Bank of America Corp. says it’s moving forward with its $4 billion acquisition of Countrywide Financial Corp. even as the troubled lender reported a $422 million fourth-quarter loss.

Countrywide’s losses for the year totaled $704 million, thanks to an even more tumultuous third quarter, when the seizure of credit markets in August contributed to a $1.2 billion loss for the Calabasas, Calif.-based lender.

Disruption of capital markets and “a severe lack of liquidity” for loans not eligible for purchase by Fannie Mae and Freddie Mac forced Countrywide to move $7 billion in loans it had hoped to securitize and sell to investors onto its own books during the fourth quarter, writing down their value by $394 million, the company said in a press release today.

Countrywide also revealed that it was forced to boost reserves for credit losses to $1.9 billion at the end of the year, compared with $1.2 billion at the end of the third quarter and $269 million at the end of 2006.

In an unusual departure from past practices, Countrywide did not hold a conference call to brief investors on the results, citing the pending merger with Bank of America.

At an investor conference in New York City today, Bank of America Chief Executive Officer Ken Lewis said “everything is a go” to complete the acquisition of Countrywide in the third quarter, the Associated Press reported.

Lewis said Bank of America was not surprised at Countrywide’s quarterly and year-end report to investors, and that fundamentals in mortgage lending are improving as low interest rates drive up originations volume, AP reported.

Earlier this month, Countrywide reported December loan fundings were up slightly from November at $23.5 billion, but that delinquencies and foreclosures in its $1.48 trillion loan servicing portfolio continued to rise (see Inman News story).

Today, Countrywide reported that the percentage of delinquent loans hit 8.64 percent during the fourth quarter, up from 7.12 percent during the third quarter and 5.3 percent a year ago. More than one in three subprime loans were delinquent 30 days or more, compared with about one in five a year ago.

Delinquency rates on conventional first-lien loans increased to 5.76 percent, up from 3.05 percent a year ago and 4.41 percent in the third quarter. Delinquencies on prime home-equity loans also more than doubled in the past year, from 3.59 percent in the fourth quarter of 2006 to 7.32 percent during the fourth quarter of 2007.

Countrywide, which laid off a third of its loan originations staff from July through December, or 11,687 employees, said restructuring charges related to the layoffs and other cost-cutting moves totaled $87 million in the fourth quarter and $145 million for the year.

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