H&R Block NPL Portfolio Doesn't Sell

Washington-A $240 million portfolio of nonperforming loans recently offered for auction by H&R Block failed to sell, according to participants with knowledge of the deal.

The mortgages offered belonged to its now-defunct subprime division, Option One Mortgage Corp., Irvine, Calif. At press time, H&R Block's media department had not returned telephone calls about the auction.

Those familiar with the transaction declined to be quoted, citing confidentiality agreements. One observer noted that there was strong interest in the portfolio but "the bid price was a little low." He added, "At the end of the day there was great activity on it."

One advisor said the H&R Block portfolio was actually part of a larger loan auction that included $635 million of mortgages. "About $400 million of the package was performing well," said the advisor, requesting anonymity.

Professionals who play in the NPL space say very few large NPL deals are getting done these days, citing changes to mark-to-market accounting rules promulgated by the Financial Accounting Standards Board. "Banks are less inclined to sell because they don't have to write it down as much," said one investment banker.

However, investors that buy small loan packages of less than $50 million say their deals are getting done.

H&R Block is a publicly traded tax preparation company that also owns a bank.

A year ago H&R Block sold Option One's servicing operation to investor Wilbur Ross, but retained many of the subprime wholesaler's delinquent loans.

H&R has quietly been trying to auction off some of Option One's loan portfolio but has declined to talk about the process.

It's believed that many of the loans in question were the subject of early payment defaults and loan buyback requests from Wall Street.

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