Dedicated to Deposits: Deals, Data, and Discussion

It's Official. Bank of America is Buying Countrywide

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Bank of America
Bank of America just recently announced this news, and coincidentally, Countrywide Bank's CD rates just had a large decline. According to Bank of America's press release:
Bank of America Corporation today announced a definitive agreement to purchase Countrywide Financial Corp. in an all-stock transaction worth approximately $4 billion.

I don't know what the short term implications are to Countrywide Bank depositors. In the press release it states that "Bank of America plans to operate Countrywide separately under the Countrywide brand with integration occurring no sooner than 2009." Also it states that the purchase is expected to close in the third quarter. CNN has more on this news story.

Since the purchase isn't expected to close until the third quarter, it seems unlikely that Countrywide Bank cusomters will see too many changes in the short term. This should help ease concerns of depositors of having their money in a bank that is on the verge of going under. So Countrywide may not feel the need to keep rates as high as they have.

The latest rate change was likely unrelated to the current news. I found this quote in this yesterday's LA Times article:
Pierre Habis, head of retail deposits at Countrywide Bank, said it had continued to attract new deposits this week despite the latest bankruptcy rumors.

The cash inflows have so greatly exceeded expectations, he said, that the bank planned to begin trimming its CD rates in the next week.

If Countrywide lowers CD rates, that could help damp concerns that the company is facing a funding crisis.

Countrywide's 3 and 6-month CD yields declined today from 5.45% to 5.25% APY.

  Tags: Bank of America

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Comments
10 Comments.
Comment #1 by tu (anonymous) posted on
tu
Glad I got on the phone last night and opened a couple of "stakeout" CDs.

Under current account agreement, you can lock the rate if you fund the account within 10 days. Further, and very importantly, you can ADD ADDITIONAL FUNDS for 30 days and get the orginal rate.

NOTE: These terms may be changing in the near future. Confirm before you execute.

1
Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
That's a very good point about the 10-day rate lock and the 30-day additional funding option. These are very nice features during this time of dropping rates. I have more info on this in this post.

1
Comment #3 by Anonymous posted on
Anonymous
I believe the terms will change effective January 18 or so and the 30-day additional funding option will be gone.

1
Comment #4 by Anonymous posted on
Anonymous
If the deal is not scheduled to close until the 3rd quarter, then the rates on our existing CDs ought to be safe until then.

1
Comment #5 by Anonymous posted on
Anonymous
I came very close to pulling the money in my savingslink account last night, but I just couldn't click the button. It is my emergency fund money and being unemployed, I really didn't want it tied up for any length of time. Maybe, I can breath easier for awhile, but I doubt the rates will stay at 5.25% very much longer.

I did get in on one 12 month 5.65% CD for the minimum 10 grand a couple months ago. Maybe it will scoot through to maturity...

1
Comment #6 by Anonymous posted on
Anonymous
just opened a cd yesterday for 5.45%.
just in time..... wow.

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Comment #7 by Bozo (anonymous) posted on
Bozo
I don't claim to have any inside information on the Bank of America - Countrywide deal, but, since it isn't a bankruptcy with an FDIC takeover, it would not appear existing CDs are callable. My wife and I have been through several takeovers with existing CDs, and none resulted in calls on CDs (examples: World Savings to Wachovia; First Republic to Merrill).

Wiser folks may disagree, but I think if you have or buy a CD, the rate and term will be honored.

That having been said, I suspect it's "look out below" for CD rates for the foreseeable future. Lock in anything you can, for as long as you can, at or above 5%. As I always say, anything above 5% is a gift.

Yours,

Bozo

1
Comment #8 by Anonymous posted on
Anonymous
BOA put up over 40 million last Oct-Nov to buy countrywide.
Where have you been?

Scary thought is - There are very reliable sources discerning countrywides talk of bankruptcy due to the government failure to assure failing loans in time.

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Comment #9 by tu (anonymous) posted on
tu
@ bozo -- BofA is acquiring the stock of Countrywide. As such, Countrywide (as a subsidiary of BofA) is still obliged to live up to all of its legal obligations, e.g., the terms/conditions of its existing deposit agreements.

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Comment #10 by Anonymous posted on
Anonymous
"For all Certificate of Deposit accounts" The following change will be effective February 19, 2008: Limitations -You may not make additions to principal outside of the Grace Period.-

So says the Notice Of Change In Terms that accompanied the paperwork I received 1-12-08 mailed to me on 1-8-08 from Countrywide on a 6mo 5.45% CD that I initiated on 1-4-08 and funded on 1-7-08.

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