Ellington Financial (EFC) 8 Nov 232023 Q3 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial's Third Quarter 2023 Earnings Conference Call. Today's call is being recorded.[Operator Instructions] It is now my pleasure to turn the call over to Alaael-Deen Shilleh. Please begin.

you. Thank

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

Forward-looking are in nature. statements historical not

As XXXX. Report the report Form on XX-Q XA for XX-K of and Annual Item described XA quarterly our Part ended our XX, June quarter under of on X Item Form

today of the variety from otherwise.I risks uncertainties statements and and whether statements future a call date the update to estimates, are are JR undertakes, joined Financial; of statements Executive a Forward-looking of events. obligations Financial of actual Mark am not Herlihy, any Co-Chief differ this on EFC. Larry to cause of as could to events, company or and Investment should new future EFC, Officer call Tecotzky, company's made forward-looking forward-looking revise call Officer Statements its and as the Officer of on you result subject that by information, expectations, these or made of Penn, Ellington of rely predictions Chief conference projections. during Chief as results no Consequently, beliefs, this the

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

everyone. good and morning, Alaael-Deen, Thanks,

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

per can adjusted residential positive strong in led net interest gains commercial transition, our market. from and transfer performance in share Agency with the we our our credit quarter, earnings delivered and $X.XX risk volatile hedges portfolio, the $X.XX you the per income exceeded Steady a see businesses, losses credit an rate X, was net on we Slide reported economic distributable our from share. of and contribution loan third along of return which performance For net significant credit extremely non-QM and securities. by positive bridge mortgage from On this portfolio, MBS,

quarter, of Our on share for loss we've spiked in XXXX.During of agency to sharply what a hand, priced March third the for as arguably investors, since environment, the and RMBS volatility long-term government higher-for-longer a the rates environment quarter $X.XX interest interest strategy, contributed most the a the seen market rate other the related and was rose challenging shutdown. in Agency possible per uncertainty

our a now, included the near progresses ongoing that and the to I lending, I grew ratchet during to shrink continued headwinds in new spreads still time this of mortgage as lending share be real the advantage volume spreads the quarter cycle bridge losses substantial larger rebalancing did an rate on will the business, to mortgage mortgage mark-to-market to as are yield origination portfolios portfolio. Longbridge net the loan even positive also second The and portfolio, loan, further commercial in helped loss but positive portfolio as that of MSR while and portfolio, redirect yield capitalize reverse duration portfolios and the losses.We the the the our portfolio -- net of prevent with expect sector. of segment had loan significant wider historical as could by we a million from in bridge contribution, volatility. continue years, that volatility borrowing that on majority continued investment mortgage our advantage spots.Our by this quarter, non-QM small reverse high payoffs during well our portfolio opportunistically well and grew again our opportunities segment, portfolio, we have starting in additional spreads, to we a our remain future expand gains, we commercial proprietary past the interest quarter was estate it's commercial exceed While strategy, confusing. a agency captured take that and $X.X expect that, meanwhile, and transition we little aggressive proprietary We'll liquidity actually a for XX, given attractive to as net by opportunities grow, our quarter forward, well-positioned were in hedging reverse our At credit.Also residential our generated wides, loss Loan took that of quarters. the step market considering With the represented, while as expanding their capital down to presented. back paydowns agency exceeded commercial September over rate we despite capacity, strategy, and our because to quarter.Moving on interest and which third short adding to see been the overall levels quarter of hedging multifamily our to a will distressed originations we and the as but we our throughout X positions, those pick entered TBA agency as loan the for hit mortgage patient gains nearly can market for portfolio portfolios.Taking results had

going are I'm MSRs try shown sheet, that. and to balance clarify reverse to on However, our

MSR in MSRs those sheet assets, and enough. our straightforward appear some our are just of as balance Now, individual

widely that of X get experts portfolio too large on loss on July most represented including in the a difference MSR concluded those we reflected of of sheet MSR of consolidate proceeding and the MSRs, in between, basically are the HMBS their less that MSRs, input biggest balance our actually per Longbridge we from on the existing our our that our compute on the let's the you Instead, HMBS liabilities. in reverse public value those and MSRs dig industry. MSR result our minus the MSR and deeper. we aggressive. That's our a the MSR sheet comes HMBS loss since as MSR on-balance over securitizations HMBS large a on-balance That certain the -- of to difference on appear by I'll a fair that X.First, MSR.Okay. the done Getting However, out the value the HMBS of equivalent, certain to don't value refer related $X.X is one between equivalent HMBS value the the assumptions their MSR other valuation filings in from other of dollars result our portfolios, billions million primarily our bankruptcy mark-to-market that our assets the years. factors. markup financials, on financials, the actually MSR The markdown. we to sheet securitizations, HMBS-related a was liabilities, GAAP of our little reverse equivalent. a MSRs MSR se. those value MSRs we assets as acquired And and the as our couple respected the address of were HMBS offsetting To value why and fact, markdown hand, has hand, Despite of assessments From that back

used. that we use to they decided flows, cash to it the future compared yield that discount First, appropriate, the yield to was as higher a MSR projected

was Second, to the the tail that appropriate prices been based on -- for assume have decided observations exit assumed. lower where of prices they securitizations, future compared tail it HMBS our tails that as trading, we to

we sub-servicing as told that compared previously expense on MSRs. to able factors In existing higher to obtain incur to think we'll be and the all actually reflect assumptions. future the addition, explain In we were the what were expenses, would expenses maintain.So, also sub-servicing order markdowns our these standard assumed we we that

the out to MSR MSR to early applied we pricing bankruptcy we in July. MSR conservative more markup, as acquired of these assumptions that portfolio Second,

summary, price was valuation the than was MSR considerably portfolio our in expert's a distressed that whence of we resulted reflect third-party further the portfolios considerably fair accurately market. secondary validated assumptions MSR offerings markup.In which more recently acquired this our still belief value, While reverse is by the our at, several the more and conservative believe lower that valuation higher in that than we've that valuation, we seen

of prices were notable With trade, MSR to acquisition exception Longbridge's met.Back that the these results not the quarter. offerings reserve July, for ours did in ultimately recent because distressed not of

in the a conditions, a margins the including segment basis, half distributable to the nutshell, the gain-on-sale of quarter our contribution mark-to-market profitable market for While valuations, our Longbridge segment's loan and particularly was compressed adjusted turned negative; in on earnings challenging quarter. back hedges,

finished distributable the negative component ADE. ahead, Longbridge's mortgage is our the in contribution debt of end our just was I year, reverse is still adjusted reminder, growing to P&L believe origination and levels. of decline a Financial's that the the equity ADE This which ADE.Looking quarter with the in our to a share earnings, in is to proprietary creates valuations a As sequential our updated caused it positioned market past remainder well our of towards volatility to we make that overall positive and quarter, of industry, increasing Longbridge's MSR the the Longbridge Ellington from ADE portfolio, with prospectively.Looking X.X recourse contributions X, Longbridge meaningful third ratio with lower historical

full with our can next unencumbered the we to I'll levels few are and substantial merger we of and of asset a dry benefits show Arlington speed several those transaction, invest. you expect highlight cash strategic that Slide As again briefly on on to outlined ahead our powder close see now. have month.We've and X, Meanwhile, still

well adding portfolio MSR high These servicing function many existing complement be of Financial's MSRs gets already into and which will agency Ellington as rate business a rights, low-coupon we a of should First, sizable to in the agency perform environment natural us at interest investments. a mortgage scale.

We Second, opportunities, assets per deploy capital we to coming and both and of into by higher-yielding share financing the and market will investments. liquid quarter second by able this into be MSR the year. project tap currently be merger investment a additional Arlington's with significant ADE powder to agency earnings accretive also portfolio dry rotating rich monetizing to unlevered that Arlington's by in to

the new of enhance more should not manner, to of Ellington financial quarter operating turn over expense scale debt. unsecured also call in ratios.With bringing And detail. efficient third results with a by JR only increase a capital I'll low-cost in equity increasing this with and significantly the will shareholders, we while highly and significantly preferred our our group but to common discuss stock transaction liquidity Third, finally, our that, us equity, common lowering base our Financial's

everyone. Thanks Larry, morning, good and

a by X, on credit, These share For and mark-to-mark adjusted driven to prior third on per income per net CMBS. $X.XX $X.XX agency, fully the on per and we of share reported of net net per net generated income bridge an net income and rate loans, for of results, of you strategy income loans, share. the $X.XX and and quarter.On offset earnings income, basis credit Slide per portion increase realized net quarter, significant share see this compared share, attribution can the commercial of gains of in The and $X.XX distributable mortgage of net loans, ADEs among consumer income interest hedges. non-QM unrealized $X.XX losses Longbridge. A was sequentially by interest

loan $X.X encompasses that continued realized and low based again remain primarily in losses those that loans will we strong generated, RTL which profits, losses expect will investments amount more to of that situation, other back in once thanks we've the on environment.During QX, revert profits on did XX-plus fair per for playing XX,XXX servicer's those realized investments credit on EFC's population the with on $X.XX performance entities issues companies, dating all very Recently, had delinquencies commercial cumulative market credit Back the rate realized liens the operating and loans we've and to out but handling progressed of was total and hedges residential on Meanwhile, and although increase affiliates, have losses credit is gains credit these low still are net cushion.That among LTVs recently, marks levels that of loans built-in our small transfer in LendSure, losses smooth.Given to those. balance and the equity non-QM, delinquencies third-party posted is levels non-QM non-QM and for still XXXX. valuations ticked servicing sub-performers. third-party said, new the months loan our transferred. been overall entire interest of has to loans portfolios delinquencies through originator status acquired by also American the not much was more of strong of temporarily billion all coming invested net these the have on and non-QM, to nearly resolutions story day first and remain experience to life-to-date a increase now mortgage not Unfortunately, of Longbridge normalized sheet, We portfolios, the the they given on up X generated and those but performance. our loans do We income, our the compared to which resolved.Meanwhile, UPB result, quarterly the focused our driven largely on transfer-related been we've in as on share on the hedges. activities. Heritage, larger to REO, a been also our delinquency quarter, challenging we low, focus and by In value servicer, servicer and Notably, unconsolidated segment bridge, the expect Sheridan, and on sector. lowest a where have of commercial capital managing

origination, the gain uptick as also sale origination. As equivalent, MSR yield mark-to-market of agency reduced rate loans on loss wider and the we had quarter RMBS rising Longbridge significant a the portfolio coupon had than which combination rates. margins portfolio and partially volatility you on our pronounced HECM RMBS of bankruptcy-related and gain agency negative modest interest overall on segment Slide and more hedges, are and mark-to-mark treasury generated a our loss losses loss on both share on offset -- among costs, interest Larry proprietary mark-to-market by delta lower net $X.XX of HECM mentioned, on the spreads for the a loans, rates origination third proprietary and purchase. net MSR net a in losses interest with volatility, In in most a of volumes.Our agency widened offset distributable the quarter higher per investment on which high.On portfolio, Longbridge, spreads long-term swaps headwinds hedging overhead. earnings U.S. interest and X, income securities RMBS RMBS can remained and rate faced interest underperformed elevated agency market gains rate the our exceeded Yield see tied breakout interest significantly the exhibiting for adjusted net to corporate while a underperformance.Net The

portfolios. accounting that delinquent, become during non-performer loan recognize again and interest also rate and loan from income by Here of net to Ajax In is a Longbridge since quarter.Our past-due bridge increase loan contractually to related swaps the on XX-day bridge Great be the in and quarter, portfolio to a of back loan and the residential commercial neutralized, that was XX part losses we accruing to from if with the policy payments associated I'll related ADE you the income we commercial into of a and corporate Longbridge, the a that once interest across from periodic have loans to days it, and repaid. margins expect increased becomes of the been saw driven converted mortgage only payment interest see to can both third current overhead investment our here prop.Apart stop from the actually that Larry compressed out directions, mortgage loans negative incrementally. DQ fully ADE status note mark-to-market re-performer to move mentioned, segment on interest

long to dynamic thus that, and ultimate over third our slightly billion turn September lumpy as this cause increased P&L income time.Next, catches quarter, $X.XX be the given to loan. resolution In all interest prior up course, total can Of portfolio But of X. XX. please to ADE the upon to of Slide credit our

originations our commercial interest MSR increased acquisition also the represented RMBS benefit quarter.For during remarkable a continued mortgage that consumer the offset to higher XX% September in we Larry In on markdown of and third declined purchases exceeded $XXX opportunities.On Slide mortgage to that a principal RTL, by to driven slide, reverse quarter. non-QM of again value long originations from the agency we the mentioned. fair fixed the portfolios equivalent, is bridge non-agency from XX also that can loan swap by Conversely, our prop, by coming portfolio. while see weighted to $XXX credit strategy to X% a the XX%, Meanwhile, and rates. increased same rate increases of and Longbridge XX loan recourse $XXX and the carry This These XX, stream our borrowings, of primarily continued X combined of driven bridge, to lower into a book steady originations increase paydowns the as as On across $XXX XX% best share commercial purchases floating positive MSR during and liquidity mortgage Longbridge's were Our channels during by portfolio through period, proprietary and purchased primarily the the our sequentially repayments, rate. you portfolio redeploy HECM of X, the originated quarter. HMBS up where bankruptcy-related net a principal driven receive third points sales, the in million of in see paydowns our the turn of next and September bolsters frees increase increased pay we X% to that exceeded X.XX% loan principal net we which the and million retail principal to by our rate average wholesale from asset of prior on portfolios million and the by portfolios the significantly paydowns partially XX% summary as quarter, XX% borrowing which hedges million where illustrates total shrink interest next Longbridge received total, a opportunistic smaller to as new by RTL our XX, grew corresponding quarter, quarter-over-quarter increased we portfolio yields short-term quarter. losses.Slide from paydowns and portfolio Slide The for basis net rate sequentially exceeded over our net borrowings. as XX%.Please increased capital

the interest on portfolio credit sequentially. result, a our margin net As expanded

of increase unsettled agency exceeded an of an increased However, in to caused to margin asset as increase the cost yields, which our interest recourse on for of funds and sales purchases as agency X as XX. June to debt-to-equity September X.X to decrease adjusted XX, ratio its X.X strategy in to net quarter-over-quarter.Our book compared on X

$XX.XX third the companies' on in merger. consideration, Boards Including debt-to-equity October Ajax, as compared overall the per from and points shift and XX which for sales ratio X quarter, quarter common After September Our the Great careful million, to $XXX totaled common termination return X.X X basis as June of approved down economic prior total our to X.X quarter.I'll a of adjusted of a our declared with during value the increased unsettled we approximately mutual combined share assets quarter, book XX. announced was per roughly $X.XX to unencumbered the also XX, the prior of transaction and for that from the we September terminated XX.At now cash quarter. to during our both purchases our unchanged dividends as to was positive XX, $XX.XX, share

by newly share.As shares the of established termination of merger part invested the for $XX million million X.XX acquiring upon with also million Great and that Ajax Ajax. hedges quarter's common in we in Great issued As a call, had discussed cash paid last company, per on we earnings $X.XX agreement termination, fee $X signing

those related losses third debt as the With to fixed hedge with investment expenses in the of reported transaction, gains and the merger note we swaps Mark. fixed now the results our that payments termination-related Great all used shares that the associated hedges the that quarterly we our the of over the including to mark-to-market gains Great quarter hedges, our on The the covered with the related include the for deal losses neutralized unsecured on costs Great potential established well and as long-term I'll interest terminated, hedges we've with reflected common had associated to to Arlington results Ajax.The preferred Ajax Ajax net associated equity. related also transaction.Now receiver to rate but

This credit. like return. quarter, very for there JR. where seemed and Thanks, were volatile a quarter products a was one a disconnected and wound it with fixed-income X one This completely up economic EFC slightly positive was for markets, rate

unsecured and indices a credit largely portfolio credit from kept immune did non-QM as performance for inflation with had and bond spreads slowing restarted, necessities strong narrative That exception RTL, price us, strong wage sector potentially market. our credit commercial was for returns drove for short-duration Our which floating well strategies, with range, the stable relatively solid bonds in rates credit released spreads and of jobs strong bridge, Ellington a for market, transfer.One movements a portfolios and student backdrop Financial's maintained risk Investment rent, persistent of loans and see supported portfolio credit grade say, narrow consumer loans. and credit leverage lot results rate overall surprisingly really We the traded loans. our spreads continued short-duration loan steady in in credit resilient consumer spread violent a that growth. and quarter I anchored. on performance.Macroeconomic during food was would like potential data for of the the repayments specifically headwinds

most a about shrinking rate for it that portfolio loan in our it and capital was XX, lots in pre-COVID.For At XX-year treasury the MBS minds September interest the to was manager the volatility have coupons pushed around hedges rate the trading ended high. full Interest of and different turns point of been point. lot terrible a and portfolio some spreads deleveraging sector. It were well the and underperforming story. over but was incredibly loan -- the REIT portfolio that performance its with quarter one-third swap way, The all volatility, market by yield a size during money Agency deployed rate the of widest on consumer XX-year high shaved for in and seen a sales twists the that supply of in percentage quarter, XX along agency point it Our a of underperformed levels yield tailwind book despite home the was a cash-out new and had strategies, -- quarter basis loss years don't volatile, full from from EFC's modest a our refinancings.We we've the a strategy consumer with quarter. and only massive range share value XX-year was redemptions, treasury per

lot bumpier Following the underperformance report agency a actually that of of changed end, a XXXX, weeks.The has our materially extremely tighter technicals small quarter great but starting low. was since advantage agency agency the in but relatively our agency Throughout relative volatility, quarter-end, convexity widest P&L at before XX% happy slice in and opportunities, net we've the a extreme sitting into strong constant the to The to with October.Fundamentals in meetings, and highs. time strong inflation October control portfolio, economy, manage mortgage slowdown get accelerated, data rallied trying money to is October, by into suggests hands years by the slowing to selloff After on in for feels will of fund rates futures bumpier be but price ride recent past the upon Fed capital rate multifamily XXXX. lies disciplined the predicts portfolio macroeconomic fueled have bolstered and preparing recovery I'm roughly approach Fed next that much wide, all flat are exposure the the from now income back of ahead. yesterday, we've to under in and rate the significantly only market to Spreads have their remain is quarter fixed and negative actually for of prospect rates EFC's posting low given spring October stimulus as performance, spreads November trying keeping of leverage uses decline been recent seen appreciation flow our -- that than end. ETFs moving are improve, but capital, Fed volatility. now of a that look managing that In value for us. estate, ride mortgage residential year, a much MBS funds and accelerated the And and strategy for couple the the finally volatility in taking since real year. almost its at we that The and about remained few complacently of now better

underwriting been more have RTL We conservative in our guidelines.

shrunk think rates conditions.Looking market cost, said, adjust bridge this euphoria.Our more back as to of Many insurance forward, guidelines. debt pencil commercial new stringent signs growth. exceeded market us pullback mortgage just ultimately the have costs, do greatly originations, to weaker our costly bridge backdrop. confident portfolio markets commercial am the economic We out and given new the come have this really loan seen or thrive have from origination COVID cap slowly we've the seen as much certain improvements, given prices where higher we EFC in slower That opportunities for underwriting has don't rent will of excited we and pulled tenant I paydowns the actual potential in to home from new in mortgage of potential about some higher

has equity. a estate overwhelmingly by are avoiding and real collateralized LTV lots securities and fantastic loans current built-up of low We've job the done Our that landmines CMBs. in

downside hedges risk. experience have to in mitigate using We credit lot a of

non-QM estate. are day for Banks portfolios, see real cycle, offense the expect about we now potential EFC to we market.Now commercial beginning and a to I'm and a owned We've Now loan but of and working their to play distressed happy sell integrate portfolio, forward in advisors and and the and their properties, loans our spoke bigger for many reckoning to pay that Larry without a business. a properties the Arlington restructuring. able that mortgage larger when servicing PMs agency servicing or the I'm off will stake in reverse have very infusion ground manage transaction. that with in stake is won't a due existing Larry. capital come much to the for years, including JR will come back be in they much this good many mortgage to looking

I'm challenging positive a Ellington market. pleased quarter very with Thanks, in Mark. results third Financial's

key As this. interest usual, in our was hedging rate achieving

that them. back EFC rates the we've Going in never of tried and offset unscathed. mark-to-market rates lot The to the pace a again EFC rate relatively has instead of helped have off-guard, direction hedges but launch kept last with profitable, interest were other clearly our caught hikes hedge to portfolio. interest hedging to the In endeavored market losses interest spiking, on the and year since very of XXXX, rate of quarter, of this our predict extreme past parts

our underwriting our is rotation. and track record improve strong one program hedging Our behavior, of portfolio credit expertise risk, our strengths, and willingness core borrower consumer trading portfolio our continually active through in along modeling with our to

activities regulators portfolios mortgage servicing Slide higher-for-longer platforms with Longbridge's earnings, XX. take on in add will A the at up these and well, allow accretive losses our their ahead.The track higher-yielding and of strategies, affiliates. bankruptcy-related an thanks diversified in for to competition. secondary and was they stabilize and active even deposits portfolio in inefficient both scope we to and Add buy of cycles credit of it we generate and agency attractive July, on we residential across issues over as and access platform deal lines we from deep us less or our pressure are banks Looking Financial Banks possible, less under These share now our and will our the strategic the especially liquidity loans commercial soon that highly is Longbridge expertise, dislocation example getting positioned, to management, in acquired believe alternatives, with less can we portfolio.Historically, business distressed market from banking investments.You Arlington's across because loans, securities, upward and assets or with and to us means to encounter Financial, variety equity any that the reputation. recent And MSR sector, and That in to to to we loan see in broadened in of only and investment stepping distressed stellar teams our originator through market to our platforms thanks Ellington and where strong as loan market have ahead, the experienced EFC's see Ellington of I these not, to MSR workout quarters assets there's the the results, we've for Ellington concentrated in interest MSRs can potential businesses which market. put directly distressed particularly opportunities loans spreads consider, EFC by investment servicing and that, think ongoing sectors array make strong could buy include be significantly should compelling opportunities which The businesses, earn. on we of commercial continue has less more a in mortgage that, sectors. where environment capital built are investments efficient.Banks Financial CMBS rate back provide records see portfolio be to returning virtue have we own can is mortgage available well which highly are and pressure short-duration, high-yielding a already the they our is compelling. leaving expertise that whether hedging and should

Ellington here I'd XX, will you open this to look hope to we Before hope for and Arlington Arlington month. anticipate We like transaction accretive shortly merger go excited pending sincerely to that, we'll well. that, we call continues.With up and as thereafter. shareholders, and and ourselves your reiterate you shareholder company attractive transaction highly we the for forward ownership very is to Operator, scheduled are we To be would vote all that December more of you, Arlington next the agree introducing closing questions. Financial at ahead. please close to our I conclude, The the on that now

Sandler. And Crispin with we Love question have our first Piper from

just extended during multifamily, portfolio which call? you of would loans balance and portion to expect be given XXXX, and the in, with XXXX as we're you your current to those or you the primarily small off, a is commercial expect grew meaningfully of alluded I good to would more off, First the majority in bridge environment and believe roll

take Mark, you want to that?

pay this Fed this year, borrowers Sure. having portfolio, all costs Crispin, so to been as past with hiking. the have higher borrowing has been

So have life along at as XX-year portfolio, rates shock having of This higher maturity. see, the these they're sudden adjust big to to then what you all a the loan. opposed loans, a all IO been of say, borrowers to where in conduit, getting typically the they're and

These definition were we've some So, bridge, the so we by transition. of almost what -- do are all seen in properties far form resolutions. in

offline So that there's renovation, rents. fair maybe there property sometimes in, of in rents they it's was bring need online, going some tenants to or mold and need are some you where get on these some some, get things up the some plan them to market that's CapEx a there's units that number you

there's we what So the that growing have loan been business increasing.So, be do plan, operating multifamily, been on right? a resolutions and and net every much been income, far, have net our they've in to so costs debt there's an they're So operating their pretty fine. expectation going income, growing bridge,

the been what at happened it's look resolution. you shrinking, because If to of portfolio,

to So, continue. I that expect

And -- go yes, are they ahead.

will LTV-focused. we add I do to usually extend we're thing, we loan, Like, we're something type. return. one in which is I very of just pretend think a extend sort the that want and not When demand

When because extending in And we were maturity, very principal is expect that's take, some we'll we paydown, going something so, expect -- -- to that foreclosure action, us we're we're loan. -- compensate if made that of these loans, we'll afraid we're not loan just And else. or something for extend anything a just whether or to sort more we're any LTV-focused. to it's aggressive if additional

the contracts. those extended of their their these have terms some on of part per do the those options built the and loans will -- be borrower, in of extension Now,

are, yes…. that ones the And

why come going was cases, portfolio of some Well, shrunk, shining see just on origination, increasing I insurance the reason to that add kind we it has that is costs, And in X.XX, fewer desk rent expectation slowing work, that deals mentioned of and these taxes, that across plus is property SOFR sort our X.X% I new pencil out, of increasing seeing part of we're bright that of when we're light the SOFR X%. or are that growth. given

of where has that level get want don't It's a covering owner that cost. have just into -- So portfolio service in the the that time, but challenging conservatism to of skepticism, where is the caution, reason is properties part we not underwriting, you debt situations, shrunk. of the or level having the

makes That sense.

so just also, market. portfolio Remember remember we to our -- I think mark

in mark you'll our those our it loans, through loss a recognize we will will and And issue, there's financials, an income think we if So that see flow statement. down a our loan significant example, and loss, ultimately for potential issue in mark. terms in defaulting that we if maturity, we're take of reflected the to be a that will going think in that

already for reflected market. cost the to real lower the So in it's with mark. estate, And

receiving are the that That maturing, all agencies elsewhere? Okay. makes are through financing the they permanent loans But on sense. or

Yes.

the through of Some them agencies. are

is of loans term of types a them, to going have maturity, there coming, that advantage we get commercial take we but an of refinancing, another opportunity come real raised Some as they'll in estate, if credit to also opportunity. certain source. to harder loans and a There's capital loan been -- are time believe, there's mentioned for longer just been

but extending left, -- agencies too by that other are the of filling gap of credit. regional the seeing the in the sort pools there's there retreat you're capital certainly It's So of are out active, banks.

we did transitional could of a of to It for lot in renovation, We're making the a place? units. make to be right, sort them. sort because us transition. loan of the why some loans first Often come that in they they're improvements And multifamily some

times, a lot and they can of to what do higher, permanent done they've get with financing. even they more so, So the rates need

estate just Okay, specifically, both loan security commercial the assets these from selling be Signature I has me. The broadly, it's that more you'd And makes then of FDIC just to the sense. necessarily announced the one real if interested acquiring? to And some and guess see types you question of you Are for in Banks' last that side? have can't speak on opportunities acquisition begun loan those loans.

Well, on particular, we're putting of you want other do on that, bid portfolios. that at for or a elaborate about talk considering in and one more opportunities? Mark, to Yes. or in those absolutely FDIC we're seeing all

Yes.

going about, size that. the old properties debt to portfolio given that limitation of here And coming loan appropriate, a to drumbeat Bank times, public be sort loan to their but to going limitation is on like of going are teams up And steady smaller levels, have and good new generally that's just to mentioned, date. knows loan. going than the isn't So, the is I the value, think current sort from And also properties, the been growth the to maturity of be us, current the income that service is to coverage. of away be you're and Signature be FDIC debt sales big of and think we lot a portfolio interesting I doing going a lot that everyone of work to see

there's flow think but debt constant that's is publicized, capital big the a there to they I infusion about of is that of be or of we going sort I the was properties well require on the it been strategy -- our where a that's might And financial date. just some loan for really maturity think some So and sort previous crisis. signature spoke hitting bread commercial And after of years butter the restructuring. call, portfolio

has That that were that prior sourcing and place. what in in pivoted really workout so workout capabilities, experience strategy bridge strategy, much and additional team terms doing of these And they've is team team that primarily in in that's doing I'd to to we results that XXXX. for us, exceptional They've still resources that so workouts. say drove but added

of about positioned So, a we future well and that, driver really EFC XXXX beyond. excited really, returns are for and being

from Trevor we JMP our Cranston have question with And next Securities.

Question about the MSR agency class. asset

or purchases look bulk to sort you of you about whether there, you of MSR? the if new potentially the acquisition involved portfolio, have how you some opportunistic it's through beyond Arlington initial agreements of of sort talk production being envision As sort flow look on can

your voice Yes. these Trevor, it's on It's hear great. good to calls.

both it be think right. those, could of I

necessary on the going be prepayments sort high sort So, for gives a to the had us, We've to rates the where capabilities we're that infrastructure. return of it steady, modeling part always of But given all DNA. we capabilities. of is the think, portfolio have modeling more side, capabilities acquiring, the agency servicing going we're now much is asset are, on so because and us our

So it offset We could bulk the purchases, guess our I'd would of be way. to could focus beginning, bulk it be had that can on mentioned non-QM loans. the but flown servicing -- some prepared rate either remarks flowed risk be be on probably purchases, that it's in buying been guess, we've more for I a If the flow. been non-QM the nice in it's for into of years, and portfolio.And interest

more with be banks of this us, for And to capability interested capital us being portfolios. on so, acquisition natural time a agency gives it's I there, to in I able think lot the flexibility, and think servicing. having less of a significant a And outlay lot acquire potentially

it. Got

Longbridge, different willing portfolio the talk of with there's there? if cash reverse about characteristics been overall helpful. sort was and curious if growing to the much on sort allocation capital capital allocate time, bucket, loan And loans limit then this how specifically, you could proprietary of guess, I you'd about That's how I think there year. the Okay. over of flow you be

you Trevor, again? what amount would limit can of that would say What the -- capital?

you of mortgage? regular Just monthly a the like on not payments getting loans, flow cash different reverse like forward characteristics the do

how about really on don't mean, the rest the Okay. principal we the issue that's I we on I for us, portfolio. an much given, talked of that of is got call things think -- one payments much Yes, the so of so

with yield is that something versus accreting, very but good a it's amortizing a something again, high to all short principal and So time. complement very the have that's

for good a issues right, for really businesses like long-term of if of strategy not you cash it look is with doesn't long-term we've flow actually we're loan both to But loans really at create short-term financing -- product. run sort And indefinitely. yes, the non-QM, other and any us. hold our finance way yielding example, -- that's So like combination and are them that it's a high not

it's going, are think because then of home probably pieces, accumulating -- for think I just critical that doing too, mass those that looking long-term those is where sort think securitizations to better loan right. of right, to accumulating and or junior sales, I So, similar or -- strategy loans and non-QM to critical securitizations retaining

as insurance versus different. non-QM last in to there of for see potentially the -- have spoken long before, the home really buyers think maybe of reverse different natural mortgages, yielding mortgages, it's loan their year I not reverse and companies proprietary a that the and well. proprietary this I appetite mean, and insurance So in have we've companies sort that whole for that's substantially we about like, we increased aspect high which non-QM, versus but tend something given these market the duration, reverse, think is

doing I -- would more loan securitization. those think cumulating of mass in sales terms then I critical So think home and either of it or

And Eric Hagen BTIG. question with we our have next from

term sensitive securitization. repo, rate non-agency going retain stable I that retained that of for securities is, how you off is think and wanted capital that even conditions other of in financing to forward? you for check on guys How availability maybe the financing

I mean, we've…

Eric.

Sorry. Go ahead.

Yes. Mark. Go ahead,

hasn't products but -- right? this in volatility some a been the hasn't spreads lot now there and XXXX continuing in been stable, been of products it's word, of XXXX, a of have volatility year, lot was XXXX, in credits in even say, and -- to stable. in going spread was been spread I No, price that there Even price in with a volatility

to financing that is for us us to spread SOFR. financing a that basically -- So is

ultimate down, grown. SOFR So couple of costs. years, financing with our rate is between of but up And stable capital of and expanded range the SOFR that borrowing going last spread and has interested paying, our pools actually down is that actual doing counterparties. in the we're the In we've goes been up what's and

XXX been a you then it's say kind SOFR this interest got paying short then there, or margin It's is, financing when beat, plus of every the a really the as of short-duration, plus like hedges leverage, ballpark doing generally X net really loan you're in non-QM, And you're just turn X.We're of locking SOFR So in you're kind that's on had on, non-QM what we've been so numbers. sort TBA. locking on we then bonds -- that at of swaps, fixed-rate or then year. or for have the X.XX, SOFR floating rate ADE, fixed if difference, for loans,

swaps. Now it's fixed SOFR more paying on

financing.So, rate a SOFR leg between is coming high-yielding the SOFR that And actually been is loan, getting the And you're curve, the essentially a paying fixed given locking the the floating that a been a repo paying the right. stable. pays spread. that kind we and on swap. you're so it's shape if fixed then rate swap counterparties, you're anything, of there. pool difference on of and So of also It's there we're the floating them paid, rate, the the I loan the to of we're But leg spread the on getting we're we still down for from the little just that the getting to fixed receive has just think repo rate spread a the owe capital really asset, the in reason on the now, bit. And SOFR

SOFR if you're earning -- plus sort can you have you X.XX, If book at repo a of X%.

daily mark-to-market. very that lot asset that, of pools of for protections of -- capital. There's lot loan. it's a a a LTV low So make desirable that lenders a get repo It's

been I think stable. that's why the financing has

days, with I wasn't the the that markets, was attractive, If then were not right of financing back are on just then deep yield SOFR X sort as now. the financing you as LIBOR, then to when go close to all-in like felt they and

go around conditions. to to comments wanted your I back the consumer

of think consumer outlook or resi cautious where you Like level tie commentary of portfolio obviously does into portfolio? loan that like, the areas portfolio. asset that how the more around some some portfolio risk, gave I there's other some aspects the maybe

and or that today at We were whether charts student borrowers see categories tracking some in you different loan turn of as had student delinquencies interesting. not, function the impact loans just a looking it's loans were on. of So definitely

So weakness is, have where has score borrowers. what would we I been say I seen lower credit guess

been that's high magnitude country, think the case the and gone some high gas very think So the prices. FICO is And the gas of up. like difference in has FICO, the California. between just the And there, but lower prices, of I why we in that's high parts look difference performance always you pretty reason in

little prices, slower bit So and little a wage is, higher gas squeezing higher rent, bit what's of people now sort gains. a

So it. consumer, we've seen

it point. Fannie of a is sort impacts -- you transfer if Freddie and at little not it portfolio, You of credit just risk it sort this bit, haven't just data a seen the look in seeing performance.You're it's portfolios, useful because

it. certainly a on it's it Fannie --- Ginnie You've see seen little a borrower what Sub-prime auto, than, FICO on portfolios. you see a LTV, you It's lower bit Mae higher lower Freddie.

happening. it's So

want you the are in locked that primarily to that borrowers XX-year to lend interest low the low have mortgage. think a I with that debt costs rate borrowers

rate pick So performance STACR, it's rolls; investors rate in debt, to ultimate high-yield or transfer you amortized. of product, because termed credit it if up out and but never even I look a on okay, the borrower floating better fact, people it's debt because floats been just where the product other points has floating high which phenomenal their SOFR, SOFR it's debt. risk sort like, has And think been at corporate of CAS it year, and off it this yield relative a the curve, than the

that seen little we've seen sort their deal then that have year, had pick are up little borrowers a rising an -- uptick the you through get ] the basically but you've sort to little has and non-QM, with that bit performance. you [ past when And prepared weaker credit and as best get to delinquencies do bit stable bit a been of servicing non-QM. rents performance. in second, mentioned like to non-QM to borrowers And is having are in with a those remarks, So, then you but renters most of that of Cantor have nothing

that. just add to And I can

$XX we've If for loan want so you look X, you've backward-looking make made million. we're got remarks less some in to just to point little the see the than at, it I ABS, investments, Slide XX.X% you $XX to marked look opposed yield we some it, million, you that on at, and already.If somewhat includes we've -- that the portfolio as but were consumer example, forward-looking equity that includes row, right. sense basically that that can where the a the projecting

it so, think drops and we've So, not consumer, good forward that, that down, price we to going actually point that's marked unsecured is want -- place. the out and I I also that put portfolio of a after we've yield most consumer. mark-to-market secured in just And

don't that's $XX We it's We small XX.X%, it's right. an think going unlevered a think marked I under and it's to -- on yield It's So portfolio. million. basis.

we add So, possible feel good if it's portfolio going portfolio that situations. and that to get forward some about we we good that

with Matthew have Howlett we Riley. B. And question next our from

normalized, contributor. one-timeish sort forward at I at ex run look you're It those going dividend agency a contributing EAD contribution. quarter, of Just but the obviously side, -- dividend mean, -- those the there then of $X.XX I agency basis? -- first you how coverage, the Longbridge, positive had then looks shrinking from be negative negative was contribution it I mean, probably out think mean, course I will was I be that look when by stable, mean, Longbridge terrific, at do the and sort in rate the I going I credit negative. was you're likely we a high probably a to results are the I you're and segment, it mean, had I -- then Backing to probably was of that, what a and events. level, when I mean, at -- on look like

Yes. Matt, we're that's right. close, -- think I

overhead. and $X.XX, about Longbridge at XX% you XX% $X.XX, add had investment So, one our contributed times way picked it per portfolio contributing of equity $X.XX approach they're was certainly they've corporate to that, net is quarter-end, share $X.XX if to If $X.XX allocated $X.XX, of from they've up where to the of we quarters ADE.

in think on how of say guess and move remarks, those dividend. income, sum the stop the accruing model when and because be income we then could some income ADE We to idiosyncratic kicks I you on close So delinquency expect we you in interest or pretty when to to in did the the caveats into is include our they behavior reperform term, prepared some or paid near have at and again. interest loans interest par about

continue, So, track net-net, there that will expect some there.We think but on wise. run rate be to noise I we're

channels October a was of to and off of namely some saw October I the yet, numbers high, in on continuation not some should see get in Given in out we rates in we're add QX, which October same we volatilities the as be be selling origination but And we're ADE said, next surprised would QX. -- additional wouldn't accretive. continue Arlington, challenges a including we the as But deploying some that to with QX if of then in in saw not challenges powder, contribution weigh think from year. be on and then you in agencies into we tracking, that all basis, dry normalized that might be QX,

So, hopefully that… threw are lot there a but up, I that of know pieces I there

could modeling literally like, is negatively about or get could about no, one on When -- very of think like When rates? we think of year clearly quarter. spreads, thinking volatility lower gain same looking HECM the about through about this it margin spreads, clarified highest -- walk to and -- about positively much they conforming the think I some just is impact in of and volumes, it's talk track think side, it, when what some about when it. or we way we highest channels. at it when margins the We're -- the really I'm Longbridge, the down? glad think about about them, me, stability, we what or next spreads? is Longbridge, it all you when it me conventional about we we I'm the mattered it is are, value comes when the mean, influence HPA we what thinking into it Sort or agency you

that. address I'll Sure.

mark-to-market out share, I I'm want Before need what is to because continuing that, I that see great as impacts they that market to as the to just go, it's that will add I so to right a do, as said, it perspective. dividend. of an think this -- from and so, we once terms quarter, our do question, we're it's which we with point right a in and ADE there it to actually to we continue But think JR not a that do Longbridge, say, normalizes right, but they be about mean, that perspective, Longbridge tough -- things was to from long going ADE, that

of dividend profits Absolutely no of fluctuate, have Longbridge. plans to we So, not. because origination at in have the fluctuations our sort

think to analyst hate thing market. another their with this see view, I But I going from metric. you're sort tough of yes, ex a even share, So as market been about I look non-GAAP you could Longbridge really with so of and to think -- think, at. point it's an But -- to increasing acquisition, about ADE another our mean, yes, think I

Okay.

that we is Longbridge, the now it's MSR. back to it's conservatively feel things So and marked yield. sort We now good to to going get generate what have of great driving at very a

you're be because going want makes to you inflation. borrowers right? rate looking And curve, of the So That's the accretion, still in is it at long-term on in have means that We and program loan. and making sort unfortunately, the earning the what HECM So reverse of of gauges interest right, drive These a you're how some makes that especially borrow borrowers XX-year sense, high not -- -- sense, just much payments, what right? way amount, long-term the program, It are around that works. rate make part market a the mortgage. the environment. that then to a can sure just interest And right? are the we're rates, interest

long-term as the part and going amount curve that so and discount lower drive to -- going a that is drive can going the And create to draw going the of to rates go is up. it's to it's borrower principal

all business. been that's So mortgage entire the reverse hurting

regular different wayside. -- another again, it hurts the the notable so nevertheless but notable market, seen also but why then player you've shrink, player, And it's seen reason, sort market so forward a the you've very one by versus, that of go small

So, lot A) in has Longbridge larger tapping for borrowers a you're have business right.Because now market then share, value of a smaller, prop higher is market homes. we the that much growth, room see that, a but as into having

Longbridge a more less So and looking may with really profitable the talking the think borrowers prospects it's as that wide, taking affected loan-by-loan good a HMBS for that's proceeds.So basis, right, to are sensitive that's monthly and and just on tough be about you're and execution basis. out participants forward, affected market -- we the on like been Longbridge, spreads about issue you're share, a gain continue long-term that all And that's agency but market. volatile, on they other not the

could they aren't sale the so and And be. what gain margins

that so as if also should And well. normalize spreads there normalize ultimately,

in Longbridge origination from you'll So, volatility, think, ADE short-term I profits. from see coming volatility our

so And to for think have will market us. the that to something that's I adjust

I I clarified, and MSR has too that but mean, lot this appreciate sense a related to And you get it of it on now, no prepayment. reverse, not makes to color. complex call, the

just perform lower would I conventional performed? -- We forward, negatively a rates impacted? in is the same that…? mean, get -- mean, higher what moving MSR or rates, going I So the that way to going is

complex. It is Yes.

mortgage right. So of not lower strip, it's old regular the their reverse rates. of sensitive sometimes refinance take down, go when is will lot but all, servicing And a strip to do in advantage people value first be, mortgages, of a as rates a forward prepayment quite as

cash do to refinance sometimes out refi. they appreciate, prices home As

of factors affect a that. So sort -- the lot of a similar

a interest aspect there is rates. prepayment to it, So negatively is mildly to correlated which

you're is future of MSRs So those most but for rates, And money couple called that's from a But tails. are out where not These the on going into portion to these the MSR, more but have notably more and really of Maes. -- is sensitive the Ginnie is reverse can significant that actually to mortgage. their then spreads. spreads turning a there it's portions, take there the also interest borrower, good of so profit other value these rates. are And portion high that draws

maybe factors. correlation So yes, the sort yes, going a of other there's there. way they're so offsetting And also

total Makes sense.

I to know going you the MSR on bank financing MSRs think is -- there? with Because run on you correctly going begin they for of -- look next quickly called I and did with So have leverage you're report be the Longbridge receivable. year. they I to a hear MSRs home Real to to guys lines something forward some

want of you And think some think banks or of give MSRs? closes. I you the it's get, on to leverage I MSR. you debt, like type But like you what said -- on deal what an can put type corporate excess preferred even once leverage are, the if then will you you something

Just go points? over those X

the has afterwards. stock the unsecured and and merger debt Yes. outstanding, those think already of No, Arlington travel saying when preferred -- that preferred with I

So, we inherit that.

rate -- and become will a in And done those interest are debt. our preferred that environment. unsecured different So were our

of financing then financing for MSRs. in very a financing the forward us.So lot a -- attractive MSR, that's So there's availability financing appear of those. yes, There's -- terms to for and

advance think stick practice, we financing rate, to probably, XX% of north in I XX%. can get would but think a I you around

-- turn you could that one to So call leverage. one turn

and Look look Look forward transaction the for to to Perfect. continued closing the -- success. timing forward terrific. a was

George have KBW. question Bose next And we our with from

This Bose. is for actually filling in Frankie

On your then you interest question. provide the Just the much agency you one in position to MBS changes agency And Can spreads? about a Slide sensitive do rate hedge is sensitivity. follow-up. you talk how XX, How spreads? just

Sorry. or to Sensitive to rates? spreads

spreads? To

right. I'm Okay. Yes.

see this shows you that if can't TBA -- slide, yes, but that the to on You the look exactly. slide

think I So Slide XX. the go. XX to place is

Okay.

if yes, you to you elaborate. that, If -- yes, turn turn to I'll

XX. Yes, XX and

Yes.

when you of amount we net that equivalent the see right. our can spreads you TBA longs, shorts, So really on hedge which out dollar-for-dollar --

You to agency net agency, assets ratio pool can our what net X.X:X. was see we our call equity that

at Well, is if does So there then net you mean? can $XXX to on can the right. long our you go you what slide, and that exposure actually, look see basically okay, million, pool say, agency

points on Mark, points about do if would a you think so, Is And half basis that's it What point-ish? say in basis the XX spreads you portfolio, -- what? think? XX you is

That's was X-year Yes. what I Yes. exactly going spreads… Like to say.

Yes. Right. Yes.

about talking basis -- you're $X.X as X.X% points, move if by spreads million is So million. of then about XX $XXX

basis see -- XX all-time a maybe, We So is it's significant already possible and points we're XX is could in move near spreads. but wide. a

spreads by a pretty notional, hit. spreads were it's think a huge it's close right even notional context they that, -- a certainly are not but as mean, we entire our of on certainly we but But like the portfolio, I said, back a where not on right COVID basis, in it's other exposure. metrics, given that one to now close I after are So

spreads are wide. So

TBA as could Slide also roughly say little the can but of rate of that September widening can is addressing from the the our XX% bit X/XX, kind XX shortly, take that whereas at up another XX% a you in don't. interest see rule XX, prior spread risk swap is hedging thumb XX% then you And of you is portfolio Yes. or that of

fluctuates. that as So

hedging how we're of see through basis, TBA's swaps. not much You can mortgage the versus

thank in final our question was you We Earnings XXXX Third Financial that for the And today. Call. participating for Quarter Ellington Conference

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