The Effects may be felt Countrywide: Part 2

This article is a followup to the post The Effects may be felt Countrywide, which discussed the potential effect that the melt-down of Countrywide Home Loans could have on the local economy of Simi Valley.  In the previous article I made mention of Bank of America's (BofA) intentions to buy the failing lender, Countrywide; however, change may be in the air...  Below is a quote from the New York Times about what could be changing: 

At least two analysts said Bank of America Corp will likely lower its purchase price for Countrywide Financial Corp , with Friedman, Billings Ramsey analyst saying the bank may bring down its deal price to the $0 to $2 level or completely walk away from the deal.

Shares of Countrywide, the largest U.S. mortgage lender, fell nearly 12 percent to $5.29 in morning trade on the New York Stock Exchange, after Friedman downgraded Countrywide to "underperform" from "market perform."

Analysts at S&P Equity Research expect Bank of America to complete the buyout of Countrywide, but at a lower price due to the rapid deterioration of Countrywide's credit portfolio.

Friedman analyst Paul Miller, in a note to clients, said Countrywide's loan portfolio has deteriorated so rapidly that it currently has negative equity and the proposed takeover of the company will be a drag on Bank of America's earnings due to the elevated credit expenses at Countrywide,

Miller cut his target on Countrywide's stock to $2 from $7.

My Thoughts

Even if BofA does renegotiate the deal with Countrywide and pays almost nothing for the company, it will still likely have to make deep cuts, eliminating most of Countrywide's current staff, in order to achieve profitability.  Thus, my prediction may be right on track...  But for the sake of the residents of Simi Valley, let's hope I'm wrong.