Santa Fe REIT Planning to Lend to Homebuyers
Hochstein, Marc, American Banker
Thornburg Mortgage Inc. is moving from buying mortgage securities to actually making mortgage loans.
The $4.5 billion-asset real estate investment trust started a correspondent lending program this year and plans to lend directly to consumers -- though selectively, in keeping with its policy of investing only in assets with the highest credit quality.
"From mid-1993 to mid-1997 we didn't find much opportunity in the loan sector," said Larry A. Goldstone, president and chief operating officer of the REIT in Santa Fe, N.M. But two years ago mortgage securities became "expensive relative to loans," he said, and Thornburg, seeing "an opportunity on the loan side," began buying bulk packages of loans.
Mr. Goldstone estimated that Thornburg has bought about $1.5 billion of loans, mostly from Merrill Lynch Credit Corp., since 1997.
Thornburg pools the loans it buys into securities, which it retains. By securitizing mortgages, it creates Aaa-rated assets, which are easier to trade and hence cheaper to finance than an unrated batch of loans.
In June, Thornburg kicked off its correspondent lending program, buying mortgage from banks and thrifts -- including FleetBoston and Dime Bancorp -- as the loans are closed. So far its production through this channel has been minuscule -- only $19 million through September -- but Mr. Goldstone said Thornburg's 20 correspondents have the potential to deliver $150 million a month.
Rising interest rates this year have hurt most mortgage bankers' profits. But Thornburg only buys adjustable-rate mortgages, which have become more in demand as homebuyers have become less apt to lock themselves into a fixed rate. …