Los Angeles ? Struggling lender Countrywide Financial Corp. said Friday it would cut as many as 12,000 jobs as it struggles to deal with challenging conditions in the mortgage industry.

The company said the cuts, amounting to as much as 20 percent of its work force, are needed because it expects new mortgages to fall about 25 percent in 2008 from this year’s levels.

The job cuts are expected to center primarily on the company’s production divisions and its general and administrative support areas, Countrywide Chief Executive Angelo Mozilo said in a letter distributed to employees Friday.

He also called the current market cycle “the most severe in the contemporary history of our industry.”

“During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction,” Mozilo said in the letter.

In recent weeks, the company borrowed $11.5 billion and sold a $2 billion stake to Bank of America so that it could keep operating its retail banking and mortgage lending businesses.

The Calabasas, Calif.-based company said it intends to keep transferring its residential lending business into its Countrywide Bank unit as a way to strengthen its access to funding.

Almost all of its residential lending activity will be originated through the bank by the end of this month, the company said.

The company has shifted its loan production guidelines and now only makes loans that can be sold on the secondary market, such as to government-backed enterprises like Fannie Mae or Freddie Mac, or which qualify under the investment requirements for its banking unit.

The latest cuts followed the elimination of about 900 positions earlier this week and 500 others last month.