Countrywide: 'Worst deal in history of American finance'July 2, 2012 @ 8:40 am
Bank of America's purchase four years ago of Countrywide Financial Corp. has proven to be a costly one. After purchasing Countrywide for $2.5 billion, Bank of America has already faced more than $40 billion in real estate losses, legal expenses, and settlements stemming from that 2008 purchase, The Wall Street Journal reports.
"It is the worst deal in the history of American finance," said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte.
Countrywide was once the largest originator of home mortgages in the nation. But during the housing boom, the lender processed a surge in subprime and adjustable-rate mortgages that have since led to a host of losses and lawsuits.
"Countrywide saddled Bank of America with hundreds of thousands of delinquent borrowers, thrust it into the middle of a foreclosure-paperwork scandal, and exposed the bank to countless lawsuits from mortgage-bond investors and insurers," The Wall Street Journal reports.
"Obviously, there aren't many days when I get up and think positively about the Countrywide transaction," Brian Moynihan, Bank of America's CEO said.
But Bank of America officials say they believe the worst is finally behind them, although they say they will likely face another $5 billion in losses and several other lawsuits from Countrywide loans.
Bank of America has slowly seen a recovery in assets. Its stock shares gained more than 40 percent this year, prompting it to become the best-performing stock in the Dow Jones Industrial Average, The Wall Street Journal reports.
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