Troubled ultra-jumbo lender Thornburg Mortgage Inc. (TMA) said Tuesday morning that net income for the second quarter was at $412.3 million -- but that was before $209.6 million in MBS impairment charges, and a fair value gain tied to accounting for some liabilities, which helped push adjusted net income to just $22.7 million. (On the bright side: net income was still positive.) Those MBS woes looked likely to continue into the third quarter, as well -- with Thornburg saying in a filing with the Securities and Exchange Commission that an additional $1.1 billion in carrying value of MBS was downgraded by rating agencies between June 30 and August 22; those downgrades affected collateral securing various reverse repurchase agreements, the company said. Those downgrades have led to $219 million in margin calls, which Thornburg said it had so far met; it's expecting another $25.9 million in margin calls, as well, based on collateral downgrades. The company's execs were blunt with investors and analysts on the earnings conference call. "Our circumstances are somewhat precarious, to put it mildly," CEO Larry Goldstone said. "Whoever thinks [mortgage securitization] is being fixed or getting better out there, it's not." As a result, the lender has not been able to re-start lending operations; the company's specialty in so-called ultra-jumbo lending under a originate-and-sell model has proven untenable given the recent dearth of would-be buyers for any new loans. Despite a complex and last-ditch effort to save the company from bankruptcy at the end of March -- an effort that saw distressed investment specialist MatlinPatterson Global Advisers LLC step in -- Thornburg warned that there is yet "substantial doubt about the company's ability to continue as a going concern for the foreseeable future." At the end of Q2, Thornburg held total assets of $28.8 billion -- $27.2 billion of which consisted of adjustable-rate mortgage assets; that compares to $36.3 and $35.2 billion, respectively, one year earlier. On a brighter note, credit quality remains outstanding, with just 0.65 percent of ARM loans serviced 60 or more days delinquent at the end of the quarter. Disclosure: The author held no positions in TMA when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.