As expected, H&R Block Inc. announced that it has signed an agreement to sell its struggling Option One Mortgage Corp. lending arm, though unit subsidiary H&R Block Mortgage Corp. is not part of the deal.

Block will sell Option One to OOMC Acquisition Corp., a newly formed company affiliated with Cerberus Capital Management LP, for about $1.27 billion in cash -- a purchase price equal to the value of the tangible net assets of the business, though Block could receive an additional cash payment depending on Option One’s future income from mortgage loan originations.

H&R Block will close the operations of H&R Block Mortgage, a loan originator dealing directly with retail borrowers, before the transaction closes, taking  pretax charges of approximately $25 million, and another pretax charge of approximately $16 million for the impairment of the subsidiary’s goodwill.

Block will continue to provide its retail tax and other clients with residential mortgage loans through H&R Block Bank, which launched a year ago.

“With the changes occurring and being discussed for the U.S. mortgage industry, Option One will be positioned to more effectively compete, while allowing H&R Block to focus on growing its core tax, accounting and aligned financial services businesses,” said Block chairman and chief executive Mark A. Ernst, in a statement.

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