Countrywide Deal Wins Few Fans

"Liquidity issues have gotten very acute, and I'm not sure those have been fully addressed or resolved," Wolfe says.

Shares of Calabasas, Calif.-based Countrywide's stock soared 6% in early morning trading but cooled a bit after Mozilo's on-air comments. Bank of America acquired convertible shares with a 7.25% coupon to support the home lender's business, which has been stymied because of increasing defaults and an inability to roll over short-term commercial paper used to help fund its lending operations.

Credit fears and the subprime mess have claimed numerous victims, including New Century Financial(NEWCQ Quote - Cramer on NEWCQ - Stock Picks) and most recently American Home Mortgage(AHMIQ Quote - Cramer on AHMIQ - Stock Picks).

Bank of America's $2 billion investment is viewed as a big boon for the nation's largest retail bank. It could end up owning the biggest stake in the nation's largest mortgage lender -- as much as 16% to 17%, assuming full conversion of the preferred stock -- while collecting a tidy 7.25% annual yield along the way.

"We believe that in the current turmoil the stock market has been underestimating the value in Countrywide's operations and assets," BofA chief Kenneth D. Lewis said in a statement about the investment.

Indeed, the investment could be hugely successful for Bank of America, which could further solidify its stake in the mortgage business. That could pay off in future years -- but probably not until after 2009 or so, when billions of dollars in adjustable-rate mortgages finish the process of resetting to current rates, Wolfe points out.

"We think that there are continued challenges in the market," Wolfe comments. "Third-quarter [resets] are going to be rather scary," he adds.

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