American Home Mortgage Investment Corp. announced Thursday night that, in light of the liquidity issues occurring in the secondary mortgage market, the company will significantly reduce its operating structure by laying off 6,250 employees (reducing the company base to 750) on Friday. In addition, the Melville, New York-based company will stop taking mortgage applications.
"It is with great sadness that American Home has had to take this action which involves so many dedicated employees," said Michael Strauss, American Home's CEO. "The employees affected should understand that this is not a reflection on their efforts or their productivity. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative."
The company says it currently is maintaining its thrift and servicing businesses. As of 11:30 a.m. Friday morning, stocks for American Home were down nearly 50 percent.
According to Mark Vitner, senior economist with Wachovia, the downsizing of American Home is primarily the result of investors getting out of the housing market and, more than likely, is a sign of things to come in the mortgage industry.
"There is probably more carnage to be played out here," Vitner told BUILDER Online. "The infrastructure that was built up to finance this huge investor driven surge in home buying is simply too large for the market that's likely to exist over the next few years."
Vitner predicts that even after the housing market hits the bottom and begins to repair itself, the mortgage market will continue to experience major difficulties.