OOMC Takes Loss as Reserves Increase

Subprime giant Option One Mortgage Corp., Irvine, Calif., lost $69.7 million in its fiscal third quarter ending Jan. 31, reflecting a large increase in loan loss reserves.The loss figure was released late Thursday when OOMC's parent, H&R Block, reported its earnings. H&R Block officials also revealed that OOMC sold $670 million in delinquent loans during the quarter. H&RB chairman and CEO Mark Ernst noted there "is a weak secondary market" for early payment default loans. The company still expects to sell OOMC for at least $1.3 billion and is continuing to talk to potential investors. It promised to provide an update on the sale process in March. H&RB said it reported OOMC's third-quarter results as "discontinued operations," saying the unit added $111 million to loan loss reserves during the period. H&RB offered a ray of hope that conditions were improving at OOMC, noting that "early payment default trends improved reflecting the company's efforts to tighten underwriting criteria." (For more details see Monday's National Mortgage News.)