Countrywide borrowers: Fear not

NEW YORK (CNNMoney.com) -- If you're struggling with a mortgage you got from Countrywide Financial, you may be wondering what Bank of America's takeover plan bodes for your loan.

The short answer is that you could come out ahead.

"I think it's positive for the borrowers," Bruce Marks, chief executive of Neighborhood Assistance Corporation of America said. "There are millions of home owners with unaffordable mortgages." When Countrywide's lending unit is fully integrated into Bank of America, Marks said, "The deal will allow Bank of America to restructure loans to what homeowners can afford." (See editor's note at bottom)

Marks suggested that Bank of America will be able to help current Countrywide customers where Countrywide can't, because it doesn't give risky subprime mortgages, so it plans to convert them into prime loans.

When the housing crash began, Countrywide found that an increasing number of customers with subprime loans were delinquent with their mortgage payments or facing foreclosure. Bank of America insulated itself from the housing crisis by not participating in subprime mortgages.

According to a Bank of America press release, the company does not plan to originate any subprime loans after the merger is completed.

John Taylor, President and CEO of National Community Reinvestment Coalition, agreed that the merger would pay off for Countrywide customers: "Bank of America can be flexible because they are the biggest retail bank in country, have liquidity, and a great financial track record," he said.

"Countrywide has a liquidity problem, but Bank of America doesn't, so it has the capacity to handle the volume of Countrywide loans that are coming in from this deal," Taylor added.

Though Taylor believes that Countrywide borrowers should be happy because Bank of America offers a great deal of accountability, others like George Hanzimanolis, president of the National Association of Mortgage Brokers, are not so sure.

"[This deal] doesn't make any difference to the home owner," said Hanzimanolis. "The only difference will be where you pay your bill to. Just because Bank of America is buying your Countrywide subprime loan, it doesn't change [into a prime loan] when they buy it."

Despite its struggles, Countrywide did $408 billion in mortgage originations in 2007 and serviced about 9 million loans worth $1.5 trillion. "Bank of America has said in the past that they didn't like how mortgage lending has been done," said Marks. "But Bank of America realized that this deal is too good an opportunity to turn down."

Marks believes that the the $4 billion price tag is in essence a liquidation for Bank of America. "With that acquisition, Bank of America has written off a huge amount of loans that Countrywide services," he said.

"Both companies share the goal of keeping distressed mortgage borrowers in their homes when possible," Bank of America sad in a press release. "Bank of America plans to expand the ... internal capacity and flexibility for loan modifications for loan workout teams following the purchase of Countrywide."

Hanzimanolis did concede that since Bank of America wants to be viewed positively in the public eye, it may try to modify some loans in cases of need. "If it sees people in trouble, it will be willing to help. [Bank of America] wants to send a message that 'we're strong and willing to work for our customers.'"

Taylor noted that restructuring loans also makes financial sense for the bank. "Bank of America may very well intend on having loans restructured to ones that are closer to prime loans and performing assets, because they would rather have the homeowners stay in their homes and pay their mortgages than face the alternatives."

In doing so, Bank of America may be able to recoup some of the losses it incurred from purchase of Countrywide, said Marks. Since the bank has already written off the value of many of those loans, it plans on getting strong returns by restructuring customers' loans.

Marks said that once the acquisition is fully integrated, "Customers should absolutely contact Bank of America to restructure their loans into something they can afford." Until that time, borrowers should still contact Countrywide or one of its counseling partners.

As for investors in mortgage-backed securities, restructuring of loans may help those investments as well. Taylor suggested that with portfolios "crashing and burning" now, some modifications of the loans may be able to help investors retrieve some return on the investment.

"Investors are happy about this," Taylor said, "If Bank of America can modify the loans, at least the investment [in mortgage-backed securities] is not a total loss."

Editor's note: An earlier version of this story implied that Countrywide borrowers should call Bank of America now. They should wait until the deal has finished and the integration is complete.