Morningstar DBRS Confirms Ranking on Longbridge Financial, LLC

DBRS, Inc. (Morningstar DBRS) 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 was formed as a Delaware LLC in 2012 primarily to originate and service reverse mortgages. The Company originates and acquires agency-backed home equity conversion mortgages (HECM) and a suite of private reverse mortgage products under the Platinum name through retail, wholesale, and correspondent (closed loan seller) channels. In 2023, the Company acquired or originated more than 6,500 reverse mortgages totaling over $1.1 billion composed of 95% HECM and 5% Platinum product by loan count. Longbridge is wholly owned by Ellington Financial Inc. (Ellington, listed on the New York Stock Exchange (NYSE) under the ticker EFC).

The MOR RVO2 residential reverse mortgage originator ranking reflects Longbridge’s experienced and tenured senior management team and experienced underwriting staff, strong underwriting practices, targeted origination channels with comprehensive approval and monitoring practices for third-party originators, focused risk and compliance culture and continued investments in technology to enhance efficiencies across the platform.

The Company has approximately 430 employees and is headquartered in Paramus, New Jersey, with additional call center offices in Charlotte, North Carolina, and Houston, Texas as well as several sales branch offices nationwide. Longbridge is led by a senior management team averaging nearly eight years of Company tenure and 27 years of industry experience with no significant turnover during the past 12 months. The underwriting team, which manually underwrites each loan, averages almost 24 years of industry experience with minimal turnover over the past year. The Company has continued to right-size its staffing levels consistent with portfolio volumes through attrition and will continue to adjust staffing as needed based on volume. Longbridge has consistently demonstrated the ability to grow its reverse originations while maintaining solid loan performance.

In 2023, Longbridge had its second consecutive full-year net loss, with an adjusted return on average equity of -3% and adjusted return on average assets of -0.1%, netting out Home Equity Conversion Mortgage-Backed Security (HMBS) obligations, which artificially inflate the balance sheet. Losses continued to be driven by mark-to-market changes in the value of HMBS securities, despite interest rate hedges, and lower origination volume. However, 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. The Company more actively uses derivatives to hedge its interest rate risk, but the effectiveness of these hedges is undetermined and could be a potential risk in times of extreme volatility.

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

Morningstar DBRS 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 U.S. Residential Mortgage Originator Rankings (June 26, 2023), which can be found on dbrs.morningstar.com under Methodologies & Criteria.

For more information on this ranking or this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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