johnnymk

This is not good news considering it's a large mortgage company

http://www.newsday.com/business/ny-b...orld-headlines

After weeks of troubling news and near-silence from official spokesmen, American Home Mortgage Investment Corp. yesterday told employees that the company would shut down all operations tomorrow, more than a dozen employees have told Newsday.

In an email just after 3 p.m., company chairman, chief executive officer and president Michael Strauss sent an email to employees stating, "our business is no longer viable."

"It is with great sadness I announce today that American Home Mortgage has been forced to close," wrote Strauss, who founded the Melville-based company in 1988 and built it into a top-ten mortgage lender through rapid-fire acquisition of other mortgage companies. "What that means for most of our employees is that Friday, August 2, 2007 [sic] will be your last day of employment."

Employees said senior management had been circulating through departments, telling some groups of employees that the company's rapid rise had led to an even faster fall.

By midafternoon, employees were streaming out of the company's 520 Broadhollow Rd. offices, some of them in tears and many carrying boxes.

"The same day I got hired was the same day I got laid off,"said Edward Muratov, 38, a Queens computer programmer who started his job Monday -- the day American Home's stock dropped 90 percent following a Friday night announcement the company lacked the cash to pay shareholders a dividend that was due that day.

At American Home's 538 Broad Hollow Rd. headquarters, the news spread and many employees said they were instructed to remain at work yesterday and return for the full day today.

Many expressed shock and outrage at how the situation had been handled. Several cited a Wednesday conference call in which executives told them to "keep positive attitudes" and continue taking loan applications -- even though the computer system for entering them had been taken off-line.

By the time Strauss' email arrived in their inboxes, employees were standing in front of the building in small groups, crying, smoking cigarettes and talking on their cell phones. One employee said vendors had been in the building removing coffee machines in recent days.

"It's just sad," one executive said. "No one had any time to plan. There was no communication at the employee level, no forewaring."

Another worker said she was "furious" that the company had been silent over the last week as the company's creditors pulled their backing.

As of last Thursday, American Home said it employed 7,627 people - including about 1,460 in Melville. Most of the employees interviewed yesterday delclined to be named, saying they fear of scaring off future employers. American Home representatives did not respond to numerous requests for comment.

Numerous shareholder lawsuits have already been filed against American Home and its executives.

Although this year's troubles in the housing industry have brought down many mortgage banks, American Home is the largest non-subprime lender to face bankruptcy. Its demise has heightened fears among investors and stock analysts that the uncertainty in the mortgage industry is not confined to the subprime area.

Even during bankruptcy proceedings, "it's unlikely there's a lot coming out of there" for common shareholders, said Bose George, an analyst with Keefe, Bruyette & Woods in Manattan. He said most of the company's creditors also stood to lose substantial amounts of money.

Although the company still had not issued an official announcement about the reports as of 7:15 p.m. last night, its wholesale division's website carried the message that it would be "shutting down all operations, effective immediately."

Newmark Knight Frank principal broker Brian Lee, who has assisted American Home with its real estate transactions since it moved to Melville in 2000, said, "To assist with such rapid growth and success, and then to see it crumble overnight -- it's a tragedy."

ray

I hate to be a bastard, but all of those employees who complain that there wasn't enough advance notice should really read the newspaper or watch the news more often. It's partly their fault for not noticing the recent fallouts of other mortgage companies and not seeing all the signs pointing to potential layoffs or meltdowns of firms. I realize that American Home was a larger company who did not focus on just subprime loans, but the writing's been on the wall for many months now. Most of my friends who work in the mortgage industry all started looking for new jobs earlier this year. Some have moved on, while others have been offered retention contracts just to help operations run until layoffs are complete. While it's not a guarantee their job will be around when that retention contract is up, it's still a paycheck while they are looking for something else.

Daedalus

It's been coming for a while, but the word on the street is that the entire mortgage broker industry is gone and there will be more earthquakes within a week. It's pretty much down to just banks that will write loans now, since they can keep them in house. Expect loan rates--those that are still availbale--to go up a couple percent. If anyone has tried to short any of these stocks you know that there is no stock left to short.

johnnymk

http://online.wsj.com/article/SB1186...googlenews_wsj

Lenders Broaden Clampdown on Risky Mortgages


Jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records.

This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country.

Lenders are tightening standards and "raising rates like crazy," said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week. (Jumbo loans are those too large to be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac.) A Wells spokesman said rates are lower on loans made directly by the bank than on those through brokers.

The market for mortgage-backed securities is "very panicked," Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender's Web site yesterday.

Seeking to soothe the market, Countrywide Financial Corp., the nation's largest home lender, said it had plenty of funds available to weather the industry's troubles.

The fright among investors is forcing lenders to go back to more-conservative practices that were the norm before the housing boom of the first half of this decade. Many now are focusing on loans to borrowers who are willing to document their income, can make a down payment of at least 5% and have a history of paying bills on time.


This credit squeeze "will further crimp the effective demand for housing, and will make the late summer home-sales season even worse than the dismal spring season," said Thomas Lawler, a housing economist in Vienna, Va.

Tom Lamalfa, managing director of Wholesale Access, a mortgage-research firm in Columbia, Md., expects that half or more of the market for no- and low-documentation loans will disappear.

Some people use so-called low-doc loans to avoid paper work or because they are self-employed and have trouble showing a steady stream of income. But low-doc mortgages also can be used by people exaggerating their incomes.

National City Corp., another large lender, said yesterday that it is suspending originations of stated-income loans, which don't require the borrower to verify income. Wachovia Corp. said it had stopped making Alt-A loans through brokers, joining a trend among big lenders to rely less on outsiders to arrange mortgages. Wells Fargo told brokers this week that it was making "day-to-day" decisions on the pricing and availability of Alt-A loans amid reduced investor demand.

Several dozen lenders have gone out of business in the past six months, and others are teetering. Shares of Accredited Home Lenders Holding Co. fell 35% yesterday on the Nasdaq Stock Market after auditors said its "financial and operational viability" is uncertain if a pending merger isn't completed.

Pemolis

The sad thing is that the employees are out of a job..

but the owners and board members are still and will forever be multi billionaires with what they raked in the past 10 years.

.. and they couldn't pay the dividend... they just didn't want to take a paycut, those greedy glutton bastards...

YellowCoffee

A paycut wouldn't have done much (especially just 1 year of paycuts). Liquidity is the big problem that these lenders are facing. Investors do not want to buy risky loans in the secondary market, and they feel uncomfortable w/ their securitizations and loans sold so many of these loan pools are being repurchased. This means that the lender has to buy back the loans and may incur a loss. The only lenders that will survive are ones w/ enough cash and committed relationships w/ banks.

Also, just a sidenote regarding the fact that employees "should have known better": This may be so, however, management plays a role on being honest w/ their employees. Obviously many employees were kept in the dark on their company's well-being. Sure, everybody knows the mortgage/lending industry is suffering, but I don't think everybody knows the severity of it. This is just common last-minute corporate procedure. Senior mgmnt does not want people to panic or bail. Mgmt should have had a better exist strategy. I'm sure they've known that they were going to close shop at least a month or two in advance. Greed and irresponsibility led to this.

I personally feel bad for the employees, but that's just how it is sometimes.

Pemolis

Consider the average employee makes about 40k a year.

The higherups make 100K+ a year, + bonuses, + perks, + Stock (in allot of cases).

Guess who does all the work.. the local drudge 40k employee.

Who plays golf, has the 3 houses and the Lamborghini..

Yea both get hurt, but hell the manager "if he is SMART" is in a MUCH better situation than the person they just hired.. and then fired....

Dave_7

Socialist? Union member? Both? Neither?

Dave.

zippyjuan

Maybe just a memeber of the working class who has seen their own wages stagnate despite increases in productivity while those at the top have seen their incomes have large increases over the last decade.

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Dave_7

Perhaps... the name of the game is always making yourself more valuable. If your productivity increases because technology improves and allows one person to do the work of three, then you haven't necessarily become more valuable because of your greater output (in fact, you could very well be less valuable because now there are two other people out of work who can do your job of three). I don't see productivity as a linchpin to higher wages as an employee... it's more about the relative value of your skill set/ability. No?

Dave.