California company home loan mortgage

American Home Mortgage adds 23 loan offices in Western states

Homeowners may be lifting their feet off the gas when it comes to refinancing, but American Home Mortgage Investment Corp. is going full-speed ahead with takeovers.

AHM announced plans earlier this month for its 10th deal, this time to take over 23 loan offices in five Western states from Columbus, Ind.-based Irwin Mortgage Corp. The purchase, announced March 14, gives AHM a greater presence in Arizona, California, Colorado, Hawaii and Washington.

AHM executives said the deal, expected to close in April, should give the firm up to $1 billion in additional mortgage originations annually. The firm originated $23 billion in loans last year.

It gives them branches in Western states that have very strong housing markets - Arizona, Colorado and California, said Steven C. DeLaney, a senior vice president of financial institutions research at Florham Park, N.J.-based investment bank and brokerage firm Ryan Beck & Co. They had some presence already, and this gives them additional offices.

AHM CEO Michael Strauss said the Irwin deal will allow the firm to continue adding assets and expanding its portfolio. The latest purchase is expected to add 100 employees to the firm, which already employs more than 5,000 people nationwide.

Irwin will be AHM's 10th acquisition since it snapped up California's Marina Mortgage in 1999 and went public the same year. Established in 1987, AHM became a mortgage real estate investment trust in 2003 and has been growing at a meteoric pace, filing acquisitions in the Midwest and Southeast United States.

AHM inked perhaps its most high-profile deal in July 2004, when it acquired mortgage offices from Washington Mutual in regions where the bank didn't have a presence. With that deal came about 500 employees, a 20 percent jump in AHM's head count.

In the fourth quarter of 2004, the REIT was ranked No. 20 by National Mortgage News for total company mortgage originations, No. 14 in retail lending and No. 16 in wholesale lending.

It's a big deal in the world I cover: mortgage REITs, said DeLaney, who gives AHM an outperform, Ryan Beck's highest rating. They're a well-known company.

One reason for AHM's success? Mortgage REITs are competing with banks and traditional mortgage companies.

A lot of those mortgage companies don't have the scale to be efficient in the mortgage business, but someone like American Home does, said Mary M. Feder, a spokeswoman for AHM. We have the back office in place. We can just add production offices.

DeLaney added, The great thing about being a being a REIT is you pay dividends to shareholders not subject to corporate income tax. They retain the loans of the quality they want for the REIT portfolio, and that gives them a steady source of income.

Even so, some industry watchers predict that AHM is likely to face challenges ahead.

The Mortgage Bankers Association projects a 9 percent decline in mortgage production nationwide in 2005, amid a slowdown in refinancing and rising Fed lending rates.

But DeLaney said the REIT could even cash in on rising rates.

More than 40 percent of total mortgage loans nationwide are adjustable, and those adjustable loans comprise a big chunk of AHM's business, he said.

The fact that fixed rates may go up in 2005 or 2006 isn't affecting their business, DeLaney said. A lot of their borrowers would prefer an adjustable-rate loan in the first place.

And as for the potential slowdown in refinancing, that could have a silver lining for AHM as well.

There's an interesting phenomenon going on for the demand of second homes and investment properties, said DeLaney, adding that vacation and investment properties accounted for 30 percent of new and existing home sales in 2004.