US: Credit Market

Thornburg Loss Tops $1 Billion; Shares Dive

Thornburg Mortgage said it lost more than $1 billion in the third quarter due to the fallout in the mortgage markets and elected not to pay a dividend to holders of common shares to conserve cash.

Shares of the mortgage lender dropped about 13 percent Wednesday.

Thornburg Mortgage reported a quarterly loss of $1.09 billion, or $8.83 per share, compared with earnings of $72.9 million, or 64 cents per share, during the same quarter a year ago.

Analysts polled by Thomson Financial, on average, forecast a loss of $7.98 per share for the quarter.

During the third quarter, Thornburg Mortgage sold a total of $21.9 billion of loans at a loss of $1.09 billion. Thornburg also posted a loss of $11.5 million to fund forward commitments.

The lender was forced to sell loans from its portfolio at a discount because of the declining mortgage market. Investors have shied away from purchasing all but the safest, most traditional mortgages in the secondary markets amid rising delinquencies and defaults on riskier loans.

Thornburg Mortgage originates jumbo loans -- mortgages larger than the $417,000 cap at which government-sponsored entities Fannie Mae and Freddie Mac are willing to purchase loans.

Typically mortgage lenders rely on secondary markets to sell current loans to fund future mortgages. With investors avoiding jumbo loans, Thornburg Mortgage was forced to slash the price on its loans just to sell them.

The company decided not to pay its regular 68 cents dividend to holders of common shares to conserve cash. Thornburg said it would "consider resuming" those payments if results improve as expected in the fourth quarter.