May 1 (Bloomberg) -- Thornburg Mortgage Inc., the Santa Fe, New Mexico-based “jumbo” home lender racked by the collapse of U.S. mortgage markets, filed for bankruptcy a month after saying it would seek court protection and shut down.

The company listed assets of as much as $500 million and debt of more than $1 billion in Chapter 11 documents filed today in U.S. Bankruptcy Court in Baltimore.

The mortgage loan market “has been adversely affected by weakening house prices, increasing rates of delinquencies and defaults on mortgage loans,” Clarence G. Simmons III, Thornburg’s chief financial officer said in court papers.

Thornburg said it, along with units that are in bankruptcy and others that aren’t, had a total of $24.4 billion in assets and $24.7 billion in debt as of Jan. 31, according to court documents. The company said it had $19.7 billion in assets and $19.3 billion in debt in “securitization trusts” of affiliates that haven’t filed for bankruptcy. In April, creditors took control of some assets held outside the trusts that were valued at about $4.4 billion.

Thornburg specialized in mortgages of more than $417,000, typically used to buy more-expensive homes, and invested in mortgage-backed securities. Jumbo loans, those too big to be sold to government-run mortgage buyers Fannie Mae and Freddie Mac, financed 10 percent of Southern California home sales in March, down from 40 percent a year earlier.

Housing Crisis

Founded in 1993 by Garrett Thornburg and Larry Goldstone, the lender thrived for 14 years by providing mortgages to borrowers with high credit scores who kept their homes even as the housing crisis escalated. By avoiding subprime loans and the defaults that followed, Thornburg’s delinquencies were only 1.6 percent of its $21.4 billion portfolio at the end of last September, according to company reports.

Thornburgh started running short of cash in August 2007 as foreclosures nationwide headed toward new highs and investors became leery of assets backed by home loans. A bailout in March 2008 from buyout firm MatlinPatterson Global Advisers LLC failed to revive the company as lenders demanded payments to cover the plunging value of mortgage assets.

The company had $7.3 billion of mortgage-backed securities and owed its lenders $4.7 billion against those assets, according to company presentations. Thornburg on April 1 agreed to transfer its mortgage-servicing rights to the investment firms.

Remaining Assets

Thornburg announced last month that it would seek bankruptcy and shut down operations. Its remaining assets will be sold or liquidated to pay bondholders and creditors, according to the April 1 statement.

From 2000 to 2006, Thornburg’s profit rose 10-fold and the stock tripled, compared with the 54 percent gain for the Standard & Poor’s 500 Financials Index.

The business collapsed in the first quarter of 2008 as the credit markets seized up and lenders cut off funding. Thornburg’s counterparties began demanding cash the company didn’t have to cover the plunge in the value of its securities.

Thornburg and its units 20 largest unsecured creditors are owed about $4.6 billion, court papers show. Wilmington Trust Co. is the largest, owed about $1.3 billion, as trustee for the holders of 12 percent senior subordinated notes.

The case is Thornburg Mortgage Inc., 09-17787, U.S. Bankruptcy Court, District of Maryland (Baltimore).

To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net.

Last Updated: May 1, 2009 17:00 EDT