On the coattails of yesterday's layoff announcement, American Home Mortgage Corp. is now seeing all of the usual trappings of a company in trouble. Up first, the company received at least one temporary Cease & Desist order, this one coming from Connecticut banking officials:
State banking officials issued a temporary cease and desist order Friday against American Home Mortgage Corp. of New York and two of its affiliates for possible violations of mortgage banking laws. The order requires American Home to stop failing to fund loans on time, cooperate with the investigation and comply with agreements with borrowers. The company could face a fine of up to $1 million, banking officials said. American Home did not transfer loan proceeds for 38 loans scheduled to close in Connecticut, regulators said.
Beyond the first of likely many cease and desists, the class-action law firms are clearly out in force as well -- just as they've been with major subprime lenders including New Century, Accredited Home, NovaStar and others. I'm counting at least 10 law firms looking to get a class-action suit certified, all with complaints similar to this one:
The complaint alleges that defendants made false and misleading statements and material omissions regarding the Company's business and operations and that, as a result, the price of the Company's securities was inflated during the Class Period, thereby harming investors.
Update: Newsday is now confirming that, not surprisingly, American Home is in the process of filing for bankruptcy protection.