Archive for the ‘finance’ Category

Jan12

Bank of America Buys Countrywide

The less-than-stellar mortgage lending industry got a huge show of support yesterday when Bank of America agreed to buy Countrywide Financial for $4 Billion. Obviously this won’t solve problems but it goes a long way in showing that someone believes the housing and mortgage market will eventually recover.

According to a Wall Street Journal article (quoting numbers from Inside Mortgage Finance), Countrywide and Bank of America controlled approximately 25% of the mortgage market during the first 9 months of 2007. That puts their market share at slightly more than twice their nearest competitor which is at a distant 11%. I’m curious to see if this plays out negatively as Bank of America seeks regulatory approval for the acquisition.

Given the state of the mortgage market, the acquisition will probably win Bank of America some bonus points as it teeters just below the 10% limit on U.S. deposits as regulators look to relax this restriction. Bank of America will also be getting a relatively large (I’m assuming some Countrywide members are already BofA account holders) base of potential new business – they’ll be able to offer their new members banking and credit card services which could be a huge selling point. I’ve also read rumors of tax breaks but nothing firm so far.

I think we’ll see some other large mortgage lenders at least enter into discussions, if not get bought out, by suiters. While the mortgage lending market doesn’t look great for most of America, it’s a prime acquisition target while prices are low.

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