Thornburg Mortgage Meltdown

NEW -> Contingent Buyer Assistance Program
I read somewhere that Thornburg had no exposure to subprime...true ? Is this all collateral damage ?








<a href="http://dailybriefing.blogs.fortune.cnn.com/2008/03/03/margin-calls-thrash-thornburg-again/">FORTUNE: Daily Briefing Margin calls thrash Thornburg again «</a>
 
<em>“The turmoil in the mortgage financing market that began last summer continues to be exacerbated by the <strong>mark-to-market accounting rules</strong> which are forcing companies to take unrealized write-downs on assets they have no intention of selling,” he said Monday. “In this environment, the current market price of assets has become disconnected from their underlying recoverable value, resulting in increased volatility and imprecise quarter-to-quarter comparisons of asset valuations.”</em>





In other words, because the market thinks these things are not worth what you say they are, then the market will make for a margin call on your credit line. It sucks to be them, because it sounds like the days of warehouse lines are over anyway, and this is the bank's way of getting out of warehouse line business. That, and they know the RE market is tanking, and they know these loans will actually be worth less in no time at all.
 
TMA is a casualty of tight credit. They're being forced to sell their good stuff (AAA) mortgages at a big discount just to meet margin requirements.



Talk about getting F'ed!
 
It's so sad to see Thornburg Mortgage--whose entire portfolio is nothing but cream of the crop borrowers--suffer collateral damage. They did everything right--including margins as low as 1.00 on their ARM products--and now this. *sniff!*
 
Does anybody know what Charlie Gasparino said to the <b>BIG</b> Ambac announcement? </sarcasm><p>

But, I seriously do want to know what he said.
 
I dunno what Charlie said, but Doug Kass laughed, and said, "may the farce be with you". Oh, and I could have been greedy and still held my puts on ABK, but I made my profit I wanted and walked away.
 
<p>awgee... the CNBC website has a link to his video at the bottom page of their story on it, but the video keeps crashing IE for some reason. I caught his remarks on the radio as I was driving, and he sort of got baited at the end, mocking the usefullness of a bailout when their business model is effectively FUBAR.</p>

<p> </p>
 
<p>What he said all the time and what really happened were things totally different not even close to what really happened: a bailout of a group of banks vs. selling common shares, the banks left ABK to its own devices.</p>
 
FWIW....my buddy just e-mailed me...a quote on a 30 year fixed rate non-conforming jumbo mortgage. Citibank 8.00%, Downey Savings 8.50%



WTF!?!??!
 
Why is that suprising optimus? These banks know they can't sell the loans to anyone, so they are adjusting the interest rate to match the risk in using "their" own money. Considering that the Fed rates are not likely to stay low for long, real inflation is rising, and the dollar is diving I am surprised that high-end mortgage rates aren't in the double digits. I know I would want <em>at least </em>10% to tie my money up for 30 years.
 
It's bound to get worse. One side effect of all of this is that, in my opinion, there won't be much competition left for the big banks in the mortgage arena which will allow them to act more or less in concert to keep mortgage rates high regardless of what the Fed does.
 
"It's bound to get worse" Depends on who it's worse for.



For all the sucker investors who bought the junk mortgages, they will thanking their stars and breathing a sigh of relief.



For all the fools (FBs) who finagled a house they couldn't afford with stated income loans, paying 5x annual income for their home and bidding up the bubble prices, for these people things will be worse as it should be.



Prices will adjust down because of the higher rates. If your payments are the same (payed more for house at lower interest or paid less for house but higher interest) then you actually come out ahead because more of you monthly payment will be tax deductible interest and your property taxes will be lower. You will just have to sit it out for 3-4 more years will prices adjust.
 
The temporary raising of the cap wasn't done in order to originate new loans, it was done primarily so that the GSEs would insure the garbage so lenders with jumbos on their books can unload them in the secondary mortgage market.
 
Poor Thorny.



March 7 (Bloomberg) -- Thornburg Mortgage Inc., the New Mexico provider of ``jumbo'' home loans, said the company doesn't have enough money to meet $610 million in margin calls and its survival is in doubt.



Bankers have agreed to freeze their demands for payment while Santa Fe-based Thornburg tries to raise enough cash before a deadline of midnight tonight, according to a statement. Falling prices for mortgage assets and the company's shrinking liquidity ``have raised substantial doubt'' about Thornburg's ability to stay in business, the statement said.



Cash ran short at least twice since August at Thornburg, whose shares have dropped 95 percent in 12 months, and Citigroup Inc. analyst Donald Fandetti said this week that bankruptcy is possible. Investors are shunning all except the safest debt, driving down prices on mortgage assets, and Thornburg's bankers want more collateral to protect themselves against losses.



``Quite simply the panic that has gripped the mortgage financing market is irrational and has no basis in investment reality,'' Larry Goldstone, chief executive officer of Thornburg, said in the statement.



Thornburg lost 46 cents, or 28 percent, to $1.19 at 2:41 p.m. in New York Stock Exchange composite trading. The stock sold for more than $12 last week.



Thornburg plans to restate 2007 earnings after the value of its mortgage-backed assets declined, the company said. The lender expects to record a $427.8 million charge, the statement said.



A call to Thornburg spokeswoman Suzanne O'Leary Lopez was not immediately returned.



Shooting the Customers



Home lenders including Thornburg pledge mortgage-backed securities as collateral to obtain financing. Debt markets that trade those securities have seized up as investors grow more concerned about record U.S. defaults and foreclosures.



That's left creditors ``no place to sell these securities, and so it's forcing them to shoot their customers,'' said Christopher Whalen, managing director at Institutional Risk Analytics, a financial consulting firm in Hawthorne, California. ``Thornburg is an unfortunate victim.''
 
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