American Home Mortgage tumbles on liquidity issues

NEW YORK (Reuters) - American Home Mortgage Investment Corp sank on Monday after the home loan provider announced "major" writedowns, delayed a dividend and said lenders were demanding it put up more cash.

Shares of American Home were down 39 percent, falling in pre-market trading to $6.39 from Friday's close of $10.47. On Friday the shares hit their lowest level since April 2003. Trading on Monday was halted for news pending.

The announcement late Friday evening reflects how liquidity and credit issues affecting subprime lenders are extending to companies that make home loans to borrowers considered to be good credit risks.

American Home, based in Melville, New York, specializes in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation. Such loans are often considered riskier. The company recently commanded a roughly 2.5 percent share of the U.S. mortgage market.

"Bankruptcy is not out of the question," said Matt Howlett, an analyst at Fox-Pitt Kelton Inc. in New York. "It needs to find a partner with alternative funding and hope the market turns around. It's going to be tough."

He added, "It's clear now we're in a liquidity crisis. Any loans that aren't pure prime are falling in value."

American Home did not immediately return a call seeking comment.

Read full news with figures at: Reuters.