By: Liz Farmer

Stifel Nicolaus is downgrading the value of LendingTree, the online service that puts people in touch with a network of lenders, because of potential competition from Google. Within the next few weeks, Google plans to launch a service that will compete directly with Tree.com’s LendingTree Exchange business.

The competition could seriously impact LendingTree’s earnings, Stifel said.

“We project that the Exchanges segment of LendingTree will represent about one-third of Tree.com’s total revenue in 2009 and a higher percentage of gross profit,” the report by analyst George I. Askew’s team said. “If Google launches a competing product, we believe LendingTree may face a decline in consumer loan requests, fewer lenders in its Exchange, higher marketing costs and lower lead pricing.”

LendingTree has also filed a law suit this week against Mortech Inc., claiming the mortgage technology provider violated its contract with LendingTree by partnering with Google in the endeavor.

Shares of Tree.com fell more than 8 percent by mid-morning.