Philip Gvinter

BoA Cuts Off Countrywide ARMs to Save Body of Mortgages

The problem with taking this approach is that it essentially requires capitulation. Eliminating the neg-am would involve losing the majority of the interest accrued on the loan over the first two or three years, and because these loans were most popular in FL, NV, CA and a few other overheated markets the principal reduction is somewhere in the neighborhood of 20% or more. This is a HUGE hit to take and requires the institution to essentially predict a default rate of >12% on the portfolio in order for the alternative to seem economical. At that point the FDIC has to step in because an institution that is overweight these kinds of loans is insolvent.

BofA, Lehman, AIG: The New Financial Realities

WM and WB with their massive Option ARM holdings should be the next two in line.

What's the BofA / Merrill Synergy?

Ken Lewis seems hell bent on becoming the next G. Kennedy Thomson his former cross town rival. CFC was a cheaper version of the Golden West deal but this MER purchase at a crazy premium to current market price should ultimately be his downfall.