(Changes source, adds details, share movement)
March 12 (Reuters) - Bear Stearns upgraded “jumbo” mortgage lender Thornburg Mortgage Inc TMA.N, saying mortgage market liquidity appears to have improved significantly a day after the U.S. Federal Reserve announced moves to pump liquidity into the financial system.
Shares of the Santa Fe, New Mexico-based Thornburg, a lender whose survival is in question, more than doubled to $3.50 in morning trade on the New York Stock Exchange.
The brokerage raised the stock to “peer perform” from “underperform.”
“The Federal Reserve’s Term Securities Lending Facility should provide a significant benefit to Thornburg as liquidity is restored to the non-agency mortgage market,” analyst David Hochstim wrote in a note to clients.
On Tuesday, the U.S. central bank set plans to lend up to $200 billion of Treasury securities in exchange for a wider array of collateral, including larger home loans.
“Just as price declines were compounded by a reduction in the liquidity available to finance the company’s low risk assets, the Fed’s willingness to lend against these securities for 28 days... appears to be dramatically improving the liquidity and valuation of these mortgage securities,” Hochstim said.
Thornburg, which specializes in large, highly rated residential mortgages for borrowers who buy more expensive homes, had on Tuesday restated 2007 results to reflect a $676.6 million write-down for adjustable-rate mortgages, 58 percent more than it had projected on March 7.
The lender has said margin calls, together with falling mortgage prices and decreasing liquidity, have raised “substantial doubt” about its survival. Analysts have said Thornburg might need to file for bankruptcy protection.
“While we don’t know how much the company has sold this week, the ability to obtain financing through dealers until early April should enable the company to develop alternative sources of financing on a more orderly basis,” Hochstim said.
The analyst noted that Fannie Mae FNM.N and Freddie Mac FRE.N will begin securitizing ‘jumbo-conforming’ mortgages shortly, and said Thornburg’s high quality assets should qualify for securitization by the government sponsored enterprises.
This could significantly reduce the company’s dependence on short-term borrowings, Hochstim added. (Reporting by Tenzin Pema in Bangalore; Editing by Gopakumar Warrier)