American Home Mortgage shares were down sharply today after a discouraging news release that stated multiple problems. Lenders are demanding more hard currency backing, the dividends have been delayed, and write-downs are increasing. Shares fells as far as $6,25 today, off the previous close of $10 and reaching levels not seen since 2003. The stock is currently halted for trading. The collapse of American Home Mortgage is only the most recent sign of a snowballing phenomenon among lending corporations. Triggered by rising mortgage defaults, this impending panic appears to be gathering steam. Initially, investors only needed to be concerned about those corporations representing the greatest risk in home mortgages — those that were offering sub prime rates to poor credit households with little collateral. American Home Mortgage, on the other hand, is thought to be a more trustworthy lender with business dealings largely based in the prime market. Originally AHM specialized in prime lending and good credit clients, but apparently in recent months they too had fallen victim to the tantalizing siren call of high risk / high reward lending practices.
