American Home Trims Guidance

American Home Mortgage's(AHM Quote) first-quarter profit slumped 44%, fueled by a deteriorating market for risky loans.

In the first quarter, the Melville, N.Y., mortgage lender made $30.7 million, or 54 cents a share, compared with $54.5 million, or $1.02 a share, in the year-earlier period. Revenue dropped 15.4% to $197.2 million.

"As has been well publicized, the first quarter was a difficult period for mortgage lenders," said Michael Strauss, American Home's CEO. "Our company also found the first quarter to be challenging. During the quarter, a severe disruption in the secondary mortgage market caused the prices we received for our loan production to be far less than in previous quarters."

Strauss said the company's gain-on-sale margin, excluding delinquency-related charges, was 1.09%, compared with 1.52% in the fourth quarter. He said American Home's reserves for loan delinquencies are at record levels.

"While I am disappointed by our company's results, our company will always be susceptible to significant disruptions in the secondary mortgage market," he said. However, "it does appear that the secondary market is stabilizing. During April, more loan buyers have been bidding to buy our loan pools. Additionally, spreads on some junior mortgage securities have retraced a portion of the sharp widening that occurred in March; junior mortgage securities are trading in a more orderly fashion."