Mortgage Daily

Published On: June 12, 2008

Thornburg Mortgage Inc. reported a massive quarterly loss and disclosed that it temporarily halted new loan originations recently. Shareholder equity has been wiped out.

The Santa Fe, N.M.-based company had a $3.3 billion first-quarter loss, according to a filing today with the Securities and Exchange Commission. The huge loss compares to a profit of $65 in the fourth quarter million and a profit of $75 million a year earlier.

Unrealized market value losses as a result of a decline in the value of its mortgage-backed securities and securitized loan portfolios accounted for $1.5 billion of the quarterly loss. Declining home prices were also blamed for the dismal results.

“Despite modestly increasing delinquencies in our loan portfolio and some additional downgrades of our mortgage-backed securities assets, the overall credit performance of our portfolio continues to perform well,” President and Chief Executive Officer Larry Goldstone said in the report. “In the first quarter, as disclosures about the continued deterioration of the credit performance and supply imbalance of mortgage securities became known, we faced a sudden downward spiral in prices on our AAA-rated mortgage assets.”

First quarter originations were $549 million, reflecting a “rapid recovery in loan origination activity” during January and February, Thornburg said. But by March, liquidity concerns forced the company to halt new originations — the second time it has done so since August 2007.

The real estate investment trust has since reinstated originations, funding $239 million since March.

Loans delinquent at least 60 days, including real estate owned, were 0.65 percent as of March 31, climbing from 0.44 percent on Dec. 31 “but still significantly below the industry’s conventional prime ARM loan delinquency ratio of 5.54% at Dec. 31.”

Thornburg reported stockholder equity of $2.0 billion on Dec. 31. Given the $3.3 billion first quarter loss and the $1.35 billion raised in March through a private placement of senior subordinated secured notes, warrants for common stock, and participations in the principal payments on a specific MBS portfolio, the company has virtually wiped out all shareholder equity and may even have a negative net worth.

Company officials were not immediately available to clarify its net worth position.

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