Countrywide Financial (NYSE: CFC - News) , the giant mortgage lender being acquired by Bank of America (NYSE: BAC - News) , said on Tuesday it lost $893m in the first quarter as conditions in the US housing market worsened.

Countrywide, a significant player in the subprime mortgage market, agreed to a $4bn takeover offer from BofA last year after teetering on the brink of bankruptcy.

BofA, which long coveted Countrywide's lending platform, expects to close the deal in the third quarter. It has said Countrywide will no longer offer loans to high-risk subprime borrowers.

Countrywide said it lost $893m, or $1.60 a share, in the quarter, compared with a profit of $434m, or 72 cents, in the first quarter last year.

Provision for credit losses on Countrywide's investment in residential loans soared to $1.5bn from $158m last year. Charge-offs were $606m, up from $39m. Countrywide increased its reserves for credit losses by about $1bn, to $3.4bn at the end of the quarter.