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Here's what happened with American Home Mortgage....

Here is a video briefly explaining what happened with American Home Mortgage last week.

http://www.cnbc.com/id/15840232?video=456595341

In short, it talks about the secondary market that funds Alt-A loans and how Wall Street investors just stopped buying those types of mortgage backed securities. When that money dried up, it didn't give some mortgage companies enough cash to fund their loans. The same thing happened to sub-prime in the past few months.

Personally, I feel that the worst may be behind us with the weaker companies filing for bankruptcy and the stronger ones will grow stronger now that there is less competition in the marketplace. The companies that still have the liquid assets required to fund the loans will soak up all the business that is getting left behind. As for now, just know that 100% financing with less than perfect credit is becoming much more difficult to get approved. Also know that sub-prime is not dead. I can still get approval for scores as low as 500, but the borrowers must have some cash to bring to the table.

On a side note, Countrywide announced that its financial condition is "strong," and that is has nearly $50 billion of "highly reliable" short-term funding liquidity.

Tony D. Howell
Mortgage Consultant
Olympic Mortgage Consultants, Inc
910-264-7802

Posted by Tony D. Howell on 08/06/2007 03:12 PM

Comments (7)

7 Comments on Here's what happened with American Home Mortgage....

AUG

2007

"Stupid lending", eh? I suppose that explains it all. That was an interesting piece -- thanks for posting it.

the worst is ahead of us not behind us. The is a global liquidity crunch for all mortgage backed securities not offered by freddie, fannie and govie products. The next couple of weeks will play out, but my hunch ths will be the biggest financial story since the S&L crisis and the junk bond scandals of the 90's

Great piece. thanks for the post.....

Alan, why do you think this might be the biggest financial story of our times? One of my mentors told me years ago that these things happen in cycles.

AUG

2007

I think unless liquidity returns to the secondary market it will exceed the s&L crisis in terms of impact on the over all economy and dollars lost. It won't be like the tech stock bubble, but a huge financial loss and a big story. It is all cyclical, but there are often outliers even in cyclical turns. Like the tech bubble, accounting scandals at enron, s&l crisis and this.

I disagree with you Alan, I think that this is nothing compared to what we experienced with the S&L which combined with the closings of military bases. The S&L crisis would not have impacted as many people if it had not been coupled with the closing of military bases., especially in California. We saw things go nuts in 1998 and didn't think that the markets would every recover - well they did - and in a big way.

There are two truths here: after expansion come recession, after recession comes expansion

the expansion will return, but we have to get through this time period. HUD is working behind the scenes to make FHA products more accessible and increase lending limits. I posted informaiton on this in my blog earlier today.

there is opportunity here, it's just shifted to different areas of the mortgage and real estate markets.

AUG

2007

Informative post. Have been watching this on the news, and I personally thought this meant the beginning on the bad.

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