I wrote earlier this week about the market’s reaction to the rumors that Countrywide Financial, one of the country’s largest home-mortgage lenders, would file bankruptcy soon. I mentioned that although the rumors may have been nothing more than a scare tactic, there was probably some truth in the fact that Countrywide was struggling to the point that bankruptcy was possible.

So what happens when a company is doing so bad that the market begins believing it might have to file bankruptcy? They get acquired of course! Bank of America announced today that it would but Countrywide Financial for $4 billion (with a ‘b’). But the fact that Countrywide was willing to take a deal that valued it shares 8.3% below trading levels reveals just how desperate the firm was.

Can you tell when the announcement was made?

Of the deal, Stifel Nicolaus analyst Christopher Brendler said:

“This deal comes together because no one wanted to see Countrywide fail; it is a win-win for everyone involved, but doesn’t indicate that the mortgage problems are behind us.”

But it does mean that BofA will likely become the nation’s largest mortgage lender. Brendler also said Countrywide is no sure bet for BofA. The company still has a dicey portfolio, with $80 billion in high-risk mortgage loans. Several months ago, many of these loans were not considered high risk, but the deterioration of the markets now makes them so

So let’s all give BofA a round of applause for helping to stabilize the lending market (and pick up a a major lending company at WalMart prices) and wish them luck with their new prize!

Looking to buy or sell a home in the next few months? Mashable.com has collected a very long list (65+) of Web 2.0 tools and websites that can help. Even if you’re going overseas for work or school, there’s something here for just about every type of living arrangement.

Real Estate Toolbox

If you’ve listened to the news at all lately, you’ve probably heard a lot of talk about the effects of the subprime mortgage crisis. In a nutshell, the crisis began last month when many subprime mortgage owners were forced to foreclose on their homes. Many of these homeowners entered into “subprime” mortgages, meaning that the rate they were paying was lower than the market rate, in exchange for higher interest rates down the road. The “adjustable rate mortgages” (ARMs) have a low introductory interest rate, but reset every 5 years or so to the new market rate. Basically, you’re gambling that the rates won’t rise to a point that you won’t be able to keep up.

Unfortunately, many people took the grasshopper approach, and didn’t bother preparing for an increase in interest rates. Without the ability to meet the higher mortgage payments, many homeowners were forced to foreclose, with banks taking a bit hit. Some lenders took such a big hit that they were forced to file bankruptcy, forcing the market to “freak out” (yes, that’s a technical term).

The blame has already started, of course. Many people blame the lenders for being overly aggressive and lending to anyone who walked through the door. Others blame borrowers (who I think are ultimately to blame) for overstating incomes, or trying too hard to buy a home they couldn’t afford to begin with.

But recently, President Bush outlined ways the federal government can help troubled borrowers keep their homes in an effort to address rising foreclosures fueled by the mortgage crisis. In a move also backed by Ben Bernanke, Federal Reserve Chairman, the government isn’t going to “bail out speculators or those who made the decision to buy a home they knew they could never afford.”

Bush said the Federal Housing Administration, a government agency that provides mortgage insurance to borrowers through lenders in the private sector, would soon launch a program called FHA Secure. The program would let homeowners who have good credit histories but can’t afford their current mortgage payments to refinance into mortgages insured by the FHA.

Bush also urged Congress to modernize and improve the FHA so more homeowners could qualify for the mortgage insurance provided by the agency. Last year the House passed legislation to modernize FHA, but Congress has not yet sent a bill to the White House.

And in one more effort, Bush also pledged to work with Congress to reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages. Under the current rules, if the value of your house declines by $20,000 and your adjustable rate mortgage payments have grown to a level you cannot afford, the bank might modify your mortgage and forgive $20,000 of your loan. But the tax code treats that $20,000 as taxable income. And when your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes.

But I wonder if this help isn’t too little too late? Has anyone ever seen a mortgage document? It’s like 100 pages long full of legalese and loopholes that practically nobody can understand. In my opinion, a large effort should be put into improving lender education. Let’s get that mortgage document down to 10 pages of plain English, and mandatory education classes for new homeowners. The government wouldn’t have to step in and help refinance homes if people were properly educated and knew that an adjustable rate mortgage is not the best move when buying a $1 million home with a $85k income.

But what do you think? Has the government done enough? Should they do more?

The following is a paid review of CreditDemystified.com.

CreditDemystified is actually a site sponsored and presented by Countrywide Home Loans. The goal of CreditDemystified, other than to promote Countrywide Home Loan products, is to educate and inform anyone interested in credit or credit-related topics.

Lets break it down:

Looks: As always, a site needs to make a good aesthetic first impression before I spend anytime looking beneath the surface. Call me shallow, but it’s true. When I first visited CreditDemystified, I didn’t really know what to make of it. From the homepage, I counted 4 large Countrywide Home Loan ads shouting “Call Now!” It was only later that I realized that they were not only an advertiser… but that they were the only advertiser. But, other than the huge banner ads asking you to call for a loan quote, the rest of the site is set up just like any other blog - with numerous posts under each of the categories - Improving Your Credit, Credit Learning Center, Credit Quotient Quiz, Credit Scores, Home Loans, and Library.

Amount of Content: If you couldn’t already tell by the number of “topics” that CreditDemystified covers, the site has information on just about everything related to Credit. I was impressed, however, with the way in which the site was organized - so that the amount of information wasn’t overwhelming. The site has not only a “Tag Cloud” on the homepage but the information is organized in an intuitive manner.

Let’s say that you were thinking about buying a car and needed some sort of loan. Simply click on Credit Learning Center and you’re presented with a laundry list of credit types - from Mortgages and Home Loans to Types of Business Loans. Drill down further into Auto Loans (for this example), and you’ll learn about the different types of auto loans and how to shop for one.

I should say that I was a little nervous about Countrywide Home Loan giving advice on how to shop for a loan - since the entire point of the website is to get you to take out a loan… from them. But I was impressed with the unbiased information they presented to users. The advice is practical, if not common sense.

Quality: If you’re looking for specific things you can do to improve your credit score after a bankruptcy… keep looking. But if you are interested in finding overall ways to improve your own credit score… this is the perfect place to start! Start by taking the Credit Quotient Quiz (I got a perfect 10!). You’ll get an idea of how much (or little) you know about credit. As a result, you’ll know where to start looking for more information. For example, did you know that you can get a free credit report from each of the three reporting agencies each year? Or do you know the definition of the word “Principal?” (I’ll give you a hint… it isn’t the man you visited during Elementary school)

One of the most interesting parts of the site is its Library. The library of CreditDemystified.com is unique in that it offers a number of PDF informational “guides” on popular credit topics. These guides would be perfect to email to a friend or family member who might be thinking of buying a house, or having credit problems. The library also includes a few podcasts on life-changing events that might alter your credit situation. However, I wish the site had built this section out a bit further - with more interesting podcasts and other PDF guides, it does provide a firm foundation for further study.

During the last year or so of college my wife and I threw around the idea of owning investment property in our college town. During our college career we had both seen our fair share of horrible landlords (if there were any) and dumpy homes that were never maintained. We told ourselves that we would make great property owners and that we could easily maintain a nice looking home that could be rented out to four or six college kids. If we maintained the property, we were convinced that we could charge a bit more than the dumps in the neighborhood and still attract tenants.

Now that we’ve left that college town and are actually considering our investment options, it’s time to seriously consider an investment in student housing - but is it a good idea? Apparently off-campus student properties are providing good returns around southeastern and southwestern campuses, especially at public universities. But taking what you know about college students, would you want to maintain a house full of them?

One expert in the field of student housing ownership, Michael Zaransky, states “that for at least 20 years there will be a boom in the population turning 18 and a large percentage of them are choosing to go to college.” But do a large number of college students automatically mean that student housing is a good investment?

One suggestion is that your individual investment decisions should be made first on the ratio of university-owned beds to total enrolled students. The lower the ratio for the campus, the greater need for privately constructed student housing - and the greater demand for your off-campus property.

Another suggestion is to purchase property for your own children while they attend college. To help you purchase this type of student housing, the Federal Housing Administration offers something called a ‘kiddie condo loan’. This loan program is designed to allow both students and non-students to purchase a home with a blood-relative’s good credit standing and cash, according to MSNBC. These homes qualify for all tax advantages of a primary residence and require only 3 percent down. The owner-child can build a positive credit history as they escape from university dorm life.

But what happens when your son’s roommates are late on the rent? Can you deal with that awkward situation?

Although my wife and I are still researching the subject, student housing still looks to be a good real estate investment. Student housing properties bring in a steady positive cash flow (even after maintenance and insurance) and can even bring in enough to cover your mortgages. But when looking for college towns to invest in, look for areas with increasing rent prices that you can take advantage of - even if your child will never attend that school.