Ellington Financial Inc. Completes First Securitization of Closed-End Second Mortgages

Rhea-AI Summary

Ellington Financial (NYSE: EFC) has successfully completed a $199 million securitization backed by closed-end second lien residential mortgage loans. The company contributed approximately 51% of the loans, while funds managed by Ellington Management Group provided the remaining portion. The securitization's debt tranches received ratings from Fitch and KBRA, with the senior-most tranches achieving AAAsf and AAA (sf) ratings respectively.

Positive

• Completed $199 million securitization of second lien mortgages
• Secured highest possible AAA ratings from both Fitch and KBRA for senior tranches
• Strategic partnership with Ellington Management Group for loan contribution

Negative

• None.

Insights

Financial Analyst

The $199 million securitization marks a strategic milestone for Ellington Financial, demonstrating their ability to innovate in the mortgage-backed securities market. Second lien securitizations are relatively rare and achieving AAA ratings from both Fitch and KBRA indicates strong underlying asset quality and structural protection. With EFC contributing 51% of the loans, this transaction provides meaningful revenue potential while sharing risk with affiliated Ellington funds. The deal should enhance EFC's earnings through both interest income and potential securitization gains, while freeing up capital for new investments. The successful execution also validates their second lien mortgage strategy and could pave the way for similar transactions, potentially establishing a new recurring revenue stream.

Mortgage Market Specialist

This pioneering securitization of closed-end second mortgages represents a significant market innovation. Second lien securitizations are complex due to their subordinate position and higher risk profile, making the dual AAA ratings particularly noteworthy. The structure likely incorporates robust credit enhancements and overcollateralization to achieve these ratings. The risk-sharing arrangement with Ellington Management Group funds reflects a prudent approach to portfolio management. This transaction could help establish a new market standard for second lien securitizations, potentially benefiting the broader mortgage market by increasing liquidity for these assets and providing investors with new rated securities options.

OLD GREENWICH, Conn.--(BUSINESS WIRE)-- Ellington Financial Inc. (NYSE: EFC) today announced that it has closed a $199 million securitization backed by a pool of closed-end second lien residential mortgage loans. Ellington Financial contributed approximately 51% of the loans included in the securitization, with the remainder contributed by funds managed by Ellington Management Group, L.L.C.

The debt tranches issued in the securitization were rated by Fitch and KBRA, with the senior-most tranches receiving AAAsf and AAA (sf) ratings, respectively.

About Ellington Financial

Ellington Financial invests in a diverse array of financial assets, including residential and commercial mortgage loans and mortgage-backed securities, reverse mortgage loans, mortgage servicing rights and related investments, consumer loans, asset-backed securities, collateralized loan obligations, non-mortgage and mortgage-related derivatives, debt and equity investments in loan origination companies, and other strategic investments. Ellington Financial is externally managed and advised by Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241216278027/en/

Investor Inquiries:

Ellington Financial Inc.

Investor Relations

(203) 409-3575

info@ellingtonfinancial.com

Press & Media Relations:

Amanda Shpiner/Grace Cartwright

Gasthalter & Co.

for Ellington Financial

(212) 257-4170

Ellington@gasthalter.com

Source: Ellington Financial Inc.

FAQ

What is the size of EFC's latest mortgage securitization in 2024?

Ellington Financial's latest securitization is $199 million, backed by closed-end second lien residential mortgage loans.

What percentage of loans did EFC contribute to the $199M securitization?

Ellington Financial contributed approximately 51% of the loans to the securitization.

What ratings did EFC's latest securitization receive from Fitch and KBRA?

The senior-most tranches of the securitization received AAAsf from Fitch and AAA (sf) from KBRA.

Who contributed the remaining loans to EFC's $199M securitization?

The remaining loans were contributed by funds managed by Ellington Management Group, L.L.C.