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You Can't Find a Bottom in the Dark

If you think you perceive the slightest brightening for mortgage lending and homebuilding, I have a bridge that traverses the East River that I'd love to unload cheaply. The still-dark picture for those two related industries has been reinforced this week by the plight of Thornburg Mortgage (NYSE: TMA  ) , the Santa Fe, New Mexico-based mortgage lending REIT that caters to the jumbo and super-jumbo segment of the adjustable-rate market.

For the quarter, the company recorded a net loss of $1.084 billion before preferred stock dividends, or $8.83 per share. Those figures compared with net income of $75.3 million, or $0.64 a share, a year earlier.

At the same time, Thornburg's board has elected not to declare a common stock dividend for the third quarter. The board "noted that it expects profitability and market conditions to improve in the fourth quarter and would consider resuming common dividend payments at that time." Beyond that, and given my antipathy for much of corporate America's own antipathy for brief and effective communication, I'll spare my Foolish friends CEO Grant Thornburg's unbelievable 94-word sentence explaining that decision.

But I think we get the picture, especially since the Thornburg release occurred in the same week that:

  • The National Association of Home Builders announced that builders' confidence has descended to its lowest level ever.
  • The Commerce Department told us that housing starts fell by 10.2% last month. That's from August, not from a year ago.
  • Mortgage lending leader Countrywide (NYSE: CFC  ) said that it would take a $125 million to $150 million charge related to its job-slashing binge.
  • Housing market woes cost Washington Mutual (NYSE: WM  ) a 72% decline in quarterly profits.
  • Housing and credit market difficulties also resulted in an earnings tumble at several big banks in the most recent quarter, including Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) .
  • D.R. Horton (NYSE: DRI  ) , the nation's largest homebuilder, said its cancellation rate in the most recent quarter jumped to 48%.

So, Fools, I'll renew my plea that you avoid attempting to catch the bottoms for the housing and mortgage groups. As I've said before, you'll know it's time to start stroking those bottoms when they slap you in the face.

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12/4/2008 4:07 PM
TMA $0.24 Down +0.00 +0.00%
Thornburg Mortgage CAPS Rating: *
BAC $16.67 Up +0.11 +0.66%
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C $49.57 Down -0.01 -0.02%
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DRI $63.07 Up +0.19 +0.30%
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