Discover Financial Targets Mortgage Market With Home-Loans Unit
March 22 2012 - 2:04PM
Dow Jones News
Discover Financial Services (DFS) expects to launch its online
mortgage business by mid-year as the credit-card lender continues
its push beyond plastic.
Discover Home Loans will originate mortgages and sell the loans
in the secondary market, a plan first laid out last year when
Discover announced it was buying assets from Tree.com Inc. (TREE),
an online lending platform.
"Our aspiration is to be as large as Quicken Loans is today,"
which does about $30 billion in origination volume annually, said
Carlos Minetti, president of consumer banking and operations, at
Discover's investor update in New York Thursday.
Mortgages are the lender's latest move to diversify its
business, which is still heavily reliant on credit-card loans. In
recent years, Discover has also begun offering private student
loans and personal loans to grow its balance sheet.
Discover plans to cross-market mortgages to its existing
customer base as well as advertise to the broader market,
executives said.
It has no plans to retain the servicing functions for the loans
it originates but may reconsider that depending on market
conditions in the future, said David Nelms, chairman and chief
executive.
The move into mortgages also plays into Discover's efforts to
become a full-scale online bank that offers a wide array of
financial products. To that end, Discover is also testing checking
accounts and plans to make them commercially available later this
year. The company already offers savings accounts, certificates of
deposits and other products. Discover's direct consumer deposits
reached $27.3 billion in the fiscal first quarter ended Feb. 29, up
25% from a year earlier, the company said Wednesday.
"You do have a lot of turmoil in branch banking," Roger
Hochschild, president and chief operating officer, said
Thursday.
As low interest rates make it difficult for branch banks to grow
revenue, "you'll see significantly more fees," which should help
Discover's efforts, Hochschild said. Discover does not plan to
charge maintenance fees for its checking accounts.
Discover's shares were up 4.3% at $32.99 Thursday, a day after
it reported a 36% increase in fiscal first-quarter profit to beat
analysts' estimates.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
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