Thornburg Mortgage, Inc. (TMA), a Santa Fe, New Mexico-based single-family residential mortgage lending company, on Friday said the company's Board of Directors has determined that the financial statements for the year ended December 31, 2007, should be restated. The decision follows a letter from the company's independent auditor KPMG LLP on Tuesday, which said the audit report for fiscal 2006 and 2007 should no longer be relied upon. Additionally, Thornburg said it might not have the ability to hold certain of its purchased ARM assets to recovery. Accordingly, the company has concluded that a $427.8 million charge for impairment on its purchased ARM assets is required. The stock has plunged over 26%.The company also noted that there is considerable doubt about its ability to continue as a going concern, thanks to difficult market conditions and a liquidity position under pressure from increased margin calls. The market conditions have led to deterioration of prices of mortgage-backed collateral. Margin calls force borrowers to repay loans or put up more collateral to secure them. Banks are forced to put out margin calls on borrowers when the value of collateral, including mortgages and asset-backed bonds, declines.Thornburg, which had readily available liquidity of about $580.0 million as of December 31, 2007, is also facing margin calls, some of which it is not able to meet. As of March 6, the company received $1.777 billion in margin calls since December 31, 2007, and satisfied $1.167 billion of them primarily by using its available liquidity, principal and interest payments and proceeds from the sale of assets. However, as of March 6, the company had outstanding margin calls of $610.0 million, which significantly exceeded its available liquidity at that date. The company has entered into a temporary syndicate agreement with its remaining reverse repurchase agreement counterparties, which freezes additional margin calls through March 7, 2008, while the company tries to resolve its liquidity shortfall. Through the close of business on March 6, 2008, four lenders had sent the company notices of event of default under reverse repurchase agreements. On Wednesday, the company said in a regulatory filing that JPMorgan Chase & Co. (JPM) issued a default notice on February 28, following the company's failure to meet a $28 million margin call attached to a $320 million loan. The default notice spurred cross-defaults on agreements the company had with other lenders. The next day, a credit rating agency and a brokerage firm downgraded the company's stock. These moves spurred a downward trend for the company's stock, which lost over 50% of its value.Bear Stearns analyst David Hochstim on Thursday downgraded the company to "Underperform" from "Peer Perform". Hochstim said the need to sell assets to pay off the margin calls puts Thornburg in "a very difficult situation." Fitch Ratings downgraded Thornburg stock on Thursday due to its defaults. Fitch lowered its issuer default rating on the company to "RD" from "CCC".Thornburg said it is working to meet all its outstanding margin calls within a timeframe acceptable to its lenders, through a combination of portfolio assets sales, issuing collateralized mortgage debt and raising additional debt or equity capital. Since December 31, 2007, and through the close of business on March 6, the company has reduced its portfolio of ARM assets financed with recourse financing by about $4.6 billion. Out of this, $1.9 billion has been permanently financed in order to reduce its exposure to margin calls. The company also raised $488.0 million in equity capital since December 31, 2007. The company said on Friday that the impairment charge resulted in a decrease in management fees of $300,000 and the elimination of the fourth quarter performance fee of $5.4 million. The company intends to reflect the revised financial information in an amended Annual Report on Form 10-K/A. The company does not expect the restatement to have a material impact on its book value as of December 31, 2007.The housing slump and the credit crunch have led to investors shying away from securities they consider unsafe, including high-rated mortgage securities that Thornburg specializes in. Thornburg focuses on mortgages used to buy more expensive homes.According to Thornburg Mortgage President and Chief Executive Officer Larry Goldstone, The mortgage financing market's complete inability to differentiate and appropriately value superior AAA-/AA-rated mortgage securities from all other mortgage assets is as unprecedented as it is frustrating. Our portfolio of mortgage-backed securities has exhibited exceptional credit performance and comprises loans that are among the most solid in the industry. Quite simply, the panic that has gripped the mortgage financing market is irrational and has no basis in investment reality. On February 4, the company said its earnings available to common shareholders for the fourth quarter declined on fall in interest and non-interest income. Net income available to common shareholders decreased to $44.8 million or $0.33 per share from $76.8 million or $0.68 per share in the same quarter of the prior year. Net interest income for the fourth quarter fell 4% to $87.2 million from $90.7 million in the same quarter of last year. Non-interest income plunged to $355 thousand from $17.2 million in the same quarter of the previous year.Stock MovementTMA is currently trading at $1.21, down $0.44 or 26.67%, on 37.98 million shares. The average volume for the past there months was 7.15 million. For the last 12 months, the stock trended in the range of $1.26-$28.40.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.