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To: Johnny Canuck who wrote (44083)	4/2/2007 11:07:12 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70085

M&T Filing Highlights Mortgage Squeeze Joshua Lipton, 04.02.07, 1:50 PM ET Last week, Federal Reserve Chairman Ben Bernanke marched up to Capitol Hill where he said he didin't see any significant indications that the headline-grabbing problems in the subprime sector had leaked into the prime loan market, mortgages made to creditworthty borrowers. But recent news from Buffalo-based M&T Bank could cause the Fed chief to reconsider his opinion. The bank reported in a Securities and Exchange Commission filing that its first quarter financial results will be impacted by what it said were "current adverse market conditions." What's the reason for the bad news? M&T told investors that problems in the subprime residential mortgage lending market have had a negative effect on the rest of the residential mortgage marketplace, specifically with regard to alternative, or Alt-A, residential mortgage loans that M&T originates for sale in the secondary market. "Unfavorable market conditions and lack of market liquidity impacted M&T's willingness to sell Alt-A loans in the first quarter," the company said in the filing. "At a recent auction of such loans fewer bids than normal were received and the pricing of those bids was lower than expected." Alt-A loans are the highest of the below-prime category, generally comprising mortgages made to creditworthy borrowers but with limited documentation. M&T's filing means that the bank thinks the loans it has recently originated are worth more than investors in mortgage-backed debt are willing to pay for them, another way of saying that the ocean of money that floated the U.S. housing market for the past few years is evaporating. M&T said that, in accordance with generally accepted accounting principles, loans held for sale must be recorded at the lower of cost or market value. The result: the carrying value of M&T's Alt-A portfolio that had been held for sale was reduced by $12 million in the first quarter, which M&T estimates will result in an after-tax reduction of net income of $7 million in the quarter, or 7 cents per diluted share. Investors didn't like what they heard. On Monday morning, the bank's shares nose-dived 8.1%, or $9.41, to $106.42.