DBRS Morningstar Confirms Ranking on Longbridge Financial, LLC

DBRS, Inc. (DBRS Morningstar) confirmed its MOR RVO2 residential reverse mortgage originator ranking for Longbridge Financial, LLC (Longbridge or the Company). The trend on the ranking remains Stable.

Longbridge is a privately held company established in 2012 to provide reverse mortgages to homeowners meeting the age requirements in the United States. The Company originates agency-backed home equity conversion mortgages and a suite of private reverse mortgage products under the Platinum name, through retail and wholesale channels. In 2021, the Company originated over 9,200 reverse mortgages totaling over $2.1 billion and had a servicing portfolio exceeding $6.65 billion. Longbridge is majority owned by EF Holdco RER Assets LLC, a subsidiary of Ellington Financial Inc. (Ellington) and Home Point Capital Inc. Ellington is in the process of purchasing the ownership stake of Home Point Capital Inc. and, as a result, will own 99.2% of Longbridge. The transaction is subject to regulatory approval and is expected to close in Q2 2022.

The MOR RVO2 residential reverse mortgage originator ranking reflects Longbridge’s experienced and tenured senior management team, highly experienced underwriting team, financial profitability, and good loan performance.

The Company has approximately 327 employees and is headquartered in Mahwah, New Jersey, with additional offices in Charlotte, North Carolina, and Houston. Longbridge is led by a senior management team averaging almost 10 years of Company tenure and 30 years of industry experience. The underwriting team, which manually underwrites each loan, averages over 20 years of industry experience. Longbridge has consistently demonstrated the ability to steadily grow its reverse originations while maintaining solid loan performance.

Longbridge has been profitable since 2017 with acceptable returns. The Company has limited credit risk as it benefits from government guarantees provided by the Federal Housing Administration and Ginnie Mae on the performance of its reverse agency-backed portfolio while selling its private reverse mortgages to a third-party investor on a flow basis. Similar to other nonbank mortgage companies, Longbridge’s narrow funding profile relies predominantly on secured wholesale funding, which results in a highly encumbered balance sheet that may limit financial flexibility during periods of market stress. The Company maintains relatively low leverage, and its capital comfortably exceeds the required amounts from regulatory agencies and credit facilities.

All rankings are subject to surveillance, which could result in rankings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar mortgage originator rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that originate residential mortgage loans. Although the originator’s financial condition contributes to the applicable ranking, its relative importance is such that a originator’s ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is U.S. Residential Mortgage Originator Rankings (August 28, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https:// www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The ranked entity or its related entities did participate in the ranking process for this rating action. DBRS Morningstar had access to relevant internal documents of the ranked entity or its related entities in connection with this ranking action.

For more information on this ranking or this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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