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Fund Times: Mortgage Sector Woes Continue to Hurt Funds

Plus, news on PIMCO emerging markets fund, Fidelity manager changes, and more.

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American Home Mortgage Investment Corp. (AHM), a REIT that also originates, services, securitizes, and invests in residential mortgage loans, dropped nearly 90% on July 31, taking some funds with it. For example,  Schneider Small Cap Value (SCMVX) and CIP JSAM Value (CIJVX) held large stakes in the firm (5.68% and 8.35%, respectively), based on their most recently filed portfolio holdings.  Hotchkis and Wiley Mid-Cap Value (HWMIX), Munder Small-Cap Value (MCVYX), and several others had smaller stakes.

American Home Mortgage's troubles began in recent weeks as the market for its mortgage-backed securities dried up, when concerns over the subprime mortgage crisis widened. A liquidity crisis ensued, as the firm, unable to sell its loan packages, lost access to its credit lines and saw lenders initiate margin calls that sent the firm into a classic credit crunch. On July 27, the firm announced it would have to delay payment on its dividend. By July 30 uncertainty over the firm's future caused the NYSE to halt the trading of its stock. And on July 31, the company announced it was unable to originate loans.

Lawrence Jones does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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