The mortgage lender rankings are changing rapidly…
Bank of America is finally getting into the subprime game by purchasing Countrywide for $4B. Ok, not exactly getting into the game. B of A already invested $2B in Countrywide, but otherwise, they have been largely on the sidelines of subprime lending over the past 5 years.
Look for WaMu (JP Morgan Chase) and IndyMac to get purchased by a larger suitor in the next few months as well. Yes…the same Indymac that hired all those former sales consultants from now defunct American Home Mortgage (their hiring strategy didn’t seem to work).
I have always been curious about investor rationale and their previous bullishness for national mortgage lenders in recent years like those above whose P&L’s are dominated by origination revenue (which are subject to volatility in mortgage rates). Now these firms imploding.
With financial pressures mounting, Countrywide’s stock price collapsed in 2007, falling 80 percent, wiping out $20 billion in market value. Earlier this week, Countrywide’s shares plummeted further as speculation about a bankruptcy filing roiled the market, a rumor the company denied.
Like stock market investors flight to safety in US treasuries, it is anticipated that mortgage consumers will seek safety in mortgage lending brands. Recently, consumers have been willing to pay a premium to make sure that their mortgage money actually shows up at the closing table.
Its a good day to be a stodgy slow moving conservative bank.
I wonder what the B of A underwriters were thinking about this 4 billion dollar stated income loan.