Carlyle Capital Corp. has failed to reach an agreement to save its $21.7 billion portfolio of residential-mortgage-backed bonds and said it expects banks to seize its remaining assets, the Associated Press reported. This sent shares of the Amsterdam-listed fund plummeting 70 percent to 83 cents.

Carlyle was able to sell more than $5 billion of its securities, but failed to reach a deal with banks to prevent liquidation of the remaining $16 billion. This has increased fears that billions of dollars of mortgage-backed securities will flood the market, causing their value to drop even further.

More than a year ago the fund, managed by Washington, D.C.-based Carlyle Group, leveraged its $670 million equity 32 times to finance the portfolio of AAA-rated residential mortgage-backed securities issued by Freddie Mac and Fannie Mae. At least a dozen banks and firms, including Bank of America Corp., Citigroup Inc. and Merrill Lynch & Co. Inc., lent Carlyle money.

Carlyle posted the securities as collateral under repurchase agreements, allowing lenders to ask for more collateral (a margin call) if the value of the securities fell. If the borrower does not meet the margin call, the lender has the right to sell the securities. In this case, as the value of mortgage-backed securities fell as U.S. home prices dropped, banks asked Carlyle for more than $400 million in additional capital.