American Home Mortgage Revenues Fall
Buffeted by the collapse of the market for bad credit home loans and by sagging home prices, American Home Mortgage said yesterday that its earnings declined 43.7 percent in the first quarter.
That’s compared with the same period last year.
Melville, N.Y., based AHM, one of two publicly traded home mortgage lenders headquartered on Long Island, warned earlier this month that its first-quarter results would be disappointing.
The mortgage company’s stock plummeted 15 percent that day.
AHM said it earned $30.7 million in the first quarter, compared with $54.5 million during the similar period in 2006. Sales in the quarter were $197.2 million, down from $233.1 million in the year-ago quarter.
On a per-share basis, AHM said it earned 54 cents, down from $1.02 in the same period last year. Nonetheless, AHM beat estimates by analysts, who had forecast earnings per share of 48 cents.
Michael Strauss, AHM’s chief executive, said in a statement before markets opened that while the mortgage lender’s situation was “well publicized,” he was nonetheless “disappointed” in the results.
The executive, in what came as a surprise to no one, attributed most of the problems to “significant disruptions in the secondary mortgage market.”
But, Strauss added, “it appears that the secondary market is stabilizing.” He said that this month, “more buyers have been bidding on our home loan pools. We will have to see how the market develops as 2007 progresses.”
AHM said it has set aside $60.5 million in anticipation of missed payments on loans. The company said that most of the reserve is for a kind of loan in which the home loan lender doesn’t verify the borrower’s income and the home does not provide enough collateral for the debt.
AHM mostly packages its home loans into mortgage-backed bonds, but it also auctions some mortgages to investors in a secondary market.
The company has reduced full-year 2007 earnings guidance to between $3.25 and $3.75 per share, saying the reduction “assumes continued weakness in mortgage markets with little improvement in the company’s gain on sale margin.”
SOURCE: Newsday