Thornburg sells assets to cut risk

NEW YORK (Reuters) - Mortgage lender Thornburg Mortgage Inc TMA.N said on Monday it sold more than 35 percent of its assets and reduced its borrowings to cut its risk, and cautioned that the investors that buy its home loans are still jittery.

Thornburg's shares fell as much as 11.9 percent as the company said it has written down the value of more home loans on its books.

Mortgage lenders have increasingly had trouble financing their operations as investors panic about the home loan market, where home prices are declining and defaults are rising.

"Investors' confidence in the mortgage financing space is not doing well," said Larry Goldstone, chief operating officer, in an interview with CNBC television on Monday.

Thornburg said it sold off $20.5 billion of assets and reduced short-term borrowings by an equivalent amount.

Countrywide Financial Corp., CFC.N the largest U.S. mortgage lender, said last week it drew down an $11.5 billion bank credit line after losing some access to short-term borrowings.

"Companies with short-term funding still have challenges," said Bose George, analyst at Keefe, Bruyette & Woods in New York.

Thornburg said the asset sales will stabilize the company's ability to meet its financing obligations and continue its mortgage lending operations.

But the risk reduction will also result in a realized capital loss of about $930 million, Thornburg said.

Thornburg also said its book value is about $12.40 per share as of August 17, compared with a book value of about $14.28 per share as of August 13, signaling the value of its assets declined last week.

The company sold most of its lowest-yielding assets, including unprofitable loans, and expects to remain profitable on an operating basis in the third quarter.

Thornburg's shares fell $1.44 in morning trading, or 9.1 percent, to $13.60, after falling as low as $13.25. The company's shares traded as low as $7.50 last week. Thornburg's shares closed 2006 at $25.13.