This is quite unusual. During the last real estate collapse, in the early 1990s, I remember a few firms shoring up their money-market funds so they wouldn't "break the buck." Now we're seeing it again. Money-market mutual funds are supposed to invest in short-term, high-grade paper so that they don't lose any investors' principal. Their share price is supposed to never go below $1 -- unlike shares of other mutual funds, which fluctuate based on the underlying value of the investments. Legg seems to have bought some poorly performing paper and is now injecting $100 million of its own money so the share price doesn't go below $1. The fund in question is an institutional fund, Bloomberg reports, not a fund involving retail investors. The Legg filing doesn't say anything about mortgages, but Bloomberg reports that the fund in question bought structured investment vehicles, many of which have gotten in trouble by owning mortgage-backed securities. From the Legg filing:

As discussed above in Note 10 of Notes to Consolidated Financial Statements, in November 2007 we entered into arrangements with a large bank to provide letters of credit (“LOCs”) for an aggregate amount of approximately $238 million for the benefit of two liquidity funds managed by one of our subsidiaries. As part of the LOC arrangements, we agreed to reimburse to the bank any amounts that may be drawn on the LOCs and, to support this agreement, we provided approximately $178 million in cash collateral, which will be increased to the full amount of the LOCs by December 28, 2007. In addition, in October 2007 we invested $100 million in another liquidity fund that a subsidiary manages in order to provide additional liquidity support to the fund. We may elect to provide additional credit or other support to liquidity funds managed by our subsidiaries if we deem this action necessary and appropriate in the future. If we do so, we may be required to use additional cash to pay for the support or as collateral. The pledge of cash and the investment in the fund restrict our ability to use the cash for other purposes and, together with any future uses of cash to provide additional support, reduce our flexibility to use these assets for other corporate purposes, including debt prepayments, stock repurchases and acquisitions.