It has filed for bankruptcy.. The company stated that it was focused on earning net interest income from self-originated loans and mortgage-backed securities, and through its taxable subsidiaries, from originating and servicing mortgage loans for institutional investors.
Mortgages were originated through the company's employees as well as through mortgage brokers and purchased from correspondent lenders and were serviced at the company's servicing center in Irving, Texas.
The company filed for Chapter 11 bankruptcy protection in Wilmington Delaware federal court, on August 6, 2007. The week before the filing, the company said that many of its lenders had demanded their money back, and that AHM was also unable to deliver on about US$ 800 million in commitments for housing loans, and had laid off nearly ninety percent of its 7,000 employees.
On July 31, 2007, the company announced that it can no longer fund home loans and may liquidate assets, putting its survival in doubt. The Melville, New York-based real estate investment trust retained Milestone Advisors and Lazard to help it evaluate options and advise "with respect to the sourcing of additional liquidity including the orderly liquidation of its assets." American Home's announcement shows how concerns about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans. "The chances are pretty high that the company either goes bankrupt or materially restructures, leaving little value for shareholders," said Bose George, an analyst at Keefe, Bruyette & Woods Inc. in New York. American Home has specialized in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation of income or assets. It recently commanded about 2.5 percent of the U.S. mortgage market.
It is with great sadness I announce today that American Home Mortgage has been forced to close. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that our business is no longer viable. What this means for most of our employees is that Friday, August 3, 2007 will be your last day of employment. Detailed information regarding payroll, benefits and other human resource related matter will be available Friday morning for distribution in the office. I would like to personally thank every single individual working for the company for their efforts. It has been my privilege to be associated with such a wonderful team.
Following Strauss's email, at least one employee of AHM has stated that the western division of AHM had been purchased by IndyMac Bank, saving those employees' jobs. In 2008, IndyMac also failed—one of the largest bank failures in American history. On July 11, 2008, IndyMac Bank was placed into conservatorship by the FDIC and on August 6, 2008, the bank filed for Chapter 11 bankruptcy protection.