Under a cloud of litigation, Bank of America Corp. has closed on its acquisition of Countrywide Financial Corp. The merger creates a company that is the biggest U.S. bank and largest residential mortgage lender.
"Countrywide Financial is proud to have to have become a wholly owned subsidiary of Bank of America Corp," a statement on Countrywide's Web site reads today.
The Calabasas, Calif.-based company today was acquired by BoA in a deal many thought would never reach the closing table.
The merger creates a bank with around $773 billion in deposits -- more than any other U.S. bank, according to recent data from the Federal Reserve Board. The combined entity will likely originate around $425 billion annually, making it the biggest residential lender in the country.
But the deal was done with a cloud hanging over it.
As the biggest target, Countrywide was blamed for the mortgage meltdown by delinquent borrowers, politicians and media looking to put a face on the culprits. The combination of global financial turmoil and election year politics only exacerbated the negative image.
Just days before the merger closed, California's attorney general and the attorney general in Illinois sued Countrywide, claiming the lender abandoned prudent underwriting in favor of accelerating originations. The state of Washington followed with its own actions.
Today, Florida Attorney General Bill McCollum announced another lawsuit against Countrywide and its legendary founder, Angelo Mozilo, claiming the company deceived borrowers into signing risky loans.
"It appears to us Countrywide did no due diligence and accepted applications which were patently fraudulent and reflected no ability on the part of the borrowers to make the required payments," the Florida announcement said. "We cannot help but conclude that the most financially unsophisticated segment of the population was targeted by the brokers who knew Countrywide would write these mortgages."
Mozilo is currently being investigated over his sales of Countrywide stock even as the mortgage meltdown was picking up steam.
Charlotte, N.C.-based BoA has named Barbara Desoer to run the combined mortgage operations from Calabasas.
BoA and Countrywide employed approximately 260,000 people as of March 31, 2008. BoA announced Thursday that around 7,000 employees would be laid off during the next two years as a result of the merger.
An announcement today indicated the combined company will begin originating mortgages under the Bank of America brand by mid-2009.
Countrywide shareholders received 0.1822 shares of BoA stock in exchange for each share of Countrywide.
Office of the Attorney General, Department of Legal Affairs, State of Florida v. Countrywide Financial Corporation, et al
Case No. 08 30105 03 (filed June 30, 2008 in the Circuit Court of the Seventeenth Judicial Circuit, in and for Broward County, Florida)