August 2 2007: 6:30 PM EDT
NEW YORK (Reuters) -- Mortgage lender American Home Mortgage Investment Corp. is closing its doors Friday, and has told employees they will be laid off, according to the Long Island newspaper Newsday, citing an e-mail to employees from Chief Executive Michael Strauss.

The news shows how problems in the U.S. mortgage market are broadening, as credit quality issues begin to affect lenders that focused on borrowers with decent credit, as opposed to "subprime" borrowers thought to be greater risks.

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Shares of American Home (Charts) closed down 2 percent to $1.45 on the New York Stock Exchange. Its shares plunged 51.7 percent in extended trading.

The housing slump: How deep is the pain?
While Melville, New York-based American Home focused on borrowers considered good credit risks, it made many loans to people who could not document income or assets.

American Home this week said its own lenders cut it off, that it could not meet its escalating margin calls and that it might liquidate assets. It also stopped taking loan applications.

"Bankruptcy is the next logical step for them," said Steve DeLaney, analyst at JMP Securities in Atlanta.
Spokeswoman Mary Feder and the company did not return phone messages and e-mails seeking comment.
The company offered many "Alt-A" mortgages, which fall between prime and subprime in quality, as well as adjustable-rate loans. Founded in 1987, the company said it had by 2006 become the 10th largest U.S. retail mortgage lender.

Dozens of mortgage lenders have shut their doors or tightened loan standards as housing prices slumped, borrowing costs rose, and delinquencies and defaults soared.

Countrywide Financial Corp. (Charts, Fortune 500) said Thursday that its financial condition remains strong, after a bond insurer said Countrywide mortgage bonds seem to be facing higher loan delinquencies. Countrywide's bonds weakened dramatically relative to Treasurys earlier in the session.
Home sales may pick up

Homebuilder shares tumble on credit woes



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