Company issues another non-QM loan securitization despite economic headwinds
Ellington Financial has continued to invest in non-qualified mortgage loans despite challenging market conditions, recently closing a $365 million non-QM securitization deal.
The mortgage-focused investment firm reported completing a $365 million securitization backed by a pool of non-qualified residential mortgage loans. Approximately 85% of the loans included in the securitization were contributed by Ellington, while the remainder were from a fund managed by Ellington Management Group.
The transaction, which received AAA ratings from both Fitch and KBRA, is the latest in the firm’s string of non-QM securitizations. In July 2022, Ellington issued a $345 million securitization supported by a pool of residential MBS – 58% of which are non-QMs and 42% are investment properties.
During the company’s third-quarter earnings call, Ellington CEO Laurence Penn said that while the performance of its non-QM portfolio remains strong, the company has been “tightening underwriting criteria on new investments in response to the evolving economic environment.”
“In this difficult quarter, our diversified portfolio, stable sources of financing, and dynamic hedging helped limit our book value decline,” Penn said. “Strong performance from our RTL and SBC loan portfolios, CLO and CMBS strategies, non-QM interest-only securities, and interest rate hedges offset a meaningful portion of the losses on our loan originator investments, agency RMBS, and unsecuritized non-QM loans.
“Looking forward, the market selloff has created attractive investment opportunities for us in securities, as well as wider spreads and higher yields on new loan originations. However, given the risks of ongoing volatility, a hawkish Fed, and an economic slowdown, we continue to weigh the deployment of capital against maintaining adequate liquidity buffers to guard against another market downturn.”
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