Mortgage Unit Put on the Block by H&R; Block

H&R; Block Inc. says it is looking to sell its Irvine-based wholesale mortgage unit, Option One, in an effort to focus on its retail businesses.

Founded in 1992, Option One specializes in mortgages to customers with bad credit, originating about $3.6 billion in loans over the last year. That makes the company--which employs 1,500 people nationwide, including 600 in Orange County--slightly larger than Orange-based rival Long Beach Financial Corp., which recently agreed to sell itself for $350 million to Seattle-based Washington Mutual.

Kansas City, Mo.-based H&R; Block bought Option One in 1997 from a unit of Fleet Bank as part of a diversification into nontax businesses. Now company officials say they want to sell all or part of the Irvine unit and use the money to expand into other retail businesses that deal directly with consumers, rather than relying on brokers.

“Option One has experienced tremendous growth, more than tripling its loan originations since we acquired it,” said Frank Salizzoni, chief executive at H&R; Block. “While we are confident in the continued growth of Option One, this step reflects H&R; Block’s efforts to more narrowly define our focus on our retail business strategy.”

H&R; Block has retained Friedman, Billings, Ramsey & Co. to help locate potential buyers or joint venture partners.

Analysts say likely buyers include large banks and thrifts that have been seeking to boost their sagging returns by moving into higher-profit business lines, such as lending to borrowers with poor credit.

Option One reported annual revenue of about $222 million and a pretax profit of $75 million during the fiscal year ended April 30. The company has 25 offices nationwide.

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Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.