Morgan's HELOC Woes Not Shared by Rivals

Don't expect a new rash of problems at other big brokerages in the wake of Morgan Stanley's(MS Quote) recent decision to freeze a chunk of home equity lines of credit.

Morgan Stanley notified thousands of clients this week of the freeze due to declining property values and the overall deterioration in the housing market, according to Bloomberg, which cited a person familiar with the situation. Large banks, including JPMorgan Chase(JPM Quote) and Washington Mutual(WM Quote), among others, have already been notifying clients earlier this year of tightened lending standards and freezing credit lines on their home equity loans.

But while Morgan Stanley and Merrill Lynch(MER Quote) have forayed into mortgage and home equity lending during the housing boom to complement their large retail brokerage arms, rivals like Goldman Sachs(GS Quote) and Lehman Brothers(LEH Quote) generally cater to high-net-worth clients who have little need for such services.

"Lehman and Goldman don't do business with the vast majority of the people out there," says Richard Bove, an analyst at Ladenburg Thalmann. "So their exposure to things of this nature is substantially less. So I don't think it will be a problem for them."

Brad Hintz, an analyst at Sanford Bernstein, echoed Bove's thought. Goldman's and Lehman's client base is "all high-net-worth," Hintz says. "If a client really needs home equity loans they probably shouldn't be a client" at either firm, he adds.

Morgan Stanley will begin reviewing home equity lines on a monthly basis, Bloomberg reported Wednesday.

"Consistent with the terms of the [home equity line of credit], Morgan Stanley periodically reassesses client property values and risk profiles," according to spokeswoman Christine Pollack. "A segment of clients was recently notified of a change in the status in their HELOC due to a change in the value of their property and or their credit profile."