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Thornburg on its last legs?

by Morgan on August 27, 2008

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Thornburg Mortgage, the company famous for buying prime (then) jumbo mortgages (above $417,000) is struggling to survive. The company’s CEO calls the situation “precarious” and they continue to try to fight off the effects of a $3.3 billion first quarter loss and a secondary market that’s all but vanished.

Thornburg is classic proof that Bernanke’s containment theory was flawed at best and fraudulent at worst. Thornburg bought high-credit quality mortgages and got hammered by the credit crunch. Poor loan performance (many jumbo mortgages were mid-length adjustable rate mortgages between 5-10 years) coupled with investors heading for the aisles left the company awash in losses.

From Forbes.com:

“Our circumstances are somewhat precarious, to put it mildly,” Thornburg Chief Executive Larry Goldstone said on a conference call.

Sante Fe-based Thornburg Mortgage reported earnings of $412.3 million, or 84 cents per share, vs. $78.1 million, or 66 cents per share, in the year-ago period. This is respectable considering the firm’s aggressive fund-raising tactics, which increased the number of outstanding shares to 484.6 million common shares in the 2008 quarter from 119.3 million in the 2007 quarter.

…

Thornburg, which specializes in originating and investing in jumbo mortgages that are worth more than $417,000, has been hurting since the middle of 2007 when the U.S. housing market began to sour. In June, the firm admitted that regulators are investigating whether the firm can continue (see “SEC Probes Sickly Thornburg”) after it posted a $3.3 billion first-quarter loss.

Goldstone added that the mortgage securities market is not getting better, despite some speculation to the contrary.

Last 3 posts by Morgan

Related posts:

  1. Thornburg quarterly losses hit $3.3 billion
  2. GreenPoint closed by Capital One, Thornburg Hammered
  3. Thornburg, the Jumbo Secondary Market & New FHA Limits
  4. Thornburg Funding Suspended Until Margin Calls Resolved
  5. Changing the jumbo mortgage game

  • jlewis44
    This is one of the truly sad stories in all of this mess. These guys cultivated a profitable niche, operated with sound underwriting guidelines and are still going down. This one is throwing out the baby with the bath water because companies like Thornburg deserve a place in this industry.

    Hopefully their major players can reorganize and make a comeback once the capital flows resurface in a few years.
  • Fielding Mellish
    Thornburg did, indeed, operate with sound underwriting. They only seemingly created a profitable niche. I'm not saying I could have done better or that I even understand how they obtained the money they lent out. It's clear in retrospect, though, that they didn't adequately move risk off of their books onto someone else's when their servicing portfolio could be virtually without defaults and they were still taken down by "mark-to-market".

    Their ongoing operations have been a mere shell for many months. The rates they're offering are well into the double digits, so obviously they're not doing any new business whatsoever. Continuing the ruse of putting out daily ratesheets must be part of attempt to buffalo ignorant young stock & bond analysts into thinking that there might be a remote chance that Thornburg could survive. They can't. If their share price fell to 4 cents, I'd still sell.
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