Thornburg Mortgage ( TMA) led the financial sector's shaky recovery Wednesday after the lately battered lender calmed investors' nerves via a TV interview.

President and chief operating officer Larry Goldstone said on CNBC Tuesday night that Thornburg "will survive this disruption" and that it has "no intention" of filing for bankruptcy. He also said the company isn't for sale despite the company's recent precipitous share-price drop. Shares of the Santa Fe, N.M., firm rocketed 42.2%, or $3.21, to $10.82.

Luminent Mortgage ( LUM) seesawed back into the green by 18.6%, though the beleaguered mortgage investor was still trading at just 51 cents, and Impac Mortgage ( IMH) shot up more than 14% after suspending funding on Alt-A loans -- those with borrowers who don't have prime credit. The Irvine, Calif., firm also swung to a wider-than-expected loss, but shares traded up 17 cents at $1.37.

Elsewhere, Lone Star extended its takeout bid for Accredited Home Lenders ( LEND) by a couple of weeks to Aug. 28, as required under their merger agreement, and said it received preliminary tenders representing about 43% of the company's shares. Lone Star reiterated, however, Accredited's "failure to satisfy" all conditions for closing of the merger. Shares of the San Diego-based subprime lender surged 14.6% to $6.30.

In brokerage action, Virginia-based insurer Genworth Financial ( GNW) climbed 3.9% after Goldman Sachs reiterated its buy rating on the stock, saying shares have fallen too far amid fears regarding its mortgage-market exposure. Washington Federal ( WFSL), a Seattle-based bank, rose 3.2% to $24.50 on a Friedman Billings upgrade to outperform.

Starkly on the losing side was KKR Financial ( KFN), which sold about $5.1 billion in residential-mortgage loans and joined the choir of mortgage investors searching for "various alternatives to resolve potential funding disruptions resulting from the current market environment." The loan sale should result in about a $40 million hit, and KKR also says it might have to take additional charges of up to some $250 million relating to other liabilities. The San Francisco firm plummeted 24.2% to $11.58.

Countrywide Financial ( CFC) saw furious trading that pulled shares down 7.5% to $22.63 after Merrill Lynch harshly cut its rating to sell from buy on liquidity concerns.

And Scottish Re ( SCT), a Bermuda-based insurer, said its pretax second-quarter operating loss widened to $52.9 million from $28.5 million a year ago. This excludes a big one-off tax benefit. Shares tumbled 24.4% to $2.79.

More broadly, the NYSE Financial Sector Index straddled the flat-line after a stalwart morning climb as the KBW Bank Index gained 0.7% to 103.18.