Thornburg doesn’t do subprime and is well known throughout the Bay Area for its single-minded focus on wealthy creditworthy borrowers. The news keeps getting worse for Thornburg Mortgage (TMA). The Santa Fe, N.M., jumbo mortgage lender saw its shares plunge 23% in premarket trading Monday after the company said it received more margin calls as the market value of its mortgage securities holdings continued to fall. Thornburg, whose shares fell sharply late last week after the company said it received $300 million in calls for more collateral, said Monday morning that it has gotten an added $270 million in margin calls since then - and that it hasn’t been able to meet most of them. The company said it ”is working to meet all of its outstanding margin calls within a time frame acceptable to its lenders by either selling portfolio securities or raising additional debt or equity capital.” With Thornburg’s shares having lost three-quarters of their value over the past year, any capital-raising will come at a steep price to existing shareholders.
The company’s CEO, Larry Goldstone, blamed a quirk of fair value accounting for Thornburg’s plight. “The turmoil in the mortgage financing market that began last summer continues to be exacerbated by the mark-to-market accounting rules which are forcing companies to take unrealized write-downs on assets they have no intention of selling,” he said Monday. “In this environment, the current market price of assets has become disconnected from their underlying recoverable value, resulting in increased volatility and imprecise quarter-to-quarter comparisons of asset valuations.”
Goldstone isn’t the first to make this claim, but he remains upbeat about the prospect that Thornburg will muddle through the mortgage mess and realize higher profits. “These difficult market conditions have also created increased profit opportunities as lower-priced mortgage assets will translate into wider mortgage spreads and improved portfolio margins going forward,” Goldstone said. “We remain committed to manage through these challenging and volatile markets and remain focused on building long-term value for shareholders.”
