Thornburg on its last legs?

Thornburg Mortgage, the company famous for buying prime (then) jumbo mortgages (above $417,000) is struggling to survive. The company’s CEO calls the situation “precarious” and they continue to try to fight off the effects of a $3.3 billion first quarter loss and a secondary market that’s all but vanished.

Thornburg is classic proof that Bernanke’s containment theory was flawed at best and fraudulent at worst. Thornburg bought high-credit quality mortgages and got hammered by the credit crunch. Poor loan performance (many jumbo mortgages were mid-length adjustable rate mortgages between 5-10 years) coupled with investors heading for the aisles left the company awash in losses.

From Forbes.com:

“Our circumstances are somewhat precarious, to put it mildly,” Thornburg Chief Executive Larry Goldstone said on a conference call.

Sante Fe-based Thornburg Mortgage reported earnings of $412.3 million, or 84 cents per share, vs. $78.1 million, or 66 cents per share, in the year-ago period. This is respectable considering the firm’s aggressive fund-raising tactics, which increased the number of outstanding shares to 484.6 million common shares in the 2008 quarter from 119.3 million in the 2007 quarter.

…

Thornburg, which specializes in originating and investing in jumbo mortgages that are worth more than $417,000, has been hurting since the middle of 2007 when the U.S. housing market began to sour. In June, the firm admitted that regulators are investigating whether the firm can continue (see “SEC Probes Sickly Thornburg”) after it posted a $3.3 billion first-quarter loss.

Goldstone added that the mortgage securities market is not getting better, despite some speculation to the contrary.

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