Would-be American Home Mortgage borrowers scramble for new loans

BY ELLEN YAN | ellen.yan@newsday.com

7:15 PM EDT, August 3, 2007

On Monday afternoon, Coach Realtors agent Herta Kapp arrived at the Melville office of American Home Mortgage to close a deal on her client's Garden City house but was soon told a "computer glitch" was preventing loan checks from being issued.

Three hours later, with no money wired into the seller's account, everyone left, knowing the company was in financial trouble. Worse yet, the buyer worked for the lender.

Kapp said her client has applied at three other lenders and has no idea when the closing can take place. "Everybody's a little bit anxious and unsettled," said Kapp, who works in Coach's Garden City office.

The lightning-fast demise of American Home Mortgage has left many in the real estate industry in a holding pattern, new homes and commissions a closing away for buyers, sellers, attorneys and others. Other lenders have jumped into the gap left by troubled loan providers. In today's tighter market, sellers won't be able to get another buyer quickly.

As borrowers with useless loan approvals rush to reapply with other lenders, they're getting offers of fast-track closings, little paperwork and other deals from places like Countrywide, Wells Fargo and others. Some said not all the pitches have come true. Many may have to pay some fees twice.

"This all adds up to a lot of money," said one Queens woman who had locked in a 6.35-percent interest rate and now faces a 6.75 percent rate. She said she did not want to be named because she's embarrassed about being seen as a less-than-prime borrower, American Home Mortgage's specialty.

Lend America, a national mortgage banker in Melville, will soon advertise its ability to decide and close within a week. "What I did was waive all our junk fees, the processing fees, the application fees," said Steve Rosenberg, vice president of sales at Lend America, where several one-time American Home Mortgage customers have dropped off their files. "We'd close loans as fast as possible and try to match the rates they got."

East Meadow real estate attorney Marilyn Price said it's unlikely anyone will lose their down payment. After a closing is delayed, buyers usually have 30 days, but more time is not unreasonable. "People should realize that nobody did this intentionally," she said.