If rumors in the financial press are correct today, Bank of America (NYSE: BAC) could announce a deal to buy Countrywide Financial (NYSE: CFC) for about $4 billion as early as today (UPDATE: Rumors of the deal have been confirmed). According to news reports, the boards of directors have been in talks for about a month. Countrywide's market value dropped from $27 billion a year ago to about $4.5 billion as of yesterday on rumors that Countrywide was close to bankruptcy.

Bloomberg reports that Bank of America was looking at a potential loss of $1.3 billion from its stake in Countrywide and instead decided to buy Countrywide at fire sale prices. Bank of America gave Countrywide a $2 billion cash infusion about five months ago in exchange for preferred stock with a yield of 7.25% that was convertible to common shares at $18. With Countrywide's stock closing at $7.75 yesterday and rumors of bankruptcy, Bank of America's cash infusion was looking like a really bad deal. Eric Schopf, fund manager at Hardesty Capital Management, told Bloomberg, "I hope Bank of America isn't throwing good money after bad. They struck a deal that wasn't very attractive. Hopefully they can get it right the second time around."

What does this deal do for Bank of America? The bank gets control over the largest mortgage lender with a lucrative loan servicing business with $1.4 trillion worth of mortgage loans -- the largest loan servicing portfolio as well -- for just about $4 billion in stock. Not bad when you remember that BOA paid $48 billion for FleetBoston Financial in 2004 and $35 billion for MBNA in 2006. In addition, BOA gets instant access to Countrywide's top-notch infrastructure and technology.