Countrywide shares down amid doubt on BofA buyout

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Countrywide shares plunged nearly 9 percent, or 53 cents, to close at $5.45. The Calabasas, Calif.-based lender's shares have traded between $3.95 and $42.24 over the past 52 weeks.

A call to Bank of America seeking comment was not immediately returned.

Countrywide agreed in January to sell itself to Charlotte, N.C.-based Bank of America for about $4 billion in stock a deal that's supposed to close in the third quarter.

Friedman, Billings, Ramsey & Co. analyst Paul Miller said in a research note that Bank of America should walk away from the deal or cut its offer for the lender.

The deterioration of the mortgage market and Countrywide's loan portfolio could lead to costly write-downs and create a drag on Bank of America's earnings, he said.

Countrywide "has significant risk in its loan portfolio, which in our opinion could experience significant write-downs when marked to fair value when the acquisition closes," Miller wrote.

In a separate note, S&P Equity Research analyst Kevin Cole said he believes Bank of America will complete the transaction but at a lower price, noting that the value of Countrywide's assets have deteriorated "dramatically" since Bank of America made its takeover bid.

Last week, Countrywide reported that it lost $893 million in the first quarter and took $3.05 billion in credit-related charges increases driven by the company's expectation that more borrowers will miss payments and default on loans as housing values continue to slide.

Bank of America factored into its offer that it would have to lower the value of some loans in Countrywide's $95 billion loan portfolio, but it's possible now that those write-downs could exceed the company's initial estimates, Miller concluded.

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