American Home Mortgage: Going, going...

A few quick hits:

--American Home Morgage shares finally opened today on Wall Street. When we checked they were down 88%, to $1.20 (yes, down 88% in a single day; this is what happens when a business collapses). The stock has traded above $36 in the past year. As part of his "housing is doomed" rant, Jim Cramer predicted worthlessness (bankruptcy) for this stock.

From Bloomberg: "American Home Mortgage Investment Corp. shares plunged 89% after the lender said it doesn't have cash to fund new loans and may have to sell off assets. ... 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."

--From Reuters: IndyMac, the Pasadena-based lender that cut 400 jobs last week, said profit declined as more borrowers fell behind on payments and it made less from selling loans to investors. The shares rose as much as 20 percent as the company said credit losses weren't as steep as its competitors. Second-quarter net income slid 57%, while revenue fell 21%.

--From Inman News: Lending Tree, a division of the internet company IAC, lost $1.3 million in the second quarter, after making a $9.8 million profit a year earlier. Revenue declined 9%, to $98.6 million.

Thoughts? Comments? Insights?

Comments

[Cal]

Indymac has a bunch of Combo 2nds sitting waiting to sell, very few secondary market buyers want a second lien in this market (HSBC had to write off almost their whole portfolio of their 2nd lien, the 20 part of the 80/20 loans). With the credit market deterioating, I would think those loans values are falling substantially.

http://www.inman.com/inmannews.aspx?ID=64063

"But IndyMac was able to sell only 90 percent of the loans it produced during the quarter, totaling $20.2 billion, for a $101 million gain on sale. That compares with the $201.7 million gain on the sale of $19.4 billion in loans in the same quarter last year, or 97 percent of all loans produced. "

I just wonder if that extra 10% (which looks to be about 2 billion dollars) of loans held for sale being sold (eventually) at a discount will be enough to wipe away this quarters gains.

Add into the additional factor of having to qualify IO and Option ARM applicants at the fully indexed, fully amortizing rate, I would think that would hurt them substantially going forward.

[willie]

That's sad! That means that the market will be full of properties falling off escrow, deals made that are going to be broken and countless of people out of work.

[Mike]

These businesses are suffering because they are in the loan origination business. They originate the loans, and then need other companies to buy and service them, so that they can originate more loans. Most of their loans are sold off almost immediately. In hindsight it might have been better for them to service some fraction of the loans they originated. Holding the loans is less glamorous and profitable a business than selling the loans when times are good, but, apparently good times don't last forever.

[Cal]

Liquidity is a light switch, somebody hit the switch in February, these pass through lenders that had enough cash on hand to survive the buy backs are now learning that liquidity isnt coming back anytime soon.

They tried having the loans sit on warehouse lines to wait the market out, the problem with that is the people lending the money for the warehouse lines look at the collateral sitting on the lines devaluing and want to protect themselves (thus the margin calls). You either underwrite loans that you are willing and able to keep or you just might not survive.