Rational

Let Thornburg's Demise Be a Lesson to You

TMA's origination business is solid and you can see from the $950M or so securitization they closed on a couple months ago they have no problem securing permanent financing (not subject to margin calls) on their new loans. The problem is the older Alt-A loans they never securatized in order to make more profit by financing them via commercial paper, and in August 2007 the commercial paper market closed to mortgage lenders. Thus as Alt-A values drop regardless of performance, margin calls/etc pile on and we see the end result.

TMA did about $350M in origination in 4th quarter 2007 at a nice profit. Business grew to $300M in January and another $300M in February. If not for the margin calls/etc, they were on pace to grow new origination volume to around $6B this year. The overall mortgage industry is slowing, but TMA's market share is very small and they've barely tapped into the wholesale mortgage broker market.

All of these new originations move from warehouse line to CMO without the need for repo agreements or other things subject to margin calls. If only they could have shed the Alt-A loans back in August or before the meltdown...