Wednesday, September 21, 2011
Countrywide Financial May Be Considering Bankruptcy
Bloomberg recently reported Bank of America Corp (BAC) insiders have leaked the bank might consider filing bankruptcy for its Countrywide Financial Corp. unit should the litigation cost threaten to cripple the parent organization, BAC.
BAC is based in Charlotte, North Carolina, and after acquiring Countrywide Financial Corp., has maintained the acquisition as a separate entity. Apparently, Countrywide has sold faulty loans, for which they have been sued. An analyst with Credit Agricole Securities USA has booked at least $30 billion of cost for faulty home loans, most of which were sold by Countrywide.
Back in 2007, Countrywide was the largest mortgage originator in the United States, with 17 percent of the market. It is questioned as to whether Bank of America has enough reserves to pay claims. One of the claims were filed by the Federal Housing Finance Agency, which sued BAC and 16 other banks to recover $200 billion in mortgage-backed securities sold to Fannie Mae and Freddie Mac (the article list as Freddie Mae).
Countrywide has $11 billion in assets that could be depleted through demands to repurchase defective mortgages.
You can find the entire article at http://www.bloomberg.com/news/2011-09-16/bofa-said-to-keep-bankruptcy-as-option-for-countrywide-unit.html?cmpid=bit