Ellington Financial (EFC) 24 Feb 232022 Q4 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Fourth Quarter 2022 Earnings Conference Call. Today's call is being recorded. [Operator Instructions].

pleasure of the SEC my , over now President Vice Reporting. is to call turn to It

You may begin.

Thank you.

forward-looking conference Before we certain may of this that Reform harbor Securities provisions of remind to the of constitute the call the safe start, I statements XXXX. would made like statements meaning within Litigation Private everyone Act during

Forward-looking statements are not historical in nature.

for X report under report XXXX, are on could and and results XX-Q expectations, Part from actual annual on XX, XA quarterly Form to uncertainties company's our our Item its ended beliefs, of Item and of forward-looking As subject estimates described variety XA September to that quarter Form of differ the XX-K statements cause a risks projections.

these events. as statements, of on obligation call undertakes future events as Consequently, to of or this the conference company or not forward-looking Statements forward-looking of made during call, revise you future whether as of new this no otherwise. information, a update are result date rely predictions made the statements and should any

Officer Executive EFC. on and I Chief Larry JR Penn, of Mark of Chief Investment Ellington today Financial; Herlihy, Financial by joined the Tecotzky, EFC; call Co-Chief am Officer Officer of

entirety our As figures in will this presentation ellingtonnfinancial.com. described Management's the that references the to our track notes note by any presentation. their fourth end back earnings of prepared the on presentation our quarter release, qualified in earnings call remarks available at conference press is website, presentation. the in Please are

the With that, to will call Larry. over turn now I

Thanks, Tara, everyone. and good morning,

I'll X the begin your for time Slide presentation. you interest of and Ellington thank always, Financial. in As on

from quarter earnings Longbridge from net per per reporting Excellent quarter results. addition of of and reverse $X.XX Financial's our distributable from and For the share Agency RMBS fourth drove in quarter, are Ellington positive to our originator, strategy, loan performance income another share. our mortgage $X.XX portfolios, adjusted Financial, for we the

and to way now acquired stake in our reporting. a past Financial, the that's we this financial in minority Longbridge And since with going start We company. back forward had XXXX. driving controlling change the all I'll stake dating a October, a to Longbridge,

As Longbridge's the results financials, quarter. consolidating EFC's now and we a balance into operations with fourth of beginning result, are sheet

quarter, its yield servicing spreads tightened which HECM balance fourth reverse and Mae value we increased loans that mortgage Ginnie of the sheet the During Longbridge that HMBS mortgage on holds and by and rights consolidation, also led down new originations. as now margins our spreads to expanded hold that sale tighter But on sheet. seasonally, net gain originations. and modest loss balance were volumes origination on The on on yield Longbridge's expected, the

it all together, Putting for results Longbridge strong quarter. the generated

middle you Longbridge the of Slide our share. contributing net $X.XX income see can On per X, to

slide You on more by significant the following and monetary contribution outlook can sector. also policy, quarter. the quarter, the Fed X see benign on of Agency fourth the quarters a rebounded underperformance the from Driven in mortgage in Agency dismal basis consecutive strategy this in our inflation sharply

portfolio, net sell interest And earnings November. capital and going around in that spread strategy to specified especially strong rotated the our the advantage from Our further the Agency able market diversify and We attractive of were income yield to the potential losses net some a quarter strong to portion for the as we our earlier tightening per took $X.XX credit expand we strategy pools, delivered margins share where forward. recover Agency see of in of we in year.

multiple skyrocketed hikes. short-term for those substantially. indices of distributable but recent did spiked or or adjusted our quarter borrowings not was Fed Most so and either where rates quarter-over-quarter, the with interest SOFR float off a ADE, that earnings, have Our decline of surprising LIBOR,

the the early the many well we rate RTL of on our still some of of investments reflect our XXXX. environment of as that includes of hikes. yields lower still purchase So the as part existing the from This hold fixed-rate cost pools well. before Meanwhile, that as the loans originated interest funds many spiked agency rate we

RTL with a that year, news average whereas very is our well good do rate in under the is of nature, floating portfolio lives short but fixed have is rate. financing The coupons, they

often drag points So a new RTL there's loans yield the a short-term but that where are rates above originating NIM since that on interest market paying are natural should rising RTL in at in our yields are drag, be widening, spreads we and XXX-plus a are basis the are off. rates loans that

our a and ADE turnover our boost in big be to this So portfolio XXXX. NIM in should

net to per of $X.XX was Once because lower Longbridge In as appreciation But from expect that comes, due in Ellington contribution addition, that to that contributed volumes. our ADE factors. the share mind into income fourth for ADE. quarter. the in fourth modest, the mainly Keep in mentioned, fourth spring origination while appreciation I significant Longbridge just Financial's seasonal way. the contributing contribution EFC's isn't start I Longbridge's segment was MSRs to quarter, was to in The ADE a quarter factored to the

spreads of quarter XXXX wide to We in in in non-QM to completion originally December. deal the were the fourth of had highlight market was intended for come securitization Another fourth September. of but September, this our securitization

sheet. keep to able more That constructive a we take and postpone to loans execution. in instead stronger was to on were achieve the patience of advantage rewarded deal as decided we balance market So those launch December

as want to that loans borrowing core poor keeping delay be get understand a it's because these loans maintaining and didn't enforced. available the diversity gets In risk non-QM have we well is our EFC, extra and long-term lock lines. this we important management. so forced flexibility hand to just to case, rates how repo in as stress of securitize to off our At we borrowing tenet to to this of of think capacity financing liquidity sources I the a

we by we when And in our were around XX be to fact, debt cleared what Our September. about strong points basis able have would AAA enables securitizations. price the that management liability launch opportunistic in balance sheet the than tighter estimate we and to us market waiting,

continued far. were able so attractive securitization progressed to another has markets securitization costs. we have year this non-QM earlier long-term The more even and how financing at with to close improve, month this Looking

In cost even most recent than securitization our of this on fact, funds cost was our blended repo. lower of

non-mark-to-market we incremental last So an of securitizations. have all locked-in in provided million our benefits got non-QM that us of addition the to Combined, securitizations financing. important benefit financing with through nonrecourse, long-term $XXX X

liquidity quarter. to fourth continue we maintain a during Finally, position strong the

also and this the remarks. can see you I'll cash in were As able we preferred my which concluding access and unencumbered discuss asset market figures, earlier to from month, our equity

over And fourth it more with I'll in discuss JR turn our detail. that, to results to quarter financial

good Thanks, morning, Larry, and everyone.

on per ADE $X.XX $X.XX distributable For the per for per we are fourth and adjusted and net a a These share income net basis mark-to-market of prior share fully loss to reporting quarter, compare $X.XX per of earnings of of share results the share. $X.XX quarter.

quarter You'll notice some Longbridge to our consolidation around this the changes disclosures Financial. of

mentioned, controlling October. fourth quarter interest we Financial And in a consolidate acquired As in results, beginning Longbridge. Longbridge Larry we with our

see contribution expenses. the our adjusted strategy's between portfolios attribution you well see corporate Agency can And the level Slide credit on presentation and to you existing can In earnings. on EFC's distributable each as XX, X, and Longbridge of as earnings earnings Slide

of see impact or Longbridge's origination sheet. the rights insured has equity Mae on retains and pools, HMBS and the eligible Ginnie If the come When those our FHA largest that the you servicing Longbridge balance consolidation pools. for turn by in conversion you these are which mortgage next is the XX, can mortgage to that rights. with HECM, issuing the servicing-related home business Slide inclusion HMBS guaranteed Ginnie Mae loans, obligations

is even And GAAP. these any under This of as not HMBS investors, of remain third-party In the is as unrelated sales mortgage sold on under the though sales HMBS to HECM transactions sheet a sold treated financing balance well-known even pool HECM are with a the true reverse HMBS industry. pools long-term loans are case, after loans. treated those those the pool GAAP, idiosyncrasy

pools. roughly Since loans of Longbridge securitized HMBS July billion XXXX, into has $X.X HECM

stood since as $X.X XX. origination. can as But Of course, those Longbridge's see you have pools here paid of GAAP associated December loans Slide on HMBS at many of XX, these liability with billion off

ratio all includes Longbridge EFC's itself balance reasons, the after we the rest had of loans the quarter-over-quarter EFC than ratio This that small portion a on sheet, our than EFC's Now doubled GAAP total to and debt-to-equity holds more year-end. among year-end. only balance lower that Longbridge, declined EFC's sheet. of is actually brought in liabilities other the And liabilities. case, reverse about on that Longbridge at recourse only because, And represents these equity at GAAP consolidate of even debt-to-equity consolidation total recourse Longbridge a MSRs this we fact, equity, and Longbridge's though XX%

to the value As MSR generated yield for that performance can as the stake of book benefited and the value XX, quarter bargain income reflected transaction existing see fourth net a its a closing at purchase gains the Larry from results transaction our Longbridge's acquisition. value at time occurred book you closing, our the statement. September from and also HMBS on Longbridge EFC's quarter resulted the strong led Because a Longbridge mentioned, tighter HECM that fourth generated gain for the loans. the because to of purchase which of discount also gain, bargain at fair to same noncontrolling on discount spreads

losses significant quarter portfolio as net spreads on proprietary The and on tighter interest results commercial offset our loan mark-to-market in combined also net hedges. portfolio, rate were pay-ups acquisition. strategy investments. as interest hedges mark-to-market portfolios strong net retained by our from Our and our interest with that well gains gain exceeded well, had the income, on notably Agency positive interest our as equity mortgage-related increased net on drove partially driven certain primarily had stakes which, yield and net rate losses income bargain non-QM net a credit losses gains as by These gains, and originators Longbridge certain and credit most on loan tranches and gains purchase

the Finally, stake our in LendSure of did originator overall, profitable for the change value quarter. for fourth affiliate XXXX LendSure for but fair the quarter fourth and meaningfully not our was

portfolio to our summary. X, Slide Turning back

you can now largest detail are holdings underlying You are on and page, separately our more we we some listing X so at towards RTL the Longbridge of see can showing top the that non-QM portfolios. and the portfolio the see

to the September As of higher compared XX. as significantly portfolio yields market on year-end, average were credit

mentioned, Larry of the environment rate lower purchase had that on earlier last interest many As we assets still reflect our yields the original year.

our yields narrow, turn our interest in purchase to over margin assets, continue be should the ADE. we between gap that will of we expect and supportive net yields that market our As and

X. next Turning to Slide

replenish at the of in non-QM to closing to During loan with as long credit we decreased year-end. no small RTL not did investment fourth part factors the the in our we of include balance new originations in commercial mortgage The our Longbridge a total decrease significant $X.XX billion offset larger These X% and were portfolio that credit partially portfolio securitization because quarter, paydowns longer long the by portfolio. by was due December, our portfolio.

million consumer of XX% the represented which For the and we SBC into the combined portfolios of paydowns loan received during those RTL, coming the quarter, principal quarter. value of portfolios, $XXX fair

the XX% we by portfolio On million size reduced see next opportunistic Agency by the that can of Slide X, and driven slide, to principal you repayments. $XXX sales the long

a Slide X new one. is

of Longbridge of Here, loans. proprietary $XXX and MSRs, XX, reverse December million consisted mainly loans we the mortgage the totaled components HECM Longbridge portfolio At illustrate unsecuritized reverse portfolio. and the

XX% wholesale originated and million about fourth its retail. through the through $XXX quarter, For and across Longbridge correspondent channels proprietary, XX%

turn Slide borrowings. for Please summary a next our of to X

than XXX Our secured higher portfolios, weighted by cost our the than rates proportion points MSR driven though period, assets. the to basis increased for lesser greater our our rates of by rate loan amount also which increased a credit our Agency and to respective short-term asset of Agency sharply and by X.XX%, portfolio funds. borrowing a higher Book over both carry thanks borrowing borrowings strategies by yields average same and turnover, now their

increase Also, recourse ratio as ratio smaller year-end. from of as in EFCs lower sequentially as stand-alone and an total a sales Longbridge's and well than portfolio mentioned, quarter in at a debt-to-equity Our debt-to-equity adjusted marginally recourse X.X:X result the X.X:X equity. third purchases investment for was declined the rest also to declined unsettled I as of

treatment This at the we from at Longbridge's overall ratio I on obligations, those other HMBS-related for our earlier. the by XX.X:X which X:X offset fourth non-QM of unsettled driven truly hand, XX, sales to means fact securitization, by and adjusted debt-to-equity was On year-end consolidation that quarter true increase increased loans sale September discussed off partially which recognized the came books. our purchases

also expenses with associated expenses the and as Longbridge's increased subservicing loan business to sourcing operating onto and due income Longbridge's expenses statement. increased expenses substantial our expenses we G&A investment-related consolidate now certain

our our share $XXX quarter, XX. $XX.X, XX, for combined during $X.XX the million, per Including common at X.X% approximately our quarter dividends total book of down assets fourth unencumbered declared the we totaled that Finally, common return September and was value and share cash from December per X.X%. the was economic

Mark. to over Now

Thanks, JR.

X year in the not sector intra-quarter came surprisingly highs. rates first been months hedging we their to instruments, had to October. however, In sector widen, the December, XXXX, down and considerably had ended that significantly and the to QX. case and be outperform MBS, which materially saw Agency was elevated first the which also in Over off volatility the first volatility we interest seen of continued November

when phase credit-sensitive parts numerous other. of with fixed often most times, spread led You sectors spread Agency to seen this MBS that tightening out outperformance Agency cycles of notably widening credit each late catch outperform and later. March and in for MBS We've initially quarters are X XXXX see of income up X Agency and or Fed Agency extreme to see for buying

real holdings. we are the typically quickly MBS underperformance and MBS can and funds and or technical meet raise because large other they have companies pension the highly other insurance in are time. scenario to This to market MBS or saw Agency MBS first abrupt to needs, a cash are transparent, When because prices of selling investors address a these redemptions is liquid visible -- XXXX, play cash for these In sell money often MBS, cause Agency managers, sales very out. kind different negative for need

had tailwind. turned And inflection play that Beginning least headwind second inflows Agency MBS technical turned scenario the fixed for quarter in a XXXX But suddenly Agency Agency sectors. this at money for saw an Agency for for as felt market of was overall. and QX of the one the of been reasons then We specifically. bond the the into out underperformed much was manager 'XX, outflows what for for MBS half many quarter, selling that like stabilized and in into a concentrated of income drove fourth significantly Agency point much and credit-sensitive outperformance

that see posted after Agency some strong a result can challenging You X as strategy very quarters. results EFC's

monitoring very performance residential focused the on have and Given mortgage we elevated and risks underwriting of commercial recession, been of loans. closely

strong. others some loans commercial in well we reserves headaches applies of current to we that of fully remained EFC for to on default holdings, few have as expected Recently, credit has through. many and surprisingly same is And performance size far, it have CECL as a or So given office a mark-to-market way already have buildings. there work the our been on increased CECL always lot headlines loss concept as the because been. are does a high-profile about not

automatically are or adjustments, statement. any income reflected value our reserves in through credit flow which impairments So fair

big Part seeing seeing that performance is -- commercial our of LTVs, big of and portfolio. nuances, part in and and issues sound bridge CECL are we But appropriate underwriting that type the we property loan concentrations. putting performance not is aside are

look can can you concentrated. see headlines that is than where which XX, many our Slide less of office, on XX% you been portfolio of the is in have recent As

pressuring replacing when have With interest tenant are economics on rates debt we with increased don't higher, more that greatly cap exceeded SOFR Also are prices buildings the reflect for home, rates NOI office and an many challenging, improvements with especially cost Rising tenant. marching yet. employees think of working costs fully from higher, properties. existing predictively

our multifamily, the portfolio but recession. the a interest think more we in rising is hold XX% all will best sectors impact up than space, Of which of commercial course, of rates

portfolio. have in mortgage So far, commercial we headaches bridge few our very loan

sectors implementing We with of also in Thinking are Agency watching end dynamic by material seen in have other our borrowers and recoveries in things where business our contact the very and closely, monitoring to a recovery on staying close sector the MBS very progress more recovery leads plans. 'XX, liquidity the pricing. about we non-QM their in

had to what extended to prices prepayments Agency then happened even overall parallels sector mortgage more, so longer rose, disciplined dropped, the in fact, so because what no bonds were, the prices XXXX dropped happened Yields management sector. in bonds, prices many widened then non-QM In focus and the dropped but means more. spreads on newer financing helpful. cash even We so duration unscathed, longer-term staggered very our by was on slowed, arrangements

actively more Working cases. saw potentially ample back and to take XXXX, and non-QM we increasing to Eventually, and on we capacity were both opportunistically QX, and levels We new both by and we lines. added was cheap the gathering had non-QM that lenders of of to to QX the were attract financing in many in remain sector loans RTL, enough disciplined, turned advantage MBS repo very clouds team, adding with opportunity. by repo existing relative to and ample to out sectors storm capacity be our capital new buying our way advantageous by capacity Agency cash other

started First, buy to in so deal Then improve. And QX to which spreads one insurance now buying, [indiscernible]. securitization with start come have drove with have its XXXX. did one back and We deal far originations coupons full attractive, circle again done liquidity a and new securitization very tight companies in and securitizations loans. -- being to we spreads battle now to and and

happened existing since almost dropped big will much Existing XX loan for think in that month XXXX a slower drop months hasn't the One sales row and refinancing. and thing volume, for the out I home resulting Agency both this and home new no in a again from in play non-QM 'XXs. is sales

Okay.

the into positioned shorts Despite we we to EFC. contributor it we agency, EFC's worked now this hold, as came didn't and TBA than able were quarter we with the make to results and quarter losses. for for good recovery back strategy I in debt a was what about of a XXXX's fewer quarter. for reduced typically what talked were significant a and So the allocation, capital portion in well

is been largest and If you performer credit and our dedicated great now the grew strategy look RTL We we that sellers, for year. on X, us. has Slide during staff added added We significantly a portfolio.

our because of to short-lived. we down non-QM, rising need short environment, rate are on don't writing securitize to expected closely the loans in tenors the financing so of we contrast short-term a match tend and spreads. the And maturity the loans, that any to drags In NIM even up aren't be repo with securitization so

At in economics the sufficiently these at point opt some it's are all we if loans, to not future, necessary. compelling, but securitize could

With these a typically flexibility. repo lot that average their gives us and loans are before the mature short lives, maturing lines of

are are very lower prices to nationally time performance a sell the as to That and intending environment clear the is it. when property an that here With bought is the the builder confronting they slumping, time obvious is We closely. home watching sector headwind. at home prices RTL where this is first compared the

to we have favoring lower properties we're on ratios, loan-to-cost with renovations. properties lower focusing we're Well, projects What on protect cost and done ourselves? and more affordable

are with data from every in have of origination amount experience leverage month, the data our the analytics in on conjunction and information that Ellington's we as business, well over immense boots drawn as our the specialty. that We ground that an pour own we

it helps inform Star, North is underwriting. our and our Data

of where we our underwriting been there, have weakness price multiple in too. cities California, and we've what We been quarter, declines exposure in tightening example, are certain been the did notably the consumer some a have nationally. in some seen business that most have For parts some of see reducing declines areas,

clearly so spending given look see flush data, their consumers been. savings they you are that COVID the as at been down inflation, they have have as elevated can not If you

yet is how about good counterparties or had initiating So 'XX many half and us to existing Liquidity So back high But are correction is but for financing to mortgage reach initiating given growing X.X% the off better, bring in to still housing year, up? historical seen second of modest much numerous norms. shaping and and too start. to home facilities. far, the We've are affordability we lending new rate. a prices buyers a out securitizations enough we've not a

there were just way regional as up. HPA of lot a and And the in differences

on the or more of for You're way seeing lot have We XX% the a differences , regional markets some post-COVID we've down. already. example, think corrected of high-flyer like

crucially generate So in really home and granular understanding scale well stakes, now. is ROEs. gain important our originator prices Thanks on are securitize high we originate, being to to positioned

Given the duration equity portfolio RTL volatility. our mark-to-market short limited cushions, has in

desk, in team in is focus and a with but they allows our brakes tighten, and have on that when keep us the to they markets markets lean origination which to when we capital help joined are our wide performance stay Our underwriting. pump vigilant laser

back Now Larry. to

yield periods challenges. Thanks, Mark. XXXX along the interest dysfunction hide. extreme volatility there was certainly truly Agency had rapidly nowhere in had and widening the particular, We market navigate rising to its spreads rates sector, of In and MBS with way. to

more with in activity, management As hedging allocation. year, But discipline crystallizing importantly, can only capital responsible our was for half though fraction our capital largely credit our losses a and it able were and portfolio to we Agency losses mark-to-market opportunistic than patient Slide the leverage. with strategy for small XX, our were with We on securitization see even portfolio. most our of of represented you avoid

to to add the value book the throughout, and able strategically origination our we credit market year, were assets We growing on portfolio decline market portfolio. and course significantly while our add capitalized Agency We during maintained over attractive the limit downsizing volatility the share, dividend year. our the of

then And market to opportunities. investment ATM We fund our efficiently extreme markets of big just-in-time some through repurchase stock raise a to took at shares capital book program to last discount sell-offs we year rebounded, provide when our advantage attractive to value. common capital

facilities in fourth We also including quarter. year, the several loan throughout extended the

liquidity I believe access X well synergies, reverse Longbridge, growth forward. really acquired out that to year strong a year. originator, the attractive huge XXXX a Longbridge's closed as upside a including attractive earnings portfolio as lot level. drive We acquisition us pipeline. entered top well. at We great We balanced with accomplished We positioned last going mortgage a to And gives and very loan

last for in call, this and preferred investment and market. share originator our adding market consolidating loans securities month, market Earlier these us the million we discussed the excitement loan quarter's in a the On raised opportunities powder to affiliates of also equity continue our in about earnings we ample both opportunity $XXX opportunities. dry help access to

newly with C Our our Series existing A rating Series preferred equity equity, preferred B, and along issued in carries the NAIC-X only sector. our

able were preferred B XXXX, which targeted an environment where at Series we this transaction our offering, much I principles Financial's priced Thanks to effective in where institutional reflects cycles, risk Ellington rightly book of priced as value spread for management market was as important yield protection December similar to are and demand price believe spreads that a rating on to the across the long-standing strong were our we now in that assets tighter. ever.

includes asset we mortgage in loans, continue seeing strategies as source the available allow direct that take that acquisition much should sourcing, to at the capital proprietary new are expect are consequence our our us of businesses investment some now advantage This to new to tremendous and now strategies. Longbridge. as our a diversified to reverse of loan us origination to I provide of across such investment the of opportunities that access set

issuance our A-rated market the priced of second preferred quarter EFC, equity window issuance transactions We notes. C for the capital including follow hopeful that right unsecured recent senior March XXXX in our million footsteps I'm turmoil. Series inside of $XXX of other of of well-timed will single a timing transaction that all stability before the

be a we are is reinvestment metrics the as rotate be, we of be preferred as within from deployer earnings offering think that always, While dividend. of fast wide as will proceeds earnings yields, our need manage we well. to to again believe both accretive EFC sectors the Once as both picking continue into and adjustable distributable spots and the as this capital, I and patient the we'll we offering known that deployed will higher fully that to cover the portfolio range

questions. with the open up we'll And that, Operator? call now to

Instructions]. [Operator

from Our Eric BTIG. question comes first Hagen with

And I the like, But of X.Xx questions. that even have what you origination looks supporting recourse at the funding how think Can many that a the the or MSRs? couple what to got supporting that origination apply does counterparties cost is is that funding? Longbridge, of I -- are pipeline you and how then you can't guys the say funds leverage necessarily thing? are sort from loans, the directly us average the brokers? transition and that themselves. resi loans characteristics, profile, in also credit some other is, originators of LTV buying you you give from that the the loans around color Or can buying Maybe hold [indiscernible] balance the

Eric.

Okay.

the me tackle Let one. first

X then that major leverage securitization on loans prop facilities [indiscernible] themselves. recourse HECM and the balance loans So that categories that are the really cite, securitized, do Longbridge, these it's financing at on that on and we to so are the the but MSRs loans principal HECM have holdings waiting, been has with the loan sheet Longbridge, have not

Slide categories. amount So those are on is the The summarized X X.

in page. the million financing recourse of see You Longbridge $XXX

that where divide to allocated in equity Longbridge, the Longbridge, ratio the the from. You and that's capital by comes

factor don't significant experience buyout at at all doesn't right? for Their new should and much And relatively Yes. Longbridge. a young, buyouts MSR activity represent say, is all, I and

on X.XX% borrowing -- X combined weighted number portfolios at that you those counterparties. see was And with year-end, can or rate X counterparties, it's the borrowings of the average those

very helpful. That's Okay.

And the was? question next

loans... transition Resi

Yes. Right.

don't we loans from so brokers. Eric, individual So buy

sort how from. credit in, of and improvements, a see an have of some whom have we're several have we we buy just stake where we property underwrite, how they of that originators, we they very equity have We think whom with some seen long-standing like-minded about on relationship

control one big of terms like in single transition loan-to-value if the has of of market sort non-QM metrics just will. in attributes, of a residential risk is is that in ratio -- of LTVs, So the sort loans that opposed X you

first to loan is The cost.

renovation to builder it's are for how property maximize much you that needs of value. they're a the property. versus paying what generally lending sort So And that some

it So what them what the at do, is? And they're for rehab loans, there's of lending of are the then paying versus loans time component. we you most as a

in rehab So draws a get there paid construction. they there's done plan. for some is arrears Then a budget, rehab of once that they've

going is And this much LTV, you're lending renovations. origination, portion of amount add second then X, either of So to repaired so day that be some lending certain time versus value? the you're at all a or funding you're which how there's

-- to to what that expended So expectation that have renovations is going extended their the much is when what's of right? end, worth be to builder -- then total you've the done, are you be your to -- the how at how property what and much the going expectation debt versus

So data I the about real-time market in are talked the because metric, sort comments now. one important analysis on dynamic in of of little things and what's bit going prepared a

at We -- month, We as-repaired above the we we properties of value as X% -- big okay, that okay, look underwritten a that the it's the look getting is. at at, And this top So we we thing you're selling is, one So thought what above look right? of nice feedback this where -- properties are value. quick month, they're X can lot short, thought right look at is as-repaired regionally. say, higher a we what how X% in house product months, feedback, function on as-repaired or because the and the is. look that sold so month, like about selling that is versus every what's X, value we can can

We And probably to think so come home prices more. down. it's down more are coming likely

be it's of same. think we region in to not sort how talked the prepared going performed I every comments the just

up. the regional You saw way differences huge on

in prepared the big regional comments, way to see I differences we're down. on think the said we going

the you with a need relative and there's the to there's obviously down. housing home are a dynamism way time a non-QM have right? sales the back to market. existing And come the focus of that where because is at there's to properties time in some sold, right where now, -- be markets in that's So thing on paid most One areas lending you of is get housing RTL lot where the market way dynamic you're

So on lot. area focus that's we a another

Our Piper next from Sandler. comes question Love Crispin with

Crispin Crowley, this It's on Justin morning. for actually

both Agency other and just looking credit due to were the So the and paydowns portfolios down in at quarter, factors.

point mentioned prepared maybe the inflection Agency side. on seeing you think the remarks, an in I

month, So seeing with there? the right seeing then what sort where foresee of investment how how anticipate I you approach curious most you're that And preferred and of deployment issuance preferred -- a wait-and-see guess you you're opportunities -- some the now, taking like that this deployment square of maybe progressing?

Yes.

they're being still the think, right? likelihood say signed the that were, pace than Fed early And So deployment when volatile, probability of we say, a of volatile of volatility higher invest, normal measured I levels. we a that going to XXXX, what they and really you aren't a measured days argues high then guess from hike just think because to today's markets would how at a incented and maybe or advantageous QX can pace the certain more the volatile, the typically, some but as you a as with to really for some I So air some couple day pick a bit pockets, in markets I of like on because would you're they're and QX sort around uncertainty up right? get I portfolios, being That's in time little of example, hit more good just is the can time, investments, at -- presented market.

small at we We're had In It's talked like, a in new like. about terms there. we a balance space how paydowns looking of the sectors we of JR commercial. lot opportunities

to get there. some had XXXX, and XXXX, for lack supply transition think securitizations We then of we're talked opportunities certain. It's tightening. going We about pick XXXX, loans. of We going residential think nonperforming driver has loans the still been EFC to about NPLs for a likely. talked the buy There you some returns non-QM huge that's also to I up.

looks levered So good QSIP returns still sort of there some and the retained also on pieces pretty opportunities. to us

going you then that. that and that the now -- we don't on us Longbridge, some if, know -- think before. I now I have Larry all opportunities that for want didn't -- that expand Larry, own to to that we of all mentioned that's have create So we

add. great. yes, that's like But to No, would Mark. I Thanks, Yes.

like the it's on this inflation my very So is risk off. big when, market obviously, is mean, be is a first of day oh big still Then or bipolar, gosh, right? to everything today I all, risk. mean risk. a have a risk I you been

to we be want don't or way So too too -- enthusiastic one be another.

capitalize much, or But at what had deal not investment preferred what similar every every to had do for a the -- are of I those environment, you're when to which a spread, So day we 'XX, a think opportunity it is tighter to debt we day, we that doing to December go a said, saw deal was like because comes to raising in right? on capital, that. deal done a you was when much opportunities got you spread

and hit we're And pick overreact will the pocket as the Mark sudden a you're more a that's going said, assets. all to to of on where going where downside, market up

to just patient being Mark be mentioned going mentioned here -- really, NPLs. us think commercial you I for is really because good

have few We right ready see of we you're we with NPLs all But retail as years distress extent, NPLs to think NPL several very were for And we to even we that now. going ago. and office -- to a those. loans that buying opportunities. in lot be was think want And some the commercial

a want raise capital something we're preferred. raise are is So we you forever, right? going It perpetual if these -- And preferred raising to long-term then and wide, to when well, try to is that widespreads, opportunity potentially spreads to capital are the you're live capital equity going with right? when be

jump want but come when absolutely we -- attractive those they then of opportunities, patient. opportunities we'll at take to be spreads on and we'll advantage So

biggest strategies. is too. model, reverse mentioned rightly not of business And acquisition. a Mark we mentioned attractive many have I the it's prop, so That very and different class right? with Longbridge very, a us, for just asset new one hear of class, tiny their But one you market. a about because focuses in that mortgages, the that's competitor it's our much asset

now ramp different opportunities and to just put sectors of lunch right to Maybe inflows can So big be Longbridge goes in continue open So choose And with lots can we we or market, our go this on them sell we and RTL those the have that activities on waves. we sheet, where up lots we'll and can are. have its balance right? want for to prop, acquisition us. from. see buy we those maybe Non-QM want and securitize. those

We of flexibility. have a lot

are rates higher your that helpful. elevated? from drive in to quarters the With funding so a as ADE to taking costs the it. wanted And there far thoughts Could covering ADE. Got to dividend, capital dividend? remain deployment regards near of Okay. there. as your the That's idea covering fitting commentary higher get -- take as few the term what it then Just and

we're in good But And of that going given great term, in and cut really but that force a that could going it. It's It question. to going point to Where that's quarter? could -- we're not the We on just longer It's not it a deployment. happen -- but QX, confident depends the we quarter. happen that the to probably we're be cover look raised, it, would second inflection the certainly, pace dividend. no a target. of look amount happen plans okay. we've the we capital in have the to Sure, is second

Got Okay. it. Helpful...

thing. to And more the add one second quarter -- sorry

million have well. -- I was in that. core future back year -- results. much starting quarter. different to large so always the could our right? indicative to want ADE you they believe But look me in a say But second was the well to net their we'll for as potentially quarter The over XXXX, should that also be check And $XX don't what performance be if So of to very addition second for past I excuse -- again, is Longbridge income

As the spring, to second right? should to income I again So seasonality, you you should mentioned, start Longbridge. see -- in start origination from see quarter, strong

guess, Understood. And gears. I Okay. then, shifting

credit you're retail then to there I portfolio extent. you on Are on. also portfolio. and commentary the know about some areas provided any a of cautious see little signs stress, You to beginning more office of bit some quality areas the becoming across talk where

So couple And just to? that you that over I guess broad of then over just crystal years? paying you're little class asset -- side, into more to your how shaping of bit certainly credit on love commentary you looking attention dig sort a I'd next the for office and that see on into ball out the signs

think that way, the I sectors -- the don't in focus can market. the those Longbridge XX, emphasize in rest But just $XX And and at But have did for seeing you very I we see the portfolio, handle don't just multifamily of number want if Slide any does, Mark really and confirm to our Mark before is, and by million let I'll have where he that do you headaches on think headaches that. office but mentioned, how we're retail. we I I XXXX. little in look the

are market But think going for Mark, spots be. the you the where go problem ahead to

the So house just buy about consumers, off. the why a you're with I it's how down to and down affordability, pay numbers they has guess buyer the if to at -- how a you home and is first look probably going some now homes much [indiscernible] thing affordable I'd peak. they much mortgage right? correct It people, XX% that if And of say already X% most But are generally one of to if rate, rates that's it anywhere affordable, which Things can right that prices you're you Fannie-Freddie right? some correct be or ways, you're the and reasons And can increase, home sales maybe X. peak. now, it come can something, drop, -- seeing not can correct in are not from affordable, aren't is those coming if incomes near areas, a from that correct few the things from down, can borrow combination and

we've ourselves and protect ratios. I things, cautious be to So about to with we got loan-to-value have think

non-QM. first We respond by started it's the market with a being the originator have to and we to in are that in in XXXX, started better to transition that in up securitization ourselves as But XXXX, evolves. where sectors it residential going first end you We of to portfolios the -- XXXX. we hold protect loan the have in think to

and we And lot years, things really a were we prices thought -- sort where good. year, affordability marching years, different. come many there's looks of had home So higher, X-odd last are

a focusing of have your think on day. you you how to I So big credit, big, spend make part

that side, loan in -- fixed have you the commercial fine. XX-year think the SOFR securities and that's of a portfolio a note have we the thing, necessarily the on whatever, side, materially shape loan. I On you not -- X.XX% get debt, person rates and our What's that XX.XX% one on a you that loan margin, it I a we're the on you're Mae they'll a while CMBS mature rate property, comments So and right? that's they're sort Freddie and on portfolio, rents and in good we've X.X% enjoying floating has stable or probably of on if grow -- the lot own. side, it's in property prepared But loan higher at on with rate mentioned loan has

right? to prepared so this borrower, you get right? trying It's when the get the throwing debt remarks, they'll always the higher some to and portfolio it probably when cost, challenge leads great point off, -- to than for the for the you a And correction. in have is challenge, a income So a it's than property always is [indiscernible] and what's challenge, the that's

can correction down, the rents the on from the you curve the come maybe correction So down. higher forward comes values or SOFR or can property come from come believe multifamily if

very multiples XX% in we're shocks. we run a world like housing bond than and a -- think we I it's And we're looking bonds, the it. certainly for lot about many think that, years. transfer -- downside in I risk. can the last it's price we'll on And we we're last to we're about home and of at think that real about but -- And focus a so a But how the a different risk what credit think shocks was X, see focus decline. X buy I when lot withstand. thing And the we on, we think shocks a the big don't

And focused and it, so to on And other worry of really sectors. I we're about it. think you got we're aware

On during you their definitely massively COVID. can side, see consumer -- have they increased savings the borrowers

because down. starting but way it auto, People so [indiscernible]. portfolio, In sort delinquencies, our buying went these everything spend you're cars was of seeing they're seen just price are of Now up. [indiscernible] auto to taking X-year out in older you've used They're not increased loans.

in subprime they delinquency a big X-year a in car. auto the loan increase And now an older when stop an see breaks paying. car you You've outstanding, because on people have and took loan that they have

very So going are perfectly, there's the plan, to spreads typically it's where if then performed opportunity, is lot world creates tight. worry sanguine, according right? everything everything if me, a that's a about. of to But to if is that's things what If is -- everything

So have and us happening continually adjust closely to real But to what's think market a too of it's see time. people our watch the and be like of right? is to I opportunistic great then challenge right? for middle, underwriting the Like this stops It right? our to and is and opportunities. think pendulum, kind to lead I get pessimistic, So never going lots investment also get too they optimistic lots credit

market, if there. borrowing sitting be think we're get reasonable dislocations. you position more we your in that have achieved good I dry costs, stable now able you're and think to I want And opportunistic right? and relatively spreads bit a motivations behind to And come the of did that articulated Larry one like and -- are but stable have saying, a all he's stuff, some With in little deal, you then, yields be to to to a some going got we wider since in off it, the get that preferred when powder a market,

you lend those homeownership? to that been home far of Or some demand of you Okay. I taking cap single-family back hurdles pull continuing Do multifamily? that class and pretty then some see starting cost? and given support that appreciate you strength are multifamily, rates as compared to the that Do of to that anticipate has looking sort the just other at as asset that squaring to with affordability factors which of mentioned. resilient color. a And

approach So properties A, one space thing $XXX. rent rents country. sort Class huge unfortunate in unfortunate, that our It's there's sector to B an Class liked multifamily never of is, been construction, housing of always and been $X,XXX a Class are really affordable the but shortage it's why really just never We've of C new of this reason lots $XXX a with is it's amenities. workforce properties, we've there's right? that And month, to -- been

have costs, two, need for that but there's lower there. demand new also, there's and rent that there's So apartments no construction

the -- obviously, because interesting multifamily and to lot But is going is higher discount end, XXXX. XXXX a in is so month, to properties lending cushion. come big buying properties our costs. to So then at building that's right? is No them a rent replacement Class a right? that's it's B those for construction multis of at that and one's what $XXX happens out So on property these we're to all But the there buyer at a discount value, LTV online

are costs So construction high.

market buying operators new these at C level, but B, level getting see construction. the So Class Class multis, the of the the properties below we is market the they're way into cost

new seeing there. not you're why that's construction So

kind layer gives double us of So I of a protection. think it

through a to I headaches to going U-turn small ours their that -- that and a it. such think, are us. relative big for manage rates them. much time they pushing thought were opportunities to a big to to And as we first greater Yes. Their going of they higher much, work the is are. to hard from have have to job is some everyone our Do They to Fed be going We going the job. since presenting thing? us, rents push I is think them they headaches, as up going is took be closely such everyone's just have as loan? included. they when bought are the they to the to move SOFRs That's This be it this the the able feeling going in marched much market have with [indiscernible]

from comes Trevor Securities. with Our next question Cranston JMP

Can to guys the of You Longbridge. add in a what proprietary reverse product acquisition of Mae that the look would the space? investments potential elaborate the of opportunity around loans the mentioned structure little to in more of and terms look to standard compared space utilize after on bit the you guys sort how reverse mortgage the Ginnie you sort like proprietary financing

wouldn't be loans. simple. generally -- mass some a size. before Yes. loan are HECM probably critical loan to are I pretty they obviously someone to it's We And fixed in terms reason so. than going They The opposed gets really securitized. HECM rate They have to mean why is a prop spreads that of they we'd -- doing be big product. wait can the as get -- wider loan

than -- the going from So an much on HECM the LTVs perspective, product. are and underwriting be to lower

FHA limited factors, where essentially principal LTV guarantee of flexibility. so-called the exactly more In -- at. prop, dictates is the are have we there by what to the willing loan the HECM they product much So LTVs driven are

that conservative And pretty Ginnie it's more Mae's. so fixed you But into product that in see the -- to goes the similar be we rate product a can on LTVs.

Got it.

done you pretty And Agency then Okay. guys January. just in curious, was for January. credit spreads value to book the on I well and of update have the gave seemed spreads end

sort wondering over the was performance value provide of maybe what some drove if flat you of month. I book color kind So the could around

Sure.

the $X.XX had months. Agency would that a non-QM We dividend, So right, strong and so out. obviously declared be netted

the ATM. were We active in also

from pretty And top on into dividend. of adjustment, if so that dilution share. ATM that a it's some the there's it's $XX But that last is in factored you close factor -- to

comes KBW. next Bose Our with question from George

outlook capacity? any the the at was origination of there I side, of growth either terms In curious, Longbridge, sort is on MSR opportunities bulk inorganic or

this et bankruptcy. pick origination we organic -- well, I call of officers, of don't saw but don't sure lot if Sure. inorganic, producers, So know year, bankruptcy a I that loan the to you of I able right? up in we don't were or end so wake know -- an the you if the towards you think -- cetera, last from I'm

-- will to to that anything a of took to future. sort whatever. you of outright market paying premium near MSR Mae terms basically in So over, And without an the come and Ginnie also having do seized, will, that acquisition, that probably potentially if in acquired, MSR

owns. from Now Longbridge the older it's a MSR different MSR very that much MSR. currently It's a

has not risks. and acquisition different a could substantial very even of very, And that so it capital. sort benefits much potentially that But and be requiring

of se. opportunities. -- per go operations existing and MSRs So out yes, other we I response terms We capacity -- in we plans think of to in don't Longbridge any to looking down its sort acquire in market of great of any staffing look in actually acquire for shown there would terms time, to at so able to have dial sort has this to point up being flexibility and its nor

kind terms that just the then sense. them? That yields makes the Okay. on guess, And the book returns of, you of are when what Great. unlevered HECM in MSRs, on I

reverse Talking about the MSRs?

yes. MSRs, reverse the Yes, Yes.

the, low in XX% and say, XX%. Yes, they're I'd between low digits, very the -- double

Financial question for XXXX That Quarter was Fourth Conference Ellington today. We you Earnings in final participating Call. our for thank

line wonderful You at have a may day. your disconnect this and time,