Catching up on news from last week: American Home pulled its earnings guidance for the remainder of 2007, citing losses on 'stated income' loans. NewsDay reports this morning:
The statement, issued late Thursday, comes two months after American Home chief executive Michael Strauss said that the company was in a "tail" period, and that the losses soon would be offset by strength in other areas. At that time, the company revised full-year profit expectations downward, to $3.25 to $3.75 a share from $3.75 to $4.25. The news release said the company will likely experience a second-quarter loss because of continued "credit-related expenses" associated with "stated income loans," which are granted based on borrowers' self-reported financial statuses. The company stopped offering the loans after determining that they were responsible for most of its delinquency-related expenses.
The same NewsDay story quotes an FBR analyst on the news as saying that American Home CEO Michael Strauss is losing credibility because of the continued bad news:
... Paul Miller, an analyst with the Arlington, Va.-based investment bank Friedman Billings Ramsey, said many market-watchers were growing disenchanted with the company. He said Strauss "doesn't have a lot of credibility, because of statements he made over the last couple of months that this would get better. Then it got worse." Miller said the challenges are not limited to American Home - most mortgage companies are losing money on loans they originated before the industry became the subject of widespread concern. But he said American Home risks losing its long-standing reputation for "coming out early with bad news." ... Miller said he expects the company will survive in the long run, but that excessive optimism in its public statements this spring have forced investors to view it with a more jaundiced eye.