Was buying Countrywide a good idea?
Countrywide is officially part of Bank of America, but in the six months since B of A agreed to buy the mortgage company, Countrywide's losses continued to build up. Jill Barshay reports.
Signs for Bank of America and Countrywide (Getty Images / Marketplace)
More on Housing - Real Estate, Mergers/Acquisitions
TEXT OF STORY
Bob Moon: It's official: Countrywide Mortgage is now a part of Bank of America.
It's been six months since B of A first agreed to buy the lender for $4 billion. Since then, Countrywide's losses have ballooned like an adjustable-rate mortgage. And there's a growing list of states now suing the company for deceit. Some are even trying to revoke its lending license. Bank of America's own stock value has tumbled by more than a third.
You've got to wonder, does Bank of America really want to own the nation's top home lender anymore? Here's Marketplace's Jill Barshay.
Jill Barshay: Stuart Plesser says Bank of America still thinks it's getting a good deal. He's an analyst at Standard and Poor's.
Stuart Plesser: It wasn't an airtight contract, they could have backed out. They could have perhaps renegotiated. They didn't do any of the above. They obviously like the deal. They have stated over and over this is a good, long-term transaction.
Plesser says Bank of America is going to have to deal with a flood of mortgage defaults and lawsuits.
Bart Narter is a financial industry consultant at Celent. He says Bank of America knew what it was getting into.
Bart Narter: When Bank of America initially made this purchase, they knew they were buying headaches. Essentially what they're gaining a huge chunk of market share in the mortgage lending business at a time when it's down, and they're hoping it's going to pick up in the next year or two, and that they'll come out smiling, looking like champs.
Perhaps Bank of America's biggest problem is dealing with Countrywide's reputation for dishonest dealings. The lender was sued in Florida yesterday for deceiving customers.
Eva Weber of the Aite Group says Bank of America has a long, difficult clean-up ahead.
Eva Weber: Reputation means a lot to institutions. So when you're associated with another institution that has a bad rap at the moment, there is certainly going to be some negative fallout as a result of that.
Not surprisingly, Bank of America is discarding the Countrywide name. Weber says to expect a big rebranding ad campaign on your television.
I'm Jill Barshay for Marketplace.
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