Mortgage woes force Thornburg to pay $300M

If available cash cannot cover future margin calls, Thornburg Mortgage may have to begin selling assets to raise cash.

February 28 2008: 9:35 AM EST

NEW YORK (AP) -- Thornburg Mortgage Inc., a mortgage lender, said Thursday it has been the subject of margin calls on a portfolio of securities backed by alt-A mortgages.

Alt-A mortgages are loans given to customers with minor credit problems or who cannot document their income or assets to get a traditional, prime mortgage. Margin calls force borrowers to repay loans or put up more collateral to secure them.

Shares of Thornburg (TMA) fell $3.09, or 26.8%, to $8.45 in premarket trading Thursday. Shares have traded between $7.49 and $28.40 during the past year.

Thornburg said in a regulatory filing it is facing margin calls because the value of the alt-A mortgage-backed securities has plummeted between 10% and 15% since the end of January. The margin calls come amid "a sudden adverse change in mortgage market conditions in general" that began on Feb. 14, Thornburg said in the filing.

As of Feb. 15, Thornburg said it has $2.9 billion of exposure to the troubled loans.

Thornburg said in a filing with the Securities and Exchange Commission its securities face a very low threat of future downgrades, which would reduce their value further, and even less risk of actual losses tied to the securities.

Here come more financiers' writedowns
So far, Thornburg has met margin calls totaling more than $300 million, which has reduced its available liquidity to meet future margin calls. If available cash cannot cover future margin calls, the lender said it may have to begin selling assets to raise cash.

In August, Thornburg was forced to sell some of its assets at a steep discount to shore up its capital reserves during a similar period where the value of securities the company held dropped precipitously. The company was able to manage through that period, while dozens of other mortgage lenders shut down.

Since the middle of 2007, investors have been worried about rising delinquencies and defaults among mortgages. That worry has all but dried up the market for securities and other debt backed by mortgages, leading to a decline in value among the debt.

Over the past month, the broader credit markets have continued to tighten, in some cases leaving bondholders unable to sell hundreds of millions or even billions of dollars in debt at any given time.