American Home Mortgage Investment Corp. (NYSE: AHM), a large Alt-A mortgage lender, said Friday afternoon that it expects lower income in the first quarter and full year 2007 than previously forecasted, due to conditions in the secondary mortgage and mortgage-backed securities markets. The announcement comes ahead of the company's first quarter results, which are set to be released April 30.
â€œDuring March, conditions in the secondary mortgage and mortgage securities markets changed sharply," said Michael Strauss, American Home's chairman and CEO.
"In particular, these markets were characterized by far few buyers offering materially lower prices, both for loan pools and for â€œAAâ€?, â€œAâ€?, â€œBBBâ€? and residual mortgage securities. These changes had a significant, adverse impact on our company's first quarter results, reducing our gain on sale revenue and causing mark-to-market losses in our portfolio."
"While the market may recover, and while we will attempt to restore our gain on sale margins by raising interest rates charged to consumers, our working assumption must be that current market conditions will persist and that our gain on sale margins will not recover through the balance of the year," Strauss commented.
Alt-A NPLs a problem
American Home also said it is feeling the effects of delinquency-related charges, and that it has been forced to establish additional reserves for increases in non-performing loans.
While high delinquency charges were expected, their impact on quarterly results continues to be significant, the company said. A disproportionate share of the company's non-performing loans are repurchased Alt-A loans.
American Home said in a press statement that it has ceased offering the particular type of Alt-A loans driving repurchases, and said it believes the portion of delinquency related charge resulting from repurchases will diminish toward year-end.
Given information currently available, the lender said that it believes its first quarter diluted earnings per share will approximate $0.40 to $0.60, and that full-year 2007 earnings guidance has been lowered to $3.75 to $4.25 per diluted share.
The company also lowered its target divident payout, saying it now expects to pay $0.70 per share per quarter for the remainder of 2007.
Noting that any problems in Alt-A were still developing, the company also warned that its guidance could drop further if the Alt-A market continues to deteriorate. Much of the company's revised guidance assumes that further write-downs, as well as the rate of both delinquencies and repurchases claims, exhibit a slowing trend over the back half of the year.
For more information, visit http://www.americanhm.com