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Friday's the end for almost all of American Home Mortgage

BY DANIEL WAGNER | daniel.wagner@newsday.com

1:18 PM EDT, August 3, 2007

After weeks of troubling news and near-silence from official spokesmen, American Home Mortgage Investment Corp. announced Thursday night that it would shutter most of its operations and lay off more than 6,250 workers, including almost all of its 1,460-person Melville staff.

"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," chief executive Michael Strauss said in a statement.

The statement said the company, which was recently ranked as Long Island's sixth largest, would maintain 750 employees in its thrift and servicing businesses "as it seeks the most appropriate course of resolution to preserve the value of its remaining assets." Many of the remaining workers will be in Texas.

In a release Tuesday, the company said one option was "the orderly liquidation of all assets." Despite the company's statement about continuing some operations, analysts and experts have suggested that creditors could force American Home into bankruptcy soon.

Thursday afternoon, employees received an e-mail apparently from Strauss' account stating, "American Home Mortgage has been forced to close" because "its business is no longer viable." It was not clear whether the e-mail was authentic, and American Home representatives did not return several requests for comment.

In dozens of interviews Thursday, American Home employees told Newsday that they had been informed that Friday will be their final day with the company. They said senior management had been circulating through departments, telling them in groups that the fast-growing company would be closing their divisions.

By midafternoon, employees were streaming out of the company's 520 Broadhollow Rd. offices, some of them in tears and many carrying boxes.

"The same day I got hired was the same day I got laid off," said Edward Muratov, 38, a Queens computer programmer who started his job Monday -- the day American Home's stock dropped 90 percent following a Friday night announcement the company lacked the cash to pay shareholders a dividend that was due that day.

Down the road at American Home's headquarters, at 538 Broadhollow Rd., the news spread throughout the day and many employees said they were instructed to remain at work yesterday and return for the full day Friday.

Many expressed shock and outrage at how the situation had been handled. Several cited a Wednesday conference call in which executives told them to "keep positive attitudes" and continue taking loan applications -- even though the computer system for entering them had been taken off-line.

By the time they received the news from official channels, employees were standing in front of the building in small groups, crying, smoking cigarettes and talking on their cell phones. A man was seen taking away large jugs of bottle water from the buildng. One employee said vendors had been in the building removing coffee machines in recent days.

"It's just sad," one executive said. "No one had any time to plan. There was no communication at the employee level, no forewarning." Another worker said she was "furious" that the company had been silent over the past week as its creditors pulled their backing.

The scene Friday outside the company's two Melville buildings was calm, but employees said inside their work involved cleaning out desks and getting briefings on any further benefits. At least one entrepreneur came to try to recruit workers for new jobs. Many reporters for newspapers and tv stations stood on the perimeter of the buildings, trying to speak to workers.

The company's stock, which was above $36 as recently as December, was trading at 76 cents in mid-afternoon.

Meanwhile, employees at one American Home branch in Washington state said they were told Thursday that their office would be taken over by IndyMac, a rival mortgage bank.

Most of the employees interviewed yesterday declined to be named, saying they fear scaring off future employers.

Numerous shareholder lawsuits have already been filed against American Home and its executives.

Although this year's troubles in the housing industry have brought down many mortgage banks, American Home is the largest non-subprime lender to face possible bankruptcy. Its demise has heightened fears among investors and stock analysts that the uncertainty in the mortgage industry is not confined to the subprime area.

Even during bankruptcy proceedings, "it's unlikely there's a lot coming out of there" for common shareholders, said Bose George, an analyst with Keefe, Bruyette & Woods in Manhattan. He said most of the company's creditors also stood to lose substantial amounts of money.

Although the company still had not issued an official announcement until after 8 p.m Thursday, its wholesale division's Web site carried the message that it would be "shutting down all operations, effective immediately."

Newmark Knight Frank principal broker Brian Lee, who has assisted American Home with its real estate transactions since it moved to Melville in 2000, said, "To assist with such rapid growth and success, and then to see it crumble overnight -- it's a tragedy."

Staff writers Ellen Yan, Emily Pickrell and Caroline Ruse contributed to this report.