NEW YORK — In the latest signal Bank of America Corp., the nation's largest bank by assets, is dealing with a persistent headache in its mortgage operations, Moody's Investors Service downgraded its underlying mortgage servicing ratings.

Late Tuesday Moody's cut the underlying ratings on the bank's home loans servicing and national bank one notch, from the top rating to the second on a five-level scale.

The ratings service said it was lowering its opinion, and keeping it on alert for further downgrades, to reflect "the challenges Bank of America continues to face with the integration of Countrywide."

The ratings refer to the ability the servicer has to mitigate losses on loans it provides for securitizations. The ratings are used by investors in securitizations, and are supposed to evaluates "how effective a servicer is at preventing defaults and maximizing recoveries to a transaction when defaults occur," Moody's said.

The changes do not affect the parent company's credit rating levels.

Bank of America, which purchased Countrywide in 2008, has created a so-called "bad bank" to separate the massive pile of soured mortgages created during the housing bubble. It is trying to work its way through the loans, moving thousands of employees from its originating operations to its struggling loan operations.

The mortgages have consistently weighed on the bank's bottom line as it has had to put aside huge amounts of revenue to handle losses in loans, and has faced growing demands for repurchases from investors that bought into securitizations.

The bank has estimated it could face up to $10 billion in repurchase requests from private investors, though the bank says that worst-case scenario is unlikely given the way contracts were written.

Bank of America shares were up a fraction in premarket trading, and are down 5.6% year to date and nearly 12% over the past three months.

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