Housing problems have become a neverending story, as Thornburg Mortgage and MGIC Investment both announced big losses, and GMAC Financial Services announced big job cuts from its mortgage operation.
Thornburg Mortgage led the way, as it announced Wednesday that it lost more than $1 billion in the third quarter and would withold shareholder dividends.
Despite Thornberg's shares falling 61.8% over the last three months, investors lowered them even more, as shares of the troubled mortgage lender fell 11.9%, or $1.36, to close at $10.04 on Wednesday.
Thornburg deals in large, adjustable-rate mortgages. Thornburg and other lenders have been hurt by rising default rates, which reduce the value of their loans.
The Milwaukee-based insurer
Investors didn't take the news well and as it sent MGIC shares down 15.3%, or $4.71, to $26.16.
Blaming sharp downturns in the U.S. residential real estate markets and the global turnoff of the mortgage finance and credit markets, GMAC announced on Wednesday that it would cut 3,000, or 25% of its work force, from its Residential Captial mortgage operation.
The Minneapolis-based ResCap said it would take a restructuring hit between $90 million and $110 million, which includes severance costs of $55 million to $65 million and costs for closing facilities of $35 million to $45 million.
Wednesday's news comes on the same day U.S. economic data showed the American housing market is still ugly, and inflation remains at disconcerting levels (See "Housing Ugly But Moving In Right Direction").
For the quarter, the Santa Fe, N.M.-based Thornburg announced losses of $1.1 billion, or $8.83 per share, compared to last year’s earnings of $72.9 million, or 64 cents pre share.
Analysts polled by Thomson Financial anticipated per share losses of $7.98.
Although the Board of Directors did not declare a dividend for the third quarter, it tried to reassure investors by saying it would consider make payments in the upcoming quarter.
Still, Wednesday’s announcement had an extra sting as the company has had recent issues paying dividends (See “Thornburg Up As Dividend More Likely”).
Wednesday’s earnings call comes after the company announced last week it lowered its expectations after it found that the number of deadbeat loans it is holding rose (See “Thornburg’s Low Loans”).
Thornburg sold $22.0 billion of mortgages since August to alleviate a suffocating credit squeeze. The company sold the mortgages quickly and at a discount because it feared values would fall further. (See: "Thornburg On The Defensive")
The sale of mortgages was just one of several moves by the company to boost liquidity. It also issued debt and sold $500 million of preferred stock earlier this year. (See: "Thornburg's Back In The Lending Game")
During the third quarter, Thornburg Mortgage sold a total of $21.9 billion of loans at a loss of $1.09 billion. Thornburg also posted a loss of $11.5 million to fund forward commitments.
The Associated Press contributed to this article
