HR Block 2005 Annual Report Download - page 68

the income tax business also exist in other countries in which we See discussion in ‘‘Risk Factors’’ for additional information.
operate. In addition, the Canadian government regulates the
refund-discounting program in Canada. These laws have not
materially affected our international operations.
MORTGAGE SERVICES
GENERAL ⬎⬎⬎ Our Mortgage Services segment originates LOAN ORIGINATION ⬎⬎⬎ The following table details our
mortgage loans, services non-prime mortgage loans and sells and originations by channel for fiscal years 2005, 2004 and 2003:
securitizes mortgage loans and residual interests in the (in 000s)
U.S. Revenues primarily consist of gains from sales and Year Ended April 30, 2005 2004 2003
securitizations of mortgage assets, accretion on residual interests Wholesale $ 21,841,783 $ 16,828,138 $ 11,434,138
and servicing fee income. Segment revenues constituted 28.2% of Retail 4,023,914 3,105,021 2,918,378
our consolidated revenues for fiscal year 2005 and 31.2% for 2004 National accounts 3,974,224 2,642,944 1,814,092
and 30.8% for 2003. Bulk acquisitions 1,161,803 679,910 411,013
We originate both non-prime and prime mortgage loans. Non- $ 31,001,724 $ 23,256,013 $ 16,577,621
prime mortgages are those that may not be offered through Information regarding our non-prime loan originations is as
government-sponsored loan agencies and typically involve follows:
borrowers with limited income documentation, high levels of
consumer debt or past credit problems. Even though these (dollars in 000s)
borrowers have credit problems, they also tend to have equity in Year Ended April 30, 2005 2004 2003
the property that will be used to secure the loan. Prime Loan type:
mortgages are those that may be offered through government 2-year ARM 61.6% 63.4% 70.3%
3-year ARM 4.0% 5.2% 5.1%
sponsored loan agencies. We conduct business through four
Fixed 1st 17.7% 28.7% 23.9%
channels: Fixed 2nd 3.8% 1.6% 0.7%
쐍Option One’s wholesale origination channel works with Interest only 1st 12.6% 0.7% – %
independent brokers throughout the U.S. to fund non-prime Other 0.3% 0.4% – %
mortgage loans through a national branch network. Loan purpose:
Wholesale originations represent the majority of Option Cash-out refinance 63.5% 67.1% 64.9%
One’s total loan production. Purchase 30.8% 26.0% 26.9%
Rate or term refinance 5.7% 6.9% 8.2%
쐍HRBMC originates residential mortgage loans directly to
Loan characteristics:
retail consumers through various sales channels, including Average loan size $ 160 $ 151 $ 144
37 loan production offices, of which four are regional offices, Weighted-average loan-to-value 78.9% 78.1% 78.7%
in 26 states in fiscal year 2005. Weighted-average FICO score 614 608 604
쐍Option One’s national accounts channel forms partnerships
with financial institutions, including national and regional WHOLESALE. Wholesale loan originations involve an
banks, to allow them to offer non-prime loans. independent broker who assists the borrower in completing the
쐍Option One’s bulk acquisitions channel specializes in the loan application, which includes securing information regarding
purchase of performing non-prime mortgage loan pools. their assets, liabilities, income, credit history, employment
Option One is headquartered in Irvine, California and operates history and personal information. We require a credit report on
in 48 states by serving 42,000 mortgage broker locations and each applicant from an industry-recognized credit reporting
through its network of 36 wholesale loan production branches company. In evaluating an applicant’s credit history, we use
and six national accounts branches. HRBMC, a wholly-owned credit bureau risk scores, generally known as a FICO score,
subsidiary of Option One, is a retail mortgage lender for prime, which is a statistical ranking of likely future credit performance
non-prime and government loans and is licensed to conduct developed by Fair, Isaac & Company and provided by the three
business in all 50 states. HRBMC is an approved seller/servicer national credit data repositories. Qualified independent
for Fannie Mae and Freddie Mac and is HUD authorized to appraisers are required to appraise mortgaged properties used to
originate and underwrite FHA and VA mortgage loans. secure mortgage loans. The broker then identifies a lender who
offers a loan product best suited to the borrower’s financial
H&R BLOCK 2005 Form 10K
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