Countrywide Bankruptcy Possible, Again

November 2, 2010 No Comments »


It feels like 2007 all over again…

There’s new word that a Countrywide bankruptcy could be possible, despite the fact that the company was acquired by Bank of America back in early 2008.

Before the acquisition, it seemed bankruptcy was the only option for the ailing Calabasas, CA-based mortgage lender, which ran into liquidity issues as the mortgage crisis took center stage.

But Bank of America seemed to make all their worries go away, until lawsuit after lawsuit reared its ugly head.

Then came the issue of loan buybacks, or bad loans purchased by the likes of Freddie Mac, Pimco, the New York Fed, and others, where “breaches in reps and warranties” call for resolution.

As a result, CLSA analyst Mike Mayo noted that Bank of America could pursue bankruptcy for Countrywide to protect itself from these mortgage putback losses, which could cost the company billions.

Mayo believes Bank of America could use the threat of a Countrywide bankruptcy to negotiate with these companies, but admits actual bankruptcy is probably a longshot due to politics and reputation.

Apparently Countrywide originated 86 percent of the mortgages held by Bank of America that are now 60 days or more delinquent.

And let’s not forget that Bank of America recently shuttered its wholesale mortgage division for the second time, so clearly it’s not dealing with its new found position in the mortgage market comfortably.

It seems Countrywide just won’t go away quietly…

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