Mortgage Foreclosure & Refinance Resource

Merrill Lynch, the nation’s biggest brokerage firm, is expected to announce a $15 billion write-down on soured mortgage-backed securities, far more than analysts expected. Investors took the setbacks as a sign that the financial industry is still reeling from last year’s collapse in the subprime mortgage market. The New York Times reported on Friday that Merrill Lynch expects to write down nearly twice as many assets as it originally estimated. But Merrill’s shares rose nearly 4 percent as investors concluded that the firm may finally have a handle on its exposure and will not be devastated unless the write-down is even larger.

Bank of America’s announcement that it will acquire Countrywide Financial for $4 billion, a surprising show of confidence in the troubled lending market. Bank of America would inherit the “heightened” credit risk of Countrywide’s home equity loans and option adjustable-rate mortgages, analysts led by David Hendler at bond research firm CreditSights Inc. said in a report today. Countrywide became the target of shareholder lawsuits and an investigation by the attorney general in Illinois.

During the housing bubble, Bank of America avoided subprime loan business. Countrywide would exit that business and throttle back on transactions involving independent mortgage brokers and what Lewis called the “cocaine of bulk [mortgage] purchases.” Indeed, Peter Ogilvie, president of the California Assn. of Mortgage Brokers, said Bank of America was known for having more stringent requirements for the independent brokers it did business with. “They weren’t entirely driven by taking in mortgages and selling them in order to survive,” he said. “That may have done them well.”

Countrywide faces a barrage of borrower suits and investigations by federal and state agencies for alleged lending and loan-servicing abuses as well as shareholder suits stemming from its financial decline.

Plaintiffs are likely licking their chops at the prospect of being able to go after B of A’s deep pockets versus the real possibility of having had to pursue their claims in bankruptcy court.