August 4, 2007 in Business

Subprime crisis hits home

Associated Press The Spokesman-Review
 
Associated Press photo

Employees hug as they leave the headquarters of American Home Mortgage Investment Corp. in Melville, N.Y., on Friday. Associated Press
(Full-size photo)

MELVILLE, N.Y. — Some companies fade away over time. American Home Mortgage Investment Corp. is disappearing right before its 7,000 employees’ eyes. The latest victim of the subprime mortgage implosion has run out of money, and now its workers have run out of time.

“I thought it was like a dream,” said Saikumar Bullachi as he left the company’s Long Island headquarters Friday morning for the last time. “Suddenly, you know, somebody wakes you up and says it’s all over now.”

American Home Mortgage, which has been struggling to raise money to make new loans, stunned its work force this week by announcing its financial backers have essentially pulled the plug and all but a fraction — or 750 — of the staff was let go. The unemployed include the 1,400 workers at its Long Island headquarters.

The Wall Street banks that lend American Home Mortgage money for home loans will not extend the company any more money, and some have demanded a return of money already lent.

Many employees declined to speak with reporters who converged outside the offices, with several saying “it’s not appropriate” to comment on the layoffs. But those who did praised the company, and were generally optimistic about their futures.

“It’s a very emotional thing,” said Bullachi. “People who spent a lot of time here, they are pretty emotional about being separated. But then everybody is positive they’ll get opportunities.”

Kaneen Morgan, a single mother raising a son in Port Washington, worked on producing the company’s Web site. She said there were tears on Thursday after the workers heard of the impending shutdown.

“I didn’t expect this at all, but these kinds of things happen, especially in this type of field,” she said. “It hurts, but I believe in God and things are going to get better. I believe something better is out there.”

American Home Chief Executive Michael Strauss said in a statement that “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.”

American Home Mortgage’s lenders were balking because the mortgage loans that act as collateral for the company’s credit lines have sunk in value. The market where investors buy mortgage loans has suffered “unprecedented disruption” this year, the company said, and it was having trouble selling its mortgages.

“We were in risk management so we kind of saw everything coming,” said analyst Jonathan Blumberg, who was racing for a train to his Brooklyn home after leaving work. “It’s tough to say” what the industry’s immediate future holds, he added.

Christine Cruz of Holtsville, who had worked as a business analyst for the company since last year, was cautiously optimistic about her future.

“It’s going to be tough, the market is tough out there,” she said. “There’s going to be a lot of people looking for the same positions. You know a lot of people have been here for a really long time. It’s kind of like family here; it was a really good company to work for.”

It also appeared that some employees might not be out of work for long. As they carried file folders and other items to their cars, they were greeted by fliers on their windshields advertising job openings, including one with a local law firm.

On another side of the parking lot, a man who identified himself as Manny Mosquera of Union America Mortgage in Mineola hopped out of a stretch limousine to tell reporters his company had openings for some of the American Home alumni.

“The bottom line is people still have to buy homes, people still have to refinance their house,” he said. “That’s not changing, that’s never going to change.

“We’re trying to help some people out, find them some employment, simple as that.”


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