Discover to buy Tree.com's mortgage business for $55.9 million
Discover Financial Services (DFS) said it has reached a deal to buy Home Loan Center, a subsidiary of Tree (TREE) for $55.9 million. Discover, known mainly for its credit card business, will add the residential mortgage business to its direct-to-consumer banking model. The Chicagoland firm intends to originate consumer mortgages to sell to the secondary market on a servicing-released basis. Discover said the acquisition will have a nominal impact on its 2012 earnings. The deal is expected to close by the end of the year and is subject to approval by regulators and Tree.com stockholders. Home Loan Center, which operates as LendingTree Loans, originates and processes consumer mortgage loans nationwide. "Discover is acquiring a proven operating platform that we can scale by leveraging our brand and lending expertise," said Carlos Minetti, president of consumer banking and operations for Discover. "This will enable us to expand our line of banking products and provide home loans to consumers." Besides credit cards, Discover also offers personal loans, student loans, certificates of deposit, savings accounts and Roth individual retirement accounts. It also operates an ATM network known as PULSE. Doug Lebda, chairman and chief executive officer of Tree.com, said the deal will enable Tree.com to focus on its core lead generation business. The acquisition is subject to the approvals of regulators and Tree.com stockholders. Discover's net income for the first quarter 2011 was $459 million, or 84 cents a share, compared to a net loss of $122 million, or a loss of 22 cents per share, in the first quarter 2010. The financial transaction firm said the number of credit card loans that were 30 or more days overdue continued to decline in the first quarter, which allowed Discover to lower is loan-loss reserves. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.