Banks Reduce Credit Lines to H&R Block Mortgage Unit
H&R Block the largest U.S. tax preparer, said on Wednesday bank lines at its Option One Mortgage Corp lending unit were terminated or reduced, as the subprime mortgage company reduces it lending volume.
Banks reduced and closed out warehouse lines of credit, which H&R Block's Option One Mortgage Corp used to temporarily finance home loans made to consumers.
H&R Block has struggled to sell the Option One unit as rising defaults force mortgage lenders to scale back their lending to people with weak credit.
Cerberus Capital Management agreed to buy Option One in April, but in August, H&R Block said Option One would stop offering loans to people with weak credit and larger loans, and that Cerberus may buy only the loan servicing business, which collects mortgage payments from customers.
One of the warehouse lines of credit terminated was with JPMorgan Chase and the other was with Citigroup. The terminated lines were for $1 billion each, according to a filing with regulators.
Another warehouse line with Citi was reduced to $150 million from $1.5 billion. A warehouse line with Greenwich Capital, a unit of Royal Bank of Scotland Group was reduced to $750 million in committed funding from $2 billion in committed and $1 billion in uncommitted funding.