Mortgage Loans Held For Investment And Related Assets

6 Months Ended

Oct. 31, 2011

Mortgage Loans Held For Investment And Related Assets [Abstract]

Mortgage Loans Held For Investment And Related Assets

4. Mortgage Loans Held for Investment and Related Assets

The composition of our mortgage loan portfolio as of October 31, 2011 and April 30, 2011 is as follows:

	(dollars in 000s)
As of	October 31, 2011					April 30, 2011
		Amount		% of Total			Amount		% of Total
Adjustable-rate loans	$	311,218		58	%	$	333,828		58	%
Fixed-rate loans		226,536		42	%		239,146		42	%
		537,754		100	%		572,974		100	%
Unamortized deferred fees and costs		3,762					4,121
Less: Allowance for loan losses		(91,379	)				(92,087	)
	$	450,137				$	485,008

     Our loan loss allowance as a percent of mortgage loans was 17.0% at October 31, 2011, compared to 16.1% at April 30, 2011.

     Activity in the allowance for loan losses for the six months ended October 31, 2011 and 2010 is as follows:

		(in 000s)
Six months ended October 31,		2011			2010
Balance, beginning of the period	$	92,087		$	93,535
Provision		12,750			16,300
Recoveries		88			86
Charge-offs		(13,546	)		(22,354	)
Balance, end of the period	$	91,379		$	87,567

     When determining our allowance for loan losses, we evaluate loans less than 60 days past due on a pooled basis, while loans we consider impaired, including those loans more than 60 days past due or modified as troubled debt restructurings (TDRs), are evaluated individually. The balance of these loans and the related allowance is as follows:

	(in 000s)
As of	October 31, 2011				April 30, 2011
	Portfolio Balance		Related Allowance		Portfolio Balance		Related Allowance
Pooled (less than 60 days past due)	$	276,447	$	10,076	$	304,325	$	11,238
Impaired:
Individually (TDRs)		89,351		8,576		106,328		11,056
Individually (60 days or more past due)		171,956		72,727		162,321		69,793
	$	537,754	$	91,379	$	572,974	$	92,087

     Our portfolio includes loans originated by Sand Canyon Corporation (SCC) and purchased by H&R Block Bank (HRB Bank) which constitute 63% of the total loan portfolio at October 31, 2011. We have experienced higher rates of delinquency and have greater exposure to loss with respect to this segment of our loan portfolio. Our remaining loan portfolio totaled $201.1 million and is characteristic of a prime loan portfolio, and we believe subject to a lower loss exposure. Detail of our mortgage loans held for investment and the related allowance at October 31, 2011 is as follows:

Credit quality indicators at October 31, 2011 include the following:

	(dollars in 000s)
	Outstanding Principal Balance		Loan Loss Allowance				% 30 + Days Past Due
			Amount		% of Principal
Purchased from SCC	$	336,689	$	78,517	23.3	%	44.7	%
All other		201,065		12,862	6.4	%	11.7	%
	$	537,754	$	91,379	17.0	%	32.4	%

	(in 000s)
Credit Quality Indicators	Purchased from SCC		All Other		Total Portfolio
Occupancy status:
Owner occupied	$	238,204	$	127,138	$	365,342
Non-owner occupied		98,485		73,927		172,412
	$	336,689	$	201,065	$	537,754
Documentation level:
Full documentation	$	100,555	$	145,912	$	246,467
Limited documentation		8,707		21,830		30,537
Stated income		196,106		20,515		216,621
No documentation		31,321		12,808		44,129
	$	336,689	$	201,065	$	537,754
Internal risk rating:
High	$	136,885	$	—	$	136,885
Medium		199,804		—		199,804
Low		—		201,065		201,065
	$	336,689	$	201,065	$	537,754

     Loans given our internal risk rating of "high" are generally originated by SCC, have no documentation or are stated income and are non-owner occupied. Loans given our internal risk rating of "medium" are generally full documentation or stated income, with loan-to-value at origination of more than 80% and have credit scores at origination below 700. Loans given our internal risk rating of "low" are generally full documentation, with loan-to-value at origination of less than 80% and have credit scores greater than 700.

     Our mortgage loans held for investment include concentrations of loans to borrowers in certain states, which may result in increased exposure to loss as a result of changes in real estate values and underlying economic or market conditions related to a particular geographical location. Approximately 52% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California and New York.

Detail of the aging of the mortgage loans in our portfolio that are past due as of October 31, 2011 is as follows:

	(in 000s)
	Less than 60 Days Past Due		60 – 89 Days Past Due		90+ Days Past Due (1)		Total Past Due		Current		Total
Purchased from SCC	$	27,296	$	6,614	$	139,761	$	173,671	$	163,018	$	336,689
All other		9,683		801		20,826		31,310		169,755		201,065
	$	36,979	$	7,415	$	160,587	$	204,981	$	332,773	$	537,754

(1) No loans past due 90 days or more are still accruing interest.

Information related to our non-accrual loans is as follows:

	(in 000s)
As of		October 31, 2011		April 30, 2011
Loans:
Purchased from SCC	$	145,493	$	143,358
Other		23,079		14,106
		168,572		157,464
TDRs:
Purchased from SCC		3,055		2,849
Other		893		329
		3,948		3,178
Total non-accrual loans	$	172,520	$	160,642

Information related to impaired loans is as follows:

	(in 000s)
	Portfolio Balance With Allowance		Portfolio Balance With No Allowance		Total Portfolio Balance		Related Allowance
As of October 31, 2011:
Purchased from SCC	$	180,396	$	45,369	$	225,765	$	72,465
Other		26,241		9,301		35,542		8,838
	$	206,637	$	54,670	$	261,307	$	81,303
As of April 30, 2011:
Purchased from SCC (1)	$	180,387	$	51,674	$	232,061	$	71,733
Other (1)		29,027		7,561		36,588		9,116
	$	209,414	$	59,235	$	268,649	$	80,849

(1) Classification of amounts as of April 30, 2011 has been restated to conform to the current period presentation.

Information related to the allowance for impaired loans is as follows:

		(in 000s)
As of		October 31, 2011		April 30, 2011
Portion of total allowance for loan losses allocated to
impaired loans and TDR loans:
Based on collateral value method	$	72,727	$	69,794
Based on discounted cash flow method		8,576		11,055
	$	81,303	$	80,849

Information related to activities of our non-performing assets is as follows:

	(in 000s)
Six months ended October 31,	2011		2010
Average impaired loans:
Purchased from SCC	$	226,880
All other		35,525
	$	262,405	$	320,371
Interest income on impaired loans:
Purchased from SCC	$	3,076
All other		238
	$	3,314	$	3,353
Interest income on impaired loans recognized on a cash basis on
non-accrual status:
Purchased from SCC	$	2,973
All other		224
	$	3,197	$	3,146

     Our real estate owned (REO) includes loans accounted for as in-substance foreclosures of $6.2 million and $7.7 million at October 31, 2011 and April 30, 2011, respectively. Activity related to our real estate owned is as follows:

		(in 000s)
Six months ended October 31,		2011			2010
Balance, beginning of the period	$	19,532		$	29,252
Additions		4,438			11,185
Sales		(6,303	)		(12,784	)
Writedowns		(1,706	)		(2,076	)
Balance, end of the period	$	15,961		$	25,577