one piece," said one servicing manager. OOMC services $62 billion in loans.

Investment bankers say the likely buyers include hedge funds and Wall Street firms. Even though the subprime market has been decimated over the past nine months, investment bankers say private equity money continues to look at the sector, hoping to acquire assets at bargain basement prices.

The mortgage company -- which H&R Block bought from Fleet Bank a decade ago -- services 349,000 nonconforming loans, 8.64% of which are in foreclosure, according to figures compiled by Mortgage Servicing News and the Quarterly Data Report. (See table.)

Lazard Asset Management, New York, has been hired to market the portfolio and platform.

In mid-December, H&RB said publicly that it and Cerberus Capital Management have terminated their deal whereby the hedge fund was scheduled to buy OOMC.

Earlier this year Cerberus -- which also controls GMAC Mortgage -- agreed to buy OOMC for $1 billion but as the subprime crisis worsened most mortgage executives familiar with the deal expected the hedge fund to back out.

"There is no way this deal is going to get done," one executive who worked for Cerberus told MSN back in September.

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