The Federal Reserve Board on Thursday announced its approval of the notice of Bank of America Corporation, Charlotte, North Carolina, to acquire Countrywide Financial Corporation ("Countrywide"), Calabasas, California, and thereby indirectly acquire Countrywide Bank, FSB, Alexandria, Virginia, and certain other nonbanking subsidiaries of Countrywide.

Attached is the Board’s Order relating to this action.

Attachment (1.38 MB PDF)

Countrywide Financial Denies Speculations of Bankruptcy. 1-8-2008

It was a very rocky day for shares of Countrywide Financial. A lot of news and speculation. This all started this morning around 11:00, 1-8-2008. The stock went straight down. We called around, and it was tough to find people who knew what was going on. We were able to track down a number of the traders who told us this was living on bankruptcy speculation, and it kept going down. The stock was down by as much as 25%, and early in the afternoon, trading was halted. Countrywide put out a statement saying there is no truth to this, and the stock came back, but it is still down almost 20%.

Merger and Acquisition News: Bank of America Buying Countrywide Financial. 1-10-2008.

According to Wall Street Journal, Deal with Bank of America and Countrywide Could Come Soon

What is going on now is that Countrywide, according to a report from Dow Jones news service, is potentially in talks to sealy deal with Bank of America. Bank of America buying it out right. Bank of America bought a $2 billion stake in Countrywide during the summer and that happened at a time when Countrywide was desperately searching for capital. Since then, things have deteriorated and Countrywide has had rising foreclosures.

Bank of America in Talks to Buy Countrywide - Investor Perspectives. 1-10-2008.

Reaction with Yves Lamoureux of Blackmont Capital.

“Well capitalized senior financial companies will eventually profit from the ongoing demise of the smaller home mortgage lender competitors. This is basically what we’ getting today. Bank of America will buy a weaker mortgage player, and they will be stronger going forward. I think this is great news for Bank of America shareholders”.

Person Familiar says; Countrywide, Bank of America Boards have agreed to deal, NY Times says. 1-11-2008

Investors who stuck with Countrywide may come as welcome relief. Countrywide has dropped more than 80% in 12 months. With doubts that the company will be able to finance itself, Bank of America has a $140 billion balance sheet so it can withstand a lot of pounding and there may be plenty to come.

Countrywide is a target of lawsuits and under scrutiny by regulators.

Talk about their market cap of $4 billion a year ago it was like $ 27 billion. Why would Bank of America do this? They probably want to watch their investment. Bank of America has invested $2 billion already and the value of that investment has declined by $1.3 billion. Statements from the same time show they got the right to match any offer for Countrywide.

Bank of America is the biggest or close to being the biggest in all of the US consumer businesses except for Morgan so by buying Countrywide it could scale up at a discounted price in the mortgage business and reduce Countrywide’s funding costs by about $200 million. Citigroup estimates they pay about a half point more in interest than peers for deposits and Bank of America may be able to cut $400 million in the cost of its own mortgage business.

So huge cost savings for Bank of America in buying Countrywide.

Bank of America Agrees to Buy Countrywide for $4 Billion in Stock. 1-11-2008. 08:32 AM EST

Bank of America IS buying Countrywide Financial for $4 billion in stock. This could be great for Bank of America. This deal makes them all largest mortgage lender and servicer as well and expand their leading share in the US consumer banking industry. At the same time, it removes one of the concerns in the markets, the future of Countrywide.

The chief executive of Bank of America is calling this a rare opportunity to bind. He sees Countrywide as a key part of growth. one reason for the optimism may be that Bank of America does not plan to originate any subprime mortgages and is said to be willing to renegotiate existing mortgages.

SUMMARY: Bank of America Buys Out Countrywide. Jan. 11, 2008. 07:11 PM EST

Analysts say even at $4.1 billion, Bank of America may have received a bargain when it bought out troubled mortgage giant Countrywide Financial.

Countrywide Financial, the largest U.S. mortgage lender is asking a federal judge to stop an investigation into whether the company overstated how much it is owed by bankrupt homeowners. Countrywide has fallen more than 9% in the last session, down 82% over the past year as the company has reported problems within the subprime mortgage markets, as well as and rising mortgage defaults and foreclosures.

Andrea Kramer interviews market analyst Mark Fightmaster on Countrywide Financial.

Schumer Urges Review of Countrywide Financial Collateral

Senator Charles Schumer has urged the regulator of the Federal Home Loan Banks to undertake a special review of the loans that Countrywide Bank has pledged to collateralize $51 billion in advances from the FHLBank of Atlanta.

The thrift subsidiary of Countrywide Finance increased its advance borrowings in the third quarter by $28.2 billion, up nearly 80% from those of the previous quarter.

In a letter to the Federal Housing Finance Board, Schumer urged the regulator to “probe” the underlying risk of Countrywide’s collateral, which includes payment option mortgages.

The senator said in a CNBC-TV interview that he has concerns about the Atlanta FHLBank’s ability to assess the risk of Countrywide’s collateral. “At a time when Countrywide’s mortgage portfolio is deteriorating, the Federal Home Loan Bank’s exposure to Countrywide poses an unreasonable risk,” the Senate Banking Committee member said.

A Finance Board spokesman said the agency would “respond to Senator Schumer,” but declined to comment further.

C-BASS Owned Fieldstone Files for Chapter 11

The C-BASS owned Fieldstone Mortgage of Maryland which closed its doors last week has filed for Chapter 11 bankruptcy protection.

According to the Mortgage Industry Directory, Fieldstone ranked 26th among all subprime lenders last year, funding $5.2 billion.

According to its bankruptcy filing, its creditors include Morgan Stanley, Bear Stearns, and Countrywide Financial, among others. C-BASS, in turn, is owned by two publicly traded mortgage insurance companies, MGIC and Radian, which have been trying to sell the company and its servicing unit, Litton Loan Servicing of Texas.

In February C-BASS bought Fieldstone, a publicly traded real estate investment trust, for $260 million. This past summer, in the wake of the margin calls, MGIC and Radian wrote down their interest in C-BASS by $1 billion.

Wholesale Mortgage Production Falls 57% at Countrywide Financial

Countrywide Financial funded just $3.2 billion in mortgages through loan brokers during October, a startling 57% decline from the level of a year earlier.

During the month its retail production fell by 29%, while loans bought through the correspondent channel declined 52%.

Countrywide funded $22 billion in October, a 48% drop from the level recorded a year earlier. Like most residential lenders, Countrywide has been hurt by the meltdown in the subprime and nonconforming niches and a credit crunch in the secondary market.

In a statement, Countrywide president David Sambol noted that 90% of the company’s production is now funded through its thrift affiliate.

Anthony Mozilo of Countrywide Financial - Brokers Will Survive

Even though the future of loan brokering looks dicey, the business will survive, according Countrywide Financial chairman and chief executive Angelo Mozilo.

In a recent speech at the annual UCLA Real Estate Conference, Mr. Mozilo said, “Mortgage brokers will continue to be an important channel, but the ultimate financing will come from banks and thrifts, or conduits directly related to their activities.”

He said banks and thrifts will be the “primary providers” of U.S. mortgage finance money in the future. A recent report issued by Wholesale Mortgage Research & Consulting, predicted that the number of loan brokerage firms operating in the United States would fall by one-third, to 35,000, by the end of 2009.

Countrywide Loses $1.2B in 3Q.

Countrywide Financial on Friday morning announced a stunning $1.2 billion loss in the third quarter. This is the largest loss in Countrywide’s history and then predicted an unbelievable return to profitability in the fourth quarter and next year.

The company also revealed that it moved $12 billion of nonagency loans and securities onto the balance sheet of its bank, into a “held-for-investment” account.

In a statement, Countrywide chairman, chief executive and the man currently investigated by the US Securities and Exchange Commission and who was also paid in excess of $57.0 million, Angelo Mozilo blamed the loss on the mortgage market’s nonprime liquidity crisis, noting that it was forced to revalue its mortgage holdings downward and pay more to third parties for credit protection.

The company said it lost $1 billion by selling mortgage assets at a discount or marking down their value.Its servicing business was a major source of income in the quarter, posting operating earnings of $764 million, a 47% rise from that of a year earlier. But its loan production unit lost $1.3 billion in the third quarter.

Countrywide funded $94.6 billion in loans during the quarter, a 19% drop from the level of a year earlier.

The National Association of Mortgage Brokers is hoping to find some middle ground with House Democrats on a provision in a newly introduced predatory lending bill that would ban “incentive” payments to originators, including yield spread premiums that are a broker’s main source of compensation.

All direct mortgage lenders, such as Bank of America, Countrywide Financial, WAMU, receive the same yield spread premiums BUT they DO NOT have to disclose it! Because of loose banking laws, that need to be addressed as well, they are able to hide their upfront profits from the consumer.

“I understand their intent is aimed at incentive payments,” NAMB executive vice president Roy DeLoach said, where a securitizer pays an additional premium for certain types of loans.

The NAMB agrees that incentive payments should be banned. “We want to clarify that an origination fee can be paid by the lender to the brokers,” Mr. DeLoach said. Otherwise, the mortgage brokers will be forced to oppose the bill introduced on Oct. 22 by Reps. Barney Frank, D-Mass., Brad Miller, D-N.C., and Mel Watt, D-N.C.

“The indirect compensation mortgage brokers receive from lenders is a defendable fee that actually lowers closing costs to consumers,” NAMB president George Hanzimanolis said.