Countrywide investors back merger

Countrywide was almost bankrupted by the US housing crisis

Shareholders at the US's biggest mortgage lender, Countrywide Financial, have backed its merger with Bank of America, in a deal worth $2.8bn.

The all-share merger values Countrywide at a tenth of its value in early 2007.

Holders of more than 69% of eligible Countrywide shares voted in support of the deal, Countrywide said.

It comes as the company faces legal action from two US states, California and Illinois, over alleged mis-selling of mortgage loans.

'Accountable'

California Attorney General Jerry Brown is suing Countrywide, chief executive Angelo Mozilo, and chief operating officer David Sambol.

It is alleged they misled borrowers into taking on risky loans they could neither afford nor understand.

And Illinois Attorney General Lisa Madigan has said the state wants to "hold Countrywide accountable for its conduct."

She also claimed the firm engaged in "unfair and deceptive" practices to get homeowners to apply for mortgages beyond their financial means.

Sub-prime blow

The firm - a key participant in the sub-prime sector - has also been hit by the severe downturn in the housing market.

Sub-prime lenders such as Countrywide gave loans to those with poor credit records or unpredictable incomes.

During the housing boom, a huge number of people took out mortgages to take advantage of lower borrowing costs.

But with US interest rates climbing over the past two years, many borrowers have been unable to repay their monthly loans, prompting huge defaults and repossessions.

It is Countrywide's lending practices they have now come into the spotlight and been scrutinised by borrowers, lawyers, politicians and regulators.