On March 10, 2011, management made the decision and finalized a plan to close all of the field offices of the proprietary full-service real estate brokerage business known as RealEstate.com, REALTORS®. We exited all markets by March 31, 2011. In September 2011, we sold the remaining assets of RealEstate.com, which consisted primarily of internet domain names and trademarks. Accordingly, these Real Estate businesses are presented as discontinued operations in the accompanying consolidated balance sheets and consolidated statements of operations and cash flows for all periods presented.

On May 12, 2011, we entered into an asset purchase agreement with Discover, which provides for the sale of substantially all of the operating assets of our LendingTree Loans business to Discover. On February 7, 2012, we entered into an amendment to the asset purchase agreement. We have evaluated the facts and circumstances of the pending transaction and the applicable accounting guidance for discontinued operations, and have concluded that the LendingTree Loans business should be reflected as discontinued operations in the accompanying consolidated balance sheets and consolidated statements of operations and cash flows for all periods presented.

The revenue and net loss for the Real Estate businesses that are reported as discontinued operations for the three months ended March 31, 2012 and 2011 were as follows (in thousands):

	Three Months Ended March 31,

	2012			2011
Revenue	$	41		$	1,997

Loss before income taxes	$	(74	)	$	(16,106	)
Income tax benefit (expense)		—			—

Net loss	$	(74	)	$	(16,106	)

Net loss for the three months ended March 31, 2011 includes non-cash goodwill disposal charges totaling $8.0 million, non-cash trademark impairment charges of $4.1 million and restructuring expense totaling $1.9 million.

The revenue and net income (loss) for LendingTree Loans that are reported as discontinued operations for the three months ended March 31, 2012 and 2011 were as follows (in thousands):

	Three Months Ended March 31,

	2012			2011
Revenue	$	50,866		$	19,250

Income (loss) before income taxes	$	19,722		$	(7,302	)
Income tax expense		(2,230	)		—

Net income (loss)	$	17,492		$	(7,302	)

The assets and liabilities of Real Estate that are reported as discontinued operations as of March 31, 2012 and December 31, 2011 were as follows (in thousands):

	March 31, 2012			December 31, 2011

Current assets	$	12		$	33

Current liabilities		490			702
Non-current liabilities		27			54

Net liabilities	$	(505	)	$	(723	)

The assets and liabilities of LendingTree Loans that are reported as discontinued operations as of March 31, 2012 and December 31, 2011 were as follows (in thousands):

	March 31, 2012			December 31, 2011

Loans held for sale	$	157,880		$	217,467
Other current assets		17,728			14,925

Current assets		175,608			232,392

Property and equipment		4,246			4,181
Goodwill		5,579			5,579
Other non-current assets		1,186			1,187

Non-current assets		11,011			10,947

Warehouse lines of credit		142,205			197,659
Other current liabilities		55,206			51,669

Current liabilities		197,411			249,328

Non-current liabilities		881			978

Net liabilities	$	(11,673	)	$	(6,967	)

Upon closing of the sale of substantially all of the operating assets of our LendingTree Loans business to Discover, LendingTree Loans will cease to originate consumer loans and will no longer have additional borrowings available under the warehouse lines of credit it currently maintains. The remaining operations will be wound down following the closing of the transaction. These wind-down activities will include, among other things, selling the balance of loans held for sale to investors, which historically has occurred within thirty days of funding, and paying off and then terminating the warehouse lines of credit. Additionally, liability for losses on previously sold loans will remain with LendingTree Loans. Below is a discussion of these significant items.

LendingTree Loans originates all of its residential real estate loans with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first mortgage loans that are secured by residential real estate throughout the United States.

The following table represents the loans held for sale by type of loan as of March 31, 2012 and December 31, 2011 ($ amounts in thousands):

	March 31, 2012					December 31, 2011

	Amount		%			Amount		%
Conforming		100,318		64	%	$	171,375		79	%
FHA and Alt-A		55,242		35	%		40,433		18	%
Jumbo		2,320		1	%		5,659		3	%

Total		157,880		100	%	$	217,467		100	%

The following presents the difference between the aggregate principal balance of loans on nonaccrual status for which the fair value option has been elected and for loans measured at lower of cost or market valuation as of March 31, 2012 and December 31, 2011 (in thousands):

	As of March 31, 2012

	Loans on Nonaccrual— Measured at Fair Value			Loans on Nonaccrual— Measured at LOCOM			Total Loans on Nonaccrual
Aggregate unpaid principal balance	$	641		$	660		$	1,301
Difference between fair value and aggregate unpaid principal balance		(229	)		(198	)		(427	)

Loans on nonaccrual	$	412		$	462		$	874

	As of December 31, 2011

	Loans on Nonaccrual— Measured at Fair Value			Loans on Nonaccrual— Measured at LOCOM		Total Loans on Nonaccrual
Aggregate unpaid principal balance	$	539		$	—	$	539
Difference between fair value and aggregate unpaid principal balance		(244	)		—		(244	)

Loans on nonaccrual	$	295		$	—	$	295

Included within the loans on nonaccrual status are repurchased loans with a net book value of $0.5 million at March 31, 2012 and $-0- at December 31, 2011. During the three months ended March 31, 2012, LendingTree Loans repurchased two loans with an unpaid principal balance of $0.7 million. During the three months ended March 31, 2011, LendingTree Loans did not repurchase any loans.

We categorize our assets and liabilities measured at fair value into a fair value hierarchy that prioritizes the assumptions used in pricing the asset or liability into the following three levels:

A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Transfers in and out of Level 1, 2 or 3 are recorded at fair value at the beginning of the reporting period.

Following is a description of valuation methodologies used for instruments measured at fair value as well as the general classification of such instruments pursuant to the fair value hierarchy.

LendingTree Loans enters into commitments with consumers to originate loans at a specified interest rate (interest rate lock commitments—"IRLCs"). We report IRLCs as derivative instruments at fair value with changes in fair value being recorded in discontinued operations. IRLCs for loans to be sold to investors using a mandatory or assignment of trade ("AOT") method are hedged using "to be announced mortgage-backed securities" ("TBA MBS") and are valued using quantitative risk models. The IRLCs derive their base value from an underlying loan type with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The most significant data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan. IRLCs for loans sold to investors on a best-efforts basis are hedged using best-efforts forward delivery commitments and were valued on an individual loan basis using a proprietary database program prior to January 1, 2012. These valuations were based on investor pricing tables stratified by product, note rate and term. The valuations were adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. Effective January 1, 2012, LendingTree Loans began valuing IRLCs for loans sold to investors on a best-efforts basis using quantitative risk models on a loan level basis. The decision to modify the valuation calculation for IRLCs for loans sold on a best-efforts basis evolved from a desire to achieve principally two goals: 1) to include this portion of the IRLCs into the main operating system we use for fair value (known as QRM) allowing us to improve our estimate of loan funding probability and 2) to include elements of the all-in fair value that we could not previously calculate in the previous models. The most significant data inputs used in the valuation of these IRLCs include, but are not limited to, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. LendingTree Loans applies an anticipated loan funding probability based on its own experience to value IRLCs, which results in the classification of these derivatives as Level 3. The value of the underlying loans and the anticipated loan funding probability are the most significant assumptions affecting the valuation of IRLCs. A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement.

Loans held for sale measured at fair value and sold to investors using a mandatory or AOT method are also hedged using TBA MBS and valued using quantitative risk models. The valuation is based on the loan amount, note rate, loan program and expected sale date of the loan. Loans held for sale measured at fair value and sold to investors on a best-efforts basis are hedged using best-efforts forward delivery commitments and were valued using a proprietary database program prior to January 1, 2012. The best-efforts valuations prior to that date were based on daily investor pricing tables stratified by product, note rate and term. These valuations were adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. Effective January 1, 2012, LendingTree Loans began valuing the loans held for sale and sold to investors on a best-efforts basis using quantitative risk models. The most significant data inputs used in the valuation of these loans include investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. Loans held for sale, excluding impaired loans, are classified as Level 2. Loans held for sale measured at fair value that become impaired are transferred from Level 2 to Level 3, as the estimate of fair value is based on LendingTree Loans' experience considering lien position and current status of the loan. A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement. LendingTree Loans recognizes interest income separately from other changes in fair value.

Under LendingTree Loans' risk management policy, LendingTree Loans economically hedges the changes in fair value of IRLCs and loans held for sale caused by changes in interest rates by using TBA MBS and entering into best-efforts forward delivery commitments. These hedging instruments are recorded at fair value with changes in fair value recorded in current earnings as a component of revenue from the origination and sale of loans. TBA MBS used to hedge both IRLCs and loans are valued using quantitative risk models based primarily on inputs related to characteristics of the MBS stratified by product, coupon and settlement date. These derivatives are classified as Level 2. Prior to January 1, 2012, best-efforts forward delivery commitments were valued using a proprietary database program using investor pricing tables considering the current base loan price. Effective January 1, 2012, best-efforts forward delivery commitments are valued using quantitative risk models based on investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. An anticipated loan funding probability is applied to value best-efforts commitments hedging IRLCs, which results in the classification of these contracts as Level 3. The current base loan price and the anticipated loan funding probability are the most significant assumptions affecting the value of the best-efforts commitments. A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement. The best-efforts forward delivery commitments hedging loans held for sale are classified as Level 2, so such contracts are transferred from Level 3 to Level 2 at the time the underlying loan is originated. For the purposes of the tables below, we refer to TBA MBS and best-efforts forward delivery commitments collectively as "Forward Delivery Contracts".

The following presents our assets and liabilities that are measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011 (in thousands):

	As of March 31, 2012

	Recurring Fair Value Measurements Using
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Loans held for sale	$	—	$	157,006	$	412	$	157,418
IRLCs		—		—		9,849		9,849
Forward delivery contracts		—		231		132		363

Total	$	—	$	157,237	$	10,393	$	167,630

	As of December 31, 2011

	Recurring Fair Value Measurements Using
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Loans held for sale	$	—	$	217,172		$	295	$	217,467
IRLCs		—		—			9,122		9,122
Forward delivery contracts		—		(4,107	)		19		(4,088	)

Total	$	—	$	213,065		$	9,436	$	222,501

The following presents the changes in our assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2012 and 2011 (in thousands):

	March 31, 2012

	Interest Rate Lock Commitments			Forward Delivery Contracts			Loans Held for Sale
Balance at January 1, 2012	$	9,122		$	19		$	295
Transfers into Level 3		—			—			229
Transfers out of Level 3		—			(516	)		—
Total net gains (losses) included in earnings (realized and unrealized)		42,387			629			18
Purchases, sales, and settlements
Purchases		—			—			—
Sales		—			—			—
Settlements		(2,634	)		—			(130	)
Transfers of IRLCs to closed loans		(39,026	)		—			—

Balance at March 31, 2012	$	9,849		$	132		$	412

	March 31, 2011

	Interest Rate Lock Commitments			Forward Delivery Contracts			Loans Held for Sale
Balance at January 1, 2011	$	5,986		$	3		$	884
Transfers into Level 3		—			—			335
Transfers out of Level 3		—			(28	)		—
Total net gains (losses) included in earnings (realized and unrealized)		15,940			195			(32	)
Purchases, sales, and settlements
Purchases		970			(58	)		—
Sales		—			—			(220	)
Settlements		(3,441	)		—			(5	)
Transfers of IRLCs to closed loans		(13,827	)		—			—

Balance at March 31, 2011	$	5,628		$	112		$	962

The following presents the gains (losses) included in earnings for the three months ended March 31, 2012 and 2011 relating to our assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

	Three Months Ended March 31, 2012							Three Months Ended March 31, 2011

	Interest Rate Lock Commitments		Forward Delivery Contracts		Loans Held for Sale			Interest Rate Lock Commitments		Forward Delivery Contracts		Loans Held for Sale
Total net gains (losses) included in earnings, which are included in discontinued operations	$	42,387	$	629	$	18		$	15,940	$	195	$	(32	)

Change in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2012 and 2011, which are included in discontinued operations	$	9,849	$	132	$	(23	)	$	4,832	$	129	$	(99	)

The following table summarizes our derivative instruments not designated as hedging instruments as of March 31, 2012 and December 31, 2011 (in thousands):

	Balance Sheet Location	March 31, 2011 Fair Value			December 31, 2011 Fair Value

Interest Rate Lock Commitments	Current assets of discontinued operations	$	10,007		$	9,282
Forward Delivery Contracts	Current assets of discontinued operations		1,220			480
Interest Rate Lock Commitments	Current liabilities of discontinued operations		(158	)		(160	)
Forward Delivery Contracts	Current liabilities of discontinued operations		(857	)		(4,568	)

Total Derivatives		$	10,212		$	5,034

The gain (loss) recognized in the consolidated statements of operations for derivatives for the three months ended March 31, 2012 and 2011 was as follows (in thousands):

	Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended March 31, 2012		Three Months Ended March 31, 2011

Interest Rate Lock Commitments	Discontinued operations	$	42,387	$	15,940
Forward Delivery Contracts	Discontinued operations		4,561		(904	)

Total		$	46,948	$	15,036

LendingTree Loans has elected to account for loans held for sale originated on or after January 1, 2008 at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting.

LendingTree Loans did not elect the fair value option on loans held for sale originated prior to January 1, 2008 and on loans that were repurchased from investors on or subsequent to that date. As of March 31, 2012 and December 31, 2011, 2 and -0- such loans, respectively, both of which were impaired, were included in loans held for sale and were carried at the lower of cost or market ("LOCOM") value assessed on an individual loan basis. The market value (or fair value) of these impaired loans at March 31, 2012 and December 31, 2011, measured on a non-recurring basis using significant unobservable inputs (Level 3), was $0.5 million and $-0-, respectively. This fair value measurement is management's best estimate of the market value of such loans and considers the lien position and loan status.

The following presents the difference between the aggregate principal balance of loans held for sale for which the fair value option has been elected and for loans measured at LOCOM as of March 31, 2012 and December 31, 2011 (in thousands):

	As of March 31, 2012

	Loans Held for Sale— Measured at Fair Value		Loans Held for Sale— Measured at LOCOM			Total Loans Held For Sale
Aggregate unpaid principal balance	$	151,743	$	660		$	152,403
Difference between fair value and aggregate unpaid principal balance		5,675		—			5,675
Lower of cost or market valuation allowance		—		(198	)		(198	)

Loans held for sale	$	157,418	$	462		$	157,880

	As of December 31, 2011

	Loans Held for Sale— Measured at Fair Value		Loans Held for Sale— Measured at LOCOM		Total Loans Held For Sale
Aggregate unpaid principal balance	$	208,918	$	—	$	208,918
Difference between fair value and aggregate unpaid principal balance		8,549		—		8,549

Loans held for sale	$	217,467	$	—	$	217,467

During the three months ended March 31, 2012 and 2011, the change in fair value of loans held for sale for which the fair value option was elected was a gain of $0.4 million and a loss of $1.6 million, respectively, and is included in discontinued operations in the accompanying consolidated statements of operations.

Significant unobservable inputs for assets and liabilities measured at fair value on a recurring basis and non-recurring basis

The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2012 (dollars in thousands):

Quantitative Information about Level 3 Fair Value Measurements

	Fair Value as of March 31, 2012		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
Impaired loans—fair value option elected	$	412	Estimated Investor Bid	NA	NA
Impaired loans—fair value option not elected		462	Estimated Investor Bid	NA	NA
IRLCs		9,849	Quantitative Risk Model	Anticipated Loan Funding Probability	5.64% – 98.2% (60.6%)
Forward delivery contracts		132	Quantitative Risk Model	Anticipated Loan Funding Probability	5.64% – 98.2% (60.6%)

LendingTree Loans sells loans it originates to investors on a servicing-released basis so the risk of loss or default by the borrower is generally transferred to the investor. However, LendingTree Loans is required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the loan. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual loans, LendingTree Loans may be obligated to repurchase the respective loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery.

In the case of early loan payoffs and early defaults on certain loans, LendingTree Loans may be required to repay all or a portion of the premium initially paid by the investor. The estimated obligation associated with early loan payoffs and early defaults is calculated based on historical loss experience by type of loan.

The obligation for losses related to the representations and warranties and other provisions discussed above is initially recorded at its estimated fair value, which includes a projection of expected future losses as well as a market-based premium. Because LendingTree Loans does not service the loans it sells, it does not maintain nor have access to the current balances and loan performance data with respect to the individual loans previously sold to investors. Accordingly, LendingTree Loans is unable to determine, with precision, its maximum exposure for breaches of the representations and warranties it makes to the investors that purchase such loans. However, LendingTree Loans utilizes the original loan balance (before it was sold to an investor), historical and projected loss frequency and loss severity ratios by loan type as well as analyses of losses in process to estimate its exposure to losses on loans previously sold. LendingTree Loans maintains a liability related to this exposure based, in part, on historical and projected loss frequency and loss severity using its loan loss history (adjusted for recent trends in loan loss experience), the original principal amount of the loans previously sold, the years the loans were sold and loan types. Accordingly, subsequent adjustments to the obligation, if any, are not made based on changes in the fair value of the obligation, which might include an estimated change in losses that may be expected in the future, but are made once further losses are determined to be both probable and estimable. As such, given current general industry trends in mortgage loans as well as housing prices, market expectations around losses related to LendingTree Loans' obligations could vary significantly from the obligation recorded as of the balance sheet date or the range estimated below. In estimating its exposure to loan losses, LendingTree Loans segments its loan sales into four segments based on the extent of the documentation provided by the borrower to substantiate income and/or assets (full or limited documentation) and the lien position of the mortgage in the underlying property (first or second position). Each of these segments has a different loss experience, with full documentation, first lien position loans generally having the lowest loss ratios, and limited documentation, second lien position loans generally having the highest loss ratios.

Tree.com has guaranteed certain loans sold to three investors in the event that LendingTree Loans is unable to satisfy its repurchase and warranty obligations related to such loans. The original principal balance of the loans sold to two of these investors is approximately $2.4 billion and $1.5 billion as of March 31, 2012 and December 31, 2011, respectively. The unpaid principal balance of the loans sold to the third investor is approximately $62.0 million and $32.4 million as of March 31, 2012 and December 31, 2011, respectively.

The following table represents the loans sold for the periods shown and the aggregate loan losses through March 31, 2012:

	As of March 31, 2012

Period of Loan Sales	Number of loans sold		Original principal balance		Number of loans with losses		Original principal balance of loans with losses		Amount of aggregate losses
			(in billions)				(in millions)		(in millions)
2012		5,000	$	1.0		—	$	—	$	—
2011		12,500		2.7		1		0.3		—
2010		12,400		2.8		4		1.1		0.1
2009		12,800		2.8		4		0.9		0.1
2008		11,000		2.2		31		6.6		1.7
2007		36,300		6.1		158		21.9		7.9
2006		55,000		7.9		205		23.9		13.3
2005 and prior years		86,700		13.0		88		12.1		5.0

Total		231,700	$	38.5		491	$	66.8	$	28.1

The pipeline of 340 requests for loan repurchases and indemnifications was considered in determining the appropriate reserve amount. The status of these loans varied from an initial review stage, which may result in a rescission of the request, to in-process, where the probability of incurring a loss is high, to indemnification, whereby LendingTree Loans has agreed to reimburse the purchaser of that loan if and when losses are incurred. The indemnification obligation may have a specific term, thereby limiting the exposure to LendingTree Loans. The original principal amount of these loans is approximately $65.2 million, comprised of approximately 67% full documentation first liens, 2% full documentation second liens, 28% limited documentation first liens, and 4% limited documentation second liens.

In the fourth quarter of 2009, LendingTree Loans entered into settlement negotiations with two buyers of previously purchased limited documentation loans. The settlement with one buyer was completed in December 2009 and included a payment of $1.9 million related to all second lien loans sold to this buyer, including both full and limited documentation. The settlement was included as a charge-off to the reserve in 2009. Negotiations with the second buyer were completed in January 2010. This settlement of $4.5 million, which was paid in four equal quarterly installments in 2010, relates to all future losses on limited documentation second lien loans sold to this buyer. LendingTree Loans was also required to pay an additional amount of up to $0.3 million in conjunction with this settlement since it did not sell a certain volume of loans to this buyer in 2010. This amount is included in the total settlement amount and was included as a charge-off to the reserve in 2010. These settlement amounts were not determined on an individual loan basis and are, therefore, not included in the loss amounts disclosed above for the years such loans were sold.

In December 2011, LendingTree Loans agreed to a $1.2 million settlement related to specific loans, and such losses were charged to the reserve in 2011 and are included in the table above. The $0.3 million settlement amount discussed above and this $1.2 million settlement were recorded as liabilities separate from the loss reserve at December 31, 2011, and were paid in January 2012.

Based on historical experience, it is anticipated that LendingTree Loans will continue to receive repurchase requests and incur losses on loans sold in prior years. However, the two global settlements discussed above will eliminate future repurchase requests from those buyers for the loan types included in those settlements. As of March 31, 2012, LendingTree Loans estimated the range of remaining possible losses due to breach of representations and warranties based on the methodology described above as $30 million to $40 million. We believe that we have adequately reserved for these losses.

The activity related to loss reserves on previously sold loans for the three months ended March 31, 2012 and 2011, is as follows (in thousands):

	March 31,

	2012			2011
Balance, beginning of period	$	31,512		$	16,984
Provisions		2,466			3,250
Charge-offs to reserves		(475	)		(196	)

Balance, end of period	$	33,503		$	20,038

The liability for losses on previously sold loans is presented as current liabilities of discontinued operations in the accompanying consolidated balance sheet as of March 31, 2012 and December 31, 2011.

Tree.com will continue to be liable for indemnification obligations, repurchase obligations and premium repayment obligations following the anticipated sale of substantially all of the operating assets of the LendingTree Loans business to Discover. A portion of the initial purchase price to be paid by Discover will be held in escrow pending resolution of certain of these contingent liabilities. We plan to negotiate with secondary market purchasers to settle any then-existing and future contingent liabilities, but we may not be able to do so on acceptable terms, or at all.

Borrowings on warehouse lines of credit were $142.2 million and $197.7 million at March 31, 2012 and December 31, 2011, respectively.

As of March 31, 2012, LendingTree Loans had two committed lines of credit and one uncommitted line of credit totaling $325.0 million of borrowing capacity. Borrowings under these lines of credit are used to fund, and are secured by, consumer residential loans that are held for sale. Loans under these lines of credit are repaid using proceeds from the sales of loans by LendingTree Loans.

The $125.0 million first line was scheduled to expire on the earliest of (i) forty-five days after the closing date of the pending sale of substantially all of the operating assets of our LendingTree Loans business to Discover or (ii) April 25, 2012, but was extended to the earliest of (i) forty-five days after the closing date of such sale or (ii) October 25, 2012. This line is also guaranteed by Tree.com, LendingTree, LLC and LendingTree Holdings Corp. The interest rate under this first line is the 30-day adjusted LIBOR or 2.0% (whichever is greater) plus 1.5% to 1.75% for loans being sold to the lender and 30-day adjusted LIBOR or 2.0% (whichever is greater) plus 1.5% for loans not being sold to the lender.

The $100.0 million second line is scheduled to expire on the earliest of (i) forty-five days after the closing date of the pending sale of substantially all of the operating assets of our LendingTree Loans business to Discover or (ii) August 20, 2012. This line is guaranteed by Tree.com and LendingTree, LLC. The interest rate under this line is 30-day LIBOR plus 3.25% (LIBOR may be adjusted upward for any increase in the reserve requirement of the lender as further described in the master repurchase agreement).

The $100.0 million third line is scheduled to expire on the earliest of (i) forty-five days after the closing date of the pending sale of substantially all of the operating assets of our LendingTree Loans business to Discover or (ii) January 4, 2013. This line is guaranteed by Tree.com, LendingTree, LLC and LendingTree Holdings Corp. The interest rate under this line is the overnight interest rate incurred by the lender for borrowing funds plus 3.25% to 3.75% for most loans.

Under the terms of these lines, LendingTree Loans is required to maintain various financial and other covenants, and is restricted from paying dividends under the terms of the first two lines. These financial covenants include, but are not limited to, maintaining (i) for the first two lines, minimum tangible net worth of $25.0 million, and for the third line, minimum adjusted net worth equaling the sum of $20.0 million plus 50% of the positive quarterly net income for the three months prior to any date of determination, (ii) minimum liquidity, (iii) a minimum current ratio, (iv) a maximum ratio of total liabilities to net worth, (v) a minimum unrestricted cash amount, (vi) pre-tax net income requirements, (vii) for the first two lines, a maximum warehouse capacity ratio and (viii) for the third line, a minimum of one additional warehouse line. LendingTree Loans was in compliance with all covenants as of March 31, 2012, except for the requirement to provide audited financial statements to each of our lenders within 90 days after the end of the fiscal year. We have obtained a waiver for this violation.

The LendingTree Loans business is highly dependent on the availability of these lines. Although we believe that our existing lines are adequate for our current operations, reductions in our available credit, or the inability to extend, renew or replace these lines before completion of the pending sale of substantially all of the operating assets of our LendingTree Loans business to Discover, could have a material adverse effect on our business, financial condition, results of operations and cash flows. In such instance, management has determined that it could continue to operate the LendingTree Loans business at a reduced capacity as long as one of the lines remains available.