BofA throws Countrywide $2-billion

The Pine Cone is not sure why BofA decided to put somemoney in Countrywide's coffers but we can bet they're getting a nice return on it...if the lender survives:

http://www.latimes.com/news/local/valley/la-fi-mortgage23aug23,1,2935598.story?page=2&coll=la-editions-valley

The Calabasas-based lender is back on firm footing, but others caught in the sub-prime crash shed 4,000 jobs.
By E. Scott Reckard, Elizabeth Douglass and Tom Petruno, Los Angeles Times Staff Writers August 23, 2007
Bank of America Corp. threw home-loan colossus Countrywide Financial Corp. a $2-billion lifeline Wednesday in a vote of confidence that could stabilize the reeling mortgage company.The deal came as cash-starved sub-prime mortgage lenders across Southern California announced more than 4,000 layoffs nationwide.

Bank of America, which has the largest retail banking operation in the country, for some time has wanted to expand its mortgage business and has been seen as interested in acquiring all of Calabasas-based Countrywide. Wednesday's deal puts BofA, based in Charlotte, N.C., in a strong position to accomplish both goals.The transaction, which was announced after the stock market closed, also gives BofA a chunk of the country's largest mortgage lender at what some might consider a bargain price.For its $2 billion, Bank of America received preferred stock that pays a 7.5% annual dividend and can be converted into Countrywide common stock at $18 a share. If the stock is converted, BofA would own 16% of the mortgage company.Countrywide's stock soared 21% on the news to $26.30 a share in after-hours trading after finishing the regular market session at $21.82, up 3 cents for the day. The shares ended 2006 at $41.93.BofA, the sixth-largest U.S. home lender in 2006, recognizes that "once the dust settles the survivors [in the mortgage industry] will have much less competition and will thrive," said John Buckingham, head of Al Frank Asset Management in Laguna Beach and a Countrywide shareholder. "It looks like BofA got a very nice deal."Angelo R. Mozilo, chairman and chief executive of Countrywide, said in a statement that the deal positioned the company for "future growth and success" with help from BofA.His counterpart at Bank of America, Kenneth D. Lewis, said the deal recognized Countrywide's importance in financing home purchases."We hope this investment will be a step toward a return to a more normal liquidity in the mortgage markets," he said.Countrywide has been badly squeezed by the credit crunch ravaging the mortgage industry, as Wall Street lenders have cut off funding and investors around the world who once eagerly gobbled up mortgage-backed bonds have turned up their noses at anything but securities issued by government-sponsored mortgage buyers Fannie Mae and Freddie Mac.Countrywide had been reeling since reporting Aug. 9 that credit-market disruptions could hurt its financial condition.Last week a Merrill Lynch & Co. analyst warned that the company could face insolvency if the credit crunch worsened. That helped trigger a violent sell-off in the stock market overall, drove Countrywide shares down 23% for the week and caused some savers with deposits at Countrywide's bank to pull their funds.With Bank of America's investment, Wall Street is likely to put aside fears that the company could fail, analysts said."Countrywide is no longer on the endangered company list," Punk Ziegel & Co. analyst Richard X. Bove said in a note to investors."Clearly Mozilo does not want to sell yet," Bove wrote in an e-mail to The Times. "But when he does it looks like [BofA] will win the prize -- and it is a prize despite what has been said recently."The preferred shares that BofA acquired are nonvoting. If BofA converts them to common shares, it can't sell them for 18 months.BofA's shares rose to $52.60 after hours. They had closed at $51.65, up 35 cents, in regular trading.The deal could mean big losses today for traders who have "shorted" Countrywide shares -- betting that their price would continue to slide. The number of shorted Countrywide shares surged to a record 83.6 million on Aug. 10 from 51.4 million a month earlier, according to New York Stock Exchange data. The short sellers of Countrywide stock may rush today to close out their wrong-way bets, adding fuel to any rally in the shares.The widening credit crunch has stemmed from a wave of defaults on sub-prime mortgages -- loans made to people with poor credit. And there was little good news Wednesday in the sub-prime business, where the layoff tide became a tsunami:

* San Diego's Accredited Home Lenders Holding Co., whose planned sale to a Texas buyout firm collapsed last week, said it would accept no more new loan applications and would close 60 retail offices and half of its 10 wholesale divisions. Afterward, the company would have about 1,000 employees, down from 2,600 at the end of June.

* Wall Street powerhouse Lehman Bros. Holdings said it was closing BNC Mortgage, its Irvine-based sub-prime unit, eliminating 1,200 jobs in 23 U.S. offices.

* Impac Mortgage Holdings Inc. of Irvine announced the layoff of 350 employees nationwide, the latest in a series of job cuts.* Sub-prime specialist Delta Financial Corp. of Woodbury, N.J., said it cut 300 jobs, 20% of its workforce, closing offices in California, Texas and Florida.

* London-based HSBC Holdings closed an Indiana sub-prime mortgage office that had employed 600 people.

* Agoura Hills-based Quality Home Loans filed for Chapter 11 bankruptcy protection, along with three affiliates that also specialized in sub-prime loans.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to outplacement firm Challenger, Gray & Christmas Inc.In a piece of good news for the industry, Pasadena thrift IndyMac Bancorp Inc. said Wednesday it would resume making "jumbo" loans to home buyers with solid credit and 15% to 25% down payments -- but would keep the loans on its books. Fannie Mae and Freddie Mac are barred from buying such loans because they exceed the $417,000 limit set by the government. Lenders have found it difficult of late to sell jumbo loans to private investors.

NEW CRISIS ON VALLEY REAL ESTATE FRONT: San Fernando Valley foreclosures spike in July

This story from the L.A. Daily News is very nearly all bad but key to understanding the future of the Los Angeles real estate market:

http://www.dailynews.com/business/ci_6744880

Foreclosures soared an annual 246.8 percent in the greater San Fernando Valley during July as trouble with adjustable rate loans continues to mount, a university research center said Tuesday.
"This is an ominous sign," said Daniel Blake, director of the Economic Research Center at California State University, Northridge. "There are a lot of possible (loan) resets out there, and we don't know the extent of them."
The foreclosure spike is happening to a great degree because many homeowners with spotty credit took out adjustable rate loans with low initial payments and they are not able to afford higher payments with their interest rate increases.
And credit-worthy buyers who extended their finances with adjustable rate loans so they could buy better homes are also encountering trouble, said Blake.
In all, 263 homeowners lost their properties last month. In July 2006 just 47 homeowners from Glendale to Calabasas lost their homes. At the current rate, foreclosures alone could account for 4,700 homes on the market next year.
"That could bring enough housing on the market to upset the price stability we've seen here," Blake said of the market from Glendale to Calabasas.

Jim Link executive vice president of the Van Nuys-based Southland Regional Association of Realtors, said that it may even bring a buying opportunity because prices have yet to fall by a large amount.
"Roughly 20 percent of the market (sales) being REOS (foreclosures) I think ... would definitely have an impact on prices," he said.
So far only sales continue to suffer, though.
Combined with the deepening credit crunch, home sales continued to spiral in July, hitting their lowest level for that month in at least 22 years, the association said Tuesday.
Last month sales in Valley, excluding Burbank and the Glendale area, fell an annual 22 percent to 617 transactions. Sales also fell 10.6 percent from June, said the association.
The next lowest July sales total is 670 transactions in 1992. And that year ended up being the weakest since 1985.
Nevertheless, the median price inched up 3.8 percent, or an annual gain of $23,000, to $630,000, because more sales are at the high end of the market now than the low end.
So far foreclosures are not depressing prices to a great degree and providing attractive deals to potential buyers. And the tighter credit standards are, in effect, killing sales before they can happen.
Link said that the lower priced end of the market is the toughest to buy into.
"The people getting squeezed the hardest are the first-time homebuyers or people with really good credit but too little income or nothing for a down payment," Link said. "Because so few lenders are offering 100 percent loans at an affordable rate, this segment of the market is paralyzed.
The smaller condominium market showed a similar trend last month. Sales fell an annual 13 percent to 276 transactions and the median price increased 1.9 percent to $407,500.
Combining both markets, 833 properties changed owners in July, an annual decrease of 26 percent. The median price inched up 1.4 percent to $565,000.
At month's end there were 7,195 properties for sale in the Valley, an 8.6 month supply at the current sales pace and 2.6 months more than what's considered a balanced market.
Malaise continued in other markets, too, including the Santa Clarita Valley. Sales of previously owned single family homes fell 18 percent to 194 transactions. And the median price declined 5.8 percent to $570,000.
Condo sales fell an annual 32 percent to 83 properties and the median price slipped 4 percent to $359,000.
Realtors sold 277 homes - single-family and condos combined - even with the previous month, but down a total of 22.8 percent from July 2006.
These reports are similar in tone to one Monday that showed single family home sales falling 22.7 percent statewide. The median home price increased an annual 3.2 percent to $586,030.
The California Association of Realtors report showed that:
In Los Angeles County, sales fell 12.4 percent from a year ago and the median price increased 1.9 percent to $592,300.
In Ventura County, sales fell an annual 17.8 percent and the median price dipped 3.2 percent to $682,920.
In the High Desert, which includes the Antelope Valley, sales plunged an annual 50 percent and the median price fell 11 percent to $296,220. But it is one of the state's most affordable regions.

MOSQUITO BANDITO - Valley washes cleared to curb mosquitoes that could carry West Nile virus

Hoping to battle West Nile virus carrying mosquitos in the San Fernando Valley, county crews today began removing vegetation from the Bell Creek debris basin in West Hills.
Unclogging Bell Creek, a tributary of the Los Angeles River, is just the latest effort to eliminate mosquito-friendly places across the San Fernando Valley.
On Monday, crews finished digging a channel in the Limekiln debris basin in Chatsworth, and other crews started clearing the "Woodley Drain" in Van Nuys last week.
In Panorama City, crews were filling parts of the bed of the Pacoima Wash to level it and improve water flow. An operation to clear excessive growth wrapped up Aug. 18.
The Pacoima Wash, which runs out of Limekiln Canyon, was the source of 17 of 19 West Nile samples collected this month, county public health officials said.
Four human cases of the virus have been confirmed in Los Angeles County this year. The virus is spread to humans from infected mosquitoes. The blood- sipping parasites get infected by feeding on diseased birds. So far, no evidence has shown that the virus can spread by person-to-person contact.

CENSUS BUREAU STATS TELL L.A.'s STORY: FIFTEEN PERCENT IN COUNTRY AND NINETEEN PERCENT IN CITY STILL LIVING BELOW POVERTY LINE

Median household incomes are on the rise, according to Census Bureau data released Tuesday.
Income rose in the county rose 6.3 percent from 2005 - to $51,315 - and the percentage of residents living in poverty dropped from 16.3 percent to 15.4 percent last year. But many still live in poverty and you have to wonder what sort of statistical fiddling was done in order to goose these numbers out. Anyone living in or near Los Angeles can see poverty is a greater threat and homelessness is a greater issue than it was even two to five years ago. Still, the county improvements in at least these numbers, mirroring similar gains in the city and statewide, also are expected to be reflected in the San Fernando Valley when Census Bureau figures for the region are released.

COUNTRYWIDE CONTINUES TO REASSURE INVESTORS...OF WHAT WE DON'T KNOW

According to SmartMoney.com, Countrywide Financial Corp. (CFC), the U.S.'s largest mortgage lender, sought to reassure customers Monday that the liquidity problems dogging its mortgage operations weren't affecting its banking unit. The assurance came amid a report that Countrywide has started laying off an undisclosed number of employees as it tries to ride out the credit crunch that has rocked the home loan industry. The job cuts occurred in Countrywide's Full Spectrum Lending unit, which handles mortgages given to customers with minor credit problems or who can't provide full income documentation required for traditional prime loans, The Wall Street Journal reported, citing an internal email sent Friday to employees of that division. Countrywide Financial spokesman Daniel Weidman didn't immediately respond to a phone message from The Associated Press seeking comment. The Calabasas, Calif.-based company ran full-page ads on Monday in U.S. newspapers, including the Los Angeles Times and Detroit Free Press, in which it asserted "the future is bright" at Countrywide Bank FSB.
The ads noted the bank has more than $100 billion in assets, investment-grade ratings from three major credit agencies, and that the credit woes rocking its mortgage lending business don't affect federally insured deposits at its 105 financial centers around the nation. It's a message Countrywide has tried to get across since last week, when a Wall Street analyst suggested the company could end up in bankruptcy if the liquidity crunch sparked by rising mortgage defaults worsens. Countrywide said last Thursday it had borrowed $11.5 billion so it could keep making home loans. The developments left many Countrywide Bank customers frazzled over the security of their deposits. Many have converged on bank branches in search of answers.
The lobby of a branch in West Los Angeles was packed Monday with nervous people waiting to speak with bank officers to make sure their assets were safe. Some customers came away feeling confident about leaving their money at Countrywide Bank. "Everything I've got is federally insured," said Jim Maurer, 59. "I don't think there's going to be any problem with Countrywide." Countrywide employs a total of about 61,000 people. Its shares fell $1.50, about 7%, to $19.93 in afternoon trading Monday after rising 13% on Friday. The shares have traded in a 52-week range of $15 to $45.26. Countrywide is the largest mortgage lender by volume, accounting for more than 13% of the loan servicing market as of June 30, according to the mortgage industry publication Inside Mortgage Finance. The mortgage lending industry has been grappling with a spike in mortgage defaults and foreclosures as the housing market has cooled. Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth. Like other lenders, Countrywide has also tightened its credit guidelines and stopped selling some types of adjustable rate loans.

ANOTHER DISPATCH FROM THE HOUSING VOID: CALABASAS' COUNTRYWIDE MORTGAGE CONTINUES ON DOWNWARD SPIRAL

In a move that should surprise no one, the Daily News reported today Calabasas-based Countrywide has started laying off mortgage origination staff. These layoffs will impact Countrywide employees in the company's Full Spectrum Lending unit, which handles many mortgages in a category known as Alt-A. What's "Alt-A" you ask? Well, Alt-A borrowers are often the self-employed or others who fall between prime and sub-prime and are frequently those who don't document their income and, as a result, typically don't qualify for a conforming mortgage of the type that can then be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac. While it's unclear how many of the company's reported work force of 61,000 are affected by the layoffs those in "Full Spectrum" accounted for some 6,800 sales agents out of a total Countrywide mortgage origination staff of 18,000, according to a Securities and Exchange Commission filing, as of June 30.

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