Bank of America, the second-largest US banking group, last night came to the aid of Countrywide, the biggest US mortgage lender that is beset by a funding crisis, with a $2 billion injection of capital to prop up its operations.

Shares in the beleaguered mortgage group, which last week startled investors when it tapped the entirety of an $11.5 billion credit line after difficulty raising short-term debt, leapt in after-hours trading on Wall Street as news broke of the impending move by Bank of America.

Countrywide shares jumped by $3.73, more than 17 per cent, to $25.55, as it emerged that Bank of America will mount the $2 billion support operation. That is expected to involve the US bank buying preferred stock in Countrywide, which yields 7.25 per cent, and which can be converted into common stock at $18 a share.

News of the Bank of America bail-out came after a brutal day for the US mortgage industry as job losses and closures linked to the shake-out in the sub-prime home loans sector mounted.

Lehman Brothers announced the closure of its sub-prime unit with the loss of 1,200 jobs, Accredited Home Lenders closed to new business with 1,600 redundancies, and HSBC shut its 600-staff home loan office in Indiana.

Lehman Brothers, the biggest underwriter of US bonds backed by mortgages, became the first Wall Street firm to close its high-risk home loan unit, BNC Mortgage, setting aside $52 million (£26 million) to cover redundancy costs and a goodwill writedown.

A spokesman said that “market conditions have necessitated a substantial reduction in resources and capacity in the sub-prime space”. The bank will continue to make loans to “prime” borrowers through its Aurora unit.

Accredited, the San Diego-based sub-prime lender, also said that it is to shut “substantially all” of its retail lending business, which has 60 branches, keeping just 1,000 of 2,600 staff.

It ceased taking loan applications immediately, although it said that it would honour existing commitments and pledged to resume offering mortgages through brokers when the market had picked up and financing becomes easier to obtain.

HSBC, which became the first mainstream casualty of America’s mortgage woes in February, when it gave its first profit warning to cover a surge in bad debts, shed about 600 jobs when it closed its office in Carmel, Indiana.

Yesterday’s 3,400 job cuts by these banks take financial services redundancies in the US past 91,000 for the year so far, according to Challenger, Gray & Christmas, a consultancy. That is 75 per cent more than the 50,327 recorded for all of 2006. About a quarter of this year’s total have come this month.

The US housing market slump looked set to continue as new data showed that mortgage applications fell by 5.5 per cent last week, from the week before –the biggest week-on-week decline in nearly three months.

In Europe, Standard & Poor’s (S&P) slashed ratings on two mortgage-backed securities funds from the top grade of AAA to “junk” status.

S&P cut the rankings on $3.2 billion of debt issued by Solent Capital Partners in London and Avendis Group in Geneva by 17 notches to CCC and gave warning that it might reduce the ratings further.