Barclays Sees $2 Billion of Bad Loans at Bank of America

Loans to be ‘reclassified’ even as borrowers pay on time

Bank of America's home-equity holdings exceed its market value. Photo: AP Bank of America's home-equity holdings exceed its market value. Photo: AP

Noting that Bank of America’s home-equity mortgage portfolio exceeds its stock market value, Bloomberg reports that BofA will probably will say about $2 billion of junior loans are bad assets Thursday even as some borrowers are still paying on time.

Citing Barclays Capital estimations of what the bank will most likely report for its first-quarter results, the news service adds the announcement will follow recent decisions by JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup 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,” Bloomberg writes. “About 20% 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% of Bank of America’s were at least partly ‘underwater’ at the end of last year.”

“The reclassification may change the way the investors look at the company but as far as the vulnerability it does nothing to take that away,” the service quotes Jeffrey Sica, president of SICA Wealth Management, as saying. “This is something they have very much tried to keep under wraps.”

Almost a quarter of homes in the U.S. were worth less than the mortgages against them, according to CoreLogic, a data firm based in Santa Ana, California. About 4.4 million had home-equity mortgages.

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