There are two important financial headlines this evening and the futures are solidly red. Let’s take a look at news regarding Wachovia and Bank of America starting with the former.
Wachovia Halts Wholesale Mortgages
Wachovia mortgage unit halting loans via brokers.
Wachovia Corp (WB), the fourth-largest U.S. bank, on Monday said its main mortgage unit will stop offering home loans through brokers this week, joining a growing number of lenders to curb wholesale lending.
“We thought it was important to focus on customers who have relationships with the bank, and in geographies where Wachovia has branches,” spokesman Don Vecchiarello said. “Based on that, we’ve decided to discontinue doing business through our wholesale mortgage channel as of July 25.”
Wachovia is assessing how many jobs will be affected by the decision, Vecchiarello said.
The Mortgage Lender Implode-O-Meter had this news headline up, hours before mainstream media reports.
Earlier today Bloomberg reported Bank of America Earnings Drop Less Than Estimates.
Bank of America Corp., the biggest U.S. consumer bank and home lender, said second-quarter profit fell less than analysts estimated and predicted the purchase of Countrywide Financial Corp. will add to earnings this year.
The bank said Countrywide will add to profit this year, and that cost savings will be “significantly” more than the $670 million projected in January.
Inquiring minds who have been pondering the question “How the hell can Countrywide add to Bank of America earnings?” now have their answer.
Bank of America Will Not Guarantee Countrywide Debt
Bank of America Corp., the second- biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial Corp.’s debt after taking over the mortgage lender, increasing the likelihood of a default.
“There is no assurance that any such debt would be redeemed, assumed or guaranteed,” the bank said in an April 30 regulatory filing, adding that no decision has been reached. Investors had grown more optimistic the bank would back Countrywide debt. Ratings firm Standard & Poor’s cut the mortgage-lender’s debt to junk today after saying it would raise the grade earlier this week.
The $4 billion purchase of Countrywide is scheduled to close in the third quarter. Investors have speculated Bank of America may seek a lower price or cancel the deal because U.S. home prices and sales have deteriorated.
“This confirms how tenuous this transaction is,” said Christopher Whalen, managing director at Institutional Risk Analytics, a banking research firm in Torrance, California.
Naked Capitalism is talking about fraudulent conveyance in Bank of America’s Scheme to Stiff Countrywide Bondholders.
I am wondering how much taxpayers will be asked to foot the bill for this fiasco. I am afraid we all know the answer.
Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List