Jan. 11 (Bloomberg) -- Robert Shiller, Yale professor of economics and co-creator of the S&P/Case-Shiller Home Price indexes, said the falling U.S. housing market may cut the value of Countrywide Financial Corp., the mortgage lender being acquired by Bank of America Corp.

``There's a tendency for people to underappreciate the risk of the housing market,'' Shiller said. ``I might have a lower valuation of Countrywide than Bank of America does.''

Charlotte, North Carolina-based Bank of America, the biggest U.S. bank by market value, agreed to buy Countrywide, based in Calabasas, California, for about $4 billion, taking over the largest U.S. mortgage lender during the worst housing slump in 26 years.

A record number of foreclosures has contributed to home price declines that leave many borrowers owing more on their mortgages than their homes are worth. Shiller compared the housing slump to a ``tidal force.''

``Maybe Countrywide and Bank of America are going to have some problems going forward,'' he said. ``When people see that their houses are worth a lot less than their mortgage balance, they have an incentive to default. The troubled mortgages that Countrywide already has will be followed by even more troubled ones.''

Countrywide, founded in 1969 by Chief Executive Officer Angelo Mozilo, gives Bank of America about 9 million borrowers and fees from servicing $1.5 trillion of mortgages. In past years, Countrywide has been responsible for one out of every five U.S. mortgages.

To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Kathleen Hays at khays4@bloomberg.net.

Last Updated: January 11, 2008 15:38 EST