Bank of America has come to the rescue of Countrywide Financial, agreeing to buy the ailing mortgage giant for $4 billion in stock.

The deal not only props up Countrywide but should help stave off a looming mortgage-default crisis that threatens to plunge the economy into a full-blown recession.

"We believe this is the right decision for our shareholders, customers and employees," said Countrywide Chairman and Chief Executive Angelo R. Mozilo.

Bank of America Chairman and CEO Ken Lewis said the deal would benefit Bank of America by giving it a stronger position in the home-financing field.

"Mortgages will continue to be an important relationship product, and we now will have an opportunity to better serve our customers and to enhance future profitability," Lewis said.

The acquisition agreement follows fears that Countrywide, the nation's largest mortgage lender, would have to seek bankruptcy protection. Yesterday, Countrywide reported that foreclosures and late payments rose to the highest on record in December, renewing concerns the lender may seek bankruptcy protection.

Meanwhile, pending home sales dropped in the latest report as Treasury Secretary Henry Paulson said there is no evidence the market has hit bottom.

Like most mortgage lenders, Countrywide has been hit hard by falling home prices, rising default rates and tight capital.

Country's Mozilo has called the nation's housing slump the worst since the Great Depression.

Countrywide said the foreclosure rate for the 9.03 million mortgages on which it collects and processes payments doubled to 1.44 percent from 0.70 percent a year earlier, and rose from November's 1.28 percent. The delinquency rate rose to 7.20 compared to 4.60 percent a year earlier.

Pending sales

Fewer home buyers were willing to sign a contract to purchase property in November. The National Association of Realtor's index of pending home sales dropped 2.6 percent during the month, to 87.6. The index had risen 3.7 percent in October.

Treasury Secretary Paulson said he believes the nation's housing slump will continue.

"There is no evidence it is bottoming," Paulson told interviewers on CNBC.

In fact, Paulson said federal assistance to homeowners may need to be expanded beyond struggling subprime borrowers.

To put the November pending sales numbers in context, the pending sales index was 19.2 percent below the November 2006 level of 108.4.

Economists interpreted the numbers as the latest sign that more careful lending practices, belatedly adopted after the subprime mortgage collapse, would keep the housing market soft well into 2008.

The Realtors, meanwhile, managed to find a silver lining. Lawrence Yun, NAR's chief economist, said he expects existing home sales to hold "fairly steady" over the next few months, then rise later in the year. He projects a full-fledged rebound in 2009.

"On the one hand, we have a pent-up demand from the four million jobs added to our economy over the past two years of sales decline," he said. "On the other, consumers continue to wait for additional signs of market stabilization.

"There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase. As a result, the exact timing and the strength of a home sales recovery is a bit uncertain. A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

South strongest

Pending sales were strongest in the South, where they rose 2.3 percent in November to 100.7. But that's 19.8 percent below a year ago. In the West, the index slipped 2.1 percent to 86.6 but is 18.5 percent lower than November 2006. The index in the Midwest fell 4.1 percent in November to 82.1 and is 18.6 percent below a year ago. In the Northeast, the index dropped 13.0 percent in November to 70.1 from a spike in October, and is 19.1 percent below November 2006.

NAR said existing-home sales for 2007 will probably total 5.66 million, which it notes is the fifth highest on record. Meanwhile, the group says existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, hold even this year and then rise 3.1 percent in 2009 to $224,400.

"Rising home prices in the affordable midsection of the country are likely to offset declines in some of the previously hot markets," Yun said.