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New Lender Looking to Grow as Large as Quicken Loans

Mortgage News

A new player in the online home lending market told investors that it hopes to originate as much in residential loans as Quicken Loans Inc.

During 2011, Quicken’s home-loan production was $30 billion. That was $1 billion more than the Detroit-based company closed in 2010 and its highest level of volume on record.

The record originations landed the online lender in the No. 8 position last year based on data collected by Mortgage Daily.

But Quicken’s standing could be challenged if Discover Financial Services reaches lofty goals outlined to investors Thursday.

In May 2011, an agreement was disclosed for Discover-subsidiary to acquire Home Loan Center from Tree.com. The cost of the acquisition was reported at $55.9 million.

Executives at today’s meeting with investors said that the deal is expected to close within the next 90 days. No legacy loan portfolio is involved.

Discover said that the lender has an experience management team, two call centers and 300 licensed mortgage bankers.

Once the new unit, which will operate as Discover Home Loans, is up and running, loans will be originated through a proprietary direct-to-consumer technology platform for sale on a servicing-released basis. Product offerings will include conforming first liens as well as mortgages that are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

The company will provide streamlined processes that are differentiated for purchase and refinance transactions. A simple, step-by-step application process will be utilized, and each prospective borrower will be assigned to a dedicated mortgage banker.

Discover plans to market to its existing base of customers, though business will also be generated from online lead aggregation.

Carlos Minetti, who is Discover’s president of consumer banking and operations, said that Home Loan Center is currently originating $3 billion a year. The company has been operating at a 50-basis-point margin.

But he noted that Home Loan Center currently has no marketing capabilities and sees volume growing substantially.

“Our aspiration is to be as large as Quicken Loans is today … even better as a matter of fact,” Minetti said in response to one analyst’s question.

However, David Nelms, Discover’s chairman and chief executive officer, quickly chimed in, “I think we’re going to walk before we run.”

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