Bank of America Corp shares fell as much as 6.6 percent on Monday, reaching their lowest level in two weeks, as investors fretted about the bank facing additional legal liabilities over mortgages.

Bank of America's shares staged the biggest decline among the major U.S. bank stocks, and helped bring a broad measure of the banking sector down to its lowest level since July 2009.

A report in the Wall Street Journal on Monday said that U.S. federal and state officials are clashing with banks over how wide-ranging their legal settlements over mortgages should be.

Banks including Bank of America and JPMorgan Chase & Co are looking to be released from a wide array of potential litigation linked to mortgages in exchange for paying penalties of $20 billion to $25 billion, the paper reported. Government officials are looking for more narrower releases.

Investors had hoped that banks could negotiate this settlement and be much closer to ending their legal problems from mortgages, but that may have been too optimistic, investors said.

They could still have people coming after them, even after this settlement, said one analyst at a hedge fund.

Bank of America shares fell in early afternoon trading by 5.6 percent or 39 cents, to $6.58, on track to reach their lowest close since August 8, which was in turn their lowest close since March 2009. The bank's shares fell as low as $6.51 on Monday.

JPMorgan shares fell 1.8 percent to $33.72. Overall, bank stocks as measured by the KBW Bank Index fell 0.11 percent.

(Reporting by Dan Wilchins)

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