Dec. 11 (Bloomberg) -- H&R Block Inc., the biggest U.S. tax preparer, said its second-quarter loss widened on writedowns tied to closing its money-losing mortgage business.

The net loss for the period ended Oct. 31 was $502.3 million, or $1.55 a share, compared with a loss of $156.5 million, or 49 cents, a year earlier, the Kansas City, Missouri- based company said today in a filing with the U.S. Securities and Exchange Commission. About $366 million, or $1.13 a share, of the loss was from discontinued operations, it said. The company will file full quarterly results by Dec. 14.

Richard Breeden, the hedge-fund manager and former head of the SEC, replaced Mark Ernst as chairman last month after H&R Block's Option One Mortgage Corp. lost more than $1 billion over five quarters. The yearlong effort to sell the unit ended Dec. 4 when a proposed sale to Cerberus Capital Management collapsed and 620 jobs were cut.

``We continue to move resolutely to end our participation in the subprime mortgage business,'' Breeden said in a statement today. ``While we incurred a painful loss in exiting these positions, we determined to take our lumps and move forward.''

Mortgage Losses

H&R Block has fallen 13 percent this year in New York trading as the worst U.S. housing recession in 16 years caused higher loan losses and reduced new business for Option One. The company is trying to sell Option One's billing and collections unit, the only part that won't be closed by January.

H&R Block's pretax loss from discontinued operations was $551.2 million, according to the statement. The results included a $252 million net loss on the sale of $3 billion in mortgages and related trusts, a $123 million impairment charge to adjust mortgage and servicing assets to their fair value, a $62 million impairment charge tied to remaining interests on mortgage securities, $61 million connected with a writedown of Option One assets, and $53 million in other operating losses.

The company's net loss from continuing operations widened to $136 million, or 42 cents a share, from $121.0 million, or 38 cents. That compares with the 36-cents a share average loss estimate of six analysts surveyed by Bloomberg.

H&R Block fell to $18.18 in trading before the official market open, from $19.95 at the close on the New York Stock Exchange yesterday.

Revenue from continuing operations during the second quarter rose 10 percent to $434.8 million from a year earlier, reflecting growth in the company's ongoing businesses, H&R Block said in the statement.

`Toward The Lower End'

H&R Block said today that fiscal 2008 earnings would be ``toward the lower end'' of the previously forecast $1.30 to $1.45-per-share range because of higher borrowing costs.

The company said it couldn't make its second-quarter earnings report on time because Deloitte & Touche LLP, the accounting firm it hired on Oct. 15, wasn't able to complete the necessary work prior to the filing deadline.

Breeden, whose firm controls about 2 percent of H&R Block's shares, pushed for the closure of the mortgage unit in June. He won a proxy fight to get elected to the board in September, leading to Ernst's ouster and Alan M. Bennett taking over as interim CEO.

Option One, based in Irvine, California, was the sixth- largest U.S. subprime home lender through Sept. 30, according to trade publication Inside Mortgage Finance.

Ernst put the unit up for sale in November 2006, saying it may fetch at much as $1.3 billion. When it was announced in April the deal with Cerberus was valued at $800 million by UBS AG.

H&R Block expanded into mortgages, retirement planning and other financial services over the last decade to counter the seasonality of the tax business. The company usually reports a loss in the first half of the fiscal year when few returns are filed. The U.S. tax season starts in January and runs through mid-April.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: December 11, 2007 08:21 EST