The subprime lending arm of tax giant H&R Block continues to hemorrhage money, to the extent that it's close to being unsalable, according to Bloomberg.

H&R Block Inc.'s mortgage unit lost a $1.5 billion credit line, falling ``dangerously close'' to the minimum amount demanded by a hedge fund firm that has agreed to buy the money-losing home lender.

The so-called warehouse credit facility for Option One Mortgage Corp. wasn't renewed by Lehman Brothers Holdings Inc. when it expired on June 28, Kansas City, Missouri-based H&R Block said in a federal filing. That reduced the unit's borrowing capacity to $8 billion in committed loans and $2 billion in uncommitted lines of credit.

Cerberus Capital Management LP, a New York-based hedge fund manager, demanded Option One maintain warehouse lines of at least $8 billion when it agreed to buy the unit in April. Investors are counting on the sale to stem mortgage losses that totaled $808 million in fiscal 2007 and free H&R Block to focus on its tax preparation business, which hasn't grown in the last two years.

``This leaves Option One skirting dangerously close to the line,'' said Kathleen Shanley, an analyst at Gimme Credit who has a ``deteriorating'' credit score on H&R Block. ``The company has little margin for error.''

H&R Block Mortgage Unit Loses $1.5 Billion Loan Line [Bloomberg]
(Photo: Maulleigh)

PREVIOUSLY: H&R Block Subprime Lending Division Loses $676.8 Million