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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (80417)	6/28/2007 5:58:54 PM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

CR, look like the reuter article was pulled... But here is the PR.. biz.yahoo.com American Home Mortgage Provides Mid-Quarter Update Thursday June 28, 4:40 pm ET Company will establish additional reserves for delinquent loan repurchases that are likely to cause a loss for the second quarter of 2007 2007 Earnings Guidance Withdrawn, but Quarterly Dividend Policy of $0.70 per Share Affirmed Company Has Issued $125 million of 9.75% Convertible Trust Preferred Securities to Funds Managed by Marathon Asset Management, LLC MELVILLE, N.Y.--(BUSINESS WIRE)--American Home Mortgage Investment Corp. (NYSE: AHM - News) announced today that it will take substantial charges for credit-related expenses in the second quarter. As a result, the Company's second quarter financial results are uncertain, and it is likely the Company will experience a second quarter loss. As has been previously described, the Company's credit-related expenses have been primarily caused by the three month "timely payment" warranty the Company granted to loan buyers who purchased stated income loans with high loan to value ratios from the Company. The Company has stopped making these types of loans. Consequently, the Company believes that the high credit-related charges resulting from prior loan sales will diminish as the three month "timely payment" warranty expires. ADVERTISEMENT Michael Strauss, American Home's Chief Executive Officer, commented, "Our company's goal is to put the impact from the discontinued products behind us. A benefit of the substantial reserves we are establishing in the second quarter is that the discontinued product's impact on our future financial results is likely to diminish. As we put the impact from the discontinued products behind us, the positive contributions from our portfolio, mortgage origination franchise and loan servicing business will again drive our results. Altogether, the second quarter will be a period of "clean-up" as the impact from the discontinued products continues to wind down." While charges related to repurchases of discontinued products will have a significant impact on the Company's second quarter results, new repurchase claims have dropped substantially as the second quarter has progressed. Specifically, claims reached a high in April, but May and June claims have declined approximately 53% from April levels. Claims are typically made shortly after the expiration of the warranty period. The reduction in new claims is a result of the expiration of the three month "timely payment" warranty on loans previously sold by the Company. Claims and related reserves are expected to continue to trend lower in the third and fourth quarters. SECOND QUARTER LOSS WILL BE LIMITED The Company's delinquency-related charges in the second quarter will be substantial. In addition, the Company expects that it will reclassify a portion of its other comprehensive loss. The reclassification will be charged to current quarter earnings, but will reduce other comprehensive loss by a like amount, and consequently will not affect the Company's equity. Altogether, the total amount of loss in the second quarter is expected to be contained. Specifically, the Company expects that its total stockholder's equity will actually be higher at the end of the second quarter compared to the first quarter of 2007. EARNINGS GUIDANCE WITHDRAWN Because of Company's second quarter results and current conditions in the mortgage industry, the Company is withdrawing its previously issued earnings guidance for 2007. The Company expects to reestablish earnings guidance toward year-end. DIVIDENDS POLICY REAFFIRMED While losses from the "timely payment" warranty on discontinued products will drive the Company's second quarter results, base results from the Company's mortgage origination business have benefited from a stabilization of the secondary mortgage market. Specifically, the Company's loan pools offered for sale are now attracting multiple bidders and are being traded at supportive prices. Based on the Company's ongoing revenue from its portfolio, loan sales and servicing fees, the Company is reaffirming its quarterly dividend policy of $0.70 per common share. The dividend policy is subject to change without notice, and the Company's Board of Directors may reduce or eliminate the dividends if it believes the Company's prospects warrant such a change. ISSUANCE OF CONVERTIBLE TRUST PREFERRED SECURITIES The Company also announced today that it has issued in a private placement $125 million of convertible trust preferred securities to funds managed by Marathon Asset Management, LLC. The trust preferred securities pay a dividend of 9.75% per annum, and are convertible into the Company's common stock at an initial conversion price of $25.57 per share. The conversion price is subject to limited downward adjustments based on the performance of the Company's shares and its common dividend yield.