‘Thornburg Mortgage’ Shares Fall; More Wall Street Analysts Downgrade Them

Many of us will be not-so-shocked to hear that the shares of mortgage lender Thornburg Mortgage fell as much as 29% Tuesday morning, which is a hilariously substantial amount. This resulted in the diluting (pun intended) company to face liquidity pressures especially as more analysts downgrade the stock.

“Despite solid collateral performance, the widening of spreads in all non- agency mortgage securities, combined with high degrees of leverage, is presumably leading to massive asset write-downs,” wrote analysts.

“We believe that margin calls exacerbated by decreased available leverage is forcing asset sales,” the analysts said. “In addition, with Thornburg’s stock trading at a substantial discount to book value, we believe the company has no opportunity to raise permanent capital to stem the tide.”

In their defence, Thornburg Mortgage were reliable to a point and did succeed at certain times. Thornburg is a prime mortgage lender.

“The credit quality of the REIT’s mortgages has consistently been excellent, and Moody’s believe that the REIT has maintained its underwriting quality,” Moody’s said.

“However, Thornburg has aggressively used leverage to boost its equity returns, leading to limited financial flexibility,” the agency added. ” In addition, the REIT remains exposed to continued margin calls related to its repo financing, which represents 42% of the firm’s debt funding.”

The future of Thornburg Mortage Inc and many other companies lie in the hands of ratings agencies, with the slightest dig resulting in fatal losses.

Will Thornburg Mortgage Inc. be able to make their way back up after this?

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