American Home Mortgage Trading Halted on NYSE

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Is it obvious now? There is no such thing as containment.

American Home Mortgage’s shares tanked nearly 50% in pre-market trading prior to being halted by the NYSE as reports surfaced that the Alt-A mortgage company would not issue its previously announced dividend to share holders. Nothing like pulling a dividend to kill a stock price. The move put in to question the future of the company as questions about its liquidity were escalated with the announcement.

The company, an Alt-A and prime lender is the latest in the Alt-A space to feel the effects of mortgage defaults and credit downgrades that have shuttered so many subprime lenders over the past few months.

There is plenty of coverage on this as AHM could become the poster-child for the final downfall of the “containment” theory bandied about by “experts” including Fed Chief Ben Bernanke. Clearly, there is no containment. Just ask Opteum, Impac and now AHM. Prime markets will be affected by loose underwriting and mortgage defaults in the same manner as subprime markets. In fact, there is evidence that Alt-A defaults and credit writedowns may be worse than subprime. Many Alt-A loans were made on little-to-no documentation on investment properties and second homes. These properties, held for investment only, may be the first to go sour as the market worsens. At least with subprime loans the property is actually the person’s primary residence – they have a reason to fight to hold on to it.

There is lots of coverage out there today from Bloomberg, Housing Wire and others. There have been some amazing rumors sweeping the web today about the fate of AHM and a potential big name buyer; but nothing is confirmed and until then we are keeping quiet.