H&R Block has conceded in its quarterly earnings statement what many had suspected in recent weeks: that a deal to sell Option One Mortgage Corp. to Cerberus Capital Management is in trouble.Kansas City, Mo.-based Block said certain closing conditions upon which the deal is contingent are not being met. Instead of a sale of the entire Irvine, Calif.-based Option One subsidiary, H&R Block said it is working on a deal to sell its servicing platform to Cerberus while Block contemplates "divesting or winding down" its loan origination business. Block executives said the company has already laid off some 615 Option One loan origination employees. About 400 remain on the staff. Block said it is "engaged in discussions" with Cerberus to modify terms of the proposed sale of Option One, which was negotiated before turmoil in the credit markets largely crippled the subprime mortgage origination business. Block said it is negotiating to waive a requirement that Option One fund $2 billion in loans within 60 days of closing and have a minimum of $8 billion in warehouse lines of credit. Block can be found on the Web at http://www.hrblock.com, and Option One can be found at http://www.optiononemortgage.com.

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