Discover Shuts Down Its Mortgage Unit

Discover announced yesterday (June 16) that it is closing its mortgage origination business bought in 2012, a move which will reportedly result in laying off about 460 employees. Charges related to exiting the business are expected to be approximately $0.04 per share.

“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.

According to Bloomberg, Discover’s first quarter saw less than $1.2 billion in total mortgages. And since it entered in the mortgage loan market, its total originations have declined.

The Illinois-based credit card provider says it wants to focus on its profitable direct banking products. Discover for instance recently upgraded its reward program, offering to double the cash rewards its new cardmembers would earn at the end of their first year. In April, it rolled out Freeze It, a tool that allows cardmembers to freeze their accounts in the event of a misplaced card, helping avoid any fraudulent activity.

Meanwhile, online mortgage lender Lenda has found a way to keep its loan application process online while wringing out origination costs. At Lenda, applicants who need help can call a toll-free line to talk to a licensed loan officer. The company’s technology uses algorithms to identify the most suitable type of loan for a borrower early on in the process and then eliminate questions unnecessary for that product.

“It costs money to pay commissions to telemarketers and junior loan officers and loan officers,” said Jason van den Brand, CEO of the San Francisco-based startup, at the time of the news. “We’re building software that removes a lot of that stuff so when people find us online, they actually stay online and they don’t have to talk to a loan officer.”

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