Originally Posted By: Oldmoparguy1
Wow! big hitters are jumping on TMA!
Quote:
More than $300 million paid to back mortgage securities since Feb. 14
SAN FRANCISCO (MarketWatch) -- Thornburg Mortgage Inc. has had to come up with more than $300 million in cash since Valentine's Day to back troubled mortgage-related securities, according to a company regulatory filing.
If it can't meet future margin calls, Santa Fe, N.M.-based Thornburg (TMA) warned that it may have to start selling some assets to raise cash.
Thornburg shares slumped 20% to change hands at $9.26 shortly after the open on the New York Stock Exchange.
Thornburg's disclosure marks the latest sign that the mortgage market hasn't recovered since the subprime crisis erupted in the summer. That's despite aggressive interest-rate cuts by the Federal Reserve, several efforts to minimize foreclosures and new legislation to stimulate the broader economy.
The market value of mortgage-related securities fell between 10% and 15% in February, triggering margin calls, Thornburg explained.
Margin calls happen when securities bought with borrowed money lose value. If they drop too far, brokers require more cash be deposited in an investor's account to support the position or else sell some of the assets.
That happened to $2.9 billion of mortgage-backed securities Thornburg holds, forcing the company to post more than $300 million since Feb. 14, the company explained.
There was "once again a sudden adverse change in mortgage market conditions," Thornburg said. It hasn't realized any losses on the securities, but the company has "observed deterioration in the liquidity for these securities and increased difficulty in obtaining market prices."
"In the event that we cannot meet future margin calls from our available cash position, we might need to selectively sell assets in order to raise cash," Thornburg said. "To date, no such sales have been required to meet margin calls."