As Expected A "Prime" Lender American Home Mortgage Investments Corp Slashes Earnings

So, in conjuction to my previous article stated "Gloom and Doom for Shorts?", American Home Mortgage Investments Corp comes clean and preannounces their earnings. They now expect first quarter net income of $.40 to $.60 from the prior guidance of $1.02 per share. Analyst consensus was at an average of $1.06. Additionally, they cut their quarterly dividend to $.70 from January's dividend which was raised $.06 to $1.12.

I want to point to some pertinent facts from this pre-announcement from AHM. First, they are a "prime" mortgage lender with low subprime exposure, like Countrywide Financial Corporation (CFC). The reasons cited for this cut is "Mortgage lender American Home Mortgage Investment Corp. said Friday it expects lower first-quarter and full-year earnings due to secondary mortgage and mortgage-backed securities markets conditions."

The issues are compounded by continued degradation of CDO marketablity.

This is a culmination of all the things discussed on this blog for the past month. I believe this "mortgage" related shortfalls will be the common theme for the big lenders. I believe the pain will continue because no one has given much thought to the problems associated with ALT A Option ARMS.

It will be interesting to see if Countrywide will follow suit. I cannot imagine that Countrywide will remain immune to this condition. I know that CFC has been like a teflon to bad news but like all things, the bigger they are the harder they fall. The issues related to CFC is that they have not been very forthright with their situation. They have propped up their share price by smoke and mirrors. They can continue to hide but on the day of reckoning, more gnashing of the teeth will be felt by the insiders.

I am counting down to the day CFC grows a conscience and does the right thing. But even now, Mozilo continues his campaign of greed driven selling. Carma will be a bitch.