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Q2- '08: Riverside-San Bernardino tops the list...
. Q2 2008 6-05-08:- Bank of America & Countrywide: A signal of a housing bottom? Home Page
California Real Estate and Economy: Riverside County - San Diego County
6.5.08: Today, the FED approved the acquisition of Countrywide financial by Bank of America. This has been in the pipeline for some time, it is old news and now is one step closer to happening. Upon thinking of the consequences of this deal, initially one thinks its not a very wise move by Bank of America. The loan portfolio held by Countrywide probably has 0% equity for all loans made in the last 4 years. Not to mention BAC is paying the market price for the shares; not getting any real discount from the current CFC stock price.So why is this seemingly bad move by Bank of America to acquire Countrywide a harbinger of recovery for the housing market? The important thing to consider are the long term implications of the deal. While I remain extremely bearish on housing, this deal gives me a slight bit of pause. Firstly, the deal gives strength back to the lender, where the lenders position was formerly weak. Secondly, it puts a 'bottom' to the willingness of capable consumers to allow foreclosure on spec houses and second homes.
After its acquisition of MBNA, Bank of America has a more than significant percentage of the consumer credit card industry. With Countrywide, any defaults would surely see a delay in processing, and the lenders position was extremely weak. On the contrary, with Bank of America holding the note, the delay period should be reduced and there becomes a threat of immediately losing unsecured credit. Therefore, people that can actually afford to pay their 'upside down' mortgages must continue doing so.. or risk losing their credit cards. So now the same bank that has your mortgage will have your credit card debt. Are you going to walk away from your losing mortgage, when you have one or two $30,000 unsecured lines of credit with BAC that remain unused? I don't think so: You are going to suck it up and pay.Conclusion? This deal is actually good for the overall housing and mortgage markets. It makes people stay with their loser home mortgages, if they can. Not exactly the best thing for the consumer on the street, but it may be best for the economy, as it puts a 'bottom' or 'stop' to the level of foreclosures; limiting them to people that actually cannot make the payments. Speculators that still have good credit and are carrying 'under water mortgages' will be forced to honor them, or lose other lines of credit with Bank of America. In short, people are less likely to 'screw around' with Bank of America than they are with a struggling lender like Countrywide.
Overall: It still does not mean there will be another run up in housing, I think this may be impossible for a long time. However, this deal may help to bring about a bottom in the housing market by limiting "frivolous foreclosures", and bringing strength and threat back to the lender.
Click here for quick California bank earnings and foreclosure rate updates ---> Analysis of California Bank Earnings
**ARTICLES** Most recent listed last
. Q1-Feb 10 '08: - The Perfect Storm of Economic Downfall Q2- '08: So what do we do now? . .. Q1-Feb 21 '08:- The Counter Intuitive Market Force: But Housing is the Exception Q2- '08: Analysis of CA Bank Earnings . ... Q1-Feb 21 '08:- The 5% Income Rule Q2- '08: Riverside-San Bernardino tops the list... . ... Q1-Feb 21 '08:- A Compelling Argument for Alternative Investments Q2-'08: Bank of America & Countrywide: A signal of a housing bottom? . .. Q1-Feb 26 '08: True Market Analysis, or Self Interest? Q2 '08:- Oil and war speculation . Q1- '08: No Recession, but Deflation? . 3.17.08: Next for the Economy: The Greatest Bull Run in History? Q2- '08: The Schizophrenic FED Gambit .. Q2- '08: Bearish on Housing, Bullish on Stocks
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