According to the Niche Report, Bank of America Corp., whose home-equity mortgage portfolio exceeds its stock market value, probably will say about $2 billion of junior loans are bad assets tomorrow even as some borrowers are still paying on time.
That’s what Barclays Capital estimates the bank will report in its first-quarter results, following decisions by JPMorgan Chase & Co., Wells Fargo & Co. (WFC) and Citigroup Inc. to reclassify $4.1 billion of junior liens as nonperforming.
Regulators are pressing for the change on concern that falling home prices have wiped out collateral on many second mortgages, leaving them as unsecured debt. About 20 percent of the nation’s $845 billion of home-equity loans exceed the value of the properties when combined with primary mortgages, according to CoreLogic Inc., and about 36 percent of Bank of America’s were at least partly “underwater” at the end of last year, according to regulatory filings.
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