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URL:  http://boards.fool.com/i-owned-some-thornburg-tma-which-went-belly-up-30646322.aspx

Subject:  Re: WSJ: Regulators Worry Mortgage REITs Pose Th Date:  4/21/2013  6:39 PM
Author:  klee12 Number:  74156 of 78787

I owned some Thornburg (TMA) which went belly up. Here's what I think happened. They held jumbo loans from high net worth borrowers who had assets to cover their mortgages. I think I was right there but TMA still went belly up. Here's what I think happened.

Thornburg was in the business of writing mortgages, and then bundling them up in an RMBS. Say it would take a year to create a $100M RMBS. They would borrow money to pay for the loans that they underwrote with a repo, that is if they had a mortgage for 500K, they would used that as collateral for a short term loan on a haircut, i.e. TMA received 499K, say, from a bank. The bank, I think, legally owned the loan, and promised to sell the loan back to TMA for 500K after a year. There was the added condition that the bank could call the loan if the market for the loan went down or some other condition. If TMA could not meet the call, the bank could sell the loan and TMA would owe the bank the difference between what the bank received and value of the loan.

OK, some mortgage bundler, e.g. New Century, went belly because they underwrote lousy loans which started going bad quickly and the repo market froze. One couldn't get a quote on the repos. It didn't matter if the mortgage unerlying the repo was good, you couldn't get a quote. The banks called TMA's re