The continuing drama of Countrywide Financial

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From Times staff writer Walter Hamilton:

Countrywide Financial Corp. is back in familiar territory: on the list of stocks that have tumbled the most today.

Its shares plummeted 15% after an analyst speculated that Bank of America Corp. might renegotiate -- or even cancel –- its deal to buy the deeply troubled mortgage lender.

Paul Miller, an analyst at FBR Capital Markets, wrote that Bank of America could slash its offer from roughly $7.25 a share to $2 or less.

That could be quite a blow to shareholders who have tried to pick up Countrywide shares on the cheap -– and been repeatedly penalized as the stock slid ever lower.

Even at its worst moments over the past year, the stock never closed below $4. It finished at $7.75 on Jan. 10, the day that word of the deal leaked out. Shares of Calabasas-based Countrywide fell 91 cents to $5.07 today.

Countrywide’s $95-billion loan portfolio has ‘deteriorated so rapidly’ this year, Miller said, that buying the company could dent Bank of America’s earnings or force the banking giant to raise additional capital.

The deal was announced in January at a price tag of about $4 billion in stock. But Bank of America might have to write off another $20 billion to $30 billion in Countrywide-related losses, Miller wrote.

Bank of America ‘should completely walk away’ from Countrywide, Miller wrote.

Though others doubt the deal will be aborted, the mere speculation is one more question mark that neither the financial nor the housing market needs.

Money & Co. blogger Tom Petruno is on vacation this week. He returns May 12.