By Tim Zawacki

American Home Mortgage Investment Corp., citing "unprecedented" disruptions in the credit markets, did not make a quarterly dividend payment on its common stock as scheduled on July 27 as the company engages in efforts to preserve liquidity amid severe market stress.

In a statement released very late July 27, American Home said that by withholding the dividend payment it hopes to gain "a better understanding of the impact that current market conditions in the mortgage industry and the broader credit market will have on the company's balance sheet and overall liquidity." It had declared a dividend of 70 cents per share on June 15 to common shareholders of record as of July 9. The company also anticipates delaying its planned July 31 payment of dividends on its series A and B cumulative redeemable preferred stock.

The credit-market disruptions, American Home said, led to "major write-downs" of its portfolios of loans and securities, and the company is facing what it characterized as "significant margin calls" on its credit facilities.

News broke on July 27 in Long Island, N.Y.'s Newsday that the company was reportedly in the process of laying off more than a thousand employees. A company spokeswoman confirmed to the newspaper that it had recently eliminated 228 positions — for a total of 428 positions through the month of July — as a result of what she described as "right-sizing our departments in response to market conditions and to keep our departments efficient during challenging times for our industry."

American Home's shares had plunged by more than 20% on July 19 amid rumors that one of its warehouse facilities had been pulled by a major investment bank. The decline was such that the NYSE asked the company to issue a statement to indicate whether there were any corporate developments to explain the unusual market activity. Initially, the company did not respond publicly, but the same spokeswoman told several news organizations the following day that no warehouse lines had been pulled.

The company issued earnings guidance on June 28 in which it withdrew earnings guidance for 2007 and predicted that its second-quarter results would include "substantial" charges for credit-related expenses. But American Home reaffirmed its common stock dividend at that time, citing "a stabilization of the secondary mortgage market." The company said on June 28 that its loan pools offered for sale "are now attracting multiple bidders and are being traded at supportive prices." It did, however, caution that its dividend policy is subject to change without notice and that its board may either reduce or eliminate the dividends if it believes prospects warrant such a change.

In mid-July and continuing through the latter part of the month, secondary market conditions were widely viewed as having deteriorated substantially as a result of a variety of factors. Countrywide Financial Corp. CEO Angelo Mozilo said during a July 24 earnings conference call that "volatility in the secondary market has increased significantly early in the third quarter, and liquidity for mortgage securities has been reduced as a result."

But while markets sold off during the week of July 23 in response to Countrywide's earnings report and commentary, American Home's July 27 close at $10.47 per share was only 29 cents below its day-end level on July 19.