American Home Mortgage
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American Home Mortgage Investment Corporation was the 10th largest retail
mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pu ...
lender A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
in the United States and was structured as a
real estate investment trust A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping cente ...
(REIT). In 2007, it filed for
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...
and was liquidated. The company was focused on earning net interest income from self-originated loans and mortgage-backed securities, and through its taxable subsidiaries, from originating and servicing mortgage loans for institutional investors. Mortgages were originated through the company's employees as well as through mortgage brokers and purchased from correspondent lenders and were serviced at the company's servicing center in
Irving, Texas Irving is a city in the U.S. state of Texas. Located in Dallas County, it is also an inner ring suburb of Dallas. The city of Irving is part of the Dallas–Fort Worth metroplex. According to a 2019 estimate from the United States Census Bureau, ...
. The company filed for
Chapter 11 bankruptcy Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, whe ...
protection in Wilmington Delaware federal court, on August 6, 2007. The week before the filing, the company said that many of its lenders had demanded their money back, and that AHM was also unable to deliver on about US$800 million in commitments for housing loans, and had laid off nearly ninety percent of its 7,000 employees.


History

Founded in 1987 in New York City, the company became a publicly traded on
NASDAQ The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
in September 1999. The company moved its corporate headquarters to
Melville, NY Melville is an affluent hamlet and census-designated place (CDP) in the Town of Huntington in Suffolk County on Long Island, New York. The population was 19,284 at the 2020 census. History The area was known to the Native Americans as ''Sun ...
in 2000. Since its beginning as American Home Mortgage Holdings, Inc., it was engaged only in the origination and servicing of mortgages. Following its acquisition of Apex Mortgage Capital in December 2003, the Company became a
REIT A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping ce ...
and changed its name to American Home Mortgage Investment Corp., the new parent company of American Home Mortgage and moved from NASDAQ to NYSE. The company has made numerous acquisitions since 1999 including Marina Mortgage of Irvine, CA, First Home Mortgage of Mt Prospect, IL, Columbia National of Columbia, MD, and retail branches from Principal Residential Mortgage, Waterfield Financial, Irwin Mortgage, and 86 Washington Mutual offices. On July 31, 2007, the company announced that it can no longer fund home loans and may liquidate assets, putting its survival in doubt. The Melville, New York-based real estate investment trust retained Milestone Advisors and Lazard to help it evaluate options and advise "with respect to the sourcing of additional liquidity including the orderly liquidation of its assets." American Home's announcement shows how concerns about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans. This announcement caused its stock price to plunge 90% that day to $1.04 on the NYSE. "The chances are pretty high that the company either goes bankrupt or materially restructures, leaving little value for shareholders," said Bose George, an analyst at
Keefe, Bruyette & Woods Keefe, Bruyette & Woods, Inc., ''a Stifel Company'', is an investment banking firm headquartered in New York City, specializing exclusively in the financial services sector. KBW's primary business lines include research, corporate finance, equi ...
Inc. in New York. American Home has specialized in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation of income or assets. It recently commanded about 2.5 percent of the U.S. mortgage market.


Financial difficulties

On August 2, 2007, Michael Strauss sent an email to the entire company announcing company's serious financial difficulties.
It is with great sadness I announce today that American Home Mortgage has been forced to close. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that our business is no longer viable. What this means for most of our employees is that Friday, August 3, 2007 will be your last day of employment. Detailed information regarding payroll, benefits and other human resource related matter will be available Friday morning for distribution in the office. I would like to personally thank every single individual working for the company for their efforts. It has been my privilege to be associated with such a wonderful team.
Following Strauss's email, at least one employee of AHM has stated that the western division of AHM had been purchased by IndyMac Bank, saving those employees' jobs. In 2008, IndyMac also failed—one of the largest bank failures in American history. On July 11, 2008, IndyMac Bank was placed into conservatorship by the FDIC and on August 6, 2008, the bank filed for Chapter 11 bankruptcy protection. American Home Mortgage Servicing Inc. was sold to Wilbur Ross & Co. LLC, as part of the bankruptcy liquidation, in November 2007. The entity was formed by affiliates of WL Ross & Co. LLC in November 2007 for the purpose of acquiring the servicing assets of American Home Mortgage Investment Corp., American Home Mortgage Corp. and American Home Mortgage Servicing Inc. in the bankruptcy liquidation. American Home Mortgage Servicing Inc. changed its name to Homeward Residential Holdings, Inc. in February 2012. In October 2012, Ocwen announced plans to buy Homeward Residential Holdings, Inc. from WL Ross & Co. for $750 million. The acquisition was finalized on Dec. 27, 2012.


WARN Act Class Action Law Suit

On August 8, 2007, Outten & Golden LLP filed suit against American Home Mortgage Corp, American Home Mortgage Acceptance, Inc., American Home Mortgage Servicing Inc., American Home Mortgage Investment Corp., and American Home Mortgage Holding, Inc. seeking to recover 60 days wages and benefits for former employees of American Home Mortgage who they contended were terminated on or about August 3, 2007 in violation of the Worker Adjustment and Retraining Notification Act. (the WARN Act). On December 14, 2009, the court approved a final settlement valued at $6.5 million for the former employees of American Home Mortgage. As of May 5, 2013, no monies had been distributed as "The Trustee continues to work to resolve claims and pending litigation which will impact the timing of distributions to AHM creditors, including the WARN Class
Source

The warn act settlement was distributed in 2014.


External links


American Home Mortgage Historical SEC Filings

Facing liquidity crunch, American Home Mortgage suspends dividend payment (July 28, 2007)

Outten & Golden LLP American Home Mortgage WARN Suit web page

America Mortgage Corporation Illinois Residential Mortgage Licensee.


References

{{reflist Companies that filed for Chapter 11 bankruptcy in 2007 Defunct real estate companies of the United States Financial services companies established in 1987 Financial services companies disestablished in 2007