BofA-Countrywide: The Main Street Implications

I'm going to be on Fox Business this afternoon at 4pm, talking about the Countrywide acquisition. Befitting the channel's "Wall Street meets Main Street" concept, I'm sure they're going to ask me less about the finances of the deal and more about the implications for buyers and sellers of homes.

The really big change, I think, is that Ken Lewis has explicitly stated that a BofA-owned Countrywide will not make any subprime loans. Which means that for subprime borrowers, it's going to be harder than ever to find a mortgage. And for everybody else, less competition in the mortgage-origination sector is likely to mean higher mortgage prices. The combined company will have 25% of all mortgage-origination business: in the UK, that would officially make it a monopoly.

Now mortgages are sold almost entirely on price: borrowers don't care who their lender is, so long as they're getting the cheapest possible rate. So BofA-Countrywide isn't going to have a huge amount of price-setting power. But at the margin, I think mortgages are going to be harder to get and more expensive in the wake of this deal.

On the other hand, existing homeowners whose mortgages are being serviced by Countrywide should probably be breathing a sigh of relief. No one wants a bankrupt loan servicer, and now they know that isn't a risk any more.

Are there other Main Street implications I should be thinking about?

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