DBRS Morningstar reaffirms ‘good’ reverse originator rating for Longbridge

Global credit rating agency DBRS Morningstar this week assigned a “good” rating to Longbridge Financial, reconfirming the ranking the company first achieved in 2021.

The rating is officially classified as “MOR RVO2” by Morningstar. The agency noted that in 2023, Longbridge acquired or originated more than 6,500 reverse mortgages for more than $1.1 billion in volume. Home Equity Conversion Mortgages (HECMs) comprised 95% of the total loan count and the Longbridge Platinum proprietary product accounted for the other 5%.

DBRS Morningstar cited Longbridge’s ownership by Ellington Financial and the “experienced and tenured senior management team” in its reasoning behind the rating.

The rating agency also cited the reverse lender’s “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.”

Longbridge’s leadership team has not had any significant turnover in the past year, and leaders have an average of 27 years of industry experience, Morningstar noted. The lender has also taken proactive measures to balance its staffing with business levels, and has “has consistently demonstrated the ability to grow its reverse originations while maintaining solid loan performance,” according to the rating agency.

Certain financial challenges were also addressed in keeping with the generally deep dive into the organization to determine the rating.

Although it endured a second consecutive full-year loss and a negative return on average equity, 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,” Morningstar explained.

Upon first achieving the rating in 2021, Longbridge CEO Chris Mayer described the depth and significance it represents to the company.

“The ranking process involves a deep dive on all aspects of our organization,” Mayer told RMD in 2021. “This is the second-highest Originator Ranking that Morningstar gives. A ranking of above average with no previous history straight out of the gate is an extraordinary accomplishment and will help us to work on new proprietary products and features in the months and years ahead.”

In its first-quarter 2024 earnings presentation last month, Ellington reported that its reverse mortgage segment’s adjusted distributable earnings were lower in Q1 2024 than they were in the previous quarter. Projections of loan originations and submissions, however, were tracking higher at the outset of the second quarter and the company expected that Longbridge would soon return to positive contributions.

Last summer, DBRS Morningstar issued the same rating to Finance of America, saying that company was well-positioned for stable performance despite certain attributes that the firm said it would continue to monitor.