American Home Mortgage Investment can’t fund loans
American Home Mortgage Investment Corp, a large U.S. mortgage provider, said on Tuesday it can no longer fund home loans and may liquidate assets, putting its survival in doubt.
The Melville, New York-based real estate investment trust retained Milestone Advisors and Lazard to help it evaluate options and advise “with respect to the sourcing of additional liquidity including the orderly liquidation of its assets.”
Shares of American Home, which had not traded since Friday, sank $9.15, or 87.4 percent, to $1.32, after the announcement. They traded as high as $36.36 in December.
American Home’s announcement shows how concerns about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans.
“The chances are pretty high that the company either goes bankrupt or materially restructures, leaving little value for shareholders,” said Bose George, an analyst at Keefe Bruyette & Woods Inc. in New York.
“The business model of non-bank, mortgage lenders is challenging, and may be unstable, because they are so dependent on the willingness of the capital markets to fund operations,” he added.