US banks urged to up home equity loan loss reserves

WASHINGTON, May 22 (Reuters) - A U.S. banking regulator on Thursday urged banks to shore up reserves for losses from home equity loans, which were widely offered amid low interest rates and intense competition to close mortgage deals.

John Dugan, who heads the Office of the Comptroller of the Currency, said regulators are seeing higher losses from home equity loans, which include lines of credit.

Traditionally, losses from the loans ran at about 0.2 percent but recent data among OCC-regulated banks, which are called national banks, have drifted higher. Most noticeable was a loss rate of 1.73 percent at the end of the first quarter of this year, compared with 1 percent in the fourth quarter of 2007, Dugan said in remarks prepared for delivery at the Financial Services Roundtable's Housing Policy Council. (Reporting by John Poirier; Editing by James Dalgleish)