Bank of America to buy Countrywide

[villager]

Source: AP

By IEVA M. AUGSTUMS, AP Business Writer 1 hour, 19 minutes ago

CHARLOTTE, N.C. - Bank of America said Friday it will buy Countrywide Financial for $4.1 billion in stock, a deal that rescues the country's biggest mortgage lender and expands the financial services empire of the nation's largest consumer bank.

The acquisition will make Charlotte-based Bank of America Corp. the nation's biggest mortgage lender and loan servicer.

Bank of America said it initially plans to operate Countrywide separately under the Countrywide brand, with integration occurring no sooner than 2009.

<snip>

An aggressive dealmaker who has already snapped up behemoths FleetBoston Financial and MBNA, Bank of America chief executive Ken Lewis this time isn't buying a financial winner. Delinquencies and loans in pending foreclosure are rising in Countrywide's loan portfolio, and Lewis said Friday "there are near-term challenges" in the nation's housing market.

But Countrywide's troubles have allowed Lewis to sweep in and add a major business line to his supermarket of financial products on the cheap.

Read more: http://news.yahoo.com/s/ap/20080111/ap_on_bi_ge/countrywide

[papau]

1. BAC paid 2 billion for 1% and 4.3 billion for 99% - nice "dollar averaging" :-)

[sattahipdeep]

2. Who are the real architects of the 911 attacks?

The company won't reveal its financial information, the names of its customers
or other details of its business.
Even looking at an analyst's screen at its Global Fusion Center wasn't allowed.

"No, no," Richer said, putting his hands up. "There may be customers' names on there.
We don't want you to see."

http://www.washingtonpost.com/wp-dyn/content/article/2007/11/02/AR2007110202165_2.html

[Warpy]

3. I was told about this last night

and asked the guy if it was the wisest purchase in the world.

Apparently, BoA had already infused a hair over $2 billion trying to keep them afloat, and it would take only a bit more over and above that to gain controlling interest, which is what they're doing.

There will be a vast difference in the way Countrywide will do business from now on and my guess is that a few of their people will end up doing perp walks once BoA gets done combing through the books.

However, this is a purchase done on the cheap, that's one certain thing, probably the truest thing in the article. Whether or not Countrywide is kept as an entity or chopped into little pieces and sold off with the profitable parts absorbed into BoA is anybody's guess and will probably depend on what a full audit shows.

In any case, all of you with loans through Countrywide can sigh with relief. Instant foreclosure as they enter bankruptcy proceedings is no longer even a distant threat.

[Xithras]

19. This is a very good thing for CW customers for another reason.

BofA never did the sub-prime loan thing because it wasn't a market they were interested in. That's why we're not hearing about BofA suffering under billions in losses to defaulting subprime borrowers. They have already stated that they will be working with ALL Countrywide subprime borrowers to convert their loans into standard "prime" mortgages.

I am generally critical of BofA with their fee gouging and offshoring issues, but this buyout may be a life preserver for many people drowning under rising mortgage rates.

I'll be interested to know what they do with accounts like mine. Countrywide holds the loan on my home, but it's not a sub-prime (CW has long been a good low-rate lender even for those with good credit). I actually refinanced FROM BofA TO Countrywide because I was tired of dealing with BofA's nonstop barrage of fees, and CSR's I couldn't hold a conversation with. Countrywide gave me a very nice fixed rate loan and I've never had a problem or complaint with them. I'm just hoping they're not planning on renegotiating ALL Countrywide loans.

[onehandle]

4. Bank of America sucks.

We dealt with them on my wife's mother's estate. They were total assholes and hit you with fees for just about anything.

We disputed the fees and they eventually they dismissed the most egregious ones, but only because they feared we'd take the estate's holdings elsewhere.

Now they have our mortgage. When we move this year, we will finance with another company.

[flashl]

5. One day, someone will take the time to follow BoA

Fleet (Fleece) Financials + BancBoston mergers into BoA and now Countrywide.

Is it a coincidence that BoA have ties to Fleet, BancBoston, and now Countrywide who all have links to some of this country’s worse mortgage scandals?

Is BoA the good guy with the white hat cleaning up the mess?

[L0oniX]

6. I thought they were the same anyway.

When I paid off my mortgage a few months ago, I had to make the check out to BOA. POS company. Since then I have dropped my BOA checking account and canceled my BOA credit card. Fuck them! "I don't need your stinking credit anymore you fucking asscarrots!"

[Blaze Diem]

7. My Daughter works for Countrywide..HR Dept.

They are all doubting their existance as of today.
Where'd my job go?

[flashl]

8. Employment in the financial sector is not hopeful ...

Financial Sector Saw Record Job Cuts in 2007 | Jan 3, 2008

According to a report released today by Challenger, Gray & Christmas, the 153,105 job cuts in the financial sector announced last year beat the previous record set in 2001 by a hefty 31 percent and more than tripled the amount at the end of 2006.

In the mortgage sector alone, 86,126 jobs were cut during the year as the housing crisis shuttered hundreds of lending operations nationwide.

And despite the record numbers, Challenger expects more layoffs in the struggling financial sector in 2008.

Read More ...

[villager]

9. I knew more and more people these past years that left other gigs to become "mortgage brokers..."

I wonder where they'll go now in this Bushconomy of ours?

[flashl]

10. Right now ... some are foreclosure specialist.

[villager]

11. actually, a woman I know who's been a foreclosure specialist for years

...called this downturn Xmas before last...

[flashl]

13. If only she was in the boardroom.

[slackmaster]

12. Countrywide is one of my employer's largest customers

We're concerned about it too.

I have to wonder what B of A is thinking.

[Blaze Diem]

14. I hear BoA will keep the Countrywide Brand for awhile..

Whatever that means to Cw's employees, I don't know.

[Doctor Cynic]

15. And in 4 months...

..."Chinese/Singapore/Dubai/Indian/Russian/Uzbekistani superfund bails out BoA for 40% stake..."

[Lone_Star_Dem]

16. All this adds up to a nice tax break for Bank of America

Brace yourselves, taxpayers of America. You're going to help Bank of America finance its $4 billion buyout of Countrywide.

That's because Bank of America (BAC, Fortune 500), which is solidly profitable, will be able to use some of Countrywide's losses to offset its own taxable income. The tax break could total about half a billion dollars over the first five years, according to an estimate by tax guru Robert Willens, who left Lehman Brothers Friday after a 20-year run and will be in business as Robert Willens LLC starting next week. The losses could be worth considerably more to Bank of America starting in the sixth year, depending on how big Countrywide's losses are when Bank of America formally acquires it.

<snip>

That's based on a $6 billion purchase price - $4 billion to Countrywide's common stockholders, plus the $2 billion of preferred stock that Countrywide sold to Bank of America in August. Willens says that you multiply that $6 billion by 4.49 percent - the so-called "long-term tax-exempt rate" - to calculate how much of Countrywide's losses Bank of America can deduct annually for five years after the purchase.

A $270 million annual deduction would save Bank of America something more than $100 million a year in federal and state income taxes. The long-term tax-exempt rate, which is based on Treasury rates and other things so complicated that they make my teeth hurt. The rate changes each year, Willens says, but not by much. When I asked how it's calculated, Willens, a master of tax arcana, threw up his hands. (Metaphorically, of course.) "It's like the formula for Coca-Cola," he said, "no one outside the circle knows it" and it's so complicated that, "no one else wants to find out."

So over the first five years, Bank of America can use a total of $1.35 billion of Countrywide's losses to shelter its income. (That's five years of $270 million annual losses.) If Countrywide's embedded losses when Bank of America buys it exceed $1.35 billion, Willens says, the bank will be able to deduct the rest of the losses, without limit, starting in the sixth year.

Isn't life fun?

http://money.cnn.com/2008/01/11/news/companies/sloan_countrywide.fortune/index.htm?postversion=2008011114

[flashl]

17. Seems like taxpayers will get a two-fer

Secret Countrywide Bailout: Senator Schumer Rips the Atlanta Federal Home Loan Bank

Very quietly, Countrywide has once again proven the claim: “No one can do what Countrywide can.”

After pushing the worst mortgage junk ever created, pushing their originators to sell that crap, pushing their stock in insider trading schemes before the meltdown, they have pushed this garbage on the Atlanta Fed as collateral for a quiet loan of $51 billion of your money.

A few days ago, New York Senator Charles Schumer was concerned enough about Countrywide to write this letter to the Atlanta Federal Home Loan Bank. In it he says:

I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank. I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole.

In exchange for the $51.1 billion in advances, Countrywide pledged $62.4 billion in loans, nearly 80% of its entire investment portfolio, as collateral. Of that, almost half consisted of pay option ARMs, most of them underwritten without any income verification. Delinquencies on the company’s pay option ARMs leaped 78% in the last quarter.


Read Full Text

[Lone_Star_Dem]

18. Imagine that.

Letting the largest issuer of high risk loans use those very loans as collateral for a loan of their own.

Amazing.