July 29, 2007

FLASH: It all falls apart - Alt-A "Liar's Loan" lender American Home Mortgage one step closer to bankruptcy, pulls dividend at 10:19pm Friday night


Man, it's dot-com all over again. Now it's just dot-lenders. One by one these Alt-A "Liars Loan" and Subprime sweat shops are going tits up.

This one's a shocker though. The dividend was already awarded, declared on June 15 for all stockholders of record as of July 9. And then in the late into the night on Friday, they put out this release and say oops, our bad, all of you expecting your dividend are screwed. I bet it was the auditors who finally made them come to Jesus - note they admitted but didn't document that the credit meltdown "has caused major write-downs of its loan and security portfolios"

MARKET TO MARKET. MARKET TO MARKET. MARK TO MARKET.

The market will react furiously to this on Monday. Watch for AHM to trade to near $0, get delisted, see shareholder lawsuits, announce their layoffs, and then the march to bankruptcy.

Wow. Friday night. 10:19pm. Wow. Thanks Richard for the tip.

IndyMac - you're next (yes, I'm short IMB). Your Mark to Market is going to be a shocker.

American Home Mortgage Investment Corp. Delays Payment of Quarterly Common Stock and Series A and Series B Preferred Stock Dividends

American Home Mortgage Investment Corp. (NYSE: AHM - News) announced today that its Board of Directors has decided to delay payment of its quarterly cash dividend on the Company's common stock and anticipates delaying payment of its quarterly cash dividends on its Series A Cumulative Redeemable Preferred Stock and Series B Cumulative Redeemable Preferred Stock in order to preserve liquidity until it obtains a better understanding of the impact that current market conditions in the mortgage industry and the broader credit market will have on the Company's balance sheet and overall liquidity.

The disruption in the credit markets in the past few weeks has been unprecedented in the Company's experience and has caused major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities.

The quarterly cash dividend of $0.70 per share on the Company's common stock had been declared on June 15, 2007 and was to be paid on July 27, 2007 to all shareholders of record as of July 9, 2007. The Series A Preferred Stock dividend and Series B Preferred Stock dividend had been declared on June 15, 2007 and are payable on July 31, 2007, to shareholders of record as of July 9, 2007.

37 comments:

Anonymous said...

More evidence of the handiwork by Freddy Krueger and Jason.

K.W. - Southern Ca. said...

"Mark to Market" will bring more and more of these companies down.

I'm glad this came out though, because it only clarifies how so many people will be left with nothing.

Problem is, it will only help accelerate losses in the housing sector.

Anonymous said...

Perhaps it is time for a little history lesson!


Black Monday (1987)
From Wikipedia, the free encyclopedia


Black Monday is the name given to Monday, October 19, 1987, when the Dow Jones Industrial Average (DJIA) fell dramatically, and on which similar enormous drops occurred across the world. By the end of October, stock markets in Hong Kong had fallen 45.8%, Australia 41.8%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%. (The terms Black Monday and Black Tuesday are also applied to October 28 and 29, 1929, which occurred after Black Thursday on October 24, which started the Stock Market Crash of 1929.)

The Black Monday decline was the second largest one-day percentage decline in stock market history. The largest one occurred on Saturday, December 12, 1914, when the DJIA fell 24.39%. However, in that case, the New York market had been closed since July due to the outbreak of the First World War. The greatest point loss in DJIA history was on Monday, September 17, 2001, 684.81 points, six days after the September 11, 2001 attacks and the first day after which the market was open.

A certain degree of mystery is associated with the 1987 crash. Many have noted that no major news or events occurred prior to the Monday of the crash, the decline seeming to have come from nowhere. Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached.

In the wake of the crash, markets around the world were put on restricted trading primarily because sorting out the orders that had come in was beyond the computer technology of the time. This also gave the Federal Reserve and other central banks time to pump liquidity into the system to prevent a further downdraft. While pessimism reigned, the market bottomed on October 20, leading some to label Black Monday a "selling climax", where the excess value was squeezed out of the system.

K.W. - Southern Ca. said...

So much of stocks are tied to realestate (speculated value), therfore stock values must also come down:
http://tinyurl.com/2mplu2

bozonian said...

Woo Hoo! I got a put on those guys. I don't know what idiots continue to buy these home related stocks. Maybe it's the company doing it to prop up the price.

Laymen said...

Ok, how about a little analysis for us laymen. How big will this news be come Monday when the stock market opens? It's interesting that American Home Mortgage dumped the press release Friday night, well after the market closed, so obviously they know there will be some blood -- but how much?

Anonymous said...

Hmmm. I've never heard of a company reneging on their dividend but I'm pretty new to investing. That's a REALLY bad thing to do. I'm guessing a 50% drop in their stock price by the end of Monday.

bozonian said...

Hey Keith. You keep asking "Are we there yet? Are we in fear?".

Yes. We are there. I have some alerts on houses using http://trulia.com and price reductions started to come in fast and furious after Thursday's market drop.

The smart sellers are realizing the mortgage industry is TOAST. There will be no more easy money and the pool of buyers is going to shrink dramatically (my guess is 80% fewer). First one to sell gets to avoid a 70% value loss.

Woo Hoo! My buying funds are fairly jittering in their safe deposit box like mexican jumping beans. Hold on boys! Wait until you see the whites of their eyes!

bozonian said...

Oh, on the AHM. Reneging on the dividend is very bad for this stock because it's a "value" stock. The main reason people own it, is for the dividend because the growth in stock price is non-existent, it's negative in fact. By backing out of the dividend they have basically done the same thing Bear Stearns did. They painted a rosy picture to investors all the while they were rotten to the core, riddled with subprime cancer.

I'm pretty pissed because I had PUT options (I make money if the stock goes down by at least a certain amount) on this early this year that became worthless because the company hid that it was doing badly.

I really have no sympathy.

I still have some PUTS on AHM and other lenders so Monday is going to be Happy Day for me, at least for my short positions.

bozonian said...

Housing watch (lists asking prices) is almost now completely red (prices going down). The Great Unwinding has begun for real this time. No more false starts.

http://tinyurl.com/yqrph6

If you have a god (I don't), now is the time to start praying. Even if you aren't a bubble house buyer, some side effect of the collapse may take you down with it.

Granted that's a worst case scenario.

Oh, and have a nice day!

Anonymous said...

http://www.newsday.com/business/ny-bzahm0729,0,1799064.story?track=rss

American Home Mortgage yanks dividend at last minute

In a sign of continuing tumult at American Home Mortgage Investment Corp., the troubled Melville-based mortgage bank announced at 10:19 p.m. Friday that it would not deliver the 70 cent per share dividend that was to be paid out that day of major write-downs in its loan portfolios.

Company officials made the move, which they called a delay, because, "The disruption in the credit markets in the past few weeks ... has caused major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities," according to a release.

keith said...

You're not going to believe this one. Brokers paid out the dividend to the AHM shareholders on Friday, as planned.

But AHM isn't paying the dividend. So now brokers are going to have to try to get it back.

This will get bloody Monday

http://tinyurl.com/yvfcrg

hurin said...

"If you have a god (I don't), now is the time to start praying. Even if you aren't a bubble house buyer, some side effect of the collapse may take you down with it."

I pray for a crash. The current system is nothing more than a big fraud to allow the boomers to retire comfortably and leave the X/Y'ers to pick up the tab.

I already have my new depression hobby planned out. Buying the boomers expensive toys for pennies on the dollar.

"You payed 20.000 for that pair of loud speakers, umm, nice finish. I'll give you 200. Whats that! No? But you do want something to eat don't you? Maybe if I sweeten the deal with this can of cat food."

Anonymous said...

Instead of pumping their stock Indymac management should be arranging for lawyers

AHM to zero this week

Anonymous said...

In the next five years, 1.4 million Americans will see their mortgage payments more than double. Already, half a million homeowners are 90 days behind on their payments. Foreclosure rates are up 30 percent from 2006.


How did so many end up in trouble? Was it consumer overreaching or a bull market in bad advice? Many consumer advocates and legislators believe that the latter played a big role - and are blaming mortgage brokers, the independent agents who in the past few years have sold nearly 70 percent of the nation's home loans.

"We think brokers bear a lot of the responsibility for placing borrowers into these unaffordable loans," says Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. Critics like Fishbein warn that the system gives brokers powerful incentives to push consumers into toxic loans and little to fear if their customers can't handle them.

http://biz.yahoo.com/hmoney/070726/072407_salesman_factor_moneymag.html?.v=1&.pf=loans

borkafatty said...

The PPT will be in full effect come monday..they are printing as we speak.

tmaioli said...

Two words "Black Monday"

Anonymous said...

they've delayed their 2Q earnings report...

leveraged to the max said...

Not good words from a highly leveraged company whose debt is 15 times it's equity.

Keyser Soze said...

For all the new investors....it takes stones to buck the trend, but there will be some good buys due to the RE related sell off. Personally, I will be looking at Bank of America BAC and U.S. Bankshares USB, whom I think will be survivors. If BAC hits the mid 30s or USB the low 20's....I'll probably buy and hold for 5-10 years.

Another good lesson....who said dividends were always safe?

stuckinthecity said...

K.W. - Southern Ca. said...
"Mark to Market" will bring more and more of these companies down.
--

If there are no comps for 6-9 months, how does anyone know where the market is?

Shakster said...

Monday morning MSM will ignore that news ,and instead tell the sheep that GDP is up 3.4%,Mozero is flying high,subprime is contained,and don't touch that 401k.
If any negative market news must be mentioned it will be linked to Osamma,China,Martha,and Lindsey.
Then the bimbo parade starts,and the sheep get to know all about everything that is none of their business.

Huray-fur-Bush said...

hurin said...
"I pray for a crash. The current system is nothing more than a big fraud to allow the boomers to retire comfortably and leave the X/Y'ers to pick up the tab......"
===================================
Be careful what you wish for. Your job flipping burgers down at Micky D's might be one of those that disappear.......

Shakster said...

Been searching other sites to find out more about these guys(AHM).
Word is that they weren't a sub prime lender,they were Prime ,and Alt A.
How will the jerks at CBS spin this one?

FaceMan said...

Thirtyfive years ago / In 1972, a crack commando unit was sent to prison by a military court for a crime they didn't commit. These men promptly escaped from a maximum security stockade to the Los Angeles underground. Today, still wanted by the government, they survive as soldiers of fortune. If you have a problem, if no one else can help, and if you can find them, maybe you can hire... The A-Team.

Anonymous said...

"It's interesting that American Home Mortgage dumped the press release Friday night, well after the market closed,"

No, it's not. A lot of the worst news is released Friday after market close on hopes everyone is more focused on what they're doing for the weekend. And that people, once they find out, can calm down some over a few days off.

Anonymous said...

Wow, this isn't even in the Bloomberg headlines yet. Good. The fewer people who know about it, the cheaper the puts will be Monday morning.

Anonymous said...

They only thing that's going to save the Stock market is lots of upskirt shots of Britney Spear's un-pantied muff. I hope that holds off the stock nerds long enough for me to buy some AHM puts!

Anonymous said...

Its not subprime. Its AA I think.

They are responsible for 1 in 20 mortgages in America. I think thats 5% of the market.

borkafatty said...

Its not subprime. Its AA I think.

They are responsible for 1 in 20 mortgages in America. I think thats 5% of the market.

-----------

I think even prime is starting to show loses..maybe this is the revolt i have been hoping for...pay nothing...or pay late..credit score system is a joke and that is more obvious everyday when we hear 24 year olds received funding for hundreds of thousands of dollars in funny money what a joke.

Anonymous said...

This story severely undercuts Hank Paulson's ability to damage control in Asia. The Chinese cut the head off the currpt official who sent the bad toothpaste to the U.S. What will the Chinese expect the U.S. government to do with AHM?

redboots said...

hurin said...
"I pray for a crash. The current system is nothing more than a big fraud to allow the boomers to retire comfortably and leave the X/Y'ers to pick up the tab......"

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

It's this type of post that discredits HP and its generally very sound advice.

Do you really pray for the destruction of our country and the devestation of the lives of untold Americans? Do you understand how bitter and crazy those types of statements are?

Are you really so unsuccessful or bitter in your lives that the only hope you have is for a complete unraveling of our society? Do you see how this smacks of bitterness?

I want to make clear that I am no fan of the sheeple and the culture of conspicuous consumption that defines most of the people in my age group (early 30's).

My husband and I make over $200,000 annually and live well below our means. We own a home we can afford (traditional 30 year mortgage), we carry no credit card debt and our cars are paid off. We've got a financial portfolio worth somewhere in the high six figures (stocks, savings, bonds, etc.) and have done our best to be responsible and prepare for the future.

We have friends who make far less money than we do (and who are in far worse shape financially), and yet they drive BMW's, wear Gucci and have a $35 a week Starbucks habit.

I never understood how they could "afford" their lifestyle until it occurred to me that none of them actually OWN much. It's all on credit, baby. I drive a Saturn, brew my own coffee and would rather claw my own eyes out than drop a grand on a new purse.

I see the folly of the consumer culture and am as disgusted by it as most of the HPers.

HOWEVER.

I take no joy in the fact that there are dark days ahead for us ALL. Are you really so vain that you believe you'll make it out of a financial apocolypse completely unscathed?

For every bit of good information this blog provides (and there is a great deal), there are three posts like this one. "Yay, the world is burning and I can't wait to dance around the fire!"

The Great Depression wasn't fun for 99% of Americans. EVERYONE suffered, except maybe the 1% who controlled the US at that point. I doubt anyone here is a billionaire or anywhere near the 1% that runs our country today.

You will burn with the rest of us. Remember that you eagerly awaited it when it happens.

Anonymous said...

it is getting better. Now ahm is saying they are facing margin calls.....

Anonymous said...

AHM was a client of my company's . I spent about 3 months on site in early 2006. It was the same atmosphere of a .com in 1999.

What a difference a year makes.

area 51 said...

The hilarious thing is, look at the "hard core" analysts ratings after scruitinizing and carefully conducted research:

Reuters: Neutral
Standard and Poor's: 4/5 stars
Rochdale Research: BUY
Sabrient Research: BUY

And the odd man out:
Market Edge Second Opinion: AVOID

Anonymous said...

Redboots:

Your comments are so relevant. My husband and I also live below our means, drive paid-for cars and have paid-for rental properties. Our cash-in-bank is in the high six figures. Most of our clothing is purchased at sales. Our dinner tonight was home-cooked and we try not to eat out more than once every other week, although we can clearly afford to eat out every day. And, we NEVER go to Starbucks for coffee - that is what the home coffee pot is for!

I am continuously upset by the attitude of so many bloggers who rant about the FB'ers and how they hope the same lose everything. There is such a rant for a complete economic collapse to be visited upon the "greedy pigs", without consideration that a collapse will affect everyone. I guess some bloggers never connect that they are guilty of the same greed in the stock market with all their bragging of shorting as they claim the "greedy flippers' are. Quite an example of the pot calling the kettle black.

It is so easy to be mean-spirited and abusive when cloaked in anonymity. If bloggers had to sign their names, you would see a difference in what was written.

p.s. - don't have Google account, just call me TemekuT

roopaal said...

Market Edge goes by technical analysis. AHM certainly had broken tech charts the past few months