NEW YORK— Shares in jumbo mortgage lender Thornburg Mortgage Inc. lost more than half their value Monday after the company said a spike in margin calls could force it out of business

Thornburg said it faces an additional $270 million in margin calls on top of the more than $300 million it was forced to meet last month. Margin calls force borrowers to repay loans or put up more collateral to secure them.

Santa Fe-based Thornburg has about 200 employees in Santa Fe and elsewhere and more than 300 correspondent partners around the country. The company is the 19th largest correspondent lender.Thornburg specializes in jumbo and super jumbo mortgages for affluent borrowers. The average wholesale loan size was $1.2 million in 2007.

Thornburg officials in a recent story about the company said  they felt the company had "survived one of the toughest mortgage market environments in history" and expected to take advantage of market opportunities in 2008.

Thornburg is also building a new office campus on North Ridgetop Road, off N.M. 599.

Tuesday's statement from the company indicated Thornburg is in serious difficulties.

Thornburg said it has not met the majority of the most recent calls, but is working to repay them by selling assets or through raising additional debt or capital. If Thornburg is unable to meet the current calls, it said the result could materially affect its ability to continue to operate.

"If it stays at $270 million, it looks like it's doable," Keefe, Bruyette & Woods Inc. analyst Bose George said.

The lender is most likely going to have to sell assets at a discount to raise the $270 million, as the tightening credit markets would make it extremely expensive to raise new capital through a debt offering, George said.

Thornburg has already received one notice of default among the margin calls. On Thursday, Thornburg received a default notice on a repurchase agreement worth $28 million. In a notice of default, a lender has the right to seize assets pledged as collateral and liquidate them. Thornburg said the lender has yet to exercise that option.

Shares fell $4.95, or 55.6 percent, to $3.95 in morning trading. Shares had traded between $7.49 and $28.40 during the past year.

Thornburg said the margin calls are "strictly a result of the continued deterioration of prices of mortgage-backed securities precipitated by difficult market conditions." The calls are not reflective of the actual performance of the securities, the company added.

Thornburg could face additional margin calls, further affecting their ability to meet repayment requirements. If it cannot meet margin calls, Thornburg said in a statement it would "have a material adverse effect on the company's ability to continue its business in the current manner."

"It's not in their control," George said. "It all depends on pricing this week."

Continued deterioration in the market throughout the week could lead to more margin calls, placing further stress on Thornburg.

The two portfolios causing Thornburg the most difficulty include alt-A and jumbo loans, George said. Thornburg has about $3 billion in the alt-A portfolio and $10 billion in the jumbo portfolio, he added.

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, while jumbo mortgages are loans that exceed the cap by which Fannie Mae and Freddie Mac will purchase loans.

Thornburg said last Thursday it was the subject of margin calls earlier in February on a portfolio of securities backed by alt-A mortgages. It was able to meet all those margin calls without having to sell any assets or raise new capital.

After meeting the initial margin calls, Thornburg was left with limited liquidity to handle the most recent calls.

Thornburg faced similar margin calls in August as the mortgage market deteriorated. It was able to meet those calls.

Problems in the mortgage market sprang up as delinquencies and defaults among loans increased sharply in 2007. That led investors to shy away from purchasing all but the safest, most traditional mortgages. As investor appetite dried up for mortgages, lenders were forced to cut the value of loans they hold. Rising delinquencies and defaults also triggered margin calls against mortgage originators, sending dozens out of business.

On Friday, credit rating agency Standard & Poor's cut Thornburg's rating because of the initial calls and said additional calls could weaken the company's traditional profitability levels.




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