File this one under "no surprise there." After months of wrangling for a better deal, Cerberus Capital has finally gotten out of its deal to purchase the ailing mortgage unit of battered tax-prepper H&R Block
Block's Option One Mortgage Corporation is, in fact, not making more loans. And, true to the model adopted by such other mortgage-lender losers as Novastar Financial
Remember, Cerberus knows very well what it's like to consume a sickened mortgage lender. It's the lead dog in the consortium -- which included multiple credit-crunch clod Citigroup
Much of that was a $455 million "impairment" charge to goodwill at ResCap, which is simply an admission that the biz is worth half a billion bucks less than they thought previously. Well, half a billion and then some. The quarter also had a much larger, much murkier, $840 million write-off for "... our Commercial Finance business, equity interest in Capmark, certain corporate activities related to mortgage activities, and reclassifications and eliminations between the reporting segments."
That's a lot of billions down the drain, with only about a year since Cerberus made the buy. You can see why the hound would be a little shy about gobbling up another lender in a mortgage market that's virtually dead. (GM's auto sales haven't been breaking any records lately, either.) Foolish investors looking at banks and lenders as "value" plays might consider themselves warned.
At the time of publication, Seth Jayson, a top-10 CAPS player, had no positions in any company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.