In the Crosshairs Today: Thornburg Mortgage

Important update: The IMB Report, IndyMac’s blog, has posted a copy of a letter from Thornburg to its brokers, which says the company is temporarily not funding any new business. Four analysts jumped ship on ultra high-end mortgage lender Thornburg Mortgage yesterday, a company I’ve posted about recently. It wasn’t just three weeks ago that the company released earnings that beat analyst estimates and said it would also beat its 2007 earnings target. From the AP, a good discussion of what’s gone on:

Four analysts downgraded Thornburg Mortgage Inc. on Tuesday, saying the mortgage lender will probably have to sell off some of its loans to stay afloat. Analysts from RBC Capital Markets, Credit Suisse, Friedman Billings Ramsey and Jefferies & Co. downgraded shares of the Santa Fe, N.M.-based real estate investment trust Tuesday morning … The flight from risky mortgage debt has now spread to loans carrying little actual credit risk. With a $56.4 billion portfolio, Thornburg is the largest mortgage-related security REIT and owns primarily prime loans. But the absence of liquidity for home loans means their market prices have tumbled this year … Keefe, Bruyette & Woods analyst Bose George expects the company to sell a fifth of its assets to satisfy lenders … “The company has no opportunity to raise permanent capital to stem the tide,” Jefferies analyst Richard Shane Jr. wrote in a client note.

The Wall Street Journal’s MarketBeat Blog took the analysts in question to task, noting they were all late responders and essentially piling on to an earlier report on curtailed lending activity:

Half a dozen analysts have downgraded their rating on the shares as a result, which doesn’t seem all that useful at this point in time for shareholders, so MarketBeat took a look at these researchers, and whether they’d been prescient in their view on Thornburg before this.

The result of MarketBeat’s analysis: analysts aren’t all that prescient. Speaking of being prescient, Tanta over at CR has a take on this as well, noting that trouble at Thornburg underscores just how serious the mortgage crunch has really become:

This is ugly. In my view, outfits like AHM and LUM were accidents looking for a place to happen. Thornburg makes those pretty, competitively-priced, conservatively-underwritten jumbo loans whose rate spread over conforming has tripled over the last few months.

My opinion: Countrywide and Thornburg should be considered industry bellweathers, for very different reasons. Problems at either signal much more to the industry as a whole than problems at places like Accredited. Update: How’s this for prescient? Rick Grant’s take on what’s going on at Thornburg is a must read, especially since he wrote it over a week ago. And for what it’s worth, I share his assessment of what took place at American Home.

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