A Contrarian Take On the Countrywide Acquisition

I welcome the Bank of America (BAC) acquisition of Countrywide (CFC), because for the first time BAC is acting like a contrarian investor.

I really don’t know what CFC is worth but I know it is worth more in BAC’s hands than as a standalone company. BAC will be able to provide CFC with liquidity and staying power to survive through the current crisis. In other words it brings continuity to the table (customers and partners that were having second thoughts about dealing with CFC are likely to stick around now).

I am applauding this deal because typically these are done at the top of the market, but BAC found a restraint to wait till things went to hell. Yes, it was early with its first purchase, but picking bottoms is not easy, even for almighty BAC.

Comments

[texalope:]

I believe this acquisition will create the opportunity to restructure a large number of mortgages EFFICIENTLY. This will ultimately reduce pressure on real estate prices and help increase sales. With mortgage rates so low and pent up demand building, the last part of the equation is firming up real estate prices. If the government or Fed were involved in supportung this transaction, I rhink it was a smart move.

2008 Jan 14 08:31 AM

[kurt walter:]

CFC is a play the loan servicing business. The rest of the company isn't worth much. Most of those home equity lines of credit and 2nd mortgages are worth nothing.

2008 Jan 15 12:42 PM

[W.C. Varones:]

How about CFC is worth less than nothing and B of A has tons of outs to bust the deal:

wcvarones.blogspot.com...

2008 Jan 18 12:01 AM