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

NEW -> Contingent Buyer Assistance Program
cdm - to record the asset of 3 billion you would set up a corresponding liability for the same amount, so it doesnt bring down the cost to 1.8B.
 
If the REO's are on the books at over 3, and they turn around and sell them for 1.8, then they will have to take an impaiment charge to make up the difference. The point isn't about the accounting process, but rather to point out that there is value that can be turned into cash to offset the acquisition cost. When you total up the tax breaks, cost savings of integration, real value of assetts that can/will be sold, and deduct that from price, I think that B of A will have made a good deal to get a great servicing business, and increased their market share from number 4 to number 1.



And I still think that there is a role for some vultures here. B of A doesn't wan't to be an REO clearing house; they will work out the deliquent loans that they can, and I anticpate that they will sell (at a discount), the ones thay can't. BTW, does anyone know if CFC had any real estate - ie headquarters?
 
I think their are a few ways to look at the service rates for the subprimes: Refinance those that can and desire to into more lucrative products (remember, if things get really ugly and delinquencies get to 10%, that still means 90% are current, and can be sold additional services - refi's, conventional banking, etc), they can always sell off the bad ones to vultures (and I've mentioned in my previous posts that I think this is a distinct possibility), or just call it a loss leader.



Remember, B of A just went from number 4 in the Home Lending sector to Number 1 (by a large margin!) and it only cost them 6 bil, and they do get some saleable assets and tax advantages with that. How much would it have cost them to grow to that size organically?
 
<p>It's possible that they won't be allowed the buy out due to having more than 10% of the country's deposits. </p>

<p>Also, there's the too big to fail syndrome, but then the Fed has been subsidizing Countrywide anyway, right?</p>
 
Lewis head should be on a pike along with the heads of Citi, Merrill, Bear Stearns, and HSBC. He is an idiot. His losing bet at 2 billion had to be saved by this. Idiots, pride and arrogance got us to where we are. Off with thier heads!
 
A bank cannot acquire more than 10% of the country's deposits through a "bank" purchase. CFC is NOT a "bank" it is a federally chartered thrift savings & loan. Therefore this transaction is exempt from that rule.
 
Oh, BOA will get LOTS of tax deductions. For losses. Countrywide has 215B in assets and a book value of only 15B. All their assets are flaky - starting with 20B in "mortgage servicing rights" which may, as lawyerliz points out, be worth nothing. Then there's 113B in the loan portfolio, mostly recent, and mostly toxic (option ARM, IO, piggyback, and home equity). Given that BoA is spending 4B to acquire this turkey, I expect they'll lose over 10 billion dollars on this. Which they'll get to write off, but that will be a weak salve for the stockholder's losses. But Mozilo gets his jeweled golden parachute and Lewis will get his to when TSHTF on this.
 
How bout shorting CFC now..



Downside... Loss of difference between $6.45 and $7.15 + 0.18 x apprecation (deprecation) in BOA stock price if sale goes thru projected to be minimal.



Upside... Deal tanks after BOA does due dilagence on CFC and finds billions more in losses. CFC delare bankrupcy and stock drops to pennys. Only question, will Feds let CFC go bankrupt?
 
<p>I would be scared $hitle$$ to either buy or sell Countrywide now. There is absolutely no way to know what will happen B of A doesn't know, so how can anybody else. It is distinctly possible that the tan man doesn't even know, except that it's baaaad.</p>

<p>I think you may as well go to Las Vegas. At least you get free drinks there. Or, so I'm told.</p>
 
Technically the loss on that short is unlimited. Upside I think may be nominal. Don't like the odds on that bet very much. I am covered and out of this play. Move along. Like the action in DSL though but not in it at the moment
 
Liz.

Vegas will still serve you drinks as long as your awake and gambling 24/7.



I think this "Merger" could still fall apart if the housing crash goes on into the time of closing Q3-08.

The losses could spiral to the point that B of A just cant take all the debt load. That debt is still a moving target

as long as more and more properties go into forclosure and end up REO. Plus all the outstanding bond debt.

I just dont see any value in the business as long as the primary business plan is extinct. IE. Depreciating Real Estate Values. The longer prices go down. The more Countrywide sprials down the tubes. B of A is trying to catch a falling knife.

And that knife may keep falling for a couple more years.
 
morekaos..



Please explain how the loss on this short would be unlimited, it seems pretty limited to me, do you think you CFC will rebound and double in the next 12 months.



This seems a pretty safe play rignt now.
 
It is possible, however unlikely that someone else may outbid BAC. Seen it happen before. Theoretically the loss is only limitted by what the other bidder pays. A naked short position at say $6.27 could kill you if a bidder came in at say $15.00 cash. You would then have to cover the short at $15.00. That is a huge loss on margin. That is why I have said in a situation like this you MUST buy calls as a hedge.
 
The unlimited downside is not in one's projection of probability, but in the possibility. And the hedge is way too expensive. No thanks, I will not be shorting BAC or CFC. Herb Greenburgs take is that the Fed is guaranteeing any lossed incurred by BAC on the deal. The taxpayers will pay for this one, but what's new.
 
<p>Closed today at $ 5.48</p>

<p>Love this from Implode</p>

<center><img style="FLOAT: left" alt="" src="http://ml-implode.com/img/modre1.png" /></center>

<p> </p>
 
<p>Via a blogster on Calculated Risk--if the dean doesn't go through, CFC has to pay BofA Money. Now I forget how much. The comment was CFC must have been REALLY close to bankruptcy. I just can't see this going through. I keep hearing rumors about CFC not even filing foreclosures. My former broker buddy tells me that he's heard of acquaintences who haven't paid their mtges in a year and no foreclosure yet. I think that B of A's team of accountants (I hope they have a huge team of accountants) will be finding lots worse stuff than anticipated.</p>

<p>Also on one of CR's comment threads, there was a posting of an ad for phony pay stubbs. It boggled my mind. The ad was shameless.</p>
 
<p>Its no surprise they cant keep track of the REO`s. I mean they have 3 times more than last year. Of these over 4,000 are in California. It boggles the mind what has happened. This deal just stinks to high heaven if somehow BAC gets a kiss from the government to sweep all this under the rug somehow.</p>

<p>http://countrywide-foreclosures.blogspot.com/</p>

<p><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://bp1.blogger.com/_A2btxwmKXXg/R4UPxeQNYCI/AAAAAAAAA4A/YeRFed5IvWk/s1600-h/forecosures_jan_9_2008.gif"><img id="BLOGGER_PHOTO_ID_5153542691204456482" style="CURSOR: pointer" alt="" border="0" src="http://bp1.blogger.com/_A2btxwmKXXg/R4UPxeQNYCI/AAAAAAAAA4A/YeRFed5IvWk/s400/forecosures_jan_9_2008.gif" /></a></p>
 
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