This morning, Thornburg Mortgage reported that it now expects its third-quarter loss on mortgages sold to be $1.1 billion, compared to its previous estimate of $863 million. Larry Goldstone, president of TMA, said in a statement that The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated. However, we have begun to see a modest improvement in financing conditions since August. Thornburg says its credit reserves should be sufficient to cover expected and potential future credit losses.

As a result, TMA has lost more than 9% in early trading. However, it's a fairly mild loss by TMA standards from its July 31 close at $25.42 to its August 31 close at $11.78, the shares took a pretty severe 54% hit. Today's drop takes TMA back below its 10-day and 20-day moving averages, which provided support during the last 6 sessions.

Short sellers are likely cheering today's report from TMA. Short interest on the mortgage lender increased by more than 55% during the most recent reporting period, and now accounts for 13.4% of the stock's available float.