Wells Fargo & Co. and Bank of America Corp. are the most exposed to home equity losses as pressure mounts on lenders to write down the value of such subordinate loans more aggressively, according to CreditSights, an independent fixed-income research firm.

JPMorgan Chase & Co. is also heavily exposed, but Citigroup Inc. is the least exposed of the four big U.S. banking companies, CreditSights said in a report to clients Tuesday.

A government effort to encourage banks to forgive billions of dollars in principal on underwater mortgages has reopened the debate about the home equity loans that sometimes stand behind those first liens.

Before first mortgages can be dramatically modified in this way, any home equity loan standing behind it would probably have to undergo painful changes too. In theory, these second liens may have to be wiped out before principal on first mortgages can be cut.

With roughly $600 billion of home equity loans on their balance sheets, U.S. banks may be reluctant to do modifications like this. But an updated government program offers incentives that could persuade some lenders to get more involved. This could prompt big writedowns by the largest U.S. banks.

"Residential mortgage exposures, especially high [loan-to-value] home equity loans, remain a significant headwind for large banks' credit quality in 2010, especially B of A, Wells Fargo and, to a lesser extent, JPMorgan Chase," CreditSights wrote.

A 40% writedown by Wells Fargo on home equity loans with loan-to-value ratios of more than 100% could cost it $12.8 billion of earnings, CreditSights estimated.

A comparable writedown at Bank of America could trim profit by $7.4 billion, the firm said.

For JPMorgan Chase, a 40% writedown on home equity loans with LTV ratios over 100% would cut earnings by roughly $9.6 billion, and Citi could see earnings reduced by $3.4 billion by such a writedown, it was estimated.

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