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Ellington (EFC) Taps Reverse Mortgage Space, To Buy Longbridge

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Ellington Financial Inc. (EFC - Free Report) entered a definitive agreement to acquire an additional 49.6% stake in Longbridge from Home Point Capital Inc. for around $75 million. With this, Ellington Financial, which already had an investment in Longbridge since 2014, will hold the majority of the latter’s equity.

The deal is expected to close in second-quarter 2022, conditional on closing norms, including regulatory approval.

Longbridge originates and services reverse mortgages for the budding U.S. homeowners’ cohort of 55 and above. Amid the surging home prices, the growing population of senior homeowners is struggling to repay debts and meet growing expenses due to inflation. Hence, a reverse mortgage is likely to gain momentum as it enables senior homeowners to tap their home equity.

From 2019 to 2021, Longbridge increased its annual loan volume threefold to $2.2 billion, and net income by five times. Hence, the transaction will enable Ellington Financial to leverage Longbridge’s strong platform.

Also, the deal will strengthen Ellington Financial’s foothold in the reverse mortgage market, while allowing it to continue to fortify its loan origination business and diversify its income stream.

As part of strategic initiatives, the companies plan to team up to capture additional market share, and offer innovative, compliant, and cost-effective products and solutions to their clients.

Management noted, “Significant synergies exist between the Longbridge and Ellington Financial businesses, and we are confident in our ability to work with Longbridge to develop new proprietary products and programs and meaningfully grow its platform in the years ahead. We are excited to continue supporting Longbridge through the next phase of its development and together help build long-term value for shareholders.”

Over the past year, shares of EFC have gained 7.7% against a 43.9% decline of the industry.

 

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EFC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Firms

Several companies from the finance sector are undertaking consolidation efforts to improve competencies in a bid to counter the low-interest-rate environment.

Last week, Webster Financial Corporation (WBS - Free Report) inked a definitive agreement to acquire Bend Financial, Inc., a cloud-based health savings accounts (HSA) solution provider.

The buyout will help HSA Bank, a division of Webster Bank, to leverage Bend Financial's client-facing experience that utilizes cloud-native technology and user-centered design. This will offer a modern and simplified approach to HSA management and engagement.

Earlier this month, Walker & Dunlop, Inc. (WD - Free Report) inked a deal to acquire GeoPhy, a commercial real estate technology company. Per the terms of the transaction, Walker & Dunlop will pay $85 million in cash at the closing in addition to $205 million of cash earn-out potential. The cash earn-out potential is structured to directly align with the company’s Drive to '25 goals.

The acquisition of GeoPhy, which is headquartered in the Netherlands and New York City, is expected to bolster growth in Walker & Dunlop's brokerage, lending and emerging businesses, including Apprise (the tech-enabled appraisal business) and small balance-lending platform. 

Velocity Financial, Inc. (VEL - Free Report) acquired the majority stake in Century Health & Housing Capital in December 2021. Century is a licensed Ginnie Mae issuer and servicer. Century offers government-insured Federal Housing Administration mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities.

The acquisition will help Velocity Financial to leveraged Century’s well-established platform and diversify Velocity Financial’s revenues with the addition of fee-based origination and servicing income.