MFA Mortgage to sell assets

Mortgage real estate investment trust also forecasts earnings that fall short of Wall Street's view.

March 11, 2008: 8:20 AM EDT

NEW YORK (AP) -- MFA Mortgage Investments Inc. said it will sell assets to reduce its debt-to-equity levels, or leverage, amid continued stress in the financial industry.

After the closing bell Monday, the mortgage real estate investment trust said that since Friday, it has sold about $1 billion in mortgage-backed securities, including approximately $950 million of securities backed by a government agency and $50 million of 'AAA-rated' non-agency MBS at a loss of about $15 million.

MFA Mortgage (MFA) also terminated repurchase agreements at no cost and about $525 million of associated interest rate swap agreements at a cash cost of approximately $31 million. The company said its available cash balance currently totals about $348 million, and its $19 million of unpledged agency MBS also is available to meet future margin calls.

To date, MFA said it has satisfied all of its margin calls - or lenders demanding their money back.

"We have made this strategy adjustment because it is our view that credit conditions are tightening, rapidly and indiscriminately," the company said in a statement.

MFA said that recent credit events impacting other leveraged public and private companies increases the probability of increased margin requirements in the future for all repurchase agreement borrowers, including MFA. In addition, the company is concerned about declining values for many financial assets including agency and 'Triple-A' rated MBS.

The company forecast first-quarter earnings of 18 cents per share, up from 16 cents in the 2007 fourth quarter, but below analysts' consensus estimate of 24 cents per share, according to a Thomson Financial poll.

"We have undertaken these actions to decrease potential future liquidity risks," MFA said in a statement. "We believe that while many financial institutions may face the risk of systemic margin calls, our strategy is to get ahead of the curve and reduce leverage consistent with our own discipline. We believe this strategy will reduce the uncertainty reflected in MFA's share price."

Shares closed Monday at $7.26. The stock has ranged from $5.55 to $11.07 over the past year. Shares of REITS that invest in mortgages have plunged in recent weeks after one of Thornburg Mortgage Inc (TMA).'s banks declared the lender in default. The Santa Fe, N.M.-based mortgage company has faced $570 million in margin calls in the past month.