Bank of America to buy Countrywide for $4 billion in stock

Bank of America will purchase Countrywide for $4 billion in stock, saving the mortgage lender from the threat of bankruptcy.

From MarketWatch:

Bank of America Corp. said on Friday it’s purchasing Countrywide Financial Corp. for $4 billion, effectively doubling down on a previous investment in the troubled firm and catapulting the buyer into the top spot among mortgage lenders and loan servicers in the U.S.

The stock-swap deal will put an end to the independence of the troubled California lender headed by Angelo Mozilo, and represents an increase from the Charlotte, N.C., bank’s August investment of about $2 billion.

“We believe this is the right decision for our shareholders, customers and employees,” said Mozilo, Calabasas, Calif.-based Countrywide’s chairman and chief executive, in a statement.

There has been a ton of commentary about this that I think talks best to the issues this presents Bank of America. Most notably PJ at Housing Wire with his take on the irony of it all.

For all of its maneuvering, BofA now finds itself at the altar with the company that, along with now-defunct New Century and Ameriquest, essentially helped define the subprime lending boom.

Which could mean that BofA will have managed to avoid the profits of the subprime lending boom, while nonetheless being forced to pick up at least some the tab.

Herb Greenberg from Market Watch has some prescient points on his blog:

1. The Fed is behind the deal.
2. The Fed is behind the deal because the rumors yesterday of a near bankruptcy were probably true.
3. As part of the deal, the government likely agrees to guarantee BofA against Countrywide-related losses.

No new press release on Countrywide’s site; but we’ll bring you details when they have a written statement.

So there you have it. A marriage that was predestined months ago is finally complete. We’ll be back with commentary in no short supply.

Note: At the time of this posting I own some B of A stock – just as an FYI.