This has been a week of mostly disappointing earnings for the big banks. But BofA (BAC), the biggest U.S. lender by assets, went its struggling peers one better Friday by posting a fourth-quarter loss that highlights its many legal headaches and the troubles at its scandal-plagued home lending division, which comprises among other things the former subprime king Countywide.

Bank of America lost $1.2 billion, or 16 cents a share, for the quarter ended Dec. 31. The latest period included a $2 billion home lending goodwill impairment, reflecting a decline in the value of that franchise; $4.1 billion in expenses tied to the cost of settling disputes over souring mortgages, including the widely questioned settlement announced this month with Fannie Mae and Freddie Mac; $1.5 billion in litigation expenses tied mostly to the consumer business; and weak sales and trading revenue.

Wall Street analysts were expecting BofA to make 14 cents a share. BofA said its profit excluding the impairment charge was $756 million, or 4 cents a share.

Of course, there’s nothing like easy comparisons to ease the pain of another poor performance, and BofA does have that going for it. A year ago, the Charlotte-based bank lost 60 cents a share, due mostly to its repayment of government bailout loans.

“Last year was a necessary repair and rebuilding year,” said CEO Brian Moynihan. “Our results reflect the progress we are making at putting legacy – primarily mortgage-related – issues behind us. We earned $10.2 billion before goodwill impairment charges, rebuilt our capital positions, reduced the risk on our balance sheet, and shed more than $19 billion in assets that didn’t directly serve customers and clients.”

But there’s no mistaking the weakness of these results. Revenue, in what is becoming a familiar refrain, tumbled 11% to $22.7 billion, falling a full $2 billion short of the Wall Street expectation. Noninterest income, reflecting the fees Wall Street is so fond of, tumbled a staggering 26% to $10 billion.

Update 10:21 a.m.: Even so, BofA shares rose modestly Friday, adding a nickel to $14.59 as the other big banks rose 1%-2%.

Analysts took solace in improving credit trends, as loss provisions and nonperforming assets declined. BofA also for the first time estimated what it called the high end of its possible obligations to repurchase troubled mortgages sold to investors, though it emphasized the uncertain nature of that $7 billion to $10 billion estimate.

The news comes as Wall  Street mulls over a quarter’s worth of mixed earnings reports from the biggest banks. Citigroup (C) and Goldman Sachs (GS) reported weak trading results and disappointed investors with their cautious outlooks, while Wells Fargo (WFC) was beset with rising expenses.

The weak reports, together with uncertainty over the outcome of rulemaking on the regulatory reform front, have short-circuited a bank stock rally that started in December just as everyone was getting a hold of the idea that a Fed-inspired weak recovery would bolster the health of the banks.

BofA had been one of the leading beneficiaries of that runup, rising more than 30% over six weeks or so as investors started betting that loan losses have peaked and earnings will start to build toward a cyclical high.

But its gains have stalled out, even as the government lends a hand toward clearing BofA’s books of mortgage-related messes, as new threats to housing market stability have emerged.

Friday’s results will do little to clear the haze hanging over BofA and its peers, because while the bank surely did boost its capital and clear away some costs, there is no guarantee 2011 won’t bring more of the same.