Separately, H&R Block said its loss for its quarter ended July 31 more than doubled to $302.6 million, or 93 cents per share, from $131.4 million, or 41 cents per share, a year earlier.
Excluding Option One and two discontinued businesses, the loss was $109.8 million, or 34 cents per share, a penny less than analysts on average had expected, according to Reuters Estimates.
Kansas City, Missouri-based H&R Block agreed in April to sell Option One to Cerberus, a New York private equity firm, for an estimated $1 billion, but analysts have said the subprime unit might be worth only a fraction of that amount.
Subprime lenders make loans to people with weaker credit histories. Dozens have quit the industry this year, including many that went bankrupt. Rising borrowing costs and stagnating home prices have led to increases in delinquencies and defaults, while tight capital markets have deprived lenders of needed cash.
Shares of H&R Block closed Wednesday at $19.50 on the New York Stock Exchange. They began the year at $23.04.
H&R Block said it may divest or close Option One's mortgage lending business, while Cerberus would buy the loan servicing operations. It is seeking to waive requirements that Option One fund $2 billion of loans within 60 days of closing and have at least $8 billion of warehouse credit lines. It is also trying to close before Dec. 31, when the merger agreement expires.
A Cerberus spokesman did not immediately return a call seeking comment.
Ernst said Option One is no longer making home loans that are not eligible for purchase and guarantee by mortgage companies Fannie Mae and Freddie Mac. The new guidelines mean Option One may make only $200 million of loans a month.
H&R Block reported results a week ahead of its Sept. 6 annual meeting and an expected showdown with former U.S. Securities and Exchange Commission chairman Richard Breeden, now an activist investor who is seeking three board seats.
Breeden, who runs Greenwich, Connecticut's Breeden Capital Management, wants the company to focus on tax preparation, saying its moves into banking and mortgage lending have hurt shareholders. His bid has won the backing of the three largest proxy advisory firms and at least three major H&R Block shareholders.
H&R Block narrowed its forecast for fiscal 2008 profit from continuing operations to a range of $1.30 per share to $1.45 per share from $1.25 to $1.45. Analysts on average have expected $1.33. The company said it does not expect to buy back stock before next May.