The HELOC Bust: Next Problem for Big Banks?

Say it ain't so. If a prediction from a leading research firm turns out to be accurate, three of the country's biggest banks are poised for colossal losses of up to $30 billion -- this time because of their exposure to home-equity loans.

The research firm, CreditSights Inc., says that Bank of America, Wells Fargo and JPMorgan Chase -- the three biggest U.S. consumer banks -- are particularly vulnerable to "changes in the consumer cycle," reports Britain's Telegraph. And HELOCs, as the home-equity loans are known, are shaping up to be the next problem area in housing.

In the last quarter of 2009, late payments on home-equity loans hit record highs, according to the American Bankers Association. The loans, typically taken out on top of a primary mortgage, are a source of dispute among lenders and those who advocate reducing mortgage principal to stem foreclosures -- and the subject of a Congressional hearing being held today. Second loan holders are forced to take a loss when the first mortgage loan is modified, which they are loathe to do.