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                                  EXHIBIT 10.1

                    AMENDED AND RESTATED MANAGEMENT AGREEMENT

      THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT is entered into as of July
1, 2004 (the "Effective Date"), by and between THORNBURG MORTGAGE, INC., a
Maryland corporation (the "Company"), and THORNBURG MORTGAGE ADVISORY
CORPORATION, a Delaware corporation (the "Manager"), with respect to the
following:

      WHEREAS, the Company is engaged in the business of originating, acquiring,
securitizing, servicing and retaining investments in mortgage securities
("Mortgage Securities") and mortgage loans ("Mortgage Loans") (collectively,
"Mortgage Assets") and has qualified for the tax benefits accorded to a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code");

      WHEREAS, the Company desires to continue to retain the Manager to manage
the assets and operations of the Company and to perform administrative services
for the Company in the manner and on the terms set forth herein;

      WHEREAS, the Company and the Manager entered into that certain Management
Agreement dated as of July 15, 1999, as amended as of October 17, 2000 (the
"Original Management Agreement"), which the Company and the Manager now desire
to amend and restate in its entirety in the form below, and wish the Management
Agreement, as amended and restated herein (this "Agreement"), to continue until
the next regularly scheduled meeting of the board of directors of Thornburg
Mortgage, Inc. (the "Board of Directors") following the tenth anniversary of the
Effective Date, and as evidenced by their signatures hereto, the Original
Management Agreement is hereby amended, restated and replaced in its entirety by
this Agreement as of the Effective Date;

      WHEREAS, the Manager shall not engage in any activity which would cause it
to be required to register as an investment advisor under the Investment
Advisers Act of 1940; and

      WHEREAS, the Manager shall comply with all laws applicable to it and
arising in connection with this Agreement.

      NOW THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:

      SECTION 1. Definitions. The following terms shall have the meanings
assigned to them below, unless superseded by definitions of the same terms
contained in any filing made by the Company with the Securities and Exchange
Commission after the Effective Date, in which case the definition contained in
the most recent of such filings shall be operative. In addition, all references
to the Company in this Agreement shall mean Thornburg Mortgage, Inc. and its
subsidiaries, unless the context otherwise requires:

      (a)   "Affiliate" means Affiliate as defined in the Company's Bylaws.

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      (b)   "Average Historical Equity" means for any period the difference
between total assets and total liabilities of the Company calculated on a
consolidated basis in accordance with GAAP, excluding (1) Other Comprehensive
Income or Loss, (2) goodwill and (3) other intangibles, computed by taking the
average of such values at the end of each month during such period, adjusted for
equity sold during the period on a pro rata basis.

      (c)   "Average Net Worth" means for any period the average of the sum of
the gross proceeds from any offering of its equity securities by the Company,
before deducting any underwriting discounts and commissions and other expenses
and costs relating to the offering, plus the Company's retained earnings
(without taking into account any losses incurred in prior periods) computed by
taking the average of such values at the end of each month during such period,
and shall be reduced by any amount that the Company pays for the repurchases of
its common stock.

      (d)   "GAAP" mean generally accepted accounting principles set forth in
the statements, opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, which are in effect as of the Effective Date.

      (e)   "Governing Instruments" means the articles or certificate of
incorporation and bylaws in the case of a REIT or a corporation.

      (f)   "Independent Director" means Independent Director as defined in the
Company's Bylaws.

      (g)   "Net Income" means the net income available to shareholders of the
Company's common stock, calculated on a consolidated basis in accordance with
GAAP.

      (h)   "Other Comprehensive Income or Loss" means the accumulated other
comprehensive income or loss of the Company calculated on a consolidated basis
in accordance with GAAP.

      (i)   "Return on Equity" means for any quarter the quotient obtained by
dividing the Company's annualized Net Income for the quarter by the Company's
Average Net Worth for the quarter.

      SECTION 2. General Duties of the Manager. Subject to the supervision of
the Board of Directors, the Manager shall provide services to the Company and,
to the extent directed by the Board of Directors, shall provide similar services
to any subsidiary of the Company as follows:

      (a)   serve as the Company's consultant with respect to the formulation
and updating of investment criteria and policy guidelines for consideration by
the Board of Directors ("Guidelines");

      (b)   prepare strategic plans and annual budgets for review by the Board
of Directors, and report changes to such plans and budgets to the Board of
Directors on a quarterly basis;

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      (c)   represent the Company in connection with its origination,
acquisition, retention and servicing of investments in Mortgage Assets
(including the accumulation of Mortgage Loans for securitization), and all
related financing activities;

      (d)   furnish reports and statistical and economic research to the Company
regarding the Company's investments and activities and the services performed
for the Company by the Manager;

      (e)   monitor and provide to the Board of Directors on an on-going basis
price information and other data obtained from appropriate pricing services and
nationally recognized dealers that maintain markets in Mortgage Assets
identified by the Board of Directors from time to time, and provide data and
advice to the Board of Directors in connection with the identification of such
pricing services and dealers;

      (f)   administer the day-to-day operations of the Company and perform or
supervise the performance of such other administrative functions necessary or
advisable for the management of the Company as may be agreed upon by the Manager
and the Board of Directors including, without limitation, collection of the
Company's revenues and payment of the Company's expenses, debts and obligations
and maintenance of appropriate computer services to provide such administrative
functions;

      (g)   communicate on behalf of the Company with the holders of the
Company's securities as required to satisfy the continuous reporting and other
requirements of any governmental bodies or agencies to holders of such
securities and third parties and to maintain effective relations with such
holders of the Company's securities;

      (h)   designate a servicer for those Mortgage Loans sold to the Company by
originators or sellers that have elected not to service such loans and for those
Mortgage Loans originated by the Company, and arrange for the monitoring and
administering of any such servicer;

      (i)   monitor, supervise and report on delinquent loan activity affecting
the Company, including making decisions as to troubled debt restructuring, loan
work-out agreements and ultimate disposition of real estate acquired as a result
of foreclosures;

      (j)   counsel the Company in connection with policy and strategic
decisions to be made by the Board of Directors;

      (k)   upon request by and in accordance with the directions of the Board
of Directors, invest or reinvest any funds of the Company;

      (l)   represent the Company in connection with its hedging activities
consistent with the Company's Guidelines, including those policies regarding
management of interest rate risk, and the Company's qualification as a REIT;

      (m)   represent the Company in connection with its securitizations for the
issuance of Mortgage Securities from pools of Mortgage Loans acquired by the
Company, and provide to the Company itself or through another appropriate party
all services in connection with the creation of Mortgage Securities, including:

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            (1)   serving as consultant with respect to the structuring of each
class or series of Mortgage Securities;

            (2)   negotiating the rating requirements with rating agencies with
respect to the rating of each class or series of Mortgage Securities;

            (3)   accumulating and reviewing all Mortgage Loans which may secure
or constitute the mortgage pool for each class or series of Mortgage Securities;

            (4)   negotiating all agreements and credit enhancements with
respect to each class or series of Mortgage Securities;

            (5)   issuing commitments on behalf of the Company to originate or
purchase Mortgage Loans to be used to secure or constitute the mortgage pool for
each class or series of Mortgage Securities;

            (6)   organizing and administering all activities in connection with
the closing of each class or series of Mortgage Securities, including all
negotiations and agreements with underwriters, trustees, servicers, master
servicers and other parties; and

            (7)   performing such other services as may be required from time to
time for completing the creation of each class or series of Mortgage Securities.

      (n)   provide to the Company itself or through another appropriate party
all services in connection with the administration of each class or series of
Mortgage Securities created by the Company;

      (o)   provide to the Company documentation and certifications in the form
requested by the Company with respect to functions performed by the Manager
relating to financial reporting and disclosure controls and procedures, upon
which the Company can rely in the preparation, certification and/or filing of
any reports as required by law or regulation, including federal securities laws
and regulations,

      (p)   provide the executive and administrative personnel, office space,
equipment and services required in rendering the foregoing services to the
Company;

      (q)   perform such other services as may be required from time to time for
management and other activities relating to the assets or operations of the
Company as the Manager shall deem necessary, advisable or appropriate under the
particular circumstances;

      (r)   cause the Company to qualify to do business in all applicable
jurisdictions as may be required from time to time under applicable state and
federal laws; and

      (s)   comply with all laws and regulations applicable to the Manager and
use its best efforts to cause the Company to comply with all laws and
regulations applicable to the Company.

      SECTION 3. Additional Activities of Manager.

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      (a)   Nothing herein shall prevent the Manager or any of its Affiliates
from engaging in other businesses or from rendering services of any kind to any
other person or entity, including investment in, or advisory service to others
investing in, any type of real estate investment, including investments which
meet the principal investment objectives of the Company. Notwithstanding
anything elsewhere in this Agreement to the contrary, the Manager shall not
engage in any activity which would cause it to be required to register as an
investment advisor under the Investment Advisers Act of 1940. In furtherance
thereof, during any twelve (12) month period, the Manager shall not (i) render
investment advice to more than fifteen (15) clients, (ii) hold itself out
generally to the public as an investment advisor, or (iii) act as an investment
advisor to any investment company that is registered under the Investment
Company Act of 1940.

      (b)   Directors, officers, employees and agents of the Manager or
Affiliates of the Manager may serve as directors, officers, employees, agents,
nominees or signatories of the Company, to the extent permitted by their
Governing Instruments, as from time to time amended, or by any resolutions duly
adopted by the Board of Directors pursuant to the Company's Governing
Instruments. When executing documents or otherwise acting in such capacities for
the Company, such persons shall use their respective title in the Company.

      SECTION 4. Bank Accounts. At the direction of the Board of Directors, the
Manager may establish and maintain one or more bank accounts in the name of the
Company, and may collect and deposit funds into, and disburse funds from, any
such account or accounts, under such terms and conditions as the Board of
Directors may approve; and the Manager shall from time to time render
appropriate accountings of such collections and payments to the Board of
Directors and, upon request by the Company, to the auditors of the Company.

      SECTION 5. Records; Confidentiality. The Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by duly authorized representatives of the Company at any time during
normal business hours. The Manager shall keep confidential any and all
information it obtains from time to time in connection with the services it
renders under this Agreement and shall not disclose any portion thereof to
non-affiliated third parties except with the prior written consent of the
Company, or except as may be required by applicable law or judicial process.

      SECTION 6. Obligations of Manager.

      (a)   The Manager shall require each seller or transferor of Mortgage
Assets to the Company to make such representations and warranties regarding such
Mortgage Assets as may be, in the judgment of the Manager, necessary, advisable
and appropriate. In addition, the Manager shall take such other action as it
deems necessary, advisable or appropriate with regard to the protection of the
Company's investments.

      (b)   The Manager shall refrain from any action which would adversely
affect the status of the Company or, if applicable, any subsidiary of the
Company, as a REIT or which would violate any law, rule or regulation of any
governmental body or agency having jurisdiction over the Company or any such
subsidiary or which would otherwise not be permitted

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by the Company's or such subsidiary's Governing Instruments. If the Manager is
ordered to take any such action by the Board of Directors, the Manager shall
promptly notify the Board of Directors of the Manager's judgment that such
action would adversely affect such status or violate any such law, rule or
regulation or the Governing Instruments. The Manager, its directors, officers,
shareholders and employees shall not be liable to the Company, the Independent
Directors or the Company's shareholders, for any act or omission by the Manager,
its directors, officers, shareholders or employees, except as provided in
Section 11 of this Agreement.

      SECTION 7. Compensation.

      (a)   Annual Base Management Fee. For services rendered under this
Agreement, the Company shall pay to the Manager, commencing with the month in
which the Effective Date occurs, an annual base management fee based on the
Average Historical Equity of the Company for each year, payable monthly in
arrears, as follows:

                  (i) 1.23% of the first $300 million of Average Historical
                  Equity, plus

                  (ii) 0.90% of that amount of Average Historical Equity greater
                  than $300 million and less than or equal to $1.5 billion, plus

                  (iii) 0.80% of that amount of Average Historical Equity
                  greater than $1.5 billion and less than or equal to $2
                  billion, plus

                  (iv) 0.75% of that amount of Average Historical Equity greater
                  than $2 billion and less than or equal to $2.5 billion, plus

                  (v) 0.70% of that amount of Average Historical Equity greater
                  than $2.5 billion and less than or equal to $3 billion, plus

                  (vi) 0.65% of that amount of Average Historical Equity greater
                  than $3 billion,

                  with the percentage factors for all of the above subject to
                  increase (but not decrease) as of July of each year,
                  commencing with July 2004, by any published annual increase
                  for such year over the same month in the previous year in the
                  consumer price index for all urban consumers, U.S. city
                  average, as released by the Bureau of Labor Statistics of the
                  U.S. Department of Labor.

      The annual base management fee shall be calculated by the Manager within
fifteen (15) days after the end of each month, and such calculation shall be
promptly delivered to the Company. The Company shall pay to the Manager the
applicable portion of the annual base

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management fee payable pursuant to this Section 7(a) for each month within
thirty (30) days after the end of each such month. Payments of the applicable
portion of the annual base management fee shall be pro-rated based on the number
of days elapsed during any partial month.

      (b)   Incentive Compensation. In addition to the annual base management
fee, the Manager shall receive as incentive compensation ("Incentive
Compensation") for each fiscal quarter an amount equal to twenty percent (20%)
(the "Incentive Percentage") of the Net Income of the Company, before Incentive
Compensation, in excess of the amount that would produce an annualized Return on
Equity equal to the Ten Year U.S. Treasury Rate (average of weekly average yield
to maturity for U.S. Treasury securities (adjusted to a constant maturity of ten
(10) years) as published weekly by the Federal Reserve Board in publication H.15
during a quarter) plus one percent (1%).

      The Incentive Percentage used to calculate any portion of the Incentive
Compensation that is greater than an amount of $30 million as calculated
according to the formula above shall be reduced by one percent (1%) as follows:

      Amount greater than $30 million and less than or equal to $35 million 19%

      Amount greater than $35 million and less than or equal to $40 million 18%

      Amount greater than $40 million and less than or equal to $45 million 17%

      Amount greater than $45 million and less than or equal to $50 million 16%

      Amount greater than $50 million 15%

      The Incentive Compensation calculation and payment shall be made quarterly
in arrears. The Manager shall compute the Incentive Compensation payable under
this Section 7(b) within forty-five (45) days after the end of each fiscal
quarter. The Company shall pay the Incentive Compensation with respect to each
fiscal quarter within fifteen (15) days following the delivery to the Company of
the Manager's written statement setting forth the computation of the Incentive
Compensation for such quarter.

      (c)   If loans are made to the Company by an Affiliate of the Manager, the
maximum amount of interest that may be charged by such Affiliate shall be the
prime rate publicly announced by Citibank, N. A. from time to time plus one
percent (1%) per year.

      (d)   The proceeds from any issue of preferred stock which may from time
to time be created and authorized for issuance by the Board of Directors (the
"Preferred Stock") shall be included in Average Historical Equity in calculating
the Manager's annual base management fee under Section 7(a). For purposes of
calculating the Manager's Incentive Compensation under Section 7(b), Preferred
Stock shall be excluded from Average Net Worth and the minimum or fixed rate
portion of any Preferred Stock dividend shall be deducted from taxable income
before Incentive Compensation.

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      SECTION 8. Expenses of the Company. The Company shall pay its Operating
Expenses as set forth in Section I of Annex A attached hereto, and shall
reimburse the Manager for those documented Operating Expenses that the Manager
reasonably incurred on its behalf in furtherance of the Manager's
responsibilities under this Agreement. The reimbursable expenses of the Manager
shall include, without limitation, the amount of any New Mexico Gross Receipts
Tax (the "Gross Receipts Tax") which the Manager becomes obligated to pay based
on the annual base management fees, Incentive Compensation and any other
receipts which the Manager derives in connection with its service to the
Company. The Manager shall be responsible for its own costs and expenses of
operation as set forth in Section II of Annex A attached hereto.

      SECTION 9. Annual Operating Expenses Limitation Requiring Reimbursement by
the Manager.

      (a)   Subject to the adjustment as provided in paragraph (b), Operating
Expenses reasonably incurred by the Manager on behalf of the Company shall be
reimbursed monthly to the Manager within thirty (30) days after the end of each
month. The Manager shall prepare a statement documenting the Operating Expenses
of the Company and those incurred by the Manager on behalf of the Company during
each month, and shall deliver such statement to the Company within fifteen (15)
days after the end of each month.

      (b)   Within one hundred twenty (120) days after the end of each of the
Company's fiscal years, the Manager shall reimburse the Company for any expense
reimbursement received by the Manager from the Company hereunder with respect to
such fiscal year to the extent that the Operating Expenses of the Company for
such fiscal year exceed the greater of two percent (2%) of its Average
Historical Equity or twenty five percent (25%) of its Net Income for such fiscal
year; unless a majority of the Independent Directors determines that, based upon
such unusual or nonrecurring factors which they deem sufficient, a higher level
of expenses is justified for such fiscal year, in which case, the excess
expenses attributable to that one fiscal year shall be payable to the Manager in
succeeding fiscal years to the extent that the expenses of the Company in any
succeeding fiscal year are less than the greater of two percent (2%) of its
Average Historical Equity or twenty five percent (25%) of its Net Income for
such fiscal year. Any such finding of the Independent Directors regarding the
justification of a higher level of expenses for any fiscal year shall be
recorded in the minutes of the Board of Directors. The determination of Net
Income for purposes of calculating the Operating Expenses limitation will
include any Incentive Compensation payable for such period. The amount of any
Gross Receipts Tax reimbursed by the Company to the Manager pursuant to Section
8 above is not subject to the Operating Expenses limitation set forth above.

      SECTION 10. Monitoring Servicing. The Manager will monitor and administer
the servicing of the Company's Mortgage Loans. Such monitoring and
administrative services will include, but not be limited to, the following
activities: serving as the Company's consultant with respect to the servicing of
Mortgage Loans; collection of information and submission of reports pertaining
to the Mortgage Loans and to moneys remitted to the Manager or the Company by
servicers; periodic review and evaluation of the performance of each servicer to
determine its compliance with the terms and conditions of the applicable
servicing agreement and, if deemed appropriate, recommending to the Company the
termination of such servicing agreement; acting

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as a liaison between servicers and the Company and working with servicers to the
extent necessary to improve their servicing performance; review of and
recommendations as to fire losses, easement problems, condemnation, delinquency,
foreclosing and other reports on Mortgage Loans; supervising claims filed under
any mortgage insurance policies; and enforcing the obligation of any servicer to
repurchase Mortgage Loans from the Company. The Manager may enter into
subcontracts with other parties, including its Affiliates, to provide any such
services for the Manager; provided however, all such subcontractors shall then
be subject to the terms of this Agreement and the Manager shall provide written
notice of such subcontracts to the Company; and, provided further, in no event
shall any such subcontracts or subcontractors contravene the Manager's
obligations and limitations set forth in Section 3(a) of this Agreement. For
purposes of clarification, expenses incurred by the Manager to perform the
functions described above are to be considered Operating Expenses, as set forth
in Section I of Annex A attached hereto.

      SECTION 11. Limits of Manager Responsibility.

      (a)   The Manager assumes no responsibility under this Agreement other
than to render the services called for hereunder in good faith and shall not be
responsible for any action of the Board of Directors in following or declining
to follow any advice or recommendations of the Manager. The Manager, its
directors, officers, shareholders and employees will not be liable to the
Company, the Independent Directors or the Company's shareholders for any acts or
omissions by the Manager, its directors, officers, shareholders or employees
under or in connection with this Agreement, except by reason of acts
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of their duties. The Company shall reimburse, indemnify and hold
harmless the Manager, its directors, officers, shareholders and employees of and
from any and all expenses, losses, damages, liabilities, demands, charges and
claims of any nature whatsoever (including, without limitation, attorneys' fees)
in respect of or arising from any acts or omissions of the Manager, its
directors, officers, shareholders and employees made in good faith in the
performance of the Manager's duties under this Agreement and not constituting
bad faith, willful misconduct, gross negligence or reckless disregard of its
duties.

      (b)   The Manager shall reimburse, indemnify and hold harmless the Company
or any of its directors, officers, shareholders and employees from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including, without limitation, attorneys' fees) arising out
of any intentional misstatements of fact made by the Manager in connection with
the issuance of commitments to purchase Mortgage Assets on behalf of the Company
and the purchase of Mortgage Assets by the Company resulting from such
commitments, or any act constituting bad faith, willful misconduct, gross
negligence or reckless disregard of the Manager's duties under this Agreement.

      SECTION 12. No Joint Venture. The Company and the Manager are not partners
or joint venturers with each other and nothing herein shall be construed to make
them such partners or joint venturers or impose any liability as such on either
of them.

      SECTION 13. Term; Termination Without Cause; Name Change Upon Termination
of Management Agreement; Evaluation of Manager.

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      (a)   Term. This Agreement shall commence on the Effective Date and shall
continue in force until the next regularly scheduled Board of Directors meeting
of the Company following the tenth anniversary of the Effective Date, and
thereafter, it may be extended only with the consent of the Manager and by the
affirmative vote of a majority of the Board of Directors, including a majority
of the Independent Directors. Each extension shall be executed in writing by the
parties hereto before the expiration of this Agreement or any extension thereof.
Each such extension shall not exceed a term of ten (10) years.

      (b)   Termination Without Cause. Notwithstanding any other provision to
the contrary, this Agreement, or any extension hereof, may be terminated without
cause by the Company, by majority vote of the Independent Directors or by
majority vote of the Company's shareholders, upon sixty (60) days written
notice. If this Agreement is terminated pursuant to this Section 13(b), such
termination shall be subject to the provisions of Section 16 of this Agreement.

      (c)   Name Change Upon Termination of Management Agreement. The Company
agrees that if at any time the Manager or any Affiliate of the Manager shall
cease to serve generally as Manager of the Company, upon receipt of a written
request of the Manager, the Company shall cause its Governing Instruments to be
amended so as to change the name of the Company to a name that does not include
"Thornburg" or any approximation thereof.

      (d)   Evaluation of Manager. The Independent Directors, at least annually,
shall determine that the compensation paid to the Manager is reasonable in
relation to the nature and quality of services performed and shall review and
evaluate the performance of the Manager to determine that the provisions of this
Agreement are being carried out. The Independent Directors shall also determine
at least annually that the total Operating Expenses of the Company are
reasonable in light of all relevant factors. Each such determination shall be
based upon the following factors and all other factors the Independent Directors
may deem relevant and the findings of the Independent Directors on each of such
factors shall be recorded in the minutes of the Board of Directors:

            (1)   the size of the management fee in relation to the size,
composition and profitability of the investment portfolio of the Company;

            (2)   the success of the Manager in generating opportunities that
meet the investment objectives of the Company;

            (3)   if available, the fees charged by advisors performing similar
services to other REITs and investors which are externally managed, and the
profitability, dividend yield and operating expense ratios of the Company in
comparison to those of other REITs and entities performing similar functions
which are internally managed;

            (4)   additional revenues realized by the Manager and its Affiliates
through their relationship with the Company, if any, whether paid by the Company
or by others with whom the Company does business;

            (5)   the quality and extent of service and advice furnished to the
Company;

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            (6)   the performance of the investment portfolio of the Company,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations; and

            (7)   the quality of the investment portfolio of the Company.

      SECTION 14. Assignments.

      (a)   This Agreement shall terminate automatically in the event of its
assignment, in whole or in part, by the Manager, unless the Company (with the
approval of a majority of the Independent Directors) consents in writing to such
assignment in advance. Any such assignment shall bind the assignee hereunder in
the same manner as the Manager is bound. In addition, the assignee shall execute
and deliver to the Company a counterpart of this Agreement naming such assignee
as Manager. This Agreement shall not be assigned by the Company without the
prior written consent of the Manager, except in the case of assignment by the
Company to a REIT or other entity which is a successor (by merger, consolidation
or purchase of assets) to the Company, in which case such successor entity shall
be bound hereunder and by the terms of such assignment in the same manner as the
Company is bound hereunder.

      (b)   Notwithstanding any provision of this Agreement to the contrary,
subject to Section 3(a), the Manager may subcontract and assign any or all of
its responsibilities under Sections 2(k), 2(1) and 10 of this Agreement to any
of its Affiliates, and the Company hereby consents to any such assignment and
subcontracting.

      SECTION 15. Termination by Company or Independent Directors for Cause.

      (a)   This Agreement shall terminate upon sixty (60) days written notice
of termination from the Company or a majority of the Independent Directors to
the Manager if any of the following events shall occur:

            (1)   if the Manager shall violate any provision of this Agreement
and, after notice of such violation, shall not cure such violation within thirty
(30) days of the receipt of such notice; or

            (2)   there is entered an order for relief or similar decree or
order with respect to the Manager by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
similar laws; or the Manager (i) ceases, or admits in writing its inability to
pay its debts as they become due and payable, or makes a general assignment for
the benefit of, or enters into any composition or arrangement with, creditors;
(ii) applies for, or consents (by admission of material allegations of a
petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of the Manager
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against the Manager and
continue undismissed for thirty (30) days; (iii) authorizes or files a voluntary
petition in bankruptcy, or applies for or consents (by admission of material
allegations of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other

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similar law of any jurisdiction, or authorizes such application or consent, or
proceedings to such end are instituted against the Manager without such
authorization, application or consent and are approved as properly instituted
and remain undismissed for thirty (30) days or result in adjudication of
bankruptcy or insolvency; or (iv) permits or suffers all or any substantial part
of its properties or assets to be sequestered or attached by court order and the
order remains undismissed for thirty (30) days.

      (b)   If any of the events specified in Section 15(a) of this Agreement
shall occur, the Manager shall give prompt written notice thereof to the Board
of Directors upon the occurrence of such event.

      SECTION 16. Action Upon Termination.

      (a)   From and after the effective date of termination of this Agreement,
pursuant to Sections 13(b), 14 or 15 of this Agreement, the Manager shall not be
entitled to compensation for further services hereunder, except pursuant to any
separate written management termination agreement that may hereafter be
negotiated by the parties, but shall be paid all compensation accruing to the
date of termination, including deferred Incentive Compensation which is
recoverable in accordance with Section 7(b) of this Agreement. Upon such
termination, the Manager shall forthwith:

            (1)   after deducting any accrued compensation and reimbursement for
the Operating Expenses to which it is then entitled, pay over to the Company all
money collected and held for the account of the Company pursuant to this
Agreement;

            (2)   deliver to the Board of Directors a full accounting, including
a statement showing all payments collected by it, all money held by it and all
Operating Expenses incurred by it on behalf of the Company, covering the period
following the date of the last accounting furnished to the Board of Directors
with respect to the Company to the effective date of termination of this
Agreement;

            (3)   pay to the Company all sums set forth on the accounting
referenced in Section 16(a)(2) above; and

            (4)   deliver to the Board of Directors all property and documents
of the Company then in the custody of the Manager.

      (b)   Upon the occurrence of (i) an "Acquisition Event" or (ii) the
termination of this Agreement by the Company, by majority vote of the
Independent Directors or by majority vote of the Company's shareholders in
accordance with Section 13(b) of this Agreement, the Company agrees to, and
shall be obligated to, acquire and pay for substantially all of the assets of
the Manager in a transaction intended to qualify, in the opinion of counsel
reasonably acceptable to the Manager, as a tax-free reorganization pursuant to
Section 368(a)(1)(A) or 368(a)(1)(C) of the Internal Revenue Code, as amended
(the "Reorganization"). In consideration for the acquisition of the Manager's
assets (the "Acquisition"), the Company shall issue to the Manager an amount of
publicly registered shares of the Company's common stock, calculated as follows:

                                       12
<PAGE>

            (1)   The Manager shall retain an independent certified public
accountant mutually acceptable to the Company and the Manager to prepare in
accordance with GAAP, using the cash receipts and disbursements method of
accounting, audited financial statements for the three twelve-month periods (the
"Statements") over the thirty-six month period ending with the most recently
completed calendar quarter (the "Measuring Period"). The Statements shall show
gross revenues received by the Manager less all expenses (excluding bonus
payments to the Manager's employees and Affiliates) paid by the Manager during
the Measuring Period.

            (2)   The Company shall issue to the Manager as payment for the
Acquisition that number of shares of the Company's common stock equal to one
hundred twenty percent (120%) of the quotient of the Manager's net profit
(excluding bonus payments to the Manager's employees and Affiliates) on the
Statement for the twelve-month period showing the highest net profit during the
Measuring Period, divided by the dividend per share of common stock declared by
the Company during the most recent fiscal quarter in which a dividend was
declared, on an annualized basis; provided, however, that such Acquisition
payment shall not be less than the sum of $5 million for each $100 million of
equity capital attributable to the Company's common stock and preferred stock,
if any.

            (3)   "Acquisition Event" means (A) the acquisition by any person or
entity who or which, together with all Affiliates and associates of such person
or entity, shall become the beneficial owner of twenty percent (20%) or more of
the Company's common stock then outstanding, but shall not include the Company
or any employee benefit plan thereof (collectively, "Excluded Entities"),
through an unsolicited tender offer or exchange offer or other acquisition of
such number of shares by such person, or (B) a change in the majority of the
Board of Directors, whether by resignation or removal, which change occurs as a
result of the acquisition of a controlling interest in the outstanding voting
stock of the Company by any person or entity, other than Excluded Entities, or
(C) a merger, consolidation, or reorganization between the Company and another
entity with the Company being either the surviving entity or the acquired
entity, or the transfer of assets into the Company for twenty percent (20%) or
more of the Company's equity securities or securities exercisable or convertible
into the Company's equity securities by any person or entity, other than
Excluded Entities.

            (4)   The Company shall at all times keep and maintain an adequate
reserve of authorized but unissued shares of its common stock available to
fulfill the obligation to issue shares pursuant to any Acquisition.

            (5)   Upon the occurrence of an Acquisition Event or termination
pursuant to Section 13(b), the Company shall promptly file a registration
statement and use its best efforts to cause such registration statement to
become effective under the Securities Act of 1933, as amended, with respect to
the public offering and distribution of such shares reserved for issuance
pursuant to the Acquisition.

            (6)   The Company and the Manager will, as soon as possible after
the occurrence of an Acquisition Event or termination pursuant to Section 13(b),
but in no event later than sixty (60) days after such event, take all necessary
corporate action to consummate and close the Reorganization and the Acquisition,
including the Company's issuance of the shares of common stock to the Manager as
determined in paragraph (2) above.

                                       13
<PAGE>

      SECTION 17. Release of Money or Other Property Upon Written Request. The
Manager agrees that any money or other property of the Company held by the
Manager under this Agreement shall be held by the Manager as custodian for the
Company, and the Manager's records shall be appropriately marked clearly to
reflect the ownership of such money or other property by the Company. Upon the
receipt by the Manager of a written request signed by a duly authorized officer
of the Company requesting the Manager to release to the Company any money or
other property then held by the Manager for the account of the Company under
this Agreement, the Manager shall release such money or other property to the
Company within a reasonable period of time, but in no event later than thirty
(30) days following such request. The Manager shall not be liable to the
Company, the Independent Directors or the Company's shareholders for any acts
performed or omissions to act by the Company in connection with the money or
other property released to the Company in accordance with this Section. Subject
to the foregoing, the Company shall indemnify the Manager, its directors,
officers, shareholders and employees against any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever,
which arise in connection with the Manager's release of such money or other
property to the Company in accordance with the terms of this Section 17.
Indemnification pursuant to this provision shall be in addition to any right of
the Manager to indemnification under Section 11 of this Agreement.

      SECTION 18. Representations and Warranties.

      (a)   The Company hereby represents and warrants to the Manager as
follows:

            (1)   The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, hold, lease and operate its assets and/or properties and
to transact the business in which it is now engaged and is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership or lease of assets and/or properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified and in good standing would not in the aggregate have a material
adverse effect on the business, operations, assets or financial condition of the
Company and its subsidiaries, taken as a whole. The Company does not do business
under any fictitious business name.

            (2)   The Company has the corporate power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other person
including, without limitation, shareholders and creditors of the Company, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Company in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.

                                       14
<PAGE>

            (3)   The execution, delivery and performance of this Agreement and
the documents or instruments required hereunder, will not violate any provision
of any existing law or regulation binding on the Company, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on the Company, or the Governing Instruments of, or any securities
issued by, the Company or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Company is a party or by which
the Company or any of its assets may be bound, the violation of which would have
a material adverse effect on the business, operations, assets or financial
condition of the Company and its subsidiaries, taken as a whole, and will not
result in, or require, the creation or imposition of any lien on any of its
properties, assets or revenues pursuant to the provisions of any such mortgage,
indenture, lease, contract or other agreement, instrument or undertaking.

            (4)   Nothing in this Agreement shall or is intended to contravene
any fact or representation set forth in any prospectus, registration statement,
annual report or quarterly report as filed by the Company with the Securities
and Exchange Commission.

      (b)   The Manager hereby represents and warrants to the Company as
follows:

            (1)   The Manager is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, hold, lease and operate its assets and/or properties and
to transact the business in which it is now engaged and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of assets and/or properties or the conduct of its business
require such qualification, except where the failure to be so qualified and in
good standing would not in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of the Manager. The Manager
does not do business under any fictitious business name and it has no
subsidiaries.

            (2)   The Manager has the corporate power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other person
including, without limitation, shareholders and creditors of the Manager, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Manager in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
agent of the Manager, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Manager enforceable
against the Manager in accordance with its terms.

            (3)   The execution, delivery and performance of this Agreement and
the documents or instruments required hereunder, will not violate any provision
of any existing law or regulation binding on the Manager, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on the Manager, or any securities issued by the

                                       15
<PAGE>

Manager or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Manager is a party or by which the
Manager or any of its assets may be bound, the violation of which would have a
material adverse effect on the business, operations, assets or financial
condition of the Manager, and will not result in, or require, the creation or
imposition of any lien on any of its properties, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.

      SECTION 19. Notice. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested. The
parties may deliver to each other notice by electronically transmitted facsimile
copies ("Fax") provided that such Fax notice is followed within twenty-four (24)
hours by any type of notice otherwise provided for in this paragraph. Any notice
shall be duly addressed to the parties as follows:

                   If to the Company:  150 Washington Avenue, Suite 302
                                       Santa Fe, NM 87501
                                       Attention: Larry A. Goldstone

                   Copy to:            Michael B. Jeffers, Esq.
                                       Dechert LLP
                                       4675 MacArthur Court, Suite 1400
                                       Newport Beach, CA 92660

                   If to the Manager:  150 Washington Avenue, Suite 302
                                       Santa Fe, NM  87501
                                       Attention: Garrett Thornburg

      Either party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section 19 for the giving of notice.

      SECTION 20. Binding Nature of Agreement; Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns as
provided herein.

      SECTION 21. Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous
agreements, understandings, inducements and conditions, express or implied, oral
or written, of any nature whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing approved by the
Company (including a majority of the Independent Directors) and the Manager.

                                       16
<PAGE>

      SECTION 22. Controlling Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of New Mexico, notwithstanding any New Mexico or other conflict of law
provisions to the contrary.

      SECTION 23. Annexes. All Annexes referred to herein or attached hereto are
hereby incorporated by reference into, and made an integral part of, this
Agreement.

      SECTION 24. Indulgences, Not Waivers. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.

      SECTION 25. Titles Not to Affect Interpretation. The titles of paragraphs
and subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

      SECTION 26. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, including electronically transmitted counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories.

      SECTION 27. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

      SECTION 28. Gender. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

      SECTION 29. Computation of Interest. Interest will be computed on the
basis of a 360-day year consisting of twelve (12) months of thirty (30) days
each.

                            [SIGNATURE PAGE FOLLOWS]

                                       17
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Management Agreement as of the date first written above.

                 "Company"

                 THORNBURG MORTGAGE, INC.
                 a Maryland corporation

                 By: /s/ Larry A. Goldstone
                     ------------------------
                     Larry A. Goldstone, President and Chief Operating Officer

                 "Manager"

                 THORNBURG MORTGAGE ADVISORY CORPORATION,
                 a Delaware corporation

                 By: /s/ Garrett Thornburg
                     ------------------------
                     Garrett Thornburg, Chairman

                                       18
<PAGE>

                                     ANNEX A

                       Definition of "Operating Expenses"

      I.    The term "Operating Expenses" means all of the ordinary and
necessary operating expenses of the Company of every type including, but not
limited to, costs of originating loans directly, acquiring loans through
correspondent, bulk or other loan acquisition channels, securitizing, selling,
hedging, owning, carrying, servicing and monitoring the servicing or
subservicing of, and disposing of the Company's portfolio of Mortgage Loans,
Mortgage Securities and other assets, including the costs of software and costs
of equipment related thereto, and costs of organizing any subsidiary of the
Company, costs of issuing, servicing, paying dividends or interest on, selling
or reacquiring any instrument or security or mortgage asset (whether or not a
security), costs preparatory to entering into a business or activity, costs of
winding up or disposing of a business or activity, interest, points, fees,
finance costs, costs of maintaining compliance with governmental requirements of
any type, taxes, losses, bad debts of any type, in each case incurred by or on
behalf of the Company regardless whether such expenses and costs would be
treated as current costs or expenses for tax purposes or under generally
accepted accounting principles. Such costs and expenses shall include all
compensation costs, equipment and a pro rata portion of overhead expenses of the
personnel employed by the Manager or the Company to perform the foregoing
services for the Company, other than as set forth in Section II below.

      II.   The term "Operating Expenses" of the Company shall not include the
following:

      (A)   employment expenses of the Manager's personnel who are performing
management services for the Manager (including directors, officers, and
employees of the Company who are directors, officers, or employees of the
Manager or its Affiliates), other than the expenses of those employee services
listed in Section I above; and

      (B)   rent, telephone, utilities, and office equipment, furnishings and
other office and overhead-related expenses of the Manager in connection with
those employees providing management services for the Manager, other than the
expenses of those employee services listed in Section I above.