Hattip to Reuters Blogger Felix Salmon.
Holders of Thornburg mortages are trying to buyback their mortgages now that Thornburg has filed for Chapter 11 bankruptcy.
Fascinating. I wonder how the bankruptcy trustee will handle this. I mean, selling off the mortgages for pennies on the dollar will get the trustee cash to distribute to the creditors, but to make more money selling the debt back to the mortgage borrower would be pretty genius.
Boyfriend asked me if it would be really hard to administer this, but during the due diligence to verify the debts on the books, it would be easy to send a letter to each borrower asking them to make an offer. I can’t see how it would be any harder than disposing of the assets another way.
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Seems like the folks most interested/able to buy back their mortgages would be the most capable of paying them back, leaving anything not purchased by the homeowner in a worse bond category? Doesn’t seem in the best interests of all the other creditors to dilute the bank assets that way.
Rob – These were not CDO mortgages. From what I read, Thornburg was still holding them and no one was defaulting b/c they were very careful to whom they loaned money.
The problem is that their creditors had issues with the credit market and were calling in their loans early, making it difficult for Thornburg to meet its obligations.
You’re falling into a trap thinking that all mortgages are collateralized and sold off. They’re not. To assume they get put into tranches and sold off is a bad assumption.
That sounds like a nightmare to administer for a company that’s already out of cash.
Instead of selling millions or billions of dollars at a time, you’d be splitting that up thousands of ways, all with different contractual obligations…