|A late payment on derivatives contracts, which Thornburg Mortgage Inc. has promised to pay today, is being litigated.
Wachovia Bank has filed a lawsuit against Thornburg, seeking more than $5.1 million plus interest and legal expenses for failure to honor derivatives contracts, including a series of interest rate swaps entered into in Oct. 2003.
The swaps agreement was terminated by Wachovia and Santa Fe-based Thornburg on Aug. 13 and Thornburg was required to return nearly $5.124 million in collateral by 6 p.m. on August 15, according to the suit, which was filed Thursday in U.S. District Court for the Southern District of New York.
The suit alleges that Santa Fe, N.M.-based Thornburg, which had to recently halt new mortgage rate locks due to a secondary market freeze up for nonconforming mortgages, has breached the agreement “by refusing to pay Wachovia” the amount due.
“Thornburg Mortgage agreed — and continues to acknowledge — that, pursuant to the agreement, it owes Wachovia $5,123,563.08,” the suit states.
But the suit alleges that on Aug. 22, “Thornburg Mortgage informed Wachovia that it intends to continue to pay other, unrelated counter parties with which it has established business relationships before it pays Wachovia.”
Thornburg, a spokeswoman for the real estate investment trust told MortgageDaily.com, was “surprised by Wachovia’s complaint. As previously agreed to by both parties, Thornburg Mortgage will fulfill its obligation to Wachovia on Monday [Aug. 27].”
She would comment no further.
In its suit, Wachovia seeks payment of the $5.123 million plus legal expenses, interest, including “default interest,” and “such further relief” the court “may deem just and proper.”
A Wachovia spokeswoman told MortgageDaily.com that because the suit is pending litigation she could say only that the suit was filed to “seek payment of a legitimate obligation.”
Jerry DeMuth is an award winning journalist who has been reporting for four decades.
e-mail Jerry at firstname.lastname@example.org
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