Standard & Poor’s Ratings Services said Friday it placed H&R Block on credit ratings watch for a possible downgrade, citing potential trouble for the company’s mortgage lending unit amid a crisis in the subprime market.
“Upheaval in the subprime mortgage market has depleted the results” of Block’s Option One Mortgage Corp. unit, S&P said.
H&R Block’s Option One segment is one of the battered players in subprime lending. During the housing boom, many banks issued loans to people with blemished credit histories. With housing prices sagging, those borrowers are missing payments more frequently and lenders are losing their financial backing.
H&R Block is trying to sell the unit.
Consumer advocates at Household - HSBC Watch claim it might be tough for H&R Block if their sub-prime mortgage unit takes a hard hit while their tax refund lending program also suffers. HSBC, perhaps now managed by real bankers instead of loan sharks, is withdrawing some tax loan programs and looking very hard at others.
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