Block to sell mortgage servicing business

KANSAS CITY, Mo. (AP) — H&R Block Inc. said Monday it has signed an agreement to sell its troubled mortgage servicing business for $1.1 billion to billionaire investor Wilbur Ross.

Option One Mortgage Corp., which has been rocked by the nationwide mortgage crisis, currently services about $53 billion of subprime mortgages, ranking it the fourth-largest in the nation. Kansas City-based H&R Block shut down Option One’s mortgage originations after an earlier agreement to sell the division to Cerberus Capital Management fell through.

H&R Block shares, which have traded in a 52-week range of $16.89 to $24.02, rose 89 cents, or 5.1 percent, to $18.36 in trading Monday.

WL Ross Co. earlier agreed to acquire $42 billion in mortgage servicing rights from American Home Mortgage Investment Corp., and the combined total of $95 billion will create the country’s second-largest subprime servicing portfolio, after Countrywide Financial.

WL Ross is paying $41 million for the mortgage servicing rights, $942 million plus $100 million of retained receivable for the $1.1 billion of advances and $65 million for $85 million of other servicing related assets. The advances are expected to increase to about $1.2 billion and the increment will be purchased at a 3 percent discount as well.