The Rise and Fall of American Home Mortgage: A Retrospective

A History of American Home Mortgage

American Home Mortgage, founded in 1987 by Michael Strauss, was a major player in the US mortgage industry, specializing in subprime lending to make home loans accessible to a wider range of borrowers.

The Ascendancy of American Home Mortgage

During the early 2000s housing boom, American Home Mortgage experienced rapid growth by lending to borrowers with less-than-perfect credit. At its peak, the company was originating billions of dollars in loans annually and had established itself as a household name in the mortgage sector.

The Decline of American Home Mortgage

The housing bubble burst in 2007, causing home prices to plummet and foreclosures to surge. American Home Mortgage, holding billions in risky loans, filed for bankruptcy that same year as their stock prices plummeted. This collapse was a significant event in the 2008 financial crisis, emphasizing the need for responsible lending practices.

Reflection on American Home Mortgage

The swift rise and fall of American Home Mortgage underscore the pitfalls of aggressive expansion and subprime lending. Following the crisis, the mortgage industry underwent regulatory changes aimed at preventing future collapses and promoting financial prudence.

Frequently Asked Questions

Q: What caused the downfall of American Home Mortgage?

A: The bursting of the housing bubble in 2007, leading to a sharp decline in home prices and a surge in foreclosures, was the primary cause of American Home Mortgage’s collapse due to their risky loan portfolio.

Q: What lessons can be drawn from the rise and fall of American Home Mortgage?

A: The company’s trajectory highlights the need for responsible lending practices and the dangers of excessive risk-taking for both lenders and borrowers.

Q: How did American Home Mortgage’s collapse impact the broader economy?

A: The collapse of American Home Mortgage was a key contributor to the 2008 financial crisis, causing job losses and decreased consumer spending that had global repercussions.

Q: What changes were implemented in the mortgage industry post-American Home Mortgage collapse?

A: Following the crisis, regulations were put in place to enhance transparency, reduce risky behavior, and protect borrowers from predatory lending practices to prevent a recurrence of similar collapses.