As part of its ongoing commitment to support borrowers facing potential foreclosure, Fannie Mae (NYSE: FNM: 34.23, +0.18, +0.52%) will reimburse its servicing partners when they refer homeowners who are behind in their mortgage payments to the HOPE Hotline for counseling.”We have to do everything we can, and early intervention and delinquency counseling are key to helping many at-risk homeowners avoid foreclosure,” said Jason Allnutt, Vice President for Credit Loss Management and Quality Assurance at Fannie Mae. “We believe that in these difficult times, independent counseling agencies can play a unique role by helping servicers help borrowers find more opportunities to avoid foreclosure and keep their homes.”
Read the rest of this Fox Business News article here
{ 27 comments… read them below or add one }
what is the hope hotline number and how do they plan to help clients?
My take is this is going to be bad for troubled borrowers. Confusion at both CFC and BoA. Front liners at CFC expecting their pink slips at any moment so not caring to do their job.
If Lewis sees this as an opportunity to increase loan mitigation staff instead of a chance to increase productivity (ie fire people) then it could work out well.
Yeah and Mozilo getting the 115 million payout, plus company jet, plus paying is golf club membership. That 115 million should go towards some home retention program.
YEs, Mozillo bailed out when it got too hot in the kitchen, now it looks like the buyers and the investors are left in the fire.
Great.
I bank with Bank of America, and all I know is when dealing w/ customer service, you better have translator on the line with you.
Hey, I just had another thought: Countrywide sells to Bank of America before it’s really clear how much they are worth — that is before the true state of their books becomes evident, after the ARMs start to adjust and people really start being unable to pay.
ARe they really worth $4 Billion?
JacMac-
Are you warm and a little fuzzy. I know this should make you feel a little better.
JacMac-
The servicing dept of CW is lucrative. Is the bank included in the sale? what is included in the sale. BOA will make money off this. It’s a question of how much and when.
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The Deal by Allan Sloan Full coverage
January 11 2008: 3:41 PM ESTEmail | Print Type Size
BofA’s awesome Countrywide tax break
Brace yourselves, taxpayers of America. You’re going to help Bank of America finance its $4 billion buyout of Countrywide.
By Allan Sloan, senior editor at large
Video
More video
Bank of America purchases Countrywide Financial, one of the companies hardest hit by the subprime mortgage meltdown.
Play video
THE COUNTRYWIDE BUYOUT
Get the whole story at CNNMoney.com
Why the deal makes sense
The skeptics’ view
BofA’s awesome tax break
Will BofA catch Countrywide flu?
Borrowers: Fear not
$4 billion rescue
BofA eyed for downgrade
More from Fortune
The U.S. can afford Iraq
Audi and Ford drive two different roads
Beat the mid-career blues
FORTUNE 500
Current Issue
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NEW YORK (Fortune) — Guess who’s helping Bank of America pay for its $4.1 billion purchase of Countrywide Financial? Answer: The taxpayers of the United States.
That’s because Bank of America (BAC, Fortune 500), which is solidly profitable, will be able to use some of Countrywide’s losses to offset its own taxable income. The tax break could total about half a billion dollars over the first five years, according to an estimate by tax guru Robert Willens, who left Lehman Brothers Friday after a 20-year run and will be in business as Robert Willens LLC starting next week. The losses could be worth considerably more to Bank of America starting in the sixth year, depending on how big Countrywide’s losses are when Bank of America formally acquires it.
At this point, of course, no one knows how much in losses Countrywide has run up since the junk mortgage market began souring and defaults accelerated. Countrywide (CFC, Fortune 500) itself probably doesn’t know. But it seems almost certain to ultimately be in the billions.
In tax circles, Bank of America is famous for its 1988 purchase of the failed FirstRepublic Bank of Dallas, which was being auctioned off by federal regulators. Bank of America, then known as NCNB Corp., the parent of North Carolina National Bank, discovered a way to structure the deal to save $1 billion of taxes, using a convoluted strategy that none of the other bidders knew about. That allowed NCNB to outbid its rivals for the bank, and still come out way ahead.
The Countrywide tax break isn’t in that league, but it would still be worth a lot of money. Willens estimates that Bank of America will be able to deduct $270 million of Countrywide’s losses annually for the first five years it owns the firm.
That’s based on a $6 billion purchase price – $4 billion to Countrywide’s common stockholders, plus the $2 billion of preferred stock that Countrywide sold to Bank of America in August. Willens says that you multiply that $6 billion by 4.49 percent – the so-called “long-term tax-exempt rate” – to calculate how much of Countrywide’s losses Bank of America can deduct annually for five years after the purchase.
A $270 million annual deduction would save Bank of America something more than $100 million a year in federal and state income taxes. The long-term tax-exempt rate, which is based on Treasury rates and other things so complicated that they make my teeth hurt. The rate changes each year, Willens says, but not by much. When I asked how it’s calculated, Willens, a master of tax arcana, threw up his hands. (Metaphorically, of course.) “It’s like the formula for Coca-Cola,” he said, “no one outside the circle knows it” and it’s so complicated that, “no one else wants to find out.”
So over the first five years, Bank of America can use a total of $1.35 billion of Countrywide’s losses to shelter its income. (That’s five years of $270 million annual losses.) If Countrywide’s embedded losses when Bank of America buys it exceed $1.35 billion, Willens says, the bank will be able to deduct the rest of the losses, without limit, starting in the sixth year.
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The Deal by Allan Sloan Full coverage
January 11 2008: 3:41 PM ESTEmail | Print Type Size
BofA’s awesome Countrywide tax break
Brace yourselves, taxpayers of America. You’re going to help Bank of America finance its $4 billion buyout of Countrywide.
By Allan Sloan, senior editor at large
Video
More video
Bank of America purchases Countrywide Financial, one of the companies hardest hit by the subprime mortgage meltdown.
Play video
THE COUNTRYWIDE BUYOUT
Get the whole story at CNNMoney.com
Why the deal makes sense
The skeptics’ view
BofA’s awesome tax break
Will BofA catch Countrywide flu?
Borrowers: Fear not
$4 billion rescue
BofA eyed for downgrade
More from Fortune
The U.S. can afford Iraq
Audi and Ford drive two different roads
Beat the mid-career blues
FORTUNE 500
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NEW YORK (Fortune) — Guess who’s helping Bank of America pay for its $4.1 billion purchase of Countrywide Financial? Answer: The taxpayers of the United States.
That’s because Bank of America (BAC, Fortune 500), which is solidly profitable, will be able to use some of Countrywide’s losses to offset its own taxable income. The tax break could total about half a billion dollars over the first five years, according to an estimate by tax guru Robert Willens, who left Lehman Brothers Friday after a 20-year run and will be in business as Robert Willens LLC starting next week. The losses could be worth considerably more to Bank of America starting in the sixth year, depending on how big Countrywide’s losses are when Bank of America formally acquires it.
At this point, of course, no one knows how much in losses Countrywide has run up since the junk mortgage market began souring and defaults accelerated. Countrywide (CFC, Fortune 500) itself probably doesn’t know. But it seems almost certain to ultimately be in the billions.
In tax circles, Bank of America is famous for its 1988 purchase of the failed FirstRepublic Bank of Dallas, which was being auctioned off by federal regulators. Bank of America, then known as NCNB Corp., the parent of North Carolina National Bank, discovered a way to structure the deal to save $1 billion of taxes, using a convoluted strategy that none of the other bidders knew about. That allowed NCNB to outbid its rivals for the bank, and still come out way ahead.
The Countrywide tax break isn’t in that league, but it would still be worth a lot of money. Willens estimates that Bank of America will be able to deduct $270 million of Countrywide’s losses annually for the first five years it owns the firm.
That’s based on a $6 billion purchase price – $4 billion to Countrywide’s common stockholders, plus the $2 billion of preferred stock that Countrywide sold to Bank of America in August. Willens says that you multiply that $6 billion by 4.49 percent – the so-called “long-term tax-exempt rate” – to calculate how much of Countrywide’s losses Bank of America can deduct annually for five years after the purchase.
A $270 million annual deduction would save Bank of America something more than $100 million a year in federal and state income taxes. The long-term tax-exempt rate, which is based on Treasury rates and other things so complicated that they make my teeth hurt. The rate changes each year, Willens says, but not by much. When I asked how it’s calculated, Willens, a master of tax arcana, threw up his hands. (Metaphorically, of course.) “It’s like the formula for Coca-Cola,” he said, “no one outside the circle knows it” and it’s so complicated that, “no one else wants to find out.”
So over the first five years, Bank of America can use a total of $1.35 billion of Countrywide’s losses to shelter its income. (That’s five years of $270 million annual losses.) If Countrywide’s embedded losses when Bank of America buys it exceed $1.35 billion, Willens says, the bank will be able to deduct the rest of the losses, without limit, starting in the sixth year.
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This is the true cost to US taxpayers
http://money.cnn.com/2008/01/11/news/companies/sloan_countrywide.fortune/index.htm?postversion=2008011115
Chris I’ve been called warm lots of times, but never fuzzy
Paul, that’s very interesting. I knew someone would be footing the bill.
“If Countrywide’s embedded losses when Bank of America buys it exceed $1.35 billion, Willens says, the bank will be able to deduct the rest of the losses, without limit, starting in the sixth year.”
Now that’s freakin’ amazing!
Time to sell your BOA stock
We in the industry have all wondered silently and aloud as to when this was going to occur.
The relevant news is that the absorption of Country Wide by Bank of America is not the end of this type of event. Next in line are WAMU, SunTrust and perhaps other large and influential Mortgage Banking houses into the folds of Bank of America, JP Morgan Chase, Wachovia, etc… Where does that leave the “consumer” i.e. you and me?
You know that S*&% Sandwich that someone referred to on one of the other posts? Well we the consumers are going to take a big bite everyday out of that deli delight. These institutions are large enough, globalized enough and well capitalized enough to refrain from that gourmet treat, in other words they can swallow up the bad stuff and not even burp. We on the other hand will gag daily on the repast that they are providing, paying the price for the folly that they initiated to create that unholy capital (toxic loans). If it does not cost you (the institution) in the short or long term, as you have the where with all to cover the losses, and the accounting exceptions to your bottom line granted by the government (for the self serving rescue), what and where is your impedus to fix the individual problems, of individuals, NONE.
On the flip side – do you really want just 4 or 5 institutions controlling the entire financial services industry – where is the Sherman Act and Clayton Act when we actually need them? Ponder the far reaching implications of this acquisition and all future acquisitions and just where we are going to be 15 years down the road. Truly scary if you have an overall understanding of the financial services industry and globalization.
We in the industry for over 15 or 20 years are deeply concerned and demonstratively worried and have been from the first hint in October of 2006 or so, that Bank of America may just acquire Country Wide. It has been in the works for a long time, do not kid yourselves that this was a “oh, I have 2 billion out and need to cover my potential losses/save face” kind of event. It was not, it was calculated and orchestrated, go figure and be very, very concerned.
Oh one more thing – “rare opportunity” my @ss. That is an entirely personal not professional observation. LOL
Fewer banks = less chioces/ less competition for the consumer….very bad idea!!!!!!!! With fewer banks they be able to charge fee’s at will, because consumer’s will have no other place to go!!!!! Very bad!!!!!
JacMac/Paul
Paul. Yes, this is going to cost us dearly. BOA is going to make hundreds of millions off this. They will get the 6billion back.
No taxes. We\’e2\’80\’99ll pay those, thank you. Watch the layoffs and the pitiful excuses……..fire sale of CW Company owned property…….payouts to the old but defunct execs. Don’t forget that its coming…..And JacMac, if you think the 1.35 billion won’t be discovered, check out this link.
http://wallstreetexaminer.com/blogs/winter/?p=1326
It\’e2\’80\’99s already there in the open for all to see. PIMPING 101
Poppy-
Unfortunately, you are right. This isn’t a wonderful opportunity for BOA. No stars lined up perfectly for this. This is a set up. Look at the CW/BOA history. BOA is the company that gave “tan man” the 75k to start his company in 69′. They are boys from back in the day. Up until Thurs, Angelo was predicting a CW comeback. Please. What. They called him Friday morning and said look why don’t you sell. And he said, ok, why not. Can I keep the jet? I heard what happen in Detroit I might need to make a quick move. (For those who don’t know about Detroit, reference back a few stories)
I said in a previous post, that the blue dust is going to confuse us while the new plan is being rolled out. Now here it is and watch other big banks follow suit.
Let’s see here………..Banks…….Lets create a system only a few understand. Let’s allow some start up lenders to present products to the public we made, but allowed the little guys to take credit for. Let them make some money on it. Let them put it out on the streets for awhile. We won’t call it pimping; let\’e2\’80\’99s call it getting the American Dream. Let’s put that American Dream on the yellow line and then slowly put some bad American Dream out there. They won’t notice. A dream is a dream. When it starts stinking we’ll have another dream waiting.
As the years go on……….and we are dreaming…………….Banks are buying up smaller banks preparing for us to wake up and get mad.
Keep in mind; the big banks are funding the lenders. The system is going to blow right around the time the major banks are the only game in town. They own the retail and they never let go the wholesale. Hell, they invented the wholesale.
We are awake. The system has blown. Or the banks just turned off the lines of credit or the proverbial light switch. It’s ironic, but the entire system blew and all of the “major” lenders blew at the same time. Hmm. Go figure. Bad lenders. Bad wholesale. Bad Industry. The consumer is awake and demanding change. And now, the Pimps….sorry Banks, are swinging in with their bat utility belt on “BAMMING” AND “POWING” their way into the American hearts. They are absorbing what they created. They are not even used real money. They are swapping stocks. This is a pimp keeping his PIMP HAND STRONG. Now just watch in a year or two the new Hos……..no, my bad, the new dream they come out with.
You’ll have to wonder why haven’t anyone and I mean ANYONE gone to jail for all of this mess. Remember the blue dust. A pimp can’t send his ho to jail. And that senator that was so far up CW ass just a month ago. Where is he now? He can kiss my ass for all that noise and no action. The CEO of BOA is hoping that Angelo will stick around and help out. W.T.F. wasn\’e2\’80\’99t this the year Angelo was going to retire anyway/? He announced this years ago. Kind of make you wonder the coincidence
Warning:
Blue Dust is a bitch if used properly. Not to be mixed with other chemicals and don’t operate heavy machinery when hit with it.
Not to appear dense, but what is “blue dust”?
I loved your post Chris – great analogies, just wonderful, right on and the very ugly truth.
Could blue dust be the same as “smoking something stronger than a leafy green substance”, they all are you know, it is ego and power, combined with the vast quantities of greed and lucre. I prefer the word lucre in lieu of money, you know “filthy lucre”, very fitting and apt. Oops my rampant professional cynicism if getting ahead of me……
I agree with Poppy….great post Chris….
Brilliant, Chris. Their dream but our nightmare!
Poppy,
Blue dust is a grand distraction of sorts. It only applies to people. If you try it on a dog or a horse, you might get bit. The leafy green substatnce just slows you down. This is much more potent.
I don’t know if you ever watched wrestling in the 80’s. There was a character called the Great Kabuki. When he was getting his ass kicked, out of nowhere he would reach into his magic pouch and blow dust in your face. It would temporary blind you and have you totally disorientated for a few minutes. Well in that time he would kick your ass “some good” and win the match. When the loser snapped out of it, the great Kabuki was gone with the win.
The cynicism is all we have until we find the total truth
Hats off to you Chris!!!!
I have a very sad story to share…
This week I was informed by one of wholesale lenders ( a very big player) that they discovered fraud with one of there brokers and would no longer accept loans from this broker …end of story!!!!!!!!
I said what did they do??? The broker submitted and closed 5 loans with the same ss# and credit report, but with different borrowers and properties. Clear cut Fraud!!!!! All this lender did was stop them from sending in new files……..I SAID WHAT!!!! I AM VERY PISSED !!!
I said, any charges filed?…….NOPE..
Did you report them to the FBI……..NOPE
Did you go after the borrowers who submitted and signed the applications….NOPE!
How did you not realize that you had 5 loans in your system with the same ss#???? We do not have that safe guard in our system!!! WHAT!!!!
Here is the kicker…WE DO NOT HAVE THE TIME OR RESOURCES TO FOLLOW-UP!!!!!…..I am speechless!!!!!!!!! This broker should be in jail, the LO should be in jail, fines paid, there name made public just for starters!!!!!!
If crime pays it will continue, so with all of these great ideas to disclose more,educating the LO, testing, bonding, fingerprinting, etc……who is watching the lender???????
I AM STILL SICK!!
Chris – I could try it on my dogs and horses, however…..I like them more than most humans. LOL Most likely after all the years in this business not to far from the truth. My professional skepticism and cynicism are on my sleeve, have tried to hide them, but to no avail.
Paul – They are right, we do not have the manpower or time, we are exhausted and beat up. They are scum suckers, whether they are in my shop or someone elses’ shops. We do use tools to catch that stuff on my platform, but an eyeball is the best method I know of to date. Actually as weird as it may seem, when I open that kind of file ya just kind of know. Can not explain the reasons for that, but to date I am batting 100% on the fraud-o-meter. Must be that healthy professional skepticism and cynicism working over time.
Do I catch it all, probably not, do I catch the most egregious, most likely, rather transparent stuff. Do I get as angry as you, yes, is it well received (the anger), no. Read some of my articles – Moe appears to like to post them. Yeah I get real angry and sad, does it do any good, no. Do I feel betrayed, yes. Are we all betrayed as an industry and as consumers and as a community, yes. Leaves you feeling real empty, I am truly sorry for all of us.
Paul:
That has been the problem since I have been in the mortgage business on the operations side (25 years). What you experienced is typical, although there are companies that will prosecute to the fullest extent of the law. I have worked for both types and have always felt that only one instance of fraud should trigger a full investigation and prosecution. It has been said many, many, many times on this site that the lack of self-policing in our industry was one of the many factors in this current meltdown.
Virginia,
Sad but true!
I AM A VICTIM OF PREDATORY LENDING. I CONTACTED THE HOPE LINE TO FIND OUT I COULD NOT BE HELPED. ALL I WAS TOLD WAS TO TRY TO CONTACT MY MORTGAGE COMPANY AND WORKOUT SOMETHING. I HOPE NOONE GETTING PAID TO SAY THIS TO CALLERS BECAUSE THIS IS NOT HELPING PEOPLE. I BELIEVE THIS IS ANOTHER COVER UP. HPE COULD NOT TELL ME ANYTHING I DID NOT ALL READY KNOW.EVEN WHEN TOLD TO THEM MY MORTGAGE COMPANY WILL NOT RESPOND NOR RETURN CALLS BACK TO ME .I WAS TOLD WELL JUST KEEP CALLING THEM. THIS HOPE CAMPAIGN IS A BIG FAT JOKE. WHEN WILL OUR GOVERNMENT STOP PULLING THE AMERICAN PEOPLE LEGS. THE MORTGAGE COMPANIES AND THEIR LEADERS MADE A LOT OF MONEY ON PEOPLE LIKE ME .WHY DON’T THE GOVERNMENT DO SOMETHING ABOUT RATHER THAN ALL THIS SMOKE LIKE THEY ARE GOING TO FIX IT. SO BODY GOT RICHER ,AND RICHER MEANWHILE PEOPLE WAS LOSING THEIR HOMES BECAUSE OF THIS DECEPTION LIKE THE SITUATION I AM IN .WHY DON’T REAL HELP TAKE PLACE .THANK GOD HE SEE IT ALL!!HOW DO YOU PEOPLE SLEEP AT NIGHT WITH ALL THE LIES AND DECEPTION THAT YOU ALL CREATE FOR THE AMERICAN PEOPLE.
the problem is that the servicers have no incentive as of yet to help you…it is a sad fact but unless there is a benefit to the investor then no much will happen.
When and if the government finally steps in and offers to pay some stipend to help homeowners then we will see some positive outcomes for the homeowner. Keep trying and be persistent because you will eventually get the ear of a person who will help you. good luck
Lenders aren’t really working to help the borrowers