The value of Countrywide Financial has been on a downward slide for sometimes now. It is only a matter of time before they have to make a move to survive.
Countrywide Financial and Bank of America Corp. have been negotiating a deal that could save Countrywide from going into bankruptcy.
The news was first leaked just two days after the Countrywide had insisted that there was “no substance” to rumors that they were about to file for protection form their creditors. Countrywide is widely viewed as on of the main players that offered risky loans to homeowner with low income and weak credit profiles.
Countrywide, valued at $3 billion compared to $26 billion a year ago, is also under investigation by US prosecutors for purposely misleading its customers about repayment commitments.
For Bank of America, who helped out Countrywide in August with a $2 billion investment in convertible stock, the cost of buying the mortgage giant would amount to about 3 months of profit.
"It is very logical that Bank of America would be interested in Countrywide, especially with the valuation that has been placed on it in the marketplace," banking analyst Robert Napoli of Piper Jaffray told the Los Angeles Times. "It's not a lot of money for BofA to get control of Countrywide, and they've wanted to get into the mortgage business in a bigger way for years."
Neither company has made any comments or official statements about the merger to this point.
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