ALEX VEIGA
AP Business Writer

Released : Wednesday, August 22, 2007 6:49 PM

LOS ANGELES-Countrywide Financial Corp. said Wednesday that Bank of America Corp. has made an investment of $2 billion (?1.5 billion) in the company, a deal that comes as the United States’ largest mortgage lender tries to weather a credit crunch that has rocked Wall Street and the mortgage industry.

The transaction was completed and funded Wednesday, Countrywide said.

“Bank of America, with $1.5 trillion (?1.1 trillion) in assets, has the largest retail banking franchise in the U.S. and is one of the most respected companies in the world,” Angelo R. Mozilo, Countrywide’s chairman and chief executive, said in a statement.

“Bank of America’s investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success,” Mozilo said.

Under the terms of the deal, Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually, Countrywide said.

The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions, Countrywide said.

Countrywide shares jumped jumped more than 20 percent to $26.25 in after-hours trading. Before Countrywide’s announcement, the shares had closed the regular session up 3 cents at $21.82.

Kenneth D. Lewis, Bank of America’s chairman and CEO, said in the statement that turmoil in the stock market has led some to underestimate the value in Countrywide’s operations and assets.

“This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country,” Lewis said.

Countrywide said last Thursday it had borrowed $11.5 billion (?8.5 billion) from several dozen banks so it could keep making home loans.

As defaults increased on subprime mortgages to borrowers with shaky credit histories, and the problems stretched to other credit markets, Countrywide’s shares plunged, hitting a 52-week low of $15 last Thursday.

The stock rebounded after the Federal Reserve cut a key interest rate Friday. Even with the rally, Countrywide shares have lost about half their value so far this year.

Shares of Bank of America, which rose 35 cents in regular trading Wednesday to $51.65, gained another 1.8 percent to $52.60 in after-hours trading.