American Home Mortgage & America Brokers Conduit is heading for the exits. Evidently, their CEO, Michael Strauss, sent out an email to employees citing the secondary markets and the real estate markets as a reason for their demise.
Why don't I buy this? Either a company brings value, or doesn't. Alt A and A paper is good. If the borrowers aren't paying, then either the broader economy isn't doing well, or the loans weren't underwritten well.
It appears that there had been issues with loan quality, and investors were pushing back on loans.
It is absolutely possible that those investors simply are looking for excuses to push back loans they'd rather not own, or that they would like to force American Home out of business.
If we apply game theory, I think its hard to hold that investors (Wall Street) conspired to put them out of business. It might be possible that one or two investors acted in this way in an effort to push them into bankruptacy. But if their loans were good, other investors would buy them.
Now, investors are starting to demand a higher premium for all ranges of credit. A number of corporate buy outs have been shelved or delayed.
Is it possible that a large segment of investors don't want to buy alt a loans, and the capacity in the market is being aligned to the level of investor appetite? That, or American Home didn't write good loans. Or a combination of the two.
Comments
Post new comment