The BofA-Countrywide rumor turned into an official press release last night (soon followed by rumors of either Chase or Citi buying WaMu). There are also rumors about, since Moody's downgraded over 30 Countrywide tranches of mortgage debt in addition to the company being near bankruptcy, that the Federal government will stand behind any Countrywide losses. ( Not a bad deal, having the government back up the deal). Certainly takes some risk out of it...... Bank of America Corp., the biggest U.S. bank by market value, agreed to buy Countrywide Financial for about $4 billion in stock, five months after making their money-losing $2 billion investment. Countrywide shareholders will receive 0.1822 share of Bank of America stock, or roughly $7-something a share. (Not good for anyone who bought any above $7, but better than a bankruptcy!)
Shares of Countrywide shot up almost 50% yesterday on the rumors. The press had the usual "A Bank of America spokesperson said the company did not comment on market rumors or speculation. Calls to Countrywide were not immediately returned." As we all saw, earlier this week, shares of CW dropped to their lowest level since early 2000 following speculation it was planning to file for bankruptcy itself. We will see what happens, as Countrywide's loan portfolio is "troubled." Changes in personnel, corporate structure, etc., were not immediately announced.
Fed Chairman Bernanke's comments yesterday implied a 50 basis point cut is on the table for the Fed's meeting at the end of the month. This is a good time for homeowners to refinance themselves out of ARM's way, some experts believe, since many homeowners are due for a rate reset on their adjustable-rate mortgage and that acting quickly will allow them to lock in a solid, low rate for the foreseeable future. Although conforming rates have reached a two-year low, jumbos are holding fast near the 7% mark. Speaking of rates, this morning we find ourselves at 3.88% on the 10-yr and mortgage prices slightly better - again! There is little scheduled news - the rumor mill seems to be generating enough.
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