The Daily Morgue for August 21, 2007
**First Magnus, the second largest privately held U.S. mortgage company-- and 16th largest home lender of any kind in the U.S.-- filed for federal bankruptcy protection in bankruptcy court in its home city of Tucson, Arizona Aug. 21.
**Thornburg Mortgage sold on Aug. 20, $20.5 billion of primarily AAA rated mortgage- backed securities, which cut its mortgage portfolio by 36%. Thornburg specializes in big mortgages called jumbo home loans. Fitch Rating Service downgraded Thornburg's to CCC from BB; the company can't borrow money in the commercial paper market anymore and can't securitize the loans it originates. It is at the stage of receiving last rites.
**Residential Capital (ResCap), the largest privately held mortgage lender, and a division of General Motors Acceptance Corporation (GMAC), has had massive problems with its mortgage loans, especially those which are subprime. On Aug. 21, JP Morgan Chase announced that based on the risk of ResCap credit default swaps, Rescap has a greater than 40% chance of defaulting. Bank of America announced that ResCap may lose access to the short-term credit market. Rescap services nearly $500 billion in mortgage loans. Cerberus, the hedge fund which purchased a majority share of GMAC this year, refused all comment on this situation.