Wachovia Corporation (NYSE:WB) announced today that it would be doubling its expected loan loss provision for the fourth quarter to $1 billion in additional write downs, up from previous estimates of $500 million to $600 million. Difficulties in the California and Florida mortgage markets have caused widespread devaluation in mortgage-backed securities over the past two months.

Bank of America Corporation (NYSE:BAC) also announced an increase in their loan loss provisions, which are now expected to exceed the $3 billion it previously projected. The bank stated that one third of the increase is due to growth and seasoning in their consumer lending portfolios with the remaining two thirds due to deterioration principally in consumer real estate and in some small business.

The mortgage market itself continues to face sharp losses ahead of million of ARM mortgage resets. A fraction of these resets were eliminated due to new government regulations that enable consumers to keep the same introductory interest rates. However, near-prime and prime loans facing similar resets are also likely to have borrowers that will have trouble repaying their loans.

Both banks refused to forecast quarterly earnings, but it is easy to assume that results will again by quite disappointing for both banks. Meanwhile, the final write downs remain uncertain for both banks, but at least Bank of America plans to remain profitable in the fourth quarter. Combined, these factors make BAC and WB stocks worth watching!

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