Shares of real estate investment trusts that invest in mortgages plunged Thursday after one of Thornburg Mortgage Inc.'s banks declared the lender in default.
The Santa Fe, N.M.-based mortgage company has faced $570 million in "margin calls" _ or lenders demanding their money back _ in the past month. Thornburg, which owns a $35 billion portfolio of mortgage bonds, had agreements with its lenders that the value of its portfolio would not decline more than a certain amount.
With demand vanishing for many kinds of mortgage debt, the market value of the bonds in Thornburg's portfolio has dwindled prompting lenders to demand their money back. One bank _ J.P. Morgan _ declared the company in default on its debt.
Thornburg's stock plummeted to as low as $1.26 Thursday losing more than half its value. The shares topped $28 in May.
Keefe, Bruyette & Woods analyst Bose George downgraded Anworth Mortgage Asset Corp. and MFA Mortgage Investments Inc. because he expects book value to decline and expects the companies to hold onto more cash to handle uncertainties in the market. Shares of Anworth Mortgage Asset Corp. tumbled $1.89, or 21.4 percent, to $6.96. Shares of MFA Mortgage sank $1.38, or 15.9 percent, to $7.31. Bose removed Annaly and Capstead from the firm's "Best Ideas List."
Among other real estate investment funds with steep declines, Anthracite Capital Inc. lost more 11 percent to $5.30, CBRE Realty Financial Inc. fell 18.8 percent to $3.23, Deerfield Capital Corp. sank almost 24 percent to $2.19, Capstead Mortgage Corp. plunged 23.5 percent to $12.47, and Annaly Capital Management plummeted almost 15 percent to $16.45.
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