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After only three short years of business, Discover Financial Services announced today in a press release that its mortgage origination business, Discover Home Loans Inc. will close. The origination business was acquired in 2012 to focus on profitable direct banking products that the company believed would produce greater growth opportunities.
"The business is not projected to meet our financial expectations due to ongoing challenges to our home loans operating model, so we made the difficult decision to exit," said Carlos Minetti, president of consumer banking for Discover.
Discover Home Loans will still accept applications at its Louisville, Kentucky offices through July 31, the company says. Business operations will continue there until early August, when Atlanta-based AmeriSave Mortgage Corporation is expected to finish processing the remaining applications.
AmeriSave intends to help the situation by establishing an office in Louisville and offering jobs to approximately 125 Discover employees, Discover said.
At Discover’s Irvine, California location, the business will cease operations today and will process and fund the loans that are already in process, according to the release. The company also plans to to offer severance packages to about 460 employees, mostly in Irvine, and Louisville.
The company noted that charges related to exiting the business are expected to be approximately $0.04 per share.
Discover said that despite this recent news, it will continue to originate home equity loans through Discover Bank.
According to the release, Discover Financial Services is a direct banking and payment services company and a recognized brand in U.S. financial services industry. It was launched in 1986 and since then has grown to be a major card issuer in the United States. The company issues the Discover card, America's cash rewards pioneer, and offers private student loans, personal loans, home equity loans, checking and savings accounts, certificates of deposit, and money market accounts through its direct banking business.
