Thornburg Mortgage, Inc. (NYSE: TMA) announced Monday that it has sold a substantial portion of its assets and a reduced its borrowings amid a liquidity and financing crunch which forced it to stop taking new loan applications last week.

The Santa Fe, N.M-based mortgage originator sold about $20.5 billion of primarily AAA-rated mortgage-backed securities, incurring a $930 million capital loss for its third fiscal quarter, the company said in a statement. Thornburg also reduced its short-term financing, including commercial paper borrowings to $12.4 billion as of Friday from $32.9 billion on June 30.

In addition, the company says it gained $40 million as a result of the termination of $41.1 million of its interest-rate hedges.

Thornburg shares fell $1.44, or 9.44 percent to $13.62 in late Monday trading on the New York Stock Exchange.

We believe had we not taken these aggressive steps when we did, the company's financial position would have eroded even more sharply, which, in turn, would likely have resulted in even greater losses as the mortgage market continued to deteriorate, said Larry Goldstone, Thornburg Mortgage's president and chief operating officer.

Within the next two weeks, the company expects to begin locking loans for clients and accepting new jumbo ARM applications - adjustable rate mortgages over $417,000.

The company says it is not prepared to offer earnings or dividend guidance beyond the amount of dividends already declared for September 17. However it does expect to turn a profit on an operating basis for its third fiscal quarter.

The company said its book value was $12.40 per share as of last Friday, compared its $14.28 on August 13 and $19.38 on June 30.