Fed approves sale of Countrywide to BofA

Bank of America Corp. is in the home stretch of its bid to buy troubled mortgage lender Countrywide Financial Corp., a $4 billion deal that would vault the Charlotte bank to No. 1 in home loans but also boost its exposure to a dicey housing market.

The Federal Reserve Board on Thursday approved the purchase of the Calabasas, Calif.-based lender, which has become a symbol of the nation's mortgage meltdown. The next step is a June 25 vote by Countrywide shareholders.

The deal is expected to close as early as July 1.

In a statement, Bank of America chief executive Ken Lewis said the transaction allows the bank to expand in mortgages, while also selling other products to Countrywide customers.

“Mortgages continue to be a key consumer product for Bank of America, serving as a driver for adding new customers and deepening relationships with existing ones,” he said.

Bank of America announced the takeover in January amid speculation that Countrywide was on the brink of bankruptcy. It had previously invested $2 billion in the lender.

Analysts have worried about the risk Bank of America is taking because of Countrywide's horde of bad loans and mounting legal woes. Lewis has said the deal was done at the right price. He plans to place one of his top executives, Barbara Desoer, in charge of the mortgage business.

Fed approval came after the regulator held hearings in Chicago and California. About 770 individuals and organizations testified or submitted comments for and against the deal, according to the Fed order.

The combined company would have total assets of about $1.9 trillion and deposits of about $773.4 billion. The deposits would amount to 10.91 percent of the nation's total. The deal isn't subject to a federal law that prohibits banks from acquiring more than 10 percent of deposits through an acquisition because Countrywide's deposits are housed in a savings and loan.

Approval was announced after the stock market's close. Bank of America's shares were unchanged Thursday at $31.99; Countrywide's shares closed down 6 cents at $5.29. Under the buyout agreement, Bank of America would pay $7.16 per Countrywide share.