The home lending unit of Discover Financial Services has failed in its attempt to become the next Quicken Loans Inc. and will shut down.
Back in
2012, when executives at the Riverwoods, Illinois-based company were talking with investors about the upcoming acquisition of Home Loan Center from Tree.com, executives were optimistic about the unit’s growth.
“Our aspiration is to be as large as Quicken Loans is today … even better as a matter of fact,”
Carlos Minetti, who is Discover’s president of consumer banking and operations, told investors.
At that point, Quicken was closing
$30 billion annually.
Originations at Home Loan Center, on the other hand, were just a tenth of Quicken’s production.
The deal
closed in June 2012, and the lender was re-branded as Discover Home Loans Inc.
Three months later, Discover Financial Services Chairman and Chief Executive Officer David W. Elms told investors that the unit was on pace to originate $4 billion annually.
But the mortgage business has apparently not lived up to the parent company’s objectives.
“The business is not projected to meet our financial expectations due to ongoing challenges to our home loans operating model,” Minetti said in an announcement Tuesday, “so we made the difficult decision to exit.”
Loan applications will continue to be accepted by Discover Home Loans until July 31.
Business operations will continue through early August, at which point AmeriSave Mortgage Corp. is expected to finish processing the remaining applications.
Interestingly, AmeriSave
was rated by Tree.com-successor LendingTree.com in February as one of its 10 best mortgage lead handlers.
“AmeriSave has been on a path of growth and has opened new origination centers in Irvine, California, Troy, Michigan and Charlotte, North Carolina in 2014,” Atlanta-based AmeriSave said in a statement. “This latest transaction will greatly enhance AmeriSave’s origination volume and operations with the addition of experienced consumer direct Mortgage Bankers, processors and underwriters to AmeriSave’s efficient, technology-driven platform.”
Around 460 employees, primarily in Irvine, California, and Louisville, Kentucky, are impacted by the decision to shutter the unit.
However, AmeriSave plans to open a Louisville office and offer jobs to 125 Discover Home Loans employees.
At the Irvine location, no further applications are being accepted as of today, though loans already in process will continue to be processed and funded.
The news release indicated that home-equity loans will continued to be originated through Discover Bank.
