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Longbridge Monetary acquisition by funding agency is full

Longbridge Monetary acquisition by funding agency is full

Following up on a deal initially announced in February, mortgage investment firm Ellington Financial LLC (NYSE: EFC) has completed its acquisition of Mahwah, N.J.-based reverse mortgage lender and servicer Longbridge Financial according to an 8K filing with the Securities and Exchange Commission (SEC).

The firm, which already had an equity interest in the lender, has acquired an additional 49.6% ownership interest from Home Point Capital for $75 million. This has effectively given Ellington substantially all of the equity in the reverse mortgage lender.

“On October 3, 2022 [Ellington] paid Home Point $38.9 million in cash to complete the purchase of the equity interest,” the filing reads. “There is no material relationship between Home Point and the company, its subsidiaries or any of its affiliates, or any director or officer of the company, or any associate of any director or officer of the company, other than with respect to the company’s purchase of the equity interest.”

The deal was originally expected to close in Q2 2022.

Longbridge Financial CEO Chris Mayer previously told RMD that there will be no operational changes to the lender under the auspices of the new owner, and that he will remain as CEO.

“Longbridge operates as an independent entity from Ellington,” Mayer told RMD in February. “While we are being consolidated financially just because we are sufficiently large that they have to consolidate our financials, from an operational perspective, [we’ll remain independent] and are actually bigger than Ellington in terms of our number of employees.”

Analysts including John Lunde of Reverse Market Insight (RMI) and Credit Suisse Market Analyst Douglas Harter previously related for RMD that this looks to be a favorable investment on the part of Ellington.

“[I’m] familiar with the favorable demographics and the favorable environment that has been [prevalent in] the past year or two with the strong home price appreciation helping volumes,” Harter told RMD in March. “So with that, I think the backdrop and the investment case to be made in Longbridge is favorable. For EFC specifically, the fact that [Longbridge] is still about 10% or so of their equity even with this deal, I think it fits very much into what they are looking to do.”

While Ellington recorded an economic loss for Q2 2022 according to its earnings release, Ellington remained bullish about the prospects for the reverse mortgage business according to Ellington CEO Larry Penn.

“On the bright side, securitization spreads are showing signs of stabilizing and Longbridge continues to add market share,” he said. “As we saw during the economic turmoil of 2020, demand for reverse mortgages can surge in a challenging economic environment because reverse mortgages provide liquidity to borrowers without the requirement to make monthly principal and interest payments.”

Longbridge appointed Bill Packer as its new COO in May, specifically to help the lender expand on its existing technology offerings while streamlining processes. This month, Mayer was also named a 2022 HW Vanguard by HousingWire.

“No one ever accomplishes great things on their own,” Mayer said in his Vanguard statement. “This award is a testament to what we have accomplished at Longbridge through building a strong and diverse team of people driven to succeed.”

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