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American Home Slashes Payout

TSC Staff

The Melville, N.Y., mortgage company said Friday it expects to make 40 to 60 cents a share for the first quarter and $3.75 to $4.25 a share for the year. Analysts surveyed by Thomson Financial were looking for $1.06 for the quarter and $5 for the year.

"During March, conditions in the secondary mortgage and mortgage securities markets changed sharply," said CEO Michael Strauss. "In particular, these markets were characterized by far fewer buyers offering materially lower prices, both for loan pools and for AA, A, BBB 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," he said.

A disproportionate share of the company's nonperforming loans are repurchased Alternate "A" loans. American Home said it has ceased offering those types of Alternate "A" loans that have resulted in a high proportion of its repurchases, and consequently believes the portion of delinquency related charge resulting from repurchases will diminish toward year-end. While nonperforming loans increased during the quarter, the company did experience a decline in early-stage delinquencies, with loans in early-stage delinquencies lower at the end of the first quarter than at year-end 2006.