Aug. 3 (Bloomberg) -- American Home Mortgage Investment Corp., a U.S. lender that halted operations yesterday, intends to file for bankruptcy, according to two employees told of the decision by managers in meetings.

Tim Neer, a senior officer, told about 200 employees at a facility near the Melville, New York, headquarters today that the company will declare bankruptcy, said Shawn Nuzzo, a loan sales coordinator. Employee Paul Horn said about 75 people in the information-technology department were told the company will file for bankruptcy by Aug. 6.

American Home would become the second-biggest U.S. mortgage lender to seek bankruptcy protection this year and the biggest that caters to people with good credit. The company this week stopped making loans and fired 90 percent of its 7,000 employees after a surge in borrower defaults prompted investment banks to quit extending credit. American Home issued almost $60 billion of loans last year from 550 offices in 47 states.

``This is a classic contraction cycle for the mortgage industry,'' said Bert Ely, an Alexandria, Virginia-based consultant. ``American Home had the squeeze put on them.''

At least 11 other mortgage companies have declared bankruptcy in the past year, most of them because of losses on so-called subprime loans made to people with blemished or limited credit histories. The biggest, Irvine, California-based New Century Financial Corp., sold subprime mortgages.

Regulators in New Jersey, New York, Connecticut, Ohio and Massachusetts today suspended American Home's lending licenses for failing to deliver at least $750 million of loans promised to thousands of borrowers. States took similar actions following the collapse of New Century and Mortgage Lenders Network USA Inc., another subprime lender.

Conditions `Deteriorated'

A call to American Home spokeswoman Mary Feder was greeted by a message saying her voice mail was full. No one could be reached on the company's main phone number. Neer declined to comment when reached by phone.

In an e-mail to employees yesterday, American Home founder and Chief Executive Officer Michael Strauss, 48, said conditions in the U.S. mortgage market have ``deteriorated to the point that our business is no longer viable.''

The stock, which traded at almost $40 two years ago, fell 52 percent to 69 cents today at 4 p.m. in New York Stock Exchange composite trading.

A group of American Home's creditors have agreed to hire FTI Consulting Inc., a Baltimore-based advisory firm specializing in bankruptcies and financial restructurings, Ronald Greenspan, senior managing director in FTI's Los Angeles office, said yesterday. The firm served this year as the financial adviser to creditors in the bankruptcies of New Century; Middletown, Connecticut-based Mortgage Lenders Network and ResMae Mortgage Corp.

American Home said in a statement earlier this week it hired Milestone Advisors LLC and Lazard Ltd. as advisers. Milestone represented Brea, California-based ResMae in its bankruptcy. New Century used Lazard.

To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: August 3, 2007 19:15 EDT