Large Jumbo Loan Source Looking at Chapter 11

Reuters reports that “Thornburg Mortgage Inc., a large and troubled provider of "jumbo" mortgage loans, on Tuesday said it may file for Chapter 11 bankruptcy protection.” Thornburg specialized in making mortgages above the conforming loan limit ($417,000 in most areas) to borrowers with good credit.

Now the jumbo mortgage market is less a large key player.

Same story different cover. Thornburg ran short of capital as investors stopped buying its loans. The company survived for a while through agreements to restructure, the altrernative being delaying paying its debts.

“The Santa Fe, New Mexico-based company has struggled with liquidity problems since the summer of 2007, when the value of mortgages on its balance sheet began to tumble. Thornburg later suffered a series of margin calls from its own creditors.”

A bankruptcy filing would make Thornburg one of the largest U.S. mortgage providers to seek protection from creditors since the housing slump began, joining rivals such as Washington Mutual Inc., and IndyMac Bancorp Inc. Reuters

With sources for jumbo financing drying up due to a lack of buyers on the secondary market, coupled with rising foreclosure of jumbo loans, the high-end luxury housing market will continue to show weak sales.

h/t: Calculated Risk