Surprise: Thornburg Mortgage Turns a Profit

August 26, 2008 No Comments »

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Thornburg Mortgage today reported second quarter net income of $412.3 million, or 84 cents per share, compared to $83.4 million, or 66 cents per share (due to share dilution) a year earlier.

Of course, much of the “profit” could be attributed to fair value adjustments and one-time sales gains, which when factored in, actually put adjusted income at just $22.7 million.

But it certainly beats the $3.31 billion, or $20.64 per share, the company lost in the first quarter.

During the quarter, Thornburg realized loan losses of $3.4 million and originated $243.6 million in new adjustable-rate mortgages.

As of the end of June, the 60-day plus delinquency rate on the company’s portfolio of 34,915 loans stood at 0.65 percent, up from 0.44 percent a quarter earlier.

However, a $530-million bundle of pay option arms purchased from one seller has continued to deteriorate, effectively doubling the company’s delinquency rate.

More Margin Calls

The company also revealed that as a result of negative rating agency action, it faces another $25.9 million in margin calls, and noted that there could be no assurance of a successful resolution going forward, effectively putting its future in doubt.

On August 22, Thornburg paid $219 million in margin calls related to recent downgrades of mortgage-backed securities and warned that it could face similar action in the future.

The Santa Fe, New Mexico-based mortgage lender specializes in jumbo and super jumbo adjustable-rate mortgages for the most creditworthy clientele.

Earlier this year, the company faced collapse after the value of Alt-A mortgage securities it owned plummeted in value, leading to scores or margin calls.

Shares of Thornburg were up 11 cents, or 28.73%, to 51 cents in midday trading on Wall Street, but still remain far below the 52-week high of $14.20.

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