The recount of the ugliest financial acquisition
It was in the year 2008 that Bank of America came over a decision to acquire the mortgage lender countrywide for an amount of about 40 billion USD .The merger was indeed looked upon as the avenue which has paving way for to make Bank of America to be as the major players in the mortgagee market. Ever since the housing bubble burst incident had taken place the bank was already counting in huge loses still to be made compensated for. And even made huge amount of money to escape from the various legal fights and settlement cases.
The acquisition has been always known for the worst deal which had ever taken place in the history of finance in America. In the year 2008 when it was being declared that BOA is soon to acquire countrywide it was certainly not appreciated as a wise decision because already the housing market was witnessing steep downfall, at to take such a decision was cited to be perilous.
The array of post- acquisition settlements
Just after another year of acquisition the uncertainty of the acquisition came to be more clear when the bank of America mortgage business lost about 8.9 billion USD in 2010 and 3.8 billion USD in 2009 .Not only this the circumstances were driver even more disastrous when BOA had to pay out the huge sum for the investors which were claiming countrywide mortgage securities which was almost about 600 million USD and also the sum of about 108 million USD to the SEC so as to settle down the allegations made to homeowners for excessive fee. Over in all bank of America had to rid of a huge amount of approximately 335 million USD to settle down the pending discriminatory disputes of countrywide.
This all had lead Bank of America to even go bankrupt at certain point of time and decided to keep it as a separate legal entity owing to the insolvency it holder.
Another drastic decision was taken along was the purchase of Merrill lynch for 50 billion USD .and eventually as to everybody information the losses were so huge and impeccable that a second bail out of 20 billion USD was then seeked by the bank .Ever since the countrywide financial was bought for 2.5 billion USD the bank of America mortgage business was found to lose 50 billion USD.
The deal of hardship and anguish
The attributed deal not only created distress among the investors but also to the employees, owners of various properties and even to the very prominence of Bank of America as it was established there for the early past times.
Because of this creepy mode of acquisition, the underlining recovery mode for the bank was ascertained for a long time. It was in the first half of the year itself that 52.7 billion USD was being lost by the company to compensate the various losses in terms of settlements, pavements , write downs and clearing off the various operating profits and losses.
The erroneous syndicate
Within no time it was evident that a faulty mortgage back bonded firm has been acquired by the Bank.it is not sure actually as to how much was the amount that was to be rendered as for the loses of countrywide but initially in the books of account the California based mortgage company holded about 17 % of the market share as compared to bank of America for holding about 8 % of the market share.
As of the detailed introspection of the settlements being made by countrywide the evil role of countrywide has also come into picture. Clearly it was now denounced to be the worst acquisition made so far .Bank of America actually paid off for the huge amount of past liabilities which was associated with countrywide. Taking into consideration from the very roots of the past acquisition the CEO of countrywide Angelo Mozilo had initially helped to start the company for about 75,000 USD loan in 1969.
Deviation from the objective of the acquisition
The objective which was aimed with this acquisition was to bring in an outlook opportunity to commemorate the mortgage platform in the valued based time in the most attractive manner. As the mortgage losses began to speed up in 2010, it was in the year 2011 that the investors were found to be seriously impacted because of this generalisation and were also asking for their illustrative claims creating pressure on to the bank to buyback the defective mortgages.
Early in 2011 eventually the bank announced a settlement with the private based mortgagees businessmo to sign off this amid situation for an amount of 8.5 billion USD. As the justice department came forth with the aimed resolution it was being seen that the settlement was expected to be the largest settlement ever amidst the government and a financial firm of worth 16 billion USD. Perhaps, such a large amount was being paid out still the settlement was not seen to be a satisfactory one. That baseless adjournment of becoming the dominating mortgage lender was laid back. The definition of the damage which had come across to the bank was ascertained more in value even to those in monetary terms and was more in the form of notability.
The truth got confronted exhaustively
Finally the truth of the subjective came into being and the former executive of countrywide was found to be allegedly involved in fraudulent. Countrywide was found to deceive the mortgage giants Fannie and Freddie as in terms of housing crisis. Over the suspected loan it was being claimed that loses of about 848 million USD was accounted for them which they bought from countrywide but now under acquisition the bank of America had to pay them all. As when the case got subjected in the court the previous executive of countrywide Rebecca Mairone was found to be accused of the underlying probe.
The fact also came into account that the countrywide was overrating with the scheme named hustle, which had played a significant role in deteriorating the Fannie and Freddie portfolio loans. The hustle or formally known as the HSSL, high speed swin lane program was unclad aiming to the fact that it had intervened the loan approval process. On this notion it was also being assured by the countrywide that they would be soon involved into the significant eradication of the compensated loan quantity which lead to the rampant fraudulent. Bank of America was also found to file an appeal in the court revising the fact that the decision concerned to the countrywide should be well evaluated for further consideration. The hustle loans were described as the loser’s loan which was manifesting the ditch quality of the loans which were certainly as part of intensive fraudulent which had been passed away to Freddie and Fannie.
The deal of acquisition of countrywide and bank of America was unique in itself because the established bank paid a notion of worth 30 billion USD for Fleet Boston in order to ascertain the good will worth in the balance sheet . It was probably after one year that Lewis checked on the balance sheet and added another 20 billion USD in the form of intangible assets.