Letter America Dear Doctor Guy, My friend recently stopped taking my calls because I’m dating her ex-boyfriend, but they broke up like over two years ago. I don’t know what to do.—Helpless Hottie ... More
It goes on like that, for 131 pages.
Fortunately, we know what we're looking for—the $1 billion Thornburg security mentioned in the Bloomberg story. So we can narrow things down quickly by searching the document for the letters "TM," which are common to Thornburg's sundry ticker symbols.
To nail it down, run a Google search on the CUSIP numbers in the far right column.Searching CUSIP and 885220KH5 returns a link to a Securities and Exchange Commission filing by a company called Thornburg Mortgage Securities Trust 2006-1. Bingo!
SEC filings are publicly accessible through a database called Edgar. Bookmark it; the database is full of info reported by thousands upon thousands of companies.
Searching Edgar for Thornburg Mortgage Securities Trust get us closer to the target:
Clicking through to the TMST 2006-1 security leads us to a list of all its filings. Let's look at the initial prospectus, filed Jan. 20, 2006, which explains just what was for sale—and what the Fed now owns:
For a necessary crash course in deciphering the mortgage-backed-securit-ese that follows in the SEC filing, watch this video by the staff of Marketplace and read this Wikipedia article. (Don't neglect ProPublica's bailout guide for up-to-date news and research.)
This snippet, anyway, is easy enough to understand:
This shows that half of the mortgages in this Thornburg security were given to borrowers who provided less than complete documentation of their income and assets, suggesting they perhaps shouldn't have qualified for a loan in the first place, and may be at risk of default. Thornburg Mortgage executives bragged that they offered loans to only the most creditworthy customers; such standards evidently didn't apply to the securities Thornburg sold to investors.
Certainly, other companies were even less scrupulous. Bloomberg reports that 94 percent of the mortgages in another Fed-held security had “limited documentation." Nearly 10 percent of the homes in that security have entered foreclosure. Foreclosure rates in the Thornburg security are not that high—but, as the prospectus shows, interest rates on most of its mortgages aren't set to increase for several more years.
Cross-posted at Muckraker's Guide.