Bank of America sees higher home equity losses

(Reuters) - Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) on Tuesday increased its forecast for expected losses from home equity loans, citing the deteriorating U.S. housing market.

Liam McGee, president of global consumer and small business banking, offered his forecast as the second-largest U.S. bank prepares to complete its purchase of Countrywide Financial Corp CFC.N, the nation's largest mortgage lender, in the third quarter.

"Losses have risen rapidly in the past two quarters as the housing markets continue to worsen," McGee said at a UBS global financial services conference in New York. "The 1.71 percent loss rate of the first quarter will go higher in the near term, and is expected to exceed our earlier range of 2 to 2.5 percent."

McGee acknowledged that critics have questioned the rationale of the Countrywide purchase, valued at about $4 billion when it was announced in January. He said the bank will continue to "look hard at Countrywide's processes, assets and cash flows."

David Hendler, an analyst at CreditSights Inc, wrote in a report that McGee's assessment of Countrywide suggests that the bank "was not ruling out a change in the offer price."

Bank of America agreed to issue 0.1822 of a share for each Countrywide share, valuing Countrywide at about $6.82 per share, based on Monday's closing price.

In afternoon trading, Countrywide shares rose 23 cents to $5.02, while Bank of America shares fell 70 cents to $36.74.

(Reporting by Jonathan Stempel in Bangalore; Editing by Himani Sarkar)