In the six months since Bank of America announced its plans to take over Countrywide Financial, many investors have doubted that the $4 billion deal for the hobbled mortgage lender would get done. Bank of America has been strangely silent about its plans for merging the two operations, with the exception of a cryptic regulatory filing last month warning that investors should not count on it assuming all of Countrywide’s debt.
But in a conference call on Monday with investors, Kenneth D. Lewis, the chief executive of Bank of America, confirmed his commitment to the Countrywide buyout, which is expected to close by the end of September. When asked about the fact that home prices have plummeted and loan defaults have soared since the deal was announced, Mr. Lewis defended it as “compelling,” with a “pretty nice” upside. “We don’t have our heads in the sand,” he said.
Investing in distressed assets, of course, can be extremely profitable. But Mr. Lewis’s shareholders have a right to be nervous about the deal, analysts say. As the nation’s largest home lender, Countrywide stands at the center of the mortgage storm and is being buffeted not only by woeful financial results but also by intense scrutiny from state and federal regulators. Bankruptcy judges have become vocal about what they consider dubious tactics taken by Countrywide against troubled borrowers.
“It’s a lot to ask Bank of America shareholders to stomach,” said Mike Larson, a real estate analyst at Weiss Research in Jupiter, Fla.
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