Countrywide had spiraled into disaster as investors suddenly realized that many homeowners wouldn't be able to repay mortgages that required no proof of income or downpayment, and offered adjustable rates that made monthly payments unaffordable.
The Countrywide purchase in July 2008 made Bank of America a major player in the U.S. mortgage market. Regulators, meanwhile, portrayed Countrywide's huge size as the result of its executives single-minded pursuit of market dominance, even if it meant taking disastrous risks.
In the legal aftermath, Bank of America entered an $8.4 billion settlement with 12 states over Countrywide's lending practices. A class-action suit by former Countrywide shareholders cost the bank another $600 million. Bank of America has paid out more than $13 billion for investor claims related to mortgages.
Both acquisitions turned out to be "very troublesome" for Bank of America, said Bert Ely, a banking industry consultant based in Alexandria, Va. "They're still cleaning up the mess," Ely said, and likely will have to continue to deal with it for a few more years.
Bank of America's mortgage division hasn't turned an annual profit since 2007.
After years of gobbling up other companies, the bank has been shrinking, laying off employees and selling operations.
"The challenge is trying to right-size the company" and get its earnings up to snuff, Ely said. The bank "still is not a top-notch performer. It has got more work to do," he said.
Fitch Ratings said it views the settlement as "a positive step for (Bank of America) toward resolving its multitude of legal issues." However, the rating agency added, given that other legal issues remain, "we believe these will continue to create headwinds for the company over a near- to intermediate-term time horizon, from the perspective of both management attention and earnings generation."
Bank of America said Friday that it will pay for the settlement with existing litigation reserves and about $1.6 billion in litigation expense that will be recorded in its third quarter. The company cautioned that this expense, coupled with some other charges, is expected to lower its third-quarter earnings by about 28 cents per share.
Bank of America will report its third-quarter financial results on Oct. 17.
Shares of Bank of America Corp. fell 14 cents to $8.83 in trading Friday. It shares peaked for the past year at $10.10 on March 19 and traded as low as $4.91 in mid-December 2011.
Associated Press Writer Ann Sanner in Columbus, Ohio, contributed to this report.