Thornburg Mortgage Inc , a large and troubled provider of jumbo mortgage loans, on Tuesday said it may file for Chapter 11 bankruptcy protection.

The Santa Fe, New Mexico-based company has struggled with liquidity problems since the summer of 2007, when the value of mortgages on its balance sheet began to tumble. Thornburg later suffered a series of margin calls from its own creditors.

A bankruptcy filing would make Thornburg one of the largest U.S. mortgage providers to seek protection from creditors since the housing slump began, joining rivals such as Washington Mutual Inc and IndyMac Bancorp Inc .

Thornburg has specialized in making mortgages larger than $417,000 to borrowers with good credit, but it ran short of capital as investors stopped buying its loans.

In a Tuesday statement, Thornburg said it is evaluating strategic alternatives to restructure its financing agreements, make deferred payments, and meet obligations to bondholders.

The company said several of its own lenders have agreed not to exercise their rights under various financing agreements through March 31. It also said it has hired the law firm Kirkland & Ellis LLP and the restructuring firm Houlihan Lokey Howard & Zukin Capital Inc as advisers.

Thornburg has stayed alive mainly through a series of agreements to restructure or otherwise delay paying its debts. Last March it arranged a $1.35 billion bailout from the distressed debt investor MatlinPatterson Global Advisors LLC and other investors to stay out of bankruptcy.

According to a Tuesday regulatory filing, MatlinPatterson surrendered 120.8 million Thornburg common shares on March 12 and 16 without any compensation. The firm's principals, David Matlin and Mark Patterson, resigned from Thornburg's board of directors on March 12, citing potential conflicts of interest.

Thornburg and MatlinPatterson did not immediately return calls seeking comment.

In a November regulatory filing, Thornburg said it lost $2.75 billion, or $85.71 per share, in the first nine months of 2008. It ended September with $25.4 billion of adjustable-rate mortgage assets on its balance sheet, and liabilities that included $20.4 billion of collateralized mortgage debt.

Shares of Thornburg were down 1 cent at 3.4 cents in morning trading on the Pink Sheets. Their 52-week high is $32.00, set last March 18.

(Reporting by Jonathan Stempel; editing by John Wallace)

Investment Citigroup Mortgage