FBR: BoA May Face $30B in Hits on CFC Deal

A new research report by Friedman Billings Ramsey predicts that if Bank of America moves forward with its purchase of Countrywide Financial Corp., it may face $30 billion in loan writedowns once the deal closes. FBR's advice to BoA is to "completely walk away" from the deal. Late last week BoA filed an amended S-4 with the Securities and Exchange Commission, noting that there is no assurance that any of Countrywide's debt will be redeemed, assumed, or guaranteed. The filing prompted Standard & Poor's to downgrade Countrywide's debt to junk status, from BBB-plus/A-2 to BB-plus/B. (Roughly 25% of Countrywide's subprime servicing portfolio is delinquent.) FBR also says it believes that BoA will soon renegotiate the purchase price down to $2 or less per share from $7. Countrywide's spokesman could not be reached for comment by MortgageWire's deadline.