Cerberus Capital Management LP and H&R Block Inc. said Tuesday they terminated their agreement for Cerberus to purchase H&R Block’s mortgage subsidiary, which has now stopped accepting new mortgage applications.
H&R Block said it will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down lending at Option One Mortgage Corp. About $34 million of that charge will be incurred in the quarter ended Oct. 31, with the rest incurred in the quarter ending Jan. 31, along with about $7 million in previously disclosed restructuring.
Cerberus and H&R Block have tried in recent months to renegotiate the agreement regarding Option One, first struck in April, as the mortgage market has been rocked by subprime defaults and tightened lending. The sides described the termination as “fully amicable.”
“The mortgage market today has undergone vast changes since last April when the original Cerberus deal was signed,” H&R Block Chairman Richard Breeden said in a statement. “Despite the hard work and good faith of both sides we could not find a way to restructure the original transaction to mutual satisfaction.”
OOMC has stopped accepting new mortgage applications but will honor $30 million worth of existing commitments. Most of these will be eligible for sale to Fannie Mae or Freddie Mac, H&R Block said, with the rest being sold to willing investors.