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.”

The subprime lending meltdown is such fun. This couldn’t happen to a nicer tax-preparer… would you like to put your refund anticipation loan on a pre-paid debit card? PLEASE? They need the outrageous and exploitative fees.

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

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.