Melville-based American Home Mortgage has suffered a virtual collapse on Wall Street, a situation that could have dire consequences to its Long Island employees and borrowers.

According to a company press release, American Home Mortgage was unable to fund approximately $300 million of its lending obligations Monday, and it was not expected to be able to fund $450 to $500 million of its obligations Tuesday.

Hofstra University's Irwin Kellner said the situation isn't looking good.

"They can't provide new mortgages, but they also have to have money to fund their current mortgages," Kellner said. "So there are a lot of people who could be in trouble."

Those in trouble include employees, who told News 12 Long Island off camera that they were anticipating layoffs. They said the mood at headquarters in Melville has been nervous and gloomy.

As for prospective homeowners, Lynx Mortgage Bank LLC President Zahra Jafr said American Home Mortgage's crash will affect the entire industry.

"I think lending will continue to tighten and lending criteria will tighten," Jafr said. "I think you'll see a shrinkage in product and the availability of mortgage money will decrease."