American Home Mortgage Investment Corp. shares crash

Long Island Business News, Jul 31, 2007 by Henry E. Powderly II

American Home Mortgage Investment Corp. shares tumbled nearly 90 percent on Tuesday after the mortgage lender announced it may have to sell off its assets.

In afternoon trading, shares of American Home (NYSE: AHM) fell $9.32 to trade at $1.15 per share, a new 52-week low.

The company, whose shares were halted from trading Monday and into Tuesday afternoon, in a filing said its credit facilities would no longer lend it money to cover mortgages. In fact, financial backers like UBS, Bear Stearns and JPMorgan Chase demanded their money back.

American Home is therefore considering the sale of its assets, hiring Lazard and Milestone Advisors to help the company examine its options.

American Home Mortgage said it has over the last three weeks paid "very significant" margin calls, which occur as a lender demands compensation after a borrower's collateral loses value. The company still faces "substantial" unpaid margin calls.

American Home said its financial backers will not float any more money, so the company failed to provide $300 million in mortgages promised to home buyers on Monday. The company said it expects not to be able to finance $450 million to $500 million in mortgages more Tuesday.

The reason American Home Mortgage's lenders are balking is the mortgage loans that act as collateral for the company's credit lines have sunk in value.

The market where investors buy mortgage loans has suffered "unprecedented disruption" this year, the company said, and it is having trouble selling its mortgages. Last year, the lender sold two- fifths of its loans to Countrywide Financial, Deutsche Bank and Wells Fargo.

The company, which employs 7,627 nationwide, announced its second round of layoffs last week, 228 people, mostly from its Long Island headquarters.

The Associated Press contributed to this report.