Bank of America Receives The OK To Buy Countrywide

It is done! The Federal Reserve has given the OK for Bank of America to buy subprime poster child Countrywide Financial Corp.. Bank of America CEO, Ken Lewis, says that even though the mortgage market has deteriorated significantly since the bank offered to buy the mortgage lender, buying Countrywide is still a good deal because the housing market is going to improve “by early next year.”

BOA Receives OK To Purchase Countrywide [NBC5]
(Photo: meghannmarco )

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  1. backbroken says:

    I hope the astrophysics department is studying this one, because it may be their only chance to watch a collision of two black holes.

  2. nlongtin says:

    Oh great. I have one mortgage with BOA right now and one with Countrywide. So now they will both be at BOA. I am not sure how I feel about this.

  3. Cool story bro says:

    hooray?

  4. girly says:

    BOA buys everything. I think that’s the only way for them to get customers.

    Seriously I would love to see a poll for BoA customers, of how many actually chose BoA

  5. SahuaritaSam says:

    My fiancee loves BOA, but hates Countrywide with a passion with the way they treated us when we were buying our first house. Because of their horrible customer service, as well as KB Homes, we pulled out of the deal.

    I’m not a fan of BOA with all their pointless service fees, but I can’t see how their influence would make Countrywide any worse of a company.

  6. friendlynerd says:

    Wow, this should go almost as well as the Sears/Kmart merger

  7. Bagels says:

    @friendlynerd: Or the Zayre-Ames merger

  8. blackmage439 says:

    Well, time to move my money market account…

  9. cashmerewhore says:

    @girly:

    This will be my second BoA account b/c of buyouts. My first was an MBNA credit card, and it was promptly cancelled when BoA pissed me off.

    I don’t have much of a choice with the mortgage they will be getting :(

  10. BlackFlag55 says:

    Bank of Assholes buys a country-wide scam operation. This ought to turn out well.

  11. theblackdog says:

    Hah, they think the housing market going to improve by early next year? I doubt it.

  12. enm4r says:

    @backbroken: I agree that CFC is a black hole, but BAC (excluding the CFC buyout) is actually positioned pretty well for the future, especially when in comparison to JP and Citi. Not really sure where you’re getting the BAC = black hole from.

    Unless you’re talking strictly service/perception wise, then I agree completely.

  13. Yurei says:

    Uh-oh, the planets have aligned and it’s not even 2012 ;) I suspect doomsday coming from a merger between these two. Bad meets worse. Pretty soon BofA will be the ONLY bank in the country at this rate x_X I thought the government tried to break up monopolies…

    *looks at Comcast, Verizon and Walmart in her area* oh wait, never mind, they don’t care anymore about it after all.

  14. Snarkysnake says:

    Somebody help me with the overarching concept here…

    What does Countrywide bring to the table that Bof A couldn’t do for itself ? Write crappy ,poorly documented loans ?

    Does it have a business model that will revolutionize the industry ? (with the internet being a huge part of the new reality for mortgage shopping, thats unlikely)

    Is their customer service so good that some of their goodwill will rub off on BofA ? (not from what I’ve read and heard)

    It looks like Bof A just pissed away a lot of money to look like they are ” doing something”. This always spells trouble for the owners (shareholders)

    This has all the earmarks of a debacle…

  15. inferno493 says:

    Would somebody please tell me what it is that makes them believe the housing market will be turning around next year?

    The people that run these companies are paid untold fortunes for their sage wisdom and yet I am dumbfounded by their asinine predictions. What exactly do they believe indicates the impending about-face of the market? Perhaps it is the rising cost of fuel? or maybe skyrocketing food prices? Or it could be the steadily rising interest rates on available mortgages. I suppose massive across the board layoffs could point to an upswing in home sales.

    I suppose in the end it is probably the magical combination of all of the above. So many negatives must somehow cancel each other out to create one giant positive powerhouse of economic recovery.

  16. Trai_Dep says:

    @backbroken: Wow. Just wow. You totally made my waking up this morning worth it.

  17. Trai_Dep says:

    @SahuaritaSam: “My fiance loves BofA…”
    …Grounds for annulment?

  18. enm4r says:

    @Snarkysnake: BAC gets to pay $4 billion for ~$20 billion in assets. There’s a lot of work to be done, but BAC gains huge in the longterm if they can clean up the mess…fortunately for their shareholders they have a pretty big margin to work with, on the flip side, it’s going to be rough getting there. They also become the second biggest bank by assets, so that is the considerable driving factor here.

    BAC will likely integrate very little of what CFC did previously. I suspect it’s almost entirely an asset move, look at how long it took to absorb the LaSalle Bank name almost entirely…

  19. mac-phisto says:

    @girly: that’s exactly what they do. there’s a saying in the banking industry – “it’s easier to buy a branch than to build one”. that refers to both regulatory hurdles & the challenge of establishing a new customer base. it’s pretty much a given that once a bank starts crossing state lines, their primary method of expansion is thru acquisition.

    @Snarkysnake: bank of america is at a point where they’re OVER established maximums on deposits allowed by a single bank (which they’ve unsuccessfully lobbied against removing) – these limits are $700 billion or 10% of all deposits. this constricts their future growth – at least in terms of acquiring depository institutions. couple that with a business model that’s heavily dependent on acquisitions & it’s understandable why this was a “good deal” for them. they essentially bought a few hundred billion dollar loan portfolio for pennies on the dollar.

    short-term, this is going to create some pretty massive losses, but even if 10-15% of CFC’s loans default (which is double & triple their current delinquency rate), BAC still makes out with a hefty profit.

    & i bet they use it as a springboard to retry their lobbying for the cap on deposits.

  20. mac-phisto says:

    @enm4r: are they just picking up the loans that CFC booked, or are they also picking up the servicing on $1.4 trillion in loans that they serviced? that’s certainly lucrative (with zero risk).

  21. Difdi says:

    Wow…as bad as BoA is, I never actually thought I’d be rooting for them for anything…this might actually improve Countrywide…

  22. BlackFlag55 says:

    Discounted commercial paper … huge business. Done some of that myself during the deliberate ruination of the Savings and Loan sector.

    As ENM4R points out BOA is picking up a giant pool of secured assets for pennies on the dollar. Assuming MacPhisto is on target and 15% of the loans could end up repair, BOA is still going to make out well … assuming they’re going to down size the employee pool, combine operations and strive for efficiency.

    This is the world of underperforming, discounted commercial paper.

    Now, amigos … you have just had the most glaring lesson in the US Dollar.

    All it is, is discounted paper. The US dollar is nothing more than discounted paper. Imagine what bonanzas certain of our enemies are wallowing in, with us, as Countrywide, being sold on the cheap to our enemies.

  23. Ragman says:

    @inferno493: It’s because the “golden parachute” is negotiated before they start working at a company. That way they can start talking out their a$$es with little worry, then blame someone else when they get pushed out.

  24. katylostherart says:

    why doesn’t this frighten people? it frightens me. i mean, even politicians stick their money somewhere in america. why aren’t they afraid?

  25. SahuaritaSam says:

    @Trai_Dep: No reason to leave her – we’re switching to USAA and combining accounts once we tie the knot.

  26. framitz says:

    Well, I guess it is time to change banks. BofA is already terrible and country wide is FAR worse. I’m outta there!

    I started with Security Pacific in 1975 then BofA bought them about 12 to 15 years ago and it’s been downhill ever since.

  27. enm4r says:

    @mac-phisto: I wasn’t sure if they were going to snag servicing as well, looks like it’s the entire portfolio of loans and servicing. From press release:

    Bank of America would gain greater scale in originating and servicing mortgages in the U.S. Countrywide had $408 billion in mortgage originations in 2007 and has a servicing portfolio of about $1.5 trillion with 9 million loans.

    Like BlackFlag55 said, they’re practically stealing the assets. They’re cut 1000s as they’re known for, and within a year or so they’ll integrate the systems. As dumb a move as I think it is short term, I really don’t see how BAC loses in the long haul.

  28. Trai_Dep says:

    @SahuaritaSam: Yay! Matrimonial bliss thus assured thru sage compromise.
    Such Solomon-like wisdom points to your being outstanding parents as well. So, uhh, get busy!! :D

  29. WarOtter - I went to Japan and all I got was this tumor. says:

    OMG! It is time to double teh suck!

  30. oregongal says:

    Sweet! you used my tip! Personally I hope they both rot in hell. Had horrible experience with BoA years ago and a friend is on the verge of losing her home because of Countrywide’s implosion.

  31. ageshin says:

    Well here we go again. The Bush administration is hard at work protecting us from the ravenous big corporations, er…. sorry I was thinking of T,Roosevelt. You know carry a big stick etc. Reward the criminals and punish the good folk.