In another move intended to smooth the way for its planned acquisition of Countrywide Financial Corp., Bank of America has announced that the combined company would work to modify $40 billion in troubled mortgages in the next two years — about 265,000 loans.

Bank of America also announced Monday that it’s committed to make $1.5 trillion in community development loans and investments over the next 10 years, double the existing goal of $750 billion.

Bank of America plans to complete its acquisition of Countrywide in the third quarter. Although the Charlotte, N.C.-based bank plans to phase out the Countrywide brand name, it said the companies’ combined national consumer mortgage headquarters will be located in Calabasas, Calif., where Countrywide is based.

Bank of America’s announcement coincided with hearings on the merger convened by the Federal Reserve in Los Angeles, and followed last week’s release of new lending guidelines. The new guidelines would shut down the remnants of Countrywide’s option adjustable-rate mortgage (ARM) loan program and "significantly curtail" other nontraditional mortgages such as low-documentation loans (see story).

Countrywide stopped making most subprime loans last year, after shifting origination to mortgages eligible for purchase or guarantee by government-sponsored entities Fannie Mae and Freddie Mac.

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