April 1 (Bloomberg) -- Credit Suisse Group AG is seeking to sell more than $1.7 billion of mortgage securities once owned by Thornburg Mortgage Inc. in an auction tomorrow, three people familiar with the matter said.

The securities, backed by prime and Alt-A loans, had been held by Credit Suisse as collateral and were released to the bank today, when Thornburg said it would file for bankruptcy. They range in value from single digits to 80 cents on the dollar, according to a list of assets up for sale.

Credit Suisse, along with JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc, are among Thornburg lenders taking back collateral that the company had pledged in order to borrow $4.7 billion. The banks aim to liquidate the collateral, said Suzanne O’Leary Lopez, a spokeswoman for Santa Fe, New Mexico- based Thornburg.

“All of them have indicated they intend to take possession and sell,” she said. Thornburg, an issuer of “jumbo” mortgages, is shutting down after a plunge in mortgage-backed securities wiped out its capital.

The auction is scheduled for 2 p.m. New York time, the people said, speaking on condition of anonymity because details of the sale haven’t been made public.

‘Good Start’

“This event does not change our recent guidance that Credit Suisse has had a good start to the year,” said Bruce Corwin a spokesman for the Zurich-based bank.

Citigroup Inc. and UBS AG have already taken back their collateral and submitted claims between the value of the assets and the amount they are owed of $394 million and $87 million, respectively, Thornburg said in a statement today.

Thornburg specialized in mortgages of more than $417,000, typically used to buy more-expensive homes, and invested in mortgage-backed securities. In August 2007, as the mortgage securities market was dropping, Thornburg’s lenders began issuing margin calls to cover the declining value of the assets.

Last March, Thornburg was given a one-year reprieve from margin calls so that it could attempt to raise capital and operate its business without all of its cash being drained by further requests.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Pierre Paulden in New York at ppaulden@bloomberg.net

Last Updated: April 1, 2009 17:14 EDT