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Writedown Thumps Thornburg

The lender takes a big loss on the sale of some mortgages.

Updated from 10:32 a.m. EDT

Thornburg Mortgage


slumped as much as 11% after the jumbo mortgage lender revealed that losses taken on loan sales in the third quarter would be wider than expected.

Thornburg said Tuesday that it ended up selling $22 billion worth of high quality adjustable-rate mortgage assets since early August. It expects to post a loss of $1.1 billion on the asset sales.

The Santa Fe, N.M.-based lender had originally expected to sell about $20.4 billion worth of high quality ARMs and to take a loss of $863 million.

The expanded losses are primarily due "to the receipt of actual sale price documentation for asset liquidations conducted by third-party financing counterparties as opposed to those sales conducted by the company," Thornburg said.

Thornburg also said that it would record a $286 million loss on the value of its mortgage securities portfolio, up from $262 million that was originally estimated. It had a $6 million impairment charge on one mortgage-backed security backed by pay option ARMs.

It expects to report a $16 million loss on mortgage loans funded during the third quarter.

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"The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated," said Larry Goldstone, president and COO of Thornburg Mortgage. "However, we have begun to see a modest improvement in financing conditions since August. Despite the greater than previously reported losses, we believe we have adequate liquidity to support our current borrowings portfolio and excess capital to continue to fund new loans and to opportunistically purchase and finance other high-quality mortgage assets, provided market conditions do not deteriorate further."

Thornburg specializes in originating jumbo mortgages -- loans above $417,000, which cannot be sold to Fannie Mae or Freddie Mac. Thornburg and rivals such as

Countrywide Financial


were hit hard this past summer when the market for mortgage-backed securities seized up.

Besides the loan sales of its highest quality assets, Thornburg also raised cash this summer by selling $575 million in preferred stock and borrowing funds against $1.44 billion of mortgage assets in order to finance its lending business.

Thornburg also said that its current reserves for loan losses "will be adequate to cover expected and potential future credit losses on its loan portfolio." The company said it has not experienced "any material deterioration" in the credit performance of its loan portfolio since the end of July.

So-called seriously delinquent loans represented 0.27% of the loan portfolio at the end of the third quarter.

Shares fell $1.16 to $12.30.