BofA sees additional 15% drop in real estate prices
Bank of America expects home prices will fall an additional 15 percent nationwide and 20 percent in California, Chief Executive Officer Ken Lewis said in an interview with the Los Angeles Times.
Lewis, who has been under fire for Bank of America’s decision to acquire troubled mortgage lender Countrywide Financial Corp., said that loan losses at Countrywide are on the high end of Bank of America’s projections in January, when the deal was announced. But the all-stock deal — valued at $2.5 billion when it closed July 1 — will be profitable from the get-go, Lewis claimed, with huge potential for growth when housing markets recover. Although Bank of America had initially considered using Countrywide’s widely recognized brand name, it will phase it out early next year, Lewis said.
Bank of America has previously said it plans to lay off 7,500 employees as part of the merger, and engage in workouts or loan modifications with 265,000 borrowers (see story). Bank of America also inherits lawsuits against Countrywide filed by attorneys general in Illinois, California and Florida.
Freddie Mac reports little change in mortgage rates
Rates on 30-year fixed-rate mortgages rose slightly during the week ending July 10, averaging 6.37 percent with an average 0.6 point, Freddie Mac said in its weekly Primary Mortgage Market Survey. That’s up from 6.35 percent a week ago, but lower than the 6.73 percent average a year ago.
The 15-year fixed-rate mortgage this week averaged 5.91 percent with an average 0.6 point, down from 5.92 percent a week ago and 6.39 percent a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.82 percent this week, with an average 0.6 point, up from 5.78 percent last but down from 6.35 percent a year ago. One-year Treasury-indexed ARMs averaged 5.17 percent this week with an average 0.5 point, unchanged from a week ago and down from 5.71 percent a year ago.
Policy center reports home-price impacts on wealth
The Center for Economic and Policy Research, a nonpartisan think tank, reports that if home prices hold steady through 2009 the median household headed by those 45-54 next year will have 24.7 percent less wealth than the median household group in this age range five years earlier. That’s according to a study by the group, "The impact of the Housing Crash on Family Wealth." The study also found that if real house prices drop 10 percent, the median household headed by those 45-54 will experience a 34.6 percent loss in wealth compared with the median for this group in 2004, while households in the 18-34 range will lose 67.6 percent. If prices fall 20 percent, families in the 55-64 segment will experience a wealth loss of 49.6 percent compared to the same segment in 2004.
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