Longbridge endures Q1 loss, but leaders tout ‘positive contributions’

Overall performance at Ellington saw $31.6 million in net income to common stockholders, up from $22.4 million the prior quarter. Longbridge posted a net loss of $1 million for the quarter.

However, reverse mortgage originator and servicer Longbridge “more than covered its proportional share” of adjusted distributable earnings (ADE) in the quarter, Ellington CEO Laurence Penn said on the earnings call. That’s despite what he called “lower seasonal origination volumes for HECM.”

Still, lower interest rates during the quarter, losses on interest rate hedges “led to slightly negative GAAP net income overall for the quarter at our Longbridge segment,” he added.

Despite lower volume on the HECM side of the business, the company continues to maintain stable performance with its portfolio of proprietary reverse mortgage loans sold under the “Platinum” brand, Penn said.

These volumes were “stable and their origination margins actually improved, providing further evidence of the growing demand for our prop reverse product,” he said. “In fact, in April, loan submissions in prop were considerably higher year-over-year.”

Ellington CFO J.R. Herlihy framed Longbridge’s performance similarly, saying that Longbridge “had positive contributions from both servicing driven by a net gain on the [HECM-backed Securities (HMBS) mortgage servicing rights (MSR)] and from originations driven by higher origination margins for prop reverse, and steady margins for HECM despite seasonally lower origination volumes in HECM quarter-over-quarter.”

The Longbridge portfolio increased by 31% sequentially to $549 million, which Herlihy said was driven “by proprietary reverse mortgage loan originations.”

In terms of total originations, Herlihy said that the company “originated $420 million combined in HECM and prop in Q4 [2024], down to $340 million in Q1,” which he said is largely seasonally-driven. Margins held up during the quarter, and the spring selling season appears to look good on the company’s proprietary side, he said.

While the company did not announce any reverse securitization deals in Q1, Penn added that they expect one could be announced “soon.” The company last announced such a deal in December.

Some looming questions from last quarter’s earnings calls were not addressed. Penn in February spoke about “some other products for seniors that may not technically be reverse mortgages but have a lot of similar characteristics.”

“I don’t want to give away too much, but [there are] a lot of ways with the relationships we have with the compliance program that is, I would say, unique to the reverse mortgage originators that have to do so much more when dealing with seniors, for example.”

However, Longbridge did recently announce the “Platinum Peak” product suite, which aims to offer higher available loan-to-value (LTV) ratios designed to translate into higher loan proceeds for borrowers. Peak also updates seasoning requirements for Platinum-to-Platinum or proprietary-to-Platinum transactions to 24 months, from one closing date to the next.

Peak could also potentially help company partners to reconnect with clients who had previously been short to close, according to Melissa Macerato, chief revenue and marketing officer in an interview last month.

“Internally, we found that there were over $500 million of loans that were short to close in our wholesale and retail divisions,” she said at the time. “We are helping our wholesale partners and loan officers to look at their lead pipelines and evaluate the opportunity to go back and help borrowers who they weren’t previously able to help. And we are working with our partners to help identify loans in the pipeline that could benefit from the new product.”