DFS » Topics » Mortgage Loan Underwriting and Processing

This excerpt taken from the DFS DEF 14A filed Feb 26, 2008.

Mortgage Loan Underwriting and Processing

Prior to the Spin-Off, Morgan Stanley provided marketing and application processing services for a home-mortgage product known as “Discover Home Loans” offered to our customers. Morgan Stanley agreed to continue to provide these services, on an arm’s-length pricing basis, for a transition period of up to 15 months following the Spin-Off. During fiscal 2007, we paid approximately $3,700,684 to Morgan Stanley pursuant to these mortgage loan underwriting and processing services. These services were terminated in fiscal 2007 and through January 31, 2008, we paid an additional $263,674 to Morgan Stanley for services performed in November 2007.

Prior to the Spin-Off, we provided certain marketing, information technology and print and imaging services in connection with Morgan Stanley’s mortgage lending business, including generating billing statements, printing IRS Form 1098s, mail printing, document scanning and storage and loan file management and retrieval. We will continue to provide these services to Morgan Stanley for a transition period of up to 18 months under an agreement that has arm’s-length commercially reasonable terms, including a fee-per-item pricing arrangement consistent with comparable agreements between unrelated parties. During fiscal 2007, Morgan Stanley paid $1,308,264 to us for these services.

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