Bank of American announced that it is in the process of buying Countrywide Mortgage. There are many differing opinions on this transaction. There are many questions that have not been answered.
I leave the hard stuff for the pundits to banter.
What does it mean to the consumer and the real estate market?
Well, Bank of America is a bank. Countrywide is a mortgage lender. Banks do loan money and have a relationship with consumers in that area. Mortgage lenders do not have the same products or philosophy that is found in banks.
Mixing the two is like mixing water and oil.
This is not a bad thing, they don’t mix well but they create beauty together.
Countrywide has been on the ropes for quite awhile. The largess and size of the package proposed for their former leader certainly leaves room for criticism. If I am not mistaken, only Alex Ovechkin of the Washington Capitals got a better deal this week.
Everybody knows Countrywide. If you dig around on the internet, you will find that Countrywide has a lot of unhappy customers. Countrywide did dance with the devil and took part in the rash of bad loans that were made over the last five years.
Not just sub-prime…BAD LOANS
Bank of America has their own dirty laundy. They are not just the big bank that ate all the little banks on the way to incredible market strength.
During their acquisition process, they have gobbled up some rather nasty meals. They trumpet their “innovative” programs like “Teacher Flex” and “Neighborhood Advantage”. They conveniently don’t mention that the programs were created in response to their purchase of NCNB, who had a less than enviable lending record in lower-income neighborhoods. I am sure you remember the days when they called a spade a spade. You know, if it walks like a duck and sounds like a duck and looks like a duck….it is a feathered fowl before you.
So the knight in shining armour that is riding in to save Freddie Mac and Fannie Mae from major losses is wearing a tarnished outfit. They are purchasing market share. They are purchasing future profit at a discount. They are strengthening their entry into the world of real estate. (If legislation stops them, they will just buy their way in!)
They won’t lose money. If the Countrywide group looses another 9 billion dollars, Bank of America will still stand to make a 10% profit going forward.
Bottom line, the dust will settle and Bank of America will have yet another revenue source. Consumers lose out because the number of players is reduced. My bet is that when all the votes are in…..Wells Fargo will become the major player.
For everyday folks, this is just another brick in the wall that seperates the powerful from the needy.