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The Pacman Syndrome

The Pacman Effect: The Strong Gobbling up the Weak.

Today, it was announced that Bank of America gobbled up Countrywide Bank for $4B. Is this good or bad for the industry? Probably a little of both. There were rampant rumors that Countrywide was facing foreclosure. I personally believe if Countrywide failed, the resulting backlash and uncertainty would result in the financial market and economy spiraling downward into a long cold economic winter. But, is it good for any industry to have one giant who can control the markets? What about the small guy. Will the markets be free? But from a positive perspective, Countrywide borrowers facing foreclosure may be bailed out. Bank of America's may use its deep pockets to prevent the predicted widespread foreclosures of Countrywide's sub prime loans.

For those who work for Bank of America and especially Countrywide, I would start planning an exit strategy just in case. There will be a lot of change in the banking industry and in especially the mortgage market after purchase has been approved but before the brands merge. Countrywide has a lot of garbage and duplication that Bank of America does not need or want. I predict that Bank of America will "cherry pick" Countrywide's assets and sell what it does not need. And, if you work for Bank of America, be careful that the Countrywide assets that Bank of America keeps do not displace you.

Does this buyout mean stability for the credit market? Maybe. But, keep looking over your shoulder!

Posted by Alan 'AJ' Nisen California Contra Costa Mortgage Officer on 01/12/2008 10:03 AM

Comments (16)

16 Comments on The Pacman Syndrome

I was talking to some people at the bank about this yesterday. Some feel that it will be good for the investors in the short run, but will be good for the mortgage lender in the long run. I guess that we'll see . . . 8-)

01/12/2008 03:41 AM

by Michael Thornton (Complete Home Inspections, Inc.)

They deserve each other. A week ago if someone asked me who the two worst lenders were to work with I would have said Bank of America and Counrtywide. They will make a good amtch.

01/12/2008 04:08 AM

by Gary McAdams (GMAC Schwartz Property Sales)

Geez, Alan, I did not see this one coming. My opinion in brief, short term- good, long term- not so good. Have a great day.

01/12/2008 05:12 AM

by Bill Carroll (Hampton Estates Realty)

It can only be good...a Countrywide failure wasn't really an option.

Here's to a GREAT '08!

Be of service! The rewards will come!

www.mattcrow.com

01/12/2008 10:10 AM

by Matt Crow - www.mattcrow.com 630-728-6051 (Huntley Realty)

Some succeed, some fail, and others get bought. The Wall Street Journal has some very good writing on this deal and the future of the Countrywide brand and what this means to the mortgage markets. Obviously, the stock of Countrywide (as well as their mortgage portfolio, services, etc.) had some value, or BOA would have not did the deal.

Let's all have a great 2008!

01/12/2008 10:18 AM

by Michael Sally - Victory Lending Group (Victory Lending Group)

I hope it does not change the countrywide mortgage programs, we are a direct lender but have relationships with other lenders of which countrywide is one and they have some pretty good loan programs

01/12/2008 10:23 AM

by Connecticut FHA LOANS,CT VA Loans CT First Time Home Buyer:CT Home Loans (www.BenchmarkCT.com: CT Commercial Loans)

Alan- Bank of America is better than a foreign entity. Like in the case of Citibank with United Arab Emirates.

01/12/2008 10:30 AM

by Mark Horan P.A. "The Resident Chef" at Keller Williams (The Resident Team at Keller Williams At-The-Lakes)

Having been re-engineered by Digital Equip in the 80's Citibank in the 90's and PCS sent my work to Jamaica in the new Century, It is always advisable to keep your resume up to date.

I have found my working in Real Estate at least lets me know who the boss is.

01/12/2008 11:42 AM

by Charlotte

Alan, enjoyed reading your article since I too, came up with the same points of interest. It's an excellent time for both entities to clean house and have the "best of the best."

My main area of concern is like yours...are we now resorting to a monopoly...one by one they are going, going, gone! Never will feel that a monopoly is in the best interest of the public.

01/12/2008 01:56 PM

by Sacramento Real Estate and Luxury Homes, Assoc. Real Estate Broker,Gena Riede (Remax Gold, Assoc Broker)

I was reading about this last night. Who really knows if it's good or bad until it's all said and done. I guess we will have to wait and see.

01/12/2008 04:08 PM

by Christy Powers - Pooler, Savannah Real Estate Agent (Keller Williams Coastal Area Partners)

AJ - Have not thought this would change the credit markets much. But that's probably us just not thinking, or denial. We can hope it's positive. And we shall certainly see it more clearly a little later on. The knee jerk at the stock market yesterday was not exactly the welcome wagon.

cheers

01/12/2008 06:48 PM

by Gary Bolen (CRS) Lake Tahoe Real Estate Information (Dickson Realty - South Lake Tahoe)

Bank of America has its fingers in everything. It is good that Countrywide will not fail. We do not need any more bad news. B of A is going to make a bundle off this.

01/12/2008 06:58 PM

by Portland Oregon Real Estate >> Wayne B. Pruner, GRI (Oregon First)

Never hurts to keep the resume all polished and ready. Likely there will be big shakeouts over time.

01/12/2008 11:01 PM

by Bob & Carolin Benjamin - E Phoenix Arizona Real Estate (The Benjamin Team - Keller Williams Integrity First Realty )

Agents, the same could happen to us. Don't forget that real estate offices are independently owned and subject to sale. You might be surprised by the changes a new owner can have on your current office. Watch for a tightening of the the budget in order to make the numbers look better for a sale. It happens in our industry too.

01/12/2008 11:10 PM

by Robert Slick (Prudential Source One Properties)

Just a note for Mark- The majority of bad US debt is sold to foreign investors anyway. They buy it one way or another.

01/12/2008 11:13 PM

by Robert Slick (Prudential Source One Properties)

Most likely will end up in a monopoly, like in the 70's. The strong always gobble up the weak. And that is saying it mildly. All I can say, as prayer changes things. Have a great day. Thanks for blogging. Lu

01/13/2008 09:08 AM

by Lu Kalaj (The Michigan Group)

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