Thornburg Mortgage Inc. said Tuesday that its third-quarter losses on sales of securities backed by adjustable-rate mortgages totaled $1.099 billion, $236 million more than previous estimates.
The increase was due primarily to receipt of the actual sales price on asset liquidations conducted by third-party financing counterparties, as opposed to sales conducted by the company itself, Thornburg officials said in a press release.
Losses also increased because Thornburg sold an additional $1.6 billion in mortgage-backed securities (MBS) beyond the $20.4 billion estimate the company issued Aug. 17. Thornburg also reported a $6 million impairment charge on one mortgage-backed security backed by pay-option adjustable-rate mortgages (ARMs).
“It’s important to note that the earlier loss estimates previously announced by the company were based on the best information available to us at the time,” Thornburg President and Chief Executive Officer Larry Goldstone said in a statement. “In many cases, where sales were conducted by counter parties instead of by us, we did not have sale price documentation and had to rely on our estimates of sale prices and the application of proceeds.”
Goldstone warned that Thornburg continues to collect information from third parties and that there could be further changes to the estimates when third-quarter earnings are released Oct. 16.
Thornburg also estimated the loss in market value of its securities portfolio at $286 million, up from a previous estimate of $262 million.
The Santa Fe, N.M.-based company, which describes itself as a “super-prime” mortgage lender focused on jumbo and super-jumbo ARM loans, said its mortgage securities portfolio consists of 94 percent agency, AAA- and AA-rated mortgage-backed securities, with the remaining 6 percent of MBS rated below AA. An estimated 0.27 percent of loans in its portfolio were seriously delinquent as of Sept. 30, up from 0.23 percent at the end of July.
“These investments are performing consistently with the long-term historical experience of similarly rated securities, and none of the ratings have been downgraded by any rating agency as a result of recent rating agency activity,” the company said.
Goldstone said Thornburg has begun to see a “modest improvement” in financing conditions since August. “Despite the greater than previously reported losses, we believe we have adequate liquidity to support our current borrowings portfolio and excess capital to continue to fund new loans and to opportunistically purchase and finance other high-quality mortgage assets, provided market conditions do not deteriorate further,” he said.