Tuesday, August 7, 2007

Honey, I Shrunk the Company

Bloomberg.com ---
The winner of this week's ``Honey, I Shrunk the Company'' award has to be American Home Mortgage Investment Corp. Worth more than $1.8 billion just six months ago, the company's value dropped to as low as $56 million this week.

The lender specializes in Alternative A mortgages, a catch- all classification for loans made to borrowers that don't meet the standard to be classified as ``prime'' while not scoring low enough to drop into the subprime category.

In April, American Home Mortgage said demand from financial companies that buy and repackage its so-called Alt-A mortgages was ``stabilizing.'' This week, banks cut its credit lines.

Perhaps part of its downfall was the May decision to let customers make their mortgage payments using American Express Co. credit cards. Think about that for a second. Using your Amex card. To make your mortgage payments. Can you spell usury?

A cardholder with a $3,000 monthly obligation could earn enough points in a year to get a free DVD player or portable video player. Never mind that gizmos like that come free with cornflakes these days. Or that the hapless borrower would be paying double interest for the privilege.


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