American Home Mortgage Closes Its Doors

Mortgage lender American Home Mortgage Investment Corp. will shut down most of its operations on Friday, the company announced late Thursday night. "Bankruptcy is the next logical step," said JMP Securities analyst Steve DeLaney. The closure comes two days after the company's shares plummeted 90% on news that its banks had cut off its credit lines. American Home will lay off all but 750 of its 7,400 employees. "It is with great sadness that American Home has had to take this action which involves so many dedicated employees," said CEO Michael Strauss. "Unfortunately, conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative." All operations will be closed down except for the thrift and servicing businesses "to preserve the value of... remaining assets." American Home specialized in adjustable-rate and Alt-A mortgages geared toward borrowers with relatively good credit histories. The company's collapse suggests that the effects of the housing downturn are no longer contained within the subprime market. Its shares shed 50% to $0.72 in AH trading.

Sources: Bloomberg, TheStreet.com, Reuters, New York Times
Commentary: American Home Mortgage Plummets on Bankruptcy Fears • The AHM Meltdown: Symptom of a Much Larger Problem • American Home Mortgage: The Liquidity Crunch Claims Another Victim
Stocks/ETFs to watch: AHM. Competitors: IMH, NFI. ETFs: REM

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