Aug 3, 2007

American Home Mortgage Investment Inc. No Time Wasted

American Home Mortgage Investment Inc. is just the latest in a long list mortgage companies defaulting. They currently have approximately 7,000 employees and will be letting all but 750 go by this Friday (today). The speed at which this happened has caused many investors to start looking at anyone who has the slightest exposure to the mortgage industry.

Monday, July 30th AHM missed a required $95 million payment to
RAIT Investment Trust, a Philadelphia mortgage real estate investment trust.

Thursday, August 2nd AHM announced that they were ceasing most of their operations and would need to terminate employment of 6,250 workers.

Thursday the lawsuits started to pile on:
PHILADELPHIA, Aug. 2, 2007 (PRIME NEWSWIRE) -- Law Offices Bernard M. Gross, P.C. announced that a class action lawsuit has been commenced in the United States District Court for the Eastern District of New York, Civil Action No. 07-3193.
NEW YORK, Aug. 2, 2007 (PRIME NEWSWIRE) -- The law firm of Seeger Weiss LLP announces that it filed a class action lawsuit today in the United States District Court for Eastern District of New York on behalf of purchasers of American Home Mortgage Investment Corporation.
NEW YORK, Aug. 2, 2007 (PRIME NEWSWIRE) -- Kirby McInerney & Squire, LLP announces that it has filed a class action lawsuit in the United States District Court for the Eastern District of New York on behalf of all persons who purchased or otherwise acquired the publicly traded securities of American Home Mortgage Investment Corp. ("American Home Mortgage" or the "Company") (Nasdaq:AHM) between April 26, 2006 and July 30, 2007, inclusive.

RAIT Investment Trust wasn’t left out of the fun:
PHILADELPHIA, Aug. 1, 2007 (PRIME NEWSWIRE) -- Law Offices Bernard M. Gross, P.C. today announced that a class action lawsuit has been commenced in the United States District Court for the Eastern District of Pennsylvania on behalf of purchasers of the securities of RAIT Financial Trust ("RAIT" or the "Company") (NYSE:RAS) between January 10, 2007 and July 31, 2007.

Friday, August, 3 AHM leaves the mortgage industry keeping only it’s S & L portion alive to maintain the companies remaining assets.

So far all the bad news has been confined to the subprime part of the mortgage market. AHM specialized in Alt-A’s, not subprime loans and are considered less risky than subprime. The unfolding of AHM illustrates just how precarious the existence is of any company that requires borrowed funds to operate on.

It’s interesting how AHM describes there business in the
Investors Section of their website:

"American Home Mortgage Investment Corp.'s primary goals in managing its portfolio are to gain yield through the benefit of self-origination, and otherwise seek to reduce risk. The Company attempts to minimize the risks associated with holding a leveraged portfolio of securitized loans held for investment by approximately matching the duration of its securitized loans held for investment with the duration of the liabilities the Company utilizes to finance those loans. The Company further seeks to mitigate risk by investing primarily in adjustable-rate mortgage ("ARM") and hybrid-ARM securitized loans."

1 comments:

Consumer Mortgage Reports said...

Great post! Like to add some thoughts.

This is about survival of the fittest. AHM is JUST a conduit - NOT a direct lender. A good friend of mine at Wells Fargo, a major buyer of AHM paper told me that this is NOT a spill over into the conventional market, but it is about mitigating risk and reward.

AHM underwrites the loans and sells them to 1 of 4 major buyers, At that point, they initially make the VAST majority of the revenue and then pass on the loan.

That is what they are a pass thru, just look at the dividends they paid out. Everyone saw how much they made and now its tightening AND now the big 4 better control their risks without sharing in the rewards.