NEW YORK (MarketWatch) — Is home equity the new subprime? Goldman Sachs may think so — the brokerage lowered its 2008 earnings estimate for JP Morgan Chase & Co. to $3.30 from $3.44 Thursday amid warnings that problems in the bank’s home equity loan portfolio could cost it $450 million, more than twice previous estimates.

A team of Goldman (GS) analysts headed by William Tanona made the predictions in a note to investors.

JP Morgan (JPM) was down more than 2% in early trading Thursday.

“Home equity losses will be [JP Morgan]’s most significant headwind,” the Goldman analysts said, citing plummeting housing prices and skyrocketing negative equity as major concerns for the bank in coming months.

Goldman retained a “neutral” rating on the stock. Merrill Lynch and Co. (MER) also trimmed its earnings target for JP Morgan Thursday, to $3.83 from $4.07.

The analysis followed JP Morgan’s annual investor day, which was held in New York City Wednesday. The day saw presentations about the bank’s bottom line from JP Morgan CEO Jamie Dimon, Chief Financial Officer Mike Cavanah and the bank’s six business unit chiefs.

The headline-making news out of the meeting was Cavanah’s disclosure that JP Morgan could lose $450 million on home equity loans during the first quarter alone, more than double what it had originally predicted.

JP Morgan’s home-equity related losses ballooned more than 65% during the fourth quarter of 2007 to $248 million, a severe spike from $150 million a scant year earlier.

Goldman analysts took particular notice of that leap in their note Wednesday.

“Management estimates that potential losses on its home equity portfolio could be $2.0-2.5 billion if national house prices fall 5% in 2008 and $3.2-3.7 billion if house prices fall 10%,” Goldman wrote. “We increased our loan loss estimate and provision in 2008 to the high end of this range in light of our views that US house prices will fall an additional 12-13%.”

Negative equity, too, remains a concern. As the bottom continues to fall out of the nation’s real estate market, many homeowners have found themselves holding loans worth far more than their home’s new, much lower value.

“With 10% of its home equity portfolio having a CLTV greater than 100% (negative equity), the charge-off rate could go as high as 4% if house prices decline 10% nationally,” Goldman said.

Analysts also stressed that prime borrowers, too, are feeling the pinch of a weakening economy and faltering housing market. Prime borrowers with loans worth more than 95% of their home’s value are defaulting at much higher rates, accounting for more than 4.3% of JP Morgan’s total loan losses in the fourth quarter.

“These loans have been the primary driver of losses within home equity – about 60% of [fourth quarter] losses came from loans with a CLTV greater than 100%. California accounts for the largest percentage of no-equity loans, followed by Florida, Arizona and Michigan,” Goldman said.

Those types of losses are beginning to be felt across all loan ages, the brokerage cautioned, a possible harbinger of troubles to come.

“Contrary to some beliefs, home equity losses are also being experienced in earlier vintage years,” Goldman said, adding that there is little change in loan loss rates for home equity loans where the first lien is held by JP Morgan or a separate bank.

“Cumulative loss rates in home equity have risen sharply on a number of vintages including those prior to 2006, and the data shows no signs of abating any time soon,” analysts wrote.

The outlook for consumer credit remained grim as well, as many borrowers struggle to cope with new resetting loan terms by depending more and more on credit cards–often causing a major uptick in payment delinquencies.

“[JP Morgan], as well as the rest of the credit card industry, has enjoyed a benign credit environment in recent years,” Goldman said. “However, indications from management suggest that net charge-offs are moving higher and they reiterated that the charge-off rate is likely to approach 4.5% in [the first quarter] and could climb to 5% in the back half of the year.”

As a result, Goldman said it expects to remain cautious on further consumer credit predictions for the bank in the coming quarters.

Goldman and Merrill are only the two latest brokerages to raise alarm bells about further writedowns in the banking sector — Citigroup (C) analysts said Wednesday that they predict Bank of America Corp. (BAC) , Wachovia Corp. (WB) and JP Morgan to report billions more in losses in the first quarter.

The price tag for JP Morgan? It could be as much as $1.44 billion in losses for additional leveraged loans and investments related to mortgage-back securities, Citi said