The company's 7,000 employees were told by managers Thursday that today will be their last day and that none of the company's strategic options for remaining open had panned out, the Long Island newspaper Newsday reported.
CEO Michael Strauss told the staff in an e-mailed memo obtained by Bloomberg News that ''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,''
Shares of American Home Mortgage Investment Corp. plunged 90 percent Tuesday after the company's warnings, which renewed concern about worsening credit quality in the mortgage market and killed a Wall Street rally. The shares fell 3 cents, to $1.45, Thursday, then plummeted 50 percent, to 72 cents, in after-hours trading.
The Wall Street banks that lend American Home Mortgage money for home loans - which include firms such as UBS AG, Bear Stearns Cos., and JPMorgan Chase & Co. - cut off credit earlier this week, leaving the company unable to fund at least $750 million of mortgages promised to thousands of now-stranded borrowers.
Investors have punished shares of U.S. home lenders as defaults spilled over from sup-prime borrowers with the worst credit histories to people with more reliable records.
American Home specializes in mortgages for people with good credit who don't qualify for loans with the best terms.
The reason American Home Mortgage's lenders are balking is the mortgage loans that act as collateral for the company's credit lines have sunk in value.
American's demise echoes reports from a number of other mortgage lenders of late, including New Century Financial Corp., the Irvine, Calif.-based lender that filed for bankruptcy protection earlier this year.
