Promises to buy back loans could cost lender

Expanding rapidly as the nation's largest home mortgage company, Countrywide Home Loans quietly promised investors who bought its loans that it would repurchase some if homeowners got into financial difficulties.

But now that Countrywide itself is struggling, it may not be able to do so, making it even harder for troubled borrowers to reduce their interest rates or make other changes to avoid foreclosure.

The possibility that Countrywide may have to buy back mortgages that it sold comes on the heels of its disclosure last week that the tightening credit markets had forced it to draw on its $11.5 billion line of credit.

But yesterday, Bank of America agreed to invest $2 billion in Countrywide, buying preferred shares that can be converted into common stock at $18 each.

"Bank of America's investment in Countrywide represents a vote of confidence," Angelo R. Mozilo, chief executive of Countrywide, said.

Countrywide had been seen as a prospect for a takeover. But any obligation the company has to buy back loans may complicate discussions with potential buyers.

The repurchase agreements said that Countrywide Home Loans, a unit of Countrywide Financial, would buy back mortgages if their terms were changed to help borrowers remain current. In general, it is difficult for homeowners to get loans modified if they are in a securitization pool.