A brutal week for credit markets

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Problems in the banking and recognition marketplaces intensified last week, spreading to sectors that had been weathering the storm.

The hebdomad started with Thornburg Mortgage, which specialises in high-quality elephantine loans, saying it couldn't ran into border phone calls from lenders.

By week's end, investors were dumping the securities issued by Fannie Mae and Freddie Mac, considered the bedrocks of the lodging market.

It all adds up to large jobs for the recognition sector that, left unsolved, could ensue in tremendous jobs for the economy. Many norm people have got got no thought how bad things have gotten.

Unlike the stock market, whose rotations can be tracked by popular marketplace indexes, the recognition marketplace is extremely complex and difficult to follow, even for experts and policymakers. So far, the Federal Soldier Reserve's involvement charge per unit cuts have got done small to reconstruct assurance in the recognition marketplaces or excite lending. That's partly because so much loaning now takes topographic point outside of the regulated banking industry, where fearfulness is rampant.

Here's a expression at some of this week's events:
Thornburg's bad news

On Monday, Thornburg said it had failed to ran into border phone calls from lenders.

Thornburg had been holding up better than some mortgage companies because it specialises in making high-quality, adjustable-rate elephantine loans (bigger than $417,000) to borrowers with good to first-class credit. Although default rates on these premier loans are very low, Thornburg also held some securities backed by Alt-A mortgages, which fall somewhere between premier and subprime.

On Thursday, Polecat Ratings set a broad swath of securities backed by Alt-A mortgage on reappraisal for possible downgrade.

Thornburg is structured as a existent estate investing trust and is known as a mortgage REIT. Like most mortgage REITs, Thornburg borrows against its mortgage assets to do or purchase more than loans.

When the value of collateral falls, loaners can inquire borrowers to set up more than hard cash or sell the plus held as collateral. That's known as a border call. As the value of Alt-A loans have got got been called into question, many holders have been dumping them onto the marketplace - sometimes as a consequence of border phone calls - causing their value to fall farther.

Thornburg have been getting border calls, and for a piece it had enough hard cash to ran into them. But on Monday, Thornburg said it had failed to ran into border phone calls it had received over the former three days. To ran into them, Thornburg would have got to sell assets or raise capital. That set off a mob in Thornburg's shares, which distribute to other mortgage REITs.

On Friday, Thornburg said marketplace statuses had caused "substantial uncertainty about the company's ability to travel on as a going concern."

Thornburg's sufferings also caused rates on elephantine loans to go even higher last week, states Keith Gumbinger, a frailty president with HSH Associates. Bernanke's comments

On Tuesday, Federal Soldier Modesty President Ben Bernanke, speaking to a grouping of community bankers, suggested that Banks see reducing loan balances for some householders who owe more than than their places are worth.

"In this environment, principal decreases that reconstruct some equity for the householder may be a relatively more than effectual agency of avoiding delinquency and foreclosure," he said.

While that may sound appealing to struggling homeowners, some people were shocked to hear the nation's top banking regulator propose that capital-starved Banks take losings that would further gnaw their capital. Bernanke's address came just a few years after he told United States Congress that more than banks, primarily littler ones, would fail. Ambac's disappointment

On Wednesday, Ambac Financial Group, the troubled chemical bond insurer, defeated marketplaces when it said it would raise desperately needed working capital by merchandising $1.5 billion in stock and equity units. Many were hoping Ambac would procure a larger bailout from planetary banks.

Although it managed to sell the stock on Friday, the other shares will thin the company's net income per share. Ambac's shares lost almost 20 percentage for the week.

Ambac is one of respective big companies that started out insuring relatively safe state and local municipal chemical bonds but ventured off into guaranteeing mortgage and other asset-backed securities that went sour.

Problems with the chemical chemical bond insurance companies have got caused pandemonium in municipal bond markets, forcing many authorities to pay higher involvement rates on their debt.

Vallejo's narrowly avoided bankruptcy and a possible bankruptcy filing by Thomas Jefferson County, Ala., have got done nil to calm down the flustered muni markets. Thomas Thomas Carlyle concerns

Potentially more than worrisome, on Thursday hedgerow monetary fund Carlyle Capital said it had failed to ran into border phone calls on portion of its portfolio of AAA-rated securities issued by Fannie Mae and Freddie Mac. Thomas Thomas Carlyle is a publicly traded spin-off of Carlyle Group, the politically connected private equity firm.

Fannie and Freddie are publicly held companies (often called agencies) that buy, sell and warrant place mortgages.

Heretofore, their chemical bonds have got been considered nearly as safe and liquid as U.S. Treasurys. Although they are not explicitly backed by the federal government, there is a given that the authorities would not allow them neglect because of their importance in the lodging market.

Recently, however, there have got been growing concern about Fannie and Freddie's portfolios, specifically what are called private-label mortgage securities they have bought from others and make not guarantee, states Joshua Rosner, managing manager of research house Billy Graham Fisher.

Private-label securities do up almost one-third of Freddie Mac's retained loans. Although they are generally very high quality, investors today are leery of anything that is not guaranteed.

The larger job is that many hedgerow funds, REITs and other investors who have got got been getting border phone calls on their lesser-quality indirect have been raising hard cash by merchandising Fannie and Freddie securities. That is driving down their terms relation to Treasurys.

On Thursday, the U.S. Treasury Department denied a rumour that it is going to explicitly vouch Fannie and Freddie, which did nil to assist the Fannie/Freddie merchandising frenzy.

In a news release on Friday, Thomas Carlyle Capital said, "In the past respective days, there have been a rapid and terrible impairment in the marketplace for U.S. authorities federal agency AAA-rated residential mortgage-backed securities" such as as those issued by Fannie and Freddie.

In response, respective of Carlyle's loaners marked down the value of its collateral and said they would soon inquire for more. "The company believes these further border phone calls and increased collateral demands could quickly consume its liquidness and impair its capital," it said.

On Friday, the Dutch stock exchange where Thomas Carlyle Capital is listed halted trading in its shares.

Fannie and Freddie's shares drop almost 20 percentage last week. What it all means

Where the recognition crisis stops is anyone's guess. But it assists show why the Federal Soldier Reserve's involvement charge per unit cuts are doing small to excite the economy.

"The jobs that we confront cannot be fixed by pecuniary policy," Rosner said in a report.

Instead of focusing on cutting involvement rates and pumping liquidness into the banking system, he says, the Federal should be forcing Banks to let on and recognize losings and raise capital.

"The cardinal to whole job is allowing establishments to neglect that are fundamentally weak," and letting working capital flowing to the 1s that are strong, he says.

Good fortune with that.

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at .

Fitch Rates $823.9MM Thornburg Mortgage Securities Trust Series 2007-5

NEW YORK--(BUSINESS WIRE)--Fitch rates Thornburg Mortgage Securities Trust (TMST) series 2007-5
residential mortgage pass-through certificates, as follows:

Group 1:

--$754,461,100 social classes 1A1, 1AX, 1A2, 2A1, 2AX, 3A1, 3A2, 3A3, 3A4,
3AX1, 3AX2 and A-R ('senior certificates') 'AAA';

--$11,725,000 social class B1 'AA';

--$5,865,000 social class B2 'A';

--$2,345,000 social class B3 'BBB'.

Group 2:

--$37,314,100 social classes 4A1, 4AX and 4AR ('senior certificates') 'AAA';

--$6,005,000 social class 4B1 'AA';

--$2,170,000 social class 4B2 'A';

--$1,150,000 social class 4B3 'BBB';

--$1,460,000 social class 4B4 'BB';

--$1,430,000 social class 4B5 'B'.

The 'AAA' evaluation on the senior certifications for grouping 1 reflects the
3.50% subordination provided by the 1.50% non-offered B1 class, the
0.75% non-offered B2 class, the 0.30% non-offered B3 class, the 0.45%
non-offered and non-rated B4 class, the 0.30% non-offered and non-rated
B5 social social social social social social class and the 0.20% non-offered and non-rated B6 class. Polecat
believes the above recognition sweetening will be adequate to back up
mortgager defaults, as well as bankruptcy, fraud, and particular jeopardy
losings in limited amounts. In addition, the evaluations reflect the quality
of the mortgage collateral, the strength of the legal and fiscal
structures, and the capablenesses of H. G. Wells Fargo Bank, N.A. (Well Fargo)
as maestro servicer (rated 'RMS1' by Fitch).

The 'AAA' evaluation on the senior certifications for grouping 2 reflects the
27.50% subordination provided by the 11.75% non-offered 4B1 class, the
4.25% non-offered 4B2 class, the 2.25% non-offered 4B3 class, the 2.86%
non-offered 4B4 class, the 2.80% non-offered 4B5 social social social social social social class and the 3.10%
non-offered and non-rated 4B6 class. Polecat believes the above recognition
sweetening will be adequate to back up mortgager defaults, as well as
bankruptcy, fraud, and particular jeopardy losings in limited amounts. In
addition, the evaluations reflect the quality of the mortgage collateral,
the strength of the legal and fiscal structures, and the capablenesses
of H. G. Wells Fargo Bank, N.A. (Well Fargo) as maestro servicer (rated 'RMS1'
by Fitch).

The mortgage pool for grouping 1 dwells primarily of 919 recently
originated, adjustable rate, conventional, first lien, one-to
four-family, residential mortgage loans, a significant bulk of which
have got original footing to adulthood of 30 years. As of the cut-off date, the
pool had an congeries principal balance of approximately $781,125,168. The norm loan balance is $850,735, and the leaden norm original
loan-to-value ratio (OLTV) for the mortgage loans in the pool is
approximately 68.33%. The leaden norm FICO recognition mark for the
pool is approximately 748. Cash-out and rate/term refinance loans
stand for 30.73% and 19.51% of the pool, respectively. Second and
investor-occupied homes business relationship for 22.21% and 12.60% of the pool,
respectively. The states that stand for the biggest geographical
concentration are Golden State (26.00%), New House Of York (12.65%) and Centennial State
(10.19%).

The mortgage pool for grouping 2 dwells primarily of 31 recently
originated, adjustable rate, conventional, first lien, one - to
four-family, residential mortgage loans, a significant amount of which
have got original footing to adulthood of 30 years. As of the cut-off date, the
pool had an congeries principal balance of approximately $51,115,114. The norm loan balance is $1,648,874, and the leaden norm
effectual loan-to-value ratio (OLTV) for the mortgage loans in the pool
is approximately 64.43%. The leaden norm FICO recognition mark for the
pool is approximately 725. Cash-out and rate/term refinance loans
stand for 55.00% and 15.22% of the pool, respectively. Second and
investor-occupied homes business relationship for 20.81% and 4.81% of the pool,
respectively. The states that stand for the biggest geographical
concentration are Golden State (34.27%), Nutmeg State (20.69%) and Grand Canyon State
(12.35%).

The mortgage loans in grouping 2 are adjustable-rate mortgages (ARMs) with
the possible to negatively amortize, commonly known as Option ARMs. The
Option arm borrowers have got four payment options: involvement only (IO),
minimal monthly payment (MMP), principal and involvement payment based on a
15-year amortization schedule, and principal and involvement payment based
on a 30- or 40-year amortization schedule. The loans may negatively
amortise if the borrower takes to do the MMP particularly in a
rise charge per unit environment. The Option weaponry in this pool are mostly indexed
to the 1 Year Libor rate.

None of the mortgage loans are 'high cost' loans as defined under any
local, state, or federal laws. For further information on Fitch's
evaluation criteria regarding predatory loaning legislation, see the fourth estate
release 'Fitch Revises Evaluation Criteria in Aftermath of Predatory Lending
Legislation,' dated May 1, 2003, available on the Polecat Ratings web land site
at .

Recognition Switzerland First Hub Of The Universe Mortgage Securities Corp. deposited the loans
in the trust, which issued the certificates, representing undivided
good ownership in the trust. For federal income taxation purposes,
elections will be made to handle the trust monetary fund as one or more than existent
estate mortgage investing conduits (REMICs). Sieur de LaSalle Bank, N.A. volition
move as Trustee and H. G. Wells Fargo Bank, N.A. volition move as securities
decision maker and maestro servicer for the trust.

Fitch's evaluation definitions and the footing of usage of such as evaluations are
available on the agency's public site, .
Published ratings, criteria and methodological analyses are available from this
site, at all times. Fitch's codification of conduct, confidentiality, struggles
of interest, affiliate firewall, conformity and other relevant policies
and processes are also available from the 'Code of Conduct' subdivision of
this site.