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The credit crunch hit one of the llargest jumbo loan lenders hard!


The effect of the credit crunch that hit the mortgage industry in late 2007 and early 2008 has cost Thornburg mortgage billions in losses.

The predictions of Thornburg mortgage first quarter loss were in the 3 to 5 dollar range. This morning the company posted a loss in excess of $20 per share, topping three billion dollars for the first quarter of 2008. Thornburg is one of the nations largest jumbo loan lenders, in the past year their share price has dropped from the mid twenties down to sixty seven cents per share. The company was nearly forced out of business in January due to margin calls against its portfolio of mortgage backed securities. The company ran into problems as the values of their jumbo loan securities were downgraded and the lenders who provided their working capital to fund new loans stopped providing capital and forced the company into a chain of margin calls. The company was able to raise over one billion in working capital, but this was highly dilutive to their share holder base. The spread between conventional and jumbo loan rates remains well above two percent and the company is struggling as the secondary market for these loans is non existent. The company has a small window to save the company in the near future. The economic stimulus package will help them as jumbo loans in certain areas are now saleable to Fannie Mae and Freddie Mac, based on the county of residency. Jumbo loans are a key component to the real estate market and will need to be more financially attractive to investors and consumers to help in restoring the housing market.

6-12-2008 ? LoanNetwork.com





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