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Ellington marketing $258M non-prime RMBS of alt-doc mortgage originations

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Ellington Financial is sponsoring a $258.7 million securitization of nonprime mortgages originated by an affiliated mortgage company specializing in alt-doc loans for higher-income homebuyers and investors.

The $258.7 million Ellington Financial Mortgage Trust 2019-2 collateral includes 613 first-lien mortgages that were mostly underwritten with alternative income documents, according to presale reports from Kroll Bond Rating Agency and S&P Global Ratings. Sixty percent of the loans were underwritten with just 12- or 24-month bank statements, for example.

Ellington acquired the loans originated by LendSure Mortgage Corp., which is 45% owned by the $8.6 billion-asset Ellington.

About 76% of the loans are categorized as non-qualified, with the remainder considered exempt as investor loans. According to presale reports, 8% of the loans were issued to borrowers with prior credit events and 6.6% underwritten to foreign nationals or non-permanent resident aliens. In addition, 81% of the loans feature an adjustable rate with a gross average coupon of 6.2%.

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While the deal is considered nonprime, Kroll considered the credit attributes of the borrowers to be either prime or expanded prime due to strong credit scores (a weighted average FICO of 708), average incomes of $275,854, and liquid reserves of $211,843.

The transaction features seven classes of notes, including three senior-note tranches: a $188 million Class A-1 tranche with preliminary AAA ratings from S&P and Kroll, a tranche totaling $17.9 million rated AA by S&P and AA+ by Kroll, and a Class A-3 tranche with notes totaling $31.1 million with an S&P A rating and a Kroll A+ rating from each agency.

The largest concentration of loans is in California (50.1%), Florida (12.6%) and Texas (9.4%).

Ellington, established in 1994, has about 38% of the company’s portfolio invested in residential mortgage-related assets, and has issued nonprime RMBS securitizations since 2017.

Ellington’s previous securitization was in June 2019, which pooled 497 loans totaling $226.9 million.

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