05/09/2008

Associated Press

H&R Block Inc. said Friday the Office of Thrift Supervision has rescinded a rule requiring the company to hold a 3 percent tangible capital reserve, a restriction that had prevented the company from buying back stock.

Regulators eliminated the requirement after H&R Block closed the sale of its mortgage servicing business, which had operated under its Option One Mortgage Corp. unit. The sale, along with the reduction of debt, reduced the company's risk profile, allowing the OTS to pull the requirement.

The OTS typically requires financial firms it regulates to maintain a reserve reflecting a percentage of the company's total assets.

Losses at Option One, which largely collapsed in last year's mortgage meltdown, had put H&R Block out of compliance with the 3 percent rule. H&R Block is subject to the OTS because it owns H&R Block Bank.

A separate 3 percent capital requirement applying to the bank was unaffected by the OTS decision, the company said.

"We are elated with the OTS action, which eliminates a significant constraint on the structure of H&R Block's balance sheet," said Chairman Richard Breeden in a release.