Discover To Accelerate Payments For Tree.com's Mortgage Business

Discover Financial Services (DFS) and Tree.com Inc. (TREE) modified a pending acquisition agreement, requiring the credit-card company to make certain payments sooner than planned.

Discover in May said it would buy most of the assets of Home Loan Center, a mortgage subsidiary of Tree.com, for $55.9 million. Originally, $20 million of that cost was deferred, with $10 million due each on the first and second anniversaries of the deal's closing.

Now Discover must pay $3 million of the deferred amount by March 7, regardless of whether the deal closes, $7 million at closing and $10 million by the first anniversary.

The changes also allow Discover to further extend the deadline for closing the deal to July 6, subject to certain conditions, Tree.com said. Previously, Tree.com could terminate the agreement if the deal didn't close on or before Oct. 9, 2011. Discover has exercised a series of 30-day extensions it was allowed under the original agreement, extending the deadline to March 7 and paying $5 million to do so. Those payments will be applied to the purchase price due at closing.

"We now anticipate closing to occur by mid-year," Doug Lebda, chairman and chief executive of Tree.com, said in a statement.

A spokesman for Discover couldn't immediately be reached for comment.

The pending acquisition is part of the Riverwoods, Ill.-based company's efforts to diversify beyond credit cards, the largest part of its business. The company has also been expanding its direct-banking operations and pushing personal unsecured loans to grow its balance sheet.

At the time the deal was announced, Discover executives said they planned to originate mortgages and sell them into the secondary market.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; [e-mail]