American Home Mortgage Investment Corp will reportedly close its doors Friday and lay off its workforce, after announcing Tuesday that it could no longer fund loans.

“It is with great sadness I announce today that American Home Mortgage has been forced to close,” company Chairman Michael Strauss told employees in an e-mail, Forbes reported. “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.”

Founded in 1988, the Alt-A lender made nearly $60 billion in loans in 2006 and employed 7,400 people, Bloomberg News said. Alt-A loans are those made to borrowers with better credit than subprime borrowers, but with issues that prevent them from receiving prime loans.

Bloomberg estimates American Home would be among more than 70 or more mortgage lenders that have closed or been acquired by competitors as home-price appreciation slows or reverses and delinquencies and foreclosures rise.

Lenders that remain have tightened their standards, curtailing the use of some products and charging higher rates to borrowers with flawed credit. That could hamper a recovery of housing markets as prospective home buyers pay more to borrow or are turned down altogether.

Alt-A lender IndyMac Bancorp Inc. has made major changes to underwriting standards and is raising interest rates because of the “panicked and illiquid” market for securities backed by mortgage loans, Chief Executive Officer Michael Perry told employees in an e-mail posted on an official company blog.

IndyMac sold only 90 percent of the loans it produced during the second quarter, compared with 97 percent at the same time last year, the company said in a Securities and Exchange Commission filing. In his e-mail, Perry said it is now difficult to trade even the highest-rated, AAA bond, on private mortgage-backed securities.

“To give you an idea as to how unprecedented this market has become … I received a call from U.S. Senator (Christopher) Dodd this morning who’s seeking an understanding of ‘what is really going on and how can I and Congress help?’ ” Perry wrote in the e-mail.

At Inman News’ Real Estate Connect conference in San Francisco Thursday, Realogy Franchise Group President and Chief Executive Officer Alex Perriello said that economic indicators like job growth and household net worth look favorable for housing markets. But “the wild card is what’s happening with subprime,” he said.

Perriello cited a Credit Suisse report predicting $50 billion in adjustable-rate mortgages will reset in October, with an additional $30 billion a month through October 2008.

While housing markets have historically involved four years of expansion followed by two years of contraction, it won’t be clear where the market is headed until the end of this year or early next year, Perriello said.

Foreclosure tracking service RealtyTrac reports foreclosure activity increased 55 percent in the first half of 2007, and predicts foreclosures could top 2 million this year.

Countrywide Financial Corp. Angelo Mozilo told investment analysts in a recent conference call that the housing market is like a “huge battleship” that will take the balance of 2008 to “slow down and stop” before heading in the other direction in 2009.

“My feeling is by that time, we’ll have reduced competition, very substantial pent-up demand, because of all the people that have been closed out of housing, probably lower interest rates,” Mozilo said. “I do think that this ultimately has to have an effect on the economy. I just can’t believe that this economy is totally insulated from housing, and we’ll be 2009, 2010, 2011 I look to as sort of like 2003, 2004 and 2005 — great years for the industry.”

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