DBRS Morningstar Assigns MOR RO2 Residential Mortgage Originator Ranking to Acra Lending

DBRS, Inc. (DBRS Morningstar) assigned a MOR RO2 residential mortgage originator ranking to Acra Lending (Acra or the Company). The trend on the ranking is Stable.

Acra is a specialty finance company focused on nonqualified mortgage (non-QM) lending. Acra is a registered DBA of Citadel Servicing Corporation (CSC), which has been originating loans since 2013. CSC was acquired by funds managed by HPS Investment Partners in February 2020 and in 2021 rebranded its origination arm as Acra Lending to differentiate that business from the servicing arm. Acra offers non-QM,QM exempt, multifamily, fix and flip, and jumbo prime products through wholesale, consumer-direct lending, and correspondent channels. The Company is fully licensed by the Nationwide Multistate Licensing System and Registry and authorized in 40 states and the District of Columbia to originate and service mortgage loans. The Company has originated more than $8.6 billion in loans since 2013.

The MOR RO2 residential mortgage originator ranking reflects Acra’s highly experienced management team, focused underwriting processes, sound risk and compliance culture, and stable loan performance.

Acra is headquartered in Lake Forest, California, with regional offices in Atlanta; Clackamas, Oregon; Lehi, Utah; Tampa; Las Vegas; Hartford, Connecticut; Scottsdale, Arizona; and Kansas City, Missouri and an operations center in Irvine, California. All areas of the Company have well-defined reporting lines with clearly delineated responsibilities. Acra has approximately 278 employees dedicated to originations, including 32 underwriters led by a highly experienced executive and senior management team averaging more than 26 years of industry experience. The underwriting team, which manually underwrites or re-underwrites each loan, averages 14 years of industry experience.

Acra's profitability is acceptable as the Company has reported significant year-over-year earnings growth for the last six out of seven years. However, volatile gain-on-sale revenue makes up the majority of Acra's revenue, which negatively affects the quality of its earnings. The Company has limited credit risk exposure as it syndicates all originated loans within approximately five weeks. Similar to other nonbank mortgage companies, Acra is reliant on short-term warehouse financing. Meanwhile, capitalization is supported by relatively low leverage and an acceptable tangible common equity ratio relative to the credit risk on the balance sheet, which exceeds regulatory requirements and credit facility covenants.

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 an 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 the 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: www.dbrsmorningstar.com/research/384482.

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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