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Thornburg Hopes to Resume Locks

Plans are to open lock desk on Aug. 20

August 16, 2007


Jumbo lender Thornburg Mortgage Inc. plans to reopen its lock desk and resume locking in rates on potential new loans on Monday, Aug. 20, after halting all new locks for four days.

But Thornburg spokeswoman Kathrin Schlenzig admitted to that "nobody knows at this point" what the market situation will be on Monday.

"The market is so volatile and changing every day," she commented. "Every day is a new day basically.

"But on Monday we're expecting to open the lock desk again. That's our plan. That's what we're working on right now with a variety of strategies that we're exploring and trying to implement."

The lock freeze was a "short-term measure" implemented in order to slow lending activity and provide some time to "put some things into place and be better prepared to continue to navigate through this situation," she said, pointing out that Thornburg was now "well positioned to navigate through current market conditions."

She stressed that all loans in its pipeline that had already been locked were being honored.

Another "short-term measure" undertaken by Thornburg was to delay its $0.68 a share common dividend for the second quarter to September 17 from August 15. She said the delay, announced on Tuesday, was done "to keep liquidity within the company right now so that we can better react to the difficulties the market is presenting us."

President and COO Larry Goldstone said the decision to delay dividend payments was made because of the "sudden and unprecedented decline" in the market prices of its AAA-rate MBS and the subsequent increase in margin calls related to its repurchase agreement financings on those securities. He blamed the problems on current "significant disruptions in the mortgage market."

The delay, he explained, would enable Thornburg to "retain our cash to enhance our ability to work with our lenders and weather this tumultuous environment.

"We will rebuild when the environment stabilizes," he vowed.

Schlenzig explained that every mortgage company has its own strategies concerning rates today.

"Rates are really hard to predict. It also depends on what the Fed will be doing and what they will come out with," she said. "They put $17 billion into the market. That's a very small amount. It seems they're driving a strategy with smaller liquidity pushes into the market. But they haven't come up with any other measures they're planning to do to help stabilize the situation and counteract this global crisis that we're dealing with right now."

In the past week both Moody's and Standard & Poor's downgraded Thornburg's ratings as a result of the liquidity and funding difficulties that plague Thornburg and the rest of the mortgage business.

On Tuesday, Moody's lowered its rating for Thornburg's senior unsecured debt to B2 from Ba3 and its rating for Thornburg's preferred stock to Caa1 from B2.

In addition, it placed its new downgraded ratings under review for possible further downgrade should there be further difficulties in meeting margin calls on secured debt or additional shrinkage of borrowing options, according to analyst Brian Harris.

And last Friday, S&P lowered Thornburg's long-term counterparty credit rating to B from BB and also placed that new rating on CreditWatch Negative.

S&P credit analyst Adam Rosengarten said the downgrade reflects the unsteady state of the secured financing capital markets on which Thornburg relies to fund its mortgage REIT operations. "This abrupt and significant liquidity pullback does not seem to be abating," he said, noting that the restricted access to liquidity is "likely to continue to be a severe event for the company."

Fitch Ratings lowered its rating of Thornburg to negative from stable last December and currently rates the mortgage REIT at BB, a spokesman told

However, Thornburg's stock recovered on Thursday, closing at $12.38, up from Tuesday's 52-week low of $7.49. The stock had traded at $28.40 on May 1, which was its 52-week high.

Also on Wednesday, Moody's assigned a Aaa rating to the senior certificates issued by a Thornburg Mortgage Securities Trust backed by adjustable-rate prime mortgage loans originated by Thornburg, Countrywide and others.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]

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