Thornburg President Says Lender Has Begun to 'Turn the Corner'

Wednesday, 15 Aug 2007 | 10:39 AM ET
Jumbo Problem for Wall Street?
Discussing whether the jumbo funding issue is a signal of trouble ahead, with Larry Goldstone, Thornburg Mortgage president/COO;

Thornburg Mortgage's president told CNBC Wednesday that the residential mortgage lender is still having having problems raising financing but has begun to "turn the corner" and hopefully "by next week it will be pretty much back to business as usual."

"There are a variety of strategies that we've been working very hard on the last couple of weeks to stabilize our liquidity position," Larry Goldstone said in an exclusive interview on "Squawk on the Street." "I think by next week we're going to be on the other side of this."

On Tuesday, Thornburg's stock plunged 46% after it reported liquidity problems. In an interview late Tuesday on "Kudlow & Company," Goldstone said he was having difficulty with financing but had "no intention of filing Chapter 11."

Thornburg's stock soared as much as 49% on Wednesday.

Like many rivals, Thornburg has struggled because investors, wary of rising defaults, have refused to buy many kinds of loans. Among them are loans considered high quality, including Thornburg's specialty, prime "jumbo" loans--those above $417,000.

Many bankers are also refusing to extend credit to mortgage lenders. Nonetheless, Moody's said Thornburg has "superior asset quality."

Thornburg Mortgage President
Thornburg Mortgage says it is experiencing delays in ability to fund loans, and the company's president, Larry Goldstone, discusses the issue with CNBC's Erin Burnett

Earlier Tuesday, Thornburg said that because of "unprecedented and irrational sentiment" in the secondary market, it will not accept new requests to lock in rates for four days.

"Financing in the jumbo mortgage space is difficult," Thornburg said in Tuesday's CNBC interview. "But we are navigating our way through this process."

He added: "There are so many rumors flying around the Street, particularly about Thornburg Mortgage. But 80 percent of what you're hearing just isn't true."

Asked if the Federal Reserve could accept collateral other than Treasurys or other government-backed debt, Goldstone was doubtful:

"We've actually explored this over the last several days. We've spoken to our representatives here in New Mexico. We've had communications into the Fed, the Treasury department, the president trying to communicate what we think is ia very severe issue for the housing market and it's not about Wall Street," he said.

"It's about Main Street, because Main Street is being negatively affected by mortgage interest rates for jumbo mortgages today and its all because of this dislocation that's going on in the credit markets. Apparently, the Fed cannot change their collateral requirements like the Eurpean Central Bank...But I do believe the Fed could do some jawboning. I think they could get involved in a dialogue basis with the major banks and major Wall Street dealers and begin to provide some liquidity into the system."


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