The complaint further alleges that Strauss, Hozie and Bernstein misled American Home Mortgage's auditor about the adequacy of the reserves. Strauss and Hozie also failed to disclose the fact that, during the month of April 2007, American Home Mortgage was forced to sell the majority of its multi-billion dollar mortgage-backed securities portfolio to meet pressing liquidity demands. Strauss and Hozie knowingly failed to reserve adequately for the expected losses caused by these delinquent loans.Īccording to the SEC's complaint, Strauss and Hozie made misleading disclosures concerning, among other things, the riskiness of the mortgages the company originated and held and the company's liquidity. The analysis also showed that the company's losses on its delinquent second liens were mounting quickly and that American Home Mortgage would lose at least 72% of the value of these loans after the properties went through foreclosure. In fact, as Strauss and Hozie knew, the company's own analysis showed that American Home Mortgage needed significant additional reserves. The complaint alleges that Strauss and Hozie fraudulently understated American Home Mortgage's first quarter 2007 loan loss reserves by tens of millions of dollars, converting the company's loss into a fictional profit. The Commission alleges that Strauss and Hozie engaged in accounting fraud and made false and misleading disclosures that were designed to conceal from investors that American Home Mortgage's financial condition and prospects had significantly worsened in the first four months of 2007. On April 28, 2009, the Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of New York against former senior officers at American Home Mortgage Investment Corp., Michael Strauss, Stephen Hozie and Robert Bernstein. Michael Strauss, Stephen Hozie and Robert Bernstein, Civil Action No.

2967 / ApSecurities and Exchange Commission v.

21014 / ApAccounting and Auditing Enforcement Release No.

SECURITIES AND EXCHANGE COMMISSION Litigation Release No.

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