Another One Bites The Dust

American Home Mortgage Investment Corp. (AHM) warned of troubles in their mortgage portfolio on Friday. It did not trade on Monday. Tuesday it opened at the market close at $1.04 down from $10.47 and down from over $30 in January.

Keefe, Bruyette & Woods analyst Bose George said American Home Mortgage will probably go bankrupt, or at least be restructured into something leaving very little value for shareholders.”The chances are low,” he said of the company’s prospects for survival.

[…]

American Home Mortgage specializes in adjustable-rate mortgages, which carry interest rates that reset according to certain benchmark interest rates. This type of debt has hamstrung a lot of borrowers in the past year because interest rates have jumped.

The company also lends to so-called Alt-A borrowers, or borrowers that cannot document their income.

Bill Murphy at LeMetropole Cafe writes that Barclays, UBS, Bear Stearns Cos. and Bank of America Corp. may be on the hook for a total of $9.7 Billion loaned to AHM.

In related news the WSJ reports that Bear Sterns has lost two funds, now has a third fund in trouble with roughly $900 million in mortgage investments.

The NY Times reports that Sowood Capital has shut it’s doors. At one time the hedge fund, run by a money manager who hailed from the team that built Harvard’s endowment into the $30 billion giant that it is today, carried positions valued at $12 to $15 Billion.

Yesterday, Sowood sent out a letter to investors indicating that heavy losses in the credit market had caused the fund to lose more than half its value, prompting it to sell its portfolio to another hedge fund and return the remaining $1.5 billion to investors.

Meanwhile, the market dropped over 146 points after being up more than 80! OIl closed at a new all time high, above $78 per barrel.

Mortgages
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2 Responses to “Another One Bites The Dust”

  1. Mover,

    As you may remember, RW followed SB965 last session which would’ve devastated the good mortgage brokers, all the while stating that the industry would cleanse itself, without government intervention.

    Thanks for helping make the point.

  2. It’s a painful process!

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