Thornburg Mortgage( TMA) shares sank after the mortgage lender sold part of its mortgage-backed securities portfolio at a loss.
The jumbo mortgage originator, which has been hit hard by the collapse of the secondary market for mortgage securities, sold off $21 billion worth of mortgage-backed securities in a bid to raise cash and resume normal operations.
The Santa Fe, N.M., lender, said the move will result in a $930 million capital loss, of which Thornburg has previously reserved $700 million. Thornburg will also take a $40 million gain for the termination of its interest rate hedges.
Thornburg reaffirmed its plan to pay a 68-cent dividend next month but said it will withhold guidance on further dividends till it can get a better view of the future.
The company said the sale of the securities reduces its exposure to margin calls on short-term borrowings. Thornburg and other big lenders, ranging from
( CFC) and
( LUM), have been laid low by margin calls as the value of their mortgage-related assets have tanked.
"The company did sell most of its lowest yielding and negative spread assets as part of these asset sales and expects to remain profitable on an operating basis in the third quarter," Thornburg said. "Further, the company believes that mortgage yields have improved to at least 1.25% over its cost of funding new mortgage assets, which indicates an expected improvement in its portfolio margin going forward as compared to its reported margins over the past year."
The sale resulted in the reduction of its mortgage asset portfolio to $36.4 billion from $56.4 billion at June 30. Thornburg said that with the sales, its book value has fallen to $12.40 a share from $14.28 a week ago and $19.38 on June 30.
"We believe we have nearly stabilized our liquidity situation," said CEO Larry Goldstone, "which we expect will allow us to begin to resume normal operations over the next two weeks as a leading residential mortgage portfolio lender in the high quality jumbo and super-jumbo adjustable-rate mortgage market."
Within the next two weeks, Thornburg Mortgage hopes to reopen its loan lock desk in an effort to gradually begin locking loans for clients and accepting new jumbo ARM applications. The company also anticipates the gradual resumption of funding loans for its nationwide base of lending partners and their clients.
"The actions of the past week have been regrettable and disappointing for management and our shareholders," said Goldstone. "However, we expect that the mortgage market will be substantially more profitable than it has been over the past several years, and we anticipate that new high quality mortgage assets can be originated and acquired at far better portfolio margins than they have been in the past several years. We fully expect that, as we rebuild the company's lending business and its asset base, our profitability will improve. In addition, given the rapid industry consolidation, we anticipate the mortgage market will offer highly attractive growth opportunities for Thornburg Mortgage's lending business."
Shares fell $1.24 to $13.80.