 |
| 30 Yr Fix |
6.37% |
0.02% |
| 15 Yr Fix |
5.91% |
-0.01% |
| 1 Yr ARM |
5.17% |
0.00% |
| 5/1 ARM |
5.82% |
0.04% |
| 30 Yr Tres |
4.47% |
-0.05% |
| Fed Prime |
5.00% |
-0.25% |
|
|
|
|
 |
Free Subscription To News Alerts
Stay up to date on breaking news with our free News
Alert Service. |
|
|
Alt-A Lender Crashes and Takes Stock Market With It
11420
Views - Printer Friendly - Email
This Story To A Friend
After two days in which trading was suspended on the basis of information about
margin calls, shares in American Home Mortgage (AHM) were again
put into active trading on Tuesday and immediately lost over 90 percent of their
value.
Stock in the company had been trading around $36 as recently as February but
had fallen to the high teens in recent weeks because of subprime
problems. Rumors were rife on Friday that the AHM had lost some of its warehouse
lines and was scrambling to find additional collateral or funding to complete
its obligations. AHM denied the rumors at that point and its
stock recovered slightly during the day, closing at $10.47. However, by the
time the market opened on Monday the company had confirmed its problems and
trading in the stock was suspended by exchange officials. When trading in the
stock was finally reinstated Tuesday afternoon the stock plummeted. At the end
of the day Tuesday shares were trading at $1.04.
The company admitted that it had met a number of margin calls over the last
few weeks as the value of its loan portfolio declined and lenders and investors
demanded more collateral for its loans.
Further spooking a jittery market is the fact that AHM is not a subprime lender
but rather a big player in the Alt-A
market, catering to borrowers with decent credit. It also writes huge numbers
of adjustable rate mortgages. There has been a lot of speculation that, as these
rates adjust,
marginal customers will be unable to make payments or refinance to more affordable
products and defaults and thus foreclosures will skyrocket.
The company has been told by its lenders, those banks and other financial entities
that actually provide money for the mortgages the company writes, that they
will no longer fund AHM loans. It is estimated that the company
had to default on closing $300 million in mortgages on Monday and was expected
to cancel closings on another $450 to $500 million loans Tuesday because the
money was simply not available. Among the companies that lend to AMH are Bank
of America Corp, Credit Agricole SA, Calyon affiliate, UBS AG, and Bear Stearns.
Bear Stearns has had substantial problems of its own because two of its hedge
funds are heavily invested in residential mortgage backed securities. The company
has lent the funds huge amounts of money in recent weeks and one of the funds
has closed.
Analysts speculated that AHM will have little choice but to file bankruptcy
in its present situation and the company said it has hired Lazard Ltd. and Milestone
Advisors to help it sort through its options. None of these options appear to
be favorable to stockholders.
Not surprisingly, other lenders also saw their stocks lose value. According
to Reuters, NovaStar Financial a subprime lender lost one quarter of its value
on Tuesday.
The stock market itself had been having a pretty good day with the Dow Jones
up as much as 140 points, then trading opened in AHM and the bulls fled. The
market closed down 1.1 percent or 146 points.
The ripples are beginning to affect more and more sectors of the economy. Reuters
also states that two of the major issuers of private mortgage insurance,
MGIC Investment Corporation and Radian Group lost 15 to 16 percent of their
stock value after they announced that they might be forced to write off a combined
$1.03 billion from a joint venture they formed related to subprime mortgages.
But the saddest ripples of all engulfed homebuyers and sellers on Monday and
Tuesday. Imagine showing up at the title company all atwitter at the prospect
of finally owning your own home or walking out with a big check only to be told
that the money will not be there to complete your sale. Based on an average
home price and a 10 percent down payment we figure that some 3750 home closing
were directly impacted on Monday and Tuesday and surely there are more that
were scheduled over the next few weeks. And the ripples don't stop there.
Many of the sellers will now be unable to complete the purchase of their next
home, in all likelihood many will lose substantial deposits for being unable
to perform and, as a practical matter, how many people had already packed up
and vacated old homes and apartments and now have no place to go.
What was being called a mess a few months ago is now turning into a genuine
nightmare and it is hard to figure how or when it will end.
Related Tags
Select a Tag for more information related to that Tag. (View
All Tags)
|
Comments (11)
| A year ago, We received approval from our broker we would have no problem qualifying for our homr loan. Its a year later, were two weeks to closing, and $250K into our home, and we dont have a lender. We stand to lose everything. Our builder keeps every nickel of our money and were out. |
|
| Above Posted By:
FM
| Fri, 17 Aug 2007 21:15:23 EST |
| I work for a national appraisal management company and AHM is our biggest client. One division completely went bankrupt so we no longer have any business with them, but the sector of AHM that has survived somewhat unaffected, the REO sector, is still going strong. This was a huge hit to our company. |
|
| Above Posted By:
Anonymous
| Sat, 11 Aug 2007 09:30:59 EST |
| I'm a mortgage broker and I can tell you the real problem is we need to educate people about there finances. It should be mandatory all thru school - how to budget money and how to build credit and balance a check book, make a household budget. These are tools we need thru our whole life but yet most can't balance a check book at 18. We have really failed in this area. We cant expect them to keep good credit with no tools. Just like P.E force it! |
|
| Above Posted By:
Bonnie
| Fri, 10 Aug 2007 20:07:43 EST |
| Hey Joe
Where do you think the loan officers got the programs to sell? They masterminded the whole subprime market? We were given these programs from lenders who got the ok by the feds. We didn't think of these investor based programs, blame the lenders, investors, banks and the federal government. Loan officers will continue to do what they do best, sell loans to those people who qualify for the best possible program. |
|
| Above Posted By:
Yvonne
| Thu, 9 Aug 2007 17:57:40 EST |
| Greed? No the system full of loopholes brought them down. Non-Arms length relationships between brokers and Real Estate agents brought them down. That cozy little relationship...its over....the industry will have to be arms length again....no more lenders, realtors, appraisers, inspectors in-house....crazy from the beginning. |
|
| Above Posted By:
Mike A.
| Thu, 9 Aug 2007 03:46:46 EST |
| Its mind boggling it took the feds this long to get involved. You CANNOT have uneducated ding bats selling mortgages for the benefit of his or her own commission. I can go on and on and on and on. This makes me sick. |
|
| Above Posted By:
joe
| Tue, 7 Aug 2007 20:41:28 EST |
| The industry is over. This is only the beginning. The writing is on the wall. You CANNOT give mortgages to people with extreme high ltv's, low credit scores, and absurdly low reserves. Top it off with the fact that there is literally trillions of debt adjusting to higher rates in the near future(which was difficult for the consumer to pay before the rate hikes) and you have a complete utter catastrophe. Scumbag,greedy,uneducated loan officers are taking down the American economy. cont. next post |
|
| Above Posted By:
joe
| Tue, 7 Aug 2007 20:39:11 EST |
| Apparently Aegis Wholesale was next. Heard from friends within the company today that they are shutting down, as they were asked to repurchase 400M in loans or have their lines shut down. They chose to close the doors, more people out of work, more people don't get to close on time. |
|
| Above Posted By:
AM
| Mon, 6 Aug 2007 16:20:43 EST |
| It is too bad, I worked with AHM people in the past and they were the best! It's a shame that their big brothers on the wholesale/credit side of the business caused their demise! |
|
| Above Posted By:
Frank W.
| Mon, 6 Aug 2007 12:12:53 EST |
| Too, bad, Greed brought them down and now everyone suffers. They could have saved it if they wanted to, but they let people just walk away rather than try to work with them. I am sure they could have helped people in the same "creative" way that they developed these exotic loans, but they chose to do nothing and now they go down with the ship. |
|
| Above Posted By:
CG
| Wed, 1 Aug 2007 18:43:16 EST |
| This is really huge. Our industry is spinning out of control. Who is next? |
|
| Above Posted By:
Robert
| Wed, 1 Aug 2007 16:47:45 EST |
Post A Comment
Please fill out the form below to submit a comment.
|
|
NEW VIDEO
|
 |
|
Trump Talks Economy, Oil and Real Estate
|
 |
|
New Evidence of Deceptive Practices at Countrywide
|
|
WOW. If history repeats itself, what will other customers do in other banks should the economy get worse and other banks start to ...
Read |
The solution to the housing and foreclosure mess is that lenders and borrowers be forced by law to work out new loan agreements, t...
Read |
the federal reserve is a private corporation. It is a private corporation created for the profit of private bankers. The federal r...
Read |
|
