Bank Of America To Buy Countrywide

Deal Worth $4B In Stock Aimed At Rescuing Largest U.S. Mortgage Lender

(CBS/AP)  Bank of America Corp. said Friday it has agreed to buy Countrywide Financial for $4 billion in stock, a deal that both rescues the country's largest mortgage lender and expands the financial services empire of the nation's largest consumer bank.

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

"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," Bank of America chief executive Ken Lewis said in a statement.

The buyout come less than five months after Bank of America plugged $2 billion in Countrywide Financial Corp. during the height of the summer's global credit crisis, and just weeks after Ken Lewis vowed that making a deal in the mortgage industry would require him "to eat about seven years of my words."

It also places Lewis, an aggressive dealmaker, in the position of a market savior. By buying Countrywide, he's keeping the industry and regulators from the messy task of figuring out who would take on the responsibility of collecting payments for the millions of U.S. home loans serviced by the Calabasas, Calif.-based lender.

"There's still plenty of risk involved," said Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. "He's brave to do it. But I think that it's very likely down the road to be profitable, maybe not immediately, but long-term."

"It is very important not only for Countrywide's health, but for the economy's health that something was brokered," analyst Sean Egan told CBS News correspondent Anthony Mason.

The graveyard is full of mortgage lenders, reports Mason. Since January of last year, 147 have gone under. But Countrywide is the largest; the California-based company services more than nine million home loans or about one of every six home mortgages in the country.

Shareholders of Countrywide will receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. The deal is expected to close in the third quarter and to be neutral to Bank of America earnings per share in 2008 and lift earnings per share in 2009, excluding buyout and restructuring costs.

Bank of America expects $670 million in after-tax cost savings in the transaction, or 11 percent of the expense base of the two companies' mortgage operations.

The agreement has been approved by both companies' boards and is subject to regulatory and Countrywide's shareholders approval.

Countrywide shares plunged more than 18 percent, or $1.42, to $6.33 in pre-market trading after soaring $2.63, or 51.4 percent, to close at $7.75 Thursday on reports of a possible deal. Bank of America shares fell 2 percent, or 80 cents, to $38.50.

On Thursday, Federal Reserve Chairman Ben Bernanke pledged to slash interest rates yet again to prevent housing and credit problems from plunging the country into a recession.

The Fed chief made clear the central bank was prepared to act aggressively to rescue a weakening economy. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.

Bernanke, in a speech to a housing and economic forum, cautioned against reading too much into one report. However, he said that if employment conditions were to continue to deteriorate, that would raise risks to the economy. The big worry is that consumers might cut back on their spending, sending the economy into a tailspin.

Incoming information suggests that the outlook for economic activity for this year has worsened and that the "downside risks to growth have become more pronounced," Bernanke warned.

A housing slump, weaker home values, harder-to-get credit and high energy prices all "seem likely to weigh on consumer spending as we move into 2008," Bernanke said.

[kesac4650]

It is good for Countrywide that they have been bought.
It kind of spoiled my plans to buy Countrywides stock while it was down. It will get its value back within about 2 years, and would have been a good buy at any price under $8, if just left alone.

[prinzowhales]

That''s right, buy Countrywide...fold all that bad debt into the banking system and hide the bad loans with the rest of the bad debt in America...which banks are going to be loaded up with the bad assets and collapse and which are going to be left with the good and prosper? Now, just how much will BOA pay for this bankrupt?

This is the same BOA that requires no ID to start an account if you are an illegal allien...It gives mortgages to illegals because the Oligarchs who run it are for a North American Union and an end to the Constitution and Bill of Rights (for government by "elite consensus" as one Hucksterbee advisor has publicly written)and want the illegals to have a "stake" here so that it will be more difficult to dislodge them.

These are the people who support open borders...and refuse to guard them! They will want bailouts from the US government...and Congress will award them... What is the income of the head of Countrywide--a man who has taken that firm to the verge of bankruptcy? How much has he been paid for this kind of entrepreneurship???

[jowand]

The Department of Justice - Has no other Job Description than to -
Play a game of : Nepotism and Patronization to :

The Bush Nazi Regime
The Republican Nazi Party
Criminal Corporate Nazi America

Lastdance
Posted by lastdance7 at 12:47 AM : Jan 12, 2008

Call Dr Phill you need help

[morseanders]

Well, BOA is something all right! Here in Central Illinois (Peoria, IL to be exact) we are suffering at the hands of BOA.

They pulled the note that our public television station had (Seasame Street, Nature and Nova among others). Which NO payment has been missed. (yes some other criteria were not met- but they never missed a payment)

So to hear that they have the "deep pockets" to take in Countrywide is somewhat maddening. I guess we can only wait and see if BOA becomes the grim reaper "Coutrywide" to families holding mortgages and making payments only to be foreclosed on anyway?

No more reading and math the fun way on public television - thanks BOA.

[thgdriver]

The B of A are a bunch of crooks, they tried to pull a credit card scam on me, I reported them to my states attorney Generals office and others. They backed down. I still don''t recommend them as truthful or trustworthy. I cut them loose a long time ago.

[mcv57]

BoA is going to prove to be the McDonald''s of Banks, cheap burgers and lots of grease.

[erpcat]

just another business sector on the oliGOPolistic pile.
as citizens we must unite and demand competition of businesses. no longer let business tell you what they want you to have. citizens take back control of all levels of your gov''t. put a stop to this so called (spin) free market (aka big business)

[fstop100]

I am closing my B of A credit card account now!!

[usayesterday]

One of the big signs of a "credit crunch" is the various financial institutions merging and buying each other out.

Foreign banks/investors have bought portions of major investment banks in America.

There''s only so far these big banks can go before one or more of them begin to fold. And when that happens, there will be a "run" on the banks... the likes of which America has not seen since the time leading up to the Great Depression of the late 1920s.

The signs are there. It''s just a matter of time before we see the 21st century version of the Great Depression. Guaranteed.

[ibzjem]

I dropped BOA a loooong time ago. Will not ever return.

[fornicario]

Maybe if banks took the view of helping the customers they have, instead of looting them for every last dime, we would not be in this economic mess.

[shanev137]

The demise of B of A has begun.

[buddhabman]

So BofA gets Countrywide for 6 Bil (2 Bil previous loan and 4 Bil in stock). That''s a pretty good bargain as Countrywide has a pretty good ratio in it''s portfolio of standard conventional loans to the risky sub-prime and Alt-A loans. It''s just going to be harder and more expensive for people to get jumbo loans now, with one less lender. It is still conceivable that prices in some areas will drop 15-20% more.

[lochlan-2009]

ibsteve2u- Can''t get more accurate than that.

[missingamerica]

Huh...BOA is just about big enough to have more effective power over the nation''s economy than the Fed does, now...

[duffyn]

I agree with fuzzybear. The corporations in this country are getting way to much power. that''s why their mouthpiece bush said "outsourcing is good for the economy" Good for who''s economy? The corporation''s economy NOT the American worker who just lost his job, and then, probably his or her home....

[downtowner97]

All those years I heard the commercials saying "No one can do what Countrywide can". This statement literally means that even Countrywide can''t do what Countrywide can. I thought they meant "No one else can do what Countrywide can". It turns out, they were right. They couldn''t do it.

I think it''s hilarious that a lender that hires hundreds of ebonic-speaking people to call and hound their customers for money couldn''t make it and went bankrupt. It makes me want to call and say "Missa Countrywide, can you tell me why you''re late with your paymit?".

[omega39-2009]

Yeaaa, another merger, more layoffs, less competition. It did wonders for the profits of the oil companies so why not.

[fstop100]

Whatever happened to the Anti trust laws? I believe it was called the Sherman Antitrust Act? Correct me if I am wrong.

[christiansin]

mega bank, mega kakon