In a sign that the subprime meltdown is no longer contained, mortgage lender American Home Mortgage Investment -- whose clients generally have prime or near-prime credit histories -- is delaying dividend payments and might also delay payments on its preferred shares. The lender is taking this course because it has been hit with margin calls following a steep write-down of the value of its loan and security portfolios. In a press release, the company said the delays are necessary "in order to preserve liquidity until it obtains a better understanding of the impact that current market conditions in the mortgage industry and the broader credit market will have on the Company's balance sheet and overall liquidity." American Home Mortgage has $4.01 billion in debt outstanding under its warehouse lines of credit, total liabilities of $19.3 billion, and assets worth $20.6 billion. Earlier in July, the lender's shares took a 20% hit on a rumor, later denied, that a bank had pulled one of its credit facilities. At the end of June, the company warned it will probably report a Q2 loss and retracted its earnings guidance for 2007. Its shares closed down 1.5% at $10.47 Friday, their lowest point since April 2003.
Sources: Press release, Financial Times, Reuters
Commentary: American Home Mortgage Gets Expensive Financing • Optimism Takes a Hit as Real Estate Continues to Slump • "Unexpected Weakness In Home Sales"
Stocks/ETFs to watch: AHM, CFC, HBC, LEND. ETFs: REM
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