American Home Mortgage Investment Corp., the under pressure mortgage lender who had earlier in the week announced fresh layoffs, has announced today that it will shut down and layoff more than 6,250 of the remaining employees.
Melville, New York-based American Home Mortgage announced today that its own mortgage lenders had cut it off, and that the company was unable to meet mounting margin calls.
The company also stopped accepting new loan applications, and many felt the liquidation of assets was imminent.
Financial analysts believe American Home must apply for bankruptcy protection by no later than Monday.
To add to the bad news, Connecticut State banking officials issued a temporary cease and desist order Friday which requires American Home to stop failing to fund loans on time, among other things.
But what’s worse is how the news of the closure reached many of the American Home Employees.
There seemed to be quite a bit of confusion and secrecy surrounding the closure, with company officials telling employees to continue taking loan applications as late of Wednesday despite the fact that some infrastructure had been shut off.
Rumor has it company employees received e-mails late Thursday afternoon saying the company had been forced to close, although that news hasn’t been authenticated.
The only sign of the closure on the website was text that said the company is no longer taking loan applications.
An interesting aspect of the closure is that American Home Mortgage is the largest non-subprime lender to face possible bankruptcy, with much of their business focused on the Alt-A market, dealing mainly with reduced documentation and non-verified assets.
American Home Mortgage was founded in 1987, and had become the 10th largest U.S. retail mortgage lender by 2006, originating $59 billion in loans last year.
American Home Mortgage did say they would keep 750 employees in the thrift and servicing businesses, located mainly in Texas.
Shares of American Home Mortgage were trading at $0.71 cents, down 50% on the bad news.
See the complete list of closed lenders, mortgage layoffs and mergers.