Earnings won't be as good as previously projected for a New York-based mortgage company. But the lopsided secondary market conditions in December responsible for the disappointing results aren't expected to continue.

Previous fourth quarter earnings per share estimates of $4.60 to $4.80 won't be met, American Home Mortgage Investment Corp. warned today. The lender blamed "changing market conditions" for the disappointing results.

"During December the secondary mortgage market became one-sided, with very few buyers being offered a large amount of product," said Chairman and CEO Michael Strauss in the statement. "Most buyers moved to the sidelines to wait out the holidays, and significant discounts to what had been standard pricing a few weeks earlier were necessary to sell loans, driving yields sharply higher."

An unusually severe widening of the spread between the LIBOR and mortgages securities, which were not hedged, had a significant impact on the Melville, N.Y.-based company, which said it also "expects other comprehensive loss in the fourth quarter of approximately $28 million."

The value of its mortgage loans held for sale and its investment portfolio fell as market conditions worsened toward the end of the fourth quarter, the real estate investment trust explained. Some lower-yielding, recently-originated mortgages, about $800 million total, were not sold because of the low prices offered by buyers.

"Finally, the fourth quarter market changes affected the value of the company's permanent assets and its loans held for sale, which resulted in the recognition of a liability under Statement of Accounting Standards No. 133 and a corresponding expense," the statement said.

American Home noted it continually adjusts its rates to reflect secondary market conditions and "does not expect that the market changes which affected its fourth quarter results will continue to impact its results during the first quarter 2006," adding that the spread between its mortgages and LIBOR is returning to more normalized levels.

"I believe market conditions at the end of the fourth quarter were, in part, an anomaly, and that equilibrium is returning to the market as we move into January," Strauss added.

Fourth quarter production was $13.6 billion, off slightly from $13.7 billion reported in the third quarter. A year prior, originations were $6.7 billion.