Discover Financial Services originated nearly $1 billion in direct mortgages during the first quarter of 2013, company executives said during an earnings call with investors Tuesday.
The credit card issuer has been diversifying its product line with the addition of checking accounts and its
The Riverwoods, Ill.-based company currently originates conforming mortgages that are sold to Fannie Mae and Freddie Mac or insured by the Federal Housing Administration. Chairman and CEO David Nelms told analysts that while the lending unit is profitable, it accounts for a small share of Discover’s overall business, adding that the company is actively monitoring industrywide trends in origination volume.
“Like other loan origination businesses, we are certainly benefiting from the current significant refinance volumes and we do expect those to slow over time,” he said.
“But we are taking a lot of steps to get stronger in the initial purchase part of the market to enhance our cost structure and ability to remain profitable through other parts of the lending cycle,” Nelms added.
The expansion of Discover’s mortgage business could come in the form of new products like home equity lines of credit, after the company gets a better grip on the regulatory climate.
“It's still our intent to expand into home equity later this year,” Nelms said. “However, there a lot of new rules that have just come out that are focused on home loans, but have some bearing on home equity as well.”
He added that while jumbo mortgages are a product “we could certainly consider long-term,” Discover does not have any current plans to expand into that product category.
Discover reported net income of $673 million for the quarter ending March 31, up 4% from net income of $650 million in 1Q12. Revenue (net of interest expense) was $2 billion in 1Q13, up 10% from revenue of $1.8 billion in 1Q12.
