BoA Completes Countrywide Merger, But Story Continues

After months of speculation, Bank of America has completed the acquisition of Countrywide Financial Corp. to become the nation’s largest mortgage originator and servicer, but the legacy of the controversial mortgage lender will endure long after its brand is disowned by the bank.


The Charlotte-based bank acquired Countrywide on Tuesday in a deal worth approximately $2.5 billion, a reflection of the decline in Bank of America's stock price since announcing the all-stock deal initially valued in January at about $4 billion.

The terms of the deal include the exchange of 0.1822 shares of Bank of America for each share of Countrywide outstanding.

Some Wall Street analysts had urged Bank of America to abandon the deal, while even more remained skeptical that the bank would undertake such a risky venture.

The merger gives BoA as much as 25% of the mortgage market, but the company will also inherit a massive, rapidly deteriorating portfolio and a growing list of lawsuits.

Countrywide had heavily targeted its home state and Florida with loosely underwritten subprime loans, the states reporting the top two largest amounts of foreclosures in May, according to RealtyTrac.

Prior to the announcement of the deal, the Calabasas, California-based lender had fought persistent bankruptcy rumors tied to liquidity problems as Countrywide’s loan delinquencies skyrocketed.

Countrywide is also subject to criminal investigations by both the FBI and the Department of Justice, and sued by several states for allegedly deceptive lending practices.

After Illinois and California sued Countrywide last week, the states were joined by Florida on Monday.

Florida Attorney General Bill McCollum said Bank of America is now responsible for Countrywide’s past lending practices.

"They've acquired them, they assume their liabilities," said McCollum.

Bank of America said it expects to terminate 7,500 positions from its combined mortgage, home equity and insurance divisions.

It also indicated that it will not operate under the Countrywide brand and phase into operating exclusively under the Bank of America brand by mid-2009.
Posted on Wednesday, July 02, 2008 by staff