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News 01.04.2010 0 Comments

Reuters: 20 Bidders Expected For $11 Billion In Thornburg Assets

By Corey Pein

The news agency today follows up on the sell-off of Thornburg Mortgage's $11 billion-plus in servicing rights, which SFR mentioned in its year-end wrapup:

NEW YORK, Jan 4 (Reuters) - Bankrupt U.S. mortgage lender Thornburg Mortgage Inc (THMRQ.PK) is seeing "wide interest" in the auction for its $11 billion mortgage servicing portfolio...

Dozens of traditional mortgage banks, banks, hedge funds, private equity firms, and special servicers have expressed interest in the portfolio.

Of that group, more than 20 are likely to meet qualifications to bid on the portfolio this week...

And here's some interesting context on the sale:

The portfolio consists of 16,998 loans, and according to [the firm hired to manage the sell-off], is expected to be more attractive to potential bidders because it is seen as a "private investor" portfolio with lower risk than similar offerings from agencies like Fannie Mae (FNM.N), Freddie Mac (FRE.N) and Ginnie Mae that have dominated the servicing portfolio market over the past year.

Thornburg borrowers are a relatively well-off bunch who are nonetheless facing foreclosure more and more often, as the economy continues to slide. The final sale price will reflect how safe the bidders think this "lower risk" portfolio actually is—that is, how likely they think those 17,000-odd Thornburg borrowers are to keep on top of their mortgage payments.

Elsewhere, Reuters blogger Felix Salmon argues that people who owe more on their mortgages than the homes are worth should simply walk away from the debt. Big businesses, Salmon points out, do this all the time. Instead of a moral failing, they call it a "strategic default." The system, Salmon writes, is

tilted enormously in favor of institutional lenders who exist in a world of morality-free contracts, and who conspire to lay the world's largest-ever guilt trip on any borrower who might think about joining them in that world. It's asymmetrical, it's unfair, and it's about time that homeowners started being informed that a ding to their credit score is not the end of the world; that no one would expect a capitalist company to behave in the way that individuals are being told to behave; and that their options are in fact broader than they might believe.

In case you missed the message, here, one of the nation's top financial bloggers, employed by one of the world's top news organizations, is basically calling for open revolt on mortgage lenders. Strange times.

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