HR Block 2007 Annual Report Download - page 37

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U.S. to fund non-prime mortgage loans through a national branch respectively. Information regarding our non-prime loan originations is
network. Wholesale originations represent the majority of OOMC’s total as follows:
loan production.
Year Ended April 30, 2007 2006 2005
OOMC is headquartered in Irvine, California and operates in 49 states
Loan type:
by serving 52,000 mortgage broker locations and through its network of
2-year ARM 34.8% 43.9% 61.6%
22 wholesale loan production branches and its relationship with
3-year ARM 1.2% 1.9% 4.0%
HRBMC.
Fixed 1st 14.2% 12.7% 17.7%
HRBMC is a retail mortgage lender for prime, non-prime and
Fixed 2nd 2.4% 4.9% 3.8%
Interest only 1st 12.2% 21.1% 12.6%
government loans and is licensed to conduct business in all 50 states.
40-Year 32.9% 13.4% –%
HRBMC is an approved seller/servicer for Fannie Mae and Freddie Mac
Other 2.3% 2.2% 0.3%
and is HUD authorized to originate and underwrite FHA and VA
Percentage of fixed-rate mortgages 21.6% 20.0% 22.1%
mortgage loans.
Percentage of adjustable-rate mortgages 78.4% 80.0% 77.9%
In the current year, we terminated approximately 500 employees and
Percentage of first mortgage loans owner-
occupied 91.1% 91.7% 92.6%
closed 17 of our branch offices through a restructuring. This resulted in
Loan purpose:
a pretax charge of $21.5 million. In the prior year, we terminated
Cash-out refinance 64.0% 60.2% 63.5%
approximately 1,200 employees and closed some of our branch offices
Purchase 30.5% 35.0% 30.8%
through a restructuring. This resulted in a pretax charge of
Rate or term refinance 5.5% 4.8% 5.7%
Borrower documentation level:
$12.6 million. We expect these restructuring activities will continue until
Full documentation 53.1% 54.9% 60.1%
the sale of our mortgage operations, including the closure of additional
Stated income 36.9% 41.3% 38.1%
branch locations and the operations of the bulk acquisitions channel.
Other 10.0% 3.8% 1.8%
We filed a Form 8-K on May 17, 2007, related to restructuring activities WHOLESALE. Wholesale loan originations involve an independent
during fiscal year 2008, which includes the termination of broker who assists the borrower in completing the loan application,
approximately 615 employees. Pretax charges are estimated to be which includes securing information regarding their assets, liabilities,
approximately $19.0 million in fiscal year 2008. These restructuring
9m
income, credit history, employment history and personal information.
activities are part of our strategy to consolidate our origination We also originate stated income loans where income verification may
processes and reduce overall costs. See additional discussion of our not be obtained. We require a credit report on each applicant from an
restructuring charge in Item 8, note 20 to the consolidated financial industry-recognized credit reporting company. In evaluating an
statements. applicant’s credit history, we use credit bureau risk scores, generally
LOAN ORIGINATION –We originated $27.1 billion, $40.8 billion and known as a FICO score, which is a statistical ranking of likely future
$31.0 billion in mortgage loans during fiscal years 2007, 2006 and 2005, credit performance developed by Fair, Isaac & Company and provided
by the three national credit data repositories. Qualified independent
appraisers are required to appraise mortgaged properties used to secure
mortgage loans. The broker then identifies a lender who offers a loan
product best suited to the borrower’s financial needs. No one broker
currently originates more than 1.2% of our total non-prime production.
Upon receipt of an application from a broker, a credit report and an
appraisal report, one of our branch offices processes and underwrites
the loan. Our underwriting guidelines require mortgage loans be
underwritten in a standardized procedure that complies with federal
and state laws and regulations. The guidelines are primarily intended to
assess the value of the mortgaged property, evaluate the adequacy of
the property as collateral for the mortgage loan, and assess the
creditworthiness of the related borrower. The underwriting process
may include an automated underwriting decision system as a tool to
assist in the assessment of the creditworthiness of the borrower. Based
upon this assessment, we advise the broker whether the loan
application meets our underwriting guidelines and product description
H&R BLOCK 2007 Form 10K