BankAmerica to Acquire Arbor National

BankAmerica Corp., the nation’s second-largest banking company, said Monday it will acquire Arbor National Holdings Inc., a financially troubled New York mortgage bank, in a deal valued at about $118 million.

The surprisingly low price stunned Wall Street, triggering a wave of selling in the stock of Arbor and other mortgage companies, whose lending business has plunged as interest rates shot up this year.

BankAmerica’s offer was worth far less than the market price of Arbor’s stock on Friday, prompting a selloff that left the shares off $4.25 to close at $15.75 in Nasdaq trading Monday.

BankAmerica shares slid 12.5 cents to $45.875 on the New York Stock Exchange.

Arbor National, based in Uniondale, N.Y., on Long Island, is the nation’s 42nd-largest mortgage lender and one of the 100 largest mortgage servicers. It collects loan payments from borrowers to pass on to investors for a lucrative fee.

As interest rates have soared this year, mortgage banks’ business has declined, leading to heavy discounting on new loans and an estimated loss at Arbor of $4.5 million to $5.5 million in its second quarter, which ended Aug. 31.