Thornburg Mortgage socked by margin calls

Valentine’s Day was anything but sweet for jumbo lender Thornburg Mortgage (TMA). Shares of the New Mexico company slid 20% Thursday after Thornburg said weakness in the bond market resulted in more than $300 million in margin calls on its mortgage securities portfolio, starting on Feb. 14. The company said it doesn’t believe it will have to take any losses on the securities, but a sharp decline in demand for the paper has pushed market prices down, triggering calls from Thornburg’s brokers for additional collateral.

So far, the company has met the margin calls, but it now worries that it may have to sell assets into a weak market to raise cash if values continue to drop. “In the short term, the sudden decline in the valuation of these securities has left us with reduced readily available liquidity to meet future margin calls, relative to our cash and unpledged securities position of December 31, 2007,” Thornburg said in an 10-K filing with the Securities and Exchange Commission. “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’s disclosure shows why federal regulators are eager to lift limits on the size of the mortgage portfolios at government-sponsored lenders Fannie Mae (FNM) and Freddie Mac (FRE). Wednesday’s cap-lifting decision isn’t likely to be of any immediate help to Thornburg, which specializes in loans bigger than Fannie and Freddie have been handling, though there’s hope that legislation passed earlier this year will eventually lead the GSEs into the so-called nonconforming market. In the meantime, Thornburg is left hoping the market doesn’t melt down further.