Shareholders of Countrywide Financial, the largest US mortgage lender at the center of the housing crisis, approved its sale Wednesday to Bank of America, marking the latest shakeup in the troubled sector.
Meanwhile, the state of California announced a lawsuit against Countrywide for deceptive and unfair lending practices that left a wake of surging foreclosures.
The Calabasas, California-based lender said that owners of more than 69 percent of its outstanding shares approved the buyout at a special stockholders meeting Wednesday. The sale is expected to close on July 1.
Bank of America in January agreed to pay four billion dollars for Countrywide in a deal that rescued the nation's largest mortgage lender. The value of the stock deal is lower because of the decline in the price of Bank of America shares.
The deal eased fears of a collapse of the largest player in the troubled US mortgage market that could have sent shock waves through the world's biggest economy.
Bank of America, the leading US bank by share value, announced the takeover deal on January 11. It offered 0.1822 of its own shares for each Countrywide share in a deal worth around four billion dollars.
Analysts at the time said that would put Countrywide's share value at 7.16 dollars, a 7.6 percent discount to its closing price of 7.75 dollars on January 10.
Bank of America shares have shed 29 percent of their value since the offer was made. On Wednesday they were trading 2.48 percent higher at 27.28 dollars around 1706 GMT.
Countrywide's woes reflect the troubles of the overall US housing market and the big lender is particularly exposed to losses in the subprime mortgage market, which catered to borrowers with weak credit histories.
In October the company posted its first quarterly loss in 25 years amid surging mortgage defaults.
In August, when US mortgage-related woes started to roil financial markets in the United States and other industrialized countries, Bank of America bought a 16 percent stake in Countrywide in a deal worth two billion dollars.
Countrywide had 408 billion dollars in mortgage originations in 2007.
The Charlotte, North Carolina-based Bank of America has said the deal would have a neutral effect on its 2008 results and be a positive factor in 2009, excluding merger and restructuring costs.
Yet Countrywide's troubles deepened Wednesday as it was sued by California, one of the most devastated markets in the housing crisis.
California Attorney General Jerry Brown said the state had sued the company, its chief executive Angelo Mozilo and president David Sambol for engaging in deceptive advertising and unfair competition by pushing homeowners into risky loans for the sole purpose of reselling the mortgages on the secondary market.
"Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market," Brown said in a statement.
"Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme."