Aug
3
American Home Mortgage to severely downsize
Filed Under Stock Market News, Property, Industries, Credit & Loans
Another home load lender is set to severely downsize. American Home Mortgage, which has seen it’s stock fall over 95% this year, is set to shed over 90% of it’s workforce. In a fallout which started with defaults on loans to sub-prime borrowers, or borrowers with bad credit histories, even American Home Mortgage, which is positioned as a company offering better terms to borrowers with good credit history, has gotten a major hit.
Investment banks shut off credit to the company earlier this week, leaving the company unable to pay for over USD 750 million in mortgages already promised to borrowers.
Of the 750 staff expected to stay for now, most are in the thrift and servicing departments, which do collections and billings.
Accredited Home Lenders Co, a sub-prime lender that was recently bought over by Lone Star Funds, has also warned of a high chance of bankruptcy.
Home mortgage companies going under is likely to mean higher interest rates for borrowers, which may depress the already depressed residential property market even further.
Analysts expect that the next step is liquidation of the company, and shareholders are not expected to have any recovery.
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