While eventually these mortgage lenders (whomever survives) will be great stocks to own, in general its far to early to own these. However, I am watching with great interest TMA. I saw on CNBC last night where out of 30,000 some mortgages they have 50 some defaults. While that number will probably rise significantly in the upcoming months/year its still a very low default rate. This company serves the jumbo loan market (which I believe is $417K+) - a market that will slow but generally caters to pretty wealthy individuals. Now I don't know there entire story but if they are not doing no doc loans to people making $45,000 who are trying to buy $600K homes, than it could be an interesting story.
Today they had their earnings and it was "good enough" - they had a terrible year but this quarter was not that bad. Most important is the provision in the "stimulus" bill to stuff $500K, $600K, $700K mortgages into Fannie Mae and Freddie Mac. Aside from helping keep home prices far higher than they should be, it should be a boom to Thornburg. That part of the market has really frozen as no one wants the (gasp) risk of actually holding loans they originate. What a concept to a lender eh? Make a loan and be forced to actually care about the credit worthiness of the borrower. Shocking business idea. Well, that's how it used to work before securitization. Anyhow, this company would really benefit if this provision indeed is in the final bill. So I'm keeping an eye out - it is up 12% in after hours as the earnings seemed to appease people.
Since I need some contrary financial plays for times like the last 2 weeks when "financial stocks are god's gift to investors", and I don't want to touch credit card issuers or regional banks who are going to be fighting it out with a slowing US consumer, Thornburg might be one to delve into. Not that $500K, $600K mortgages are safe in this environment but if you can shuffle them off to Fannie/Freddie - well it's all good for Thornburg. If those mortgages default? Well that's an issue for the US tax payer someday. Thornburg was enjoying a sleepy life as a $27-$29 stock until August 2007 when life changed forever. After crashing to $8, it's back to $11s-$12s and seems to have no clear resistance until $16s/$17. I'm mulling this one... deeply. The mortgage business is not going away, so the remaining players are going to be splitting the same pie over far fewer players - and most major players are part of much larger banking institutions so it is hard to find a pure play on simply mortgages.
- Mortgage lender Thornburg Mortgage Inc. said Monday it swung to a profit in the fourth quarter, after posting a $1 billion loss in the third quarter due to the fallout in the mortgage markets.
- Thornburg posted a fourth-quarter profit of $64.8 million, or 33 cents per share, versus $80.3 million, or 68 cents per share, during the same quarter a year before. Analysts polled by Thomson Financial expected a profit of 27 cents per share.
- For the full year, Thornburg reported a loss of $915.4 million, or $7.48 per share, compared with a profit of $286.9 million, or $2.58 per share, in 2006.
- Thornburg Mortgage makes jumbo loans -- mortgages larger than the $417,000 cap at which government-sponsored entities Fannie Mae and Freddie Mac are allowed to purchase loans. (not anymore!)
From TheStreet.com
- The significant drop in LIBOR rates was just what the company needed. The portfolio yield during the fourth quarter increased to 5.75% from 5.40%, while the average cost of funds decreased to 5.04% from 5.26% in the prior quarter. This combination created the backdrop where the average net interest margin of 0.96% for the quarter was considerably higher than the 0.31% in the prior quarter.
- "Our return to profitability in the fourth quarter during a period of continued unprecedented industry turmoil is testament to the strength of our business model and our conservative approach to risk management, as well as further validation of our focus on quality across all aspects of our business," President and CEO Larry Goldstone said in a company statement.
- The company's balance sheet was also stabilized by the proceeds from the sale of equity during the quarter. This capital provided an additional source of liquidity during the quarter and helped to strengthen the balance sheet, support its mortgage loan funding operation and facilitate the limited acquisition of mortgage-backed securities.
- A believer in the stock, Chairman Garrett Thornburg had purchased a million shares in October at $9.50 a share.
No position (yet)
