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Bank of America (BAC) has been forced to mark down billions of dollars worth of the troublesome Countrywide Financial Corp. mortgage portfolio since acquiring it in early 2008. CEO Brian Moynihan took questions Wednesday from Bruce Berkowitz, founder of the investment firm Fairholme Capital Management. The timing couldn't have been better for BofA investors, who had to watch the bank's stock dive below $7 share Monday and gain little of the decline back since. BofA's mortgage woes center around the $40 billion mortgage portfolio acquired during the purchase of Countrywide. At the time of the transaction, BofA immediately marked down the value of the portfolio by $8 billion. Since then, Moynihan told Berkowitz the bank has marked it down by roughly $25 billion and 40% of it is currently delinquent. In February, BofA formed a new Legacy Asset Servicing division within the bank to handle delinquent and discontinued mortgages. The division's head, Terry Laughlin, said the bank would need three years to work through this backlog, modifying delinquent mortgages, foreclosing on others and sorting through representation and warranty claims for many. "We expect to do so over the next couple of years," Moynihan reiterated Wednesday. Since December, the bank settled representation and warranty claims with Fannie Mae and Freddie Mac for $3 billion, paid off private investors with an $8.5 billion settlement (which is being challenged) and faces another $10 billion lawsuit from American International Group (AIG). Most of the trouble centered around the legacy Countrywide portfolio, which Moynihan admitted to Berkowitz. "Obviously, there aren’t many days when I get up and think positively about the Countrywide transaction," he said. Write to Jon Prior. Follow him on Twitter @JonAPrior.

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