Paper Economy: H & R “on the” Block

Tuesday, November 07, 2006

H & R “on the” Block

In another extraordinary example of a national lender struggling to adapt to the current challenging economic environment, H&R Block announced today that they will attempt to consolidate their loan fulfillment operations by closing 12 of their branch locations and possibly even selling their entire “Option One” mortgage business.

Option One, which is the nations fifth largest originator of sub-prime mortgages, has apparently been besieged this year with an unexpected increase delinquencies.

Considering that Option One wrote no less than $40 billion in sub-prime loans only just last year, there is no doubt that whatever the outcome of the consolidation effort, it will equate to a more defensive and risk-averse posture resulting in a significant decrease in loan originations.

This is yet another example of a significant structural change to the nations housing market as there will inherently be less mortgage money available to chase the current enormous and growing backlog of unsold homes.