Sub Prime Woes Spread to Alt-A
From Marketwatch:
On Friday, American Home Mortgage Investment Corp. (AHM) cut its first-quarter and full-year profit forecast by more than 25% Friday after being hit by problems in the secondary market for home loans and mortgage-backed securities.
But, American Home isn't a subprime lender. American Home offers conventional fixed-rate home loans. Most are ARM's and Alt-A loans. Subprime mortgage are less than 1% of its total loan portfolio.
Still, American Home said Friday that earnings will be lower because investors in the secondary-mortgage market and the market for mortgage-backed securities (or MBS) offered to buy its loans at "materially lower" prices.
Lower prices for AA-, A-, BBB-rated MBS and riskier bits known as residual-mortgage securities also triggered losses in American Home's investment portfolio, the lender added.
The company also said that it's stopped offering some types of so-called Alt-A mortgages because of the high cost of delinquencies on those loans.
American Home also indicated that it continues to be affected by the high cost of delinquencies, especially on Alt-A mortgages, and that it's been forced to repurchase some of these loans.
The warning suggests that problems in the subprime-mortgage business have begun spreading to other parts of the home-loan industry.
Shares of American Home closed down 1.6% on Thursday, down 25% so far this year. Markets were closed on Friday.
On Friday, American Home Mortgage Investment Corp. (AHM) cut its first-quarter and full-year profit forecast by more than 25% Friday after being hit by problems in the secondary market for home loans and mortgage-backed securities.
But, American Home isn't a subprime lender. American Home offers conventional fixed-rate home loans. Most are ARM's and Alt-A loans. Subprime mortgage are less than 1% of its total loan portfolio.
Still, American Home said Friday that earnings will be lower because investors in the secondary-mortgage market and the market for mortgage-backed securities (or MBS) offered to buy its loans at "materially lower" prices.
Lower prices for AA-, A-, BBB-rated MBS and riskier bits known as residual-mortgage securities also triggered losses in American Home's investment portfolio, the lender added.
The company also said that it's stopped offering some types of so-called Alt-A mortgages because of the high cost of delinquencies on those loans.
American Home also indicated that it continues to be affected by the high cost of delinquencies, especially on Alt-A mortgages, and that it's been forced to repurchase some of these loans.
The warning suggests that problems in the subprime-mortgage business have begun spreading to other parts of the home-loan industry.
Shares of American Home closed down 1.6% on Thursday, down 25% so far this year. Markets were closed on Friday.
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