Posted on 07/31/2007 11:54:17 AM PDT by Moonman62
NEW YORK (Reuters) - American Home Mortgage Investment Corp (NYSE:AHM - News), a large U.S. mortgage provider, said on Tuesday it can no longer fund home loans and may liquidate assets, putting its survival in doubt.
The Melville, New York-based real estate investment trust retained Milestone Advisors and Lazard to help it evaluate options and advise "with respect to the sourcing of additional liquidity including the orderly liquidation of its assets."
Shares of American Home, which had not traded since Friday, sank $9.15, or 87.4 percent, to $1.32, after the announcement. They traded as high as $36.36 in December.
American Home's announcement shows how concerns about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans.
"The chances are pretty high that the company either goes bankrupt or materially restructures, leaving little value for shareholders," said Bose George, an analyst at Keefe Bruyette & Woods Inc. in New York.
"The business model of non-bank, mortgage lenders is challenging, and may be unstable, because they are so dependent on the willingness of the capital markets to fund operations," he added.
Mary Feder, a spokeswoman for American Home, did not immediately return an e-mail seeking comment. Her telephone mailbox was not accepting messages.
The company also did not return calls on Monday, after it delayed paying a scheduled common stock dividend and announced "major" writedowns.
Many U.S. mortgage providers have struggled with a housing slump that has caused home prices to stall, borrowing costs to rise and defaults to soar. Dozens have tightened lending policies, quit the industry, or gone bankrupt.
American Home has specialized in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation of income or assets. It recently commanded about 2.5 percent of the U.S. mortgage market.
MARGIN CALLS
In its statement, American Home said it was unable to fund $300 million of loans on Monday and did not expect to fund $450 million to $500 million on Tuesday.
It also said it could not borrow from its credit lines, and had "substantial" unpaid margin calls pending to lenders, even after meeting "very significant" calls in the last three weeks.
American Home relies on bank financing to help fund home loans. At the end of March, it had $4.01 billion in "warehouse" lines of credit, and $836.9 million of cash and equivalents.
If it sought bankruptcy protection, American Home would join New Century Financial Corp (Other OTC:NEWCQ.PK - News) and several other home lenders in seeking protection from creditors this year. Most of those lenders, however, catered to subprime borrowers, rather than borrowers considered better credit risks.
(Additional reporting by Dan Wilchins)
AHM's stock price is down over $9 to about $1.30.
Coming Soon to an Alt A and Prime mortgage company near you!
Can’t they borrow from China? It works for Washington.
One of many to come.
American Home's announcement shows how concerns about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans.American Home has specialized in prime and near-prime loans.
I don’t think the Fed has finished waterboarding the economy yet.
"doubt" is an understatement ;-)
Something tells me Monster.com is getting a fair number of hits from their web server.
pingb
This sort of failure does not affect the status of your loan as a borrower.
Yes, but a firm such as BofA, Citigroup, or chase going under would be felt in every aspect of teh economy.
Sounds like they need a second job :)
Off 90% in a day is a good-sized move. What other company has done this besides that natural gas company a few years ago?
The market will soon be flooded with RE and mortgage sales droid very soon.
The mortgage on my new home was provided through AHM. My first trust was sold to Citibank and my second trust was sold to Bank of America about a month after closing. They were very good to work with.
Time to cover my short.
/I wish
Not only that, but this is affecting the entire stock market. The move is typical of companies heading for bankruptcy.
True.
Meanwhile, how about a nice fixer-upper from their on-line inventory of foreclosed properties:
http://www.ahmhomes.com/PropertyDetails.aspx?ID=1000714668
I shudder to think to know what they loaned out on these...
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
American Home has specialized in prime and near-prime loans.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
This credit debacle is now starting to get into the mainsteam loans and lending establishment. I would nto be supprised to hear of WaMu, Wells Farge, Chase, Citigroup, or Bank Of America being affected next. The only differnence is they have cash reserves and probably can weather the storm.
I think the difference with those companies is they can use deposits to make loans.
Don’t worry. There will always be somebody willing to take your payments.
That is what I meant by that.
The first place I lived when I moved out of my folks house was a townhouse that htey used for investment purposed. They got tired of it and sold it to me for what they owed. in 6 years my loan went thru 4 different companies.
>> Meanwhile, how about a nice fixer-upper from their on-line inventory of foreclosed properties
The plywood door is a nice touch!
You guys related?
Being that you are in Cali, I don’t expect the coasts to loose too much value, but I expect a crash in the Inland Empire. Exurbs and “resort communities” will be the hardest hit, IMHO.
Video: Jim Cramer Sees Major Housing Crash Coming
MSM reports suggest that real estate prices went up about 1% since 2006. He says prices are falling all over the nation and 20% is just the start. Cramer says nearly 100% of loans were bad in 2006. Bad 2/28 loans are responsible for the coming crash. Learn More Here
Bad mortgage paper was sold on Wall Street by big firms like Bear Stearns. Cramer says the bond rating firms blew it big time. Also he says the only rating firm that is almost telling the truth is Moody's. But he also says internal estimate of only about 50% bad paper is delusional. Cramer says the best thing you can do to save yourself is to sell your house. "Just walk away. Save your credit if you can,'" he says.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
As a borrower, you have no concern about any failure of your lender. That's for its lenders and shareholders to fear.
>> Coming Soon to an Alt A and Prime mortgage company near you!
Yeah, and not only...
my DVY (ETF weighted to dividend yield) has taken a little beating the last few days.
No AHM, but lots of exposure to other (perhaps) similar consumer financials.
ouch!
THis is why I am glad I have a modest house that I only owe 60% of it appraised value. I have only one car payment, and over $10K cash.
That's idiotic. Nearly all loans made in 2006 were bad?
God, you're an idiot.
Interestingly enough, so did Orange and LA Counties, but that had more to do with the downsizing of the defense industry at that time more than anything else.
San Berdoo and Riverside Counties are home to one of the largest concentrations of subprime homebuyers. Its going to get very ugly over there.
Yes, but it is convient to do business with a company that has a branch were I can pay extra every month only 3 minutes from my house.
I still have one of Cramer’s recommends. Managed to dump the rest. That guy needs more coffee.
Something is. Too much volatility. The market could make a big move south any day for no apparent reason.
Good video!
The sad thing is many mutual fund managers have a lot of this type crap in various funds (sprinkled here and there) and a whole lot of 401K folks are gonna take it on the teeth even without knowing it. Hey, the thugs on The Street have to dump their losses onto some one, right?
I don't think my CitiMort is in trouble either, but Cap One's division is taking one on the nose from what little I've been able to find to ead.
100% of 2/28 loans not 100% of all loans. Quick, what % of 2006 loans were 2/28? What % of all outstanding loans were 2/28 loans made in 2006?
Hard to pimp that blog if you keep telling lies.
You’re right that not all loans written were 2/28 ARM’s.
But here’s what you’re missing, and what is the reason why this isn’t “contained” to sub-prime.
What happened to those 2/28 ARM loans to non-creditworthy borrowers? How were those mortgage-backed bonds sold to the primary lenders?
If you don’t know, just ask and I’ll explain why 2/28’s are causing heartburn clear across the bond market.
She said that it was an "in house" transaction...whereby her company had represented both buyer and seller.
I asked her to make sure the lender involved in our transaction is not connected in any way.
Feel bad for the buyer and seller who thought they bought and sold their home yesterday...and feel bad for the agents involved who thought they finally saw a payday.
Great, tell ex-Texan
But here’s what you’re missing, and what is the reason why this isn’t “contained” to sub-prime.
I'm not missing anything and I never said anything was contained.
Actually, the person that needs to be told is Jim Cramer, who is making the debt markets overly simply for his viewers. Cramer might have been a hedge fund manager, but he clearly doesn’t know his way around the debt or commodity markets.
People who don’t know what a “CDO squared” is, and how they’re constructed (which include a lot of fund managers) are the people whistling past the graveyard.
I’m now completely convinced that the clowns at the Fed don’t know what a CDO squared is, nor do they have a handle on how large the sum of all bond derivatives is worldwide.
Even funds and banks in places like the UK, Switzerland and Germany are taking the sub-prime meltdown in the teeth. I’m quite amazed at how many foreign banks bought American mortgage CDO’s.
The open question in my mind about these top-shelf lenders is what their exposure to derivatives is.
Even if they’re running a pretty old-fashioned lending operation, the increases they’re having to make in allowances for bad loans will likely cause them to raise their standards on new lending and seriously crimp liquidity in the home mortgage business.
Couldn't be. Bernanke and Paulson told us the subprime problems weren't going to spread.
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