BANK OF AMERICA TO BUY COUNTRYWIDE FINANCAL - WHAT ARE THE RAMIFICATIONS?
$4,000,000,000 DEAL COULD CLOSE BY FALL, IF APPROVED
In recent months, California-based mortgage lender Countrywide Financial Corporation has been at the heart of media coverage on the collapse of the home mortgage market, in Chicago, and across the U.S. Countrywide is the leading consumer lender for residential mortgages, and talks around it have centered around its possible bankruptcy, amid turmoil in the sub-prime mortgage market - a prime segment for the company, and one in which it expects considerable losses as loan rates continue reset a higher levels this year.
Many experts feel a collapse of the mortgage giant would been a severe psychological blow to the real estate market, both nationally, and here in Chicago.
Enter Charlotte NC-based Bank of America. Their $4 Billion Dollar Deal would immediately make B of A a dominant player in the consumer mortgage origination and servicing market. Dan Green, an independent Chicago loan broker, feels the deal is a sensible one for Bank of America. The bank can now offer it's stable of conventional banking products to the sizable Countrywide customer base.
The deal is not risk free for Bank of America, however, as a record number of mortgage defaults are predicted for 2008. This could immediately reduce the value of the Countrywide asset, and make B of A a party to any litigation or proceedings Countrywide becomes involved in.
Real estate practitioners see a real "clash of cultures" between Bank of America and Countrywide, with poor customer servicing the result for many very-frustrated Countrywide mortgage customers. See Brian Brady's comments in The Bloodhound Blog from January 11th.
Also, check out Becky Yerak's article in the January 12th Edition of the Chicago Tribune.
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