T-minus ? until Countrywide goes under.. . .

NEW -> Contingent Buyer Assistance Program
One poster on CR said BofA could take over servicing ops and cut cost in 1/2 by closing CFC's Calabasa office in Ventura County and consolidating operations in lower cost State, which would screw Ventura County.



Another said if the CFC went back up to $9.50 there would be another good shorting op.



What do people think?
 
Typically a 30 percent premium over a fair stock price is about right. If you believe 5 1/4 is a fair price based on the information in the disclosures, and how the street reacted to the information, then 6 7/8 should be about right. However, CFC is in no position to command a premium, as it was clear that they were going to run out of money.



I think you put in your short order, as I can see this being an extension of the earlier agreement, instead of cash per share (i.e. B of A loans CFC $X.XX, convertible to so many shares at $X.XX), and the final price will be lower than the close today.



Speaking of shorts, did you see the news dragged Lennar up? WTF - no one made an offer on them!
 
I also wouldn't be surprised if B of A has a partner in this. Very clearly, the servicing business, and access to the customers, is worth a lot of money. But my guess is that B of A will not want some of the other assets (REO's, delinquent notes), and they will want some cash, so I would not be surprised to see a vulture involved.



Temasek, or other SFR?
 
Thanks,



Tried to place a short order on Etrade, got a response, "shorts for this security are not allowed as we are unable to borrow this security"
 
Look at the other housing and financial stocks that were dragged up on the news. That could be your short opportunity, especially with the AMEX news likely to drag financials back down.
 
<p>I cannot make fun of Tan Man anymore (okay a little more). </p>

<p>Major contributor to the housing bubble and foreclosures, company about to go belly up. Gets bailed out by BOA and will get a $115 MILLION payout. Unbelieveable. </p>

<p> <a href="http://www.cnbc.com/id/22608866/site/14081545/">www.cnbc.com/id/22608866/site/14081545/</a></p>

<p>"But what sort of farewell severance package might Mozilo get? He's already sold $145 million in stock over the last year, <strong>money he told our Maria Bartiromo was needed in part to help pay college costs for his grandkids</strong>." </p>

<p>-What part? The interest?</p>

<p>-I am sure that Mozilla's bank account was all tapped out before his stock sale. </p>
 
This is going to go dpwn as "the worst financial acquisition of the last 100 years."



IMO, the FED most certainly is involved/supports this buyout. Why?



First of all BofA just EXITED the wholesale mortgage business several months ago. How does buying the largest wholesale lender this side of the milky way fit into those plans? Secondly, BofA obviously miscalculated the risk involved when lending CFC 2 Billion buckaroos for $18 stock options. Thirdly, mortgage servicing is profitable only if borrowers make their payments. As borrowers fail tp pay, the servicer still has to pay the investor. What a cash flow nightmare.



Imagine what will happen will CFC option arms continue to recast and borrowers see minimum paymenst go from 1500 to 3300 a month? If the borrower rolls a 30 day late, BofA must pay the bill. CFC also has quite a large REO portfolio that is growing by the day. Could BofA be interested in CFC's deposit customers? CFC was having to promise insanely high CD rates just to keep customers from withdrawing funds.



I just can't see any rational behind the move other than BofA's belief of a FED bailout. If they were after the CFC servicing portfolio they could just wait until they file for BK and purchase the loans for pennies on the dollar. Instead they now will hold billions worth of mark-to-make-believe loans.
 
<p>Hate to follow an insightful post with one that isn't so much, but...</p>

<p>Seems like where ever you go, you see a CFC branch. An outsider would think we get loans as frequently as a coffee at Starbucks and to an extent, many people did undertake the loan process with about as much effort of thought. I hope BOA's purchase of CFC signals a return to the good ole days when banks cared about the financial viability of those to whom they lent.</p>

<p>Step one in this direction is to close all the branches which populate the strip malls and elsewhere.</p>
 
Herb Greenburg is speculating that the Fed is guaranteeing any losses BAC incurs as a result of this deal; no downside for BAC.
 
bofa number one reason for buying countrywide..... tax write off and special perks the fed promise them.



it is written all over the wall. i think bofa got countrywide for cheap.....
 
<p>from <a href="http://money.cnn.com/2008/01/11/news/companies/sloan_countrywide.fortune/index.htm?postversion=2008011115">CNNMoney</a>:</p>

<p><em>Willens estimates that Bank of America will be able to deduct $270 million of Countrywide's losses annually for the first five years it owns the firm. </em></p>

<p><em>That's based on a $6 billion purchase price - $4 billion to Countrywide's common stockholders, plus the $2 billion of preferred stock that Countrywide sold to Bank of America in August. Willens says that you multiply that $6 billion by 4.49 percent - the so-called "long-term tax-exempt rate" - to calculate how much of Countrywide's losses Bank of America can deduct annually for five years after the purchase.</em></p>
 
Mozilo’s Monster Payday

Posted by Dana Cimilluca



<p>Countrywide stock may have lost most of its value in the past year, but that isn’t stopping its CEO, Angelo Mozilo, from walking away from the deal with Bank of America a very rich man. </p>

<p><img alt="Moz" align="left" src="http://s.wsj.net/media/Moz_blog_20080111114323.jpg" />According to the <a href="http://latimesblogs.latimes.com/laland/2008/01/mozilo-severanc.html">LA Times</a>, Mozilo <em>(left)</em> stands to get a severance package valued at more than $110 million. That would be on top of $140 million of his Countrywide stake that Mozilo sold in 2006 and 2007, as the housing wave crested and then crashed. (In fact, as the <a href="http://online.wsj.com/article/SB120005404048583617.html?mod=hps_us_whats_news">Wall Street Journal points out</a>, from 2004 through 2007, he sold a total of about $414 million of Countrywide shares — sales that drew the attention of the SEC.) </p>

<p>In 2006 alone, Mozilo, who built Countrywide into a thriving mortgage institution over nearly 40 years, got paid $48 million, according to the company’s last proxy statement. Compare that to the $28 million BofA chief Ken Lewis made, and you get a pretty good sense of why Mozilo, 69, may not be sticking around for too long after the deal closes. Asked about Mozilo’s future on the call, here’s what Lewis had to say, courtesy of a transcript provided by Thomson Financial. </p>

<p>“Angelo has told me he will do anything we want him to do in terms of how long he stays. I would want him to stay through the — until the deal gets done; and then probably I would guess that he would then want to go have some fun.”</p>

<p>And what fun you can have with that kind of dough.</p>
 
I agree with jbatz, B of A got the company cheap. This is a situation where the parts are more valuable than the sum. Remember, the REO's have a book value of over 3 billion, if they are discounted and sold to a vulture at, say, 1.8 bil, that helps bring down the cost. Also, I have not seen definative info on the 2 billion loan - was this converted, or are those shares included in the 4.1 bil, and CFC still has to pay B of A back?
 
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