By DAMIAN PALETTA, VALERIE BAUERLEIN and JAMES R. HAGERTY
January 10, 2008 2:37 p.m.

Bank of America Corp. is in advanced talks to acquire struggling Countrywide Financial Corp., according to people familiar with the situation.

It isn't clear how quickly a deal might be struck, but two people familiar with the matter said it could occur very soon. It also is possible that an agreement could be delayed or fall apart altogether.

The market value of Countrywide has plunged to about $3 billion, which represents about two months' profit for Bank of America. The Charlotte, N.C., bank paid $21 billion cash over the summer for LaSalle Bank of Chicago.

Countrywide's stock has plunged in recent days amid intensifying anxiety among investors over a continuing surge in defaults and foreclosures afflicting the Calabasas, Calif., lender and others in the mortgage industry as home prices fall and the threat of a recession grows.

Bank of America last August propped up Countrywide by buying $2 billion of preferred shares convertible into a stake of about 16% in the lender.

Since then, Countrywide's default problems have continued to grow, sparking speculation that the company could face bankruptcy. Countrywide was forced to deny earlier this week that it planned to file for bankruptcy.

Since buying a stake in Countrywide, Bank of America has been seen as a potential buyer of the troubled lender. The Charlotte, N.C., company has first right of refusal in any sale of Countrywide, and Bank of America has a long history of opportunistic takeovers of banks facing distress.

Bank of America declined to comment, citing a longstanding policy on not commenting on rumors and speculation. Countrywide representatives didn't immediately respond to a request for comment........