MDA - Market Direction Analysis Message Board

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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 692.24

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Jan 15 4:00 PM EST

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To: HairBall who wrote (53741)	6/12/2000 11:47:00 AM
From: Haim R. Branisteanu	Read Replies (3) of 99985

LG, due to the high pricing of housing it would be important to pay attention to the financial sector. As a reminder if a bank holds a performing mortgage and the value of the RE goes down they must set aside reserves to compliment the shortfall in the L/V ratio even if the mortgage is performing by this curtailing the amount of money that can be forwarded as loans. If the mortgage is not performing ... e.g. payments stop .... this will translate in a special reserve which is deducted from the bank's equity. Banks can lend at 1 to 20 ratio based on their equity base. Special reserves are therefore very harsh and quickly affect the bottom line of any financial institution. Similar regulation are on Insurance companies who hold most of the MBS's issued by banks. Haim

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