H&R Block saw its plans to disentangle itself from the subprime mess (perhaps we could just start call it the SPM) evaporate this week as a tentative deal to sell its Option One Mortgage Company to Cerberus Capital Management LP dissolved under the worsening mortgage conditions.

Option One had accounted for about half of the HRB profits as recently as three years ago. The tax-preparation service had gotten into the mortgage business because it offered a way to even out the seasonal nature of the company's core business.



The deal to sell to Cerberus was struck in April; six months after HRB put Option One on the market. Subprime problems were emerging at that time but were yet to start killing off companies by the dozens and the proposed sale was for a little less than $1 billion, about $300 million below what Option One's CEO had predicted the sale would bring. Within two months HRB announced a pretax loss of $192.8 million on its mortgage division and Cerberus started renegotiating the deal.

While it will continue to market Option One to possible buyers, HRB has announced it will shut down the origination portion of the business while continuing its servicing activities and will eliminate 620 jobs at a pretax cost of about $75 million.