Countrywide to be bought by B of A?
Posted: Thu Jan 10, 2008 9:34 pm
When Countrywide borrowed $11 billion from a consortium of banks and
Bank of America a week or two later loaned Countrywide $2 billion at
near hard money terms between banks the tea leaves were apparent - the
Fed had put pressure upon Bank of America to step up. Some of us can
remember back to the old American Savings Bank, FSLIC and RTC days,
some of us will remember the breaking up of banks between a "good
bank" meaning that left with valuable assets, and a "bad banks" being
that left with bad loans. Bank of America was bailed out of its bad
international loans by spinning off those loans into what would become
First Interstate Bank. And, so, it was pay back time! The need for a
bad bank has substantially been replaced with the sale of assets to
Wall Street. Countrywide has far less in deposits than loans, and so,
under the bank regs should probably be closed, but that would shake an
already jittery market. And, so, the Fed will move to liquidate
Countrywide through its deal with Bank of America taking its
collateral (the deposits and performing loans), leaving the remains on
the cow dung heap of the Charlie Keating and the likes from the last
go around!! Ultimately, the tax payer will pay for the excesses of
Countrywide, as Countrywide borrowed heavily ($$ billions) from the
Fed Discount Window, based upon collateral of a declining value.
What does this mean for our clients? For us as consumer bankruptcy
lawyers? Fewer and fewer lenders to compete with favorable terms.
More likely than not, there will be a move back to Fannie-Freddie
guidelines of 80/20 LTV and 32/38 income and expense ratios. This
would mean, probably, that although there may be willing buyers, there
are no willing lenders. No refinancing out of Chapter 13 cases.
There likely will be the elimination of the artificial demand created
from those that currently fail to meet the guidelines, but were
fogging the mirror and passing for able borrowers from October 2001
through August 2007. We need to be prepared for more cases and more
complex cases, including the return of "Lam Motions." We need to be
prepared for greater scrutiny of bank loan documents, foreclosure
notices, and proofs of claims submitted by lenders and their assignees
(see listserv about Judge Bufford RSF).
This should be a good and exciting year for members of the cdcbaa.
wrote:
>
> NEWS ALERT
>
> from The Wall Street Journal
>
> Jan. 10, 2008
>
> Bank of America is in advanced talks to acquire struggling mortgage
provider
> Countrywide Financial, according to people familiar with the
situation. It
> isn't clear how quickly a deal might be struck, but people familiar
with the
> matter said it could occur soon. It also is possible that an
agreement could
> be delayed or fall apart altogether.
>
> Bank of America last August propped up Countrywide by buying $2
billion of
> preferred shares convertible into a stake of about 16% in the
lender. The
> market value of Countrywide has plunged to about $3 billion amid a
> continuing surge in defaults and foreclosures afflicting the Calabasas,
> Calif., company.
>
> For more information, see:
>
The post was migrated from Yahoo.