MBS Chaos Roils Thornburg Mortgage

Anyone with a decent market pedigree probably saw this coming a mile away: ultra-jumbo lender Thornburg Mortgage Inc. (TMA) said Thursday that it lost a ton of money in the first quarter, as the value of both mortgage bonds and mortgage loans on its books tanked. The company had delayed reporting on its first quarter results while it attempted to digest not only the (re)valuation of its core assets, but also how to swallow a Hail-Mary financing deal in March that helped the lender avert bankrupcty. Just how big were the losses? The first quarter net loss totaled $3.3 billion, or -$20.64 per share; the mark-to-market activity on its assets drove a loss of $1.5 billion. The last-ditch deal to save the company from the bankruptcy heap on March 31 led to additional charges totaling $949.1 million, Thornburg said. Thornburg CEO Larry Goldstone said that the lender was “significantly and negatively impacted by conditions impacting the entire mortgage market, including, among others, declining home prices and substantial declines in mortgage securities and mortgage loan prices.” Of course, those are problems that aren’t exactly unique to Thornburg’s business. Goldstone said the company had received $1.8 billion in margin calls on its AAA-rated mortgage assets as the Alt-A market quickly imploded heading into March — those margin calls quickly led the company to the precipice of bankruptcy, an outcome that was eventually avoided by heavily restructuring the company’s outstanding repo lines. While the problems affecting it are far from unique, unlike other lenders, Thornburg is not seeing material increases in borrower defaults within its loan portfolio, although delinquencies are increasing. 60-day plus delinquencies and REO inventory totaled just 0.65 percent of the company’s $23.5 billion portfolio of ARM loans at the end of March, the company said Thursday — or 158 of the 36,316 loans in the company’s portfolio. “Despite the continued modest increase in loan delinquencies in the first quarter of 2008 and our expectation that delinquencies are likely to continue to increase modestly over the balance of the year,” Goldstone remarked, “the credit quality of our originated and acquired loan portfolio continues to perform extremely well, and their performance is consistent with our current estimates.” Thornburg had temporarily halted originations in March as it faced possible insolvency, but said Thursday that it had reinstated its warehouse lines and funded roughly $239 million since the end of Q1. For more information, visit http://www.thornburgmortgage.com. Disclosure: The author held no positions in TMA when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.