The Bank of America, seeking approval of its Countrywide Financial Corp. takeover, announced Monday it will modify at least $40 billion in troubled mortgages during the next two years to keep customers in their homes, Bloomberg News reported Monday.

The action could help as many as 265,000 homeowners, Liam McGee, president of the Bank of America's (NYSE: BAC) global consumer and small-business banking unit, said Monday in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase, Bloomberg News reported.

``No one benefits from a foreclosed home,'' McGee told Bloomberg News. ``It is bad business for banks.''

Bank of America's shares moved 10 cents higher to $38.40 while Countrywide (NYSE: CFC) gained 7 cents to $5.91 on the news in Monday afternoon trading.

Economist David H. Wang told BloggingStocks Monday he likes what he hears regarding the Bank of America's proposed plan, from both sector and macroeconomic standpoints. "It is a prudent move. It's not a move without costs, but in the long run the Bank of America will have more performing loans, which will benefit its bottom line," Wang said. "It's also good from a macroeconomic standpoint, because we know that people in their homes tend to buy furniture, appliances, and other home maintenance items. So the more people who are able to retain their homes, the better, for the U.S. economy." Wang added that he doesn't own shares in either BAC or CFC.

Get 'ball rolling in right direction'

Wang said he hopes other banks will follow suit "to the extent they are able to" and also agree to modify what he called "at-risk loans" - - those that are in danger of foreclosure, or near that stage.

"The Bank of America's pool contains 265,000 [borrowers]. Now imagine another 250,000 [borrowers] able to retain their homes, and maintain their homes, ...stay as functioning homeowners in their communities. That would have a significant stimulative effect on the U.S. economy," Wang said. "It would be a positive data point that would get the ball rolling in the right direction."

The Bank of America did not specify the costs associated with its plan, and Wang did not want to speculate, prior to a review of the bank's proposed initiative. However, Wang did say the plan "may not contain as high a cost for the bank as one might assume," if new mortgage terms enable the bank to recapture a portion of due principal/interest deferred.

In January 2008, amid the nation's worst housing slump in more than 15 years, the Bank of America agreed to acquire troubled Countrywide Financial, pending regulatory and shareholder approval. If approved, BAC said it would operate the combined company under the Bank of America brand name.