updated 6/26/2008 5:22:27 PM ET 2008-06-26T21:22:27

Bank of America said Thursday it will cut about 7,500 jobs after it closes its acquisition of mortgage lender Countrywide Financial Corp.

The job cuts amount to about 12.5 percent of the combined companies’ mortgage, home equity and insurance businesses, after the purchase is completed next week.

The Charlotte-based bank said the cuts will take place over the next two years in locations across the country “in instances where the two companies have significant overlap.” The company will begin notifying affected employees in the third quarter.

Bank of America expects to close the deal July 1, having received the go-ahead from Countrywide shareholders on Wednesday.

The all-stock deal, valued in January at about $4 billion, is now worth around $2.8 billion, reflecting a decline in Bank of America’s stock price over the last six months.

Earlier this month, the Federal Reserve cleared the way for the acquisition, which would give Bank of America control of 20 percent to 25 percent of the home loan market.

Countrywide had been the nation’s largest mortgage originator before a spike in bad loans ravished its business. The deepening housing slump and lingering credit crisis have since fueled deep losses.

Countrywide lost about $1.6 billion in the last six months of 2007 and another $893 million in the first quarter of this year. It also faces numerous investigations and lawsuits related to its lending practices.

This includes a pair of lawsuits brought Wednesday in California and Illinois.

Both cases accuse Countrywide of systematically deceiving borrowers in order to get them to take on risky loans they couldn’t really afford, and name Chairman and CEO Angelo Mozilo as a defendant.

The states both seek unspecified damages and for Countrywide to pay restitution to borrowers who lost their homes or loans.

Investors have worried that further deterioration in the mortgage market as home loan delinquencies and defaults rise could make it harder for Bank of America to manage Countrywide’s loans. That could lead to costly write-downs, hurting Bank of America’s profits.

Bank of America is expected to report its second quarter earnings July 21.

Bank of America shares tumbled $1.80, or 6.8 percent, to $24.81 Thursday. Countrywide shares fell 16 cents, or 3.5 percent, to $4.42.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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