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So by now you have heard the news. Bank of America is buying out Countrywide for pennies on the dollar. You got to give it to BOA… they got a deal. Of course, it does come with baggage as well, but I think it will still be good for BOA. My question is though, will it be good for consumers….

At the end of 2007, Bank of America closed their wholesale mortgage division. This effectively cut off working with mortgage brokers across the US. The explanation at the time was that Bank of America was going to refocus their mortgage options solely on retail sales. Of course, to BOA clients that meant higher rates. (Anytime you choose retail over wholesale, you pay more.) But beyond that, Bank of America CEO Ken Lewis had gone on record as calling mortgage brokers “toxic waste.”

From what I have been told, Mr. Lewis could have been misquoted. The reference to “toxic waste” was supposed to be in a comment regarding the subprime lending practices from a couple years ago and how he felt the mortgage brokers offering subprime loans were “toxic.” Now it is 2008 and people are beginning to see that this kind of thinking is much like blaming your local car dealer for the manufacturer’s defaults and recalls. As a mortgage broker, we can only sell what the wholesale lenders offer us to sell. And anytime you have a product that offers broad reach to a largely underserved and hungry market, you are not going to withhold that product.

Another insider has mentioned that Bank of America may have dropped their wholesale division in anticipation of acquiring Countrywide and making that ther wholesale channel. If this is the case, that would make sense. But that also means that this was all orchestrated back when BOA dumped the $2 Billion “investment” into Countrywide. Maybe that was simply a downpayment! And keeping it hush hush would help to allow stocks to fall naturally so that the rest could be bought for pennies. Smart thinking if you ask me, and if this is what happened.

So my question is this…. what happens next? Do we discover over time that BOA’s pull out from the wholesale mortgage market was strategic thinking in regards to picking up Countrywide, or was it an expression of the CEO’s attitude towards wholesale marketing?

If the latter is the case, this is bad news for the consumer. Countrywide, even with it’s faults, brought great competition and innovation to the mortgage marketplace. With innovation comes risk and well, Countrywide is suffering from some of those risks. But if the wholesale side of Countrywide is eventually done away with, mortgage brokers across the country will feel some bad effects and customers could be at the mercy of the big banks. Let’s hope this was all just a strategic move.

The message today…. BUY NOW! With mortgage rates super low and home selection super high, take advantage of it. If BOA dumps Countrywide’s wholesale approach to business, you can expect rates and fees to rise, and customer support to drop. Sorry, but when big business stomps out the “little guys” they begin to bully their own customers. We’ve all felt those effects.

So act now and take advantage of what is available. There could never be a better time in history to buy a home! (Or refinance the one you have!)

Ed Nailor, mortgages in Charlotte