Bank of America Corp is in talks to sell its correspondent mortgage lending unit to a division of Fortress Investment Group LLC, the Wall Street Journal reported on Friday.

The largest U.S. bank by assets, which has been saddled by losses and litigation related to its residential mortgage business, last month said it would either wind down or sell the correspondent business, which buys loans from other banks and mortgage brokers.

Nationstar Mortgage Holdings Inc, which is owned by Fortress, is conducting due diligence on the deal, according to the paper. It cited unnamed sources who said no final agreements have been reached.

Fortress officials could not immediately be reached by Reuters.

We continue to work with interested parties, and feel we are making positive progress toward a potential sale, said Dan Frahm, a Bank of America spokesman. He declined to elaborate.

A sale of the mortgage unit would join a steady flow of sales of noncore assets that the bank has been disposing of this year to raise capital to offset losses and meet tougher capital rules being phased in by regulators worldwide.

The bank's shares have lost roughly half their value this year on concerns that continuing problems related to the loans of the former Countrywide Financial could force the company to raise as much as $50 billion of new equity and dilute current shareholdings.

Chief Executive Brian Moynihan, who in August arranged for a $5 billion investment from Warren Buffett's Berkshire Hathaway, has said the bank can absorb its losses through asset sales and earnings.

(Reporting by Joe Rauch in Charlotte, North Carolina; editing by Steve Orlofsky and Andre Grenon)

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