Billionaire investor Wilbur Ross has reached an agreement to acquire the mortgage loan servicing business of H&R Block's Option One Mortgage, forming the second largest mortgage servicing company in the United States.
The $1.1 billion deal adds to the acquisition by WL Ross & Co. of American Home, giving the company $95 billion in mortgage financing. The deal is expected to close by May 30.
"We've been focusing on the mortgage area, and on the monoline insurance people. We have not been focusing on the brokerage investment banking companies," Ross told CNBC.
"I think it's very, very hard, particularly from the outside, to figure out what one of these is worth."
Option One currently services about $53 billion of subprime mortgages, ranking it the fourth-largest in the nation. H&R Block shut down Option One's mortgage originations after an earlier agreement to sell the division to Cerberus Capital Management fell through.
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.
WL Ross has agreed to offer comparable positions to a "substantial portion" of employees at Option One's servicing business.