MBA/510 Managerial Decision Making
Countrywide’s fall from Grace
Countrywide was founded in 1969 and has been known as “America’s #1 Home Loan Lender.” What changed at Countrywide to cause it to fall in stock value, become a target for buyout by Bank of America (BofA) and to be named in two lawsuits by both Illinois and California? The merger of Bank of America and Countrywide became official on July 1 of 2008, and has negatively impacted the stock value of both companies. Countrywide will remain a wholly owned subsidiary under Bank of America and will continue to work through the lawsuits which accuse Countrywide of “misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans.” Bank of America and Countrywide have been financial partners for many years and Bank of America made a significant financial investment in August of 2007 when Countrywide began to experience problems. Will the merger give Countrywide the boost that it needs to regain control of its failing loan services and will it make both companies stronger in the long-term. The team will identify the status of both companies today from a financial perspective and the long-term projections to pinpoint where the breakeven point will be and when Countrywide will be contributing to the success of Bank of America.
Independent and Dependent Variables
There are several independent variables in this business situation including:
• In 2007 Countrywide was responsible for 17% of home loans currently taking place in the US.
• The stock price of Countrywide dropped over $20 a share and continues to go down. Their third quarter losses equaled to $1.2 billion.
• Allegations of predatory lending, abusive loan servicing and dangerous products.
• Prior to the merge, Bank of America had already had to bail out Countrywide to the tune of $2 billion. The merger price, set at $4... [continues]
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