Kansas City-Missouri-based H&R Block Inc., reported third quarter losses this week after the company’s subprime lending subsidiary Option One Mortgage posted a loss of $69.7 million for the third quarter of its 2007 fiscal year. The latest loss follows a year in which the company reported a record $42.4 million in earnings for the same period.

In a press release, the company concluded its “loss from discontinued operations reflects an increase in loan loss reserves of approximately $111 million, with approximately $93 million of the reserves related to loans originated in previous quarters. H&R Block says despite the latest earnings report, the company has improved its early payment default trends by implementing tighter underwriting guidelines.
“First payment default rates are the best we’ve seen since June of last year,” said Mark. A Ernst, chairman and chief executive officer. “We view this as a good early indicator that actions taken at Option One are improving overall loan quality and payment characteristics.” The company also was optimistic when reporting “revenues from continuing operations rose 11 percent in the quarter” due to solid gains in the tax services segment and a strong performance in Consumer Financial Services.