Originally forecasting a 2% loss factor on their home equity loans, Bank of America is now saying that the figure may be even higher than that. The company made it very clear to analysts that their other loans were still performing well despite the fact that the home equity loans weren’t. It’s unfortunate for lenders, but home equity loans come with some of the highest risk factors in the industry due to the fact that there aren’t many options available should they default.Liam McGee, a Bank of America spokesperson, acknowledged the fact that many mistakes were made in the way they grew their portfolio in 2005 and 2006. However, he did note that they have since tightened their lending standards for home equity loans as a result of those mistakes. Edward Najarian reported that a 30% dividend in the third quarter is still possible and that it is not beyond the realm of possibility to see an even larger cut.There was also a comment about Bank of America’s plans to purchase the financially challenged Countrywide Bank, and that Countrywide’s assets, cash flow, and their earnings were being scrutinized very closely. It was also reported that the deal may be going up in smoke which wouldn’t hurt Bank of America in the long run.
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