According to Bank of America (NYSE:BAC) Chief Executive Officer Brian Moynihan, he’s not too concerned over the losses the company will incur from their home-equity loans, which holds about $149 billion in its portfolio.
Moynihan added he’s comfortable with this not being considered a “big issue” at the company going forward. He agreed that there is a significant increase in write-downs, but believes the company can handle it okay.
Bank of America holds about $43 billion in home-equity loans where the mortgage is higher than the value of the home. Approximately 20 percent of those are no longer making their payments, said Moynihan, which means the company, in this area of business, is dealing with about $9 billion in losses if things continue on as they are.
Moynihan addressed the claims that the entire portfolio of home-equity loans were having problems, saying it wasn’t true at all.
He did say BofA is writing off about $1.5 to $2 billion in loans a quarter. The one question is whether that will grow in the first quarter from mortgage re-sets, which are expected to surge through the first half of 2010. The re-sets are required by law.
One proposed solution to help borrowers is for the largest lenders in the country, which includes Bank of America, to write down the value of the mortgages, making is easier for the mortgages to be restructured successfully.
