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Thornburg Ups Mortgage Loss Estimates

Thornburg Mortgage Inc. said in a statement this morning that it lost $1.1 billion selling bonds backed by adjustable-rate mortgages.

The Santa Fe, New Mexico based mortgage lender had previously estimated the loss at a mere $863 million, forcing shares down roughly 12 percent in early trading.

“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,” Larry Goldstone, Thornburg’s president and chief operating officer, said in the statement.

“We have begun to see a modest improvement in financing conditions since August.”

Thornburg has sold $22 billion in “high quality” adjustable-rate mortgages since August 10th, but warned that it would take a $16 million loss on mortgages originated in the third quarter, and said “there could be further charges” on estimates of its mortgage sales.

“The losses were greater than expected from the credit crunch in August,” said Jason Arnold, an analyst for RBC Capital Markets in San Francisco.

“They have a little bit smaller asset base. That certainly doesn’t help out on the earnings side and will also have a greater impact on book value.”

Thornburg estimates that “seriously delinquent loans” will represent 0.27% of its loan portfolio as of Sept. 30, up slightly from the Aug. 17 estimate of 0.23% as of July 31.

The jumbo loan lender said it expects to write down the value of its mortgage portfolio by $286 million, compared to the August estimate of $262 million.

Thornburg believes its credit reserves will be sufficient to cover “expected and potential future credit losses” on its loan portfolio, noting it hadn’t suffered “any material deterioration” in the credit performance of its loan portfolio since July 31.

Shares of Thornburg were trading down $1.17, or 8.69% to $12.29 in midday trading, far from their 52-week high of $28.40.

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