Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: EL KABONG!!! who wrote (37344)	8/20/2003 10:47:54 PM
From: Haim R. Branisteanu	Read Replies (1) of 74559

The analysis is a bit flawed as there were very few home equity loans at the time and REFI was not as popular as in the last 2 to 3 years. At present many homes are financed above the 80% LTV and by FED regulations a reappraisal of those homes may render many mortgages in to the "general reserve" category as it was after the 1989 RE boom. General reserve is imposed if the loan is performing but the newly appraised LTV is below the norm (80%) General Reserve lowers the ability to lend by the amount set aside as reserve. Specific reserve is much more harsher as it lower the financial institution equity which has a 15 to 20 times leverage in lending This will trigger a spiral of lower housing prices as those forced to sell, will sell at lower prices. It may start as a trickle but appraisals are based on comparable recent sales and they are headed lower. IMHO most of the recent "home equity" loans held by FDIC institutions will go to "general reserves"

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