July 30, 2007

FLASH: American Home Mortgage crashes 35% before trading halted, mortgage meltdown and liquidity crisis spreading

The ratings agencies totally blew it, and now investors in subprime, alt-a liar's loans, jumbo loans and even prime mortgages are getting destroyed.

Why?

Because the system got gamed by corrupt mortgage brokers, appraisers, realtors and builders, and the debt holders got left holding the bag.

Oh, what will IndyMac have to say tomorrow? Should be interesting (yes, short IMB)...

American Home Mortgage Investment Corp (AHM.N: Quote, Profile , Research) shares fell sharply on Monday after the company delayed its quarterly dividend, announced "major" write-downs, and said lenders were demanding it put up more cash.

Shares of American Home were down 39 percent, falling in premarket trading to $6.39 from Friday's close of $10.47. Trading was halted for news pending prior to the market open. The shares on Friday hit their lowest level since April 2003.

Late Friday, Melville, New York-based American Home said it was struggling from "unprecedented" disruption in credit markets. The announcement fed investor worries that bad loans are extending beyond "subprime" lenders to providers of home loans to borrowers considered to be good credit risks.

American Home specializes in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation of income or assets.

"Bankruptcy is not out of the question," said Matt Howlett, an analyst at Fox-Pitt Kelton. "It's clear now we're in a liquidity crisis. Any loans that aren't pure prime are falling in value."

23 comments:

Anonymous said...

Yes markets are soaring today...as usual Captain Panic is, well, panicking for no reason. Keep buying those 5% CDs smart guys. See you at DOW 15,000 next month.

borkafatty said...

.

Yes markets are soaring today...as usual Captain Panic is, well, panicking for no reason. Keep buying those 5% CDs smart guys. See you at DOW 15,000 next month.

---------------

Pump & Dump

DOPES said...

WAIT.....
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YUP....JUST WHAT I THOUGHT.
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100 POINTS AND CLIMBING.
.
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SOME CRASH!!!!!!
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HAHAHAHAHAHAHAHAHA!!!!

Anonymous said...

Pump & Dump

Sounds like borka on a date!

Anonymous said...

Oops!

Anonymous said...

I can hardly wait to get the latest report on Joe Consumer tomorrow morning.

Hard to believe AHM didn't have a bigger effect this morning. And it still hasn't traded. Where there's smoke...

Anonymous said...

Why Bernanke Won't Save Investors
After the stock market's plunge, investors are betting that the Fed could cut rates as early as August. Don't count on it

After the stock market's late-July rout, plenty of pundits assume the cavalry will come to the rescue. They say it's a near certainty that the Federal Reserve will cut interest rates to keep credit conditions easy and the economy growing.

But will the Fed cut? Don't be so sure.

Federal Reserve Chairman Ben Bernanke and his fellow rate-setters have been saying all along that they regard inflation as a greater threat than slow growth. And the real economy—as opposed to the financial markets—remains reasonably healthy. The Commerce Dept. reported July 27 that the gross domestic product grew at a brisk annual rate of 3.4% in the second quarter. So, unless the market downturn snowballs, a 2007 rate cut remains not much more than a 50-50 likelihood. There's even a chance that the Fed's next move will be to raise, not cut, interest rates.

http://tinyurl.com/2au3oy

Anonymous said...

Where's the Bottom?
Monday July 30, 8:08 am ET
By Ben Steverman


News from credit markets and economic data on July 26 toppled the "wall of worry" that stocks had been climbing on the way to record highs earlier in July. With the Dow falling 311.5 points and the Standard & Poor's 500-stock index off 2.33%, how much worse can things get before they get better?

The problem for those making predictions is that crises in the debt and housing markets are playing out in slow motion. The full effects of a credit crunch or an even deeper housing slowdown aren't yet clear.

Illegals Everywhere said...

CNBC almost reported the truth about AHM this AM. The brunette (not hot lips Maria) was reporting AHM down 45% and pulled from trading. The camera cut away mid story with no further explanation until an hour or so later.

The scheming behind this and everything else relating to the market is just plain BS. More obvious than Hillary’s African American Accent. You know whad Im talkin bout!

Danny said...

I'm waiting for AHM to be delisted soon. I'm making a killing shorting these stocks. Go, go SRS.......

Great post Keith.

Danny
http://housingtsunami.com/blog/

Anonymous said...

AHM Shocks Investors

American Home Mortgage Investment has made its bed – and now it’s asking investors to lie in it. The Melville, N.Y.-based mortgage real estate investment trust announced on Friday that it will delay payment of its second-quarter cash dividend to stockholders to preserve liquidity.

The company announced the dividend suspension late on Friday, and when investors had a chance to react in premarket trading on Monday, they pushed its shares down 39.0%, or $4.08, to $6.39. The stock was suspended on Monday by the New York Stock Exchange, pending an announcement from the company.

Keefe, Bruyette, & Woods analyst Bose George said the situation for American Home is serious. "They had roughly $1 billion in cash going into second quarter. Then when they need to retain the dividend -- especially the $3.3 million on the preferred stock -- it means the situation is quite dangerous," George said. "I would say there's a 50% chance of them going bankrupt."

http://www.forbes.com/2007/07/30/ahm-dividend-subprime-markets-equity-cx_ra_0730markets30.html?partner=yahootix

Anonymous said...

Anonymous said...
Yes markets are soaring today...as usual Captain Panic is, well, panicking for no reason. Keep buying those 5% CDs smart guys. See you at DOW 15,000 next month.

Um, down 500 last week, up 100 today. I'm not sure you know which way is UP. Hint, when it goes up another 400 then it's going up.

Peahippo said...

I don't recall who said it on this blog before, but it was beauteous and I only strive to do it justice to its initial elegance:

"Subprime is contained in a wider market."

In case anyone's wondering, my 5% CDs are doing just fine. In fact, I don't even have to check on them. I know that in a few months I'll cash a few of them out and then turn them over for another 6-mo 5%.

Hmm. I wonder if the "smart guys" holding builder stocks can issue the same assurance?

Shakster said...

You guys notice the Miners are doing well today?Thats a good sign,and also that gold is moving up inverse to the dollar?I know,that's normal,but the interesting thing is PLATINUM.It's going in the opposite direction of silver ,and gold.
Platinum ,although a Noble metal is more affected by the Industrial market health than banking,or investing.HMMMMMMMMMMMMM Keep an eye out,and as always,Screw the DOW.

Anonymous said...

Anonymous said...
Yes markets are soaring today...as usual Captain Panic is, well, panicking for no reason. Keep buying those 5% CDs smart guys. See you at DOW 15,000 next month.

July 30, 2007 7:20 PM
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Don't get too happy. Dow still down 400 in last 3 trading days.

GT said...

http://tinyurl.com/yu5r7w

Subprime’s Other Victims: The Yacht-Owners

poor souls

Muhammad Saeed al-Sahhaf said...

Everything is fine, there is nothing to worry about. The past few days were but a glitch in the system. The authorities have to pump today, painting the tape at the exact end of the month is frowned upon. When your ability to trade electronically is shut down and the phone to your broker is busy, then is the time to panic.

masmid613 said...

NEVER SHORT A STOCK WITH AN 8.5% div.

Buy puts!!!!

yoski said...

"..., and the debt holders got left holding the bag."
Oh bummer. I loaned $20 to the crack head across the street. He promised to pay me back next time he sees me. Ya think i'm sitting on a bad loan?
What kills me is that nobody would be so stupid to loan $20 to a crack head, but $200K with no documentation and 103% financing, no problemo!

yoski said...

"The Commerce Dept. reported July 27 that the gross domestic product grew at a brisk annual rate of 3.4% in the second quarter. "
...if you believe the manipulated inflation numbers anything is possible.

borkafatty said...

Pump & Dump

Sounds like borka on a date!

------------
Hey I wasn't called the
"2 Pump Chump" for nuthin :)


But for real I think this is going to be a long drawn out process with Highs & lows...Stagflation ..We are already in a Deflationary position..IE: Home Values And Building Materials have come down a bit.

doped said...

How can this be? The government said that subprime was contained. Now Alt-A and prime lenders are failing?

42 said...

ok, so any wagers on IMB's earnings report?

I got $20 Oct puts on the table. tank! tank!