Thornburg Is Back, Countrywide Execs Start PennyMac,

Yesterday Thornburg Mortgage announced, in a filing with the SEC, it will allow an investor to acquire up to $300 million worth of stock in the company’s offering of $1 billion of convertible debt. The purchaser would have to provide assurances that the ownership would not jeopardize the company’s REIT qualification. The news is a sign that the company is likely able to raise the rest of the necessary cash and Thornburg Mortgage appears to have staved off bankruptcy in satisfying its creditors by raising almost a third of the cash it needed to preserve its standing. Given Thornburg’s focus on full doc loans, and away from stated deals, many feel that they “deserve” to continue buying loans.

Former Countrywide COO Sandy Kurland has created a mortgage company that will focus on buying loans from financial companies trying to reduce their mortgage exposure. Nine other former Countrywide officials (Kurland, the managing director of production technologies, the president of Countrywide Bank, the managing director and chief of staff for the executive office of the president, the CFO & treasurer of Countrywide Bank, the chief of emerging technology & innovation, chief strategy & governance officer of Countrywide Bank, and the chief lending officer of Countrywide Bank) joined him at “Private National Mortgage Acceptance Co.” PennyMac said its focus is on “investing and servicing residential mortgage assets on behalf of private investors”, and is sponsored by BlackRock, Inc and Highfields Capital Management

Let’s see. The Federal Government has enacted laws, the Federal Reserve has lowered rates and added capital, and OFHEO has loosened up Fannie & Freddie’s requirements. Now all we need is some price appreciation and some less-stringent underwriting criteria, right? And maybe some investor interest in mortgage-backed securities. Yesterday the FHLB’s regulator said that the FHLB (Federal Home Loan Bank) could increase their purchase of MBS by about $150 billion. Last week’s move by OFHEO appears to be the most substantial move (given the lack of enthusiasm about the new loan limits) to get the mortgage market back to “functioning”. Will the government buy loans directly from institutions? Everyone in the business knows that, given the tight criteria now in underwriting and the move away from stated loans, mortgages are a great investment. Over the weekend a Federal Reserve official denied a newspaper (The Financial Times) report that the Fed is in talks with foreign central banks about the feasibility of using taxpayer money to buy mortgage-backed securities: a Resolution Trust Corp.-type agency that would buy bonds backed by home loans.

Speaking of which, they have become so cheap that mortgage-related investments are luring some pension funds to come back into the market. Retirement systems in South Carolina and Pennsylvania are betting that they have been beaten down so much that the ones with good credit ratings could yield strong returns later. South Carolina is reportedly looking to buy $100 million of mortgage-related investments, and Pennsylvania has hired outside managers the fund hires are looking for bargains. But in both cases, the states emphasize they’re only investing small amounts of their overall portfolios.

Yesterday mortgage and Treasury prices got smacked throughout the day, although it was led off by Home Sales rising 2.9% in February, the first increase in 7 months. NAR reported that the median price fell roughly 8% from a year ago. Stocks were helped by the news that J.P. Morgan Chase would raise its Bear Stearns bid per share from $2 to $10 to appease shareholders who had threatened to block the deal. In spite of the worsening mortgage prices, however, our Lock Desk reported relatively light lock activity. At 7AM PST we’ll see Consumer Confidence, along with January’s S&P Case Schiller Composite, which is expected to show a decline of 10.5% year-over-year. Ahead of another exciting day in the mortgage business, mortgage prices are slightly better than yesterday afternoon, and the 10-yr is in the mid-3.50’s.

Yesterday’s Wells news dealt with wholesale brokering. For correspondent, for FHA loans locked from March 31 on, Wells will require compliance with the following minimum Loan Scores — regardless of any AUS decision: Purchase and Rate/Term Refi 580, cash out refi LTV <= 85% 580, cash out refi LTV > 85% 600, and Credit Qualifying Streamline Refis 580. Wells correspondent also put loan score adjusters in place for all government loans: 580-599 (1.00) and 600-619 (0.25). Wells Fargo Funding will no longer purchase FHA loans approved based on a non-traditional credit history. A traditional credit report with Loan Scores is required.