American Home Mortgage Investment Corp. Case 07/31/2007
According to a press release dated July 31, 2007, the complaint charges American Home Mortgage and certain of its officers and directors with violations of the Exchange Act. American Home Mortgage is a real estate investment trust (REIT), which engages in the investment and origination of residential mortgage loans in the United States. The Company primarily originates and sells securitized adjustable-rate mortgage loans, as well as engages in the sale of mortgage loans to institutional investors and servicing mortgage loans owned by others.
According to the complaint, during the Class Period, defendants issued materially false and misleading statements that misrepresented and failed to disclose that: (i) the Company was experiencing an increasing level of loan delinquencies which was depressing its earnings; (ii) that the Company was experiencing increasing difficulties in selling its loans and, therefore, was required to decrease prices, thereby reducing margins and profits; and (iii) as a result of the foregoing, the Company was overstating its financial results by failing to write-down the value of certain of the loans in its portfolio as these loans had declined substantially in value.
Then, on June 28, 2007, American Home Mortgage issued a press release announcing that it will take “substantial charges for credit-related expenses in the second quarter.” The Company reported that the increase in losses was related to its practice of extending a three month timely payment warranty that the Company granted to loan buyers who purchased stated income loans. In response to this announcement, the price of American Home Mortgage stock declined from $20.91 per share to $18.38 per share on extremely heavy trading volume. Then, on July 27, 2007, after the close of the market, American Home Mortgage issued a press release announcing that its Board of Directors had determined to delay paying its dividend. In response to this announcement, on July 30, 2007, the NYSE halted trading in American Home Mortgage stock before the market opened.