(Bloomberg) Invesco Mortgage Capital Inc., a real estate investment trust that invests in mortgage-backed securities, is no longer able to fund margin calls.
The company said in a statement Tuesday it couldn’t meet calls received the previous day and probably won’t meet additional expected calls in the near term. It’s negotiating forbearance agreements with its financing counterparties, according to the statement. The news sent Invesco’s shares plummeting in early trading.
The coronavirus is wreaking havoc in the $16 trillion U.S. mortgage market, which is suffering its worst turmoil in more than a decade. Firms that invest in mortgage-backed securities face margin calls and sinking valuations, forcing them to solicit offers on billions in assets in emergency sales.
Real estate investor Tom Barrack said Monday that the U.S. commercial-mortgage market is on the brink of collapse and predicted a “domino effect” of consequences if banks and the government don’t take action to keep borrowers from defaulting.
Mortgage fund AG Mortgage Investment Trust Inc. announced Monday it failed to meet some margin calls and doesn’t expect to be able to meet future margin calls with its current financing. And TPG RE Finance Trust Inc., which focuses on commercial real estate debt, said it’s starting talks with lenders because of uncertainty about meeting future margin calls.
Eric Hagen, an analyst at KBW, said other firms are also likely facing margin calls “especially given the challenging overall environment for sourcing liquidity.”
Invesco also announced that it will delay payment of its previously announced quarterly cash dividends. Its shares dropped as much as 44% to $2.99 in early trading.
