In what may be the final hurdle ahead of an expected shareholder vote, the Federal Reserve on Thursday afternoon approved Bank of America’s expected purchase of Countrywide Financial Corp. (CFC). The purchase of Countrywide would make Bank of America Corp. (BAC) the nation’s leading mortgage lender and loan servicer and would mark an important step toward deepening the company’s consumer real estate product offerings. In recent weeks, BofA chief Kenneth Lewis has reiterated his commitment to following through on the deal, dismissing speculation that the bank might look to renegotiate the $4 billion purchase price. “This transaction represents a rare opportunity for Bank of America to significantly gain market share in the mortgage business, allowing it to expand in a cornerstone financial product,” he said in a press statement Thursday.
In its order approving the deal, the Fed noted that it had received 440 public comments on the deal, which it said were “submitted in the form of one of two substantially identical email messages.” Many of the messages took the tact of leveling criticism of Countrywide’s business practices, the Fed said, while other commenters were concerned about BofA’s ability to absorb the Calabasas-based company’s substantial mortgage lending and servicing businesses. Fed officials countered much of the criticism of Countrywide’s business practices by noting that Bank of America, Countrywide, and affiliated lending subsidiaries all had received a satisfactory or better rating under the guidelines set forth in the Community Reinvestment Act. Disparities in lending to minorities, as demonstrated in HDMA data, were characterized as “troubling,” but Fed officials noted that such disparities existed outside of BofA and Countrywide, and therefore weren’t reason enough to prevent the acquisition. After the proposed deal, Bank of America would remain the largest depository institution in the country, controlling approximately $773.4 billion in deposits, which represent 10.9 percent of total insured bank deposits in the country, the Fed noted. “Mortgages continue to be a key consumer product for Bank of America, serving as a driver for adding new customers and deepening relationships with existing ones,” BofA’s Lewis said. “Countrywide, through its systems, distribution network and servicing platform, will give Bank of America greater ability to meet customers’ credit needs.” Countrywide shareholders will vote on June 26 on the proposed purchase, and are expected to approve the acquisition. Disclosure: The author was long CFC, and held no positions in BAC when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.