BOA To Obtain Countrywide Corp

Jan 11th, 2008 @ 3:24 PM by Alden Smith

Countrywide, long hailed as the top leader in the mortgage industry, has taken the tumble like so many others before it.  Countrywide is being bought out by Bank of America, the nation’s top leading consumer bank.  This move makes BOA in a position to prove its strategy.  Because Countrywide is a losing proposition, BOA must be able to turn that around and see a profit in the future.

BOA is gambling on the fact that the infrastructure of Countrywide is top end, and that its operating platform is one of the best in the business.  BOA had already pumped $2 bn into Countrywide in August of 2007.  Now, BOA has to kiss that loan goodbye, and absorb Countrywide into its already huge financial institution.

BOA plans to run Countrywide as a stand alone entity, with hopes of getting it into the black by 2009.  This move makes BOA the largest lender and mortgage servicer in the United States.

Bank of America chief executive Ken Lewis is aware of the problems at Countrywide, but feels it can be turned around in the future to its once outstanding status.  Lewis, known as a deal maker in the industry, has helped BOA obtain both FleetBoston Financial and MBNA.  Lewis said in a statement that “Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers.”

Shareholders of Countrywide will be given a 0.1822 share in BOA stock.  There is no real news of what will become of Countrywide CEO Angelo Mozilo.  He is expected to stay with Countrywide until the transition is made.  There currently are no plans to for job cuts, but analysts are certain that BOA will downsize the 15,000 employees Countrywide now has.