Delaware Mortgage Loans

Countrywide Financial (NYSE: CFC, $6.50) is being acquired by Bank of America (NYSE: BAC, $38.42). The deal is a stock swap. Shareholders of countrywide will receive 0.1822 shares of Bank of America for every Countrywide share, the equivalent of about $7 per share of CFC. Bank of America is getting a very good deal. Goldman Sachs has a 2008 earnings estimate of $1.50 a share for Countrywide. Argus says Countrywide will earn $1.40 in 2008. With Bank of America now involved, those earnings estimates look a whole lot more realistic. Bank of America is paying just five times these 2008 earnings estimates. Even if the estimates turn out to be too high or at least premature, Bank of America will be looking good in a short while. I won’t be surprised if the deal is accretive for Bank of America’s earnings in the first year after the deal closes.

The big question now is will countrywide continue to offer wholesale loans or will it go the way of Bank of America and close down the wholesale division and strictly focus on retail side.  Either way, I see another round of job cuts for countrywide once Bank of America takes over the company.  I also see the wide range of loans products being offered by countrywide to be severely limited.  This process has already started and is being followed by other banks like Chase.  Chase announced that effected Monday January 14th it is eliminating Stated Income Stated Asset Loans all together  and eliminating its Alta A products as well.