American Home Mortgage Investment Corp., a large home lender catering to people considered good credit risks, completed its rapid descent on Monday when it filed for Chapter 11 bankruptcy protection.
The Melville, New York-based real estate investment trust, one of the largest independent U.S. home loan providers, filed for protection from creditors with the U.S. Bankruptcy Court in Delaware.
The filing came after American Home closed most operations on Friday, laying off all but about 750 workers. The company said it had started the year with more than 7,400 employees.
American Home's bankruptcy reflects how worries about loan defaults fueled by slumping U.S. housing prices have spread beyond subprime lenders, which lend to people with weaker credit, to companies that make higher-quality loans.
American Home invested in home loans and mortgage securities, serviced mortgage accounts and originated loans from a network of branches.
The company offered Alt-A mortgages, loans that fall between prime and subprime in quality, as well as adjustable-rate loans. Founded in 1987, American Home said last year it grew to become the 10th-largest U.S. retail mortgage lender by originating $59 billion in loans.
Yet American Home's collapse was faster than that of New Century Financial Corp., a subprime specialist that filed for bankruptcy on April 2, less than two months after disclosing accounting problems and mounting losses.
New Century has since liquidated most of its assets.
American Home cut its dividend and warned in late June of rising losses from sour loans, but it wasn't until July 27 that it first revealed it was suffering a credit crunch and postponed paying a scheduled dividend.
Four days later, the company's own lenders cut off its access to credit lines. American Home hired advisers to help it evaluate options, including a liquidation of assets. Several states told it to stop making new loans.
Several large U.S. mortgage lenders have sought bankruptcy protection this year, but most catered to the riskiest, subprime borrowers.
(Reporting by Tim McLaughlin, Jonathan Stempel and Joe Giannone)