Longbridge performance
The lender contributed 30 cents per share to net income and 17 cents per share in adjusted distributable earnings (ADE) in Q4 2024. Penn also credited December’s reverse mortgage securitization of proprietary loans as a key contributor to the segment’s performance.
“We completed our third proprietary reverse mortgage securitization of the year in a deal that was oversubscribed several times over and which priced considerably tighter than our two prior deals in 2024,” Penn said.
“Our wholly owned subsidiary Longbridge has become one of the largest originators of proprietary reverse mortgages, so we have good pricing power in that market, as well as great visibility on the flow we’ll continue to see of that product.”
J.R. Herlihy, Ellington’s chief financial officer, went into greater detail on some of the particulars of the segment’s performance. He also cast it as a solid contributor to the company’s overall success.
“The robust results from [Longbridge] were attributable to an excellent quarter for originations driven by higher volumes, which increased 18% sequentially across all products,” he said.
“Improved origination margins in [Home Equity Conversion Mortgages (HECMs)] and net gains related to the [proprietary] reverse securitization, Longbridge also had a net gain on its [mortgage servicing rights (MSRs)] driven by tighter [HECM-backed Securities (HMBS)] yield spreads, as well as net gains on interest rate hedges with rates higher during the quarter.”
But the Longbridge portfolio “decreased sequentially by 15% to $420 million,” Herlihy explained. He said that the impact of the proprietary securitization “exceeded the impact of new originations in that business.”
Mark Tecotzky, Ellington’s co-chief information officer, added some additional color to Longbridge’s performance by again singling out the year’s three proprietary securitizations.
“With each succeeding deal, we brought in a larger and larger roster of debt investors, and we’ve executed at tighter and tighter levels, [showing] that tighter deal execution translates directly into more competitive loan pricing for Longbridge,” he said. “Which is helping them build loan volumes and market share.”
‘Excited’ about demand, possible new product
Penn added that Ellington is “excited” about what the company is seeing in regard to demand for Longbridge’s proprietary reverse mortgage products. These are marketed under the “Platinum” brand name, which recently saw a reduction in its minimum home value.
During the Q&A portion of the call, a question regarding the demographics of the reverse mortgage industry came into play. The caller described the business as “tremendous” and “generally underappreciated” before asking the leadership team if more mainstream competition in the reverse mortgage space is something they’re anticipating.
This led Penn to reveal that Longbridge is collaboratively developing a new product that speaks to the question, but he declined to offer many details.
“Longbridge is actually actively working with some other partners to create some other products for seniors that may not technically be reverse mortgages but have a lot of similar characteristics,” Penn said. “I don’t want to give away too much, but [there are] a lot of ways with the relationships we have with the compliance program that is, I would say, unique to the reverse mortgage originators that have to do so much more when dealing with seniors, for example.”
“We’re excited and we’re hopeful that we can even announce some interesting new products in the near future.”
When asked if this could be a collaboration with life insurers, Penn said it would instead be focused on “other types of loan originators.”
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