The trustee for bankrupt Thornburg Mortgage has sued Goldman Sachs, Barclays and other big banks for a combined $2.2bn, blaming them for the former US lender’s bankruptcy, reports Reuters. The trustee filed four separate lawsuits, the most extensive of which blames a “collusive scheme” by units of JPMorgan, Citigroup, RBS, Credit Suisse and UBS for driving the company into bankruptcy. The trustee, Maryland lawyer Joel Sher, accused the five banks of acting together to use a series of unjustified margin calls to extend their control over Thornburg, once a leading provider of “jumbo” home loans. The lawsuit seeks to recover $2bn for fraudulent conveyances and transfers by the banks. Sher said the banks eventually drove Thornburg into Chapter 11 in May 2009. It sought protection from creditors with $36.5bn in assets, making it one of the larger bankruptcies of the financial crisis.
Bank of America has moved to resolve claims that its Countrywide Financial unit sold loans based on faulty information, agreeing to pay $2.6bn to Fannie Mae and Freddie Mac, the troubled US mortgage giants, reports the FT. Fannie and Freddie, which have received $150bn of government aid since 2008, have been trying to force lenders to buy back flawed mortgages. BofA faced $12.9bn in such claims in late 2011, about half from Fannie and Freddie and the rest from private investors. Indeed, warns DealJournal, investors, who drove BofA stock up more than 6% on Monday, “shouldn’t party too hard” given the liabilities from private mortgage insurers and investors. But, says Lex, at least BofA’s mortgage woes now look more manageable.
Unless this a decidedly poor April Fool’s joke, Thornburg Mortgage has finally thrown in the towel.
The jumbo-mortgage lender said on Tuesday it would sell all remaining assets and cease operations, as well as file for Chapter 11 bankruptcy protection. Read more
Thornburg Mortgage, a provider of big mortgages on expensive properties that was badly wounded by the implosion of its funding model, may be about to give up the ghost.
The lender said on Tuesday it was considering filing for Chapter 11 bankruptcy protection after more than 18 months of liquidity problems, legal difficulties, whopping losses and a collapsing share price. Read more
US mortgage lender Thornburg has filed a material default notice with the SEC.
Thornburg’s share price crashed on Tuesday after speculation over margin calls hit the press. Read more
The US mortgage meltdown spread further on Monday as two big lenders announced expected losses of a combined $1.8bn. Capital One Financial, one of the largest US credit card providers, said it would close its wholesale home lending unit, GreenPoint Mortgage, eliminate 1,900 jobs and take an after-tax charge of $860m. Thornburg Mortgage, which provides big mortgages, said it would record a $930m Q3 loss on the sale of mortgage-backed bonds.
Renewed turmoil in global money markets sent stock prices falling around the world on Tuesday and in Asia on Wednesday as investors ignored a declaration by Jean-Claude Trichet, ECB president, that conditions were returning to normal. Traders were particularly alarmed by signs that the market for asset-backed commercial paper – which provides $1,500bn in short-term borrowings for big companies – was drying up. The anxieties were exacerbated by dismal pronouncements from financial companies including UBS, Sentinel and Thornburg Mortgage. Asian markets on Wednesday slumped to a three-month low, led by Mitsubishi UFJ and Sumitomo Mitsui, after the Japanese banks reported losses on investments related to US subprime loans, reports Bloomberg