Mortgage investment firm Ellington Financial LLC (NYSE: EFC) released its Q3 2020 earnings results, and has once again touted the success of top reverse mortgage lender Longbridge Financial, describing the lender’s performance as pronounced particularly as seniors continue to find new sources of cash flow due to the COVID-19 coronavirus pandemic.
In an earnings call on November 6, Ellington CEO Larry Penn describes the performance of Longbridge as a standout in its larger mortgage origination portfolio.
“With a part of our portfolio, I’d like to focus most on today is the strength and growth of our loan origination businesses,” he explained in the call. “Ellington Financial’s results this quarter were again boosted by strong performance from our strategic investments in loan originators, most notably Longbridge Financial, which continued its excellent performance this year.”
The nature of the reverse mortgage business itself has been pivotal in driving demand for the products offered by Longbridge, underpinned by the COVID-19 pandemic, Penn said.
“As we’ve discussed on past calls, because the reverse mortgage business provides liquidity to borrowers without the requirement of monthly principal and interest payments, borrower demand for the product has surged this year, amidst the economic turmoil drawn by COVID,” Penn explained.
Much of the confidence Ellington has in Longbridge also extends to the larger reverse mortgage industry, which has gone through difficulties in prior years but which is now more steadily recovering, Penn explained.
“Some of the reverse mortgage companies, as is widely known, have gone by the wayside over the past couple of years, it was a tough market,” Penn said. “Now, it’s not a tough market. Now it’s a great market and Longbridge is getting market share there. At some point, it could become a flow provider for us, for example, in getting direct exposure to servicing instead of indirect exposure. But for now we’re going to continue to do what we can to help those companies grow.”
Penn also said that exposure to reverse mortgage servicing is something that Longbridge will allow Ellington to have access to an even more unique asset class in the future.
“We do buy Ginnie Mae HECMs, and I think having that investment in Longbridge definitely has an incremental benefit in terms of how we manage that portfolio, there’s no question about it,” he said. “But for now, that really is an investment [that] gives us exposure to reverse mortgage servicing, which is as you know which is a unique asset class obviously and that we’d really like.”
Penn previously praised Longbridge’s performance in Ellington’s portfolio in a Q2 earnings call, as well.
Read Ellington Financial’s Q3 2020 earnings report.