BANK OF AMERICA BUYS COUNTRYWIDE!

In a move that was widely anticipated, Bank of America acquires Countrywide. Back last summer. BOA invested 2 billion in CW in order to shore up the faltering mortgage lender. The continuing decline in origination saw that investment lose 75% of its value as shares of CW lost value. Countrywide basically was almost going to file for bankruptcy. BOA's action is in fact a way to salvage that investment and allow it to buy CW at a discounted price.
CW was a very aggressive player in the market with aver 51,000 employees and a strong national presence. The demise of CW follows that of more than 43 major lenders who have since closed. Mortgage companies that relied on borrowing money to originate loans instead of using their own funds were hard hit when investors stopped buying highly risky securities backed by non performing mortgages.
The impact on existing borrowers who are in good standing is negligible. Those who are facing rates reset are going to find it more difficult now that the number one player has left the field. New borrowers will face tougher conditions because the pool of lenders has contracted.
The number of foreclosures will continue to rise, bringing more properties in an already saturated market. Those individuals who are looking to purchase will continue to have the edge since rates remain low and the inventory is very high.
Facing this abysmal performance, the Fed is expected to cut the rates later this month. This comes in addition to auctions that the Fed has undertaken in order to provide more liquidity to banks.
The R word as in recession has been floated lately. Experts are divided on that issue: some claim that we are already in it while others claim the contrary. What is clear is that jobs are lost, gas prices are taking a bigger share of consumers' income and no real action has been taken to correct the ongoing problems facing subprime borrowers.
The loss of CW as an independent company will severely impact the mortgage market as we know it.
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