Bank of America said it plans to eliminate the brand name of Countrywide – nearly synonymous with the subprime crisis and deceptive lending in the public imagination – by the end of April, although BoA chief executive Ken Lewis recently said the lender is “on fire, in a positive sense.”
Despite remaining on track to eliminate 7,500 Countrywide positions, the bank said it expects to create hundreds of new loan production jobs.
In a deal announced in January 2008 for $4.1 billion and completed the following July for $2.5 billion on declining stock value, Bank of America purchased Countrywide Financial Corp.
At the time, the Calabasas, California-based lender was fighting off bankruptcy rumors as defaults skyrocketed into the double-digits for the company, once the largest subprime originator in the nation.
Countrywide had heavily targeted its home state and Florida with loosely underwritten subprime loans, the states reporting the top two largest amounts of foreclosures for the last two years, according to RealtyTrac.
By the time the deal was completed, Countrywide was subject to criminal investigations by both the FBI and the Department of Justice, and sued by several states for allegedly deceptive lending practices.
Within weeks, the newly-acquired company was revealed to be the subject of a federal grand jury investigation.
Since 2007, Countrywide has been repeatedly hit with lawsuits by investors, employees, consumers and state officials across the country.
In March 2008, Countrywide became the subject of an FBI criminal investigation into possible securities fraud for suspicions that the company misrepresented its financial health.
Both the Justice Department and the Federal Bureau of Investigation have begun a criminal inquiry into public representations by the company in the face of the subprime crisis.
Furthermore, former CEO Angelo Mozilo was placed under a formal investigation by the Securities and Exchange Commission (SEC) for allegedly tampering with his stock plan to sell off nearly $150 million in shares of Countywide as the company’s value tumbled by more than 60%.
Mozilo founded Countrywide in 1969 with David S. Loeb, who died in 2003, just as the lender began to rise into a mortgage juggernaut with the expansion of the industry into the subprime loan products they helped pioneer.
Aggressively spare underwriting in the face of rising interest rates have many critics placing Countrywide as one of the primary players in the subprime crisis that morphed into a bank liquidity crisis in 2007, which ultimately led to a U.S. recession and a global economic crisis.
In late April, BoA will eliminate the brand – if not the economic effects – of Countrywide Financial, in favor of the name Bank of America Home Loans.
In April 2008, Bank of America CEO Ken Lewis informed shareholders at the company’s annual meeting that the Countrywide brand would be phased out rapidly following the merger’s completion.
The bank indicated that it remains on track with plans to phase out 7,500 jobs related to the merger, expecting another wave of layoffs as it converts its systems.
Last week, Bank of America said it is in the midst of filling 300 phone support positions in Ballantyne, North Carolina.
The jobs are part of an effort to create 1,000 jobs in mortgage origination and processing across the country, although the company acknowledged that the majority of positions would be filled by employees already in the BoA organization.