American Home Burns Down

American Home Mortgage(AHM Quote - Cramer on AHM - Stock Picks) plunged 84% after hiring investment bankers to consider options that could include "the orderly liquidation of its assets."

The Melville, N.Y., company hired Lazard and Milestone Advisors to oversee the process. The news comes as American Home has been sidelined by margin calls that have left it unable to borrow on its credit lines.

American Home said it couldn't fund lending obligations of $300 million Monday, plus an added $450 to $500 million as of Tuesday.

The company is the latest lender to be hit by rising defaults among home buyers with shabby credit histories. Lenders including Accredited Home Lenders(LEND Quote - Cramer on LEND - Stock Picks), Fremont General(FMT Quote - Cramer on FMT - Stock Picks) and NovaStar(NFI Quote - Cramer on NFI - Stock Picks) have all sought strategic partners, while dozens others have closed up shop altogether.

Tuesday's setback comes just a month after American Home reaffirmed its quarterly dividend of 70 cents a share. The company said late Friday that it was delaying its dividend payments because of margin calls and writedowns, which it blamed on the "unprecented disruption now occurring generally in the secondary mortgage market."

The company emphasized Tuesday that it is seeking a resolution "that is least disruptive to its business and to the many thousands of home buyers to whom it has committed to provide mortgages."

Shares of American Home, which hadn't traded since before Friday's dividend-delay bombshell, fell $8.77 to $1.70.