Discover Financial Services will exit the residential mortgage-origination business that it acquired in 2012.
Discover will record a charge of about 4 cents per share, to cover the costs of shutting down its Discover Home Loans business. The Riverwoods, Ill., company did not indicate in which quarter it will record the charge.
Discover will continue to originate home equity loans through its Discover Bank unit.
AmeriSave Mortgage in Atlanta reached an agreement to finish processing Discover Home Loans' remaining applications. AmeriSave will open an Louisville, Ky., office and offer jobs to Discover's 125 employees who work there in the mortgage business. Financial terms of the agreement between Discover and AmeriSave were not disclosed. AmeriSave expects the deal to close in August.
David Nelms, chief executive at Discover, earlier this year suggested that he was looking at exiting the business, although he had not said the unit was up for sale. Discover entered the mortgage space in 2012 with its acquisition of LendingTree Loans, but found the market more difficult than expected.
"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," Carlos Minetti, Discover's president of consumer banking, said in a news release.
Discover will also stop accepting mortgage applications today at its Irvine, Calif., office but continue processing and funding the loans already in process. Discover will offer severance to a total of 460 employees in Irvine and Louisville.