Discover Financial Services
) expanded its product portfolio to include residential mortgage
with the launch of Discover Home Loans. The announcement comes
close on the heels of the company's takeover of almost all the
operating and related assets of Home Loan Center, a subsidiary of
). Home Loan Center originates and processes residential mortgage
loans across all 50 U.S. states as well as the District of
With the launch of the new unit, Discover now offers commercial
and Federal Housing Administration loans with both variable and
fixed rates. Earlier, the company offered only credit cards,
personal and student loans and deposit products.
Discover intends to establish a strong foothold in the home loan
market through its customer-focused approach. The company has
developed an organized application process with licensed mortgage
officers to assist customers through the entire application
process. The company also has a dedicated website to help customers
upload documents securely and check the status of their loan.
Moreover, Discover will offer credit of up to $1,000 toward
closing costs in case it fails to close a loan on schedule.
Moreover, it will reward customers who return for home loans or
refinancing through a Welcome Back Bonus credit of up to $2,000
toward closing costs.
The home loan unit is expected to boost the earnings of
Discover's Direct Banking segment, which is already showing
substantial growth. The segment reported pre-tax income of $962
million in the first quarter of 2012, reflecting a $285 million
increase from the year-ago quarter.
The Zacks Consensus Estimate for the company's second-quarter
2012 earnings is currently pegged at 95 cents per share,
down about 12.5% year over year. For full-year 2012, the Zacks
Consensus Estimate stands at $4.01 per share, down 1.3% from
We maintain a long-term Outperform recommendation on the shares
of Discover. Currently, the company caries a Zacks #2 Rank,
implying a short-term Buy rating.
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