Global credit rating agency DBRS Morningstar has assigned a “good” ranking to Mahwah, N.J.-based reverse mortgage lender Longbridge Financial, in a move that Longbridge says will help to facilitate the creation of new products and features it can offer borrowers in the months and years to come. This is according to a release this week from DBRS Morningstar itself, and outreach to Longbridge by RMD.
Rankings firm DBRS was purchased by Morningstar, Inc. in 2019. Both separate entities have discussed trends related to the reverse mortgage industry in the past, but Longbridge has no previous history with a ranking from either the separate or unified entities, and has been given the second-highest ranking that DBRS Morningstar can assign to a U.S. residential mortgage origination company, according to Longbridge’s CEO and the firm’s ranking methodology.
The ranking
DBRS Morningstar assigned an “MOR RVO2” residential reverse mortgage originator ranking to Longbridge Financial, its second-highest such rating which indicates that based on the information made available, the products offered and the processes governing them in place at Longbridge are of “good” quality, according to the publicly-available originator ranking methodology obtained by RMD.
A ranking of “MOR RVO1” would be the highest ranking that DBRS Morningstar could issue for a reverse mortgage lender indicating “superior” level of product management and processing, while the “MOR RVO2” ranking is above average or “good.” This is the first such ranking that DBRS Morningstar has issued for a reverse mortgage lender. The ranking firm also describes the trend on the ranking as “stable.”
“Longbridge is a privately held company established in 2012 to provide reverse mortgages to homeowners in the U.S. over the age of 62,” DBRS Morningstar says of the company in its ranking assessment. “The Company originates agency-backed home equity conversion mortgages and a private reverse mortgage product, Longbridge Platinum, through retail and wholesale channels. Longbridge is majority owned by Ellington Financial Inc. and Homepoint. In 2020, the Company originated close to 6,600 reverse mortgages totaling over $1.2 billion and has a servicing portfolio exceeding $4.5 billion.”
The ranking is intended to reflect positively on Longbridge’s portfolio and operational processes, the firm explained.
“The MOR RVO2 residential reverse mortgage originator ranking reflects Longbridge’s strong and tenured senior management team, highly experienced underwriting team, financial profitability, and good loan performance,” the document explaining the ranking said.
The ranking additionally demonstrates that the lender has “proficiency in loan origination standards,” but could be vulnerable to future credit events. However, lenders with this rating have been determined to have “manageable” qualifying negative factors, according to the ranking methodology.
Company details informing the ranking, what it means for Longbridge
With approximately 200 employees across its Mahwah, N.J. headquarters and other offices in Charlotte, N.C. and Houston, Tex., the senior management team has demonstrable experience in the reverse mortgage field with an average of nine years of company tenure and 22 years of industry experience, the firm explained.
“The underwriting team, which manually underwrites each loan, averages three years with the Company and over 20 years of industry experience,” DBRS Morningstar said. “Longbridge has consistently demonstrated the ability to steadily grow its reverse originations while maintaining solid loan performance.”
While the rankings issued by DBRS Morningstar may not necessarily have a lot of value in terms of consumer-facing details, the “above average” ranking should be able to communicate potential business viability to other interested parties including investors or auditors. The rankings are not really designed for consumer consumption, nor are they an indication of creditworthiness, according to the firm.
“[The rankings] are designed to evaluate the quality of the parties that originate residential mortgage loans,” the firm said in its release explaining the Longbridge ranking. “Although the originator’s financial condition contributes to the applicable ranking, its relative importance is such that a[n] originator’s ranking should never be considered as a proxy of its creditworthiness.”
Response from the lender
Response to the ranking by Longbridge has been very positive, and could mean that future endeavors that the company wishes to explore could benefit from receiving it. This is according to Chris Mayer, CEO of Longbridge Financial.
“This is exciting news for Longbridge and a testament to the hard work and dedication of each and every one of the Longbridge team,” Mayer told RMD. “The ranking process involves a deep dive on all aspects of our organization. This is the second highest Originator Ranking that Morningstar gives. A ranking of above average with no previous history straight out of the gate is an extraordinary accomplishment and will help us to work on new proprietary products and features in the months and years ahead.”
According to recent Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), Longbridge is the seventh largest reverse mortgage lender in the space, logging 1,788 retail endorsements in the 12-month period ending in January, 2021.
On the wholesale side, Longbridge is the fifth-largest lender in the space, logging 2,204 wholesale endorsements in the 12-month period ending in November, 2020 according to RMI data.
