Bank Of America Raises Loan Losses, What About The Countrywide Deal?

Bank of America Raises Forecast for Home-Equity Loan Losses: “Bank of America Corp., the second- biggest U.S. bank, raised its forecast of home-equity loan losses to more than 2.5 percent.

Liam McGee, president of the Charlotte, North Carolina- based company's consumer division, gave the new forecast at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

McGee also said the bank's credit-card customers are “showing stress” as they increase spending on necessities instead of travel and entertainment.”

The Federal Reserve Statistical Release on Consumer Credit was freakish. The annual rate of increase in revolving (credit card) debt was nearly 8% in March, more than double the annualized rate of increase in wages.

Consumers or maxing out on their cards and hoping things improve…

Well, since Bank of America (BAC) is raising its own loan loss projections, there is no way they intend to guarantee Countrywide (CFC) debt… and it is becoming increasingly likely they could walk away from the CFC deal entirely. That would strand about $38 billion in CFC debt.

I write about BAC beginning to quietly back off the CFC deal in my post Finally, Dollar Smile Theory In Play?:

Bank of America May Not Guarantee Countrywide's Debt (Update6): “Bank of America Corp., the second- biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial Corp.'s debt after taking over the mortgage lender, increasing the likelihood of a default.”

BAC is in a tight range. Its break down and out or bounce time. A break below $36 would result in tests of the $35 area and the $32 area. A bounce to the $40 area wouldn't necessarily result in an immediate break out and up.

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