Thornburg Raises Loss Estimates Amid Continuing ‘Dislocation’

Thornburg Mortgage, Inc., an ultra-prime jumbo lender that has seen some hard times recently due to the mortgage credit crunch, said today that losses will exceed its earlier estimates. The company had said in August that it lost $863 million on the sale of $204. billion of adjustable-rate mortgages, a number it revised today to a loss of $1.1 billion on the sale of $22.0 billion worth of whole loans. Thornburg also said write-downs on its securities portfolio will exceed the original $262 million estimated in August, instead coming in at an estimated $286 million, and noted that it expects to report a $16 million loss on mortgage loans funded during the third quarter. The funding loss comes as the company said it had locked rate commitments prior to August 2007. “The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated,” said Larry Goldstone, president and COO, who noted the company’s belief that it has access to adequate liquidity. “As market conditions and financing terms continue their return to normalcy, we believe that the future profitability of the company will improve as we put the events of August and September 2007 behind us.” It’s worth noting here that Thornburg had said in August that it expected to resume “business as usual” at that time — it’s clear now that market conditions have had a different idea, although Goldstone characterized the firm’s original estimates as “based ont he best information available to us at the time.” Goldstone also hinted that further changes could be in the offing when the company reports its third quarter results. There is an interesting tidbit buried in the press release, however: a mention of a $6 million impairment charge on one MBS backed by pay-option ARMs. HW readers know that I’ve mentioned recapitalization schedules here in the past as a real problem facing the housing markets, beyond the volume of resets; this is something that hasn’t been picked up on outside of the trades just yet. I’ll be posting more on this shortly.