American Home can't fund loans, may liquidate assets

[Mister K]

Source: Reuters

NEW YORK (Reuters) - American Home Mortgage Investment Corp , a struggling mortgage lender, said on Tuesday it can no longer provide funding for home loans and has hired advisers to explore options, including a possible "orderly liquidation of its assets."

The Melville, New York-based real estate investment trust is one of the largest U.S. lenders to struggle with a U.S. housing slump that has caused home prices to stall, borrowing costs to rise and defaults to soar.

American Home shares closed Friday at $10.47. They have not traded since trading was halted on Monday morning.

A sign points to a home for sale in a new subdivision in Vancouver, Washington, April 25, 2006. The subprime industry, which makes loans to borrowers with weak credit, is facing tough times as the air hisses out of the housing bubble. Defaults are rising as home prices slump, rates on many adjustable-rate mortgages adjust higher, and personal savings decline. REUTERS/Richard ClementView Larger Image View Larger Image


Read more: http://www.canada.com/nationalpost/financialpost/story.html?id=94641c37-d247-41e3-b995-cb90556b9fde&k=31247

[Tandalayo_Scheisskopf]

1. I wonder at what point...

A clear sense of panic(with some cocommitant hysterical diarrhea) will start to evince itself on Wall Street and in Washington?

I figure it's any time now.

[sarcasmo]

7. Eventually one or two Mortgage companies will own every Mortgage.

That's just IMHO, of course.

[MissB]

2. According to the article, they do prime and near-prime loans with a big "but".

"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."

[Occulus]

4. What do they mean by "little documentation"?

How "little" is "little"?

[MissB]

5. No paycheck stubs?

We had to cough those up back in 2003 when we got the mortgage on this house. We had excellent credit, so they didn't look to closely but they *did* ask for proof of income.

[Kingshakabobo]

6. Fannie Mae and Freddie Mac have provisions for VERY limited documents....

......for good credit and lower loan to value ratios. "Conventional" loans often require 1 pay stub or no pay stub - they only require a 'verbal verification of employment.' These aren't to be confused with "stated income" or "liar loans." The conventional loans still require a document(s) to be signed that allows the end investor to "verify" your income for normal audits or an audit in the event of an early default. The conventional loans are streamlined for "convenience" of the borrower - NOT because the borrower can't prove income.


Re: True Stated loans....
It never made sense to me to allow a borrower, working in a job that provides pay-stubs and W2s, to state their income. It was just asking for people to lie. I've seen senior officers, from national banks that call on our office, encourage us to "make up" income - as long as it's "reasonable."

[pokercat999]

8. You didn't know? In the mind of these starched collar

upper class executives anyone without verifiable income is obviously a drug dealer making thousands everyday! So why not give em a loan they'll be good for it.

[Purveyor]

3. More from a Bloomberg article:

Investment banks cut off credit lines, leaving American Home without money yesterday for $300 million of mortgages it had already agreed to provide, the Melville, New York-based company said in a statement today. It anticipates $450 million to $500 million of loans probably won't get funded today.

``They can't function without access to capital,'' said Bose George, an analyst with KBW Inc. in New York. ``The company either has to file for bankruptcy or go through some type of rescue or restructuring, and either way will leave almost nothing for the common shareholders.''

American Home caters to borrowers whose credit scores fall just short of standards for top-rated mortgages. The announcement provides fresh evidence that defaults may be spreading from subprime borrowers with the worst credit records to homeowners with more reliable repayment histories. The biggest U.S. mortgage lender, Countrywide Financial Corp., said last week overdue payments rose among some of its most creditworthy clients.

---eoe---

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3F3Zttj6aT0&refer=home