Countrywide acquires some assets of retail mortgage-exiting HomeBanc
Published on : Tue, 07 Aug 2007 14:06
LONDON (Thomson Financial) - Countrywide Financial Corporation and HomeBanc Corp announced today that they have reached an agreement whereby Countrywide will acquire some of the assets related to HomeBanc's retail mortgage operations, including five retail branches, and hire a significant number of HomeBanc's retail loan originators. Countrywide will pay no cash premium in the transaction.
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'Countrywide is continuing to leverage the opportunities that are arising from the consolidating market,' said a spokesman.
'In light of the extraordinary difficulties existing in the mortgage market, we feel this agreement with Countrywide provides us with an attractive opportunity to transition a portion of our mortgage origination assets to a well-established and respected lender in this space,' said a HomeBanc spokesman.
As part of the transaction, Countrywide will acquire fixed assets related to five branches in Georgia, Florida and North Carolina and will assume the leases of those branches. Countywide will not acquire any other assets or assume any other liabilities connected with HomeBanc.
My gosh where to begin deconstructing this move? Doesn't matter what I think. The stock is up 6% on the news. Got that? Adding a bad lending arm to your suppsedly strong lending arms makes CFC stronger. Damn, let's talk about more upbeat items. Energy primer and bridge collapse later today.
8 comments:
FIRST!
CFC is going to crash hard very soon... you can only double down so many times with losing hands.
Murst.
NR
PS I forgot to mention how delightful it was to be vacationing in Scandinavia two weeks ago and read about Murseboy's dreams of moving there. We flew back quickly.
I hope it is ok I post this here...?
Sacramento's large enclave of immigrant Slavic evangelicals is becoming a force on social issues. Their actions shock many.
http://www.latimes.com/news/local/la-me-russgay13oct13,0,3388537,full.story?coll=la-home-headlines
Slavic evangelicals
CFC has long been on Cramer's list of stocks to buy. The reasoning, as he gives it, is that they have a retail banking arm, which he thinks will give them the stability to survive the sub-prime implosion. CFC appears to have received the memo, and is attempting both to expand its physical footprint and send a message regarding its financial stability.
Of course, the real story is about leverage, and lines of credit, and the differential between the rate that CFC borrows at and the rate that it lends at (not to mention the rate that its loans default at). But the real story appears to have been lost on the markets.
But I wouldn't bet against CFC; the old saying about the markets staying irrational longer than you can stay solvent comes immediately to mind.
CFC still has massive institutional interests. Until they can quietly unwind those positions expect the stock price to stay high.
Eventually there will be a double whackage of CFCs stock price. I expect it will be precipitated by accusations that there isn't a firewall between banking and other operations. The phrase "private piggy bank" will be the signal. You are absolutely correct about their negative speads. They have got to be buying high and selling low. the only way I imagine that is possible without losing their wholesale lines is if the worst is being sold to their own private piggy bank.
It is an obvious ploy to show the sheep that all is well. "Some of their assets"? Five retail branches? Peanuts. They had a credit line, this is a PR gamble to boost sagging stock prices, and you're right, it seems to be working, in the short term anyway. Mark to Market, liquidate back inventory, write off neg am payments previously booked. Then we'll see who's laughing. Hey, when you have the SEC helping you cook the books you know it's desperate. That also tells me that the fed won't be so quick to open the discount window, otherwise the SEC wouldn't be helping them defraud the stockholders.
Check out www.eyeoncountrywide.info, an independent consumer resource examining sub-prime lending and Countrywide Financial Corporation
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