Author: Mortgage News Alert
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Bank of America to invest $2B in troubled mortgage giant
Financial titan Bank of America said late Wednesday it had agreed to invest a hefty $2.0 billion in troubled US mortgage giant Countrywide Financial Corporation.
Countrywide Financial, America's biggest mortgage company, has seen its finances stretched by an industry-wide liquidity squeeze amid a nationwide housing downturn.
Surging home foreclosures have forced other home lenders out of business and sent shock waves through the multi-trillion dollar mortgage sector.
"We believe that in the current turmoil the stock market has been underestimating the value in Countrywide's operations and assets," Bank of America's chairman and chief executive Kenneth Lewis said in a statement.
Bank of America said it will invest $2.0 billion in Countrywide Financial in the form of special securities which can be converted into stock at $18 per share.
Lewis, who has overseen an aggressive expansion by Bank of America which has seen it grow into the country's second-largest financial institution behind Citigroup, said the move should also boost liquidity in the mortgage market.
Despite Countrywide's large size it has been struggled to weather the financial storm beating mortgage companies across America.
Its stock price has plummeted and it was forced last week to seek an $11.5 billion credit line from 40 major banks to boost its finances.
Investors have shunned mortgage firms and mortgage-backed securities contributing to the industry's credit issues.
Source: Agence France-Presse
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