This is bigger than just a Lender

Monday, trading for one particular lender was halted on the floor of the stock exchange.
The company is American Home Mortgage Investment Corp. (Ticker symbol AHM)
Although they may have done Sub-Prime Loans, they are what is called a Alt-A lender.
That means they fund loans that may fall slightly out of conforming guidelines.
Typically an Alt-A product might be a loan that has a "wrinkle", keeping it from being pooled with other normal loans.

The problem for American is that their financial backers have abruptly stopped their "backing".
This story in from Bloomberg states that American had $300 Million of loans that it had already told borrowers they would fund. The company site says, "It does not anticipate funding approximately $450 to $500 million today."

The AHM Website also says, "These issues are primarily the result of the unprecedented disruption now occurring generally in the secondary mortgage market."

Imagine you are set to close on your new home.
All you are waiting on is the funding for the fully documented, 700+ credit score, 30 year fixed loan you signed last week.
The phone rings, it's your loan officer, he has bad news...

"Sorry, your whole deal just fell through. The lender is out of business!"

The article says towards the bottom:

"Writedowns, collateral calls and cash shortages triggered bankruptcies of subprime lenders New Century Financial Corp. and Mortgage Lenders Network USA Inc., and led to sales of Accredited Home Lenders Holding Co. and Fieldstone Investment Corp."

But remember, those were Subprime Lenders - American is an Alt-A Lender, there is a difference.

"The company was the 20th-largest Alt-A lender in 2006, according to March data from trade publication Inside Mortgage Finance. IndyMac Bancorp Inc. ranked first."

IndyMac was caught up in this as well, but they have a slightly different spin - They reported that their profits were down, but their shares went up!

"IndyMac Bancorp Inc., the No. 2 independent U.S. mortgage lender, said profit declined as more borrowers fell behind on payments and it made less from selling loans to investors. The shares rose as much as 20 percent as the company said credit losses weren't as steep as its competitors."

Is that like saying, "Business sucked, but our business sucked less" ?
You bet it is!

In the end the point is that ALL THINGS ARE CONNECTED.

You, me, the subprime lenders, the house next door, the house across country. Everything and everyone. Just because you have signed loan documents, just because you are dealing with a A paper lender, don't for one minute think that you are safe. We're all connected.