BoA to Close Countrywide Purchase Deal in '08
Bank of America chief executive Kenneth Lewis said recently that he expects his company's purchase of the troubled Countrywide Financial Corp. to close some time in the second half.
Over the past few weeks there has been speculation that BoA might back out of the deal. To date, both companies have released few details about the transaction.
In a research note discussing the deal, Sandler O'Neill analyst Jeff Harte said the bank is paying a "significant discount" to CFC's equity, "but it may be premature to call the purchase price cheap."
CFC, he noted, is facing potential writedowns on its $80 billion on-balance-sheet mortgage portfolio "and operating headwinds from a deteriorating domestic mortgage market may make the deal more expensive by closing."
Sandler and other analysts are concerned that BoA might harm its venerated franchise by becoming No. 1 in a business niche (mortgages) that is highly cyclical and prone to huge corrections every five or six years.
To date, there has been no word on the fate of CFC chairman and CEO Angelo Mozilo. Mr. Mozilo, who turns 70 this year, is expected to leave by year-end if not sooner.
Last week, the treasurer of the Service Employees International Union sent a letter to Federal Reserve chairman Ben Bernanke and elected officials that oversee the mortgage industry, asking them to carefully review the transaction.
"While the short-term appeal of this acquisition may be tempting, the long-term implications of bank industry consolidation on this scale raise serious policy and regulatory questions that need to be answered now," wrote SEIU treasurer Anna Burger. The union has 1.9 million members. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/