Dive Brief:
- Capital One is winding down Discover’s home equity lending business, a spokesperson for the McLean, Virginia-based bank said Monday.
- “We conducted an extensive strategic business review of Discover’s home equity and refinance loan business to better understand its position and potential as part of Capital One's business portfolio,” a Capital One spokesperson said in a statement. “In late June, we announced the difficult decision to exit this business. We are focused on supporting our customers and associates through this transition.”
- A notification at the top of Discover’s home loans web page says, “Discover Home Loans is no longer accepting applications for new home equity or mortgage refinance loans, although we will continue to process applications that are in progress.” It directs those with pending applications or current loans to a page with contact information.
Dive Insight:
Capital One completed its $35.3 billion purchase of Riverwoods, Illinois-based Discover in May, marking the largest banking deal of the past six years. The acquisition also created the largest credit card issuer in the U.S.
After the deal closed, Capital One undertook a strategic review of Discover Home Loans, which focused on home equity loans and refinance for existing homeowners. While Capital One winds down the originations pipeline, the bank will continue servicing the existing portfolio and assess strategic options for sale and servicing.
The Capital One spokesperson didn’t respond to questions regarding the size of the business or the number of employees affected by the move. A majority of home loans employees will take on other roles within the company or aid in the wind-down of the business, while some positions will eventually be cut.
At a June investor conference, Capital One CEO Richard Fairbank emphasized the appeal of Discover’s network and credit card business.
“We're going to take what they do well and try to very much continue and invest in those things,” Fairbank said last month. The purchase “also allows us to continue to get thrust in our building of a national bank,” he added.
Owning a network also helps Capital One “build some insurance against one of the risks that we face, which is the reliance on other networks and some of the pressures those networks are under,” Fairbank said.
Although Discover will no longer be a corporate brand, it will remain a network brand “as far out as we can see,” and a product brand under Capital One, similar to its Venture card line, Fairbank said.
In July 2024, Discover’s bank subsidiary struck a deal to sell its $10 billion private student loan portfolio to global investment firms Carlyle and KKR.
Discover launched the mortgage origination business in June 2012, after purchasing a subsidiary of LendingTree in 2011 for $55.9 million. Three years later, in June 2015, Discover said it was closing the home loans business, citing an intention to focus on profitable products where it saw more opportunity for growth. The company continued to originate home equity loans through Discover Bank.
