Following months of sub-prime mortgage lenders shuttering their operations, a sharp decline in home prices in some key markets around the country, along with a dramatic increase in the number of foreclosures nationwide, the only recent bright news in the mortgage industry came last week when Countrywide, the nation's largest mortgage originator, announced with Bank of America, the nation's largest retail bank, plans for Bank of America to acquire a $2 billion stake in Countrywide.
While Bank of America saw the alliance with Countrywide as an opportunity to continue doing what it does best in meeting the needs of its retail savings and consumer account holders, the $2 billion deal with Countrywide provided an immediate solution to the cash crunch that threatened it's lead in the mortgage origination business, a business Bank of American until now has struggled to grow in competition with Washington Mutual, Wells Fargo, Countrywide, and Indymac Bank, among others.
"While $2 billion dollars is a drop in the bucket from a credit risk perspective," said Dr. Buczynski. "It is a huge signal of confidence for consumers and Wall Street lenders. In the days leading to the Bank of American and Countrywide alliance, Countrywide was loosing depositors and their loan origination business was grinding to a halt."
"Ironically, the Conference Board's consumer confidence index released on July 31, before the financial calamity, hit a six-year high. The pervasive expectation now is that the Conference Board's consumer confidence index will probably move in lock-step with the Michigan Index when their survey results are released today."